Finance Peer Challenge – Progress Review: Mole Valley District Council

Mole Valley District Council (the council) undertook an LGA Finance Peer Challenge (FPC) from 24 to 26 June 2024 and subsequently published the full report, along with an action plan.

The Progress Review is an integral part of the Finance Peer Challenge process.  It usually takes place approximately ten months after the FPC and is designed to provide space for the council’s senior leadership to:

• Update peers on progress made and receive feedback on this
• Consider the changing context since the peer challenge and the peer’s reflections on new opportunities or challenges that may have emerged since the peer team was ‘on-site,’ including any further support needs
• Discuss any early impacts or lessons learned from the progress made to date.

The LGA would like to thank the council for its commitment to sector-led improvement.

The original FPC in June 2024 was supported by officer and member peers from across the local government sector in England.  The Progress Review took place on 1 April 2025.

The following members of the original FPC team were involved in the review:

• Tracie Langley, former COO and S151 officer, Cornwall Council
• Councillor Richard Keeling, Leader of Teignbridge District Council
• Andrew Winfield, Peer Challenge Manager, LGA

The preparation included the council developing a self-assessment of its progress against the action plan, which was shared with the peer team.  The team was also provided with pre-reading, which included updates on the medium-term financial plan (MTFP), budget reports for 2025-26, reports on Transform Leatherhead, and those concerning Local Government Reorganisation.

The original peer challenge made ten principal recommendations in response to the areas it was asked to examine, which are outlined in the council’s action plan (Appendix). These recommendations were clustered under the following themes.

1.    Financial leadership 
2.    Financial strategy, planning, and forecasting
3.    Decision-making
4.    Financial outcomes
5.    Partnership and innovation

The timetable for the peer team’s time onsite included a scene-setting meeting to consider changes in context, several focus groups with officers and members, meetings with the senior leadership team (SLT), and a cabinet workshop. The key findings and feedback from the review were shared with senior political and managerial leaders of the council through a facilitated conversation at the end of the day. 

While this review focuses on the progress made against the council’s action plan, it also allows for consideration of changes in the council’s operating environment since the FPC.  This can often mean new opportunities, challenges, or broader changes in context since the team was last onsite.  As part of the review preparations, the council provided further information on this, including the “super-fast track” government proposal to create unitary authority government across Surrey for 1 April 2027.  This is the first stage towards creating a mayoral-led strategic authority, at a future date as yet unknown.

Finally, the peer team recognised that although it had been a short time since the peer challenge, significant progress had been made on the action plan and the council’s plans for the future.  This included the recommendations and the council's grip on the broader recommendations within the report. 

The peer challenge found that the council is well-run, with excellent member-officer relationships and good governance arrangements.  This remains the case, as indicated in this review, and provides an important platform for responding to ongoing financial pressures and meeting the challenges presented by local government reorganisation.

The cabinet has oversight and understanding of the challenges ahead, and, as mentioned above, this is critical to providing the necessary political leadership during a challenging environment.

Financial leadership and financial management remain strong, with a growing appreciation for the importance of this area in addressing ongoing financial challenges.

The council has made excellent progress against the peer challenge recommendations.  The RAG rating in the action plan indicates that all but one recommendation is in the green zone, categorized as either completed, on track, or ongoing. 

The Evolve 26/transformation programme continues to deliver savings and service improvements.  However, as is the case in most other local authorities, a financial gap has to be addressed for 2026-27, and the council appreciates that transformation may be approaching the limit on financial savings that can be achieved.  In light of this, the council has developed contingency plans B and C, which may need to be implemented if agreed-upon transformation savings look unlikely to be achieved.

The council recognises that local government reorganisation will place significant demands on it in preparing for the new unitary local government on 1 April 2027. However, it is also clear that the process offers opportunities to be taken advantage of, benefiting residents, businesses, and the new councils.

7.1.    Financial performance  - what is working well

The council actively looks outside itself to learn from other local authorities and organisations. This includes financial benchmarking, the recent Seven Lenses survey of transformation, and the CIPFA Financial Management Improvement Framework. Self-assessment against others is a strength in improving service performance and understanding the external environment.

An unmodified opinion on the 2023-24 statement of accounts was issued on audited and approved accounts. This is a significant achievement in a challenging auditing environment and a testament to the Finance team's ability to minimise the level of risk perceived by the auditors. The high level of external borrowing was identified as a risk, and debt reduction plans already in place are making a difference, with external borrowing levels now at a manageable level.  

There remains a comparatively low level of useable reserves.  These are projected to be at £11.4m at the budget outturn for 2024-25.  Despite this, reserves remain above the minimum level of £7.2m agreed by the council.  (This threshold acknowledges that if it were to be breached, it could necessitate the S151 officer issuing a S114 notice.)  The commitment to maintaining reserve levels is outlined in the Long-Term Financial Strategy and regular budget reports submitted to the council.  Levels of reserves are monitored by regular reporting to the cabinet and strategic leadership team (SLT).

