In what has been a rollercoaster year for those involved in local government finance, Room151 has featured an array of voices to provide reasoned and insightful opinions, takes and analysis, and we present some of the best here.
From detailing the possible causes of section 114 notices to delving into successful borrowing strategies, and from trying to fix the audit backlog to assessing LGPS strategies, our bloggers’ commentaries continue to be a popular feature of the site – generating debate, discussion and, sometimes, controversy.
In no particular order, here are a selection of 12 of the best blogs written in 2023.
Conrad Hall: who broke my local council?
“Local councils are going bankrupt, and if no one can sort out who is to blame then it will happen again and again. And someone will have to tell the citizens that they can no longer have local services.”
So wrote Conrad Hall, corporate director of resources at the London Borough of Newham and chair of the CIPFA LASAAC Local Authority Code Board, as he tried to get an answer to the question of who is to blame when a local council goes bankrupt, assessing a broad range of potentially-at-fault characters and organisations.
In the course of his investigation, Hall first cited the story of 1960s boxer Davey Moore, who died during a fight, and then – memorably – produced lyrics for a song about broken councils in the style of Bob Dylan (who would “never descend to trying to sing the refrain”).
Chris Naylor: s114 reports don’t deliver sustainable councils, they just make matters worse
“It simply isn’t plausible any more to claim there are no more opportunities to save, do things more efficiently or generate more income. Government knows it, hence the new guidance and tools in the form of Oflog. So too do many chief executive officers and finance directors.”
In a time when the threat of section 114 notices has become almost ubiquitous, Chris Naylor, director at Inner Circle Consulting and former chief executive officer and s151 officer, delivered a hard-hitting and frank assessment of them – that they achieve little and actually make it harder to deliver a sustainable financial future.
He also told councils to be proactive and stop waiting for central government support. These sentiments were echoed in a Room151 interview with Max Caller, the “poster child for best value” and lead commissioner at Birmingham City Council.
Both pieces generated much debate over the roles and relationship between central and local government.
Alison Ring: the spotlight on local audit is also shining on the accounts
“Everything starts with the financial statements. Not because they are more important than high-quality timely external audits, strong financial management, good governance, or a proper system of accountability, but because they are the rock on which everything else stands.”
The backlog in local government audit remains a significant and controversial topic, with much finger-pointing of blame and despair over a seeming lack of progress. It was also the subject of a parliamentary select committee inquiry this year and, finally, of a government-proposed solution.
In this blog, Alison Ring, director, public sector and taxation at the Institute of Chartered Accountants in England & Wales (ICAEW), eloquently argued that the sector must take a once-in-a-generation opportunity to fix longstanding, underlying problems with the way local government financial statements are used.
In a later blog, she also explained why the Levelling Up, Housing and Communities Committee had delivered a “landmark” report that will transform local authority financial statements.
Richard Harbord: time for a rebirth of the Audit Commission?
“It is not credible to think that there is any one solution that will solve both the government’s concerns about spotting potential problems early and everybody’s concerns about the timeliness and professionalism of external audit.”
Among a series of excellent blogs this year, regular Room151 contributor Richard Harbord, the former chief executive of the London boroughs of Richmond and Hammersmith & Fulham, added his voice to the debate on the audit backlog by posing a provocative question. Was getting rid of the Audit Commission a mistake, and should we bring it back?
While the answer may not be ‘yes’, the discussion did lead to an examination of the potentially important role Oflog could play – if that organisation is successful.
Stephen Sheen: local authority financial failure and the mystery of the lost audit objective
“An authority is entitled to expect its auditors to have a view about the ongoing reliability of its financial records. It would not then be unreasonable for absence of adverse comment about the real financial impact of an investment scheme to be taken as an expression of satisfaction.”
A curious case, this one. Stephen Sheen, managing director of consultancy Ichabod’s Industries, trawled through the records to find a forgotten audit objective – giving a view about the ongoing reliability of an authority’s financial records.
But, he argued, the framework for reawakening this objective exists, and doing so would be beneficial to all.
The blog prompted a response from National Audit Office director for local audit code and guidance Mike Newbury, who believed that he’d found the missing audit objective after all, giving his reasoning in his own Room151 blog. Readers were left to make their own conclusions on whether the case was truly closed.
David Spreckley: f is for fuzzy fiduciary finking
“At Barnet, we believe that allowing pension fund committees to account for a levelling up dividend within their decision-making processes will encourage more investments in levelling up initiatives. However, fuzzy thinking on fiduciary duty may encumber our ability to do this in practice.”
