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Welsh councils must strengthen financial planning arrangements in light of Brexit

Despite good systems being in place that help manage and control finances, spending within tighter budgets is “proving to be a challenge” for some local authorities in Wales, the Welsh auditor has said, adding that there is still scope to improve how savings are made – especially in the context of austerity measures and Brexit.

In its report on the financial resilience of Welsh councils, the Wales Audit Office praised the “mostly sound” governance arrangements and financial planning processes across local authorities, but highlighted areas where improvements could be made.

For example, it said the engagement of councillors and the effectiveness of decision-making in terms of savings are still inconsistent. This follows on from its 2014-15 work, which found that around half of local authorities faces “some risk” in one or more key governance areas.

The 2015-16 report showed an improvement, with over two-third of councils having fewer issues, but a major weakness around ensuring that the delivery and progress of savings plans are separately analysed and routinely reported still endures.

Overall, the report said that councils and the Welsh Government must strengthen their financial-planning arrangements while ensuring they have a comprehensive reserves strategy.

Cllr Aaron Shotton, deputy leader of the Welsh Local Government Association (WLGA) and spokesperson for finance, noted that council reserves are “a clear example of how councils must continue to plan for the future”.

“These reserves can only be spent once and as the Chartered Institute of Public Finance and Accountancy has emphasised, current council reserve levels directly reflect the success local authorities are having in planning beyond single year budget horizons,” he added.

“Local councils must now continue to seek ever greater consistency in their approach, and we will continue to work with our members, finance professionals and the Welsh Government to improve and to deliver the reforms we so desperately need in how local councils are funded. Key to this reform will be the need for a longer-term financial framework at the national level.”

Cllr Shotton and the WLGA welcomed the report, which did recognise improvements in financial planning and resilience at a time when local government funding “has contracted by nearly a fifth over recent years”.

But the councillor argued that the future still remains uncertain, especially with the “continued impacts of austerity coupled with the as yet unclear implications of Brexit”, all of which will require councils “to continue to cope with significant financial uncertainty and evolve their responses”.

Auditor general for Wales, Huw Vaughan Thomas, agreed and empathised with the expected financial uncertainties of Brexit, but added: “Whilst I am pleased to see councils making progress in strengthening their financial planning, they need to do more in response to the challenging environment and our recommendations to both authorities and Welsh Government will help councils move forward and ensure that services are run as efficiently as possible.”

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