Statutory officers and good governance: the new Code of Practice

LLG, CIPFA and SOLACE have this week published the Code of Practice on Good Governance for Local Authority Statutory Officers. Philip McCourt explains its purpose.

This time last year, I and my colleagues at Bevan Brittan LLP were approached and asked to produce a shared set of standards and expectations to underpin the joint working and collective leadership of Heads of Paid Service (chief executives), Chief Finance (s.151 or s.73) Officers and Monitoring Officers, the governance ‘golden triangle’ as it is known.

This we were glad to do, not only because it is an important topic but because it highlights the experience and expertise that Bevan Brittan possesses in continuing to support the statutory officers’ roles and in delivering the sector’s projects as it has done now for many years. Our specialist local authority governance team provides ongoing support, mentoring and training on governance and decision making and advises on the range of administrative and public law issues that are of direct concern to monitoring officers and their staff.

My first draft was put together over a few months. It incorporated the existing LLG Monitoring Officer Protocol from 2003 as a useful and positive base, as adopted already by many councils, and with an eye to the developing Best Value Guidance and the reports and work of the three organisations. Starting as a detailed guide to capture what we were trying to say, with the comments of colleagues and close editing of LLG, CIPFA and SOLACE, a version was produced that honed this down to a set of professional standards and requirements which went out for consultation in the Spring. The level of engagement and quality of what came back was impressive, not have been surprising given the importance of this topic, and helped to move the Code on tremendously to where it is now.

To put this into context, at the Commons’ Levelling Up, Housing and Communities Committee last December, the then Secretary of State argued that "systemic problems with leadership and governance" were to blame for at least one major council’s financial failure and was not reflective of a large number on the brink, as was put to him in what he accepted was a "tight" financial situation for local government. Many disagreed with that view of cause and effect, both then and now, but it is hard to deny that poor governance, and as reflected in the workings of the three statutory governance chief officers and the relationship with their organisations, has played a significant part in the problems suffered by a number of authorities. This became further highlighted by the report of Grant Thornton with LLG, ‘Preventing Failure in Local Government’ published around the same time.

What others have highlighted is that the lack of a long term settlement and the financial pressures on local authorities, many with only half of the spending power that they had in 2010, which have been facing eye watering increases in pressures and costs in services for children’s placements, adult social care and homelessness and a struggle to adequately recruit to key posts, means that many feel there is no ‘Plan B’. These authorities thus feel trapped, or emboldened, into taking risks to serve their communities in the way that feel they need to, and in some cases to avoid financial collapse, which on inspection have proved to be risks that they are ill equipped to manage and which, in effect, are a gamble they can ill afford to lose. After the event, history is simply pointing out those who gambled and lost.

Nothing is ever as straightforward as it seems when reduced to bite size comments of course, but we can see from afar a thread of issues and causes related to ethical cultures and governance, or lack of it, and highlighted by the work of LLG, CIPFA & Solace, Grant Thornton, LGIU and others. Of these, at more than one authority there appears to have been projects driven and run by one organisational grouping within their authority without adequate challenge being made, or systematically allowed to be made, from the centre. At others there was a belief in commercial property ventures to provide financial income, running way beyond the capability or capacity of the local authority to manage as a financial investment and business risk. At yet others we have seen a lauded company venture that was then perceived as reputationally too big and too much part of the authority’s narrative of itself to be allowed to fail. At the first of the run of s.114 reports, we saw an authority where there existed the long running belief in organising the authority on a commercial basis, almost akin to the ideas of Nicholas Ridley in the 1980’s, and which sought to set up as a series of spun out companies established on a business case of a cure for all ills, but did so without adequate oversight or control or even the capacity to do so even if it had wanted to; a lack of necessary investment in governance over their business ventures that has been repeated elsewhere.

That sounds like doom and gloom but, actually, much of this simply emphasises that local authorities have long been the real innovators in the public sector, which comes with both the successes and failures associated with opportunity and risk. Part of the purpose of a local authority is that they apply local ideas to local issues in ways that they see will address problems, needs and desires for their locality; a set of needs and desires that they know best. In many cases these innovations are shared more widely and approved of, some of which are picked up by central government and lauded and others disapproved of. The debate over South Cambridgeshire’s four day working week being a case in point. The overriding message is that innovation works and it is what has made local government by far and away the most efficient part of the public sector and, we all argue, the most successfully responsive to change.

It is here that the role of the three statutory chief officers forming the governance ‘golden triangle’, the Head of Paid Service (chief executive in Wales), Chief Finance (s.151 or s.73) Officer and the Monitoring Officer, becomes pivotal. It is their job, above all else, to ensure good governance. That might not present an exciting prospect for those wearing the blinkers of the “just get it done” variety, but the statutory officers’ role, indeed the job rightly of all officers, is to not only to deliver the ideas, innovations and new policy but, in doing so, to ensure there is in place the oversight and transparency of the kind that provides managerial and democratic accountability and to openly and adequately manage the risks that come with those opportunities. At the crucial points, it is those statutory officers’ role to speak the loudest to prevent the reign of ideology over common sense, to introduce realism into a project sponsor’s optimism bias, to say that some risks are more than the authority could afford to take, or to force an admission of failure before it goes too far, no matter how politically difficult or embarrassing to one’s reputation that might be to swallow.

