Government ‘minded’ to send commissioners in to cash-strapped council

The government has said it is “minded” to send in commissioners to oversee a city council which declared itself effectively bankrupt.

Nottingham City Council issued a section 114 notice on November 29 after it deemed it could not balance its books in the current financial year.

The authority is facing a £23 million overspend this year and a £50m budget gap for 2024-25, with service cuts likely.

In a letter sent on Wednesday, Simon Hoare, the local government minister, said the government was “minded to change the intervention in Nottingham City Council” due to it “continuing to fail to comply with its best value duty”.

The letter, addressed to the chair of the council’s government-appointed Improvement and Assurance Board (IAB), Sir Tony Redmond, said: “The Secretary of State has considered carefully the findings and evidence presented in the Board’s latest progress reports, and the section 114 notice issued by the council on 29 November 2023.

“We are satisfied, based on the evidence provided, that the council is continuing to fail to comply with its best value duty.

“He is minded to exercise his powers under the Local Government Act 1999 to appoint commissioners.”

Mr Hoare added: “The ‘minded to’ decision to escalate this intervention is not a reflection on the effectiveness of the board in helping the council to drive forward the necessary improvements.

“Indeed, it is clear that the progress that has been made to date would not have been achieved without your support.

“Despite this progress, the scale of the challenges facing the council cannot be underestimated and more difficult decisions will be required.

“It is for this reason the Secretary of State is minded to appoint commissioners to oversee the council’s recovery.”

The IAB was appointed in early 2021 to monitor the council’s response to a report by Max Caller on the demise of the council’s failed Robin Hood Energy scheme.

The council was then compelled by the government to follow the board’s advice in September 2022, after concerns were raised that improvements were not being made quickly enough.

The IAB released a second report on the council’s progress on Wednesday, in which it said that an “altogether different pace of change” was still needed to solve “significant” problems around finances, governance, culture and strategic planning.

In a separate letter sent to the council’s chief executive, Mel Barrett, the deputy director for local government stewardship at the DLUHC, Max Soule, said that three commissioners could be appointed, with one lead commissioner, one for finance and one for transformation, subject to representations.

All parties have been invited to make representations to Secretary of State Michael Gove about what intervention is needed at the council by January 2 next year, with a decision to be made after that date.

In a statement, the council said that it would work with commissioners if they were appointed, and has previously said that it can meet its obligations in the current financial year.

Councillor David Mellen, the council leader, said: “Clearly the appointment of commissioners would be very disappointing and not something that we would want to happen.

“Any decision that reduces democratic accountability, however limited and temporary this may be, should not be taken lightly.

“The council has already made progress on a number of the improvements expected of us by the Board and the Government.

“In particular, we had set a balanced budget and medium-term financial plan in March prior to the soaring inflation, high energy costs and increased demand for services supporting vulnerable people that have severely affected the finances of councils up and down the country.

“These pressures have meant our budget is overspent this year leading to a Section 114 Report being issued by our Chief Finance Officer, which has clearly been a factor along with recent reports from the Improvement & Assurance Board, in the Government’s announcement that it is minded to appoint Commissioners.

“Although not the cause of the overspend in the current year, we know there have been specific issues in Nottingham due to decisions made in the past which have affected the council’s financial reserves and resilience.

“The current situation for Nottingham and a great many other authorities is very challenging and in many parts caused by underfunding.

“There will continue to be difficult decisions that have to be made. But we are committed and determined to do what is right for the city and its residents.”