Memorandum by Audit Commission (LGA 24)
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.
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
5. The CPA process (introduced in the Local
Government White Paper Strong Local LeadershipQuality
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
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
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
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.
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
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 legislationnotably 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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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".
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.
33. Many Councils that are considering the
"fourth option" are still working out the detail of
their new arrangements. Two models appear to be emergingone
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.
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.
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.
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