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Widespread financial failure would be 'catastrophic' for sector

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Widespread financial failure by councils would be “catastrophic” for the sector, according to the chief executive of the Chartered Institute of Public Finance & Accountancy.

Rob Whiteman also raised concerns about auditors’ role, or lack of, in councils. Meanwhile, he also expressed apprehension about the quality of some council chief executives and their decision-making processes.

Earlier in the year the National Audit Office warned more than a fifth of top-tier councils will exhaust their reserves within five years if they continue to spend them at present rates, raising concerns more councils could follow Northamptonshire CC in issuing a section 114 notice

“I think that would be catastrophic for the sector if that were to happen,” said Mr Whiteman during a session on finance at the Society of Local Authority Chief Executives & Senior Managers.

Mr Whiteman said Northamptonshire “went bust because of poor management, not austerity” and because “they were dillusional” about how “unfairly treated” they were, which in turn “created a culture where they couldn’t balance the budget”.

While he thought “in several years time we could see well-run councils going bust” Mr Whiteman said if that happens now “it will be because of failure”.

Mr Whiteman spoke about seeing “a spread of capabilities in local government”, whether that be in relation to chief executives, directors of finance or members.

“We see chiefs who are not very good at managing good governance and corporate processes,” he said. “We see chief executives who are really good deal makers because they are really strong on driving deals and driving transformation but they don’t have the town clerk skills about what a good decision is.”

Mr Whiteman reiterated concerns aired earlier in the year about some directors of finance “feeling bullied” by their chief executives “to try and sign off a deal”.

However, he did acknowledge there are some “very good and brilliant” chiefs who do manage processes properly.

Paul Dossett, partner at Grant Thornton, said: “There’s an onus on the sector to not only share good practice but call out bad practice too.”

Mr Dossett told chiefs they “have got to be real about savings” and urged councils to make better use of auditors to “call out bad behaviour” and make changes within their organisations off the back of those assessments.

Mr Whiteman later said: “We have concerns there has been a race to the bottom on audit fees and they [auditors] are not being listened to and don’t have the role they once did.”

He suggested the NAO could act as an independent arbiter of individual local authority finances.

On the wider issue of finance, Mr Whiteman urged the sector to ask for more funding but expressed doubt the chances of success as the spending review will be “brutal”, not least because the NHS has already been given £20bn.

“It’s unarguable local government needs more money and you must lobby hard for it. However, I fear that will not succeed,” he said.

The NAO’s executive leader responsible for local service delivery Abdool Kara urged councils to very quickly better understand, own, and explain why there is such a variation in performance, such as in children’s services, between different councils. If councils do not “justify poor performance” the Treasury will never release major funding to the sector, he said.

Mr Kara also challenged the sector to do more to showcase good practice, particularly in children’s services which he called “the wild west” due to the dearth of shining examples.

At a time of great uncertainty over the fair funding review, Mr Kara suggested in the run-up to the Budget councils should initially prepare for a one-year settlement but added he thought, heading towards the comprehensive spending review, that there was an “aspiration” to deliver a three-year settlement for councils.

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Readers' comments (2)

  • Just to clarify that what I said was in relation to the forthcoming budget and the CSR, and not the Fair Funding Review. We expect a one year budget at the end of this October, and the aspiration for the CSR next year will be for at least a three year settlement, but who know what will happen between now and then!

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  • David Paine

    Hi Abdool, thanks for the clarification. I've amended the copy to make that clearer as the initial wording was a bit clunky. I hope that helps. David

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