Localism and intervention

Paul Feild considers recent developments regarding intervention and peer review and argues that certain legislative changes are of major significance to localism, governance and standards.

The later part of 2014 and early 2015 saw three major investigatory reports on local government. The first was the report by PricewaterhouseCoopers[1] (PwC). It was called for by the Secretary of State to investigate his concerns regarding the governance of the London Borough of Tower Hamlets(LBTH), the second was a report by Professor Alexis Jay (2014) into the response of Rotherham Borough Council to organised child sexual exploitation and finally a follow-up by Louise Casey (2015) again called by the Secretary of State to investigate his concerns regarding Rotherham’s governance. These reports and how they came about have significant implications regarding the practice challenge of localism and elected member standards in local government governance.

Tower Hamlets

PwC were commissioned by the Secretary of State to carry out a best value[2] compliance inspection of LBTH pursuant to section 10 of the Local Government Act 1999 ("1999 Act") as amended by the Local Audit and Accountability Act 2014 ("2014 Act").

It appears his motivation was a BBC Panorama broadcast[3] which made allegations regarding the probity of decision making with particular regard to property disposals and the payment of grants. There was also a concern about LBTH spending on publicity related activities.

The intervention was not welcomed by the authority. LBTH sought to resist the intervention by resorting to judicial review and was accused by PwC of not cooperating in supplying documentation (PwC 2014). LBTH efforts to resist the inspection failed and in due course PwC’s report was published[4].

The key findings were that there was a lack of transparency in the awarding of grants including to organisations which were apparently not eligible under the LBTH’s own grants criteria. PwC identified failing in governance and observed:

"in our view the current governance arrangements do not appear to be capable of preventing or responding appropriately to failures of the best value duty of the kind we have identified. This calls into question the adequacy of these governance arrangements and the extent to which they are sufficiently robust to enable the Authority to prevent or respond appropriately to other failures of a similar nature." Para 2.230 PWC 2014

The use of the 1999 Act has significant implications for localism in that intervention was not about a failure in terms of the Localism Act 2011 section 27 duty to promote and maintain high standards of conduct of members, after all Leadership is one of the seven Nolan principles. Instead the intervention was justified because of a failure to deliver best value. However while the Secretary of State considered the report provided sufficient evidence to take action so as to remove the power from elected politicians at LBTH regarding various decision making and to appoint Commissioners to exercise those powers, he did not take any direct action against any elected member by for example making a complaint. Nevertheless he made his view clear in Parliament stating:

"Localism requires local accountability and local democracy. Municipal corruption undermines the local checks and balances that are vital in a democracy and essential in mayoral systems with their concentration of power. We cannot risk such corruption elsewhere, but it is not just about the money. The abuse of taxpayers’ money and the culture of cronyism reflects a partisan community politics that seeks to trade favours and spread division on the rates. Such behaviour is to the detriment of integration and community cohesion in Tower Hamlets and in our capital city." Hansard Column 666

and

"The most important thing is for us to get into a position in which the residents of Tower Hamlets can feel confident in the mayoral system and in the functioning of their local government, which is now at best dysfunctional and at worst riddled with cronyism and corruption. I am not entirely sure that it would be appropriate for us to consider a big constitutional change. This is not about something being wrong with the system; it is about something being fundamentally wrong with the way in which the system has operated and with the people that are chosen. Should the mayor decide to resign at this point – I have no belief that he will – can I say that he would not be missed?" Hansard Column 674. Eric Pickles, Secretary of State, Hansard, 4 November 2014

Following the publication of the PwC report a further minister made a comment which again highlighted the localism perspective:

"We do not take intervention actions lightly, but previous interventions – such as in Doncaster in 2010 – have helped tackle dysfunctional governance and restore public confidence in the integrity of councils. Localism requires transparency, probity and robust scrutiny: as Eric Pickles said in Parliament last week, “there can be no place for rotten boroughs in 21st-century Britain”[5] ". Lord Ahmed, Parliamentary Under Secretary of State for Communities and Local Government, 12 November 2014

So what we saw was direct reference to localism, but intervention on the grounds of best value.

Rotherham Borough Council

On 21 August 2014, Professor Alexis Jay’s report on child sexual exploitation in Rotherham was published. She was commissioned to do so by the independent safeguarding board. Jay identified serious short fallings of the organisational culture of Rotherham Council which had contributed to the failure to tackle long term sexual exploitation of young people. Jay (2014, Para 13.64- 69) cited examples of bullying by members including the director of safeguarding recalling that the lead member for children and young people’s services when chairing a meeting allowed another officer to swear at staff and was in the director’s words "intimidating, humiliating, bullying and entirely professionally unacceptable". Jay (2014, p 115 para13.69) concluded:

"The existence of such a culture as described above is likely to have impeded the Council from providing an effective, corporate response to such a highly sensitive social problem as child sexual exploitation." Jay (2014)

The report received heavy media coverage. The Secretary of State responded utilising again the best value intervention power in the Local Government Act 1999 as used in LBTH. This time a different approach was used and an investigation was carried out by a team lead by Louise Casey CBE rather than an accountancy firm.

