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John Sinnott: Cipfa deserves backing over resilience

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I was disappointed but not surprised to see something of a rush to criticise the Chartered Institute of Public Finance & Accountancy’s consultation on its plans to establish an index of financial resilience for English councils.

There is a suspicion that Cipfa is being criticised for an overreaction to what has happened in Northamptonshire CC. I disagree with the criticism. In the current financial and political climate, there is too much at stake in terms of local government’s future and credibility for the sector to come out as defensive. Honesty is always the best policy.

That Northamptonshire was heading for a disaster was known within local government for several years. For any challenge to be effective it had to be politically–led from outside but there was a reluctance and then a failure to do anything about its micawberish whimsy and its bottom-line numbers until it was too late. Too many blind eyes were turned. The question as to why this took place is for another time but the protection of reputations must have played a part.

We must now reflect on the fact that a seriously failing council was left to its own devices. The second section 114 notice reveals the dire state of Northamptonshire’s finances and the impact on services, demonstrating how this should not be allowed to happen again.

So I find it odd that assurances can be given that no other councils are about to implode financially. What is the information base on which those assurances are given? How can anyone be sure? There are various names in the frame as to who is next. If Cipfa’s index was in place, there would be no room for doubt.

The reasons given for challenging Cipfa are predictable.

First, there is a dislike of league tables and being named and shamed for poor performance. I am not the only one to believe that too much was thrown away with the abolition of the Audit Commission, with the consequent lack of focus on corporate governance being a prime example. Also, external audit would surely be more rigorous if the commission had stayed in being, although that is no excuse for a local authority failure.

Anyway, there is no performance information vacuum. Chief executives should ensure that their councils have systems to measure and compare performance using data from LG Inform, Public Health England and government departments. You know how well your council is doing; unofficial league tables exist for cost effectiveness and value for money, prompting questions around financial sustainability.

The priority of financial resilience, however, stands alone. There may be no perfect set of performance measures on which to draw up a league table but that is not to deny its potential worth. Better to work with Cipfa in identifying indicators and their weighting rather than looking to destroy the concept. In that context I would suggest that core spending power per head of population (the lower a council’s spend/income per head, the greater the risk of failure) deserves inclusion in the resilience indicators.

Secondly, self-improvement and peer review is inevitably put forward as a better way. I presume that in regular discussions with government about funding and top-slicing, guarantees are given by the Local Government Association that there is an early warning system in place to deal with councils in trouble. Self-improvement and peer review may have their place but we have to be honest and say that Northamptonshire showed it up for what it is: something of limited value. Cipfa’s index will be a more powerful tool and the better for it.

Thirdly, there is the argument that local government just needs more cash, with implications there is little wrong with councils’ competence. That line did not wash with the government when it came to the recently announced additional NHS funding with its five financial tests. There is a lesson there.

And the quantum argument does not stand up to scrutiny. It cannot when my own council would receive an extra £350m annually if we had the same spending power as Camden LBC and an extra £104m if we had the same as Surrey CC. The system is broken and to such an extent that ‘fair funding’ and the allocation of business rates are not going to address the disparities since there would be too many losers. The Cipfa index would show up those councils with something to hide and that would be no bad thing if the vexed question of local government funding is ever to be settled.

I worry that local government will be seen as complacent if through its representative bodies or individually it tries to ward off Cipfa’s good intentions. Without financial resilience a local authority fails and local government’s claim of transparency in all its doings will count for nought if warnings are not identified, publicised and addressed. An index is not a substitute for sound financial management but Cipfa deserves local government’s backing, not criticism.

John Sinnott, chief executive, Leicestershire CC

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Readers' comments (1)

  • These comments are welcome and the CIPFA imitative should be commended and supported.It is also refreshing to see that the view that much of the work of the late Audit Commission was valuable.However I would query whether many authorities (and more significantly the public they serve) know how they are performing.The lack of comprehensive and reliable performance management information and adequate bench marking makes it almost impossible to know how authorities are doing.It is very arguable that the Northamptonshire situation would have been more publicably known about far earlier if a better reporting regime had been in place.Of course the position has been exacerbated by the demise of the local press who used to keep a “weather eye” on how their local councils were performing

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