County chief executives label traffic light ratings proposals for councils a ‘blunt instrument’

County chief executives have warned that a proposed ‘traffic light’ ranking of councils’ financial resilience will be a ‘blunt instrument’ – and they say they want to work with the organisation to develop the approach.

Responding to the launch of the Chartered Institute Public Finance and Accountancy (CIPFA) consultation on the ‘traffic light’ financial reliance plans the Association of County Chief Executives (ACCE) say whilst new measures are needed to support financial resilience, these ‘well intended’ proposals risk over-simplifying complex issues and offer no genuine solutions to councils who could be deemed ‘failing’ by the index’s standards.

The CIPFA proposals will provide an assessment of each councils’ financial health, based on a financial resilience index, giving each council an amber, green or red ‘traffic light’ assessment.

The ACCE warns that the index will be a ‘blunt instrument’ that fails to genuinely help local authorities that may be struggling financially and will not aid the sector in tackling the main issue of insufficient funding – both in the short and long term – for councils.

The grouping of county chief executives argue that as financial resilience can be calculated in a number of different ways, using a variety of different indicators, it may be difficult to get a wholly accurate picture on how well a local authority is performing. Chief executives argue it will not take into consideration other factors, such as organisational culture, local democratic accountability, the historical approach of a place and the importance and dependency of working with partners in a locality.

Both ACCE and CCN follow on from the Local Government Association (LGA) in voicing concerns over the proposals.

Instead, county leaders and chief executives say they want to work with CIPFA to create an approach that supports learning, support and innovation across the sector, rather than defensiveness judgments the proposed model could inevitably create. They also believe that improving existing systems, such as the LGA’s peer reviews, could genuinely offer help to struggling local authorities.

ACCE will outline its full views in its consultation response during August.

Richard Flinton, ACCE lead advisor for local government finance, and chief executive of North Yorkshire County Council, said:

“Councils’ future financial stability has been a recurring theme in local government this year, and these well-meaning proposals are unsurprising in the current climate.

“However, we believe they will be a blunt instrument, which over-simplifies complex issues and offers no genuine solutions to councils’ financial issues.

“Naming and shaming local authorities, based on a particular dataset, could be counter-productive in the long-term when we should be looking at how, and where extra support to specific local authorities can be provided.

“It’s no bad thing to have these type of discussions, and the ACCE is open to new measures to help improve financial resilience, but we believe alternative proposals could be far more effective.

“We look forward to engaging CIPFA during the consultation period on their proposal”