Building strong relationships between councillors and finance officers by Cllr Sir Merrick Cockell

For many councillors and in particular Cabinet Members for Finance, one of the most daunting parts of their role is managing the council budget. Not many Councillors have a direct background in finance, and of that number only a tiny number will have managed a budget of millions. Even those with experience of financial management may be forgiven for being overwhelmed by the new jargon they must master; formula grants, housing revenue accounts and top slicing can remain impenetrable mysteries to even long-serving councillors. For me, and for many councillors like me, our relationship with our finance officers is crucially important. It is only by developing strong and trusting relationships with finance officers that we manage our council’s budget in such a way that our political ambitions are realised.

Since the collapse of the Icelandic banks, councillors have been far more alert to their need to understand the detail of council budgets. The situation revealed to many councillors that financial management had become complex and required increased involvement and oversight from councillors.

A strong relationship between finance officers and councillors rests on three principles. Firstly there must be open and regular communication between councillors and officers. Secondly councillors must clearly state their political priorities and work with finance officers to ensure the budget supports these priorities. Thirdly the systems developed by councillors and officers must allow for detailed insight into the budget far more regularly than through an annual budget setting exercise.

Open communication

One of the most shocking aspects of the collapse of the Icelandic banks was the number of councils where councillors professed to be unaware of where investments were held. That might have felt appropriate in other times but the risk to Councils and Councillors extend far beyond reputational to the financial viability of the organisation. To allay that risk, it is important that councillors consider detailed financial matters more often than once a year when the budget is set.

Communication needs to take place regularly and in an informal context so councillors can ask for detailed explanations and question language they do not understand. Public meetings are unlikely to be best suited for this type of debate.

Finance officers need to feel that their role is not just to report to councillors with particular responsibility for finance, for example the chair of the finance scrutiny committee or the responsible Cabinet Member. They must see their role as guiding and supporting all members in understanding council finances. While formal training is very useful for newly appointed councillors, for more experienced councillors it is important that regular opportunities are provided to examine the detail of budgets with appropriate support from finance officers.

In my own borough the relationship between the Finance Director and Cabinet Member for Finance is crucially important. They meet regularly, which allows for issues to be addressed before they become problems. But the Finance Director is equally assiduous in communicating with me and other Cabinet Members. Finance is not seen as the responsibility of one Cabinet Member, but as something we all need to manage.

Set clear political priorities

If finance officers are to work with councillors to manage the budget effectively, they need to understand what priorities councillors want to achieve with the money in the budget. Too often councillors behave as if the budget defines their priorities in terms of what they want to achieve for their communities. It doesn’t have to be this way.

I, and my fellow councillors at the Royal Borough of Kensington and Chelsea have been clear that at our priority is to create a legacy for future generations. For example, the borough had a severe shortage of secondary school places when I became leader of the council. We required not just one new school within the borough, but two, if local children were to be educated within their communities. Schools are expensive to build, and it took many years of work on our budget, as well as applications to central government, to secure the required funding. The cost of finding land in central London did not make the situation easier. In order to fund such significant development, while at the same time managing our budgets prudently, we had to hold large reserves for many years. This brought criticism not just from residents, who asked why their council tax could not be lowered, but also from central government. It was only because we were confident in our priorities, and had devised long term financial strategy to fund our priorities that we were able to answer our critics.

Councillors need to make time to discuss and clarify our priorities and then work with officers to develop long, medium and short term financial strategies to fund them.

Developing the right systems

I know of some authorities where the process by which budgets are set each year varies. In some cases there may be good reason for this: for example a change of political control or a re-design of a process to make it more efficient. But it is useful to councillors and officers alike to know the timetable for budget-setting, the management reports which are available for monitoring the budget and the meetings at which financial matters are discussed.

In my own borough we have a challenge system during which Cabinet Members must present their proposed budget to the Cabinet Member responsible for finance and the Finance Director. Their proposed budget is scrutinised, and they and their senior officers must answer questions about the detailed proposals. Budget proposals are then revised, and sometimes the meetings are repeated. We have found this process invaluable, as it involves both councillors and officers in challenging the assumptions underlying budgets across the authority. We have also involved other councillors who can bring a fresh eye to an area of work.

Providing ample opportunities for budgets to be discussed and refined mean we are far less prey to the ‘surprises’ in the budget which sometimes only reveal themselves well into the financial year. It has also allowed for the pet projects of both officers and councillors to be questioned robustly and, in a couple of cases, discontinued. At a time of such financial pressure this has been immensely useful.

Ensuring strong relationships between councillors and finance officers is a time consuming process. Cabinet membership changes and finance officers move positions. But I have found that all the time and effort we invest pays rich dividends in ensuring our budgets are well managed and our financial strategy supports our political priorities.

Councillor Sir Merrick Cockell has been Leader of the Royal Borough of Kensington and Chelsea since April 2000. He is also Chairman of the Local Government Association.