Liverpool City Council - The Directors Cut
Paul Feild looks at what can be learned from the latest developments in the Government intervention in Liverpool City Council.
To recap in December 2020 the Secretary of State for Housing, Communities and Local Government, appointed Max Caller CBE to lead a statutory inspection at Liverpool City Council (LCC). The power was under the provisions of section 10 of the Local Government Act 1999, as amended by the Local Audit and Accountability Act 2014 (the 1999 Act), as an Inspector to provide independent assurance that the council is complying with its Best Value Duty’.
Last year I wrote a piece for the Local Government Lawyer regarding the March 2021 Best Value Inspection Report on Liverpool City Council (LCC) by Caller [see ‘Deja Value all over again – The Best Value Report on Liverpool City Council’ Local Government Lawyer]. Caller was sent in by the Secretary of State as an inspector to carry out a review. Following the Caller Report the Secretary of State appointed three Commissioners to take over defined functions of the Council for a minimum of three years.
The Commissioners made their first Report to the Secretary of State in November 2021.
On 10 June 2022, the Secretary of State received the Commissioners’ second report. The report said that in addition to the best value failures identified within the best value inspection there were further instances of failure within LCC. The Commissioners considered that further Secretary of State Directions be required to resolve the problems identified within the Council. There are some interesting points for discussion which is the purpose of this short paper.
Caller’s 2021 Inspection said that:
The evidence and events over the Inspection period leads to the conclusion that there can be no confidence that the Council will be able to take and implement all the required decisions in a sensible timescale. As a consequence, the imposition of Commissioners, supported by Directions is recommended to stand behind the Council and ensure that the right decisions are taken at the right time. Caller 2021 Para 1.5
There is a good resume of the report in Local Government Lawyer in the 26 March 2021 edition, so I will not repeat that.
My 2021 article commented on how Liverpool’s legal team had been, as it were, ‘piggy in the middle’ in the failings of LCC event meriting a chapter of their own in Caller's report, yet so far as I could ascertain, they were not at fault to regarding the evidential failings set out in para 1.5 quoted supra.
I asked what about finance? Until sometime in 2018 the legal MO function was under the S.151 Officer (Caller 2021 para 8.2). The picture painted seemed to be about legal not being asked to take a full role and the resort of use of private sector firms. But in neither case is there any example of them getting the law wrong or giving incorrect advice.
The 2022 Commissioners Update Report
Well, the first point to note is the net of blame has been re-cast to now include LCC’s finance function. At Para 1.7 the 2022 Commissioners Report says:
Therefore, we are requesting a widening of the remit of the executive functions, and further Directions, to support the improvement journey, including the appointment of a Finance Commissioner (full detail set out in the recommendations section below).
I am not surprised, it was curious that so little comment was focused on the Council's finance function. Clearly this shortcoming would not go on for long and in the 2022 Report the Commissioners observed at paras 2.1 & 2.2:
The Council has not addressed the challenges that have been identified with sufficient pace or urgency. The resignation of the Section 151 Officer is a further barrier to tackling these challenges. The Council has recently acted at pace to bring in interim financial capacity, bolstering the finance team, but the absence of a S151 Officer (also the Director of Finance and Resources) comes at a difficult time. Urgent stewardship of the finance function is required. 2022 Report para 2.1
and
In June 2021, the Council commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) to undertake a review of financial management arrangements. The Council accepted the report, that indicated significant weaknesses in the way that the Council manages its resources, in October 2021. The report points to an organisation-wide culture where people do not feel accountable for managing public money, an out-dated system that relies on top-down budget setting with limited ownership of resources by individual budget holders, and poor-quality data to track spend and commitments. LCC scored two out of five on CIPFA’s score of financial management capability. 2022 Report para 2.2
Governance is still a weakness. The 2022 Report says at para 4.2 & 4.3:
The previous model was a two-weekly cycle of Cabinet meetings, which led to an unstructured set of arrangements with insufficient strategic planning on the part of the Council. The new arrangement allows for greater scrutiny of decision making and is in line with the norm across the sector. While some teething issues are expected at such a change, it is frustrating that lessons have not been learned from the preparation of the budget papers. In both April and May 2022, the Cabinet were asked to consider late reports. Beyond the change to reporting cycle, there is much to do to ensure that officers are truly accountable for developing proposals for decisions and working alongside the Mayor and Cabinet Members. It is essential that more effort is expended, by accountable service officers, to develop the options and rationale for any considerations. Where necessary, this should be supported by an effective business case and with a clear understanding of the financial implications of the options being presented. It is essential that this process is done in a timely, open, and accurate way. 2022 Report para 4.2
and
The quality of report writing is not improving at sufficient pace. There were initial improvements after the provision of training. However, out of over 150 reports that the Commissioners have reviewed, the majority have been sent back for improvements, often multiple times. The reasons for this include inadequate financial comments, budget inaccuracies, incorrect legal comments, a lack of quality assurance, and a failure to reflect the Nolan Principles. 4 [1] 2022 Report 2022 4.3
The key point is the business and practice of sound administration and financial needs proper officer leadership. It is quite noteworthy to see the frustration the Commissioner team has had regarding setting the budget, which as being an annual occurrence should hardly come as a surprise to seasoned officers.
The Commissioners identified the internal audit team was severely under resourced with 30% vacancies.
