By Joe Locker, Local Democracy Reporter
Nottingham City Council’s reliance on external consultancy firms likely dates back to a “significant change” by the coalition Government between 2010 and 2015.
The Labour-run authority has already spent £5.5m on consultants in the period since the Government intervened in 2020, following the collapse of Robin Hood Energy.
Of this sum, more than £1m has been given to internationally-recognised audit and accountancy specialist PricewaterhouseCoopers (PwC), whose reported profits surged to £1.5bn last year.
More recently, £6.5m was designated for Newton Europe, an Oxfordshire-based consultancy firm, to help improve the council’s failing children’s services, which were rated ‘inadequate’ by Ofsted in 2022.
According to William Rossiter, an associate professor at Nottingham Trent University, it is likely local authorities were pushed towards a reliance on private-sector consultants as a result of austerity measures introduced during the David Cameron (Con) and Nick Clegg (Lib Dem) coalition.
‘The privatisation of local authority auditing’
The first major change came in 2010 when the Audit Commission was scrapped.
The independent spending watchdog, which at the time employed more than 2,000 staff members, had been tasked with local government scrutiny and overseeing how councils and the NHS spent billions of pounds.
Then-Secretary of State for Local Government, Eric Pickles (Con), announced the commission would be axed as part of the Government’s austerity drive, with the commission having cost roughly £200m a year to run.
The commission’s work, and hundreds of staff, were therefore transferred in the main to private-sector firms.
“One very significant change made by the coalition Government, at the instigation of Eric Pickles, was the abolition of the Audit Commission (2015) and the resulting privatisation of local authority auditing,” Professor Rossiter said.
“[Local authorities] have legal obligations relating to audit and now have no option but to use private sector auditors, where previously this work would have been done by the [Audit Commission].”
The decision at the time was criticised.
The Financial Reporting Council, for example, suggested healthy competition in the audit market would be compromised if the Audit Commission’s work was passed on to any of the ‘Big Four’ firms.
The Association of Chartered Certified Accountants (ACCA) also raised concerns the private sector firms would fail to match the Audit Commission’s experience.
Today, PwC is considered one of the ‘Big Four’ firms in its sector alongside KPMG, Deloitte and EY.
Both PwC and KPMG have been used by Nottingham City Council in the years following the abolition of the Audit Commission.
KPMG was most notably enlisted as the council’s auditor between 2014 up to 2018, scrutinising its accounts to make sure proper practice had been followed.
It was questioned over how it had missed a series of misspends from the council’s Housing Revenue Account, totalling £51m, in the time it had acted as the auditor.
KPMG declined to comment when asked at the time.
Another of the ‘Big Four’, Deloitte, had also been enlisted by Robin Hood Energy to conduct a strategic review into its operations in the year before it collapsed into administration.
‘We don’t comment on our client work’
PwC operates as a network of firms which span over 150 countries, and offers services such as auditing, consulting, accountancy and business services.
In the financial year to June 30, 2022, PwC reported profits of £1.5bn, up 31 per cent from £1.1bn the year before.
It is currently helping the council deliver a ‘Finance Improvement Plan’, which is being delivered in two phases, with the first taking place under a year ago at a cost of £500,000, while a further £600,000 was approved recently for the second part.
Almost £50,000 will be going towards PwC staff expenses.
The Local Democracy Reporting Service contacted PwC and asked questions relating to whether it was providing value for money for local taxpayers and what work it is undertaking specifically.
A spokesperson for PwC responded to say: “We don’t comment on our client work.”
A section on PwC’s website does however paint a picture of the work it is doing within the council.
“After the collapse of the council-owned Robin Hood Energy company, the council faced a challenging mix of financial constraints, rising demand for services and the Covid-19 pandemic response,” an excerpt says.
“Our initial work with the council was focused on supporting it to rewrite its financial regulations.
“However, during our initial engagement it became clear that there was a need for a long-term, sustainable approach to transforming the council and delivering the right outcomes to accelerate their ambitions.”
On top of work on the finance improvement plan, PwC has also been acting as the council’s partner to implement improvements while helping to deliver a ‘Change Academy’.
The delivery of the first phase of the academy, whereby consultants train up council staff so the authority can rely less on external support, cost around £500,000.
The first cohort in the academy have graduated and a second cohort are now being trained.
“From the outset, we worked with the council to establish how we could support them to deliver sustainable change and not leave a legacy of reliance on consultants,” the excerpt on the website adds.
PwC has also worked with Birmingham City Council, which paid it a sum of £300,000 for 12 weeks work in developing a Ukrainian refugee database, prompting criticism over value for money.
Speaking of its work in Nottingham, the leader of the Nottingham Independents opposition party, Cllr Kevin Clarke, said: “I find it strange, you would have thought something more local would have been sought, rather than a massive company like that, to keep costs down.”
‘Broadly speaking consultants get used for three basic reasons’
Nottingham City Council says it has been using consultants because it does not have the internal capacity or expertise to deliver change at a rapid enough pace.
If change and stability are not achieved, the Government may opt to send in its commissioners to take control.
The council must therefore deliver change at the same time as making significant savings in its budget, all while keeping statutory services running.
In 2023/24 alone it must fill a £32m black hole.
Government grants for local authorities have been in decline through austerity over the past decade, meaning services must be delivered more efficiently and with less financial support each year.
Additional pressures resulting from the collapse of Robin Hood Energy, in which it lost roughly £38m, the Housing Revenue Account misspends, the cost of which is now £51m, as well as the millions lost in the Broadmarsh and Nottingham Castle, have only compounded the financial constraints.
One way Nottingham City Council has been making savings is through the cutting of hundreds of job roles.
Between 2017 and 2019, around 200 job positions were cut, while a further 27 faced the axe in around 2019/20.
In 2021 the council announced another 272 job cuts, 80 of which vacancies, which equated to roughly five per cent of its workforce.
And in the most recent budget proposals another 110 job posts look set to go.
The authority is now regularly reporting a lack of internal capacity and expertise, with no choice but to fill the gaps with consultants.
Combined with difficult labour market conditions and better pay in the private sector, Nottingham City Council is suffering.
“Broadly speaking, and from my own experience in the public sector, consultants get used for three basic reasons,” Professor Rossiter adds.
“One: Capacity to deal with workloads beyond the capacity of core staff.
“Two: Specialist expertise where specialist skills are needed that it is considered uneconomic to retain internally.
“Three: Political, where there is seen to be a value in having an external or independent view.
“The national policy… is very likely to have resulted in significant additional demands for use of consultants on grounds one and two.”
The Government has allowed Nottingham City Council to borrow up to £20m to fund external consultants and other recovery activities, and its own assets have been used as security against the sum.
Speaking previously of the use of consultants council leader, Cllr David Mellen (Lab), said: “I appreciate that when the council is facing financial difficulties, the costs of appointing external consultants may appear counter-intuitive.
“However, the council is in a position where it needs to urgently make significant changes and improvements to the way we operate.
“Often this work is for shorter periods only so it makes more economic sense to have people working on these specific projects with temporary contracts rather than as permanent staff so they can drive and direct the required changes which will leave us a better, more efficient council.”
