Government oversight of local governance arrangements must improve if councils are to cope with the increasing financial strain they are under, according to a critical report from the National Audit Office.
The failure of the Ministry of Housing, Communities and Local Government to collect data on governance, and the lack of transparency around its interventions, is undermining its ability to oversee local decision making effectively, the report found.
“The department does not systematically collect data on governance, meaning it can’t rigorously assess whether issues are isolated incidents or symptomatic of failings in aspects of the system,” it said.
“The department can intervene both formally and informally in authorities where it has concerns about governance arrangements, but the process by which it does this is not always revealed publicly, meaning its scale and effectiveness is not open to scrutiny or challenge.”
The increasing budgetary pressure on councils, driven by a real-terms cut in spending power of 29% since 2010, heightened the risk to their financial stability and their capacity to deliver services, increasing the importance of good governance, the report said.
Many authorities had pursued large-scale transformations or commercial investments which carried a risk of failure or under-performance and added greater complexity to governance arrangements. Spending to support governance had also fallen in real terms, increasing councils’ potential exposure to risk.
According to NAO head Amyas Morse, poor governance could be the critical factor in determining whether local authorities coped with the difficulties they faced.
“Given the significant challenges these bodies face, the government needs to take the lead in addressing weaknesses in the local governance system to ensure that local arrangements function as intended and support local decision-making,” he said.
Responding to the latest report, a spokesperson for the ministry said: “Local authorities are democratically-elected, independent bodies that are responsible for setting their own budgets and managing their resources.”
As LGC reported last week, one in five single tier and county councils had received qualified audit conclusions on their arrangements to secure value for money, with external auditors finding several authorities had not taken appropriate steps to address the issues raised.
Meg hillier mp
Meg Hillier MP, chair of the Public Accounts Committee of Public Accounts, said it was “worrying” that one in five single tier authorities and county councils did not have adequate arrangements in place to make sure taxpayers were getting value for money.
“As stretched local authorities look for ways to make ends meet, and risks to services increase, it is more important than ever that these checks and balances are in place and red flags raised by auditors are acted on,” she said.
“Central government has got to start taking responsibility for ensuring governance is effective across local government and local bodies need to ensure that their governance arrangements are robust and transparent to citizens.”