The Government could be forced to “suspend” Middlesbrough Council.

City councilors have agreed on an action plan to improve authority after the government crisis deepened.

A report from auditors has been forwarded to the government’s leveling department, which could impose the “ultimate sanction” if the council fails to meet its obligations.

Auditors have found that Middlesbrough Council is not making sufficient progress in tackling problems, leading them to reveal a “general lack of trust” among councilors and between council officials and politicians last year.

They have seen signs of improvement but say the council is not moving quickly enough to address “significant cultural and governance weaknesses”.

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

They have identified new significant weaknesses in contracting, procurement, financial performance and budgeting, with “minimal financial headroom available to absorb future financial pressures” and a “very real risk” that the company will be unable to meet its obligations and may need to stop all new spending. They also found weaknesses at the troubled Middlesbrough Development Company, which is now being wound up.

Now they have widened the matter to 11 statutory recommendations relating to corporate governance, deteriorating finances and ensuring greater control, the constitution, rules on financial and contractual procedures and the Middlesbrough Development Company. If the council fails to do so, the auditor could produce a “public interest report”.

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This could lead to the Department for Leveling Up, Housing and Communities (DLUHC) appointing independent commissioners to run the council, a council report says. This could include the suspension of democratic processes and the withdrawal of decision-making powers from all elected council members.

Back in January, the DLUHC delivered a 12-month “best value” notice to the council, in which Secretary of State Michael Gove will consider powers to inspect or intervene if the body fails to sort out its governance issues. And a review by professional accounting body CIPFA found last year that council staff said they had been bullied and intimidated and felt embarrassed by the behavior of politicians.

The council also faces a projected £11.5m overspend this year, a projected budget deficit of £14.2m next year and “critically low” reserves amid high inflation and higher demand for services vulnerable adults and children face. Council leaders are working on a services “transformation program” to stabilize finances. However, this will require significant investment, which will need to be covered by the sale of council assets.

Middlesbrough Council building (Image: LDR)

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

“This process will not end this year. This will be an ongoing process to ensure we are working absolutely within our requirements. I am very confident that we can do it.”

On budget pressures, he said: “We are in extremely difficult times financially. We are planning a number of transformations across various services.

“We need to make sure we do this transformative work. While investments are being made in services, there may be changes in the way those services are operated. What’s important is that we deliver our services efficiently to ensure we deliver value for money.”

Chief executive Clive Heaphy said: “Overall this is an extremely serious document. When it comes to the level of statutory advice as it stands, this is a further level of seriousness and requires us to adhere to it.

“If we fail to comply, the final step will be to publish a public interest report, which would be extremely serious. In fact, we are in the middle.

“The report was issued on the grounds that we have not made sufficient progress to date. The report has already been sent to the Minister for Leveling Up, Homes and Communities.

“Rest assured, we are not talking about historical issues here. We are talking about ongoing problems and the Council’s failure to make sufficient progress in tackling them. That is ultimately the examiners’ concern.

“It’s really important that we as an authority show that we have the best interests at heart, that we deliver quickly. It’s really important that we all work together as officers and members.”

Council members voted unanimously to approve the auditors’ recommendations and the council’s response and action plan.