In March of this year, Nottingham City Council will present its final budget and plan to balance its books. Looming over everything, the watchful eye of government, with an Improvement and Insurance Board monitoring operations following the collapse of Robin Hood Energy. The next few months are vital. Nottinghamshire Live calendar editor Joseph Locker reports.
According to the Institute for Fiscal Studies (IFS), local authorities across the country are grappling with “unprecedented” financial pressures and service responsibilities.
These pressures have only been compounded by the coronavirus pandemic, which has cost the city more than £ 66million in the last financial year, of which £ 16million is to be covered by the taxpayer.
A large part of the council’s budget now goes to its statutory services which it has a legal obligation to provide.
Adult social services and children’s services account for around 60% of the council’s budget, with over 700 children in the care of the authority at the time of writing.
Government grants generally supported these efforts until 2010, and cash injections have since declined by around £ 100million, or around £ 427 per person, each year in the city.
Local authorities are now required to fundraise for statutory services by other means.
So how do the councils collect this money?
The current and somewhat criticized method of raising funds is to increase municipal taxes.
Nottingham is almost “only challenged” in this alternative method, according to Professor Peter Murphy of the NTU Business School, the narrow city limits proving to be a problem for the council.
This is because the housing tax yield depends on the size of real estate people own, and properties in Nottingham are generally much smaller than in suburban neighborhoods and boroughs, so the tax yield here “is penalized”.
In addition, many people outside the city who use city services and infrastructure do not necessarily contribute to the financing of these assets, which means that there is less money available for people who live in the cities. city limits.
Governments generally operate under two types of “regime”; on the basis of subsidies and housing tax.
Nottingham scores better on the former because of its high levels of deprivation.
Clive Heaphy, Interim Chief Financial Officer of the Board, said: “Actually, yes, our situation is much worse than before.
“The gains are now quite small compared to the losses. Every authority feels the pinch alike and it is unlikely to ever return.
“Over time, there has been a tendency to rely less on grants and more on municipal taxes and corporate rates. This has benefited authorities with a high tax base, and as you know ours is quite low. here in Nottingham we have a lot of A and B band properties.
“Out of 125,000 taxable properties 100,000, 80%, are in bands A and B and that’s unusually low. So as governments move towards a system based on municipal taxes, we have done worse than other local authorities. “
A mess of its own making?
The Labor-led authority has constantly shouted from the rooftops about its financial situation and the impact of such a regime change.
However, opposition advisers standing below argue that he himself is largely to blame.
This became evident during the collapse of Robin Hood Energy.
The energy company started its life from 2015 with great ambitions to fight against fuel poverty, create new jobs in the city and take on the six big energy companies, including British Gas.
At its peak it had over 125,000 clients, but by January 2020 it had collapsed in administration.
And, you believe, most of those customers have been transferred to British Gas.
The council’s total losses are estimated at around £ 38.1million.
That year, as the coronavirus pandemic began to envelop the world in disaster, his hopes for the Broadmarsh Center literally collapsed.
The pandemic was the last nail in the coffin of its former owner, mall giant Intu, who was in the process of tearing down the Broadmarsh Center and rebuilding it.
Nottingham City Council lost around half of the £ 18million it had invested in the site.
(Image: Brendan Doherty at High Vision)
TEAR
Following the failures of Robin Hood Energy, a public interest report, produced by independent auditor Grant Thornton, revealed how the board continued to support the energy company despite “the deterioration of its financial performance and therefore its inability to repay “.
The board had invested £ 43million of public funds in the failing company and the auditor accused the authority of ‘institutional blindness’.
As a result, the government has appointed an independently chaired Improvement and Insurance Council and balancing its accounts is now a legal obligation.
If the council does not satisfy the government, it can send commissioners to take control.
City council set out its Stimulus and Improvement Plan in January last year to set out how it aims to achieve financial stability over the next two years – the name of which was changed this year because it bore the acronym of “RIP”.
“When the commissioners take the stage”
The next few months are vital for the board.
A newly drafted budget, currently under consultation, has proposed savings of £ 28million for 2022/23, rising to £ 38.1million in 2025/26.
Some of the biggest cost pressures come from services for children and adults and stand at £ 14.1million in 2022/23, before rising to £ 34.3million in 2025/26.
A total of £ 3.9million in savings will require public consultation, including separate consultations for the closure of children’s centers.
The final decision on the budget and the council tax is expected to be taken in March
This is all part of the council’s path to recovery as it seeks to balance its books, but what is the likelihood that government commissioners will be sent?
Everything was going fairly well until recently, when Acting CFO and Section 151 officer Mr Heaphy discovered a spate of illegitimate payments, totaling £ 15million, dating back to 2014.
Legal advice was then served on the council as these payments were illegal and involved the transfer of funds from the Nottingham City Homes housing income account (the money of which must go to the council housing stock and tenants), to the fund general (the money of which goes towards the daily services).
Nottinghamshire Live now understands that part of the money would have been spent on homeless services, which could have been seen as ‘morally justified’.
Andrew Rule, one of only two Conservative advisers on the board, described it as “a way to process money from a segregated account, pass it through a middleman and recycle it to the general fund.”
This has thrown a wrench in the works for the board and will absolutely not work well with board chairman Sir Tony Redmond who was already at the end of his tether.
One of the bright spots to take from the ordeal is that the council has been very open about it, with the head of council and Dales Ward Councilor David Mellen taking the position of the executive councilors who indeed take the responsibility. mess in doing it.
The next step for the council is to find a way to repay the £ 15million, as well as to work out a medium-term financial plan that will define its finances for the next four years.
Another positive point can be drawn from the comparisons with other local authorities which are now under the control of the commissioners.
Take Slough City Council, for example.
Here it is predicted that the council will have a budget deficit of at least £ 174million by 2025, up from £ 27million for Nottingham in 2022/23, rising to £ 33million in 2024/25 .
In the end, only time will tell, but the Labor executive remains adamant that it will retain control of operations.
To read all the biggest and best stories, sign up first to read our newsletters here.
