Northamptonshire CC will be allowed to use £70m in capital receipts to plug its financial black hole, local government secretary James Brokenshire has ruled. 

Described by Government as ‘a significant step,’ the move – called capitalisation dispensation – will help the council to reduce its deficit and put it on a more sustainable financial footing.

The action is in response to the first Commissioners’ Report on the county, which was handed to Mr Brokenshire in early September and which was published today.

The report reveals a worse than expected picture of the council’s financial collapse, saying: 'The CIPFA analysis exposed the financial position to be considerably worse than the council had anticipated. It concluded that the potential deficit for 2018/19 would be in the range of £60m to £70m.’

The council ‘will incur a £30m overspend against its budget this year 2018/19 in the absence of any corrective action', it added. 

The report claimed 'dysfunction’ under the previous management regime had led to its financial difficulties, but ‘positive cultural changes’ promoted by new staff, including the new chief executive, Theresa Grant, and new finance director, ‘have started to take effect’. 

Reacting to the report, Mr Brokenshire said today: ‘Clearly the situation in Northamptonshire is very serious. I am grateful to the Commissioners for uncovering the council’s true financial position and the robust steps they have taken to improve its financial management and governance.

Mr Brokenshire also welcomed the Stabilisation Plan agreed by Northamptionshire last month for dealing with its deficit and balancing this year’s budget.

Separately, Mr Brokenshire also launched today a two-month consultation process over plans to restructure councils in Northamptonshire, which could lead to the creation of two unitary authorities.  

The plans are based on the proposal submitted to him by seven councils in the county to replace the two-tier system.  If implemented, their plan would see one unitary authority

He also announced that he will delay elections in Northamptonshire, due in May 2010, until May 2020. This follows a request from all of the eight local councils involved.

Consultation responses must be received by 25 January 2019.