Nottingham City Council still has “significant shortcomings” in budgetary control and its underlying level of spend, with the authority facing a “stark financial challenge in 2025/26 alone”.
Those insights are included in the final report from the departing Improvement and Assurance Board, chaired by Sir Tony Redmond, on progress at Nottingham City Council. The report sets out the board’s views on Nottingham’s improvement journey since it was appointed three years ago, with the board leaving following the appointment of commissioners.
The board pointed to “encouraging advances” and progress in a number of areas when taking an overall perspective, but said it had been “disappointed” throughout its term of office at the “pace of change” in Nottingham. Additionally, in areas where there has been “a failure to deliver change in its entirety”, the board reported its “concern [that] the council has still not fully accepted the gravity of the situation”.
Future success will depend on a workforce culture that “fully embraces” the “need to deliver quality and cost-effective services to citizens, fulfilling the Best Value requirement with a clear unity of purpose demonstrated by the council leadership”, the report concluded.
The financial challenge
Looking specifically at finance, the board said relying on exceptional financial support for 2024/25, together with expected new pressures, had created an estimated budget gap for 2025/26 of £68m and a total gap over the medium term of £172m.
These figures assume the council “fully delivers on the balance of its c£60m of programmed transformation savings over the period”, however.
Nottingham will need to “urgently” put in place a revised financial planning methodology, the board report added.
The report also noted that while Nottingham had been subject to the same pressures as all upper tier councils have faced, its position was “made much worse by its failure until recently, and only in part, to reset the whole council operations to an affordable underlying cost base and level of service offer”.
Drawing “extensively” on remaining reserves and “unwinding its risk budgets to set its most recent annual budgets” resulted in a “lack of any effective capacity and financial resilience to handle the emerging budget overspends and deficits for 2023/24 and 2024/25”.
However, recent work to undertake a more fundamental review of spend, which in the report’s words employed “a distinction between duties and powers”, generated a “significant level” of savings, at £35m over two years of which £22m relates to 2024/25.
While commending this success, the board said it had come “relatively late in the council’s financial planning approach over the last three years” and has “not generated sufficient options to bridge the gap; and in the timescale involved the methodology could not address the underlying efficiency and effectiveness of current operations taking all the savings options deemed professionally deliverable from the ‘duties and powers’ work”.
This resulted in the application for £41m in exceptional financial support to set a technically balanced budget in 2024/25.
Avoiding another s114
Looking ahead, the board said that the “whole organisation, from the corporate management team to all levels of the authority, will need to rise to that challenge if the issuance of another s114 report is to be avoided”.
The report also noted that the “quality of financial controls and practice has been a consistent council–wide weakness from the outset of the board’s involvement”, despite progress being made in the past 12 months.
The board outlined areas requiring continued focus, including outturn forecasting; the workings of the budget accountability framework in practice; the culture of compliance with expected finance procedures across the council; and the quality of scrutiny and oversight provided by internal audit and the Audit Committee. “These areas were found especially wanting during the year,” the report stated.
Assessing capital planning and resourcing, the board was encouraged by the “right” decision to impose a voluntary cap on new borrowing “given the above average level of debt [the council] held”. Capital use prioritisation was also amended in a “sensible way”, the board added.
The board also commended the council’s new approach “to the governance and method applied to securing capital receipts”, which included a “more robust and transparent asset disposal policy”.
The report stated: “In response to the relevant ‘instruction’ the council has identified a further risk adjusted pipeline of circa £150m over the medium term; however a proportion of this new pipeline comprises income earning assets and thus a sophisticated approach will be required to assess the best course of action in each case.”
Finally, the board noted that there had been a “substantial de-risking” of the council’s portfolio of companies and improvement in their governance, “albeit from a low base”.
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