The culture of the organisation appears to be lacking in self-awareness and a particularly telling paragraph can be found (5.7):
Multiple reviews have been commissioned in response to mistakes made within the Council. Reviews are a useful tool when lesson learning. However, these reviews have mostly been at the request of the Commissioners, rather than senior leaders at LCC. This demonstrates a lack of internal drive and curiosity within LCC to find out how and why mistakes were made… However, many areas are slow to seek challenge: the procurement review requested in our last report is yet to be started; the forensic audit requested by the external auditor in December 2021 is yet to begin. In sum, the Council is not currently learning from its mistakes. This is a significant challenge which requires major cultural change. 2022 Report para 5.7
The picture that emerges as one reads through the 2022 Report of friction between the Commissioners and the officers of the LCC. Indeed, I struggle to recall a more critical comment on relations between the Secretary of State’s Commissioners and their contact with a council. Look at the findings regarding leadership:
The managerial leadership of the Council has not displayed sufficient pace, urgency, or grip to tackle the challenges identified through the Best Value inspection and subsequently by Commissioners. Although some positive milestones have been achieved, the journey to many of them has been contested, challenging, and often required significant effort on behalf of the Commissioners to see through. The leadership lack the required urgency and prioritisation to drive change. At times, they demonstrate defensiveness, reactiveness and a lack of long-term strategy. This has been evidenced through inconsistent engagement in the budget and planning process and significant delays providing information the Commissioners have requested, including on the Council restructure. 2022 Report para 6.1
and
To support the improvement journey, the Council needs the right senior team in place, and an organisational restructure must be agreed. It has taken too long for the Council to come forward with a credible set of proposals for the senior structure of the Council. It has taken a year to agree a second and third tier structure. The Council’s current processes means that it will take a further six to nine months to populate the structure, unless changes are made to the policies it uses. This delay is hindering progress in improvement. Early iterations of the structure proposals for finance were inadequate and failed to reflect the scale of issues to be resolved. The decision to allocate a wide-ranging set of Deputy Chief Executive accountabilities to an over stretched Finance and Resources Director was not thought through and was against the advice of Commissioners. Senior leaders require clarity of roles and expectations, and the blurring of responsibilities between the Deputy Chief Executive and the Chief Operating Officer has been unhelpful. 2022 Report 6.2
This is hard-hitting text. The Commissioners are clearly not getting on with the LCC managerial leadership. Just how is there going to be a timely delivery of the LCC recovery plan with such relations?
Worryingly, the Commissioners' comments about getting the political decision making right seem almost alien to me. It could hardly be the case that officers have not reviewed papers before they are presented to the Commissioners for their observations, can it?
The points made are basic and should be universal in that all Councils should:
- Have clarity of roles and expectations of Chief Officers – it is simple to define the responsibility in the Constitution
- Forward Planning and timetables for Cabinet decision making
- Senior Officers review their Services Reports before greater circulation
- Involvement of the Legal and Finance professionals at a early stage in policy and report writing
- Proper training in being involved in contributing to reports, and that means consideration of governance and legality
- Proper filtering of reports to ensure the Cabinet does not get bogged down in trivial matters well within a Chief Officer's capability
- A quality finance control backed with up-to-date finance standing orders (a legal requirement)
- Placement of the Monitoring Officer (MO) in the hierarchy to properly influence high standards (in LCC the MO was placed under the s.151 Chief Finance Officer)
- Avoid competing or alternative officer level decision making
Conclusion
It does seem like the legal team were thrown off the Mersey ferry in 2021, when some of the governance failings, which still exist have only been highlighted after the Commissioners have had contact with the LCC’s administrative functions. Obviously, these weaknesses were there all along, they did not suddenly emerge in late summer 2021.
It is intriguing that the shortcomings picked up in the 2022 report are as serious as those of the 2021 and it is of concern that the ‘bread and butter’ business of lack of effective administration did not get the scrutiny it clearly deserves. Why did it take so long to pick up intrinsically low standards of administrative delivery? Maybe the use of Commissioners approach is now losing its touch, or have they rubbed vested interests at LCC up the wrong way?
Maybe the answer lies with the ability to change while the Commissioners are there. Do they get on with any of the chief officer cadre? It does not look like it from the tone of para 6.2? Perhaps the Commissioners need to look at themselves too.
While one is looking from a distance it does appear LCC has over time developed a poor culture. Culture is defined as the way we do things around here. Peter Drucker once said that culture eats strategy for breakfast. This could include the Best Value Improvement Plan. The 2021 report highlighted ‘bullying’ as being widespread. But not a mention of it in the Commissioners 2022 Report. An organisational culture does not recover from such trauma overnight, instead it may become defensive and cautious. This is exactly what was said in para 6.1.
As mentioned before in previous papers, the use of “best value” as a descriptor for governance is strained. There needs to be a specific duty for governance at officer level and a specific power to intervene regarding governance in the Local Government Act 1999.
Finally, I have been intrigued to read recent commentary on the martial concept of ‘Will to Fight’ and what a major effect it has on military success in the Ukraine. In the case of LCC there is a deep cultural sickness. I am not convinced without an infusion of new leadership blood and a decisive well-resourced strategy that it will ever get entirely better. So far, the prevailing LCC culture seem to be that that of ‘flight’, leadership needs to change morale to ‘fight’. By doing their best the participants can ‘fight for Liverpool’. But to lead this change in the form of culture it may be that the current governance structure needs be changed including a new cohort of Commissioners because so far, if the second Commissioners report is to be relied on, the 2021/2 elected mayor model supplemented with Commissioners has not yet achieved the culture change momentum needed.
Dr Paul Feild is the Principal Solicitor working in the Barking & Dagenham Legal Services Governance Team. He has been deputy monitoring officer for various authorities since 2000. He researches and writes on governance issues and can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it..
Reading
Caller.M (2021) Statutory Best Value Inspection at Liverpool City Council
Cunningham. M, Killian.J, Gibson .N, & McLaughlin. D - June 2022 the Commissioners for Liverpool City Council Report to the Secretary of State
[1] I struggle to see how a report could not reflect Nolan Principles, but there you are.