Fantastic. Focused. Flamboyant. Possibly, but not necessarily, words to describe the blog written by David Spreckley, head of Pensions and Treasury at Barnet Council, but certainly words that begin with the letter ‘f’.
With the ongoing LGPS Consultation on investments underscoring the UK government’s desire for Local Government Pension Scheme funds to increase their investments in levelling up and infrastructure projects, Spreckley made the persuasive case for considering the distinct nature of fiduciary duty for the LGPS.
Joseph Holmes on AI: ‘what’s not to like?!’
“We can take the blue pill and believe whatever we want to believe or take the red pill and we can see how deep the rabbit hole goes.”
There’s just no substitute for the insightful analysis provided by our bloggers. Well, until artificial intelligence (AI) takes over, that is. In preparation for this future, Joseph Holmes, executive director for resources at West Berkshire Council, thought he’d see what AI would make of the authority’s financial statements – and whether, joking aside, there might be a practical role AI can play in the future of local government.
Despite a possible overuse of emojis (AI’s attempt to be ‘down with the kids’?), AI was able to produce a “pretty helpful” summary of West Berkshire’s financial statement, and Holmes concluded there was a big opportunity to use this tool “to organise data and information and mitigate the risk of human error”.
Geoff Wild: ‘without good governance councils’ actions will be muddled and fragmented’
“Good governance is essential for councils to be effective in providing the services and support that local people expect in these challenging times.”
What does good governance in local government look like? And how can authorities achieve it? Those were the questions that Geoff Wild, experienced monitoring officer, director of Law and Governance, consultant and interim manager, sought to answer in light of section 114 notices highlighting the importance of good governance in ensuring the financial sustainability of councils.
And what did Wild find? Just as important as structures, systems, and processes are the behavioural elements of good governance and having a “deep understanding” of how political and organisational risk intersect. That awareness should be used to “define and refine” an organisation’s priorities, he said.
Dan Bates: What we can learn from balance sheets
“As a sector there is still work to be done to use balance sheet monitoring as part of our financial resilience assessment.”
Usable revenue reserves tend to be the headline measure when considering local government financial health, but in this blog LG Improve’s Dan Bates made a compelling case that balance sheet monitoring is also vital to assessing financial resilience.
Good governance, he pointed out, needs to include a good understanding of balance sheets.
It may not be the simplest task to assess balance sheets, but no one who has read Bates’ blog will ever be able to look at them in the same way again.
Nathan Elvery: the warning signs of financial failure
“Several councils are already in choppy s114 waters, and the remainder of the local government fleet is sailing on the same seas.”
With some high-profile section 114 notices being issued this year, and many more warnings, questions of how likely it was more would be issued – and how to avoid them – were being asked.
In this blog, Nathan Elvery, past president of the Society of London Treasurers and the Association of Local Authority Treasurers and founder and managing director of Imagine Public Services, helpfully offered pointers on how to avoid the slippery slope to a possible s114 notice – highlighting what to look out for, and why s151 officers must “become comfortable with the uncomfortable”.
His stated intention with the blog was to stimulate a debate within the financial leadership of the local government sector – and that he certainly did.
Chris Buss: is the wolf really at the door now?
“There is no doubt that today’s section 151 officers are facing a range of pressures on their budgets not seen in some 30 plus years, with an almost perfect storm of high inflation, rising borrowing costs and increased demand for key services.”
Tackling the section 114 crisis at a slightly different angle to Nathan Elvery, former section 151 officer Chris Buss questioned whether the local government sector really was in such a bad predicament, or whether – as some commentators might see it – it is simply ‘crying wolf’ again.
The thought-provoking piece concluded that while most authorities might ultimately find a way to balance the books, this should not detract from the fundamental instability that is present in the sector. The only solution based on the range of statutory services that local government has to provide, said Buss, is a better funded settlement for the sector “which has to include a review of council tax arrangements”.
We are currently seeing how this is turning out…
Chris Tambini: why local government will keep rising to the challenges it faces
“Local government at its best is brilliant. The response to the pandemic was fantastic and we continue to do great things for our communities.”
Let’s end on a positive note. In May, we asked Chris Tambini to reflect on his time at Leicestershire County Council, an authority he left this year, and look ahead to the future of local government finance.
The result was a fascinating blog, and Tambini was keen to stress the “opportunities and many new tools” that could help address some of the challenges in local government.
While it is unclear whether or not Tambini’s outlook was influenced by the prospect of a long upcoming summer break, his positivity will be very much welcomed at Birmingham City Council, where he has now accepted a role as one of six commissioners, focusing on the authority’s financial position and recovery.
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