Tough Choices Require Innovative Responses

Author: James Morris, eGov Monitor - Nov 23, 2009

Local government and the public sector are facing a period of austerity that will undoubtedly last for several years – possibly as long as a decade. The Institute of Fiscal Studies estimates cuts in the order of £26bn will need to be made by 2013. Local government is shielded to some extent by the agreed grant settlement until 2011, but cuts are already on the table, and falling revenues are making the problem increasingly acute.

Given this backdrop, Localis and KPMG have last week produced a new report, called The Bottom Line: A vision for local government. This makes the case that the decisions made in the current climate should be seen as an opportunity and not just a threat, to move aggressively towards a vision of a stronger local government. It encourages councils to completely reassess their spending and investment priorities and analyse these in the context of net benefit or value to the local area, in order to make savings in the region of 20% of total expenditure in the next two years.

Councils currently run substantially more services than are required under statute. All of these must be looked at and prioritised, allowing councils to determine where their resources should be targeted. Many services are costly and could be run more effectively by businesses, charities, social enterprises or a combination of providers. Examples of these could include public amenities such as swimming pools and libraries.

Running services unnecessarily in-house undermines savings and adds a needless burden onto council tax and local residents. Therefore councils should always be seeking to look further than having a role as simply a ‘service provider’ and instead move towards becoming a commissioning and procurement hub. Some progress has been made on this in recent years but there is a need to go further.

Like spending, investment, particularly high risk, should be aligned with the core priorities of councils. Councils should consider which investments are likely to encourage new business and make a financial return to the council in light of current economic circumstances and focus on these. This should help local areas to become more economically resilient.

However, councils need to use existing financial powers more extensively to achieve this new investment strategy. Many top-performing councils are already using their prudential borrowing powers to provide business and mortgage support, and others to develop infrastructure. Trading powers, currently valued at £1 billion, similarly have a huge potential to stimulate new business and lever in more receipts. Councils should also look to initiate new PFI deals with the private sector, involve the third sector further to capitalise on their expertise and risk pool with other local authorities. Finally, councils should seek out opportunities, such as through TIFs, to achieve a return on local investment.

Councils are also sitting on substantial assets – the local authority property portfolio alone is estimated to be worth £80 billion. A corporate approach to asset management strategy should also be embedded in order to maximise revenues.

Currently local performance is characterised by a desire to improve ‘performance’ based on stars or flags rather than on adding real value to the local area. The move to the Comprehensive Area Assessment has led to assessment based on locally determined priorities – however the data itself is inaccessible to local residents, thereby risking undermining local accountability.

If councils are to offer genuine improvements in services, they must utilise performance data effectively and engage local residents directly. A recent poll from Ipsos-Mori has shown that satisfaction levels are dropping, in addition to a growing belief amongst residents that they are unable to influence decision making. Councils should therefore provide understandable, real time information to local people and should actively seek opinions from the public on what the data shows them. A strategy for incorporating responses into the political decision making process should be established.

On public services, there needs to be a move towards seamless delivery and a move away from the obsession with structures and organisations. Instead, there should be a focus on emergent organisations and groupings based on mutual interest over specific priorities or projects. The aim should be to encourage a focus on locally relevant outcomes, such as early intervention schemes for young children or by dealing with problems at the level of the family. This should also lead to a greater personalization of services tailored around the requirements of the end user. It also requires a greater local control over that funding.

Councils are perfectly placed to facilitate the direction of local public spending, through the use of contracts and commissioning. For example, they could move towards a pooled fund by encouraging existing public bodies to allocate a proportion of their budget to achieving shared desirable outcomes. Furthermore, following initiatives such as ‘Total Place’, there is the potential for funding to be targeted at specific projects rather than specific organisations. This opens up the market for service delivery and makes accountability much clearer.

Our report is not a panacea for the problems which lie ahead for councils, but it is unequivocal in the need for councils to tackle these difficulties head on. They must reassess their priorities and innovate in order to deliver high quality services to local residents.

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