Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by Audit Commission (LGA 24)

INTRODUCTION

  1.  The Audit Commission for local authorities and the NHS in England and Wales is an independent body established under the provisions of the Local Government Finance Act 1982 and the NHS and Community Care Act 1990. Its duties are to appoint auditors to all local and health authorities and to help them bring about improvements in economy, efficiency and effectiveness directly through the audit process and through value for money studies. It also has a duty to carry out Best Value inspections of certain local government services and functions. We are pleased to make this submission to the Sub-committee's inquiry into how the Local Government Act 2000 is working.

  2.  We would add the caveat that our observations must be viewed in the context that it is still very early days for the new arrangements. It is difficult to make definitive comments about the impact of the legislation. However, through our field audit work, we are able to offer some early indications about how the new structures and powers are working. Forthcoming work from the Audit Commission will present a clearer picture of how the new legislation is affecting local authority performance.

  3.  We have focused primarily on the first two aspects of the committee's terms of reference, namely: the duty for local authorities to promote economic, social and environmental well-being; and the new arrangements with respect to executives, including elected Mayors and the Cabinet model. However, we have also made some brief observations about the provisions of the legislation as they relate to the conduct of councillors and officers.

DUTY FOR LOCAL AUTHORITIES TO PROMOTE ECONOMIC, SOCIAL AND ENVIRONMENTAL WELL-BEING

  4.  The Commission is actively developing a number of pieces of work, which will address issues related to "community well being". These include the introduction of the Comprehensive Performance Assessment (CPA), a national research study of how neighbourhood renewal is being addressed by local authorities, a number of new cross-cutting inspection products (including neighbourhood renewal, community safety, sustainability etc) and its work on "quality of life" performance indicators. Commission projects should, over time, provide more evidence of how authorities are exercising their community well-being powers, how governance arrangements for partnerships are working on the ground, and how councils are carrying out their community leadership role.

  5.  The CPA process (introduced in the Local Government White Paper Strong Local Leadership—Quality Public Services 2001) is currently being developed by the Commission and will report on all top tier authorities from autumn 2002. This will provide, for the first time, an independent analysis of the performance of every Council in England. In particular, the "corporate assessment" part of the CPA will look at the capacity of an authority to provide community leadership through partnership working to develop a community strategy, and its effectiveness in delivering this to make a positive impact on community well-being.

  6.  The neighbourhood renewal study and the new inspections will also provide information about local authorities' capacity to deliver within the new governance arrangements and through the use of the new power to promote economic, social and environmental well-being.

  7.  Although previous inspections have not been explicitly addressing the new duty and powers of local authorities to promote well-being, a number of research and inspection reports have provided some information on local authorities' experiences to date.

  8.  The early indications are that some authorities are encountering difficulties with some aspects of their new roles, for example on the formation and development of Local Strategic Partnerships (LSPs). From our fieldwork on community safety, governance arrangements for partnerships are often not clear and elected councillors appear to have a very limited role. There is a lack of joint accountability and commitment by the various agencies is consequently patchy. Our inspections in the area of regeneration highlight the degree of variation between different authorities in their involvement in partnerships and the use of community strategies as a context and framework for integrated service delivery to promote economic, social and environmental well-being.

  9.  The community leadership and community planning role represent a significant cultural change for many authorities. One problem is the lack of requirements or incentives for other agencies to work with local government to develop community strategies and joint targets. Local Public Service Agreements (PSA) are one useful means of creating a joint performance agenda which can give incentives for increasing performance on jointly agreed targets and it is welcome that pilots are being extended. The rationalisation of the number of mandatory plans set out in the White Paper should also help simplify the community planning process.

  10.  There is also potential learning from the Commission's work in this area. For example, a set of quality of life indicators is being piloted on a voluntary basis with a number of councils, and with input from other agencies, could provide a useful model for establishing locally owned targets.

  11.  Over time, our inspection, audit and research functions will provide further information on how the new duties and powers are being used. At present, while we have some information from our work, we would not suggest this comprises firm evidence partly because it is still too soon to fully evaluate and assess the effect of this legislation on local authorities. We would, however, certainly support a proper evaluation of the difference the new duty and associated power is making to Councils performance as community leaders.

