Warrington faces prospect of government Commissioners being parachuted in

Warrington Council faces the prospect of government Commissioners being sent in to the local authority over fears about its financial stability.

It has failed a government Best Value Inspection, which was announced last year following concerns about the local authority’s £1.9bn of borrowing.

A report, led by Best Value Inspector, Paul Najsarek, said: “The council is in a very difficult position and its risks are made more acute by a gap of several years without an external audit. These serious problems mean the council faces a significant undertaking to improve.”

It added: “We have considered carefully the different options for intervention and support which the council requires. We have been mindful that the council has not fully implemented previous recommendations from external reviews about its commercial programme and governance.

“There are signs that the council is beginning to reduce its debt, but the messages we have received during the inspection on this issue have been inconsistent and the council’s revenue budget position has deteriorated and is now very serious.”

It says the inspection team “is not confident the council’s challenges will be addressed without external support”.

In its conclusion, the inspection team said: “Warrington is a proud borough with a proud council. Members and officers have a genuine and long standing commitment to the best interests of residents. The council provides some good services and has protected services from the change that limited resources normally requires.

“This desire to protect, along with the preference for the council to have a broad role as a provider and to be directly engaged in all the town’s key institutions, has combined with a culture of respect and deference to powerful officers to create the paradoxical situation of a traditional local authority having an unorthodox and high risk commercial approach.”

The team added: “The council has some strengths in service provision, staff and partner engagement, but it shows a number of weaknesses in relation to its best value duty. The key areas of weakness relate to leadership, culture, governance and use of resources.

“The council has adopted a commercial approach without a commercial strategy. This means it has not been able to maintain a proper overview of the work of officers and has further limited a weak culture of scrutiny.

“The nature of the programme that has developed incrementally and opportunistically is so complex as to be beyond members and many officers’ ability to fully understand. The desire to protect services from financial reductions has led to a willingness to accept assurances that the strategy is working and not address risks.”

And the team stated: “The rationale for several more recent investments, which are described as producing regeneration benefits, are seemingly without evidence and are incompatible with CIPFA (Chartered Institute of Public Finance and Accountancy) codes, statutory investment guidance and, in one case, PWLB (Public Works Loan Board) eligibility criteria.”

It added: “Individual decisions involved a number of high risk investments, some of which lost all or most of the sums invested. The rationale for a number of these investments is unclear given the due diligence reports commissioned and the agreed strategy of prioritising security and liquidity.

“It is unclear that the full costs have been factored into the calculation of the benefits of the commercial programme. It is very likely that MRP (Minimum Revenue Provision) costs will place further pressure on a stretched revenue budget. The absence of any external audit for the last few years adds to this governance and financial risk.

“The commercial governance of council-owned or part-owned companies fails to meet the standards that we would expect to see, especially when such significant sums of public money have been invested.”

There was also a warning of possible consequences for council staff when the team said: “In some cases, senior council officers may be acting as shadow directors and, as a result, unresolved conflicts of interest are common. Personal liabilities accruing to these potential shadow directors could be significant and, for the sake of the individuals concerned, should be understood and either eliminated or indemnified.”

It added: “The council received advice on how commercial governance should be structured and carried out in October 2020, but has failed to implement many critical changes in the period since, despite committing to do so.

“The council’s revenue budget position in year and for future years is increasingly precarious. The council has been using reserves to manage this position but is rapidly running out of road to continue this. There is no track record of transformation at the scale and pace required to deal with this.”

“The council is clear that it has a major problem in dealing with revenue budget overspends, even after further technical financial savings. It accepts that it is unlikely to manage these fully from savings and reserves will be exhausted quickly.

“It continues to hope that national policy on funding will be the solution to this precarious position. The recent focus on payment of loans and asset disposal is heavily driven by the need to address these significant revenue budget challenges rather than a settled strategy to reduce the risks of the commercial programme. 

“This leads the inspection team to make the recommendations we have for intervention and support as we are not confident that the council has both the necessary willingness and capacity to solve its current problems.”

The Government sent Commissioners into Liverpool City Council in June 2021, following publication of the Max Caller report in March that year into how the council was being run following the arrest of five people, including the then elected mayor Joe Anderson, linked to Merseyside Police’s Operation Aloft investigations.

The intervention ended with the withdrawal of Commissioners in June 2024, after a series of improvements in the council’s governance.