Finance Peer Challenge: Leicester City Council

During the peer challenge, the team received very positive feedback from partners. The City Mayor, chief operating officer and directors are respected and visibly driving the public sector partnerships which are vital to success of the city. 

The current financial position of the council is well understood by executive members and senior managers at Leicester City Council. This report is based on information provided at the time of the peer challenge and pre-dates the development of the council’s 2025/26 budget which took place in February 2025. 

Going forward the council’s overall financial strategy needs to more clearly align with council priorities. The council should consider the development of a delivery plan outlining the priorities which would support this alignment. This plan should include a communications plan and a transformation plan. 

There was an emerging plan to balance the budget for the next three years. The view of the team at the time of the peer challenge was that, without option, the following things needed to take place 

• The need for a clear focus on savings and demand management
• Consideration of increased borrowing as well as use of reserves and asset sales and

Capitalisation directive The plan for the next three years will not resolve the inherent budget gap of circa £60m and there is no medium-term plan in place and this focused and urgent attention. 

There is transformation work already being undertaken but this is within Departments and there is no corporate approach. In order to deliver savings to resolve the inherent budget gap this will need an ambitions corporate transformation programme with clear leadership from members and Senior Managers. This will need adequate resourcing and strong governance and to ensure the programme has the fullest impact, should be monitored corporately in its totality. This will enable the most effective focusing of resources, give the executive clearer oversight, and improve communications. However, to achieve the fullest possible required impact and for real transformation to take place, there will need to be as much a culture change as any process changes. To deliver the significant savings requires an ambitious corporate transformation programme is required with clear leadership. 

This has implications for wider organisational development which will be important. At the time of the peer challenge this was yet to be fully factored into the communications and was taking place in silos. It is important for the council to build meaningfully upon the political will to commit to transformation which some executive members were already championing at the time of the peer challenge. This was the case for example in social care  and leisure. There is also progress being made towards transformation gains through a cross-cutting digital programme taking place at the council.

There is a clear will and desire from directors and Heads of Service to drive change and improvement. Their leadership will be key alongside that of politicians and there is a huge opportunity to galvanise this cohort as their contribution to progress will be key.

In order to deliver the current savings programme and future transformation work the council requires: 

• clear governance arrangements and corporate oversight:
• a robust approach to prioritisation of resources, particularly in relation to its support services. There is programme management resource across the council. Leicester City Council would find value in considering a truly corporate approach to, and consolidation or redistribution of, its current resource. There would be value in the consideration of a Programme Management Office approach supported by accompanying training and development to support the success of such an approach.
• a focus on innovation, including exploration of alternative delivery models, new joint working possibilities and commercial opportunities
• a transformation programme to deliver the plan required to deliver a balanced budget

There are a significant number of internal boards and groups within the council. These need to be reviewed in line with the wider transformation agenda, in order to sharpen roles and responsibilities and to clarify accountability, decision-making and reporting arrangements. 

To support transformation, the council could consider further developing its positive relationships with community groups. This would also complement community health and wealth building.

It was clear that executive members recognised the need to achieve savings and supported transformation, but the peer team identified a need for further and refreshed development and training amongst members more generally.

It is crucial that financial decisions are not seen as the responsibility of finance staff. Responsibility for the financial impact of decisions should rest with budget managers, along with responsibility for ensuring that decisions are informed by relevant and robust data and intelligence.

A further key and beneficial task for the council to undertake is the development of a communications plan linked closely to both the council’s the overall financial position and the essential wider transformation agenda.

There is a need and opportunity to review the wider capacity and capability of the council’s finance team. A key objective of such a review should include identifying the means by which the council’s chief finance officer can be enabled to have a more strategic role. Achieving this will require a workforce plan and service delivery model alongside appropriate training and development to ensure the team’s enhanced fitness for purpose into the future. 

At a wider corporate level, the peer challenge team would encourage the council to consider how it can encourage leadership visibility and presence to support collaborative working and transformation oversight.

There are a number of observations and suggestions within the main section of the report. The following are the peer team’s key recommendations to the council:

Recommendation 1

Although there is an emerging plan for resolving the financial position for the next 3 years, this requires formalisation and approval, with all mitigations being required.

Recommendation 2

The plan for the next three years does not resolve the inherent gap of £60m and it is recommended that the council develop plans including of a corporate transformation programme.

