Over the past two months, I have had the privilege of chairing a number of roundtable discussions with senior officers to discuss LGA-commissioned research into councils with experience of finance and governance challenges.
The research, by Human Engine, looks at councils where these challenges have led to either a Section 114 report or a capitalisation direction.
It was commissioned as part of the LGA’s Finance Improvement programme in 2022/23 to help councils understand the issues that led to a Section 114 report being made.
The research responds to an increasingly critical issue; since it was commissioned, a further four local authorities have issued a s114 notice.
It outlines five themes identified in councils in the period before the issuing of s114s: the quality of risk management; scrutiny and reporting; delivery of savings programmes; commercial investments and arms-length bodies; and the treatment of demographic pressures.
In addition, the roundtables identified and discussed underlying themes relating to financial challenge across councils.
The culture and leadership within a council was regarded as integral to effective financial management and governance and underpinned several themes identified in the Human Engine research.
Discussions considered the importance of maintaining strong and effective officer-member relationships, transparent and open decision-making, and effective risk management and scrutiny.
Some participants proposed that a change in the narrative surrounding s114 reports could be beneficial.
With an increase in the number of councils issuing such notices, it was suggested that this should not be viewed as a way to blame the council, nor to treat it as if it has failed. Rather, an s114 could be recognised as part of a process to instigate real, positive change.
Participants identified financial planning difficulties arising from the unpredictable funding landscape caused by short-term financial settlements for local government, which create a constant state of flux and uncertainty.
The challenges lie in the inability to make long-term plans, implement necessary savings, and facilitate transformation without stability.
Hollowed-out corporate capacity as a result of successive savings rounds makes it more challenging to formulate long-term plans, execute large-scale transformation programmes, and sustain effective governance.
Participants also noted major changes in the external environment, deepening internal difficulties faced by councils.
Spiralling costs associated with delivering statutory services, coupled with rapidly increasing demand, pose significant challenges. The heightened demand is attributed to demographic pressures, particularly in adult social care.
Some participants discussed how cuts in discretionary services, which previously enabled preventative activity, have intensified pressure on the provision of essential statutory services.
I found the roundtables a valuable opportunity to hear from a range of voices across the sector and understand how they are experiencing the challenges identified by this research.
It gave us useful insights into the support that is needed, and the role the LGA needs to play in delivering it.
We will use the learning from these discussions when planning the LGA’s 2024/25 Sector Support programme. A note summarising the key themes from the roundtable discussions will be published to share the findings and learning with the sector in February.
To find out more about the LGA’s support for councils’ financial resilience, please visit www.local.gov.uk/our-support