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As a concept, the golden triangle of chief executive/monitoring officer/chief finance officer – who exercise their leadership responsibilities to own and champion good governance and effective financial management in local government is well-established.  Beyond the functional corporate responsibilities, the culture for ensuring financial sustainability across local government will require the constant vigilance of strong governance and effective scrutiny.

In joint work Localis undertook with the Centre for Governance and Scrutiny, which led to the publication of a governance risk and resilience framework, the obvious point was noted that good governance is important in ensuring good decision making and leadership in local authorities.  Contrariwise, weakness in governance can have far reaching implications for individual councils and the people they serve.  It is therefore important for councils to have a way to work through what good governance looks like for them, how the risk of weak governance can be minimised and the attitudes and behaviours that underpin this.

The CIPFA Financial Management Code makes clear that responsibility for sound financial management is not the preserve of the chief finance officer, rather it is the responsibility of all those in senior leadership roles, both officers and members.  There are very clear lessons from recent financial failures is that in reality they were governance failures, where transparency, scrutiny , challenge and open and honest conversations were missing. There are clear lessons for those authorities, not yet in a severe financial position that if they have poor governance a downward spiral into financial meltdown is inevitable.

In their follow up study into lessons from recent Public Interest Reports, and their December 2023 preventing LG failure report: ‘How can further local authority failures be prevented?‘  Grant Thornton has noted a growing trend for their issue as both a concern and reminder that things can go wrong anywhere – with potentially significant risks, including government intervention.  Their findings highlighted that not a small number of councils have failed to exercise appropriate governance with public money, exercise appropriate governance or have the capability to manage risk in the short or long term or remove optimism bias in medium-term plans.

So, if the dominant themes for financial failure to date are those of poor leadership, culture and governance and a lack of understanding or practice of oversight, do the governance tools in the wheelhouse still fit the needs of today’s world?

Significantly, we mark this year four decades from Margaret Thatcher’s Conservative Government taking powers through the Rates Act 1984 to limit the budges of councils and he rate-capping rebellion of ‘Red Ted’ Knight’s Lambeth and Derek Hatton’s Militant run Liverpool City Council (see Jonathan Werran: ‘1984 and all that’ in The MJ)

If we consider the many changes to the role and corporate running of local government that has undergone successive radical transformations, a political economy that has also moved on dramatically, and a technologically driven age of AI wonder far removed from the eight-bit ZX Spectrum era, there is a prima facie case for necessary reform and renewal.

  • For example, does the very ‘golden triangle’ model remain valid given the changes to local government corporate structure?

  • And fundamentally, how in the current economic and political context of local public finances might we need to change to better guarantee that strong corporate governance and effective scrutiny supports a culture of transparency and openness that will help deliver financial sustainability over the lifetime of the next parliament in the medium-term?

Originally published on Localis - Author: Jonathan Werran - Chief Executive, Localis

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