Recommendation 3

Establish governance and appropriate resource to deliver the transformation programme including a corporate approach and oversight (for example transformation board, Programme Management Office, clearly identified training and development requirements for this approach).

Recommendation 4

Leicester City Council’s financial strategy needs to be aligned with council priorities. The council should consider the development of a delivery plan outlining the priorities which would support this alignment.

Recommendation 5

There are a significant number of boards and/or groups. These need to be reviewed in line with the wider transformation agenda including defining the roles and responsibilities of these groups, decision making and reporting. This would support improving capacity and time management.

Recommendation 6

Develop a communications plan linked to the overall financial position and transformation agenda.

Recommendation 7

Take up mentoring, coaching, training opportunities that enable members and officers to deliver transformation.

The peer team

Peer challenges are delivered by experienced elected member and officer peers. The make-up of the peer team reflected the focus of the peer challenge and peers were selected on the basis of their relevant expertise. The peers were:

• Lead Peer: Garry Cummings (Deputy Chief Executive and Director of Finance, Transformation & Performance, Stockton-on-Tees Borough Council)
• Member Peer: Cllr Nazia Rehman (Portfolio Holder for Resources, Finance and Transformation at Wigan Council)
• Senior Officer Peer – Sara Pitt (Director of Finance & Deputy S151 Officer at Liverpool City Council)
• Senior Officer Peer – Guy Lonsdale (Deputy Section 151 Officer at North East Lincolnshire Council)
• Peer Challenge Manager – Ernest Opuni (LGA Senior Regional Adviser)

Scope and focus

The peer team considered the following five themes which form the core components of all Finance Peer Challenges. These areas are critical to councils’ performance and improvement.

1.Financial leadership: Does the authority have plans for its long-term financial sustainability, which are owned by its members and officer leaders?

2. Financial strategy, planning & forecasting: Does the authority understand its short and long term financial prospects?

3. Decision-making: Are key decisions taken in the understanding of the financial implications, risks and options?

4. Financial outcomes: Are financial results (including those of the Council’s investments and transformation projects) monitored and acted upon so as to realise the authority’s intentions?

5. Partnership & innovation: Is finance at the cutting edge of what the authority is working to achieve, working with partners and seeking innovative approaches?

In addition to these questions, the council asked the peer team to provide feedback on the following question:

6. Is the council considering/sighted on the full range of options and efficiency opportunities that may be available to it in the context of:

1. A projected (at that time) £90 million budget gap in 2025/2026
2. Reserves depletion driving a detailed review of its true service delivery capacity (Discretionary vs. Statutory) in 2025/26
3. Cost of social care and homelessness challenge

The peer challenge process

Peer challenges are improvement focused; it is important to stress that this was not an inspection. The process is not designed to provide an in-depth or technical assessment of plans and proposals. The peer team used their experience and knowledge of local government to reflect on the information presented to them by people they met, things they saw and material that they read.

The peer team prepared by reviewing a range of documents and information in order to ensure they were familiar with the council and the challenges it is facing. The team then spent three days onsite at Leicester City Council, during which they:

• Gathered information and views from more than 25 meetings, in addition to further research and reading.
• Spoke to more than 50 people including a range of council staff together with members and external stakeholders.

This report provides a summary of the peer team’s findings. In presenting feedback, they have done so as fellow local government officers and members.

There is a shared awareness of the current financial position at the council, including an understanding of the scale of savings the council will need to make. Members and officers are developing an approach and plan to balance the budget for the next three years and this needs to be approved.

Officers understand that the current budget plan is only for the next three years and that there is no plan to resolve the inherent budget gap which is circa £60m. Given the time needed to implement any changes, plans need to be developed as a matter of urgency, and owned by the whole council. Enhanced focus on growing the local tax base and a more explicit focus on the city’s economic growth will also support the financial position.

In developing detailed savings plans, consideration should be given to how the voluntary and community sector can support them. This would build on the effectivepartnerships with local anchor institutions, that already realise social value through council commissioning and procurement.

Directors and executive members are aware of the financial position and fully accept the need to make savings. However, it was not clear that all members fully understand the challenge and the scale of the actions required.

The council has the benefit of some good directors and staff. However, this leads to potentially significant points of failure if the knowledge they hold is not shared more widely. It is important that the council continues with its workforce succession planning.

The prioritisation of transformation activity will be key to delivering and will require strong central ownership and reporting arrangements. Also important will be the governance underpinning this work.

