The widespread demotion of finance directors is resulting in councils avoiding acknowledging the truth about the scale of their financial challenge, Rob Whiteman has warned.
The chief executive of the Chartered Institute of Public Finance & Accountancy made a plea for good governance in an interview with LGC to mark his organisation’s launch of a consultation on a new index to measure councils’ financial resilience.
Mr Whiteman said the index, which will consider indicators including the depletion of resources, resource levels, demographics, service pressures and borrowing, would force councils into “some difficult conversations that shouldn’t be avoided”.
He urged the sector to use the index to “mature… so we can challenge each other a little bit when the warning signs are ignored”.
Within councils, Mr Whiteman criticised what he believed to be a growing “trend” in which “chief financial officers are relegated and demoted off the top table”.
“The relegation of finance officers is just one of the things that means it’s now easier to avoid being told the truth if a council’s finances are heading in the wrong way,” he said.
“I’ve seen a worrying number of finance colleagues who have given pretty tough advice to then seen their job abolished or demoted.”
Mr Whiteman urged councils to “put some capacity” into finance roles to help them make effective budget strategies and to consider increasing pay amid a brain drain of “young, bright accountants” away from the sector.
He also expressed dismay that a lower proportion of council chief executive roles were now taken by finance or legal directors than in the past. While the trend had initially been for service directors to take chief executive jobs, these days, “the most common route to becoming chief executive is a regeneration director as a deal maker”.
“That’s good if councils want to do deals,” Mr Whiteman said. “But actually, chief executives do also need to be town clerks in the old sense of the term that set strong governance and make sure that options are considered and that officers are not bullied into feeling that they cannot give the advice that members want to hear.”
He added: “The whole Eric Pickles period of ‘if only you pay your chief exec less and spend your reserves less you won’t have to make cuts’ was a lie at the time and it’s now done a huge amount of damage to the sector from which we need to recover.”
He also called upon councils not to claim that they were financially badly treated, using the example of financially-stricken Northamptonshire CC which issued a section 114 notice earlier this year. Mr Whiteman insisted the county had received an average level of revenue support grant for the county sector.
“Northamptonshire felt it was uniquely badly treated by government and had had a harsher settlement than any other organisation,” he said. “They felt that in every service, the members felt it, they felt it in the finance department but it isn’t true.”