Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 19
19
Paragraph: 89
The absence of section 114 notices before 2018 is adduced as evidence that the regime...
Conclusion
The absence of section 114 notices before 2018 is adduced as evidence that the regime has been broadly successful. The consequences for a council of issuing a notice are serious, however, and we are concerned that, rather than concentrating minds, the regime might be hindering good financial management, as it lacks intermediary measures that councils can use to flag up concerns. Croydon Council delayed issuing a notice for fear of the negative publicity and the statement it would make about its financial position. Northamptonshire Council also delayed. We believe that an intermediary “yellow card” measure that could be applied by the Chief Finance Officer might have forced these councils to confront much earlier the seriousness of the problems facing them.
Paragraph Reference:
89
Government Response
Acknowledged
HM Government
Acknowledged
Section 114 notices are an important and effective part of the local government finance system as both a legal mechanism and as a spending control for councils that have particular issues in setting or maintaining a balanced budget. However, Section 114 notices exist within a wider system of checks and balances, such as the statutory requirement for Section 151 Officers to report on the robustness of budget estimates and adequacy of reserves as part of the annual budget setting process; or the additional powers and duties afforded to external auditors under the Local Audit and Accountability Act 2014, for example to issue statutory recommendations or reports in the public interest, to highlight concerns about an authority’s finances. This means we would expect councils to take a number of steps to address financial challenges before reaching a point where issuing a notice is necessary.