Pop goes the Council?

August 30, 2011

The bloggers at WeLoveLocalGovernment (WLLG) have posed an interesting set of policy questions into the Twittersphere; namely ‘Does there come a moment when some councils are unable to operate under the cuts being proposed? Is it close? What happens then?’ These are very big questions, and I am not going to do justice to them in a single blog, but hopefully continue the debate with some observations. My central hypothesis is that ‘managed’ failure may not be entirely a bad thing – as arguably the incentive provided by the possibility of failure is hugely powerful; moreover the imperative for turnaround might help deliver better results for localities than the prospect of a failing model being patched up ad infinitum.

But first a huge qualification – we need to define ‘unable to operate’. It could include, but not be limited to; financial insolvency (multiple causes), political breakdown, a major trades dispute, a profound legal/regulatory issue, extreme service failure or indeed other forms of shock (such as a natural disaster) which render the organisation and local service system unable to perform to a scope and level approaching reasonable expectations. Where public bodies fail in a profound sense, financial solvency will likely be at the heart of the matter, but one or more of the other factors I have mentioned will almost certainly form part of the picture – either as a cause or effect of the root financial problem. Finally, we are not talking about a temporary issue – it is highly likely a part of our definition of ‘unable to operate’ would need to focus on the likely longevity of that position. The reason why I labour definition of terms is that the solution to failure (the interesting bit!) needs to be very closely tied to the reasons for failure. Anyone who, like me, has worked on intervention (Hackney and Hull being prime examples in the UK – now a decade ago) knows that local government turnaround is fiendishly complex and multi-layered. Solving the fundamental problems, not just those that sit on the surface, takes time and unglamorous hard work.

Turning to the current position, I am led to believe there are a number of small district councils that are in serious financial distress. A combination of factors is at work here but at root their spending power does not match their basic liabilities. Of course, these Councils, their neighbours and the government can and should do their best to stave off the crystallising of insolvency, but what does need consideration in the process is whether there are deeper issues which will remain unaddressed by the injection of cash and capacity. A failing Council cannot and should not expect an automatic bail out when things go wrong – should failure occur there need to be hard consequences which result in significant change. At the same time essential services to citizens need to be protected. So my sense is that a debate about Council insolvency is a healthy one – where failure happens it is of huge concern for local people but we also need to grasp the opportunity for change it provides.

What would characterise a modern, localist policy on council failure would be a mechanism for local people taking on the challenge of reforming the council in both democratic and management terms. Central government intervention (backed up by audit and inspection) has characterised the way we have dealt with failure in the past. But I am excited by the possibility that a Council rescue could involve, at its heart, local people, businesses and other organisations taking on the challenge of rebuilding their council from the bottom up. That’s why I think we need this debate now – should one of these districts go ‘pop’ at some point soon, I hope it is local people – and not ministers – that are the prime movers in shaping the plan for recovery.

Alex Khaldi is a Director at iMPOWER. To contact him to discuss this blog or any aspect of our work, please e-mail or call 0776 413 2182

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