The transformation programme and continuous improvement have achieved savings and delivered significant service efficiencies.  This work has received two ‘substantial assurance’ reports from internal audit, which gives a high level of confidence over the methodology and outcomes.  The programme provides staff with responsibility during service reviews and insights into their services that they may not have otherwise acquired.  Staff involved in service reviews also obtain significant transferable skills that will be important in the future, where change skills will be at a premium.

This programme is also influential in widening the service's understanding of the financial pressures with which the council is working.  Finance managers told the peer team that there had been a significant and continuing improvement in this understanding.  For example, “…there is more rigour now on procurement” and business partners were more “finance conscious”.

The programme is an inclusive process with transformation leads working alongside service managers.  The council’s budget for 2024-25 includes a line for savings of £1.911m to be achieved through transformation.  However, the forecast outcome is £1.528m, representing a 20% shortfall against the target.  The reduction in planned savings was due to several factors, particularly the sale of a property asset delayed by a buyer withdrawing from the sale.  This highlights the uncertainty surrounding budgeted transformation savings and the need for contingency arrangements already identified in Plans B and C.  
The council recognises that future financial pressures cannot depend solely on the transformation programme, and it is acknowledged that most of the ‘low-hanging fruit’ have now been obtained.   Another option being pursued by the finance team is a Zero-Based Budgeting programme starting in the new financial year (2025-26).  This will be an essential exercise to review service and performance levels and the potential for productivity and efficiency savings.  It will also be an invaluable work to establish baselines with financial rigour ahead of sharing financial information for LGR.  

Asset management is crucial for the council, with an estimated net income for 2025-26 of £5.6m, accounting for nearly 50% of the revenue budget.  ‘Asset Review’ is one of the key strands of the transformation programme.  One investment asset was disposed of in December 2024, and the receipt used to reduce PWLB debt levels.  Further disposal is planned during 2025-26, subject to approval.  The medium-term financial plan update (November 2024) makes clear that “As part of the transformation programme, the council is pursuing a strategy for exiting investments that are forecast not to continue to meet criteria set in the asset investment strategy.”  The council continues to ensure that asset management arrangements are robust and plans to present an asset management strategy to cabinet in June 2025. 

The Transform Leatherhead programme continues to make progress.  Further design work has been undertaken, and several seminars and workshops have been conducted to update councillors.  Work conducted by finance consultancy 31Ten for the council has provided a financial appraisal and analysis of the scheme and the impact on the council’s revenue budget.  This work benefits the council with an assurance via an independent assessment of project affordability and viability.  Following the peer challenge and one of its recommendations, the council’s S151 officer stepped down from the partnership board, although continuing to attend as an observer, with Keir reciprocating with their counterpart.  There is a critical timeline for the planning application to be submitted and approved.

7.2.    Financial performance - areas for consideration

The annual audit report from Grant Thornton recognised that the council has embedded an organisational approach to financial planning and setting the annual budget, but that it is operating in a challenging environment.  This financial uncertainty was highlighted in the budget deficit of £0.319m for 2025-26, which was met from council reserves.  Reserves have been utilised in the past to support the revenue budget, and their use for this purpose underscores the potential risk to maintaining minimum reserve levels and the need to adhere to the agreed minimum threshold level of £7.2m.
It is acknowledged that the savings to be achieved through transformation will become increasingly difficult to obtain.  A financial gap of £0.319m for 2025-26 is to be met from reserves, and an anticipated gap of £1,076k is still to be met for 2026 -27, of which the transformation programme has identified £1,043k of savings to be achieved, leaving £33k as unidentified.  Therefore, contingency planning (Plans B and C) will be crucial to ensure that financial gaps can be addressed if required.  It is essential to acknowledge that this may involve making unpalatable and difficult decisions, highlighting the need for planning to support such decision-making if required.

7.3.    Local Government Reorganisation

All Surrey councils are working to the government’s superfast track timetable for local government reorganisation (LGR).  With councils being asked to submit a full proposal by 9 May 2025, elections to the shadow authorities are scheduled for May 2026, and the vesting day for the new authorities is set for 1 April 2027.  This timetable and the preparatory work required will be highly demanding.

Mole Valley District Council’s record of good and stable governance, along with its reputation as a respected partner among Surrey authorities, provides a strong foundation for it to engage with the LGR process.

Understandably, the council is wary of the demands that LGR preparations will make.  It remains unclear what geography the future unitary authorities will encompass, what form the planned mayoral strategic authority, with its devolved powers, will take, or when it will be established.  However, it is clear that LGR will present opportunities for the council, with partners, to follow up.
 
