Chris Game

Right – we, meaning I, must start with a dilemma declaration. How to deal with a major national news item – “Birmingham City Council declares itself bankrupt” – the consequences of which, as a long-term Birmingham resident and ratepayer, will affect you personally and about which in the distant past you might well have been invited to opine seriously and professionally. Yes, carry on being retired and/or pretend you’re still on your hols.

Obviously, I’ve chosen an alternative route, emphasising background and context and stuff that might just provide some clarification, or at least updating.  And, if it seems frivolous, tasteless or just indulgent, I apologise. Blame me, not the editor.

I’ll start, as it’s in the intendedly eye-catching title, with numerology – the study of the hidden, divine or mystical meaning of numbers. Even if you’re not into it, you’ll quite likely have come across ‘angel numbers’, aka ‘lucky primes’ – sequences of digits that supposedly bode well and make you feel good. Or, as the ologists put it, messages from the spiritual universe offering insight, wisdom, and directionality – three-digit ‘lucky primes’ usually including 127, 151, 163, 193, etc.

And which bunch of local government personnel, more than most, could benefit from having such character traits built into their job descriptions? Section 151 Officers, of course; aka Chief Finance Officers (CFOs) – those required by Section 151 of the 1972 Local Government Act to arrange and take responsibility for the proper administration of their local authorities’ financial affairs.

Just check out the numerologists. “The energies of number 1 combined with the vibrations of number 5 … a sign from the divine realm that you need to be strong, act as a leader, and be in control of your future life …” etc. etc.

The only problem being that, with a bit of searching, you can get similar hokum for almost any three- or four-digit number. So, somewhat to my disappointment I admit, no fiddling whatever would have been required of the Office of the Parliamentary Counsel – the people who actually draft our laws – to ensure that these matters would be dealt with by Section 151 of the 1972 Act.  Excepting possibly the Satanic 666, which would make the Act impossibly long anyway, almost any three-digit number would have served.  

I knew this back in 2017, but I’ve habitually kept a vague look-out for any published follow-up from my INLOGOV blogs and admit that I was quite chuffed when a few years ago one was picked up and passed on by Room 151 – the “online news, opinion and resource service for local authority Section 151 and other senior officers covering treasury, pensions, strategic finance, funding, resources and risk …”.

Chuffed too to that, albeit over a lengthier time period than I was envisaging, the broad thrust of my argument of more being on the way has proved to be accurate – a somewhat nerdy argument, admittedly, that can certainly be made even nerdier, but that, for current blogging purposes, can also be tolerably summarised in a few sentences.

So here goes!  If a council’s Chief Finance/Section 151 Officer (forever male, of course, in the 1988 LG Finance Act, although Birmingham’s current Interim Director of Finance happens to be Fiona Greenway) reckons his council’s expenditure is likely to exceed available resources, he issues a Section 114 Notice prohibiting any new spending apart from that funding statutory services and existing contractual obligations. OK, geeks, they’re technically ‘Reports’, not ‘Notices’, but that really, really isn’t the serious issue.

It’s a situation in which things are pretty obviously and publicly getting out of hand – current spending way over budget, reserves virtually exhausted, no imminent solution. The alternative, however, is worse: Section 24 of the Local Audit and Accountability Act 2014, or washing your dirty linen in public – the council’s EXTERNAL auditors appending a Section 24 ‘Recommendation’ to their Annual Audit letter, “copied to the Secretary of State”.

Which may sound chummy, but, I suggested, was “the bullet-shaped chumminess of a Mafia ‘message job’”: very nasty, and rarer even than 114 Notices – historically. Yet – and this is what prompted that 2017 blog – in the space of two months two Section 24s had been issued, to councils at the very extreme ends of the council scale spectrum: the Scilly Isles and Birmingham, the latter’s then Labour Leader, Cllr Sir Albert Bore, describing it as “the most concerning audit letter” he’d seen in his 36 years as a councillor. For the record, though, and without further explanation, that’s the last you’ll read of them in this particular blog.

The distinctions between the 114/24 courses of action were interesting and debatable, but you didn’t have to be a terribly nerdy follower of local government finances to see the probable beginnings of a trend, so it was pleasing to have been reckoned insightful by the serious pros in Room 151. Especially when the trend didn’t gather pace as quickly and widely as I speculated it might.

However, given the way local government finance ‘works’ in this country, particularly under Conservative administrations, it was only going to be a matter of time, and gradually the signals became unmissable – accelerating in quite a big way with (then Lab) Croydon LBC in late 2020, who issued not one but two s114 Notices in successive months, having again failed to balance its budget in the permitted 21 days of grace. Understandably, it prompted a Commons Inquiry by Clive Betts’ ever-watchful Local Government (sorry – Levelling-up, Housing & Communities) Committee.

Slough BC (Lab then, C/LD now) was next in July 2021, despite having been one of eight councils granted “exceptional support” the previous year, as Ministers became increasingly concerned at the adverse publicity generated by threats of councils ‘going broke’.

Come December and Cumbria’s Copeland BC (Lab then, since abolished and incorporated into Cumberland) was reported to be “in Section 114 territory”, but was soon overshadowed by (Lab) Nottingham City Council’s unlawfully diverting cash from what should have been a ring-fenced Housing Revenue Account to ‘General Funds’ – an ‘accounting error’ which personally I found extraordinary, since it’s one of the few bits of tekkie lg finance that even I know. And it dragged on.

2022 saw serious acceleration. In May Northumberland Council (Con)issued a s114 for unlawful expenditure, including allowances paid to the council’s Chief Executive. It was possibly the case generating least sympathy for the beleaguered council, whose elected members and officers went public with their mutual distrust – not the only such example, but probably the bitterest. 

Towards the end of 2022 it became clear how desperate the situation – or at least the search for commissioners available to ’intervene’ – was becoming, as returning Local Government Secretary Michael Gove sought to launch anticipatory “turnaround programmes” short of sending in commissioners – ‘risk-mitigation directions’, in Govester jargon.

Not in time, however, to prevent Croydon LBC (NOC) issuing its third s114 in three years, and Thurrock Council (Con) having the courage/desperation to report that it would require “exceptional support” from Gove’s Department “over a number of years … to stabilise our financial position and give us time to have balanced budgets.”

At which point – after an obviously uplifting Christmas and New Year – “Whitehall officials”, in the person of Jeremy Pocklington, Permanent Secretary of the Department for Levelling Up, Housing and Communities (DLUHC), had the confidence/nerve/effrontery to announce to a Select Committee that even at the time sounded, well, brave.

As reported in The MJ (Jan 10^th), “Whitehall officials are not expecting councils to issue further Section 114 notices in the coming weeks … our assessment, looking at the sector as a whole, is that the financial position is sustainable … strengthened by the additional resources made available in the Autumn Statement.”

Apart, that is, from the nine councils within the Special Interest Group of Municipal Authorities (Sigoma) who warned last week that they could issue a Section 114 notice by 2025; Stoke-on-Trent City Council (Lab) that announced this week that it is on the verge of bankruptcy … oh yes, and Birmingham.

Chris Game is an INLOGOV Associate, and Visiting Professor at Kwansei Gakuin University, Osaka, Japan.  He is joint-author (with Professor David Wilson) of the successive editions of Local Government in the United Kingdom, and a regular columnist for The Birmingham Post.