How does a council become effectively bankrupt?

“… Earlier this month, Northamptonshire went effectively bankrupt, becoming the first local authority in two decades to issue a section 114 notice. This signalled that its finances were so precarious it would be unlikely to balance the books this year and was at risk of being unable to set a legal budget for 2018-19.

As a result, One Angel Square [its new HQ] is likely to be put up for sale, three months after it was formally opened by the communities secretary, Sajid Javid. A fire sale of assets is the only way to keep the council afloat, say officials, though even this temporary fix may not be enough to save it.

… The council’s predicament has triggered bitter recrimination among local Tories. Northamptonshire’s seven MPs, all Conservatives, accused the council of mismanagement. Heather Smith, the council leader, said the government had starved it of funds. Eighteen backbench Conservative councillors called on Smith to resign.

The irony is not lost on some observers that the first local authority to go bust under austerity is not the profligate Labour municipality of media caricature, but a Tory-run council in the heart of middle England.

Penny Smith, the council’s Unison branch secretary, said: “Can you just imagine if this was a Labour authority? They’d be saying ‘Typical Labour, can’t run anything’.”

Furthermore, it has crashed after rigid adherence to the Tory ideological rulebook for local government. Northamptonshire embarked on a “next generation” reform plan in 2014. Services would be outsourced or turned into profit-making companies. The council would drastically shrink in size and be run like a business. “The old model of local government no longer works,” it declared.

The grand plan failed at a cost, say critics, of more than £50m on consultants and rebranding. Expected efficiency savings did not materialise, some privatised services have since been hauled back in-house, and the scheme’s political architects, including the then council leader Jim Harker and the then chief executive Paul Blantern, have departed. After years of freezing council tax bills on principle, the authority has raised them by 6% from April.

… Northamptonshire’s future remains precarious. A government inspection into alleged financial and governance failures will report back in March. Staff morale is at rock bottom, said Smith. There is speculation that the county could be abolished and merged along with its five constituent district councils into two new unitary authorities.

There are fears that a handful of councils could follow Northamptonshire into bankruptcy. Conservative-run Surrey county council has a deficit of more than £100m. A survey by the Local Government Information Unit thinktank found eight out of 10 councils were concerned about their finances.

McLaughlin has warned Northamptonshire’s councillors that they should not assume the government will ride to the rescue. Ministers have promised a review of council funding, but this “is more likely to be concerned with the distribution of an ever-shrinking quantum of support than a major injection of spending power”.

https://www.theguardian.com/uk-news/2018/feb/11/northamptonshire-county-council-effective-bankruptcy-tories-cuts

One thought on “How does a council become effectively bankrupt?

  1. Proof for anyone who still hasn’t realised it yet that the Conservatives have all but destroyed this country.

    They are so busy looking after the interests of their ultra-rich donors, and so busy following an ideological privatisation dogma that was discredited years ago, that they are completely unable to open their own eyes and see what they have done to us.

    Like

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