Burnham wants to give English councils more financial power, but can they do the accounting?

SUMMARY

Richard Murphy, political economist and accounting expert, examines the risks of devolving financial powers to English local authorities amid a near-collapse of the local government audit system. He argues that without restoring robust, independent audit oversight, proposals like Andy Burnham's for increased local fiscal autonomy could lead to unchecked financial mismanagement and further crises.

MAIN POINTS

• Andy Burnham proposes devolving greater financial powers to English local authorities, raising concerns about accountability. [0:00]
• England's current local government audit system is failing, with audits delayed and oversight lacking. [2:01]
• Privatization of local authority auditing in 2014 led to a shortage of qualified auditors and a massive backlog of unaudited accounts. [4:04]
• Major financial crises in councils like Birmingham, Woking, Thurrock, and Croydon were not prevented due to audit failures. [7:01]
• Murphy calls for the National Audit Office to take over local authority audits before any further devolution of financial powers. [9:01]
• Public accountability and timely audit are emphasized as prerequisites for successful devolution to local councils. [11:00]

DETAILED ANALYSIS

The proposal by Andy Burnham to devolve significant financial powers, including control over portions of locally raised income tax, to English councils is met with caution due to the current state of local authority audit in England. Since the Conservative government privatized local authority auditing in 2014 and abolished the Audit Commission in 2015, the system has been unable to provide timely or reliable oversight. Only a handful of private firms now undertake this complex work, resulting in severe delays—by 2023, nearly 1,000 audit opinions were outstanding, and only about 1% of council accounts were filed on time in 2022/23.

This breakdown has left both councillors and the public without dependable financial information, undermining trust and effective governance.

The consequences of this audit collapse are evident in high-profile financial disasters. Birmingham City Council effectively declared bankruptcy, while Woking accumulated approximately £2 billion in risky debt through property speculation, and Thurrock and Croydon faced similar crises. In each case, audits were either too late or insufficiently robust to prevent or even identify mismanagement before it escalated.

The lack of timely, independent audit means that both local and whole-of-government accounts are now considered unreliable, as local authority figures are consolidated into national accounts.

Murphy argues that the market-based approach to local government audit has failed, with increased fees delivering less oversight. He insists that before any further devolution of financial authority, the government must restore a strong, independent audit function. The National Audit Office, which currently audits central government, is identified as a suitable body to take on this expanded role, provided it receives adequate resources.

Without such reforms, devolving more power to councils risks repeating and amplifying recent financial failures, making robust audit a non-negotiable foundation for any future decentralization.

LINKS

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