Chief finance officers can be “too quick” to consider issuing a section 114 notice, the chief executive of a council that came out of intervention earlier this year has warned.

Speaking at the Society of Local Authority Chief Executives & Senior Managers Summit last week, Sandwell MBC chief Shokat Lal said the current climate, with several section 114 notices having been issued in the past few years, section 151 chief officers have a lot of power.

“They can now be too quick to flex the 114.. that power is there,” he said.

Sandwell, which neighbours Birmingham City Council in the West Midlands, went into intervention in 2022 due to concerns about governance and culture but never issued a section 114 notice. Its intervention was lifted in March this year.

Mr Lal did not say which council he was referring to but there has been significant debate about whether Birmingham needed to issue a section 114 in September 2023, effectively declaring itself bankrupt and leading to the appointment of commissioners.

Speaking at the session on how to spot and prevent council failure, Mr Lal said it was a “worry” that in many organisations that were struggling but not in intervention “the people who got into the mess are now [responsible] for how they get out of it.”

“Sometimes intervention can be a good thing to reset member officer relationships,” he said.

He said his biggest challenge at Sandwell had been staff and partners “believing that as an organisation we are different”.

Mr Lal said the trio of statutory officers at the top of a council were important and said he made sure he had appointed people he did not know to those roles as it becomes harder to “speak truth” if there is a personal relationship.

The session also heard from Catherine Staite, emeritus professor of public administration and policy at Birmingham University, who has conducted an extensive review of all councils recently subject to intervention.

She said “optimism bias and wilful ignorance” were among the common characteristics of councils that have struggled, describing her biggest alarm bell as when a council describes itself as not like any other local authority as it usually means they have embarked on some novel initiative that is unlikely to end well.

However, she also criticised the role of the Public Works Loans Board in lending significant sums to councils as well as the LGA peer review process.

“On a number of occasions PWLB carried on lending that money after it was evident that the council couldn’t afford it,” she said.

“I have read some [peer reviews] which have been very generous and have given local authorities credit for things its hoping or planning to do not the things it has actually done.”

However, the session heard the causes of failure were changing with the dedicated schools grant, escalating costs of care and equal pay liabilities now pushing some councils to the edge.

The LGA has recently strengthened its peer review process.