The council is likely to benefit from adopting a ‘task and finish’ or ‘sprint’ approach to targeted work focussed on identifying savings. This may warrant some key staff being released from their ‘day job’ to support it.

Cross-cutting work across directorates is limited and much of what the peer team encountered examples of working in silos where the delivery of such transformation is concerned. There is transformation activity underway at Leicester City Council but this does not yet benefit from the visibility and corporate approach which would maximise impact and effectiveness of this work. For example, work is underway to constrain demand in Adults’ and Children’s social care services and some of the progress that has been made is probably ahead of what other councils have managed to achieve. An invest to save scheme for temporary housing is another example of innovation by the council. Efforts to deliver the council’s homelessness agenda is clearly supported by a financial case founded on a payback model. Developments are however not yet celebrated in a way which confers recognition and which could boost staff confidence

There is now a pressing need for a truly integrated and cohesive transformation programme.

The peer challenge team identified the need for the finance team to develop, and required capacity to support the councils transformation agenda. We would encourage the department to focus on developing a workforce plan and service delivery model to enhance its capability and capacity, and thereby improve its future resilience. Any such review should seek to free the director of finance to carry out a more strategic role.

There may be value in undertaking a skills review within the finance team and then consider:

1. How best use can be made of technological developments to improve the presentation of data/information.
2. A target operating model and the introduction of a business partner model.
3. Opportunities to enhance professional development.
4. whilst there have been successful efforts to develop apprentices, recruiting adequately qualified staff has been a challenge.
5. How support to departments can change and be improved.

There is a need to accelerate a financial system upgrade to the cloud but this needs to be managed in a way that does not divert vital finance resource at this critical time.

There would be value in the council developing a refreshed corporate communications strategy for members, staff and partners. This would help focus on the key priorities of the council, including the financial challenges. Current communications appear to focus on the less positive elements of the ‘Leicester story’. There would be value in a communications exercise celebrating successes, and signalling future improvement plans. This could include the successful transformation activity in social care referred to above.

Additionally, wider integrated working between the council and other organisations will support better sharing of knowledge and transformation. It is also very important that integration is achieved corporately between partner organisations as a whole rather than depending on a small number of exceptional individuals within the partnering organisations. This is good in some instances but requires strengthening more widely. There would also be value in the council increasing focus on growth and prosperity to increase the tax base and business rates.

There is an urgent need to have a financial plan beyond the next three years (as this is when the council is forecast to run out of reserves) and to specify the savings needed to achieve the £20m in the current three-year plan.

The council is already availing itself of some external support and expertise from a number of consultants to support transformation work. There is an internal officer board that is providing support around the council’s financial sustainability.

As referred to previously in this report there is a significant amount transformation work ongoing in some services through departmental initiatives. Included in this is some increasing and improved understanding of local demographic issues and potential impact on finances. There has been a significant amount of financial modelling but there is now a need to continuously review and update the position including the impact of transformation.

There appears to be a strong approach in place for managing assets and there are groups dealing with the impact of asset disposal and utilisation. This work should continue to be supported.

Forecasting in relation to demand management has improved however it is still worthy of further consideration. It is important that social care forecasts include estimates of growth.

As there is currently no coordinated approach to transformation and awareness of overall saving potential projections are not always included. The future MTFP projections should include estimates of savings from transformation activities to ensure a realistic plan. This should be more achievable with the implementation of a more centrally coordinated approach.

There would be value in bringing together all these strands of intelligence. Along with financial forecasts, this will support decision making.

The council’s DoF has commissioned the council’s internal auditor to review both the budget and MTFP process. This is an important piece of work.

There may be potential for the council to consider further its commercial and entrepreneurial activity, particularly how it uses capital investment to deliver transformation and economic growth.

The council’s current plans assumes the achievement of asset sales totalling £60m. At the time of the peer challenge there was not a detailed plan for 2025/26 with named individuals or clear accountabilities which raised a question as to what level of risk of non-delivery exists in the absence of this clear proactive oversight. Current plans also indicated an assumed redirection of capital programmes which would effectively be using £160m of one-off resources. It was not fully clear on how this was to be delivered, nor the level of agreement from members. The peer challenge team would encourage the council to fully assure itself that it is addressing and managing any risk of being left without adequate pipelines of further or alternative savings should there be non-delivery of the scenarios presented to the team.

