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Wednesday, 25 November 2020

Nottingham City Council financial review could recommend Best Value Inspection

It comes after the collapse of Robin Hood Energy, with expected losses to the council understood to be around £38 million.

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A ‘rapid’ Government inspection into the financial situation and governance issues at Nottingham City Council could recommend full reforms.

Government inspectors began investigating Labour-run Nottingham City Council at the start of this month, and are expected to make recommendations to the council and the Government at the start of December.

It comes after the collapse of Robin Hood Energy, with expected losses to the council understood to be around £38 million.

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A highly critical external report into the handling of the energy company – which has now been sold to the owners of British Gas – found there had been significant governance failures, and not enough scrutiny of how money was being spent.

The Government inspectors’ report, which is expected to be made public, could recommend that a Best Value Inspection (BVI) be carried out – one of the most serious measures available to the Government.

When this happened in Northamptonshire, it resulted in the entire council being effectively dismantled.

Nottingham’s review is being carried out by lead inspector Max Caller, who was the same lead inspector in the Northamptonshire review in 2018.

The eventual outcome was that Northamptonshire County Council was broken up and split into two smaller authorities.

Conservatives on Nottinghamshire County Council have long been seeking local government reorganisation there, and Nottingham City Council has previously said it would want the borders of the city to be expanded if any such deal went ahead.

Now, the Government inspection is due to be discussed by councillors at a meeting next week.

A council update, which will be discussed by councillors on Friday, November 27 said Mr Caller had made clear to the leaders of the council that he had been asked to recommend actions to the Government, and that a BVI could be a requirement.

The update to councillors states the review will look at: governance, culture and leadership, financial stability, services and the capability to improve.

On the potential outcomes, the update states: “Max Caller formally met with the political leadership of the council and the chief executive to launch the review.

“During this launch meeting, he made it clear that he and the team have been brought in to provide recommendations to the Secretary of State.

“He outlined that a range of different outcomes may arise from the review, ranging from an agreed improvement plan to a requirement for a BVI to be carried out.”

It also states: “The Ministry of Housing Communities and Local Government identified specific questions that they would like the reviewers to ask, exploring the council’s financial sustainability and their management of commercial risk:

“What level of confidence can the department (MHCLG) have in the Council’s assessment of its financial position, particularly its estimate of their budget gap, for 2020/21 and 2021/22?

“What level of confidence can the department have on the council’s plan to mitigate pressures; including the delivery of necessary savings, the existing resources that can be deployed, and their ability to afford borrowing?

“What is your view of the council’s assessment of future financial risks and adequacy of their plan (or ability to plan), to manage those risks?

“What is your view of the council’s approach to mitigating their budget gap under different scenarios for how much financial support is provided?

“What level of confidence can the department have on the council’s assessment of wholly-owned companies, including the viability of companies to continue without any additional council funding or loans?

“How robust are any forward-looking commercial strategies/plans and their long term approach to borrowing and investment?

“Does the council’s oversight and management of commercial and investment risk feel adequate or fit for purpose?”

What is best value?
Introduced in 2000, best value is a government regime aimed at improving the quality of local government services. It was introduced by the Labour government as a replacement for the competitive compulsory tendering (CCT) regime, which was widely resented by local government. It is administered by the Audit Commission which carries out regular best value inspections on council services, from waste disposal to corporate strategy. A separate housing inspectorate within the commission deals with council’s housing services.

What is best value aiming for?

The aim of best value is to ensure that within five years all council services achieve performance levels that were only achieved by the top 25% of councils at the start of the five years. The emphasis of the initiative is on continuous improvement. If a council has improved its performance from poor to average it will get a better inspection report from the Audit Commission than a council whose performance has stayed at average.