Government cautions councils over major financial and organisation decisions ahead of reorganisation
Councils set to undergo reorganisation have been warned against taking decisions that could "fetter the future decisions of new councils", including major organisational restructures, establishing companies and the spending of reserves, among other things.
- Details
In official correspondence published on Friday (25 July), the Ministry of Housing, Communities and Local Government (MHCLG) also said that it will issue directions requiring written consent from successor councils for land disposals worth more than £100,000, as well as contracts worth more than £1,000,000 for capital and entering contracts of more than £100,000 for non-capital.
The letter was sent to all 21 areas that were invited to submit proposals to undergo reorganisation, which will see two-tier areas covered by unitary councils.
The correspondence said: "Given reorganisation is a once in a generation opportunity to work together to put local government on a more sustainable footing, creating simpler structures that will deliver the services that local people and businesses need and deserve, it is essential that decisions regarding ongoing service delivery and the medium term financial strategy of existing councils do not compromise the future sustainability of new councils."
It said that all involved in reorganisation should be "cognisant that decisions taken now by existing councils could fetter the future decisions of new councils and act accordingly".
Examples of those decisions "include but are not limited to the sale and purchase of significant assets, transfer of local assets, entering into new contracts for service delivering including IT procurement, major organisational restructures and changes to staff terms and conditions, establishing companies, undertaking job evaluation, permanent appointments to senior positions, changes to unplanned borrowing and the spending of reserves, and major changes to arrangements such as the local council tax support scheme and council tax exemption scheme."
MHCLG said it continues to encourage local communication on decisions and for councils to actively take steps to align services with neighbouring councils to smooth the transition to a unitary system.
It also said that the Government expects councils to continue to operate in accordance with their agreed medium-term financial plans and planned actions for the period and defer the implementation of any significant changes to service delivery other than where this would cause a gap or cessation of a key service.
However, decisions that are necessary to ensure service delivery should not be delayed, it added.
In previous rounds of local government reorganisation, directions have been issued under section 24 of the 2007 Act to those councils being reorganised to ensure new agreements will be in the best interests of the new council or the residents of the area, and do not undermine or diminish the benefits or savings anticipated as a result of unitarisation, or which may have an effect on the financial position of the new councils.
The letter informed councils that the Government intends to issue directions under section 24 of the Local Government and Public Involvement in Health Act 2007 (the 2007 Act), once Structural Changes Orders have been made, to specify a person to give consent for all relevant matters and how that power is to be exercised.
"We anticipate that these directions will follow the precedents previously set, namely that written consent from the successor council will be required for land disposals worth more than £100,000, entering contracts of more than £1,000,000 for capital and entering contracts of more than £100,000 for non-capital (whole life costs)," the letter said.
Finally, it set out the expectation that councillors and statutory officers to be "mindful of their responsibilities", adding: "Councils should maintain strong accounting and governance disciplines, prepare their accounts on a timely basis, and work closely with their auditors to rebuild assurance where accounts have been disclaimed and to ensure that all assets, liabilities and key risks are correctly identified and reported. We expect all councils in an area to work together in sharing information and making decisions that are in the best interests of the whole area."
Adam Carey
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