NEW ARRANGEMENTS WITH RESPECT TO EXECUTIVES, INCLUDING ELECTED MAYORS AND THE CABINET MODEL

  12.  Whilst some authorities have been piloting a version of the new arrangements for a considerable time, many authorities have only recently adopted their constitution and some are still at the stage of developing the new decision-making system for implementation this year. Although many of our comments could relate to any of the new models, in practice we have only reviewed two models in operation: the Leader and Cabinet and "Alternative Arrangements".

  13.  The Commission's in-house auditing agency, District Audit, is conducting some work in this area, and conclusions emerging will be made available to all of the Commission's auditors for local follow-up as appropriate. The work is based on the Democratic Renewal Audit, an audit guide which District Audit has distributed to frontline audit staff focusing on Part II of the Local Government Act 2000. It aims to assist local authorities in assessing whether their new political arrangements are contributing towards the intended outcomes of the legislation—notably increasing efficiency, effectiveness, transparency, inclusiveness and accountability. Many of the audits have been conducted in a phased way, examining the progress of authorities at different points in the process.

  14.  What has become increasingly clear is that whilst the structural changes may have been made, a cultural change is required to make the new system work effectively, particularly in relation to the pro-active role of scrutiny and the strategic role of the executive. Our comments below therefore reflect a system of local government that is currently in transition, with authorities at different stages of implementation.

INTEGRATION WITH THE WIDER MODERNISATION AGENDA

  15.  Whilst the Democratic Renewal audit has focused on examining local authorities response to Part II of the Local Government Act 2000, it is evident that the intended outcomes of the legislation can only be achieved if the changes in the political arrangements are integrated into the wider programme of modernisation. The structural changes set out in Part II form only part of the picture and cannot in themselves renew local democracy. We are beginning to see many examples in practice as to how the different components of the modernisation agenda are inter-dependent on each other.

  16.  Increases in transparency and efficiency, for example, are easier to achieve for authorities that have embraced the use of Information Technology and the wider e-government agenda. In order for the new political arrangements to work effectively they require the speedy distribution of information both pre and post decision-making. Where councils have invested in new technology, they have been able to increasingly use web-sites, intranets and e-mail systems to increase access to information and the speed of distribution.

  Evidence from the Corporate Governance Inspections (CGI) completed by the Commission so far, as well as early findings from the Commission's e-government study (published in late February) suggests that ICT remains an area where some councils are weak. There is also evidence from the CGIs that the quality of information for members remains patchy, and that this is leading in part to some of the dissatisfaction with new executive and scrutiny arrangements.

  17.  Another example of the inter-dependency of different aspects of the modernisation agenda is the need for local authorities to develop effective links between scrutiny and best value. Articulating the roles of the executive and scrutiny in the development of a comprehensive performance management framework is essential in focusing Council's on their key priorities for continuous service improvement. Scrutiny is leading to more focus on cross-cutting issues, but we have no real evidence as yet that scrutiny is leading to greater cross-cutting approaches to service delivery. Comprehensive performance assessments will provide a better indication and show how higher performing authorities are doing here, as in other areas connected with corporate governance.

PUBLIC ENGAGEMENT

  18.  Implementing the new political arrangements has not in itself resulted in increased levels of public engagement in the democratic process. In fact, some Councils report a decrease in public attendance at meetings following the implementation of the new system. This is partly attributed by them to increased levels of confusion about where decisions are made in the new arrangements, following the loss of easily labelled service committees and the sheer number of meetings within the new structure. It is difficult to estimate at this point in the process how much this is a transitional issue and whether partner agencies and the public will find the new arrangements more accessible once the new system is bedded down. District Audit aims to test some of the perceptions of local authority stakeholders and the public in future audits, in order to assist Councils in gaining a greater understanding of whether their new arrangements have increased accountability and transparency.

  19.  Although there is not widespread evidence yet available to suggest that the new decision-making arrangements have captured the interest of the public, there are signs of emerging innovative practice in Councils engaging with stakeholders and the public. We are working with some Councils which have introduced public question time and themed debates at council meetings that have increased attendance at public meetings, particularly where there was little culture of the public attending meetings before the new arrangements were introduced. Innovation is also being led by overview and scrutiny panels who have engaged partner agencies and service users in either formulating or reviewing policies. There are also some early signs that area committees are a useful way of members engaging with local constituents to debate issues that are of importance to them.

