Nottingham City Council cuts after energy firm loses millions

When Robin Hood Energy was launched, the council said it was the first local authority run energy company in the UK

A council which is making £12.5m in cuts poured millions of pounds into a loss-making energy firm, a report has found.

Nottingham City Council set up the not-for-profit Robin Hood Energy in 2015 to try to provide cheaper energy.

But by March 2019, the company had lost £34.4m despite large loans from the authority, external auditors Grant Thornton said.

The leader of the council admitted there were failings in its governance.

It comes as the council faces the impact of the coronavirus crisis, with 150 job cuts and the closure of a day centre for people with disabilities proposed last month in a bid to save £12.5m.

The leader of the opposition called for the immediate resignation of a number of senior councillors over the council's "financial incompetence".

'Institutional blindness'

The report criticised the authority for how it handled the company, into which it has invested £43m of public cash and provided £16.5m of guarantees.

It said setting it up was "hugely ambitious" and the risks were not "sufficiently appreciated".

The company had grown rapidly, with a turnover of almost £100m in the year 2018-19, but has made losses every year.

The auditors said it has had to rely on help from the city's finances to keep going, although they recognised if the company had failed, it could have at one point cost the council up to £47.4m.

They said despite the company's deteriorating financial position, the authority had "only very recently" moved away from "a determination to continue at any cost".

The report said this meant the council had "significantly depleted its useable reserves" to support services.

It accused the council of "institutional blindness" to the risks, adding: "This is not how local authorities should look after large amounts of public money."

It recommended the future of the company be determined as a matter of urgency.

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David Mellen, leader of the Labour-run council, said they had the "best intentions" when they set it up in a bid to tackle fuel poverty.

He said there had been changes in leadership at both the council and the company, and new measures were being introduced.

But Andrew Rule, leader of the Conservative group, said: "This report is a damning indictment of the financial incompetence of the city council."