The government could “suspend” Middlesbrough Council and take away all councillors’ decision-making powers if it does not smarten up its act.

Councillors have agreed on an action plan to improve the authority after a crisis over its governance deepened.

A report by auditors has gone to the government’s levelling up department, which could take the “ultimate sanction” if the council fails to deliver.

Auditors have found Middlesbrough Council is not making enough progress in fixing issues which led them to expose a “pervasive lack of trust” among councillors and between council officers and politicians last year.

They have found signs of improvement but say the council is not moving fast enough to tackle “significant cultural and governance weaknesses”.

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The auditors EY said in their latest report the council “has not made the overall progress we would have expected” since November last year and there had been a “loss of momentum in the council’s response”. They say “A lack of trust between individuals remains a significant barrier to effective governance”.

They have found new significant weaknesses in contracting, procurement, financial performance and budgeting, with “minimal financial headroom available to it to absorb future financial pressures”, and a “very real risk” that it could not meet its obligations and might need to stop all new spending. They also found weaknesses over the troubled Middlesbrough Development Company, which is now being wound up.

Now they have escalated matters to 11 statutory recommendations covering corporate governance, worsening finances and ensuring more robust control, the constitution, financial and contract procedures rules, and Middlesbrough Development Company. If the council does not succeed on these, the auditor could produce a “public interest report”.

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That could lead the Department for Levelling Up, Housing and Communities (DLUHC) to appoint independent commissioners to run the council, says a council report. This could include suspending its democratic processes and removing the decision-making roles of all elected councillors.

Already in January, the DLUHC issued the council with a 12-month “Best Value” notice, where Secretary of State Michael Gove will consider powers to inspect or intervene if it does not sort out its governance issues. And a review by professional accountancy body CIPFA heard last year how council staff reported being bulled and intimidated and were embarrassed by politicians’ behaviour.

The council also faces a predicted £11.5m overspend this year, a projected £14.2m budget shortfall next year and “critically low” reserves amid high inflation and more demand in services for vulnerable adults and children. Council chiefs are working on a “transformation programme” for services to stabilise the finances, but this itself will need substantial investment, to be met through sale of council assets.

The Northern Echo: Middlesbrough Council buildingMiddlesbrough Council building (Image: Picture: LDR)

Middlesbrough mayor Chris Cooke told a full council meeting last night (Monday, September 18): “The governance and the EY report have taken up a considerable amount of time. One of the things that is incredibly important is that we make progress against all the recommendations, and as you can see from the report, everything is either complete or on track.

“This process won’t end this year. This will be an ongoing process to make sure we are absolutely working within the means that we should be. I’m very confident that we’re going to make it there.”

He said of the budget pressures: “We are in significantly difficult financial times. We’re planning a series of transformations across different services.

“We need to make sure that we do this transformational piece of work. There will be investment in services, but there may be a change to how those services are run. What is important is that we run services efficiently, to ensure that we are delivering value for money.”

Chief executive Clive Heaphy said: “Taken together these are an extremely serious document. When it gets to the level of statutory recommendations as these are, this notches it up onto another level of seriousness and requires us to comply.

“Should we not comply the further final stage will be the issuance of a public interest report, which would be extremely serious. Effectively we’re in the middle ground.

“The report has been issued on the grounds that we haven’t made sufficient progress to date. The report has been sent to the Secretary of State for Levelling Up, Homes and Communities already.

“Rest assured, we’re not talking about historical issues here. We’re talking about ongoing issues and the failure of the council to make sufficient progress against those. That is ultimately the concern of the auditors.

“It’s really important if we’re to demonstrate as an authority that we’ve got best value in mind that we’re delivering at pace. It’s really important that we all work together as officers and members.”

Councillors voted unanimously to agree the auditors’ recommendations and the council’s response and action plan.