Legitimate concerns have been expressed about the Chartered Institute of Public Finance & Accountancy’s proposed financial resilience index for local government.
Cipfa’s plan to show financial vulnerability by giving each council a score for six key indicators has brought back memories of the New Labour era’s top-down performance assessment in which, dare we say it, there was an incentive for councils to play for a particular rating, rather than do the best for their area. It has also resulted in warnings of death by traffic light as officers are deemed to have failed as a result of a series of over-simplistic red ratings, without fair consideration of the individual pressures their council faces. And, inevitably, it is also feared that the system would lead to the stigmatisation of troubled councils, for whom no one wants to sully their CV.
The consultation on the index has now ended. Cipfa must show it is responsive and prepared to work with officers and members in order to improve its proposal, ensuring it is far more than a naming and shaming device. How the institute responds to the criticism will be intriguing. Cipfa exists to represent the interests of those working in public finance – including those who will be in the line of fire should the index reveal their organisation’s financial shortcomings. There is a limit to how many Cipfa can antagonise.
Compromise could result. The combination of indicators and the degree of weighting given to each could be amended. Meanwhile, Cipfa is understood to be keen to do what it can to avoid the data being interpreted in the form of over-simplistic league tables.
LGC understands the institute has never been wedded to a traffic light system and dislikes such a characterisation of its index. Nevertheless, it is hard to see how the index can stay true to its principles of transparency and early warning without antagonising many.
While there is an onus on Cipfa to be flexible, there is an equal onus on Cipfa’s detractors to either work with the institute to improve its plans or to come up with their own alternative. The fact that Northamptonshire CC’s impending financial oblivion was pretty much an open secret in some local government circles – but no one had fully raised the alarm – is a black mark against a sector which has for the most part withstood austerity well.
Most crucially, critical voices should show they are prepared to call out those sleep-walking over the financial precipice. Somerset and Worcestershire CCs, to name just two, have shown a lack of candour about their financial problems in the past – and they are far from alone. Local government has too regularly hidden its financial difficulties, doing residents and the sector more broadly a disservice as the full local impact of austerity is hidden. This has the effect of diminishing the debate on spending cust and cannot go on.
Cipfa deserves credit for being brave enough to seek to offer a solution and start a debate – even if this has resulted in the discomfort of so many.