Commisioners need to strike deal with Government - or Northamptonshire County Council will be faced with 'very, very difficult decisions'

Yesterday, the cash-strapped authority announced plans to save a further £18.2 million this financial year by slashing agency staff and working with the district and borough councils to increase the amount of council tax collected.

But the so-called "stabilisation plan" does not deal with a £35 million deficit left hanging over from the 2017/18 budget.

Complicated local government rules prevent councils from using capital funds (earmarked for infrastructure projects) on the day-to-day running of an authority unless it is being used to deliver "transformational services".

But a £35 million chunk from the 2017/18 budget did not meet that criteria and was deemed potentially 'illegal' by auditors in February.

The authority is now banking on its two Government-appointed commissioners, Tony McArdle and Brian Roberts, to broker a "capitalisation dispensation" agreement with the secretary of state for communities, James Brokenshire.

The one-off move detailed in a cabinet report yesterday would allow the council to use some of the £70 million in its capital accounts to clear the £35 million debt in its revenue budget.

Yesterday, leader of the council Councillor Matt Golby said that, should the commissioners not get the agreement, desperate cuts could be on the horizon.

"We would be faced with making some very, very challenging decisions," he said.

"In August, we talked about what our priorities are as an organisation.

"We agreed that our priorities would be protecting the most vulnerable and matching the spends in the directorates against those priorities.

"We have those statutory services we have to deliver and, of course, if we dramatically change some of those we know our partners in the police and health have said: 'please be careful on some of the decisions you might be taking, because it will have an impact on us'."

Councillor Golby said the council has been advised it must prove it can balance the books in 2018/19 to stand any chance of being awarded the capital agreement.

However, the council still needs to find an extra £10 million of savings in the current financial year to break even.

Councillor Golby added: "We could either look to fund that £35 million by reducing services more, which I wouldn't be supportive of, or we can look for some dispensation.

"We can't guarantee it, but it is important to say this would not be a bailout.

"When the Max Caller report came out the Government made it clear there would be no bailout because that would be rewarding past failings.

"But on the other hand, Northamptonshire has the money in the bank [of its capital accounts] and could look to pay off last year's deficit."