City council operating “significantly beyond its means” and “currently far from sustainable” but leadership has grasped reality: Commissioners

Nottingham City Council has been operating “considerably beyond its means”, to the extent that to have continued doing so would have required either a 70% uplift in Government grant funding or a 46% increase in council tax.

That finding comes from the first report by the Commissioners sent into the local authority, which was delivered to the Ministry of Housing, Communities and Local Government in August but published this week (12 December).

The Commissioners – Lead Commissioner, Tony McArdle; Commissioner for Finance, Margaret Lee and Transformation Commissioner, Sharon Kemp – wrote: “Such impossible solutions must be avoided, and they can be. By becoming substantially more efficient in its operations, through modernising and transforming the nature of its service operations and back office, optimising processes, and improving performance, a return to balance is possible in the medium-term and can be made sustainable thereafter.

“Services will have to change quickly as part of that process, and such change is inevitably difficult, but the solutions that we are pointing the council towards are those which other councils have successfully achieved in the most critical areas of delivery.”

The Commissioners said they had established “a firm, cooperative working relationship” with the council. “Despite finding our appointment a challenge, the council has welcomed us constructively and has established a positive and productive approach to engaging with us.”

The report added that a new leadership cohort was facing up the challenge that Nottingham must tackle “in full acceptance of the reality of the council’s difficulties and a declared resolve to overcome them”.

There had been no requirement for the Commissioners to use so far any of the powers made available to them under the directions in order to effect change, the report said.

The Commissioners continued: “Nottingham shares the desire of much of the sector to go beyond what is currently provided, and to expand its operations in the interests of the citizens of the city. It now recognises that it will be able to do this only when it restores its capability, embeds financial discipline, and takes advantage of learning from established best practice elsewhere to adapt to its own circumstances. Until it does those things it will continue to require exceptional financial support.

“While we are confident that what is necessary is now well appreciated at a senior political and managerial level, considerably more work is necessary to ensure that the degree of change the council must undergo in order to become sustainable is undertaken and becomes embedded throughout the organisation.”

In relation to governance and leadership, the report revealed there had been an acceptance that, under its Improvement Plan, the council “will be smaller, and that it will deliver less, but that it will focus on delivering well, and will look to different delivery methods as may be necessary – a departure from the historic assumption that the council will be the default deliverer of services”.

The council should take advantage of digital methods and AI (currently underutilised), rationalise its operational estate, place greater emphasis on early intervention, and make better use of data and intelligence.

“Critically, it determines to find and deploy best practice in service delivery, and to apply robust financial management in support of that deployment. It addresses measures to improve management of risk and of performance. All of these changes will be of critical importance,” the Commissioners wrote.

The report described the governance arrangements for pursuit of the Improvement Plan as “sound on paper”.

It added: “Beyond this, the formal structures and governance arrangements of the organisation, the informal arrangements which are in place to supplement them, and the mechanisms for the implementation of decisions are all either being changed or are due to change, as these important aspects of governance have often proved inadequate in the past.”

The Commissioners said Nottingham’s Chief Officer Corporate Leadership Team (CLT) had not historically operated as a leadership cohort possessed of a common goal and had not delivered as a whole which is greater than the sum of its parts. Putting in place these characteristics is a key priority for the new chief executive.

Delegation of decision making is meanwhile haphazardly applied, and accountability does not always accompany it. “This builds in delay, risk, and cost. It also engenders frustration.”

The report noted that relationships between the political leadership and senior managers had consequently become strained over the years.

“These relationships are being reset, and expectations made explicit. A structured, owned, and supported process of effective delegation of leadership and decision making in the council is a specific objective with associated actions in the Improvement Plan,” it said.

“This will lead to decisions being taken at the lowest possible level and supplant the discouragement of ownership which has inhibited officer career development, leading to poor levels of staff retention and of job satisfaction.”

There is also a need for more visible governance, with webcasting of council and committee meetings to be introduced as soon as practicable, the report said.

The report also covers issues faced by the council in relation to people, sustainability (the council faces a gap of £172m over the next three years, according to its Medium-Term Financial Plan), and systems and processes.

In their conclusion, the Commissioners wrote: “The council operates significantly beyond its means and is currently far from sustainable. It requires rapid modernisation of its service operations and the taking of difficult decisions to bring this about. It requires thorough application of better working methods and the systems for supporting these. It requires debt to be paid down through rationalisation of its estate and the sale of surplus assets.”

They added, however, that Nottingham’s leadership, at both a political and managerial level, had grasped the reality of this position and were demonstrating a growing understanding of the reality of what the council needs to do to get out of it.

In his response to the Commissioners, Jim McMahon, Minister of State for Local Government and English Devolution said it was clear that Nottingham faced significant challenges, but added that he was encouraged to see that the council leadership were aware of the scale of challenge that they are facing.

He suggested that the Government would play its part by repairing the foundations of the local government sector overall, and that it would “hardwire stability and security into the system with multi-year settlements and fewer restrictive grants”.

This would allow councils to focus spending on local priorities, he said, adding that the Government would set out and measure progress on the key services and outcomes it expects local government to deliver. “These measures as a whole go hand in hand with the work to make every council fit, legal and decent with a rebuilt system of accountability and oversight.”

The minister added: “In Nottingham, the road to financial recovery must be met with the seriousness it deserves, and I am pleased to see a clear commitment to move to a new operating model.

“Because of the scale of the challenge in Nottingham it is self-evident that there will still be difficult decisions to come. It is essential that in making these decisions there is a clear strategy for the form the council will take as its new operating model, and that prevention and reform of local public services is central to it.”

McMahon said: “I want central government to be a supportive partner to local government, and Nottingham’s strong relationships between the Commissioners, the Council and the Ministry is a good example of how we work in partnership to support a shared focus on recovery and reform.”

Nottingham City Council’s Leader Neghat Khan and Chief Executive Sajeeda Rose said the Commissioners’ report outlined the significant progress the council was making but that there was still much work to do to bring about the change needed.

They said: “The fact that Commissioners have so far not needed to use any of the powers they have available with the full council to make change clearly demonstrates that they feel we are heading in the right direction and that we understand what needs to be done.

“But we are under no illusions about the challenges ahead, in particular that we are operating considerably beyond our means.

“Our Budget proposals for next year and our ongoing Improvement Plan will give the council financial sustainability for the years ahead, ensuring we put our house in order and get the basics right. We want to deliver a renewed council providing the high-quality services that local people expect and deserve from us and which has an ambitious vision for leading the city forward.”