  Achievement of the broader aspects of democratic renewal was always dependent on a much wider package of measures than amendments to the structure for decision-making on its own. Simultaneous changes that are being made in the electoral process, community leadership and financial reforms are all necessary for a change in the relationship between the public and local government.

THE ROLE OF SCRUTINY

  20.  Under the new arrangements effective and accountable decision making is dependent on a robust scrutiny function. Without this, there is continued concern that power has been concentrated in the hands of fewer members and many non-executive members still feel disenfranchised, seeing themselves as having lost significant decision-making powers. There is evidence to suggest that scrutiny remains one of the most challenging roles for members. Whilst there are examples of authorities developing good practice in some aspects of scrutiny, very few councils have become proficient in all the roles set out in the guidance.

  21.  Effective scrutiny requires cultural as well as structural change. Our findings suggest that councils are placed along a continuum of change. At one end of the spectrum councils are operating overview and scrutiny panels which appear almost identical to former committee meetings, whilst at the other end some councils are beginning to operate a variety of different meeting styles and formats commensurate with the topic that is being scrutinised. Increasingly the latter authorities include pro-active, bi-partisan questioning and taking evidence from a wide range of sources and "witnesses". A significant amount of training and support is still required, however, in many areas in order to develop a robust scrutiny function.

DEFINITION OF A KEY DECISION

  22.  The definition of a key decision and the possible legal challenges as to what falls within the remit of a local definition continues to be a matter of concern for many authorities. The financial thresholds set by authorities appear to vary considerably and debate continues as to what actually constitutes taking a key decision. Our work suggests that further guidance could usefully be developed around this issue.

TAKING KEY DECISIONS IN PUBLIC AND ACCESS TO INFORMATION

  23.  Our observations of some early executive meetings would also suggest that there is some ambiguity about what constitutes taking a collective key decision "in public". Whilst the new arrangements are quite prescriptive about certain aspects, such as recording decisions, councils are still debating how to make the system more open and transparent in overall terms. There is often some form of "pre-agenda" or private meetings between officers and executive members, for example, which are not open or accessible to the public. Although the legislation and guidance has a clear presumption in favour of openness, it is still too early to assess whether the new arrangements will actually result in increased transparency in practice. When responding to surveys about whether members feel their new arrangements are achieving the intended outcomes, many still express high levels of dissatisfaction and concern about this area.

EXTENT OF DELEGATION TO INDIVIDUAL EXECUTIVE MEMBERS

  24.  Whilst it is impossible to be precise about numbers, our initial work suggests that many Councils are being cautious about giving individual portfolio holders delegated powers. This particularly applies to small district councils, but even some large unitary authorities are reporting a desire to retain collective decision making in many areas. This may change over time, as councils become more familiar with the new arrangements. The extent of delegation (both to individual members and officers) will clearly have an impact on the outcome of the new arrangements, particularly in relation to the speed and efficiency of the decision-making process. In the initial stages some councils believe that operating collectively is a way of minimising risk and learning together.

NUMBER OF MEETINGS AND WORKLOAD ISSUES

  25.  Initial impressions would suggest that in some cases the number of member meetings has not decreased under the new arrangements and that there are considerable workload issues for both officers and members. It is difficult to assess at this point whether some of the new structures will become more streamlined in the future and how much the additional workload is due to managing the transition. This issue has some significance for members, however, as the number of meetings and large workload impacts on their ability to enhance their representational role.

IMPORTANCE OF THE ROLE OF MEMBERS IN OPERATING THE NEW ARRANGEMENTS AND THE NEED FOR ONGOING TRAINING AND SUPPORT

  26.  Although the new arrangements aim to increase efficiency, transparency and accountability, there are some in-built tensions within the new political models of governance. In many respects the successful outcome of the new arrangements still depends to a large extent on the way the system is operated and the conduct of members and officers within the arrangements.

  27.  There is an in-built tension, for example, between openness and transparency on the one hand and increasing the speed and efficiency of decision-making on the other. This is best illustrated through an example of the processes that some councils are adopting for policy development. A policy report may originate at a Policy Group, acting on behalf of a portfolio executive member, for example, and then be considered at one (or more) meetings of an overview and policy panel, before going back to the executive with any comments, prior to being considered at full Council for agreement, as part of the statutory policy framework. Several Councils have highlighted this tension between trying to involve overview and scrutiny committees in an inclusive and transparent policy development process and yet also avoiding slowing down the decision-making process.

