Nottingham City Council 'at risk of bankruptcy', report says

The report found the council's finances had been out of control for the past four years

Nottingham City Council is at risk of having to declare bankruptcy without a significant bailout, a government inspector has warned.

A rapid review of the authority's finances was ordered following the collapse of its company Robin Hood Energy.

It found the council could not afford to approve a legally-required budget for 2021-22 as it stands.

Nottingham City Council said it accepted the review's findings.

The investigation was instigated by the Ministry of Housing, Communities and Local Government after the collapse of Robin Hood Energy.

The council had set up the not-for-profit firm in 2015, claiming it was the first local authority-run energy company in the UK.

It aimed to tackle fuel poverty but lost more than £38m and collapsed with the loss of 230 jobs.

It sold the customer base to British Gas in September.

Robin Hood Energy supplied 10 council-run energy providers across the country and claimed Jeremy Corbyn as a customer

The review's conclusions, not yet formally published but seen by the Local Democracy Reporting Service, include:

• The council is not in a position to approve a legally-required budget for 2021-22 as things stand. If it cannot do this, it would have to issue a Section 114 notice - effectively declaring itself bankrupt

• Council reserves are deteriorating year-on-year, and are now the second lowest of all core cities

• The council has been instructed to conduct an "in-depth review" of all its companies to determine the future status of them, and told to bring some in-house 

• Criticism of the use of councillors on the boards of council-owned companies without sector-specific knowledge

• A three-year recovery plan must be submitted to government by next month to plug a hole of between £53m and £64m by 2023-24

Bankruptcy for the Labour-run council would mean a freeze on non-essential spending, putting thousands of jobs at risk.

David Mellen said he accepted the report's conclusions

The review, led by Max Caller, said: "Four years ago, Nottingham started to lose control of their budget. They were advised that they needed to address these issues. Both managerial and political leadership failed to heed these warnings and take the necessary action.

"Today, it is clear that the council cannot balance its 2021-22 revenue budget without support."

However, the report did say it was "impressed" with the current leadership's commitment to tackling the problems and said a new government panel would be set up to monitor progress.

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Nottingham City Council leader David Mellen said: "We fully accept the findings and remain committed to making the improvements needed to ensure we are the best we possibly can be as a council.

"The review clearly raises serious issues around financial management and governance that need to be addressed urgently."

Andrew Rule, leader of the opposition Conservative group at the council, said it was "yet another report that details how the controlling Labour group have mismanaged the council's finances and wilfully ignored the advice of senior financial officers to curb their reckless spending".