Funding for the future
Increased collaboration and use of technology will help meet the targets, but many doubt it will be enough. Alex Blyth reports.
When chancellor George Osborne announced in his 2010 comprehensive spending review that the settlement with local government would be reduced by 7.1% a year until 2014, he set in motion one of the most profound transformations of the sector in living memory.
It was immediately clear to everyone that to meet these targets they would need to revolutionise how they operated. Many councils were quick to react, swiftly implementing radical measures to meet these challenging budget reduction targets. Now, two years later, we are beginning to see the effects of that radical transformation.
So, as we near the midway point of this Parliament, it is a good time to take stock, to look at which initiatives are working, which are not, and what more we can do to meet our targets.
Our survey, in association with Civica, revealed that while the vast majority (70%) of respondents are optimistic that they will achieve their 2015 targets for budget reduction, a significant minority (30%) do not believe they will do so, with 7% of them expecting to miss it by more than 10%.
Many believe that even if they do so it will not be enough: only 4% believe the government will meet the chancellor’s target of eradicating the UK’s structural deficit by 2016-17.
Most worrying, 96% believe existing cuts during this Parliament will have a harmful effect on service provision, and 31% believe that effect will be significant. In the early days following Mr Osborne’s announcement many in the sector were determined to ensure that budget cuts would not affect delivery of vital services.
Yet our survey revealed that for a significant minority this ambition has already fallen victim to the budget reductions. Some 33% would like to be allowed to charge for service delivery and 20% expect to be able to do so; 24% would like their service provision targets to be relaxed and 22% expect it to happen.
Respondents offered a clear message to the coalition on what can be done about this: when asked what single measure the government could take to improve the local government funding situation, 63% replied “relax deficit reduction targets to encourage demand in the UK economy”.
Yet our respondents seem pessimistic that the government will actually take this step. Only 18% expect it to happen.
In fact the majority expect the most likely action by central government to be the reduction of workers’ rights, while only 9% believe this will positively affect local government funding.
They are not alone; commenting on the recent Beecroft report, TUC general secretary Brendan Barber said: “The clock is now turning backwards. Already people have to wait two years before getting protection against unfair dismissal. The opponents of workplace decency, like Adrian Beecroft, are using the economic crisis as an excuse to try to smuggle through attacks on employee rights.”
Meanwhile, the Local Government Finance Bill contains clear plans for 50% of any increase in Business Rates to be localised from April 2013. However, only two-thirds of respondents (66%) were confident this will happen. Many do not expect it to be as complete a localisation as has been promised or is required.
Many respondents would like the coalition to go further. Some 50% are calling for new funding arrangements for local government such as bonds and prudential funding, but only 33% expect it to happen; 42% would like the government to relax the regulatory and inspection burden on local government and 38% expect it to happen.
There is clearly much central government can do. Our respondents also believe there is much they themselves can and should do. It comes as little surprise that 76% of respondents cite driving cost out of existing departmental operations as the strategy they are most likely to adopt to meet budget reduction targets. Only 39% think this is likely to work.
‘Not only does the online system allow people to tell councils about problems, it allows them to track progress as the issue is dealt with’
Robert Tidy (Con), East Sussex CC
Many councils are already working to streamline their back-office capabilities, and are doing so to good effect. For example, East Sussex CC has worked with the Ordnance Survey to set up an online map-based fault reporting system. It has so far handled more than 19,000 fault reports, and moving the system online has saved the council £60,000.
Robert Tidy (Con), lead member for e-government at East Sussex, points out that it has also markedly improved the service offered to citizens. “Not only does the online system allow people to tell councils and the police about local problems, it also allows them to track progress as the fault or issue is dealt with,” he says.
“The system makes reporting more efficient, saves taxpayers’ money and makes it easier for people to contact the authorities.”
There are significant savings to be made in back-office functions, but Nick Bennett, managing partner at accountants Scott-Moncrieff and former chairman of the Local Authority (Scotland) Accounts Advisory Committee, believes we ought to be cautious about focusing too much on this area. “All too often support services are viewed as a soft target for budget cuts,” he says.
“There is frequently a disconnect between the cost of support services and the added value and support they give to service directorates.”
Some 61% of respondents expect to be sharing services with another local authority in the near future, and 40% are confident this will produce savings. This is already happening across the sector. For example, in June 2011 Westminster City Council, Hammersmith & Fulham LBC and Kensington & Chelsea RBC agreed to merge a host of functions, such as environmental services.
This is allowing them to halve management costs by 2015-16. In total the councils will save £7.7m this financial year, and this is projected to increase to £33.4m by 2014-15 and £40.3m by 2015-16.
