Governance lessons

Paul Feild looks at the lessons from the imposition of commissioners at Rotherham and Tower Hamlets Councils and a recent review by the Communities and Local Government Committee of the Government's actions.

Last spring for the Local Government Lawyer [1], I considered recent developments regarding intervention and peer review, changes to the Local Government Act 1999 (1999 Act) by the Local Audit and Accountability Act 2014 (2014 Act) and three major investigatory reports on local government.

The first being the report by PricewaterhouseCoopers [2] (PwC). It was called for by the Secretary of State to investigate his concerns regarding the governance of the London Borough of Tower Hamlets (LBTH), the second was a report by Professor Alexia Jay (2014) into the response of Rotherham Borough Council to organised child sexual exploitation and finally a follow-up by Louise Casey (2015) again called by the Secretary of State to investigate his concerns regarding Rotherham’s governance. The consequences were for both Councils that the Secretary of State exercised his power under the 1999 Act and sent in Commissioners to take over the responsibility for specific defined functions [3] [4].

Review by the House of Commons

The House of Commons carried out a review of the intervention action taking evidence and last month published Government interventions: the use of Commissioners in Rotherham Metropolitan Borough Council and the London Borough of Tower Hamlets [5] (the ‘Report’).

The Committee summed up its findings as:

It is, fortunately, rare that DCLG has to intervene in a local authority. But when it does so, that intervention must be swift, effective, clear in its aims, and transparent. DCLG must therefore learn lessons from what has worked well in the interventions in Rotherham and Tower Hamlets, and from what could have been improved. Equally, lessons must be learned by DCLG, by the Local Government Association, and by local authorities across the country, about how to effectively monitor and mitigate the risk of financial, governance or service failure. In particular, we would highlight the need for all local authorities to learn from Rotherham’s experiences in relation to child sexual exploitation and ensure that vulnerable children are protected and safeguarded; from the experiences of both Rotherham and Tower Hamlets about the need to encourage and support whistleblowers and take their concerns seriously; and from both councils about the need to ensure that there are proper checks and balances and scrutiny arrangements in place to drive a culture of transparency and continuous improvement [6].

I now consider the key points by authorities:

Tower Hamlets

To recap PwC were commissioned by the Secretary of State to carry out a best value [7] compliance inspection of LBTH pursuant to section 10 of the 1999 Act (as amended by the 2014 Act). In due course PwC’s report was published [8]. The key findings were that there was a lack of transparency in the awarding of grants including to organisations which were apparently not eligible under the LBTH’s own grants criteria. PwC identified failing in governance and observed:

in our view the current governance arrangements do not appear to be capable of preventing or responding appropriately to failures of the best value duty of the kind we have identified. This calls into question the adequacy of these governance arrangements and the extent to which they are sufficiently robust to enable the Authority to prevent or respond appropriately to other failures of a similar nature. Para 2.230 PWC 2014

The Secretary of State considered the report provided sufficient evidence to take action so as to remove the power from elected politicians at LBTH regarding various decision making and to appoint Commissioners to exercise those powers, he did not take any direct action against any elected member by for example making a complaint [9].

The Lead Commissioner Sir Ken Knight told the Committee that at first the Commissioners’ progress was slow. It was only after the election of a replacement Mayor (John Biggs) that progress began to be made. He identified the lack of progress due to a sense denial from ‘the previous mayor, his cabinet and the council’s then senior officers’. Thus the obstacle to progress appeared to be organisational culture.

Rotherham Borough Council

On 21 August 2014, Professor Alexis Jay’s report on child sexual exploitation in Rotherham was published. She was commissioned to do so by the independent safeguarding board. Jay (2014, Para 13.64- 69) cited examples of bullying by members including the director of safeguarding recalling that the lead member for children and young people’s services when chairing a meeting allowed another officer to swear at staff and was in the director’s words ‘intimidating, humiliating, bullying and entirely professionally unacceptable’. Jay (2014, p 115 para13.69) concluded:

The existence of such a culture as described above is likely to have impeded the Council from providing an effective, corporate response to such a highly sensitive social problem as child sexual exploitation. Jay (2014)

The report received heavy media coverage. The Secretary of State responded utilising again the best value intervention power in the Local Government Act 1999 as used in LBTH. This time a different approach was used and an investigation was carried out by a team lead by Louise Casey CBE rather than an accountancy firm.

