Levelling Up Committee launches inquiry into financial distress in local government

A new inquiry looking into 'financial distress' in local authorities has been launched by the Levelling Up, Housing and Communities committee as part of an effort to understand council funding, financial management and the increasing demands on local services.

According to the committee, the inquiry will seek to examine the current landscape of financial resilience in local authorities in England, what lessons can be learned from the recent issuers of section 114 notices, and how the various responsible bodies are fulfilling their responsibilities to ensure effective and sustainable local government.

On Wednesday, the committee conducted two interview sessions.

In the first session, the committee heard from Cllr John Fuller OBE, Vice Chair of the Economy and Resources Board of Local Government Association, Cllr Graham Chapman, Vice Chair of SIGOMA and Cllr Claire Holland, Acting Chair of London Councils.

The second session involved Stephen Jones, Director of Core Cities UK, Cllr Barry Lewis, Finance Spokesperson for the County Councils Network and Cllr Sam Chapman-Allen, Chair of the District Councils Network.

In the first session, the committee heard - among other concerns - that children's services and adult social care are the most costly budget strain currently facing London councils.

Cllr Holland called for greater flexibility to raise money locally to handle the issue as well as more funding from central government.

On governance issues, Cllr Chapman said that some problems have arisen as a result of the pressure on local government to try to make money to compensate for cuts to their funding.

"You have also been able to borrow at 0.5%, so there was hardly any cost of borrowing at the time," he noted.

"That combination encouraged a lot of optimism, let's say. It also encouraged a culture of people who would come in and give you easy solutions to problems.

"The difficulty then is, what are your internal checks and balances? The internal checks and balances are very weak. You have the 151 officer, who reports to the chief exec.

"You have the monitoring officer, who is on the same level as the 151 officer and who reports to the chief executive. Very often, nobody is willing to stick their neck out because of the consequences—because of what their career will be or because of splitting the group."

Concerns were also raised about councils being handed new powers amid the financial turmoil.

Cllr Fuller said: "Local government is being set up to fail on certain things like that, where there are new functions going in.

"Take devolution, for example. There is an insane plan to give more non-statutory powers to upper-tier authorities—the ones that are going to go bust—so where does the devolution agenda end up? It is very difficult to see.

"We are struggling with things we have at the moment without having more non-statutory responsibilities given to the authorities that are most likely to fall over."

Two more sessions are scheduled for Monday next week (13 November), and will see the following people attend:

• David Phillips, Associate Director at the Institute for Fiscal Studies
• Jonathan Carr-West, Chief Executive at Local Government Information Unit
• Abdool Kara, Executive Director at the National Audit Office
• Paul Dossett, Partner and Head of Public Sector Assurance London & South-East at Grant Thornton
• Bob Watson, Section 151 officer at Surrey Heath Borough Council
• Steve Thompson, Section 151 officer at Blackpool Council
• Gary Fielding, Section 151 officer at North Yorkshire Council
• Lorna Baxter, President at the Association of Local Authorities' Treasurer Societies, and Section 151 officer at Oxfordshire County Council

Adam Carey