Inspectors said they did not believe the council has proper arrangements in place to manage its finances
Wallasey Town Hall where councillors will be voting on the local authority budget later this year(Image: Andrew Teebay Liverpool Echo)
Wirral Council has been told it needs to “take immediate and effective action” to balance its budget. Job cuts and cuts to services are all on the table according to a new report. Auditors Grant Thornton’s annual report on Wirral Council’s financial accounts was published on January 6 ahead of an emergency meeting to be held next week on January 14.
The audit firm found three significant weaknesses in the local authority, making a legal recommendation that its findings are debated in public. There were two key recommendations made, and 12 further areas highlighted for improvement.
The report said the council needed to respond to its recommendations publicly under the Local Audit and Accountability Act 2014 as it is “in an extremely challenging financial situation with significant financial pressures creating budget overspends combined with low levels of reserves.” Grant Thornton said there was a risk the council would need a bailout for the next two years and it needed to “take immediate and effective action.”
The council recently requested a bailout of up to £20m for this financial year to stop it from declaring bankruptcy and using up all its back up reserves to balance the books. It faces a budget gap of £57m over the next two years.
Six recommendations have been put forward including finding more savings and service cuts to manage its budget gap due to low levels of backup funds as well as an unfunded budget gap, ensure the council “has the necessary organisational grip,” make sure reports are adequate, and the council’s finance department has enough resources so they can deal with the “critical financial position.”
Recommendations were also made to ensure councillors had oversight of what the local authority is doing to address financial issues and whether the council is delivering social care services effectively.
The report said: “We are not satisfied that the Council has proper arrangements in place to secure economy, efficiency, and effectiveness in its use of resources in 2023/24. We have therefore identified a significant weakness in arrangements. Due to the significance of the financial position, we have elevated this assessment to require a statutory recommendation.”
Wirral Council management said the local authority’s situation “exists against a backdrop of increased demand and costs for social care services, compounded by the previous significant reductions in Government funding and uncertainty around the future financial settlements.” It said a government review of council funding “is of paramount importance.”
Officers said difficult decisions will need to be made in order to reduce costs and “require the organisation to shrink overall in terms of the number of established posts and a reorganisation of how some services are provided.” Council departments have been asked to prepare cost cutting proposals to be put to councillors.
A rapid review by the Chartered Institute of Public Finance and Accountancy (CIPFA) of both the current financial year from April 2024 to March 2025 and the next financial year from April 2025 to March 2026 is being carried out. This will undoubtedly raise questions about the effectiveness of the Independent Assurance Panel which oversaw the council until early last year.
This panel was set up by the government following two critical reports including one by CIPFA into the council’s finances in 2021. This said: “Current financial plans do not address the prevailing culture, which avoids making tough decisions and are by no means certain of success.”
The panel stepped down last year telling Wirral it feels “more like a normal council.” Carolyn Downs, the panel’s chair, said she expected the council to be able to balance its budget for the next three years and noted councillors in Labour and the Conservatives “have greater confidence in the quality of financial reporting and that trust in senior officers has improved significantly.”
When the panel stepped down in March 2024, Chief Executive Paul Satoor said: “This marks a significant moment for the council and the culmination of the hard work by our political leaders both past and present and the officer core responding positively to the need to improve the governance and finances of the council,” adding the panel recognised “the strength of political leadership and cross party collaboration in making significant progress.”
The CIPFA review will support the council to find more cuts to services as well as “undertaking deep-dive activity in respect of social care services.” The number of junior posts within the finance department was also raised as a challenge as “recruiting the right people is crucial in delivering the finance service the organisation needs.”
Council management said its plan to change the organisation would see progress in the long term though social care services are “under immense pressure” due to demand which “currently shows no signs of abating.” They said a performance management framework had now been introduced and councillor oversight of the budget had improved.
Officers have asked councillors to accept the auditor’s recommendations, refer it to the council’s Policy and Resources committee where senior councillors sit, as well as note management’s comments. It is up to councillors to decide whether to accept the recommendation and what action needs to be taken.