Agenda item
Review of Virement Rules
Minutes:
Special Circumstances and Reasons for Urgency
The Chair informed members of the GPC that the special circumstances and reasons for urgency associated with the proposals were as below.
“The report on Review of Virement Rules follows the Budget Council decision of 7th March 2013 and required research into what actions had been taken as a result of a previous Council decision. In order to take forward the proposed amendment at Budget Council which could not be considered at that meeting this is the earliest opportunity for the matter to be considered.”
The Chair subsequently agreed the special circumstances and reasons for urgency, indicating that she was satisfied that the matter was urgent, as defined in the Authority’s Constitution (Part 4 Rules of Procedure, Section 4.2 Access to Information Procedure Rules, Rule 6 Items of Business, sub paragraphs 6.3 and 6.5. The special circumstances justifying urgency being as detailed above.
Mr Holme, Acting Corporate Director Resources, introduced and highlighted key points in the report, which:
· Provided background information regarding the need for establishment of a working group to undertake a review budget making/ virement arrangements and make recommendations to Council. Terms of Reference and timeline for the proposed review were also reported.
· Outlined the definition and nature of virements and statutory guidance about them.
· Detailed the existing virement rules set out in the Authority’s constitution.
Mr Holme emphasised that he had progressed the initiation of the review and with GPC approval would progress the engagement of CIPFA to help identify a suitably qualified and experienced independent advisor to the working group.
A discussion followed which focused on the following points:-
· Commented that it was disappointing that a resolution of full Council taken in January 2012, instructing the then Interim Chief Executive to set up a working group on budget making and virement arrangements, was only being progressed in March 2013. Officers clarified that agreement had not been reached on setting up the working group, and in particular identifying the independent adviser to it. The action had been for another Officer to take, but was now being taken forward by the Acting Corporate Director Resources.
· Clarification was sought and given as to:
o Whether Officers were more optimistic that stakeholder agreement on the Independent Adviser (IA) would now be reached.
o What comprised the review cost of £15,000, and particularly the element for providing an IA.
· Whether the costs associated with recruiting and remunerating an independent adviser were a good use of public funds. Consensus that the review process needed taken forward and the engagement of CIPFA in the IA recruitment was an important ingredient in achieving agreement on the IA and achieving progress.
· Consideration that the Mayor’s recent agreement of virements of approximately £700k, to fund activities not provided for in the Budget set by full Council, merited action to prevent similar future decisions. Accordingly the Chair informed members of the Cabinet that she had Tabled a written Motion in relation to the recommendations set out in the report, a copy of which would be interleaved with the minutes. The Chair then formally Moved the written motion as tabled, together with the following additional proposal, for the consideration of members of the GPC:-
“That the Local Government Association (LGA) and London Councils conduct a review [of virement arrangements] as part of their governance investigation.”
· Councillor Edgar, in Seconding the tabled written motion as amended orally by the Chair [the ‘motion on the table’], commented and sought Officer responses as follows:
o It was important to have a dialogue regarding the Overview and Scrutiny Committee (OSC) being the mechanism to police the virement cap.
o The timescale for constitutional changes to affect a virement cap was constrained given the complexity of the issues and work required. However there was an imperative to act quickly as a decision had been made which was not in line with the Authority’s Budget. The full Council had wanted to set a £200k limit on virements not requiring its approval, and there was a need to act quickly to resolve the issue and ensure clarity.
o The LGA and London Councils were already undertaking a review of governance in LBTH and the Budget making and virement arrangements should be included in this.
· Ms Bell, Head of Legal Services Environment and Mr Holme, Acting Corporate Director Resources, responded:
o Officers were not aware that the LGA and London Councils had commenced a review in LBTH.
o The timetable proposed in the tabled motion was extremely tight, and may not be achievable, if work on the proposals it contained had not already started. Changes to virement rules would require advice to be sought, which may not be available in the timescale. Complex matters needed time for examination eg ratio of virement limit. to overall Council budget and the level of spend in the Authority’s control (as this may be less if outsourced and under contract).
o The constitutional changes being proposed for recommendation to full Council were significant and robust reasons for making the changes would be required, and these had not yet been given.
o The OSC was not a decision making body, and if the approvals of virements above a cap were to be referred to a committee for determination it should probably be the GPC. The statutory and constitutional position required examination.
o Any decision to introduce a virement limit of £200k had significant implications for the Section 151 Officer and his Section 114 responsibilities and this needed examination.
o Several scenarios were cited which might require urgent remedial action and an urgent funding decision, and it was uncertain how these would be dealt with without emergency action or virement powers. Therefore the operational detail needed examination, as service delivery may be severely impacted and the authority put at risk. There was a duty on the authority to properly administer its financial affairs and the proposed virement cap might limit its ability to meet this obligation.
o Officers had understood proposed changes to virement rules were to be temporary, not permanent as the in the tabled motion.
· Clarification was sought and given as to whether Officers were suggesting that whilst the working group to review budget making/ virement arrangements was established and reported, that there be a temporary £200k virement cap in the meantime. Ms Bell clarified that the full Council meeting on 17th April could be recommended to set a temporary virement cap pending the outcome of this review.
