Worcestershire council leaders suppressed a critical report by independent experts which called on them to take “urgent action” to address the county’s financial woes.
The review criticised the Conservative-run county council’s financial planning as “overly optimistic”, “counter-intuitive” and in need of “radical overhaul”.
Opposition leader Councillor Peter McDonald described the decision by the Tory cabinet team, led by Coun Simon Geraghty, to hide the findings from other councillors as “diabolical”.
Senior Liberal Democrat councillor Fran Oborski called for Geraghty to convene a full meeting of the council to discuss the financial situation in light of this news.
The report, produced at a cost of £29,000 of taxpayers’ funds, was uncovered as part of a national probe into local authority finances by independent news organisation the Bureau of Investigative Journalism, which works with Wyrelife and other independent journalists across the country to hold local powerholders to account.
Worcestershire is the fifth county council identified by The Bureau as showing signs of financial distress similar to those identified at crisis-hit Northamptonshire, a Conservative council which banned almost all new expenditure in February after being unable to balance its books.
According to official figures, the county council has also raided its usable reserves consistently over the past five years, with the “rainy day funds” falling by 47% in that time.
It has also regularly overspent on children services over the past three years, according to Bureau analysis. Children’s services were taken out of the council’s hands following a damning Ofsted report last year.
Andrew Gwynne, Labour’s shadow secretary for Communities and Local Government, said he was concerned that the county which is home to Communities Minister Sajid Javid could be in a financial mess.
“This government’s failings have forced many authorities to struggle to maintain basic services after their funding was cut to the bone.”
The Chartered Institute of Public Finance and Accountancy (CIPFA), which undertook the assessment, calculated the council’s plans could leave it with a funding black hole of as much as £26.4 million in the current financial year.
But the findings, obtained via a Freedom of Information Act request, were not shared with other councillors or discussed publicly, nor were they mentioned in any meetings held in public ahead of the 2018/19 budget vote earlier this year.
Peter McDonald, leader of the council’s Labour opposition group, said neither he nor other opposition councillors had knowledge of the report.
“It’s absolutely diabolical,” he said.
“At a time when we are having services cut year-on-year, we’re seeing hundreds of people dismissed from their jobs and work has been outsourced to private companies, this report was made and we were never informed of what it said.
“Had we been then we would have been making the correct noises to bring to the attention of the ratepayers just how bad the financial position of the council is.”
In June 2017 the council paid more than £30,000 for CIPFA, a leading accountancy body, to conduct a review of its medium-term financial plan and cost-cutting strategy.
CIPFA then gave a presentation to what the council described as “an internal meeting of Cabinet and Strategic Leadership Team”. This was the document provided to The Bureau.
The inspection team described the council’s future “transformation savings” – the main way in which it plans to balance its books – as “overly optimistic”. At the time the council was in danger of being £10.2m short of its £21.3m cost-cutting target. The council has since increased its cost cutting plans to £31.6 million, suggesting it has heeded that recommendation.
CIPFA also questioned why the forecast increase in demand for services was 2.5 times larger than the expected growth in resources. A more realistic assessment of the council’s finances projected an additional £26.4m gap in 2018/19 with a rise to £60.1m by 2020/21.
Plans to keep council tax increases below the maximum possible were described in the report as “counter-intuitive” given the situation facing the authority.
Worcestershire has since set its budget for the current financial year, including a total council tax increase of 4.94% and spending ‘reforms’ totalling £31.6m – the equivalent of almost 10% of its current budget.
No sense of urgency
CIPFA also expressed concerns about attitude within Worcestershire’s leadership team, calling for a “sense of urgency appropriate to the real challenge”. This echoed the problems at Northamptonshire, where an independent inspection concluded in March that the council’s financial crisis had been caused by the complacency of senior officers and said “living within budget constraints is not part of the culture”.
The Worcestershire report made a number of recommendations including a “radical overhaul” of the savings programme and that the council needed to “urgently consider short term initiatives” such as a targeted staffing freeze. We asked the council whether the latter measure was introduced but did not receive a response.
The inspectors called for the council’s then chief financial officer Sean Pearce to be given more support because it was “simply not possible” for him to deliver the required changes. In July 2017, a month after the review he commissioned, Mr Pearce left for another job with the West Midlands Combined Authority in Birmingham, led by Mayor Andy Street.
CIPFA also suggested the council needed to agree a “nowhere to run, nowhere to hide” financial scenario at the next cabinet meeting in June 2017, but the matter was never raised in public. The revised budget gap was instead discussed at an “internal meeting”.
McDonald said: “We have a council that is refusing to tell people the truth, with the truth being the finances of the county are a serious mess and things will only get worse.”
“I think the council needs to open up, tell the public the true position of its finances and call the government commissioners in.”
Councillor Oborski said today: “At the February 2018 Budget Meeting the 2017 Group of Liberal Democrat and Green councillors moved that the Council Tax should be increased by a further 1% and warned that Worcestershire faced a “financial Black Hole”.
“We said this following the detailed meetings which we had held with the Council’s previous Chief Financial Officer prior to his leaving the authority.
”The Conservative Finance Lead assured me that I was unnecessarily pessimistic and no additional rise in Council Tax would be needed this year.
“It gives me no satisfaction what so ever to find that our predictions were entirely accurate.
“The Leader of WCC should convene an urgent meeting of the full Council.”
Worcestershire said it had acted on CIPFA’s findings by investing an additional £10.5m in children’s social care and £7.8m in adult social care this year.
A spokesperson said: “We commissioned an independent financial resilience review from CIPFA in the summer of last year.
“The review was requested to inform our budget planning.
“The approach taken by the council was in line with the CIPFA advice and also helped us plan to shape how we moved forward with our medium term financial plan.
“Despite the budgetary pressures, we are in a robust financial position and a balanced budget for 2018/19 was approved by councillors in February.”
How are councils independently reviewed?
A Financial Resilience Review is a service by which local authorities pay for CIPFA, or an equivalent organisation, to independently assess the strengths and weakness of their finances.
The process involves an onsite assessment by a small team of experts who test the council’s financial projections and money-saving proposals, as well as short and medium-term prospects.
The findings are then provided to senior council officers in the form of a report or presentation. It is up to each authority whether this report is published.
CIPFA, which charges around £30,000 per review, declined to reveal how many reviews it has undertaken, or whether the requests have increased, on the grounds of commercial confidentiality.
The Bureau submitted freedom of information requests to all 353 local authorities in England asking about reviews undertaken in the last five years.
So far five local authorities have confirmed they commissioned CIPFA to undertake a review since November 2016: Torbay, Lambeth, South Ribble, Worcestershire and Surrey – the latter being a county council the Bureau had previously reported on for it’s severe financial issues.
Wyre Forest District Council commissioned a free ‘peer challenge review’ last year by the Local Government Association, which gave it a clean bill of health. Unlike Worcestershire County Council, the district council published its full report and issued a media release about the process it had undergone. A follow up visit is expected later this year.
*County Hall image courtesy of Worcester News