STAR OF THE SHOW
Is Britain’s film scene the key to economic regeneration?
AUDIT TRAIL
The twists and turns of local government accountability
ROUTEMASTER
How bus policy could ease the transition to net zero
Is it possible to defuse the demographic time bomb of global ageing populations?
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ISSN 1352-9250
CHRIS SMITHThere’s a lot that I hope is familiar to you about our latest edition of PF. We’re looking at the importance of connection and what people can achieve together.
There’s an old saying that it takes a village to raise a child, and that’s part of what we’re looking at with our cover story. Governments across the world are grappling with the reality of ageing populations. It’s a short-term problem with empty schools and a long-term issue because there won’t be enough people to support or pay for the services older people need.
It’s a really difficult issue for policymakers, who must challenge personal boundaries by talking about children. For generations struggling with housing costs and student debt, the blunt response is ‘show me the money’.
This edition also quoted the Audit Commission’s chief saying the best council finance leads equalled the best in industry. I doubt that view is held by the current government.
In our interview, new CIPFA president Caroline Rassell stresses the importance of connection between people and understanding what other people need. She’s taking the helm because she believes in the CIPFA community. We applaud this and wish her good luck in the year ahead.
Buses have a crucial role in keeping families together –they’re a vital link for older people and families of every kind on low incomes. They are crucial to saving the planet, too – we find out how.
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We’re also looking at the public finance ‘family’ that has been battling to meet multiple demands with limited resources. Can the new governance watchdog help? I’ve been delving through our recently acquired PF archive and discovered this has dominated editions for years.
Lastly, we’re adding some glamour with a tour of the film studios that councils are backing. It’s a bit of a homecoming for me, as my family lived just yards from the development in Dagenham. It’s not risk-free but it shows what local government can do.
Our edition really is a blockbuster production. The pictures haven’t got smaller. Lights, camera, action…
Average circulation
13,428
(Jul 19–Jun 20)
“Parliament should choose between localism and centralism,” according to the December 1984 issue.
CHRIS SMITH Editor chris.smith@publicfinance.co.ukGovernments across the world are grappling with the reality of ageing populations
55 Round the block Exploring the potential of blockchain 57 Vocabulary test Can we talk our way out of austerity?
59 Retro revisit A warning to tackle corruption early
60 Pensions update Guidance, data security and investor oversight
p10
POWER SHIFT
May’s elections were led by local issues, not national politics
p11
GREEN SHOOTS
PF takes a look at the steps being taken towards net zero
p12
US deal avoided ‘catastrophic’ default but won few friends
Work to stabilise finances at two local authorities is under way, as estimates of liabilities climbed to £3bn.
Thurrock Council and Woking Borough Council are moving closer to recovery, but months of complex work lies ahead.
Administrators have begun selling the assets of a solar investment company to which Thurrock Council lent more than £650m, in order to repay the company’s debts.
Interpath Advisory, joint administrator for Toucan Energy, revealed it has started the sale
process for its 53 solar parks, which account for about 5% of UK utility-scale solar capacity.
“We anticipate that unsecured creditors will receive a dividend, albeit the quantum and timing of this remains uncertain,” the spokesperson said.
Figures published by the charity End Child Poverty revealed 71% of children in poor households have a parent in employment. There are 40,847 children in Newham, East London, living in poverty – up by 1,864 since 2015.
But the government has revealed that Woking Borough Council faces a tougher task and sent commissioners in after an independent review found the authority had failed its best-value duty.
Its total borrowing sits at £1.9bn – and is set to grow to £2.4bn in the next two years.
The review said the authority is the UK’s most indebted council relative to its size, because of an investment strategy that relied on borrowing to lend to regeneration companies in a way not “backed by assets in any way matching that debt”.
The debt has grown so large because some companies are making operational losses but still extending their borrowing from the council to cover the cost of repaying the initial council loans.
“My administration is very clear about the huge challenges facing the council, owing to the legacy of both the extraordinarily high and disproportionate levels of debt that we have inherited from the previous administration,” said council leader Ann-Marie Barker. The Liberal Democrats won control of the authority last year.
One of the commissioners is CIPFA council member Carol Culley, deputy chief executive and city treasurer at Manchester City Council.
CIPFA chief executive Rob Whiteman warned: “The risks associated with borrowing on such a disproportionate scale have come back to haunt Woking. Clearly, the controls put in place by the Prudential Code were not followed.”
“The impact of this council’s conduct will have serious implications for the sector.”
By Calum Rutter
The huge backlog of unaudited local government accounts has ramifications across government, including for entire departments and the NHS, the head of the National Audit Office has warned.
As the number of delayed audits approaches 1,000, comptroller and auditor general Gareth Davies told parliament’s levelling-up committee that the effects are already being felt beyond the local government sector.
He said he will be “unable” to sign off the Ministry of Justice’s accounts this summer, because so many of the department’s employees are in local government pension schemes affected by the delays.
“Delays in the local government sector are directly leading to delays in the audit of entire central government departments,” said Davies.
“This is a big enough problem for local government and direct accountability at a local level; it also has negative impacts across the whole public sector.”
Because so many of the same specialists in audit firms work on the accounts of local health bodies, the time that
council accounts are taking is beginning to show.
