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EXCLUSIVE: Resilience index response prompts major rethink

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The Chartered Institute for Public Finance & Accountancy has postponed controversial plans to publish a “league table” of councils’ financial sustainability following uproar within the sector at the plans, LGC has learned.

The decision is one of a number of planned changes to the institute’s proposed local authority financial resilience index which was slammed by many senior local government figures when it was put out for consultation earlier this year.

Originally it was proposed the index would combine data from six indicators to produce a composite score that would then be made publicly available with a “traffic-light grading system”.

However, following an unprecedented response to the consultation Cipfa has ditched plans to produce one overarching score and has added nine additional indicators. The aim is to now provide a tool which will allow comparisons between similar types of authority.

In the first year the tool will only be provided to councils and their auditors to allow for continued work on the indicators before it is made publicly available next year. 

Instead the institute plans to publish a summary report of aggregate findings in the first year.

A spokesperson for Cipfa said: “We will be sharing the updated index with details of the changes made shortly.”

In September Cipfa chief executive Rob Whiteman told LGC the institute had been “blown away” by the response to the consultation. LGC has learned it received almost 200 responses, many raising concerns about the choice of indicators and the decision to make the data publicly available. 

Most of the new indicators relate to reserves management. While the initial proposal included levels of reserves and change in reserves, the new tool will also consider levels of unallocated and earmarked reserves in relation to net revenue expenditure as well as the average percentage change over the past three years.

Critics of the index as originally proposed included the Society of Local Authority Chief Executives & Senior Managers which said its members had “serious misgivings about whether a simple set of scoring metrics can produce a meaningful assessment of an authority’s financial health”. Solace also criticised the methodology for not being forward looking enough.

A seventh reserves measure will set out how many years of reserves councils have left if they continue to deplete them at the same rate as the previous three years.

Three other new indicators will consider the ratio of retained business rates income to net revenue expenditure, council tax to net revenue expenditure and spending on social care and debt interest to net revenue expenditure.

Cipfa will keep the indicators under review and consider feedback from the sector over the coming months.

 

 

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Readers' comments (1)

  • lets have scores and league tables, its more fun

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