The Office for Local Government (Oflog) lacks a clear purpose and would benefit from becoming audit system leader and having a defined role in assessing newly required productivity plans, parliament has been told.
A panel featuring Laurence Ferry, professor in accounting at Durham University Business School; Rob Whiteman chief executive at the Chartered Institute of Public Finance and Accountancy (CIPFA); and Ed Hammond, deputy chief executive at the Centre for Governance and Scrutiny, made the assessment during a Levelling Up, Housing and Communities (LUHC) Committee inquiry on Oflog’s role and purpose.
Hammond said that in the absence of a timeline for the establishment of a new audit, reporting and governance authority (ARGA) as system leader, “it feels fairly obvious” for Oflog to take that role instead.
Whiteman noted that while the FRC was capable of being the local audit system leader through the creation of ARGA, it already “has a huge agenda to clean up corporate reporting, and the concerns about corporate reporting and corporate failure”. A specialist body concentrating on local public audit and local public data would therefore “be a good thing”.
“If the single most important thing that the government must get right is local public audit, having local public audit sit with the regulator that they are creating is probably more important than the other things that Oflog is presently being given to do,” Whiteman stated.
Ferry agreed that it made “perfect sense for Oflog to take that space”. He added: “The biggest problem is that there is not a system leader. That is why the whole accountability system does not really work. The government have to be clear what Oflog’s role is in local accountability. If Oflog is not going to fill that, who is?”
Productivity plans
The panel was also questioned about Oflog’s role in reviewing the government’s proposed productivity plans, which every local authority is being required to complete. The general consensus was that, at best, more detail was needed to clarify the purpose of the plans, and that, at worst, the plans were “not a serious way forward”.
Whiteman said he was “very disappointed” by the “rather simplistic” government comments on productivity. “It reads like councils do not need more money; they should be more productive. I think councils can be more productive and efficient, but I do not think that it covers the gap of the quantum,” he said. “We have to work hard on productivity and efficiency, but we have to talk about the fact that the quantum is inadequate in how it works for some authorities.
“I promise the committee that addressing the number of equality and diversity officers in local government is not going to solve the problem of quantum.”
Ferry said the plans didn’t go “into the detail that they could have”. On Oflog’s potential role, he commented: “Oflog could review these from a performance point of view, but it comes back to what we have always said: has it got the value for money capability? It certainly does not have a value for money audit capability within the scope – it has been very difficult for them to review that.”
Hammond questioned how the government expects the plans to be used. “My assumption would be that the most value you would get out of this exercise would be by taking these plans, identifying themes and drawing out an understanding of where precious constraints issues arise for the sector as a whole – that is the greatest benefit on a national basis.
“My worry is that you would see productivity plans being used as a mechanism to identify individual councils that the government thinks, on the basis of that plan, are not doing sufficient [work] to be productive. I do not think those plans would in and of themselves be enough for the government to be able to make that judgment, but the temptation would be there to do so.”
He concluded that Oflog could use the panel process “to develop a greater level of sophistication” in reviewing the productivity plans and ensuring a worthwhile outcome.
Financial resilience
The panel was also questioned on Oflog’s overall role and its ability to identify local authorities that might be struggling financially at an early stage.
Whiteman said that while he thought Oflog’s co-ordinating of data was “a good thing”, the body has “a fairly limited scope, and we are all keen that Oflog does not become a body that means different things to different people”.
Ferry said Oflog, as currently set out, appears to be in a “straitjacket” and while it has done a good job within that, the organisation also “talks about a lot of things that are not done”. He said: “They will not lobby, arbitrate, have routine inspections, intervene like a regulator or make any policy on external audit. If you start looking at everything that they will not do, what is left? A bit of performance and data collection, which you could say is really doing what other people already do, and maybe not in as much detail.”
He added that the way Oflog is set up at the moment within its corporate plan, “it is going to be very difficult for it to do anything”, but “if Oflog became the system leader and was properly resourced, it could make quite a large improvement”.
Hammond largely agreed. “Government badly needs a centre of expertise and excellence, which could be Oflog, to give it a level of mature and sophisticated insight into councils and their needs, challenges and constraints – arguably, it does not have that currently. That is a stretch on what government has already set out Oflog’s role will be, but in practice it is the only obvious space it can occupy where it would be contributing something of value that would be of use to government and the sector more widely,” he said.
Expanding on this, Hammond said Oflog could aid the secretary of state in understanding where best to intervene in local authorities and issue best value notices. “I think that Oflog can ensure that where that power is exercised, or where the secretary of state is minded to use that power, it is doing so on the basis of more consistent and systematic evidence, which Oflog will be able to produce and provide,” he said.
“Using that to ensure that Oflog is part of that wider sector conversation about what failure potentially looks like and where risk leads to failure is a conversation that government have been having with the sector for some time. But I think that can only be a good thing, ultimately.
“I think we need more sharing and a greater shared understanding of what that looks like and therefore what early warning conversations look like within the sector, rather than what Oflog’s or the LGA’s early warning conversations look like. That work needs to be co-ordinated.”
Clarifying Oflog’s role
A second panel featured Abi Brown, chair of the Improvement and Innovation Board at the Local Government Association; Trevor Holden, chief executive and chair (& Managing Director of South Norfolk Council and Broadland Council) at the District Councils Network; and Keith Stevens, chair at the National Association of Local Councils (NALC).
While Brown and Holden commented on the good engagement they had seen with Oflog, Stevens pointed out that “a whole tier of local government is missing” from Oflog’s data gathering, with parish and town councils not included.
“I think to get a true picture of what is happening in some local government areas you need to have all three tiers involved,” he added. “Parish and town councils have an increasing part to play, and of course they have increasing funds.” While he acknowledged that having data “from 10,000 parish and town councils […] would be overwhelming for Oflog”, it “could start with our top 100 super councils, which have a precept of £1m-plus or a turnover in excess of £1.5m”.
Brown suggested that Oflog could take a role following on from the Local Government Association’s work with local authorities on corporate peer challenges in the “hopefully very small gap” where a few “councils that cannot reflect on themselves or are not necessarily prepared to take those actions [arising from the challenges] themselves”.
“There is at least one and maybe two or three councils that immediately come to mind, where you think, ‘actually, we’re offering them huge amounts of support, we’ve tried to have a conversation, but they do not really want to listen’. Perhaps we could share that soft intelligence with Oflog, and that could be the basis, potentially, of an early warning conversation,” she said.
Holden said he saw Oflog’s role as a “precursor to stop the enforcer”. He added: “There is absolutely a space for Oflog, in terms of that coercive nature of ‘If you don’t sort it out constructively, we’ll bring our big brother into the room, who might just help persuade you, because they’ve got a regulatory function’.
“I think that if local authorities see that continuum of improvement ultimately ending in intervention if improvement doesn’t happen, those conversations would be more constructive and more open in terms of those people who don’t want to have the conversation with a corporate peer challenge.”
Importance of independence
The panel also commented on potential risks to local authorities if Oflog continues to operate as part of the Department for Levelling Up, Housing and Communities (DLUHC), rather than as an independent body.
Brown said there was “always a risk if potentially there is the view that whatever is carried out has to be reflected back to ministers or potentially there is the ability of ministers to influence what happens”.
Holden said it was “really important” for Oflog to be independent so that it “can have a conversation down but can also have a conversation up”. He added: “Oflog will be seen as independent to a point, and that point will be controlled by [DLUHC]. That will not do it any good; ultimately it will not help the department; and it will not help drive the sector-led improvement that we are looking for.”
Stevens agreed, stating that an independent chair would be seen as “more credible”.
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