Casey reported in February 2015. She found a breakdown of governance. Key examples in the report were the deputy leader being investigated by Police for violence (Casey 2015);  and three members were facing action for non-payment of council tax (Casey 2015).

Furthermore she found a corporate governance inspection of 2002 which noted a lack of information, silo thinking and lack of clear plans as to priorities to be the same in 2014 (Casey 2015). She was concerned that the council did not have a clear vision and had questionable priorities:

"The Council has not got it priorities right. It puts resources into pursuing awards when it should be focussing on sorting out the basics...Surely this woeful position should have been the focus of leadership and management rather than window dressing." (Casey 2015, p 72)

The most damning comment was in the summary:

"Overall inspectors have not been impressed with the calibre and grip of leading Members. We have reluctantly concluded they cannot be left on their own to lead the Council out of its current responsibilities" (Casey, 2015 p.74)

Within days of the report being published the whole Rotherham cabinet resigned. The Secretary of State again used his powers under the Local Government Act 1999 and sent in commissioners to run specific aspects of Rotherham Council.

Local Government Association (LGA) – Sector Review

The most recent activity by the LGA on the issue of governance appears to have been partially prompted by the interventions in LBTH and Rotherham. It involves a consultation review of inspection practice. The LGA’s[6] object is to support, promote and improve local government in England & Wales[7]. It works with local authorities to improve their performance and carries out peer reviews also known as ‘sector reviews’. These involve a panel of members and officers from other authorities led by a LGA appointed chair visiting another authority by invitation and carrying out a review of the authority which they put into a report with recommendations for improvement and reflection. They consider in their sector / peer review how well an authority is faring by looking at its

1. Understanding of local context and priority setting;
2. Financial planning and viability;
3. Political and managerial leadership;
4. Governance and decision-making;
5. Organisational capacity.

(LGA 2015 p10)

The LGA consultation document expresses concern (LGA 2015) regarding the two recent interventions in LBTH and Rotherham BC. They observe:

"Moreover, in the past few months, there have been two high profile cases where central Government has used its inspection powers to go into a council to gather evidence which allows the Secretary of State to decide whether to formally intervene or not. This is the first time that Government has used such powers since 2008 and could signal a growing appetite to intervene. The Government has adopted a different approach to inspection in these two cases. In the case of Tower Hamlets, it commissioned PwC but in the case of Rotherham it appointed Louise Casey, a DCLG official, as the ’inspector’. The way these inspections have been carried out and the formal engagement with the council has therefore varied and there appears to be no clear or standard process in place." (LGA  2015 p.9)

The LGA comments identify an awareness of the vacuum created by the removal of external oversight (i.e. abolition of the Audit Commission) and the need for the local government sector to maintain high standards in practice[8]. In a nutshell, localism is creating a challenge in that the device for upholding standards is essentially complaints driven and relates to the failings of individual councillors. The Local Government Act 1999 intervention power is on the other hand directed towards lack of ability to deliver best value and improve. Neither of the two Acts works hand in glove, in fact there is contradiction. Rather than having the power to remove a failing member(s) the localism position is that it is one for the ballot box, but the 1999 Act's thrust is saying that if there is a collective failure, then intervention will be taken and if necessary commissioner(s) appointed to take over executive functions. But the failing councillors remain and could continue to receive their member’s allowances.

The later reports of PwC and Jay and Casey have prompted Government observations that localism requires transparency, probity and robust scrutiny. However the Localism Act possesses no measure to intervene on those grounds; indeed the method of intervention introduced in 2014-5 by installing Commissioners under the Local Government Act 1999 is based upon the concern that the Secretary of State may have based upon evidence that the authority under the spotlight is failing to continuously improve in its duty to provide best value and continuous improvement, not poor governance and leadership.

The current localism arrangement appears post the changes wrought by the Local Audit and Accountability Act 2014 to be transforming into a position with an inherent contradiction of not being able to remove or suspend failing members but on the other hand where there is collective failure removing their power. This is not a credible position. The various reports on the cost of the PwC investigation of Tower Hamlets are that the cost of PwC was just under a million pounds. The poor council taxpayers of the borough under the 1999 Act have to foot the bill. I have great sympathy for the LBTH objection to the opened ended cost of it all.

How can it be possibly right that the route to addressing governance failure by questionable elected leadership is by the use of the 1999 Act and asking if they are delivering “best value” or whether the authority is capable of continuous improvement? Surely the correct approach is to amend the Localism Act and include the power to suspend or disqualify such members who cannot properly function in terms of sound governance. As far as the peer review is concerned, the Local Government Association is right to question the 1999 Act intervention and I look forward to their conclusions.

Paul Feild

Paul is completing his doctorial thesis - How does localism for standards work in practice? The practitioners view of local standards post Localism Act 2011 to be published later this year.