One of the issues of concern for LGR is local authority debt across councils.  It is well documented that several Surrey councils are carrying high levels of external debt, with the total gross debt across all Surrey councils exceeding £5.5 billion.  This does not include the level of internal debt, which is also considered substantial.  It is not yet known how this significant issue is to be addressed.  Councils are understandably concerned that this could saddle the new unitary authorities with very high levels of debt from their inception.  The debt legacy will need to be resolved urgently so that councils do not dwell on this issue.

Once the geography of the new UAs is known and settled, it will be essential that all Surrey councils focus on the task of LGR, particularly on: 

• Ensuring that councils receive more information from the government on when the strategic authority will be established and the methodologies that councils may undertake to support, for example, the development of spatial, economic growth, and housing strategies
• Encouraging Surrey authorities to work even more collaboratively to ensure that the challenging LGR timetable is achieved
• Closer collaboration with the government to support councils' LGR preparations, ensuring clarity of purpose and alignment of collective energy, not only to deliver LGR but also to support the strategic planning requirements of the new strategic authority.

7.4.    Areas for consideration

Communications at Mole Valley District Council are effective.  Work is being undertaken to act on the findings from last year’s staff survey. Annual appraisals have been established for many years, but the approach has recently been reviewed to include the recently introduced competency framework.  Staff are invited to attend all staff briefings led by the chief executive.

Similarly, staff have been informed about transformation work through the Evolve 2026 intranet and their involvement in service reviews.  Good work has been conducted in producing transformation case studies that succinctly describe the project, the methodology, and the outcomes.  Similarly, the peer team saw the continuous improvement work, which described the Revenues and Benefits trial, aimed at directing lower-level calls to the Customer Service Unit, and the timeline for the council’s digital transformation.  

However, it was clear to the peer team that members and officers held different levels of understanding of LGR, which is unsurprising given the uncertain landscape.  It will be essential to ensure clear and consistent communication to minimise misunderstandings and reduce anxiety.  Developing a communications strategy for LGR may be worthwhile to keep members and staff informed in real time with up-to-date and accurate information.
Several areas in Mole Valley (and the wider Surrey) are unparished and therefore without formal communication structures, which could make local connections and communication difficult once the larger unitary authorities are established.  Surrey-wide LGR preparations should assess the benefits of communication mechanisms that may facilitate local input and connection to the new, larger councils.

The peer challenge recommendation, ‘That the council should set out a vision for the future of Mole Valley through a place-based partnership approach to good growth’ was the only red rating in the council’s action plan.  This was described as ‘not progressing’ due to the subsequent addition of LGR and the “devolution aspects and the future establishment of a strategic authority, which will have responsibility for several key strategic roles aligned to growth and place.’  The peer team feels that Mole Valley may have been a bit harsh on themselves, rating this recommendation as ‘red’ because there had been work on developing growth requirements that would benefit the wider Surrey growth plans.

The peer team believes that work on growth can be beneficially conducted during LGR to benefit the incoming unitary authorities, the strategic authority, and, ultimately, residents and businesses.  For example, the council has recently published a new local development scheme to undertake an early review of the local plan by the third anniversary of the plan’s adoption (October 2027).  The review will assess whether more housing capacity is deliverable or developable and whether the revised NPPF – see below – can achieve this with the changes to Green and Grey Belt designated land.

The new government has a priority agenda to promote national economic growth and an ambitious house-building programme.  A key development supporting this agenda is the revised national planning policy framework (December 2024), particularly the amendments to green and grey belt development.  These changes to the NPPF will likely be important to all Surrey authorities and the new unitary authorities, reinforcing the continuing duty for local authorities to cooperate with each other. The government’s ambition for growth should serve as an impetus for local bodies to work at regional, sub-regional, and local levels, including current district and borough councils in Surrey, as they prepare for unitary government.

The peer team was informed that the Surrey planning officers group is continuing to develop a growth programme that could serve as the basis for a strategic spatial strategy for the new strategic authority.  Once the geography and shape of the new unitary authorities have been determined, this group will need to work cooperatively and at pace to build on their local plan work, providing data and proposals for future strategic planning undertaken by the strategic authority.  This group will need to timetable what can be prepared and presented to the shadow authority for May 2026.  At that time, the shadow authority can direct the continuation of this work in readiness for submission to the incoming strategic authority Growth is a key policy agenda item for the government, and it should be persuaded to support and advise Surrey councils on the processes and methodologies used in preparing for LGR and developing growth proposals for the new strategic authority.

Finally, several local authority areas have undergone Local Government Reorganisation (LGR) to create unitary and strategic authorities. The council would benefit from learning from their experiences, and the Local Government Association (LGA) would be happy to assist in making these arrangements.

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

The peer team and Local Government Association (LGA) are keen to build on the relationships formed through the peer challenge, and further support can be discussed.

William Brooks, Principal Adviser for the South East, is the primary point of contact between your authority and the LGA. William is available to discuss any further support the council may require. Mobile: 07949 054421 Email:  [email protected]