Executive members are encouraged by the City Mayor to innovate and generally feel confident and well-supported in their roles, and in their ability to take big decisions as regards the council’s finances.

The ICB has clear governance and decision-making processes for utilising pooled resources, which align with “people services” priorities. The joint vision for health and social care sets the tone and direction of financial and budget discussions, which is a benefit for both the council and the city.

Within its decision-making structures, the council has numerous boards. There would be value in the council becoming clearer about the role of these various boards and where each one fits within a clearer overarching decision process. The peer challenge team would encourage Leicester City Council to be clearer than currently seems to be the case about what structures are decision-making boards and which are groups and other types of fora with different and distinct functions to perform. With the current a proliferation of bodies governance and decision-making pathways are not always clear.

The peer challenge team identified a need for the council to consider a dedicated role within its structure which is clearly charged with leading the process to ensure and drive data integration, design the appropriate governance to underpin decision- making and enable transformation is linked directly to corporate and subsequent MTFP priorities. The current picture is of an unhelpfully dispersed model comprising of a plethora of forms, processes and online approvals alongside agency spend. 

Budget managers and not finance staff need to be responsible for financial decisions. In turn these decisions ought to be driven by well-understood, clear and robust data and intelligence. The council will need to ensure that all budget holders have the right tools, training and proactive support going forward in order to deliver this responsibility effectively

The current external audit review found no issues that would lead to a qualified VFM conclusion. However (unsurprisingly) financial sustainability was identified as an area requiring focus.

The recent change in provider for the council’s internal audit function may provide the opportunity to further improve internal control and governance.

In relation to benchmarking, the number of working age adults receiving social care appears to be above average, but there is a strategy in place to address this.

There are some very strong relationships with NHS partners which is allowing for the alignment of resources with shared outcomes. There was strong evidence emanating from the peer challenge team’s conversations with not only staff from the council but also from other members on the ICB that VFM is at the heart of decision making around pooled resources. There are particularly positive and strong working relationships in evidence between some senior officers at the council and their counterparts in Health. This provides a strong foundation on which yet deeper cross-organisational collaboration could be built.

Whilst staff find that financial systems, processes and controls are adequate, there could be an opportunity to review the way financial information is presented as an aid to decision making. The team found evidence of discretionary spending controls having some success in terms of managing budgets but conversely these could potentially be stifling innovation within individual services. There would be value in some reflection on how both controls and innovation can co-exist. 

The peer challenge team found that some elected members take a very keen interest in budget variances and financial issues. This level of challenge is important, as it helps provide assurance over financial planning, risk management and internal control. There would be value in the council ensuring that roles for all members are clearly identified and supported.  

As mentioned previously it is positive that the council has a pipeline of asset sales and is putting in good governance in place. If linked effectively to wider regeneration and commercial considerations, this could be a vehicle for positive outcomes in future.

There does not yet appear to be a clear system or process to monitor progress in the effective delivery of efficiency and transformation programmes. There is a need to embed performance information alongside financial data in reports and analysis.

Social care are making inroads into reducing demand by being-people focussed and innovative, with good partnerships. Innovations include digital solutions such as pendant alarms, falls prevention work and work with care homes to support demand management. Delayed discharges are very low in Leicester which is very different to the position more widely within Leicestershire. 

The council has also focused significant attention on progressing its housing ambitions and particularly on improving availability of affordable housing.

The recently appointed Internal Auditor is providing modern internal audit services with a work programme aligned to the strategic risk register and organisational objectives.

The relationships with health partners and many neighbouring councils is very strong. Health partners are using data from public health to inform demographic and demand projects over the medium to longer term. It is important that integration is achieved corporately between partner organisations as a whole, rather than depending on a small number of exceptional individuals doing this collaboration well.

The ICB is clear around its governance and decision making for pooled resources and aligns with people services priorities. This means that Leicester City Council and the ICB are very much on the same page when it comes to understanding social care issues and associated financial challenges.

A truly embedded business partnering approach across the organisation could help innovation and decision making. For this to be impactful consistency in practice will be required. As at the time of the peer challenge, business partnering approaches did not appear to be fully embedded with the impact being that the capacity to support transformation seems to be limited.

At the time of the peer challenge, the team explored the degree to which Executive members were involved in options and recommendations being brought forward for discussion for the budget.  At the time of the peer challenge there was a significant  list of options including some of the less complex but nonetheless potentially tricky measures.

