Local Government finance settlements have experienced significant levels of retrenchment over recent times with clear indications that this will continue for the foreseeable future.
Although the sector has adapted well to reductions in budgets thus far, the medium-term is even more challenging.
As a result, local government has reached a critical juncture where it needs to consider even more radical change and some tough decisions lie ahead.
The scale of these funding reductions, and the impact of austerity on council budgets, create significant challenges for councils to maintain quality services which deliver strong outcomes through more efficient, innovative and collaborative ways of working.
Given this financial outlook for public spending in the future, the need for effective financial scrutiny is vital. It requires executive councillors and officers to engage openly, at an early stage, not just inside the council but with citizens and wider stakeholders to identify solutions to delivering outcomes for communities in the face of future funding constraints.
Councillors require robust financial information to challenge executives and officers about Council finances. Their role is crucial in improving the democratic legitimacy and level of public confidence in key decisions. But local government finance is opaque and financial scrutiny is often perceived as ineffective.
Effective financial scrutiny is about challenging how councils make crucial choices about priorities for funding and how well resources are used to achieve policy objectives.
Councils must ensure that their financial management processes are transparent and that councillors have sufficient opportunity to use financial information in ways that help them identify risks and ask questions (and expect answers) to understand the development and impact of budget proposals on the provision of services in their communities.
Effective member scrutiny of financial planning and management will only work if there are excellent officer-member (and member-member) relationships. Where this is not the case significant cultural change is likely to be required.
Helping councillors to develop their confidence in understanding financial and performance information, to link it to the way people experience services and use it to drive improvements, will increase the impact of financial scrutiny.
When done well, it can help to ensure that a strategic approach is taken to major service reconfigurations and help to minimise the risk of political fragmentation over contentious issues by providing space for discussion around major changes.
The guidance in 'Raising the Stakes: financial scrutiny in challenging times' has been produced by the Centre for Public Scrutiny and Grant Thornton to offer practical advice to council officers and councillors about how scrutiny can add value to financial planning and financial management.
As part of CfPS’s Welsh Government-funded scrutiny support programme, it draws on good practice from Welsh and English local government to provide practical ideas on how councils can ensure effective scrutiny of the use of public money.
It offers an opportunity for councils to consider how their scrutiny function engages with budget and financial planning and the major service changes that are likely to be required to deliver savings.
The use of case studies within the guide help to demonstrate how a major consultation exercise on budget and service change options, can be used by scrutiny to inform members’ challenge of council proposals.
We would like to see councils using the guide to enable scrutiny to go further, to lead the public consultation process, test assumptions and priorities and drive innovation.
This will enable councils to develop a much more transparent and inclusive approach to financial planning. While some may fear the implications of being open about plans, in the long-run it will build ownership for the difficult choices that have to be made.
Barrie Morris is a director and regional local government lead at Grant Thornton UK LLP, Jessica Crowe is the executive director of Centre for Public Scrutiny
