Potential merger of Middlesbrough Council and Redcar Council

Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, has previously proposed “rationalising” back office services between Middlesbrough and Redcar and Cleveland Councils to make savings.

However, he has now gone a step further by floating the idea of a full merger between the two.

Mr Clarke made the comments in response to failings by Middlesbrough Council to publish its audited accounts. As well as having to publish their unaudited accounts by a legal deadline, councils are also expected to publish accounts once they have been through an independent financial inspection.

The Middlesbrough Council building (Image: LDR)

The deadline for draft accounts for 2022/23 was May 31 and September 30 for audited accounts. Middlesbrough, which has a forecast overspend of more than £8.5m against its budget for the second quarter, has failed to publish its audited accounts for the past two financial years.

“It is critical that Middlesbrough Council is open and transparent with its finances,” said Mr Clarke. “This should include the urgent publication of all due accounts.

“Meanwhile, the current fire sale of assets apparently underway needs to be proven to deliver best value for the people of Middlesbrough rather than being deployed to plug holes in a sinking ship. The only way we can possibly have that kind of confidence in the council’s finances being managed properly is to have accurate and up-to-date information.

The Redcar Council building (Image: LDR)

“The current situation further strengthens the case for a root and branch review of how back office services between Redcar and Cleveland Borough Council and Middlesbrough Council could be joined up. Doing so would prevent huge duplication at the taxpayer’s expense.

“The current situation at both Middlesbrough and Redcar and Cleveland councils begs the question of whether a full merger might create a more resilient and sustainable local authority.”

Middlesbrough Council declined to comment on Mr Clarke’s remarks but previously said backlogs of audited accounts are a national issue faced by many authorities and “a common picture across the country”.

The council website said “the delay is due to awaiting the resolution of audit work on the 2021-22 accounts” This itself was delayed because of a “complex set of factors contributing to audit delays across the sector”.

The Local Democracy Reporting Service has also contacted Redcar and Cleveland Council for comment. As previously reported, the council may have to make cuts to jobs and services to fill an expected £7.7m budget shortfall.

Simon Clarke MP (Image: PA MEDIA)

Regarding its draft accounts, the council website states they were not completed by the May deadline due to “a delay in confirming balance sheet valuations of pension fund liabilities”.

Local audit is an annual check on public sector finances by an external, independent auditor to determine whether the council is complying with current accounting standards, laws and regulations.

Auditors are also required to make a statement on the value for money that local authorities are delivering. Since the Audit Commission was abolished in 2014, the number of local audits completed on time has plummeted.

Research for Action, which represents a range of organisations and individuals working on audit and accountability, said council audits provide a “crucial opportunity” to scrutinise finances and decision making. They are currently in “a terrible state”, said a spokesperson, with Middlesbrough Council “among the worst offenders”.

This is despite the recent warning that the council is has “critically low” reserves as well as an £8.5m predicted overspend against its budget for the second quarter of the financial year. Without action, the council could be forced to issue a section 114 notice, effectively declaring it bankrupt.

A spokesperson for Research for Action said “With a record number of local authorities facing the Section 114 notices that signal possible financial collapse, it is imperative that auditing is carried out in a timely and thorough manner. Inaction is hurting the local government sector, and stifling democratic participation.”

Middlesbrough MP Andy McDonald noted that councils up and down the country are falling behind in publishing their audited accounts and blamed the “additional issue of four years of an independent/Tory coalition to clean up after”.

He said: “Middlesbrough Council is now in a position whereby it is having to sell key assets such as the brilliantly successful Tees Advanced Manufacturing Park which was initiated under the forward thinking of the then Labour Mayor Dave Budd.

"The new Labour administration and the new council chief executive have got the devil’s own job on their hands to put the council back on a sound footing. But they have my full support in all their efforts to do exactly that.”

The move would be to save money for both councils (Image: Newsquest)

The Taxpayers Alliance said just 31 British councils, under 10 per cent of the total, have released audited accounts for 2022/23. And 97 councils, including Middlesbrough, failed to publish any accounts in 2022/23.

Elliot Keck, head of campaigns at the TaxPayers’ Alliance, said: “It’s unacceptable that struggling Brits have to stump up for growing council tax bills when their town hall bosses either won’t or can’t show them what they’re spending their money on.”

Meanwhile, a cross-party group of MPs has now published a report on the matter which calls on the Government to introduce rapid changes to the system used by councils in publishing their accounts.

Labour’s Clive Betts, the Chair of the Levelling Up, Housing and Communities Committee which produced the report, said: “Local audit is in crisis and the Government must act to fix it. Serious delays in local audits mean that many councils are not fully sighted to problems while they make major financial and service decisions, with audit delays also leaving local taxpayers in the dark.

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“The growing backlog of audit opinions seriously undermines efforts to hold councils to account for their financial management.

"The Government now needs to set out urgently what it will do to clear the backlog, re-establish trust in local audit, and accelerate its efforts to establish a local audit system leader.”

A spokesperson for the Department for Levelling Up, Housing and Communities said said the Government is working with the Financial Reporting Council and others to tackle the local audit backlog and “put the system on a more sustainable footing.”

In July, the then Minister for Local Government wrote to the sector and the Chair of the Levelling Up Committee to share proposals, agreed in principle with key partners, to address the issues, they said.

“We intend to begin implementing changes as soon as possible following further engagement,” added the spokesperson.