It is good that Leicester City Council has got behind the complexities and is looking at more difficult options. What is imperative is that decisions on these are not delayed and that speedy progress is prioritised. The risk of not progressing at pace is that there is a risk of changes, if delayed, not having sufficient time to embed and as a result potential impact could be lost because changes were implemented too late. There may be more training required for the wider member group as financial issues and challenges come to the fore and need to be addressed. Members will be key in defining and delivering a coherent corporate narrative.

In terms of interface between political and organisational leadership, there seems to be appropriate delegations and ability for chief operating officer to operate effectively. The clarity of this role vis-à-vis the responsibilities of the City Mayor and Executive Members in relation to management of staff and resources is appropriately delineated. Leicester City Council’s strategic directors also appear to have good and strong working relationships and are visible and accessible to each other as they work together on one open plan floor. 

The next phase required is for arrangements to develop corporate oversight of transformation initiatives and delivery to be put in place. One way this could be achieved is to ensure any corporate approach is supported by a corporate operating model, transformation board and sits underneath a cross-governance oversight group with Programme Management Office principles in place to manage delivery. 

There are also opportunities to develop corporate operating model for customer interaction and data flowing from work already ongoing through Digital, Data and Technology (DDaT) Profession Capability Framework’. If integrated effectively within a wider Corporate Transformation Programme, there will be opportunities to establish a corporate operating model which makes even stronger links between data intelligence and customer insight building on the good foundations already in place.

There is an opportunity for more of a focus upon economic growth, prosperity and growing the local tax base linked to clear economic strategy. There is also the need to explore alternative delivery models across all areas of council activity. There is the importance of having a longer-term strategy beyond three years as previously mentioned in this report allied to having a valid and best value approach to asset sales and acquisition linked to service-led pressures. There is agreement at the senior level of the council that moving the capital reserve to fund revenue without incurring borrowing instead was the right thing to do along. There could yet be more progress with additional and targeted focus on channel shift. 

The peer team would encourage the council to reassure itself by keeping under review the financial planning assumptions which sit behind the £60m savings which are earmarked to be made through managing demand growth, council tax revenue, external funding streams and the modelling of different scenarios.

There is a need for the council to be clearer about board governance with clear definition around structures being panels, boards or something else. The current array of boards and groups could potentially cause duplication and overlap due the current need to put in place some clearer overall governance. To move this even further the team would strongly suggest that the council undertakes a review of all such groups as a pre-cursor to introducing an overarching Transformation Board to oversee all of this work. 

Now is the time to implement corporate oversight on transformation work with an overall programme prioritising areas of work. The foundations of the departmental work being done provide a base on which this can be progressed. There would be value in establishment of a corporate transformation programme consolidating the work ongoing across the council. It will be important to prioritise transformation work around culture and workforce and link this directly to the MTFP. There would be value in also establishing a PMO function to improve governance and oversight of programme. There would be benefits in empowering Service Directors and Heads of Service working across directorates to support and drive a single narrative for change and transformation. This could be achieved by them being involved with any new structures put in place to deliver transformation.  

Digital and Data Profession Capability Framework (DDaT) function is a real strength but the work is not yet prioritised or inextricably linked to transformation. The peer challenge team would encourage the council to integrate digital to corporate transformation programme to enable maximum impact. The new general ledger is also a real opportunity to improve governance, information and decision-making but needs to be properly resourced to achieve all it might deliver.

There would be value in the council looking external to the organisation for transformation and efficiency levers. This includes considering opportunities for more joint working and partnership working with other councils. It also involves further exploration of the possibilities for working more closely with Voluntary, Community and Faith Sector (VCFS). There could be additional gains in relation to community engagement and benefits from co-production of alternative delivery models utilising new or alternative capacity from partner organisations.

As mentioned previously public health is using data well and having a good understanding of outcomes and measuring performance. It is worth considering whether the council is getting the full benefit and reach of this in delivery terms both internal and external to the council. 

It is recognised that senior political and managerial leadership will want to consider, discuss and reflect on these findings.

Both the peer team and LGA are keen to build on the relationships formed through the peer challenge and further support can be discussed.

In the meantime, Mark Edgell, (LGA Principal Adviser for the East Midlands, Yorkshire and the Humber and North East Regions), is the main contact between your authority and the Local Government Association. Mark is available to discuss any further support the council requires and can be reached at: [email protected]