Nottingham City Council would have to raise council tax by 50% to carry on as it has, commissioners say

Nottingham City Council is operating 'significantly beyond its means' and would need to raise council tax by nearly 50% to keep running as it has done. The three commissioners sent to oversee the Labour-run authority say the challenge of fixing Nottingham City Council "cannot be overestimated" after its effective declaration of bankruptcy last year.

Strong progress is being seen by the commissioners after sweeping changes in personnel, which have seen the council's chief executive, leader and finance director all being replaced since it issued a Section 114 notice in November 2023. Yet huge challenges remain, with a "strained" relationship between councillors and officers and "haphazard" decision making being among the problems noted in the first report by Nottingham's three commissioners, published on Thursday (December 12).

The report, written in August but only just published, says there is a lack of "cohesion" among staff and that arrangements for setting a balanced budget next year are "fragile". The report says: "The challenges facing the council have been well set out in a succession of independent inspections and reviews over a period of years.

Should Nottingham City Council have managed its finances better over the last 10 years? Let us know here

"They are considerable. They manifest themselves most notably in the council operating considerably beyond its means. Notwithstanding that financial challenges face the sector as a whole, it is sobering to reflect that in order to continue operating as it has done, the council would require a 70% uplift in government grant funding.

"Alternatively, it would need to raise council tax by 46%. Such impossible solutions must be avoided, and they can be."

The trio of commissioners, led by Tony McArdle alongside Margaret Lee and Sharon Kemp, were appointed in February 2024 for a period of two years. They succeeded a government-backed Improvement and Assurance Board (IAB) which was sent to the council in 2021 following issues including the collapse of Robin Hood Energy.

The commissioners have significantly more powers than the IAB, though, including the ability to hire and fire council officers and propose changes to the council's budgets. The team was told to report on the council's progress every six months and, in their first report, the commissioners make clear that they have not yet had to use their powers.

Yet the commissioners say the council still has a long way to go, calling for "cultural change" across the authority. A review of the council's hybrid working policy is underway as the report says the visibility of senior managers is not "greatly evident".

Making Nottingham capital of the East Midlands is 'some way off'

A more "robust" method of monitoring the performance of the council's highly-paid senior directors is also being promised. Although acknowledging that the current leadership of the council has a better grip on problems than past administrations, the commissioners say plans to return Nottingham to being the capital of the East Midlands remain "some way off".

It comes after Nottingham City Council revealed its budget plans for the coming financial year, beginning in April, just days ago. Savings worth more than £24 million are planned across the coming years, but the authority says more work is needed to close budget gaps which at the last prediction were worth more than £170 million.

In terms of how the council will have to change, the report says: "This existing overspend challenge, the fragility of the council's arrangements for setting next year's budget, its record in terms of delivery of change, and the uncertainty of what the long-term operating model will look like will all have to be taken into account.

"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.

"It should be recognised that the council does not have a good record and delivery of savings, and it must rise to the challenge of this. This challenge cannot be overestimated."

City council leader agrees authority is running 'beyond its means'

Neghat Khan and Sajeeda Rose, the leader and chief executive of Nottingham City Council respectively, have issued a joint response to the first report by the commissioners, saying: "Commissioners have highlighted the firm cooperative working relationship they have with the council and that we have welcomed them constructively and established a positive and productive approach to engaging with them.

"They have also said that, as new leader and chief executive, we have faced up to the challenges that the council must tackle in full acceptance of the reality of the difficulties and have a declared resolve to overcome them. 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.

'Difficult decisions to come' in Nottingham, government says

Local government minister Jim McMahon has welcomed the report from Nottingham's commissioners and says that, in their next review, he wants their views on when they can exit the council. Currently, the lead commissioner is being paid £1,200 for every day of work and his two colleagues are each getting £1,100.

The team are also entitled to expenses including lunch, though Tony McArdle has previously made clear he and his team will not regularly be claiming for meals. Mr McMahon says in his response: "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." The next report is set to be sent to the government by March 22, 2025.

A Labour Party spokesperson said: "We welcome this report from the commissioners, highlighting the progress that has been made at Nottingham City Council and the commitment of Labour councillors to reform and recover. We know there is still a long way to go, but as the report says, the leadership of the council understands the challenges ahead and will continue to work positively with the commissioners going forward.

"It has been a tough landscape for local authorities after a decade of cuts and financial mismanagement from the previous Conservative government. This Labour government will bring stability back to local authorities, giving them multi-year settlements so they can plan ahead, and providing a 3.2% real-terms funding increase for 2025-26."