Crisis-hit Northamptonshire CC has been told to rip up its 2018/19 budget, which would have made drastic cuts to highways and transport spending, after auditors warned it could be illegal.
The council’s external auditor KPMG has issued an advisory notice under the Local Audit and Accountability Act amid concerns about the authority’s planned use of housing capital receipts.
Auditors warned that the draft budget Northamptonshire intended to sign-off could lead it on a course of action that would be ‘unlawful’ and ‘likely to cause a loss or deficiency’.
The council immediately announced it would not sign-off its budget until spending issues raised by KPMG were resolved.
Huge cuts to highways and transport spending are still in the pipeline however. Highways and winter services budgets were among the high-profile casualties in the emergency draft budget, after Northamptonshire became the first council to issue a Section 114 notice since 2001.
Finance director Mark McLaughlin issued the notice on 2 February, under which no new expenditure is permitted beyond statutory spending and the safeguarding of vulnerable people.
Northamptonshire CC voted on February 13 to slash expenditure on key roads, bus and other transport-related services as part of plans for the authority to save £111m by 2020/21. The county is predicting a £21m overspend in 2017/18, forcing the council into a wide-ranging asset sale.
In recent years, the county has been hit by a toxic combination of central government grant cuts and soaring demand for adult and children’s services. Communities secretary Sajid Javid recently ordered an independent review of Northamptonshire CC, overseen by former Hackney Council chief executive Max Caller.
According to documents submitted to Northamptonshire’s budget-setting cabinet meeting last week, four areas of roads and transport spending could be hit – including two tranches of cuts to highways maintenance.
Under the first tranche, the county would slash spending on road marking, safety services, traffic signal maintenance and weedkilling. Spending on some services could be cut by 50%.
The second tranche of cuts will affect enforcement staffing levels, low-priority roads maintenance, cyclical gully cleansing, depot maintenance and accommodation services and fleet fuel use.
Winter services across Northamptonshire will also be affected. Draft budget documents had described a planned ‘reduction in salt stock levels and the quantity of salt spread in each treatment’.
It also planned to slash gritting routes from 43% of the local road network to 32% during the winter of 2018/19.
Initially, the council earmarked the removal of all funding to support local bus services – although it now appears that financial support will be cut by 50%.
However, Northamptonshire’s budget documents also described how some of the transport-related cuts had to be managed carefully because they could breach the council’s legal duties under equalities laws.
Philip Hollobone, MP for Kettering and a councillor at Kettering Borough Council, raised concerns about local highways spending in Parliament. He told MPs: ‘It gives me no pleasure to say that, with the issue of this section 114 notice, Northamptonshire CC becomes the worst-run local authority in the country.’
He told Transport Network: ‘It is deeply worrying that Northamptonshire is not in a financial position to deliver key services.’
Local government minister Rishi Sunak told Parliament: ‘It is important to note that a section 114 notice does not automatically mean that existing services will stop.’
The Ministry of Housing, Communities and Local Government (MHCLG) this week denied that a decision to reorganise local government across Northamptonshire had already been made and insisted the ongoing review of Northamptonshire’s finances and governance, led by Mr Caller, was genuinely independent.
But senior local government figures said they believed Mr Caller’s review will be used as ‘window dressing’ for reorganisation.
One senior source said: ‘I’d be surprised if a decision to reorganise the county has not already been made subject to the outcome of Max Caller’s review.
'It has looked inevitable for years.’