Plans to strengthen council finances announced

Plans to strengthen council finances, reduce risk to public funds and ensure councils are delivering value for money for taxpayers have been published.

Local Government Minister Luke Hall has announced the changes in a drive to boost public trust and ensure that residents are receiving the quality of services they deserve as we build back better from the pandemic. It is hoped that changes to the capital finance system will see improvements in the way that risks are monitored and will drive effective decision-making and ensure council funds are spent effectively.

he capital finance system will be improved through a multi-action approach to successfully address all the issues that create risk to the system. The first line of control is the scrutiny of local authority activity, enabled by transparency and reporting. This includes effective monitoring by government and others with a regulatory function, but also ensuring that there is sufficient transparency such that local authorities can be held to account locally.

The second line of control is the system of controls within local authorities. At this level, government actions can directly address local mismanagement through direct intervention or support strengthening of local authority controls and capability to achieve better outcomes. This aims to strengthen local decision making and risk management by supporting improvements to capability and governance of investment decisions.

The third line of control is the Prudential Framework itself. It uses the existing statutory powers for intervention, alongside previously unused opportunities to strengthen the Framework

Hall said: “Throughout the pandemic, we have worked closely with councils to ensure they have the resources they need to deliver vital services for their communities. As we build back better, we are strengthening the local audit system, to deliver value for money for taxpayers, support sound investment decisions and sustain public confidence in local government.”

The government has also confirmed a new consultation on proposals for how the new regulator, the Audit Reporting and Governance Authority (ARGA), should act as the system leader for local audit within a new, simplified local audit framework. It also includes proposals for how the government intends to implement other areas of the Redmond Review, which was an independent review by Sir Tony Redmond into the effectiveness of external audit and transparency of financial reporting in councils.