The Ministry for Housing, Communities & Local Government has been “reactive and ill-informed” in its oversight of local government, a group of influential MPs has warned.
And despite assurances from the ministry that it is committed to enhancing its oversight role, the Commons public accounts committee says it is “yet to be convinced” this amounts to more than “warm words” as the ministry has “been unable to describe any new concrete actions that will flow from its new approach”.
In a report published this morning, the committee said it was “unimpressed” both with the ministry’s account of what information it holds on risks within the sector and its reliance on ‘soft intelligence’ which the ministry had accepted was “akin to gossip”.
The report follows an inquiry into governance and accountability of local government which heard examples of audit committees not providing sufficient assurance, ineffective internal audit and weak arrangements for the management of risk in commercial investments.
The report says: “This is not acceptable in the more risky, complex and fast-moving environment in which local authorities now operate.
“The [ministry] has been reactive and ill-informed in its approach to oversight of the local governance system.”
The report acknowledges the ministry has now committed to enhancing its oversight role but warns this must lead to “concrete” actions on a “timely basis”.
The committee has called on the ministry to improve transparency surrounding its own interventions and consider whether the Local Government Association should be required to publish peer reviews.
However, LGA chair Lord Porter said sector-led improvement was working “extremely well” and the association was working with every single council. He said the LGA already published a quarterly summary of the improvement work it had carried out and said continued cuts meant there was “an argument for less rather than more oversight from central government”.
“Sector-led improvement is cheaper and just as effective as central government monitoring and inspection,” he added.
The MPs also recommended that the ministry should “assess and monitor the scale of long-term risk that authorities might have exposed themselves to through their commercial investments and ventures”.
The Chartered Institute of Public Finance & Accountancy said it would support government assessment of commercial investments.
Chief executive Rob Whiteman said: “We welcome the committee’s recommendations and agree that the department’s oversight of the system can and should be strengthened to support this goal.”
More broadly the committee, which heard that the financial challenges faced by the soon-to-be-abolished Northamptonshire CC were an “open secret”, said it had concerns about the gap between the ministry’s substantial intervention powers and the day-to-day operation of sector that was “largely unregulated” following the abolition of the Audit Commission in 2010.
Committee chair Meg Hillier (Lab) said residents would get “no comfort from being told that their council’s dire finances were ‘an open secret’.”
She added: “The government needs to recognise the extra pressure that squeezed budgets and increased commercial risks are having on local government and make sure it is monitoring the risks effectively so that it can be alert to the impact of changes on local government.”
The ministry will respond fully to the committee’s recommendations in “due course”. A spokesperson said: “We regularly assess the local government governance framework to ensure it is operating effectively and last week we published new guidance to strengthen the role of scrutiny committees in councils.”