New statutory guidance on the Best Value Duty
The Department for Levelling Up, Housing and Communities (DLUHC) has recently issued welcomed guidance on best value standards and interventions, following a consultation last summer, writes Olivia Carter.
The DLUHC guidance replaces the 2015 statutory guidance, providing more detailed and descriptive standards expected of local authorities to comply with the Best Value (BV) Duty.
The BV Duty arises from s.3 of the Local Government Act 1999, which requires ‘best value authorities’ (most local authorities, and other prescribed authorities) to “make arrangements to secure continuous improvement in the way in which [their] functions are exercised, having regard to a combination of economy, efficiency and effectiveness.”
The guidance was published in draft with the consultation in July 2023, and has been issued in similar form with some minor clarifications and changes, following overall positive responses to the principles and themes from respondents to the consultation. The guidance is complementary to sector-led initiatives to understand and assess compliance with the BV Duty, such as the LGA’s corporate and finance peer challenges, which local authorities are expected to undergo at least every five years.
The guiding principles
The guidance sets out broad principles that are said to guide the Government’s approach to monitoring and assessing compliance with the BV Duty.
- Local accountability: that local mechanisms for assurance and accountability will be explored first before relying on central government.
- Continuous improvement: with an impetus on intentions rather than outcomes, authorities should seek to learn from past mistakes, but will not be expected to be perfect.
- Openness to challenge and support: the duty is on the authority itself, and authorities should welcome and address performance indicators from external bodies.
- Expectations: the Government’s expectations are set out in the seven themes in the statutory guidance.
- Prevention: Local Authorities and Government shall both identify and act on early warning signs of failure, and address them at the earliest opportunity.
- Meeting the cost of failure: there cannot be an incentive to fail, and so the financial cost of failure should be met locally as far as possible.
- The life cycle of an intervention: in cases of significant failure where intervention powers are used, they will be expansive at the outset, on the presumption that failure may be more pervasive, but will be expected to de-escalate over time.
Seven themes to define best value
At the heart of the new guidance are the seven themes by which compliance with the BV Duty will be assessed. Although the guidance stresses there is no single version of ‘good’, which might look different in different areas, the themes represent areas in which all authorities should be able to show continuous improvement.
Each theme is illustrated with a number of example positive features as characteristics of a well-functioning authority, contrasted with a list of example negative indicators of potential failure.
The seven themes, and some of the cited indicators for each, are:
1. Continuous improvement
Mirroring the guiding principle, emphasis is on continued improvement and learning from past mistakes, rather than achieving a set standard. Authorities are encouraged to demonstrate they are using and implementing the results of internal and external scrutiny mechanisms; whereas a culture of denial and lack of openness to constructive advice and challenge is evidence of potential failure.
2. Leadership
Emphasis is placed in particular on the statutory officers working effectively together, having access to the highest levels of council decisions and having a voice in important decisions. In well-functioning authorities, statutory officers will uphold their duties and ‘speak truth to power’, and the Monitoring Officer will be supported to enforce regulations and the code of conduct without fear. Evidence of potential failure is poor financial management, or where the chief finance officer and monitoring officer do not have direct lines of communication to the Head of Paid Service, do not demonstrate ownership and accountability, or are not involved in important decisions.
3. Governance
Clear and robust governance and scrutiny arrangements should be in place, and in accordance with relevant statutory and sector guidance. Examples of good governance are where scrutiny and internal audit functions are challenging, robust, valued and contribute to the efficient delivery of public services, and where risk awareness and management informs every decision. Making key decisions without recording them effectively, without appropriate advice, not implementing decisions transparently, and excessive secrecy are all indicators of potential failure.
4. Culture
Closely aligned to leadership and governance, the authority’s culture arises from how these themes are exercised in practice. Members and officers promoting and demonstrating the highest ethical standards, a culture of compliance, and the existence of a proactive and welcoming attitude to external challenge and scrutiny are all characteristics of a functioning authority. High numbers of staff grievances and staff turnover are indications of potential failure.
5. Use of resources
A fundamental of good financial management. There should be a robust system of financial controls and reporting; and an absence of unlawful or excessively risky borrowing and investment practices.
6. Service delivery
Local services should be customer and citizen-focused, and meet the needs of diverse communities. A high number of upheld complaints to the Ombudsman may indicate potential failure in this regard.
7. Partnerships and community engagement
Partnerships can maximise opportunities for sharing resources, achieving outcomes and creating a more joined-up offer that meets the needs of residents and local service users. Appropriate governance structures should be in place to oversee partnerships, giving rise to joint planning, funding, investment, and use of resources to demonstrate effective service delivery. Weak ambition, lack of meaningful consultation or engagement, poor outcomes, and poor or non-existent communication with partners are all indicators of potential failure.
Intervention and assurance
The new guidance includes a section on the Secretary of State’s powers of intervention, and makes clear that the seven themes provide a framework for the assessment of authorities’ compliance with the BV Duty. Sources of data to underpin the assessment will come from external audit reports, peer challenges, reports from Inspectorates and Ombudsmen, the Office for Local Government’s (Oflog) Local Authority Data Explorer, and any letters from residents and MPs raising concerns.
The guidance notes that decisions to intervene will only be taken when there are significant, systemic and extensive indications of failure and it is anticipated that these will present across more than one BV theme.
There is an overview of the intervention powers available to the Secretary of State, ranging from more informal non-statutory powers (such as a Best Value Notice), to the statutory powers under Part 1 of the 1999 Act (including to direct a local inquiry, appoint commissioners to exercise the authority’s functions, or make a direction to take a specified action). These all form part of a package of intervention powers available to the Secretary of State, which were recently supplemented by the addition of Financial Mitigation Directions, introduced by s.78 of the Levelling Up and Regeneration Act 2023.
The guidance also makes reference to Oflog as a new part of the assurance regime. Oflog has no powers of intervention, but its current role is to collate and analyse information about local authorities’ performance, to identify where early intervention is required, and to demonstrate and celebrate examples of best practice. The guidance notes that it may be updated as Oflog’s role develops.
The LGA’s new improvement and assurance framework is also a useful tool available to support authorities in testing and achieving BV.
Olivia Carter is a partner at Bevan Brittan.
