Without a ‘generous’ settlement the risk of section 114s looms large

Section 114 notices have been long threatened but rarely used. A continued lack of funding may change all that, argues Richard Harbord.

It is difficult to remember now that section 114 was in the Local Government Finance act 1988. It seems incredible that it is 32 years ago given I was on the working party set up to draft the sections 114-116 of the act.

It was deemed necessary at the time because the powers under section 151 of the earlier 1972 act were not considered specific enough to deal with the situation faced in 1988. The main concern was that the downgrading of section 151 officers in a number of councils meant they needed greater powers to combat decisions agreed by members which were financially harmful to their authorities.

It is often forgotten that we saw the most important parts of the section to be the fact that the CFO was required to report when a decision was, or was about to be, made which would result in unlawful expenditure; an unlawful action which would result in a loss or deficiency; or an unlawful entry being made in the accounts.

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We were not convinced that there was a need to add on the bit about reporting when it is likely that the authority’s spending is likely to exceed its financial resources in any financial year.

There was great concern at the time about being unable to control decisions as the section 151 officers may not be on an authority’s management team.
In 3three decades section 114 has often been threatened but rarely used. The original legislation allowed the section 151 officer to act on their own, but subsequently a need to consult with the head of paid services and monitoring officers was added in.

It is quite striking that the use of the power has been, in fact very limited. Immediately after the act was passed there were a number of section 114 notices threatened. I think Liverpool was one of the first to use it and I remember being told by their CFO how the Leader had banned the notification from being carried in members’ mail and that he delivered his letter to every member on his bike. Those were the days.

Limiting

Section 151 officers generally considered that the issue of a section 114 notice was very poor form and could be career limiting.
Certainly one or two attempts to issue notices without consultation ended in tears but life generally settled down and, although occasionally threatened, section 114s were seldom actually used.

At this point in time, of course, it is a poignant topic but in a slightly different way. Relations between elected members and section 151 officer are broadly good and there is a feeling of mutual trust. Also, after considerable work, there are fewer examples of section 151 officers not being at the “top table”.

Thus, the issue of such a notice is less likely to be for the three reasons it was originally concerned with and more likely to be a warning that an authority is running out of resources. This is also more likely to be concluded collaboratively with members although, of course, originating with the section 151 officer.

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Settlement

It is impossible to generalise because every authority will be different, but there is understandable concern that local government is no longer properly funded, and the presence of statutory services means that resource allocation is difficult.

There are concerns that it is no longer possible to fund the full range of services that were previously enjoyed by communities.

This is clearly recognised by central government in the way they have asked authorities to alert Whitehall before issuing a notice. This is in order to give the government a chance to offer some temporary assistance and avoid the publicity surrounding a formal notice.

It is something of a surprise to me that in the current circumstances there are not more legal challenges to authorities about the failure to fully meet the legislation for adult and children’s care or the service offered to special needs children.

Without a generous, or even moderately generous, local government settlement this year (pause for hysterical laughter) the issue of section 114 notices is likely to be exacerbated.

It is worth re-reading the The Guardian in 2012 and the article on the “Barnet Graph of Doom” which showed that in 20 years the council would only be paying for adult social care and children’s act expenditure with no resources for anything else—not even emptying the bins. There might be a feeling currently that Barnet was being far too optimistic.

Richard Harbord is former chief executive at Boston Borough Council.