My Lords, with the leave of the House I shall now repeat in the form of a Statement the Answer given by my honourable friend the Under-Secretary of State for Local Government in the other place. The Statement is as follows:
“Mr Speaker, I wish to comment on the financial situation of Northamptonshire County Council. As honourable Members will be aware, the council’s finance director has issued a Section 114 notice to stop new spending. A Section 114 notice does not automatically mean existing services will stop. Northamptonshire’s finance director has confirmed that safeguarding vulnerable people and statutory services will continue to be delivered and that council staff will continue to be paid.
Local authorities have a legal duty to balance their budget, and Section 114 notices are part of the accountability framework that guards against irresponsible financial management. It is for the council to decide what steps it needs to take to balance its budget and I understand that the full council will meet on 22 February to consider the situation.
Of course, local government is independent of central government. That said, the Government have been aware of concerns about Northamptonshire County Council’s finances and governance for some time. This is why, on 9 January, the Secretary of State appointed an independent inspector to undertake an independent best-value inspection. The independent inspection is due to report on 16 March and, as the Secretary of State made clear in the Written Ministerial Statement of 9 January, it would be inappropriate for the Government to comment while this is under way, specifically to avoid prejudicing that inspection. The Government will address the wider issue of funding for local government in the local government finance settlement debate tomorrow.
The issuing of a Section 114 notice is a serious step. I understand that this development will be causing some concern in the honourable Member’s constituency and across the entire county. However, it is also a sign that the council is taking its responsibilities seriously. The Secretary of State and I will be taking a keen interest in the steps it takes to resolve these matters and ensure that it continues to deliver for the communities that it serves”.
My Lords, I refer the House to my registered interests as a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association.
The actions of the leadership of Northamptonshire County Council are a disgrace, putting vital services for children and some of the most vulnerable members of our community at risk. Does the Minister agree with Philip Hollobone, the Tory MP for Kettering, who described Northamptonshire County Council as,
“the worst-run local authority in the country”,
and said that problems had been “exacerbated by poor leadership”? Does he agree with Michael Ellis, the Tory MP for Northampton North, his ministerial colleague who serves in the Department for Digital, Culture, Media and Sport, who said the situation was dire and that it was,
“time for a change of leadership”?
What action does he propose to take in response to the call from all the MPs representing Northamptonshire constituencies, who are all Conservative MPs, including the Cabinet Minister Andrea Leadsom, who are calling for a commissioner to be appointed to take over the running of this authority?
My Lords, the noble Lord is right that this is clearly a serious situation. The problem is that while the best-value inspection is going on, I cannot comment on it. I am sure noble Lords will understand that. It is effectively sub judice. That said, in September 2017 the Local Government Association went in to look at what was happening in the council and made comments about the council having,
“no financial strategy to deliver a sustainable position”,
and a “short-term focus”. It also said:
“The Council has a poor record of delivering its approved budget”.
That said, it is now for the council officials who have served the Section 114 notice via the finance director to come up with a plan by 22 February, when the full council will meet to consider any relevant plan, to ensure that the council is put back on a stable footing. In the meantime, as I have said, services for vulnerable people and statutory services will continue to be supplied and council staff will be paid.
My Lords, as the Minister will understand, Northamptonshire is not alone in reaching the financial cliff edge. Professor Tony Travers of the LSE, an expert on local government finance, has said:
“I think there are others that are quite close to Northamptonshire’s position … I would be amazed if Northamptonshire was the only council to get into these circumstances”.
Does the Minister agree? Does he accept that the Local Government Association and others have a long list of councils reaching the cliff edge? Has he understood that the Government have accepted the need for extra funding; for instance, to postpone the social care crisis by introducing the social care precept, which means that council tax payers will be paying an extra 11% over the next two years? Are council tax payers still hard pressed or will they continue to pay an additional 5% or 6% each year?
My Lords, I thank the noble Baroness. I shall deal with the second point first, as it is more general and not specific to Northamptonshire, which is what the Statement is about. The social care precept has been introduced in response to widespread concerns, which I think are shared by the noble Baroness and her party, that we needed to do something like this—which will apply to Northamptonshire as well—to give extra leeway in relation to a need that is pressing on all our communities.
Turning specifically to Northamptonshire, the point is that it is alone. It has had two damning audit reports and a Local Government Association inspection and review in September. My right honourable friend the Secretary of State has ensured that there is an inspection on best value. It is the only one currently, and they are very few and far between. Tony Travers is certainly very distinguished, but the evidence I have—I have looked at this and so has the department—is that it is an outlier. Clearly we will keep these matters under review—it is important that we do so—but I certainly do not want people to go away with the idea that there are others at the cliff edge, as Northamptonshire is. There are not.
Is my noble friend aware that I had the privilege of being the Member of Parliament for Northampton South for 23.5 years? Is he also aware that my seven colleagues in the other place are unanimous in their criticism of the way the county council has been run? Does my noble friend recognise that when I was first elected there were five Members of Parliament for Northamptonshire and there are now seven? That reflects the enormous growth of population in the county. I hope the Statement that I understand will be made tomorrow will reflect the needs of those parts of the country that are growing really fast—much faster than the majority are growing.
My Lords, I was aware that my noble friend was a Member of Parliament for Northamptonshire when there were five such MPs. Clearly they threw away the mould when my noble friend ceased to be a Member and now more MPs are needed to handle the workload. There is a very serious issue here in relation to Northamptonshire. It is fair to say that there is a universal view among MPs of the area about the seriousness of the issue. I watched the Statement in the Commons and many of them were accenting governance issues. It is not just a finance issue; there is a very serious governance issue here. Indeed, the chief executive of CIPFA, commenting on this yesterday, said that although Northamptonshire, along with many other local authorities, certainly faces challenges, other authorities had met those challenges and Northamptonshire had not. That was the essence of what he said, and that is very important and instructive with regard to what is happening there.
Would the Minister care to speculate about how much of the problems of Northamptonshire County Council are self-inflicted—the words of Philip Hollobone MP—and how much might be the responsibility of the Government for perpetually cutting local authority budgets over the past eight years?
My Lords, in a sense, I have just answered the noble Lord’s point in relation to the comments made by CIPFA yesterday, not from a party-political angle, which say that this is very much a single authority that is not meeting the challenges that other local authorities are meeting. Yes, there is a financial challenge—it would be ridiculous to suggest that there is not—but as far as we can see this is the sole authority that is not meeting those challenges. I do not think it is just a financial issue; it is very much a governance issue as well.
My Lords, I declare my interest as leader of South Holland District Council and the chairman of the Local Government Association. First, we should congratulate the leader of Northamptonshire County Council on calling the Local Government Association in to do a peer review of its financial situation. She is a relatively new in that position. It is also worth noting that if that council received the average county council funding, it would have more than £20 million a year extra to spend on its services, so this problem is much more complicated than it appears on the face of it. I look forward to hearing the Minister’s response to my request to see the independence from government that we are now being given for the first council that decides it needs to put its council tax up by more than the level that the Government approve at the moment.
My Lords, my noble friend is right that the leader took that initiative to initiate the peer review. Peer reviews are important across the piece, and the LGA receives roughly £21 million so that that can happen. She certainly deserves congratulations on that. As I say, the peer review found that there were governance issues such as a lack of transparency, no culture of challenge and so on. The comments made by the peer review are important in looking at what has gone wrong in Northamptonshire. As I say, there is also a best-value inspection going on, which will report on 16 March. Clearly, we cannot comment on that while it is under way.
My Lords, I declare my interest as a member of Sheffield City Council and a vice-chair of the LGA. The Minister just said from the Dispatch Box that no other councils are near to going over the cliff edge. The Local Government Association produced a report at the end of 2017 which said that by 2020, if the financial crisis for local government is not solved, up to half of local authorities will go over the cliff edge of not being able to pay for non-statutory services. Will he reflect on the Statement he has just made and take a deep look at the financial crisis that many local authorities find themselves in across the country?
My Lords, the noble Lord’s statement, as he will see when he re-reads it, is based on a hypothesis—“if something happens, and then if something else happens”. I am merely reflecting the current position and cannot speculate about what might happen in two to three years’ time. That will clearly be a different situation and, as I indicated, this is something we keep under review. But at the moment, this is the sole authority in this position. These are unique circumstances, partly financial and partly about governance. I wanted to provide that reassurance to the House.