An under-resourced legal services team at Liverpool City Council was placed under pressure to sign off reports and had little idea when work was being outsourced, the government’s damning report into the local authority has revealed. 

Inspectors found ‘serious failings’ in governance and practice in housing and planning areas in a report on potential fraud and corruption at the local authority, with ‘corporate blindness’ failing to pick this up and remedy the position. 

The inspection, which led to statutory intervention this month, found that on property disposals, the council often did not have the resources to handle the number of cases in process, so outside solicitors were commissioned. This was commonly done directly by the regeneration directorate without any involvement with the City Solicitor, Jeanette McLoughlin, who at the start of the review period was not on the management team. 

Inspectors found McLoughlin never had any oversight of the scale and scope of activity and could never ensure a consistent approach to protect the council’s best interests and ensure compliance with standing orders.  

The report added: ‘Because the client was seen, by the outside solicitor, as being whichever regeneration officer was the lead, advice on the advisability or risk of agreeing alternative terms proposed by the purchaser was not considered in the round, just doing the deal mattered.’ 

Inspectors found it was common practice for internal legal services to be presented with reports for signing off ‘seemingly at the last possible moment with emphasis on the political support behind any proposal’. 

The report added: ‘This introduced unacceptable pressure on the internal team, impacting on the robustness of scrutiny, and increasing the reliance and trust placed (or potentially/occasionally misplaced) on the information provided by officers submitting the report.’ 

There were six teams of varying sizes within legal services, each led by a principal solicitor. The development team, which came under the scope of the inspection, had two qualified lawyers and two skilled legal assistants to cover a ‘substantial’ amount of work: in 2017 Liverpool City Council made 44 disposals of property and maintained an average of 35 disposals a year over the review period. The report noted that legal services had a reputation for being ‘slow’ and struggled to keep up with the volume of work. 

While the legal departments remained reasonably stable despite significant local authority budget cuts of recent years, the one exception was the departure of the assistant city solicitor, who left in 2018 but has yet to be replaced. While two of the principal solicitors have provided interim cover, inspectors found that the views of the legal services team ‘were not always heard or were consciously ignored when raising valid concerns with other departments’. 

Lack of capacity meant that up to 25% of legal work was outsourced, and support was procured in some cases without even involving the legal services team. Officers in the council often procured at speed and went to firms they had worked with before, creating a small pool of preferred firms and solicitors, which led to occasions where both council and developers were using the same firm.  

Outsourcing also resulted, it was found, in a lack of copies of external legal files and formal documentation, including leases for completed transactions, being kept on council records. 

Inspectors said the council’s recovery plan will need to build the prominence of legal services, invest in senior staff and reduce reliance on external firms for non-specialist matters. Any review of the constitution should provide clarity about the full responsibilities of the city solicitor. 

In a joint statement this week, acting mayor Wendy Simon and chief executive Tony Reeves said there was a 'collective commitment from both councillors and officers to learn from the failings highlighted in this report'.

The inspection was initiated in December 2020 by the secretary of state for housing, communities and local government in response to a Merseyside Police inquiry into fraud, bribery, corruption and misconduct in public office, which involved a significant connection to Liverpool City Council.