Image caption Council leader Heather Smith resigned following the report's publication

Cash-strapped Northamptonshire County Council should be scrapped, according to a government report.

The report, ordered by Local Government Secretary Sajid Javid, recommends "a new start" which is "best achieved by the creation of two new unitary councils".

Council leader Heather Smith resigned following the report's publication.

Northampton North MP Michael Ellis called the management of the authority a "national scandal".

He said he was "appalled" by the report, which "makes for chilling reading".

Mr Javid called for the report in January after the council revealed it was looking to make budget cuts of about £34m.

The authority was later forced to ban all new spending to balance its budget for this year.

Auditor KPMG then issued a legal warning that led to the council re-working its budget for 2018-19 to make £40m worth of cuts.

Image caption People in Northampton give their verdict on the council's financial crisis

In February, all seven of the county's Tory MPs said they had lost confidence in the authority's leadership.

Conservative councillor Mrs Smith criticised "vicious attacks by four local MPs", adding "you cannot win" if the "machinery of government turns against you".

Max Caller, who led the government investigation, said Northamptonshire should have two new unitary authorities by 2020, one covering Daventry, Northampton and South Northamptonshire and the other covering Corby, East Northamptonshire, Kettering and Wellingborough.

That would mean the county council would cease to exist.

The report said its findings are "very serious" for the council and its residents.

Image copyright PA, UK Parliament and BBC Image caption All seven of Northamptonshire's MPs, including Michael Ellis (bottom left), have previously called for commissioners to be brought into Northamptonshire County Council

Mr Caller also said government commissioners should be sent in to the authority.

He added that "living within budget constraints is not part of the culture" of the council.

The council "did not respond well, or in many cases even react, to external and internal criticism", Mr Caller said.

He added individual councillors "appear to have been denied answers" to legitimate questions.

In October, the council launched a campaign for fairer funding from the government, but the report said it had not been "particularly badly treated by the funding formula".

Image copyright AFP Image caption Next year's council budget will see £39.2m of cuts made, including the closure of 21 small libraries

Mr Caller was also critical of the council's 'Next Generation Model,' which planned to outsource all services and create four new bodies for child protection, care of vulnerable adults, providing health and well-being services, and improving the county.

The report said the model did not have "any documented underpinning" of how it intended to deliver £68m of savings, and "served to obscure and prevent effective" budgetary control.

It does add that the council "employs many good, hardworking, dedicated staff".

Mrs Smith said she had made "repeated representations" to central government about "spiralling costs of social care" and the council's inability to meet those costs.

She said £50m is needed per year to meet statutory obligations in Northamptonshire, adding that she would prefer a single unitary authority as "two unitaries won't save sufficient money".

Image caption Sajid Javid ordered an independent inspection of Northamptonshire County Council

Deputy leader Matthew Golby, who is performing the functions of council leader prior to any formal appointment, said the authority accepted the inspector has found "what he believes to be significant failings at the council".

He said while the report says the authority is "in no worse position than any other council", Northamptonshire's leadership "would argue the sector as a whole does face significant financial challenges".

The leaders of Northamptonshire's district and borough councils issued a joint statement saying they "acknowledge the enormity of the situation" but "do not believe a unitary model is the only way forward".

Northamptonshire County Council's financial crisis timeline