For councils in trouble, issuing a section 114 notice may feel like the end of the line – a final step when all else fails. But it is not – the s114 is just the start and it gets a lot worse from there.
Gavin Jones, should know. As chief executive of Essex CC, he has never been the recipient of a s114, but he has been a commissioner – going in to clear up the aftermath of council failures.
He tells The MJ: ‘There is a sense of, “oh well, we’ve got a section 114, we’ve got a capitalisation directive, it’s over”. Of course, it isn’t.
‘Essentially it [the capitalisation directive] means servicing the debt on that takes up a huge amount of the revenue budget. So the money you are free to spend on basic services are proportionately less.
Typically, he explains, a council’s level of debt servicing is not expected to be above 10%. After capitalisation, that goes up to 35%. ‘When you get into trouble,’ he says, ‘the impact is huge. In some cases, for generations, because you have less money for services.’
While it may seem punitive, he believes bail out is not an option. Handing over cash to failing authorities would leave the Department for Levelling up, Housing and Communities with a queue of cash-strapped councils and the threat of a s114 would be meaningless.
That said, Mr Jones suggests civil servants have been supportive. With an increasing number of interventions they are, he explains, attempting to create a consistency in how they are handled, that the right resources and commissioners are in place. ‘There is a lot of work to do around that, because we all know there will be more to come.’
Whether there is accountability, for individual officers, politicians or organsiation, remains a grey area, but he is clear: ‘If you're presiding over public money, then I think there has to be a sense of accountability for that.’
More importantly he suggests: ‘At the end of the day, the people who really suffer when a council fails will be the residents.’ Mostly, the ones most in need of services.
‘That’s why, when you do intervention, you are trying to juggle the imperative of addressing the financial issue… with the ability of the councillors to be able to provide quality services.’
Fire sales of assets and swathing cuts to services may look like the answer in the short-term, but he suggests the need to be mindful of the legacy you leave is always present.
While some councils are clearly struggling to balance the books, Mr Jones says a lack of grant is not the cause of collapse at the authorities he was involved in. ‘It is the culture and leadership, the sloppiness around governance… the money is a manifestation of a more underlying problem in these organisations.’ He comes back to the old adage – it is about doing the basics well.
He advises: ‘With a degree of humility, be prepared to objectively have your organisation reviewed about how healthy it really is.’
Peer reviews and audits are, he says, important – but the current audit situation is ‘a big worry’. ‘You have to be accountable, but within that there has to be fairness.’ And while Oflog is important, he suggests it is still ‘embryonic’ and ‘just a pure set of metrics in the absence of a place-based narrative can actually do more harm than good.’
On his own work, Mr Jones says: ‘I always like to approach intervention from the strengths – no organisation is bad at everything… what you really want to do is get it on the path of recovery as soon as possible.
‘You have to hold a mirror up to the organisation, and that means some very difficult questions.’ It is, he says, about building confidence and not shying away from ‘the hard stuff’.
‘What I don't want to do is to create a dependency on the commissioner. I think that's absolutely the wrong way. You're there to help with your own experiences and skills but the council needs to own its recovery,’ he adds.
In Thurrock BC, the council has appointed former Sunderland Council chief executive Dave Smith as MD commissioner. He is, according to Mr Jones, ‘doing a stunning job’ and the council is making good progress, with a new leadership team due to be announced soon.
It was, he suggests ‘quite tricky’ for a neighbouring council to run the intervention on Thurrock, with one political organisation reporting back on another.
Slough, Mr Jones says, is very different. The restructure that the previous chief executive put in place ‘did such damage’ in cutting posts and ‘creating confusion around accountability’ it has taken a long time to piece it back together.
Now, he says, there is ‘a stable corporate leadership’ under Steve Brown. ‘They’ve still got some real challenges,’ he explains. ‘But I’m confident now that they can move ahead at a faster pace.’
There are likely to be more councils struggling in the future but he suggests it is better to do the boring well, to avoid trouble later.