Budgetary Stewardship, Innovation and Working Culture: Identifying the Missing Ingredient in English and Welsh Local Authorities’ Recipes for Austerity Management

• Published date: 01 May 2017
• Author: Hugh Coombs,Peter Eckersley,Laurence Ferry
• DOI: http://doi.org/10.1111/faam.12117
• Date: 01 May 2017

Financial Accountability & Management, 33(2), May 2017, 0267-4424

Budgetary Stewardship, Innovation

and Working Culture: Identifying the

Missing Ingredient in English and

Welsh Local Authorities’ Recipes for

Austerity Management

LAURENCE FERRY,HUGH COOMBS AND PETER ECKERSLEY∗

Abstract: Drawing on fieldwork with 70 local authorities in England and Wales,

this paper builds on previous studies of austerity management by highlighting the

importance of organisational cultures to achieving strategic objectives. It finds that,

in line with their prevailing ‘belief system’ of budgetary stewardship, local authorities

in both countries are holding down input costs to deal with austerity. However, the

scale of funding cuts means that this strategy is unlikely to be successful over the

longer term. Instead, they need greater freedom to generate revenue, in order to

facilitate innovation and develop more sustainable business practices and service

models.

Keywords: local government, austerity, England and Wales, levers of control,

management control systems

INTRODUCTION

Following the global financial crisis in 2007/08, local authorities in England and

Wales were aware that they would be subjected to significant real-term budget

∗The first author is Senior Lecturer in Accounting at Durham University. The second author is

Professor (Emeritus) of Accounting at South Wales University. The third author is a Research

Associate at Newcastle University. Special thanks are due to the British Accounting and

Finance Association - The Committee for Departments of Accounting and Finance (BAFA

- CDAF) and Management Control Association (MCA) for sponsoring this research. The

authors also wish to thank the Chartered Institute of Public Finance and Accountancy (CIPFA)

and the Welsh Local Government Association (WLGA) for facilitating access.

Address for correspondence: Laurence Ferry, Durham University Business School, Queen’s

Campus, Stockton, University Boulevard, Thornaby, Stockton-on-Tees TS17 6BH, UK.

e-mail: laurence.ferry@durham.ac.uk

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AUSTERITY RESPONSES IN LOCAL GOVERNMENT 221

cuts, regardless of which party won the 2010 general election. In April 2009

the Conservative Party leader (and future Prime Minister) David Cameron in

a keynote speech to the Conservative Party Forum announced that the UK had

reached an ‘Age of Austerity’, as he committed to ending an era of ‘excessive

government spending’. Following on from this, and in the context of the ongoing

fallout from the global financial crisis, on its formation in May 2010 following

an inconclusive general election, the UK Coalition Government (Conservatives

and Liberal Democrats) began an austerity programme to significantly cut the

UK’s budget deficit through major public spending reductions, including for

local government (Ferry and Eckersley, 2011, 2012, 2015).

There is a large and growing public management literature examining how

governments across the developed world are seeking to cope with austerity (see,

for example, van Helden, 2000; Pollitt 2010; Peters, 2011; Eckersley and Timm-

Arnold, 2014; Grossi and Cepiku, 2014). However, although these studies have

provided a rich analysis of how public bodies are trying to cope with financial

pressures, the theoretical tools they employ do not allow for a full appreciation

of the contexts in which organisations operate, and therefore cannot give us a

complete understanding of why some strategies may (or may not) succeed. In

particular, they do not sufficiently address how issues of organisational culture

and scope can influence strategic direction.

In order to provide a more rounded perspective on responses to austerity,

as well as a better understanding of the potential shortcomings of existing

approaches, this paper employs Simons’ (1995) levers of control framework.

Simons’ framework is particularly relevant because it takes an holistic approach

to analysing corporate strategy, emphasising the importance of ‘belief’ and

‘boundary’ systems (in other words, the role of traditions and cultures in

shaping organisational strategy, and the scope of the organisation’s activity),

alongside more traditional ‘diagnostic’ and ‘interactive’ methods (budgets and

performance management systems, and corporate or community meetings). By

analysing these wider variables we build upon the rich public management

literature by attempting to further identify why some responses to austerity

may be unsuccessful. As such, our approach could help public bodies adopt more

effective and sustainable strategies in future and perhaps also open up a new

academic research agenda.

This paper applies the levers of control framework to analyse how local

authorities in England and Wales have responded to severe austerity pressures

since 2010. Since local government in both countries is heavily reliant on central

funding, and grants have been reduced significantly over this period, local

authorities have been affected particularly badly – and therefore their responses

to austerity should be especially instructive.

The next section provides a background to English and Welsh local

government, before it sets out how the levers of control theory can build

upon existing public management approaches to enhance our understanding of

austerity responses. It then outlines our methodology and applies the fieldwork

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2017 John Wiley & Sons Ltd