There is an echo of the 1980s in some of the current concerns over local government governance. Grant Thornton’s Paul Dossett argues that the sector needs a governance reset based on a culture of transparency where staff are actively encouraged to flag concerns.
When I started my career in 1986, governance was a significant issue in the local government sector. The Audit Commission had been set up in 1983 with the express challenge of improving value for money, including governance, in the sector. Not only were late accounts (and they were much easier to produce in that era) an issue, but poor financial management, weak governance and poor value for money were also key issues.
Councils such as Lambeth, Liverpool, and Hackney hit the headlines for all the wrong reasons in that time. District Auditors issued public interest reports on a regular basis and exercised powers that no longer exist, such as surcharges of members. The Public Interest Report on the Westminster “Homes for Votes scandal” was perhaps the low watermark of the relationship between local government and external audit, and the final material use of auditor surcharge powers.
The Audit Commission, CIPFA, the Local Government Association and other local authority interest groups helped with the journey of improvement into the 1990s and beyond. While there was continued use of public interest reports and statutory recommendations in that period, they tended to reflect specific and isolated failings at specific bodies rather than wider concerns about governance in the sector.
The rolling out of the Nolan Principles (the Seven Principles of Public Life) in 1995 to all public sector bodies set a benchmark for good practice and the standards we should expect from officers and members. While there were governance challenges in the first decade of this century too, they were once again relatively isolated cases.
Local government needs a governance reset to restore confidence and integrity in our politicians and public servants. A culture of transparency needs to be prioritised, where staff are actively encouraged to flag concerns.
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Back to the 1980s?
The second decade of this century though, and the start of the 2020s, have seen a very different pattern emerge, with three key themes arising.
- The decade of austerity has meant that a number of key governance controls, such as the finance function and internal audit, have been denuded by reductions in capacity. Lack of succession planning has also weakened the governance control framework.
- The abolition of the Audit Commission has meant that sector oversight and analysis of key trends in local government have been reduced – at the very time when local authorities were encouraged to develop innovative solutions to tackle funding gaps in the austerity era.
- The culture set by the Nolan Principles appears to have been diminished. There have been a number of high-profile examples where honesty and integrity in public office have been undermined, setting a poor example to the wider public sector.
Grant Thornton’s latest report, Lessons from public interest reports and other interventions (part II), provides live examples of where council members and officers have not lived up to the standards that taxpayers are entitled to expect in the use of public funds. The report identifies:
- significant concerns in respect of procurement, contract management and the use of local authority companies.
- examples where relationships between officers and members have broken down which, in some cases, includes examples of bullying and pressurising behaviour that should not be tolerated.
- where controls to ensure public monies are spent carefully were not exercised.
We believe that local government needs a governance reset to restore confidence and integrity in our politicians and public servants – the vast majority of whom continue to carry out their functions with diligence, integrity and honesty. A culture of transparency needs to be prioritised, where staff are actively encouraged to flag concerns, and all councils should look to assess their culture against the lessons learned from the latest tranche of interventions.
While there are no clear or absolute measures to assess whether a council has a poor culture, peer challenge and review could be a way for councils to work together to offer this insight, alongside ongoing self-assessment. All councils should strive for an open culture that encourages challenge and criticism. This needs to start with the political leadership and embed itself throughout the organisation.
Paul Dossett is partner and head of local government at Grant Thornton UK LLP.
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