Government poised to send commissioners into borough council after damning best value report

The Government is minded to send commissioners in to Spelthorne Borough Council after a best value report found the council in a "critical financial position, burdened by unsustainable debt levels, significant investment risks, and systemic governance weaknesses".

Writing in a letter today (17 March) to the council's chief executive, Daniel Mouawad, Local Government Minister Jim McMahon said he was satisfied that Spelthorne is failing to comply with its Best Value Duty, "specifically the themes of Continuous Improvement, Leadership, Governance, Culture and Use of Resources, as described in the statutory guidance".

On that basis, he said the Secretary of State for Housing, Communities and Local Government, Angela Rayner, is "minded to" exercise powers of direction under section 15(5) and 15(6) of the Local Government Act 1999 in order to secure Spelthorne's compliance with its best value duty.

McMahon's letter comes in response to the findings of a Best Value Inspection, conducted by Lesley Seary and her Assistant Inspectors, Mervyn Greer, Peter Robinson and Deborah McLaughlin.

The inspectors were sent into the council in May 2024 over the council's £1bn debt, which is the second-highest borrowing per capita among district councils in England, surpassing major cities such as Liverpool and Sheffield and nearly doubling that of Bristol.

Spelthorne's core spending power for 2024/25 is meanwhile just £13.5 million, against a net revenue budget of £26.1 million.

In their report, which was handed to the Government in January and made public today (17 March), inspectors said they "do not believe the council has the capacity and capability to make the urgent changes needed without significant external support".

On finances, the report warned that the combination of voids, expiring leases, and falling income streams from the authority's investment portfolio threatened the stability of its budget.

Despite these pressures, "no clear path forward has been outlined to address them", the report added.

Inspectors also said that a "culture of insularity and denial within the senior management team has, to some degree, blindsided the council to the seriousness of its situation".

Meanwhile councillors who attempt to challenge officers are met with resistance, with some perceiving them as difficult, the report said.

"These dynamics reflect a wider breakdown in the relationship between the council's political leadership and senior management", it added.

Inspectors said that even though the council was told its member-officer relationships needed improvement by the Local Government Association in a corporate peer challenge and follow-up review, the situation "has deteriorated throughout our Inspection".

It said: "Both members and officers describe a culture of mistrust and broken relationships. There is a culture of insularity and over-optimism within the senior management team, particularly regarding the council's investment strategy.

"Senior officers appear overly confident, with some asserting that the biggest risk to their investments comes not from their own actions or inaction, but from external intervention."

However, it added that despite the challenges, "there are many hard-working staff in the council who report a highly positive culture, as evidenced by good results in the latest staff survey".

Significant officer and political turnover is also a problem at the authority, according to the report.

Inspectors said that churn in the monitoring officer role – which had seen seven different people take on the position in five years – disrupted the continuity in legal oversight.

The governance arrangements surrounding the acquisition of the council's investment and regeneration portfolios were also criticised as "inadequate", with acquisitions reportedly driven by a "small group of councillors and officers", the report said.

The report added that these acquisitions suffered from insufficient consideration of potential risks and limited opportunities for effective challenge.

Elsewhere, the report said that internal audit has "historically been weak", with inspectors noting that they had not seen evidence of internal audits conducted on the council's housing company, Knowle Green Estates (KGE), or its regeneration sites over the past three years, "despite the high level of associated risks".

The report also criticised the council's track record for improvement. It said that internal assessments conducted by the council, including those against the CIPFA code and the 'Use of Resources' best value theme, "did not align with the inspector's findings, or those of CIPFA, the Local Government Association (LGA) or the council's external auditors".

"This misalignment reinforces our view that there is a lack of realistic understanding of the current challenges", the report said.

McMahon's letter responding to the report sets out a proposed package of measures, which would be implemented through directions and overseen by appointed commissioners.

The directions include the preparation and implementation of an improvement and recovery plan to the satisfaction of the Commissioners, within six months.

McMahon said this plan should include:

• A plan to overhaul the governance arrangements within the authority with regards to decision-making, capacity and skills, aiming to increase transparency, scrutiny and effectiveness of the committee system to ensure that collective responsibility is taken for the authority's decision-making.
• A plan to achieve financial sustainability and to identify and close any short and long-term budget gaps across the period of its medium-term financial strategy (MTFS).
• A plan to ensure the authority's capital, investment and treasury management strategies are sustainable and affordable.
• A comprehensive and strict debt reduction plan.
• A plan to review and update the sinking fund.
• A plan to ensure the authority is complying with all relevant rules and guidelines relating to the financial management of the authority.
• A plan to reconfigure the authority's services commensurate with the authority's available financial resources.
• A plan to strengthen the authority's financial and commercial functions, and to secure improvements in risk management, governance and the internal audit function.
• A plan to develop a comprehensive commercial strategy, with clear approaches to its investment and regeneration portfolios.
• A realistic plan to deliver housing numbers outlined in its Local Plan.
• A fully costed programme of cultural change to rebuild trust between officers and members and ensures both Members and Officers understand their respective roles and the way in which the authority and its activities are regulated and governed.
• A plan to ensure that the authority has sufficient skills, capabilities and capacity to deliver the Improvement and Recovery Plan.

Spelthorne has been invited to make representations to the Government before the ministry issues its proposed directions.

Leader of Spelthorne Borough Council, Cllr Joanne Sexton, said: "This Group Administration has faced a challenging time and has been actively pursuing the right solution to manage the historical debt that it has inherited. We have met with the Local Government Minister from central government, and we have agreed to work in partnership to take decisive action in the remaining time we have before local government reorganisation is implemented."

Deputy Leader of Spelthorne Borough Council, Cllr Chris Bateson, added: "We understand the seriousness of the report's recommendations and acknowledge the full implications for our authority.

"Whilst many financial concerns were historically inherited, this administration continues to demonstrate that we have a solid track record of delivering services for our residents and that we are well positioned to drive forward these recommendations."

Adam Carey