Casey reported in February 2015. She found a breakdown of governance. Key examples in the report were the deputy leader being investigated by Police for violence (Casey, 2015); and three members facing action for non-payment of council tax (Casey 2015). Furthermore she found a corporate governance inspection of 2002 which noted a lack of information, silo thinking and lack of clear plans as to priorities to be the same in 2014 (Casey 2015).

The most damming comment was in the summary:

Overall inspectors have not been impressed with the calibre and grip of leading Members. We have reluctantly concluded they cannot be left on their own to lead the Council out of its current responsibilities (Casey, 2015 p.74)

Within days of the report being published the whole Rotherham cabinet resigned. The Secretary of State again used his powers under the Local Government Act 1999 and sent in commissioners to run specific aspects of Rotherham Council. The Secretary of State observed that (Rotherham) was ‘currently incapable of tackling its weakness without substantial intervention’ with a ‘pervading culture of bullying, sexism suppression and misplaced political correctness that has cemented the council's failures [10].' The leader and his cabinet resigned.

The Committee heard from the leader of Rotherham council elected after the mass resignation that the tone with the Commissioner was to get an improvement plan that was much more owned by the council. However the former Commissioner for Children’s Social Care who resigned in May 2016 [11] warned that the foundations were fragile due to lack of capacity in terms of workforce planning and financial management.

Culture

The Committee identified the question of culture as underpinning the effectiveness of making sustainable improvements. It observed:

We asked the Minister how the Secretary of State could assess the sustainability of culture change. He acknowledged that having strategies in place was not sufficient to ensure that they were embedded or followed through, and said that it was something which the Secretary of State had to consider on a “case-by-case basis”. [12]

For Rotherham, the leader described that the team approach was adopted by the Commissioners and the council to drive improvements and the importance of modelling good behaviour at a senior level. Further the Commissioners’ said they had made particular efforts from the outset to build relationships with staff, councillors and key partners in order to establish “better ways of working, good behaviour and a culture which wants to learn and improve”.

The Committee found that Tower Hamlets in particular had deeply embedded problems in its culture. Sir Ken Knight observed [13]:

It was clear that the majority of Councillors on the Council in the Labour and Conservative Groups wished to work with Commissioners to seek improvements but it became apparent that the Administration together with a number of the senior officer team were not convinced of the need for intervention and so worked to justify their existing position

On 22 May 2016 [14] the Commissioners wrote to the Mayor, recounting again the resistance they had felt:

However, we have made the point in earlier correspondence that parts of the Council have found it hard to accept that things were very badly wrong, despite all its achievements, and that a very different culture and approach is required to embed the changes necessary. It is not sufficient purely to undertake the steps necessary to agree a new process or policy and then record this as a success. Greater consideration is required regarding the outcomes the change is intended to deliver and how to embed and evidence the changes required. We recorded our concerns on this in earlier correspondence and we are pleased to note the very important comments you make in your letter about resistance to accepting that things were wrong in the past

The Mayor John Biggs’s view was that behavioural and cultural change would underpin the sustainability of the improvements, but that this might take considerable time and could not be assured until the Council itself took ownership on the Commissioners' departure. He said:

Although it would be easy and indeed tempting to cast it all away as being the behaviour of a particular person or a predecessor regime, it is apparent that there are a whole bunch of cultural issues in the way in which the authority has behaved. We needed a fundamental change in our senior management team [ … ] and we needed to dust down the customs and practices and issues like civility and the behaviour of members towards one another.

Mayor Biggs’ point about behaviour and conduct is worth highlighting, as observed above an effective culture change has to be lead by high standards of behaviour being modelled by the political and officer cadre. It has a bearing on the next issue identified, being whistle blowing.

Whistle-blowing

The Committee found that there was a connection with people coming forward and confidence in the senior management team. The Committee had heard that at Tower Hamlets there had existed a culture of denial by officers described by the Lead Commissioner as the ‘three Ps “which were “Panorama, Pickles and PwC’ and that ‘it was no one else’s fault' [15]. Clearly as events turned out, the lead politician Lutfur Rahman presided over a council which did not welcome hearing concerns within the organisation about its short comings. Indeed the Committee heard that even after the Commissioners were in place progress was initially slow. Furthermore the Committee was concerned to hear that whistleblowers were not protected if they raised concerns with the Commissioners, they observe:

Sir Ken Knight acknowledged that whistle blowing continued to be challenging for Tower Hamlets, and that whistleblowers continued to approach the Commissioners because of a lack of confidence in the council. He explained that this could cause difficulties because Commissioners are not Prescribed Persons under the Public Interest Disclosure (Prescribed Persons) Order 2014. This means that whistleblowers approaching the Commissioners did not receive the same protections they would if they reported their concerns to their employer, their MP, or an external auditor. [16]

Clearly this is a major oversight. If there is a poor all pervading culture of denial, then many staff will be wary of the existing regime, they will in all likelihood wait till Commissioners are appointed. But then they will find their disclosures are not protected. Indeed their only option is to wait till the Commissioners appoint new permanent officers as only then will there be any degree of protection. Obviously many weeks or months could pass before there would be any assurance of safety and people and services could be harmed and finances and fraud go unchecked.

Function return

The Committee heard about the key question as to when do the Commissioners go and normal democratic service returns:

The Committee heard from the DCLG that although dates had been set to end the intervention they would only restore complete normal democratic arrangements and that the Secretary of State “will not give control of those authorities back to the elected members from the commissioners until he is absolutely sure that the best value test is being met" [17].

This point is crucial because the legal basis for intervention under the 1999 Act is not soundness of governance, standards or conduct but ‘Best Value’. Furthermore the Committee heard that once an authority was subject to intervention it would not simply reach a standard and then be released; it would need to have entrenched changes in behaviour. Sir Ken Knight said to the Committee that local authorities in receipt of interventions were:

“probably going to have to satisfy an even higher bar than a local council that is not, in order that there is not a risk of that council slipping back into some of the ways of working and culture”.

Fair enough, no point in the authority reverting to past practice, which it may if the poor organisational culture is not eradicated. This is only gong to be achieved over time with recruitment of a permanent competent management team.

Trigger point for intervention

The Committee heard evidence from the Minister of State, the Commissioners and the councils about what might trigger intervention and it is worth quoting at length:

The Minister explained that these information sources included contact with local authorities, relevant government departments, regulatory organisations, local authority websites, council minutes, and the local press [18]. Commissioner Sir Ken Knight told us that “One of the difficulties is that the Government will wish to see hard evidence before intervention, and sometimes it is the softer science and evidence that starts signalling a council or an authority getting into difficulties”. We asked Rotherham and Tower Hamlets whether there were any factors which, in their experience, could indicate where there were problems within councils. They told us that where councils had weak corporate management, services like children’s services were the most likely to be fragile or at risk. The councils and Commissioners also suggested that warning signs might include the need for councillors to use Freedom of Information requests to access information from council officers, or ongoing temporary appointments for statutory officers.

The Committee considered without the intervention of the Commissioners, Rotherham would not have been able to turn round its poor performance, but it would at the same time be of concern that the only way they could get expertise in addressing the problems is to trigger intervention. The DCLG confirmed that it would encourage councils with early stages of service or financial failings to engage with the LGA who can assist with sector-led improvement.

Localism and Intervention

The method of intervention introduced in 2014-5 by installing Commissioners under the Local Government Act 1999 is based upon the concern that the Secretary of State may have based upon evidence that the authority under the spotlight is failing to continuously improve in its duty to provide best value and continuous improvement not poor governance and leadership. It s not clear there is any objective test when to intervene, and the Minister is right to advance the role of the LGA offering a helping hand. It is up to local government to rally round when one of their own is floundering [19].

So who is at fault? These two councils did not fail overnight; instead a poor culture had taken root in both cases. In one example it was the abuse of power by an elected mayor and cohorts and the other a sense of unreality where the council was chasing for awards yet was found incapable of functioning with clear examples of failure to address child sexual exploitation, chaotic taxi licensing, bullying sexism and political correctness. While the Committee heard the trigger for intervention for the DCLG could be information from a range of sources, in both Tower Hamlets and Rotherham the tipping point was quantitative and qualitative evidence from eternal evaluations of the authorities by PwC and Casey / Jay and considerable media attention too.

Last year it was commented that the current localism arrangement appears post the changes wrought by the Local Audit and Accountability Act 2014 to be transforming into a position with an inherent contradiction of not being able to remove or suspend failing members but on the other hand where there is collective failure removing their power. It really should not have fallen on poor council taxpayers of the borough under the 1999 Act have to foot the bill.

The Committee had more to say on the cost. The actual total cost still accumulates but Tower Hamlets disclosed that PwC cost £1m plus daily rates of £700-£800 for each Commissioner. In the case of Rotherham between February 2015 and May 2016 the cost was £577,920. The cost of Baroness Jay and Dame Casey will also be met by the authority.

