Local Government: Statutory Interventions

All hon. Members will recognise the critical role local councils play in providing essential statutory services to their residents and being accountable to the communities they serve. Where councils do not meet the high standards that we set for local government, it is right that Government intervene in order to protect the interests of residents. Today I am updating the House on three statutory interventions: Woking Borough Council, Nottingham City Council and Liverpool City Council.

In May 2023, the Secretary of State for Levelling Up, Housing and Communities, my right hon. Friend the Member for Surrey Heath (Michael Gove), intervened in Woking Borough Council, using his powers from the Local Government Act 1999 (the 1999 Act), following evidence of extensive best value failure in the external assurance review relating to the exceptional level of financial and commercial risk to which the council had exposed itself, the quality of its strategic financial decision making and concerns over its commercial dealings. As part of this, the three reviewers were appointed as commissioners, given powers over a broad range of council functions and tasked with overseeing the improvement. The Secretary of State committed to consider the skills and experiences required to support Woking on its improvement journey within six months, following the receipt of two reports from the commissioners.

In those first six months, the council has worked collaboratively and co-operatively with the commissioners. That being said, the situation remains grave. The commissioners’ first report, published on 19 October, made it clear that the scale of the challenge at the council “should not be underestimated”. In their second report, published today, the commissioners continue to paint a stark picture of the challenges, noting that the council

“remains in an extremely vulnerable position due to its overhanging debt and historical lack of rigour in its commercial activity.”

Overall, the council has made some limited progress on areas of focus identified by the commissioners in their first report, but there remains a significant deficit in the council’s capacity and capability in some corporate functions.

This second report comes at a key point for the council’s improvement: the coming months will require the council to manage the converging pressures of setting a balanced budget, preparing for local elections and undergoing the required transformation. In the short term, tough decisions need to be made, requiring clear leadership across the council, and a steady hand at the wheel. Following the resignation of the council chief executive, Julie Fisher, the Secretary of State has decided to increase the capacity of the commissioner team by appointing a managing director commissioner, Richard Carr. Mr Carr has more than 25 years of experience and will be responsible for the day-to-day operations of the council and will provide strategic direction and leadership, until such time as a permanent appointment to the post of chief executive can be made. This appointment will increase the council’s capacity to deliver vital improvements and provide stability over the rough road ahead.

Having served as lead commissioner for six months, Jim Taylor has decided to step down from his role for personal reasons. I wish to thank Mr Taylor for the clear leadership and real dedication to his roles as both lead reviewer and commissioner at Woking. He will continue in his role as commissioner at Sandwell Metropolitan Borough Council. The Secretary of State is appointing Sir Tony Redmond as lead commissioner. Sir Tony is a respected figure with a long career in local government and is currently chair of the Nottingham City Council improvement and assurance board. He will focus on finding longer-term solutions for Woking and promote a clear strategic direction for the council. The next phase of improvement is critical and we are grateful to Sir Tony for bringing his expertise and experience to lead that change. We will keep the intervention under review to determine whether further changes are needed given the challenging weeks and months ahead.

Nottingham City Council has been in intervention since the improvement and assurance board (“the board”), chaired by Sir Tony and made up of independent experts, was first appointed in January 2021. The intervention was escalated in September 2022 by the then Secretary of State, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), with the issuing of statutory directions compelling the council to follow the advice of the board and to increase the momentum with which the necessary improvements were to be made. While the council has made efforts to address the recommendations issued by the board in February this year, the board’s latest assessment, as presented in its two latest progress reports, is that the council is still not acting at the required pace to make the necessary improvements. Weaknesses in finance and transformation, along with an underlying culture of poor governance, continue to manifest themselves. On 29 November 2023, the council issued a section 114 notice due to its inability to balance the budget for 2023-24. The precarious nature of the council’s finances, and its effect on overall transformation, together with outstanding governance issues, are causes of serious concern.

In the light of this evidence, the Secretary of State is satisfied that Nottingham City Council is continuing to fail to comply with its best value duty and he agrees with the board that improvements are not being made quickly enough. He is minded to escalate the current intervention arrangements in order to secure compliance with that duty and to ensure that the necessary improvements are made for the benefit of the local community. To that end, and in line with procedures laid down in the Local Government Act 1999, officials in my Department have today written to the council seeking representations on the board’s reports and on the proposed intervention package.

I want to place on record that the Secretary of State recognises the rigour with which Sir Tony and his fellow board members approach their work in supporting the council to address the many challenges it faces. Indeed, without their sustained efforts to date, the current situation would be even more challenging. However, a change in approach is now required to secure the necessary improvements rapidly; there are still many difficult and pressing decisions ahead and the scale of the challenge cannot be underestimated.

The Secretary of State is minded to appoint commissioners to exercise certain and limited functions as required, for two years. The proposed move to the commissioner model of intervention represents a significant change to ensure that public trust in the council is restored, particularly as the council has been working with the board since it was first appointed in January 2021. The commissioner team, if appointed, would consist of three appointments: a lead commissioner; a commissioner for finance; and a commissioner for transformation. I am announcing the proposed commissioner team structure to provide clarity to the council around the most pressing priorities, to make it clear that there can be no slippage in making the necessary improvements, and to enable representations to be made before the final decisions.

Our proposal is for the council, under the oversight of the commissioners, to reappraise its improvement plan within the first three months of the intervention and report on the delivery of that plan to the Secretary of State every six months.

