Councils cash crisis: Local government lawyers told to ‘get in the room’

As more cash-strapped local authorities circle the plughole, the president of Lawyers in Local Government has urged members to speak out over decisions that are critical to a council’s finances.

Local government lawyers must ensure they are ‘in the room’ when key conversations take place, said Rachel McKoy.

She was speaking after Birmingham City Council effectively declared itself insolvent on Tuesday, citing insufficient resources to settle a potential £650m-£760m bill relating to equal pay claims. Europe’s largest local authority issued a Section 114 notice halting all ‘non-essential’ expenditure.

Birmingham is the latest in a growing number of councils effectively to declare insolvency. In July, the Local Government Association warned that councils in England face a funding gap of almost £3bn over the next two years to maintain existing services. It has also been claimed councils have been tempted into risky money-raising ventures because they have been starved of cash by central government.

Lawyers should speak out ‘if some proposal looks off-kilter and you’re not convinced from a legal perspective of the value for money, if you’re being told “this is not a big deal”, where things are being pushed through quickly’, said McKoy. They should ‘be on guard for anything that looks a bit unorthodox – new territory-type proposals’.

In ‘extreme situations’, Section 5 of the Local Government and Housing Act 1989 requires the monitoring officer to formally report to the council any proposal, decision or omission that could be unlawful. However, this is a ‘real escalation’ and tends only to be used as a last resort, McKoy said.

Lawyers should instead make sure they are present for all the important conversations. Giving the example of a proposed leisure centre sale, McKoy said ‘lawyers need to be in the room, giving their perspective’.

Discussing Birmingham, McKoy said governance lawyers will advise on potential asset sales, with particular regard to the Public Sector Equality Duty.

While there is a hold on new spending, anything that falls under the council’s statutory duties, such as education, will be ‘business as usual’.

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