Friday 1 March 2024
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Former city council deputy leader says up to £40m misspend was to ‘keep the ship afloat’

The former deputy leader of Nottingham City Council has spoken out about the potential wrongful spending of up to £40m of council tenants’ rent money – saying he believed it was done to “keep the ship afloat” for “ethical reasons” so other services could keep going.

Cllr Graham Chapman (Lab) also said councillors were not aware of the full extent of the misspending highlighted in an independent report published on Tuesday 26 April.

The Penn Report into the council’s Housing Revenue Account (HRA) found millions of pounds – which should have been spent on council tenants’ properties including housing repairs – ended up in funds for other council services.

The Housing Revenue Account is strictly ring-fenced for council tenants and cannot be used for other purposes.

But the Penn Report says from 2014/15 this was not the case and in total funding of up to £40m was transferred to the council’s General Fund for all council services.

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The Labour-run authority had already been handed an extremely rare Section 114 legal notice in December for ‘unlawfully’ spending more than £14m of the money.

Further investigations as part of the Penn Report – commissioned by the council – have now uncovered more potential wrongful spending up to £25.6m across Nottingham City Council and the company that manages its housing stock – Nottingham City Homes.

It concludes the practice was first proposed by officers and not first created specifically to move money to the general fund – but “poor governance” allowed it to continue.

Current Nottingham City Council Leader David Mellen (Lab) said on Tuesday (April 26) the authority was committed to dealing with the issue and learning lessons, adding the money had still benefitted local people despite being moved from the HRA.

Cllr Graham Chapman (Lab) was Deputy Leader of the council when the misspending identified by the report started.

Cllr Chapman, who remains a city councillor representing Aspley said: “We were not aware of the degree of this.

“I think what was happening – officers were trying to keep, below the radar, other services going such as libraries, child protection and children’s centres and this was a source of potential income.

“They were pushing the boundaries, but it was done for ethical reasons. I am not going to blame anyone. They were trying to keep the ship afloat and keep services going.

“I do not think we knew the extent. It is a national phenomenon. It was happening across the country at other councils.”

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