With or without the help of local government bodies, central government, outside bodies or professional associations, most authorities are able to manage their internal creative conflicts and apply principles of ethical and good governance to achieve a satisfactory outcome. In so doing the officers of the golden triangle act as intended, as a failsafe to prevent or protect their authorities from its own potential actions when things start to go wrong. In some cases that is loudly and unpleasantly, as we have seen and advised on, but in the vast majority this is by quietly and effectively speaking truth unto power to colleagues and politicians in the various corridors and internal meetings of town halls.

Those few authorities who do have difficulty in delivering that positive engagement was highlighted again in the CfGS reporting of their review into one such council last year, stating for them that there “remains a deep-seated blame culture at the council which limits frank, candid conversations about emerging risks, and which encourages an aversion to change” and went on to note that this resulted in a situation where both officers and some members were circumventing the correct approach to decision-making and governance by discussing and agreeing operational actions “out of the view of senior officers and in a way that acts in direct defiance of the constitution”. Many of us would recognise that as a reality and not just at that authority. It is certainly not the only place we have seen where a cultural aversion to hearing bad news can lead to poor risk management and where such a culture, over time, has embedded both practical barriers and a lack of trust at ever deeper and deeper levels, managerially, politically and in the relationships between the two.

The question we have asked ourselves then is how do we apply our experience to help and do so positively, as trusted advisors and as colleagues, to prepare authorities for the difficult conversations, to raise understanding and to develop those who look to take these roles on in the future. This was as much a question when I was a part of putting together the LGA/IDeA’s Ethical Governance Toolkit some twenty years ago as it is now, and enabling authorities to ask of themselves ‘how does our organisation compare?’.

The professional organisations, LLG for monitoring officers, CIPFA for chief finance officers and Solace for heads of paid service (chief executives), have been working behind the scenes and with partners to develop future talent, to lobby and to put tools in place for local authorities and post holders to work with. Sponsoring and supporting the reports and research, such as that by LGIU and Grant Thornton with LLG, have been recent evidence of that.

An important part of that is to pass on that the role of the statutory officers brings with it a huge element of job satisfaction, knowing how all of the moving parts fit together to make a whole and in being there when it all works as it should (or in preventing it failing when it doesn’t). For the individuals concerned, it genuinely feels as a privilege to undertake this work, delivering positive results with a tangible impact.

What the Code of Practice on Good Governance for Local Authority Statutory Officers aims to do is to assist the three officers in the golden triangle to effectively work together to best advise their authority, implement its decisions, and help achieve good outcomes. Their role can be summarised as being, collectively, to hold sufficient skills, information and tools to understand a problem and the solutions presented, and then being able to speak truth unto power about it. Not least, it is to provide that their authority’s decisions are implementable, are financially sound, are lawful and (it would be nice to see) comprehensible to others. In being able to do that, they and those around them have to appreciate that these officers must be given the means to understand how power in all its persons and forms exists in the system, work out how they may best talk to those who wield that power and, in doing so, how to make themselves understood. One mark of success being, as said as a test of a good general counsel, “Do they want to hear my advice, even when they know they don’t want to hear my advice?”

In explaining the statutory officer posts, therefore, what the Code seeks to put across is why they exist, what their roles are and how they are to go about fulfilling them. For their authorities and others, it is help have these important roles understood, respected, and given the support required so that their duties can be fully and properly undertaken.

It is set out as a set of seven Standards of the Golden Triangle, and beneath these a set of requirements, of:

1.  Understand Governance: Roles and responsibilities

2.  Act Wisely: A duty of enquiry & the exercise of statutory functions

3.  Lead Ethically: The Seven Principles of Public Life

4.  Act Effectively: Robustness in working arrangements

5.  Resource the Roles: Get the tools to do the job

6.  Build Resilience: Deputies and development

7.  Deliver sound decision making: The outcome of good governance

Over the next year, we will be discussing it with local authorities and their officers alongside the work that LLG, CIPFA and Solace will be doing, to see how this is received and the extent to which it is adopted by authorities. We have seen some effect already, indeed we have seen some authorities act on the draft issued for consultation in their discussing it at depth with their management teams and members and making changes to how they do things. Following on, LLG have said they are looking to undertake research to see not just whether the code has been adopted, but the extent to which it will have had an impact in producing changed practices and improved governance within authorities.

We wait also to see how this will feed into the new government’s approach to the best value actions and interventions with local authorities underway, and the challenges to come, and the extent to which the Code will become a tool for inspection and improvement practice. Added to this, is the curiosity of the how or if policies on such things as the proposed new ‘duty of candour’ might sit alongside the Code’s view on the statutory officers’ duty of enquiry.

Philip McCourt is a Legal Director at Bevan Brittan.