  28.  Ironically, in an attempt to be inclusive and transparent, some policy reports now "touch" so many member meetings in the new system that this could potentially end up having the reverse effect, by making the system less transparent. Other partner agencies and members of the public could be confused about where they should make any representations in the process, and it is not always clear to external stakeholders where a final decision is actually made. Tensions such as these exist in any political system. However, it does provide some evidence to suggest that achieving the intended outcomes of the legislation still largely depends on the calibre and behaviour of members and officers in operating the new political structures.

  29.  Our work has found that offering training and support to both members and officers is crucial in allowing them to examine the new arrangements and debate the best way to balance these tensions so that they achieve both an increase in transparency and efficiency. This places the emphasis back on the central importance of the role of members and the ongoing need to ensure that this complex role attracts an increasing pool of local people.

COMMUNITY LEADERSHIP AND MEMBERS' REPRESENTATIONAL ROLE

  30.  Increasingly authorities are discussing how to link together the various elements of the modernisation agenda and considering the implications for their representational role. We are still encountering some confusion about the definition of "community leadership" and what this means in practice for partnership working, as Councils develop community strategies and assess the implications of the new well-being power. The longer-term impact on members' roles has yet to be fully assessed.

ROLE OF THE STATUTORY OFFICERS AND OFFICER SUPPORT FOR THE NEW ARRANGEMENTS

  31.  In three papers published in 2001 (Too Whom Much Is Given, We Hold These Truths To Be Self-evident, and May You Live In Interesting Times) the Commission raised a number of issues for officers and members in general, and the statutory officers in particular, such as the need to rebuild officer capacity.

  We said then that "the extent of change cannot be underestimated. The outcome of new political settlements in councils will do nothing to make an officer career more attractive. Political pressures will be even more acute, possibly putting officer careers under pressure and even in jeopardy. A major effort should be made throughout the local government service to retrain, learn from each other and evaluate early experiences. To modernise staff skills is as vital as to modernise the legislation. The retraining of existing staff needs to accompany the recruitment of new staff".[17]

  32.  We are encountering many different ways of organising officer support for the new structures. Smaller Councils report difficulties in finding sufficient resources to establish separate scrutiny and executive officer support functions. This can mean that some scrutiny panels in small districts have very little access to officers who can undertake any investigative work between meetings. Even some larger councils are also struggling with balancing the need to provide sufficient officer support for scrutiny to undertake in-depth reviews.

ALTERNATIVE ARRANGEMENTS

  33.  Many Councils that are considering the "fourth option" are still working out the detail of their new arrangements. Two models appear to be emerging—one would appear to involve minimal structural change whilst the other examines the potential of creating a powerful "policy" or "policy and resources" committee with some elements of an executive role. It is too early to really assess many of the issues that will emerge from this option at this point.

PARTNERSHIP WORKING AND CONTRACTS WITH SUPPLIERS

  34.  One of the implications of the new legislation and its associated regulations is to terminate all existing agency arrangements from the date that the function delegated becomes the responsibility of the executive. In three tier areas, there are probably substantial numbers of agency agreements between different tiers of local government (covering activities such as grass cutting and minor highways etc) which might cease to have effect from the inception of the executive arrangements. Partnership arrangements may also need to be re-constituted under the new legislation. This can be quite a task for some authorities and there is an issue about how widely these issues are known and appropriate steps taken. The above are just two examples of the need for the government to continue highlighting all the implications of the new structural arrangements for authorities.

PROVISIONS RELATING TO THE CODE OF CONDUCT FOR OFFICERS AND MEMBERS

  35.  As the codes of conduct for members were only released at the end of 2001, this is an area where we are just beginning to commence auditing. It is anticipated that auditors will start to work with authorities on reviewing their implementation of the ethical framework over the forthcoming year. Links have already been established between auditing the new requirements alongside existing work that has been carried out for many years on fraud and the wider aspects of financial governance.

CONCLUSION

  36.  The Commission is pleased to share with the Committee the results of its initial work in this area, while emphasising that it is the various studies currently in hand that will provide a firmer basis from which more definitive conclusions can be drawn.


17   May You Live in Interesting Times-Audit Commission Management Paper, November 2001, p. 23. Back


 
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