DLUHC perm sec: Devolution will ‘suffer’ because of councils in crisis

Sarah Healey says government interventions are a “signal” local authorities need to improve before greater powers are rolled out
Commissioners were sent to help fix Birmingham's finances this month. Photo: LH Images/Alamy Stock Photo

By Jim Dunton

19 Oct 2023

Department for Levelling Up, Housing and Communities permanent secretary Sarah Healey has warned that recent financial crises at English councils are likely to prompt ministers to slow the pace of devolving powers from central government to town halls.

Healey’s observations came at a conference of council chief executives in Birmingham this week, where she made direct reference to the host city’s problems and those of Woking Borough Council – both of which have declared they are unable to balance their books in recent months.

Earlier this month, communities secretary Michael Gove sent in a six-strong team of DLUHC-appointed commissioners to help Birmingham fix its finances in the face of pressures including a £760m equal pay settlement and a massively over-budget £100m IT system upgrade.

Gove dispatched three commissioners to Woking in May. The Surrey council has debts of around £1.9bn related to two major property developments, one of which features three skyscrapers. A report to Gove at the time said the annual cost of servicing Woking’s total debt was £62m – more than double the council’s annual budget.

Healey’s latest comments on greater devolution of powers to local areas – which is part of the government’s wider levelling-up strategy – came in a panel session at the Society of Local Authority Chief Executives and Senior Managers Summit on Wednesday.

The perm sec cautioned that councils being in the headlines “for the wrong reasons” was not helpful to those making the case for devolution, Local Government Chronicle reported.

She added that long-term statutory interventions were a “signal” that councils need to improve before ministers move further on devolution, even though there was an “understanding” of the importance of local authorities having more power over their own decisions.

“Despite the extraordinary work and efforts by local authorities, local government is making headlines for quite the wrong reasons following failures in Birmingham, Liverpool, Croydon, Slough and Woking,” Healey said.

“It’s a huge shame, considering the excellent practice that characterises much of the sector. But where there are serious problems it is absolutely right for the government to intervene to protect residents and taxpayers, who expect and deserve better, and protect the standard of local government as a whole.

“This will be the cause for greater devolution to suffer when a few act irresponsibly and communities are left to pay the price.”

She added: “I think it is worth acknowledging that some of the problems that have arisen could have been avoided and identified and tackled earlier.”

Negotiating “trailblazer” devolution deals with the Manchester Combined Authority and West Midlands Combined Authority – as well as pledging further devolution deals in England – was part of chancellor Jeremy Hunt’s package of levelling-up measures at this year’s Spring Budget.

The Manchester and West Midlands deals have now been signed off, but Healey’s words to the Solace Summit suggest a new caution among ministers about the pace of transfer for further freedoms.

As well as Birmingham and Woking, in recent years several other authorities have issued statutory Section 114 notices under the Local Government Act 1988, declaring themselves unable to balance their budgets for the financial year.

They include Thurrock Council, the London Borough of Croydon, Slough Borough Council, Liverpool City Council and Northamptonshire County Council.

Labour Party deputy leader and shadow levelling-up secretary Angela Rayner told a parliamentary debate last month that there were “warnings” a further 26 local authorities would be unable to balance their budgets over the next two years.

According to the Institute for Government, only 12 councils have ever issued issued Section 114 notices. In two cases – Northumberland County Council and Nottingham City Council – the notices related to unlawful spending rather than an inability to balance the books.

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