· Consideration that extreme circumstances had been given as a rationale not to introduce the virement cap, and the Authority should make decisions based on the current position not a hypothetical one.
Adjournment
At this juncture the Chair informed members of the GPC that she considered it appropriate that there be a short adjournment to allow Members time to assimilate and discuss the comments/ advice of Officers in relation to the motion she had proposed, and determine if it should be amended further. Accordingly the Chair Moved the following procedural motion for the consideration of members of the GPC, and it was: -
Resolved
That the GPC adjourn for a period of 10 minutes, at 7.50pm, and that the meeting reconvene at 8.00pm.
The meeting adjourned at 7.50pm
The meeting reconvened at 8.00pm
A discussion followed which focused on the following points:-
· Noted the Officer comments regarding the function of OSC being primarily scrutiny and that another committee maybe more appropriate for the referral of virements for approval. However the second clause of the ‘motion on the table’ was only tentative, stating that GPC was “minded” to recommend this constitutional change to full Council, so there could be a dialogue on which committee was appropriate, and if Officers concluded otherwise an appropriate change to committee terms of reference could recommended by the extraordinary GPC prior to full Council on 17th April.
· Noted Officer comments regarding the decision making sequence, the complexity of the issues involved and the significance of the implications arising from the proposals. However, the full Council had taken a view on the authority’s Budget, passed by a two thirds majority, which had since been circumvented. So virement powers were being used now and could make a significant difference to the Budget, and it was therefore considered important that action be taken quickly on the virement cap. An interim decision at the full Council meeting on 17th April would allow action to be taken, whilst providing more time for Officers to consider the complex issues involved before a further decision at the full Council meeting on 26th June. Accordingly Councillor Edgar proposed, for the consideration of members of the GPC, that the ‘motion on the table’ be amended by deletion of the words “final decision” in the last paragraph of the tabled written motion and insertion at the end of that sentence the words “ decision that remains in place until the full Council meeting on 26th June 2013.”
· Cosideration that if the LGA and London Councils were undertaking a governance review this should address all difficult and contentious issues for the Authority and its review should include budget making/ virement arrangements. However, Councillor Edgar proposed, for the consideration of members of the GPC, that the paragraph added orally by the Chair to the tabled written motion [which together comprised the the ‘motion on the table’] should be amended to read:
“That the Local Government Association and London Councils be asked to consider the issue of virement rules as part of their current governance review at Tower Hamlets.”
· Noted Officer advice that the current threshold of financial delegation to Officers was £250k, and any review of virement arrangements would be simpler and involve less work if the virement cap was to be set at £250k. Consideration however that the ‘motion on the table’ was only tentative, stating that GPC was “minded” to recommend full Council set an interim virement cap of £200k. Officers could review the implications of this and if they concluded a level of £250k was more appropriate this could be presented for consideration to the extraordinary GPC prior to full Council on 17th April.
· With reference to the budget making/ virement arrangements working group, it was emphasised that the GPC would consider its report and make a determination on its recommendations in due course. Noted that the ‘motion on the table’ took account of the timetable for the working group’s review reporting to full Council on 26th June as any decision of full Council on 17th April would be interim.
· The Chair consulted members of the GPC on their availability for the extraordinary GPC prior to full Council on 17th April, as proposed in the ‘motion on the table’, and there was consensus that the meeting be convened on 10th April 2013 at 6.30pm. Accordingly the Chair proposed, for the consideration of members of the GPC, that the ‘motion on the table’ be amended to reflect this. The Chair also requested that Officers inform all members of GPC of the agreed date the next day.
The Chair summarised that what was being proposed on virement arrangements was tentative, as the motion stated GPC was “minded to recommend full Council” and any decision by full Council on 17th April was likely to be interim. She then formally Moved the Substantive Motion (comprising of the tabled written motion orally amended by the Chair and subsequently taking account of proposed amendments from Councillor Edgar and the Chair), and it was:-
Resolved:
1. The contents of the report be noted;
2. That the Committee is minded to recommend to full Council that it amend the Authority’s Constitution to change the level at which virements need to be agreed by full Council from £1 million to £200,000;
3. That the Committee is minded to recommend that full Council delegates its power to approve virements to the Overview and Scrutiny Committee to discharge on full Council’s behalf;
4. That any such constitutional change would include a point in the Terms of Reference for the Overview and Scrutiny Committee granting them the power to refer a decision of the approval of a virement to full Council should they deem it necessary;
5. That Officers be requested to identify and draft the necessary changes to the constitution in order to facilitate the above; that it be requested that a report detailing these changes, and Officers assessment of the impact they would have, be brought to an extraordinary GP Committee to be convened on 10th April 2013 at 6.30pm. This would be to allow the full Council meeting on the 17th of April 2013 to consider the issue and make a decision that remains in place until the full Council meeting on 26th June 2013; and
6. That the Local Government Association and London Councils be asked to consider the issue of virement rules as part of their current governance review at Tower Hamlets.
Action by:
Chris Holme (Acting Corporate Director Resources)
John Williams (Service Head Democratic Services, CE’s)
Jill Bell (Head of Legal Services Environment, Legal Services, CE’s)
Supporting documents: