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Paul Coen kicks-off the fight to claw-back council cash from the Icelandic bank collapse– and rebuild the reputation of local government. One of the most frequently-asked questions in recent days has been, ‘Where are the bankers?' Why has not a single leader of one of the major, now part-nationalised banks not appeared on radio or television to give an account of themselves? The banking sector's lack of transparency in good times, and in bad, could not be in sharper contrast to local government's. The transparency, openness and fundamental integrity of individual councils, and the sector as a whole, is at the heart of its values. A time when the absence of trust has led to the collapse of the banking system and put the global economy on the brink of recession is a good moment to be able to point to such values as among those which differentiate local government's contribution to society. At the eye of a storm is precisely the moment when we should rely most on the values that define us as a sector. So, the first preoccupation of councils exposed to the Icelandic bank collapse has been concern to protect public services and the council taxpayer. At the LGA, in representing councils to the Government and on the national media, we have had two objectives in mind. First, to understand and protect councils' financial position; and second, to address the reputational risks for the sector as whole. We now know the financial picture – and it is serious. But, crucially, as with everything in local government, it is dangerous to generalise. Some smaller councils will genuinely struggle to accommodate the loss of interest. And others with larger exposure, and hence, larger loss of interest risk, nevertheless, have the resilience to accommodate the loss. That is why we agreed with the Government that the issues needed to be addressed on a case-by-case basis. First, we must ensure any councils facing immediate problems are supported. Second, we need to have clear guidance and clarity on any support the Government will offer to ensure that all councils are able to prepare budgets for 2009/10, and roll forward their three-year financial strategies. And third we need to get councils' money back. The reputational risks are harder to engage with. Being open and transparent leaves councils accessible to occasional plaudits, but more frequently, criticism and occasionally unprovoked attack. Some people think that all councils do is sweep the streets. Others, for ideological or self-interested reasons, wish to undermine the importance of local government in society, and have had a field day. For both, the challenge for us is to engage and explain. We think it's really important that we should get all the information on what the facts are out into the public domain. Why do councils have this money to invest in the first place? Where is it being invested, and why in these banks? These are good questions which deserve answers. These questions present us with an opportunity to demonstrate more about the vital roles councils play at the heart of local communities. They give us a chance to demonstrate that councils' treasury management practices are essentially sound, and help keep council tax bills down. For the sector as a whole, the evidence is, councils have fulfilled their obligations well. There is no general evidence of poor performance, still less of incompetence. Inevitably, in such a large and diverse sector, there will be examples from which councils need to learn. And there are many issues from which the LGA itself needs to learn. We have had a pretty testing few days. That said, such issues are small in relation to the real world challenges councils are now facing. Some do have significant financial challenges arising from the collapse of the Icelandic banks, and we will be continuing to do all we can to assist them. The greatest challenge for all councils and the sector as a whole, is to show how councils with their partners can offer leadership and practical help to local people and businesses in the face of what is clearly going to be an incredibly testing period for all. We have long argued that councils working with others in local economies and communities have a major contribution to make to the success of their local economy. This claim is about to be tested. I know many councils have already started work with local partners and businesses to do what they can to respond to the economic downturn. And this work will become a top priority for the sector in the months ahead. It is in the face of adversity that what we care about is most challenged. In the face of a few short weeks, our beliefs in devolution and local responsibility, and in transparency have both been called to account. It's our job to ensure we are not found wanting. Paul Coen is chief executive of the Local Government Association

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FINANCE

Avoiding the Icelandic pitfalls

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