Northamptonshire County Council’s director of finance has issued a section 114 notice imposing immediate spending controls on the organisation.
The notice is believed to be the first issued by a local authority in more than 20 years, and means that no new expenditure – other than on statutory services for safeguarding vulnerable people – will be allowed.
Under the law, councillors must meet within 21 days to discuss the implications of the section 114 notice.
Speaking on the BBC over the weekend, Conservative council leader Heather Smith said it had faced a “perfect storm” of increased demand and severe cuts.
She said: “We have been warning government from about 2013/14 that, with our financial position, we couldn’t cope with the levels of cuts we were facing.”
In a statement to Room151, Paul Carter, chairman of the County Councils Network, and leader of Kent County Council said: “Northamptonshire, like other counties, has worked hard to balance the books. But this first 114 notice issued by a council demonstrates the severe financial pressures counties are facing.
“County authorities face the deepest reductions in funding and demand-led pressures in adult social care. This is placing immense strain on local budgets after years of financial restraint.
“We must remember that not only is Northamptonshire one of the lowest funded county authority, the council tax freeze grant policy, encouraged by the previous government, hasn’t helped their finances, leaving the county an additional £23.6m worse off each year.”
Carter said the network would support Northamptonshire over the coming period but called on the government to provide more funds to support counties in next week’s final local government settlement.”
The decision to issue a section 114 notice comes less than a month after government inspectors were sent into the authority over concerns about the authority’s finances.
That intervention came after external auditor KPMG issued adverse value for money opinions in relation to the councils’ last two years of accounts.
The review found “signs that the council may be experiencing in some areas weaknesses in the compliance with proper financial and other processes”.
It also found that, although the council understands its short and long-term financial prospects, “the difficulty was being able to identify solutions to address the scale of the challenge it faces.
“There is a tradition of producing medium-term financial plans — but they have not worked because too many components of those plans have proved to be unreliable and undeliverable,” the report said.
CIPFA chief executive Rob Whiteman said he was not surprised by the issuing of the section 114 notice by the council, blaming the strain local government is under following reductions in grant since 2010.
“CIPFA has advised both the Ministry of Housing, Communities and Local Government (MHCLG) and the LGA that we are likely to see other councils reach this point in the two to three years if the government does not provide a more sustainable framework for local government finances,” he said.
But he also said issues specific to the council had also contributed.
“The county’s transformation programme, though innovative, has not yielded sufficient savings and the council depleted its reserves in an unwise manner without alternative compensatory savings of the order needed,” he said.
“However, we have seen other councils suffering the same general and specific strains manage their budgets more effectively.
“With Northampton, it appears to have now deteriorated too far for the council to be able to manage its finances and government intervention is likely to be needed to set a path for the future.”
In 2016, Room151 columnist Agent 151 said of section 114 notices: “…history tells us that an section 114-wielding CFO rarely escapes unscathed.
“Some are plucked from their office before they can even sign the notice, and some depart shortly afterwards; the fate of each obscured from public view by a compromise agreement (soon to be capped, by the way).”
The council will discuss the notice at a full meeting on 22 February.
The notice does not affect staff pay and the council will continue to meet its statutory functions.
*This article was updated on 8 February, 2018.
