• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • Slough welcomes commitment that Office for Local Government ‘will not be a burden’

    June 30, 2022

  • Homes England agrees strategic partnership with two authorities

    June 29, 2022

  • Soaring inflation and pay pressures to add £3.6bn to council budgets

    June 28, 2022

  • Underfunded social care reforms could ‘exacerbate workforce pressures’

    June 27, 2022

  • Nottingham City Council leader labels proposed intervention as ‘disappointing’

    June 27, 2022

  • Government preparing to intervene in Nottingham City Council

    June 23, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point

0
  • by Richard Harbord
  • in Blogs · Richard Harbord
  • — 11 Jan, 2021
Richard Harbord

Richard Harbord

The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness of estimates and the adequacy of reserves.

There surely can never have been a more challenging and stressful time to be a section 151 officer in a local authority. Nothing is exactly as it seems. Years of austerity mean that the room for manoeuvre in budgets is small. Add to that the unusual circumstances of what looks as if it will be the whole of the 2020-21 financial year, and the fact that the government has only been able to provide a one-year settlement, and longer term financial planning is nigh impossible.

But as budgets are strained to breaking point, a new issue is beginning to emerge. How will section 151 officers confront signing off on section 25 opinions

Section 114s

For the last few months the concentration on local government has been the possibility, or probability, of section 114 notices. We have also seen the Public Interest Report for Croydon and noted the various difficulties highlighted there.

One much talked about solution has been capital determinations—seeking permission to capitalise revenue expenditure. I am told that there have been a great many applications for these determinations to MHCLG, and you would expect that when you consider authorities were told to inform central government if they were considering a section 114 notice.
I understand though that because of the volume of these requests they are taking considerable time to be resolved and for section 151 officers the time is running out.


A Practical Guide to Investing

February 16th – March 23rd, 2021
Six free weekly CPD-certified tutorials – view brochure
Register here with a .gov.uk email address


Section 25

The next problem will be the opinion required to be given by section 151 officers under section 25 of the Local Government Act. The opinion is in two parts. The Act says that these are the robustness of the estimates made for the purposes of the budget calculation and, secondly, the adequacy of the proposed financial reserves.

There are a number of problems to be faced in writing the section 25 opinion this year (I note that in recent years these opinions have gone from being fairly brief paragraphs to statements of one or two pages carefully rehearsing the difficulties in giving such an opinion).

If an authority has been approaching section 114 territory, and has applied for a capital determination, then the opinion can be given on that basis. But there is a concern about delays in agreeing capital determinations. If the determination is not received then clearly the section 25 opinion cannot be satisfactorily made.

Definitions

There remains other complications, among them the fact that terms like “balanced budget” and “reasonable level of reserves” are not properly defined and have not been tested in the courts.

Existing examples in legislation are not terribly helpful. A budget is unbalanced when budget overspends mean reserves fall to an unacceptable level and where an authority shows the characteristics of an insolvent organisation, such as inability to pay creditors.


Room151’s Monthly Online Treasury Briefing

February 26th, 2021
Sustainable investing for treasurers
Register here with a .gov.uk email address


The Local Government Finance Act 1992 stipulates that there must be a balanced budget. The most difficult part of the balanced budget provision is the section 151 officer being certain that any savings used in reaching gross expenditure are robust, achievable and achievable in the necessary timescales.

At times such as these where it is necessary to make savings there is an understandable desire to be optimistic about the achievement of savings and unless the savings plans are robust there is a question over whether it can be a balanced budget.

The adequacy of reserves has been argued about for as many years as I can remember. At one time it was defined by the Audit Commission as 15% of net revenue expenditure though, with great argument, 10% could be adequate in certain circumstances.

At the heart of all this is simply the failure of the quantum. Fair Funding has now been postponed for another year and the demand led statutory services of adult and children’s care is a problem now far worse than ever contemplated. The current pandemic has increased demand in these areas and it was inadequately financed to start with.

Richard Harbord is former chief executive at Boston Borough Council.

FREE monthly newsletters
Subscribe to Room151 Newsletters

Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address

Room151 Webinars
Visit the Room151 channel

 

Share

You may also like...

  • 151 officers must remain at the top table 22nd Jun, 2021
  • Global macro outlook: Virus versus vaccine 22nd Jan, 2021
  • Room151 teams up with Arlingclose to explore Prudential and Treasury Codes in webcast special 27th Sep, 2021
  • Making sense of climate risk reporting for LGPS 2nd Mar, 2021

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Homes England agrees strategic partnership with two authorities
    • Soaring inflation and pay pressures to add £3.6bn to council budgets
    • Underfunded social care reforms could ‘exacerbate workforce pressures’
    • Nottingham City Council leader labels proposed intervention as ‘disappointing’
    • Government preparing to intervene in Nottingham City Council
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 4 hours ago

    Hillier confirmed as keynote speaker for LATIF/FDs’ Summit: Dame Meg Hillier, chair of the Public Accounts Committee, has been confirmed as a keynote speaker for Room151’s combined Local Authority Treasurers Investment Forum (LATIF) and FDs Summit. The… dlvr.it/ST70F7 pic.twitter.com/hxV676Iley

    Room151 4 hours ago

    Councils’ funding at risk due to ‘undercounting’ in census data: Population estimates in London and Manchester may have been significantly underestimated in the 2021 census potentially threatening government funding for frontline services in these… dlvr.it/ST707J pic.twitter.com/VncIyaXa01

    Room151 2 days ago

    Gove at LGA: councils to receive two-year financial settlement: Michael Gove has announced that councils will receive a two-year financial settlement from next year to provide authorities with “financial certainty” and allow them to plan ahead. The… dlvr.it/ST0kSV pic.twitter.com/wxL3UM4sGO

    Room151 2 days ago

    LGPS valuations: the digital journey: Rob Bilton explains how technology is helping to deliver one of the most complex data exercises in the world of public sector pensions. The 2022 valuations for LGPS funds in[...] dlvr.it/ST0kMq pic.twitter.com/VxjSPC2Uvo

    Room151 6 days ago

    Conrad Hall: ‘more sophisticated’ regulation needed for local government: The chair of the CIPFA/LASAAC Code Board has questioned the sophistication of financial regulation in local government and the continuing focus of the Department for Levelling Up,… dlvr.it/SSnPBV pic.twitter.com/G5d7JCWF8c

    Room151 1 week ago

    Slough Council approves plans to restructure finance department: Slough Borough Council has approved plans to restructure its finance department to enhance capacity and capability and to address a “significant weakness” in the function. The local… dlvr.it/SSf8DG pic.twitter.com/l5lmyHmkBg

  • Register to become a Room151 user

  • Previous story ESG and climate change risk: The new governance challenge
  • Next story Cash dethroned: The quest for liquid yield

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares