A “broken system” and “toxic environment” have been blamed for failures in the running of a council’s international health consultancy business.

Councillors heard how the controversial Northumbria International Alliance (NIA) was not subject to proper scrutiny within Northumberland County Council.

The authority’s participation in the business, which was set up in 2017 in partnership with Northumbria Healthcare NHS Foundation Trust and delivered healthcare consultancy in places including China, has been put under the microscope over the past year.

An independent investigation was commissioned after “unlawful” council spending was identified in relation to the NIA between 2017 and 2021, because it was not set up with the correct company structure. 

Sharing the findings of his investigation at an audit committee, external adviser John Gilbert said that the business was “never set on solid foundations”.

He told councillors there were no proper scrutiny or accounting processes for the NIA, which was run as an “unincorporated partnership”, and that decisions over it were wrongly taken at “informal” meetings of the council’s cabinet.

Mr Gilbert, a former chief executive of Swindon Borough Council, said the fault was not down to one individual but to a “broken system”, a “complete breakdown in trust” between council officers and politicians, and an “increasingly toxic environment” for local authority staff.

He added: “Those are not my words, they are the words of a number of individual memes and officers who I spoke to. If there was one thing that was uniform about this, it is that the environment they were working in at times was impossible... Many people felt they were operating in an environment where constructive challenge was discouraged.”

Despite the “hurt” caused by the NIA episode, Mr Gilbert said the council had to move on and “understand the lessons learned”.

A council report identifies 14 “key learning points” from his investigation, as well as 23 recommendations – six of which have already been completed.

Liberal Democrat Jeff Reid questioned why the council ever wanted to be involved in an international business, saying it was a “mystery to me how we ended up in this state”.

Conservative council leader Glen Sanderson later told the meeting that he was branded “racist” when he had questioned why the council had dealings in China.

Cllr Reid said: “Way back when, who among us thought it was going to be a good idea touting for business that we don’t know anything about in countries that perhaps we aren’t of the same view of in terms of how public business should be conducted? I can’t remember when we decided to do it and why we decided to do it. 

“Councils should be concentrating on delivering services in their area, then maybe next door to that doing work to fix traffic lights or street lights together and have companies doing that. This whole project, to me, has just been mindless really.

“The people who talk to me and question me say ‘what are we doing conducting business in China and Saudi Arabia or wherever else it was?”

Several councillors also raised concerns about the use of informal cabinet meetings to make decisions, which Labour’s Lynne Grimshaw said must “never happen again”.

Former Tory council leader Peter Jackson insisted that political leaders had asked questions about NIA, after suggestions that some councillors were not “inquisitive” enough, but that there was no documentary evidence of it.

Cllr Jackson, who was dramatically deposed in 2020, added: “One of the major reasons that no formal decisions were made, and I understand that informal cabinet was not a decision-making body, is that when you are making a formal decision you need the information to base it on. We asked time after time after time for proper budgets and accounts for those."

Cllr Nick Oliver, who served in Cllr Jackson’s cabinet, also claimed that he had previously asked whether the international business would be in the sights of the council’s internal auditors and was told it would “never happen”.

Mr Gilbert’s report noted that it was “impossible to quantify with any degree of certainty” whether NIA made a profit or a loss – but that it “does not appear that the council suffered any financial loss, and may in fact have made some net gain”.

Cllr Sanderson later told the Local Democracy Reporting Service that the council would “absolutely not” pursue another international venture similar to NIA.