Most local authorities are well led and managed and balance their books, even in these challenging times, but, unfortunately, the catastrophic failure of a local authority isn't the rare event it once was. Paul Dossett and Guy Clifton explore the lessons to learn for the sector.
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Local government serves most residents and other stakeholders well – most of the time. But a decade of austerity and wider downward trends in political governance (including auditor and government-related interventions) have led to failure in the full range of local authority bodies.

Such failures are not inevitable and the system of checks and balances which exist (in theory at least) should have caught most of the high-profile recent failures. At the heart of this system lie three key statutory officer roles: head of paid service, monitoring officer and section 151 officer. Proper exercise of their statutory functions by these officers should keep all councils safe. 

Our report explores the reasons local government fail, why the many safeguards designed to prevent councils making bad decisions that waste public money and undermine trust haven't operated effectively, and what lessons we can learn to reduce the risk of failures in the future.

 

Informing the research

There are a large number and variety of sources of evidence about the factors which have led to failure. They include auditors’ public interest reports (PIR), non-statutory reviews, best value inspection reports commissioned by the Department for Levelling Up, Housing and Communities (DLUHC), and Ofsted inspection reports.

We shared our preliminary analysis of these with a group of Section 151 officers and monitoring officers and representatives of bodies including the Society of Local Authority Chief Executives (SOLACE), Lawyers in Local Government (LLG), the Association of Local Authority Treasurer Societies (ALATS) and the Chartered Institute of Public Finance and Accountancy (CIPFA).

Their reflections provided insight on the vital and complementary roles that section 151 officers and monitoring officers play, as part of the ‘golden triangle’ of statutory officers with chief executives, in supporting good governance and preventing failure. This has strengthened our understanding of what can be done to prevent or mitigate the impact of failure. 

Why local authorities fail

Our experience of value for money (VfM) audits shows that the circumstances of each council that has experienced significant financial, governance and service delivery problems are unique. However, there are many common causes, symptoms and consequences of failure that can be observed across all types of council across England.

Causes of failure identified in our report include:

  • poor decisions, often accompanied by a lack of transparency
  • risky investments made without the necessary commercial skills and knowledge
  • lack of an effective top team
  • over-reliance on interims in key roles
  • failure of members to ask the right questions.

We've examined each instance of failure and analysed the individual causes in the context of each failing council. To get a better understanding of the complexity of the causes of failure, however, we've also explored the wider environment of the local government sector and the many organisations which operate in that sphere.

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Opportunities to prevent failure in local government

Local government, central government, regulatory bodies, professional bodies and advocacy organisations have, between them, significant powers and opportunities to prevent local government failure. Each provides a particular link in the chain of safeguards protecting the interests of citizens and the stewardship of public money However, the work of each organisation is often not coordinated with, or even visible to, others in the chain.

Each political, regulatory, professional and advocacy body operates in its own sphere with only limited shared learning from individual and collective failures. There's evidence in each case of serious financial and governance failure that one or more links in the chain has been weak or altogether broken. There are opportunities here to strengthen the chain by strengthening any weak link. 

Everyone whose expertise, powers and duties form part of the chain of safeguards should consider what they need to do to strengthen their ability to prevent failure. It's important that this is done collectively, as well as individually. That requires strong collective leadership to recast the relationships between central and local government, and all the organisations which form part of the local government family. It's a daunting task, but the consequences of failing to tackle it will be further failure and a consequent focus on regulatory provisions.

The challenge for all those in the local government system is to make the best possible use of their powers and duties to prevent failure by:

  • understanding and learning from past failures
  • understanding and mitigating the risks of failure
  • working collaboratively across professions, hierarchies and organisational boundaries to support good governance and robust financial management.

Read 'Preventing failure in local government PDF [ 1499 kb ]' for more insight and guidance on this, or get in touch with Paul Dossett or Guy Clifton.

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