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‘Naming and shaming index’ for bankrupt councils fails to offer genuine solution

An index designed to measure councils’ financial resilience in order to avoid another Northamptonshire-style fiasco would actually risk oversimplifying complex issues without offering genuine solutions to authorities who are deemed to be failing, leaders have said.

Bosses from the County Councils Network (CCN) and the Association of County Chief Executives (ACCE) warned that “well-intended” proposals from CIPFA to create a ‘traffic light’ ranking of local government financial health will be a “blunt instrument” instead.

CIPFA launched a consultation on the index earlier this month, setting out plans to make this tool an “authoritative measure” of local authority financial resilience. The open-access and free resource would draw on publicly available data in order to provide an early warning system where it is needed so that timely action can be taken at a local level.

In the consultation document’s foreword, CIPFA chief executive Rob Whiteman wrote: “The recent National Audit Office report on financial sustainability in local authorities, published following the crisis at Northamptonshire County Council, indicates that there is a heightened risk of more councils over the next four years falling into special financial measures as a result of the unrelenting pressure on budgets.

“In response to the challenges outlined above, CIPFA is strengthening its range of guidance, tools and services to promote better financial management and provide an early warning system to senior officers and members. Through the development of a new Financial Management Code, we aim to support good practice in the planning of sustainable finances.”

But county council bosses hit back, arguing that the index will be a “blunt instrument that fails to genuinely help local authorities that may be struggling” and one which will not “aid the sector in tackling the main issue of insufficient funding.”

Since financial resilience can be calculated in a number of different ways and using different indicators, it is difficult to decide on a wholly accurate picture on how well a council is performing.

CCN and ACCE both claim that the index will not take into consideration other important factors, such as organisational culture, democratic accountability, the historical approach of a place, and the importance of working with partners.

They follow on from the LGA voicing similar concerns, but went a step further, offering to work with CIPFA to develop an approach that supports learning and innovation “rather than defensiveness judgements the proposed model could inevitably create.”

ACCE will outline its full views in its formal consultation response during August.

The group’s lead advisor for local government finance and CEO of North Yorkshire County Council, Richard Flinton, said: “Councils’ future financial stability has been a recurring theme in local government this year, and these well-meaning proposals are unsurprising in the current climate. However, we believe they will be a blunt instrument, which over-simplifies complex issues and offers no genuine solutions to councils’ financial issues.

“Naming and shaming local authorities, based on a particular dataset, could be counterproductive in the long-term when we should be looking at how, and where extra support to specific local authorities can be provided.”

Top image c. Hazel Nicholson