It is the first time the Local Government Finance Act 1988 order, which requires the council to agree a balanced budget and avoid new expenditure, has been issued in almost two decades – the last authority to take action was Hackney Council in 2000.
By February, then-Communities Secretary Sajid Javid had already called for an independent government investigation by Max Caller CBE. The verdict Caller returned in March was damning, saying: “The problems faced by NCC are now so deep and ingrained that it is not possible to promote a recovery plan that could bring the council back to stability and safety in a reasonable timescale.”
Now, in the wake of the judicial review, council leader Matt Golby has pledged to “work closely with community groups, partners and interested parties within the wider context of the council’s budget recovery programme”.
But Graham Croucher, the chairman of campaign group St James’ Resident Association, has hailed the ruling as a “people’s victory”. He describes how seven-day library operations cut to just three days since February with slashed arts and craft sessions, newspapers, magazines and staff.
“We are pleased with the ruling but the real work starts now,” says Graham.
“It’s up to the NCC to come to us now to talk about what their plan is. Whatever financial compromise they arrive at, they have to ensure they comply with the law. We will continue to hold them to account.
“This was a grassroots campaign. It was a people’s victory. Now it needs to continue to be so.
“It’s like (former RMT boss) Bob Crow said: ‘If you fight you won’t always win. But if you don’t fight you will always lose.’”
Councils can’t cut services without showing their evidence – there has to be justification for their actions
The battle will rage on in Northamptonshire, where the blame has been laid on financial mismanagement, but “unfair funding” could see the story repeated elsewhere.
The County Councils Network found just one-third of council leaders were confident of delivering a balanced budget without an extra cash injection by 2020/21.
East Sussex County Council has already retreated to a “core offer” policy with the finger pointed at funding cuts, while unitary authority Torbay Council halted all non-urgent expenditure last week after forecasting a £2.8m overspend.
But will they still be able to look to libraries closures to get back in the black following this week’s ruling?
Caroline Barrett, the Irwin Mitchell solicitor who argued the case against NCC last week, believes the case is one of many that underlines the cuts cannot be unlawful, citing a ruling in Bristol earlier this month that halted a £5m cut to funding for children with special needs.
“There is a pattern now of judgements where judges have ruled that just because councils have to balance the books it does not mean that they cannot comply with the law,” she says.
“Cuts cases are happening all over the country right now and it’s not just libraries – it’s children’s centres and care provision for vulnerable people.
“Councils can’t cut services without showing their evidence – there has to be justification for their actions.”
Can a council go bankrupt?
Unlike a public or private limited company, a council cannot be wound up and liquidated when it is insolvent. Instead, the chief financial officer must issue a section 114 order, under the Local Government Finance Act 1988, when the council cannot provide a legally required balanced budget. This triggers a 21-day breathing period in which all current services continue as normal while a cabinet meeting must take place to arrange a new balanced budget – by deciding what services or staff can be cut or buildings or land can be sold and leased back to free up cash. No new expenditure can be taken on, although statutory services and safeguarding vulnerable people must be maintained, while council retreat to the bare minimum or “core offer” service.
Image: Rachel Page