Communities secretary Eric Pickles has praised this work, saying: “No council should even contemplate cutting services before they have considered following this example of how to join forces with neighbours to share back-office services, procure better, slash in-house management and cut overhead costs. Potentially £2bn of taxpayers’ money could be saved if other councils were able to copy such sensible savings across the country.”
But it does require strong political and executive leadership, warns Mr Bennett.
“There is a need for a more joined-up and co-ordinated approach across the public sector,” he says. “But leaders have to be clear about what they want to achieve from it, and if it is about saving money then they need to be prepared to take tough decisions reducing staff levels. They should also set out clear roles and responsibilities for all involved.”
Another area where our respondents expect to be doing more work is in achieving better understanding of community needs and redesigning operations accordingly. Some 55% expect to be doing this within the lifetime of this Parliament and 49% expect it will produce results and deliver the necessary cost efficiencies.
For many this will be about multichannel service delivery.
“Our own research recently found that 57% of Britons now regularly use social media to find support, advice or services. So, using multiple channels in order to deliver customer service can help local authorities do more with less, to provide support to more people not fewer,” says Patrick Nash, chief executive of Connect Assist, a South Wales based social enterprise that provides contact centre and digital services to local authorities and is part of the government’s G-Cloud Framework.
He points to the work his company is doing with Sussex Police. “We have deployed a live chat platform to deflect non-urgent telephone calls away from the 101 telephone helpline,” he says.
“Sussex Police currently has about 70 staff based at their 101 call centre, dealing with a significant number of enquiries that could easily be responded to online at a fraction of the cost.”
‘For technology, much of what you do doesn’t take effect for at least 18 months. If they are worried they will miss their 2013-14 targets they need to be investing now’
Paul Bradbury, Civica
There is clearly some enthusiasm among respondents for streamlining back-office functions, sharing services and redesigning operations based on citizen need, but two tactics stand out in terms of the belief in their promise to deliver the cost efficiencies needed. The first is achieving a better understanding of the demand for local services and adjusting frontline service delivery accordingly; 42% said that if they could do this it would help them meet budget reduction targets.
There are examples of where this is already happening. In Hull, teenage pregnancies have fallen by 35% since the city council started using maps to plan its contraception and community-based services. Cardiff Council delivered more than £1.3m in savings by better managing special educational needs routes and vehicles, as well as by more efficient contract renegotiation.
Our survey showed that the local government sector has picked up on this message - 38% are operating demographic and economic segmentation in the community to identify demand; 38% are working with public sector partners to assess demand; 21% have started to address this with a dedicated in-house forecasting unit.
Yet only 9% have partnered with an expert supplier to provide resource or expertise. “I am surprised at this result,” says Paul Bradbury, group business development director at Civica. “The local authorities we are working with are extremely keen on finding new ways to manage demand and want to hear from experts in this field. Perhaps respondents were thinking of companies like Experian and Call Credit, which have a wealth of data on individuals’ credit status and so on, but which on their own are not able to translate it into actionable insight for local authorities.
“We’ve worked with Call Credit on a project for Gloucester City Council merging council data with information on credit scores, the number of adults in work, the number of children per household and so on, to produce highly detailed assessments of which wards are most likely to need social housing in this financial year. This type of insight is very useful in planning service delivery and in allocating budgets.”
The vital role of technology
The tactic about which respondents are by far the most optimistic is capitalising on technology and technology-based services to streamline and automate services. Some 55% see this as a route to savings. Indeed, information technology and IT-based service delivery is clearly important to our respondents in driving cost savings while supporting local services and the workforce - 50% described it as very important, and 44% as quite important.
It is not hard to find examples of where this has already happened. Whether it is East Dorset DC and Christchurch BC implementing a financial management system to improve procurement and the visibility of financial information, or Cheshire Council spending four weeks researching device and application usage across its user base to discover it was paying for 15% more licences than it needed, or any one of the dozens of IT projects that are happening up and down the country, the message is clear: local government knows technology can help it meet budget reduction targets.
Despite this, 33% of respondents are finding it difficult to justify or gain funding for future IT-based projects. There seems to be a degree of short-term thinking infecting local authorities in their approach to IT.
One respondent said: “Our focus is negotiating hard on IT contracts.”
Another said: “We are exploiting existing systems to the maximum.”
One summed it up by saying: “There is an opportunistic approach rather than a strategy.”
As Mr Bradbury notes, this short-termism may well backfire. “For technology, much of what you do doesn’t take effect for at least 18 months,” he says.
“This is especially the case for large projects which enhance worker productivity. Given that about 70% of most local authority budgets are staff costs, these are the technologies local authorities really need to be investing in. And if they are worried they will miss their 2013-14 targets they need to be investing now.”
He concludes: “A failure now to grasp the strategic possibilities could have disastrous consequences in two to three years’ time.”
LGC FINANCE SURVEY, IN ASSOCIATION WITH CIVICA