Government eases Northamptonshire County Council's financial problems

The sale of One Angel Square has boosted the council's fortunes.
The sale of One Angel Square has boosted the council's fortunes.

The financial woes of Northamptonshire county council have been lightened after the government has allowed it to use the proceeds of the sale of One Angel Square to wipe off last year’s deficit.

An announcement this afternoon by the secretary of state for local government’s office has made the council’s finances far less precarious and will be welcomed by the teams of staff working to make sure the authority balances its books this year.

The statement said: “The Government has granted the Council’s request to use £70m of capital receipts to help balance its books. This significant step – called capitalisation dispensation – will help the council to reduce its deficit and put it on a more sustainable financial footing.”

Last year the authority had overspent by £35 million and ended the year with a negative balance. It was the only council in the country to do so.

It also forced the council to announce a whole raft of reductions to services.

The request for capital dispensation had been made to central government by the two commissioners who had been sent in to turn the failing authority around.

Leader of the council Matt Golby has hailed the Government’s decision as a significant step and praised the commissioners.

He said: “I am delighted the commissioners have been successful in their request for a capital dispensation.

“This will enable us to use our own resources to tackle the £35 million deficit from 2017/18 and replenish our reserves to put us on a sustainable financial position.

“We’re pleased that the Government has recognised the robust steps taken by the authority to stabilise the council’s position, and the approval of the capitalisation grant is a significant step in the council’s recovery journey.

“Working closely with the commissioners we are now making progress towards greater financial stability.

“This month cabinet approved a new Transformation Strategy, while our latest financial reports show how we are now moving firmly towards stabilising our budget.

“Next week we will be publishing our next draft budget proposals which will build on this work.”

The authority added £64 million to its coffers this spring when it sold its new headquarters. However the 35-year buy-back deal will cost taxpayers £70 million in the long run.

Labour councillor Mick Scrimshaw, who is also chair of the council’s overview and scrutiny committee, said the decision was welcome but ‘bizarre’.

He said: “This is big news. First of all it gets rid of the deficit and so there is no longer a legacy debt. It takes all the pressure off having to balance the budget this year.”

But he added: “It is clearly politics. The Conservative government did not want the political embarrasment and for that reason they have been allowed to use these capital receipts.”

The councillor also said he thought it was ‘ironic’ that the incorrect use of capital receipts, in part, got the council into its financial mess last year.

It is an unusual move as capital receipts are, as a rule, not allowed to be used by local councils for everyday service spending and instead should be spent on other capital projects.

The budget for 2018/19 is set to be announced on Monday.