The Secretary of State is proposing to direct the transfer to commissioners all functions associated with:

the governance, scrutiny and transparency of strategic decision making by the authority;

the financial governance and scrutiny of strategic financial decision making by the authority;

the strategic financial management of the authority;

the authority’s operating model and redesign of the authority’s services to achieve value for money and financial sustainability;

the development, oversight and operation of an enhanced performance management framework for officers holding senior positions;

the appointment and dismissal of persons to positions, the holders of which are to be designated as statutory officers, and the designation of them as statutory officers; and

defining the officer structure for the senior positions, to determine the recruitment processes and then to recruit the relevant staff.

I hope it will not be necessary for the commissioners to use these powers, but they must be empowered to do so if they consider that required improvement and reforms are not being delivered.

I am inviting representations from the council on the board reports and the Secretary of State’s proposals by 2 January 2024. We want to provide the opportunity for members and officers of the council, and any other interested parties, especially the residents of Nottingham, to make their views on the Secretary of State’s proposals known. The Secretary of State will consider carefully all representations and any other evidence received, before deciding whether to change the intervention, as he is minded currently to do, to make the necessary statutory directions under the 1999 Act and appoint commissioners. Our expectation is that the council will continue to work with the board to make the necessary improvements until a final decision is made. We will update the House in due course.

On 10 June 2021 the then Secretary of State, my right hon. Friend the Member for Newark (Robert Jenrick), updated the House that he was intervening in Liverpool City Council and had appointed a team of four commissioners and given them oversight of the council’s highways, regeneration and property management functions together with the associated audit and governance arrangements. Their appointment runs to June 2024. This followed a best value inspection, which concluded that the authority had failed to comply with its best value duty over a number of years. On 8 November 2022, the current Secretary of State confirmed that he was expanding the intervention and issuing further directions to appoint a finance commissioner and give commissioners finance, governance and recruitment functions.

On 6 October 2023, the commissioners submitted their fourth report. Since the last report, there has been a change in leadership at political and officer levels. The new leadership team have shown strength and grip as they continue to make improvements, and commissioners believe they are well placed to deal with challenges. Having carefully considered that report, I am announcing that the Secretary of State is minded to make a number of changes to the intervention.

First, the Secretary of State is proposing to reduce the scope of the intervention and return certain functions to the council by March 2024. This would be part of a planned and phased transition towards the end of the intervention. The Secretary of State is therefore minded to amend the current directions so commissioners no longer exercise the following functions:

All executive functions associated with highways in March 2024;

The requirement from section 151 of the Local Government Act 1972, to make arrangements for the proper administration of the authority’s financial affairs, and all functions associated with the strategic financial management of the authority, by March 2024, to include:

the power to amend budgets where commissioners consider that those budgets constitute a risk to the authority’s ability to fulfil its best value duty; and

providing advice and challenge to the authority in the setting of annual budget and a robust medium-term financial strategy for the authority.

All functions in relation to the appointment, organisation and performance of persons to positions the holders of which are not designated as statutory officers, and the designation of those persons for tiers one to three as soon as practicable.

Secondly, the Secretary of State is minded to issue further directions to the council, either to support the proposed return of powers or to address concerns raised by commissioners in their report. The Secretary of State is therefore minded to direct the council to undertake a range of actions to the satisfaction of commissioners, including:

allow commissioners to provide advice and challenge to the authority on strategic decisions related to its finance function, including the setting of annual budgets and medium-term financial strategy;

continue to take steps to rebuild trust with residents, and in particular to improve FOI performance, report writing and systems to record delegated decisions;

have completed a review of the strategic risk management and implement a strengthened mechanism based on its recommendations;

progress significantly the implementation of the corporate landlord model, commence the stock condition surveys to better understand the asset base, develop comprehensive asset management plans and produce a revised structure for the property directorate;

continue to establish and implement a cultural change programme that embeds a customer focus, performance management culture, systems and reporting across the organisation.

While I welcome the commissioners’ comments that the political and officer leadership of the council have made strong progress since May 2023 and there is early evidence of improvement, there remains a lot to do. The new leadership have not yet had the time to demonstrate their leadership of continuous improvement or their ability to resolutely make necessary difficult decisions. In order to provide enough evidence of a well-set trajectory, more time is needed to observe the impact of this new leadership as they drive improvement. The commissioners currently consider a form of statutory intervention is likely to be recommended beyond the current end date of June 2024. Their next report, in March 2024, will be vital to support my decision on how to proceed. I will update the House at that time.

I am now inviting representations from the council on the report and the Secretary of State’s proposals, also by 2 January 2024. We want to provide the opportunity for members and officers of the council, and any other interested parties, especially the residents of Liverpool, to make their views on the Secretary of State’s proposals known. Should the Secretary of State decide to act along the lines described here, he will make the necessary statutory directions under the 1999 Act. I will update the House in due course.

I want to acknowledge the work of the dedicated staff who deliver the important services of councils in today’s announcement on which local residents depend, many of whom have strived to deliver those services over recent years despite the financial, leadership and governance challenges faced by their respective authorities. I also want to thank the commissioners for all they do. They all play a vital role in each council’s recovery. I will deposit in the House Library copies of those reports I have referred to, which are also being published on www.gov.uk today.

[HCWS121]