All being well these interventions will achieve the objective of putting the authorities back on track to continuous improvement. Nevertheless it has been very expensive with no clear finding as to whether the use of PwC and its corporate expertise or the lead expert of Jay/ Casey is to be preferred. I’d be surprised if we see any further interventions like Tower Hamlets now [20].

Furthermore what about the elected members in all this? It was the judge using his powers under the Representation of the People Act who avoided the Tower Hamlets Mayoralty, not the Commissioners or the Secretary of State. Yet it is a perfectly fair interpretation that the Commissioners only began to make progress once all at Tower Hamlets could be sure their erstwhile mayor was truly gone, rather than like some éminence grise lurking in the background. The fear of his return prior to the High Court decision would no doubt act as a powerful disincentive to whistleblowers. There is also the example of Casey finding that the Rotherham cabinet could not lead themselves out of the predicament.

How can it be possibly right that the route to addressing governance failure by questionable elected leadership is by the use of the 1999 Act and asking if they are delivering “best value” or whether the authority is capable of continuous improvement? Surely the correct approach is to amend the Localism Act and include the power to suspend or disqualify such members who cannot properly function in terms of sound governance.

Lesson to be learnt for us all

The Review and evidence submitted provide some helpful pointers to ensuring that more councils do not end up in the national spotlight. Here are some key points for governance practitioners:

Key functions

It is clear that some areas of local authority functions are going to be more closely watched than others. The DCLG made the point in their evidence that while the intervention in Tower Hamlets was related to best value the intervention in Rotherham was a joint intervention with the Department of Education too [21]. Clearly something had gone seriously wrong with regard to child sexual exploitation and Rotherham's approach and response did not instil confidence. Furthermore its organisational culture including its whistle blowing process did not function robustly. It is fair to conclude that inadequate child (and adult) safeguarding services are going to be potential hair trigger points.

Not reading the warning signs

There is inevitably in any large public organisation a tendency to prize reputational management as being a key objective. However, the Minister told the Committee that in taking a view the DCLG would note information from contacts with local authorities, relevant government departments, regulatory organisations, council minutes and the local press. The management team of politicians and chief officers particularly the Chief Executive, S.151 Officer and the Monitoring Officer need to take care to examine that negative stories are not based on fact and effective action is being taken to ensure that the right things are being done straight away with the resources to do so and properly monitored with an effective action plan to ensure no repetition. One clear signifier that was raised was the danger of the statutory posts being held by interims [22]. The former Secretary of State made the point when discussing Tower Hamlets that such posts should be held by permanent staff [23].

As mentioned above a sound whistle-blowing process is vital to break a sense of unreality that seems to pervade the more dysfunctional authorities.

A further warning sign is member and member relations and member officer relations. The Committee heard that if councillors were using Freedom of Information requests to access information it was a warning sign. Further, complaints by members against officers and vice versa are not a sign of good leadership, particularly if it leads to termination agreements.

Getting help before it gets bad

Furthermore as the governance dashboard lights come on red, it is vital to seek help.

The Committee heard that the Minister would encourage an authority with early signs of service or financial failure to engage with the LGA. Far better to request help before being told to. Indeed there is no shame in going to a neighbouring authority and asking if they could rally round and assist. While resources are scarce using fellow colleagues or buying expertise is going to be far cheaper than intervention, which could cost hundreds of thousands of pounds. Certainly statutory officers could consider offering each other peer reviews and governance health checks.

Responding to the DCLG

The DCLG in its evidence stated it warned Tower Hamlets what it intended to do before issuing the direction. In doing so the Secretary of State gives the council an opportunity to make representations about the evidence (e.g. the inspection report) and the proposed intervention package, unless the Secretary of State considers that direction is sufficiently urgent to be issued without providing such an opportunity. If a confrontational approach is adopted it may lead to greater intervention because the Secretary of State could interpret the response as further evidence of dysfunction.

Conclusion

I finish by stating don’t forget the community and the council taxpayer in all of this.

The interventions continue, costing tens of thousands a month and the vulnerable have suffered. The warning signs were there but the organisational cultures which prevailed seem to have meant intervention was inevitable. As resources become scarcer sound governance and a healthy organisational culture which supports whistle blowing are quiet clearly essentials.

Dr. Paul Feild is a Senior Governance Solicitor and Deputy Monitoring Officer for BDTLegal. He can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it..