“We are starting to see signs of strain in the health market for the first time, which is very worrying and [risks] practical consequences for [signing] off the accounts of the NHS as a whole,” said Davies.
“This isn’t a problem that can be sealed off in the local government – serious as that is itself; it is starting to have wider impacts.”
Figures released in December by Public Sector Audit Appointments showed that 630 opinions were outstanding, including 220 from 2020-21 and earlier; just 12% of 2021-22 opinions were given by the previous year’s deadline, following a mere 9% the year before.
The government has commissioned an independent review into a regional development project in response to corruption allegations.
Levelling up secretary Michael Gove confirmed the probe – aimed at directly addressing allegations of corruption, wrongdoing and illegality at South Tees Development Corporation (STDC) and Teesworks – in a letter to Tees Valley mayor Ben Houchen.
The review will also report on the governance and decisionmaking arrangements at STDC and whether the project is delivering value for money.
He said that while the government has seen no evidence of corruption, the allegations pose a “very real risk to our shared ambitions to deliver jobs and economic growth in Teesside”.
Gove wrote: “Given the importance to you and to Teesside of addressing this matter, I have taken the exceptional decision to support the commissioning of an independent review to consider the specific allegations made and Tees Valley Combined Authority’s oversight of the STDC and Teesworks joint venture.”
Selling a professional services company has given Merton Council an injection of £185.6m. The authority plans to use the proceeds to make “sound investments” and generate income, as well as pay off half of its debt.
CHAS 2013 Ltd was a wholly owned subsidiary company that provides the construction sector with safety accreditation, risk management, supply chain management and compliance services. It was sold to US-based firm Veriforce.
Council leader Ross Garrod stressed that the money needs to be used sustainably.
Bury Council is set to take control of its housing management services in a bid to integrate services and reduce costs.
It will insource management of 7,700 council homes from subsidiary housing association Six Town Housing, which reported a deficit in its 2021-22 financial statement and the 2022-23 draft accounts.
The council said: “Creating one integrated management structure would enable the removal of an additional layer of management and associated costs.”
A former chief secretary to the Treasury is to become a regular contributor to PF
Labour MP Liam Byrne, who was also a Home Office and Cabinet Office minister, will be sharing insights, including research from all-party parliamentary groups, on inclusive wealth, climate change, UK regional issues as well as updates on the International Monetary Fund.
Read more, p19
The campaigns may have disappointed, but subtle shifts resulted from May’s polls
By Chris SmithMay’s local elections didn’t deliver big breakthroughs for the main parties, but instead brought subtle changes that shift the power balance and how business will get done.
1 The government faces a battle on multiple fronts
The results for 230 councils ended with Labour claiming 71 councils, the Lib Dems 29 and the Conservatives 33. Unexpectedly, the big results were in the South. Windsor & Maidenhead went to the Lib Dems and Medway to Labour – both significant. The Green party took Mid Suffolk from the Conservatives. “A truly historic result – the first majority Green council in Europe,” claimed co-leader Adrian Ramsay.
Jonathan Werran, chief executive of think-tank Localis, said the elections highlighted the growing
trend of people focusing on local priorities in council elections, rather than national issues. “Those who have had their ears to ground voted accordingly.”
It means Labour is now in control of over 120 councils with 7,000 councillors to deliver policy ideas and challenge the government’s agenda on the ground.
New administrations ditched plans agreed only this year. Southend, under minority Conservative leadership, tore up a regeneration plan that included a housing development. Medway, with others, began a review, adding to uncertainty for contractors and finance teams.
3 Northern Ireland’s budget bill is growing As predicted, Sinn Féin became the biggest party in
local government for the first time with 144 seats.
Politicians and officers, including the Northern Ireland Public Sector Chairs’ Forum, called for “a manageable way forward for NI public services” and highlighted “how the lack of a definitive budget and the prospect of drastic cuts” have caused alarm.
4 Main parties’ pledges didn’t take off
For the Conservatives, PM Rishi Sunak played safe with repeats of his priorities to halve inflation, grow the economy, cut national debt, reduce NHS waiting lists and tackle immigration.
Labour led with plans for the NHS, crime, education, the climate crisis and the economy. Shadow chancellor Rachel Reeves pledged to radically in-source services.
5 Next: manifesto battle lines and tax wars
The policies that underpin election battles are being drawn up – and the bidding to influence them is fierce. Conservative backbencher Bim Afolami called for national insurance to be cut for under-40s. Ex-chancellor Nadhim Zahawi said inheritance tax should go.
Labour MP Meg Hillier, chair of the Public Accounts Committee, cautioned: “We’re all writing manifestos. The danger is that [these]… become a proposal that isn’t deliverable.”
Kensington & Chelsea’s leader of the opposition is Kasim Ali, the first ever British-Somali to hold such a post. He’s a businessman who has been developing his own brand of food sauce and a former adviser to Somalia’s president.
He said: “I look forward to working with all councillors to improve living standards for our residents across the borough.”
And Harlow Council’s leader, Dan Swords, is just 22 years old, having only been elected as a councillor in 2021.
He said: “Fundamentally, it’s not your age that people care about – it’s what you do. I didn’t knock on doors in the election campaign with people saying to me ‘I really want a 60-year-old leader of the council’. They said they want problems sorted.”