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Analysis: how to make a few pennies go a long way

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  • Tight CSR comes as no surprise

  • Councils told to deliver more choice n services, but spend less money

  • Better joint working may be a solution

Lastweek's comprehensive spending review (CSR) announcement prompted anger from the Local Government Association, but the mood of council chief executives is generally one of stoic resignation.

"Yes, it's bad," they typically sighed in Cardiffwhere the Society of Local Authority Chief Executives & Senior Managers (Solace) held its annual conference last week. "But we knew it would be and we've just got to get on with it."

So now that the guessing games are over and the eye-watering efficiency target of£4.9bn has been set, the challenge facing chief executives is to figure out how to improve the quality of services they offer when the cost of providing them is rising and available funds are dwindling.

The hottest ticket at the conference was for Wednesday's workshop on the CSR. It was standing room only as some of the country's leading chief executives wedged themselves into a tightly packed room, eager to swap ideas on potential solutions.

The tone was set by Steve Freer, chief executive of the Chartered Institute of Public Finance & Accountancy, who opened the session. Local government had been spoiled in recent years, he claimed. The tight settlement was merely a case of normal service being resumed and councils would have to start installing an efficiency mentality throughout their organisation. "Too much work on efficiency has been taking place in the basement of the finance department," he told the crowd.

"This is about acting right now," he continued. "You need to go back to your offices and hit the breaks on spending straight away."

"But is there a dichotomy between greater levels of choice in service provision and at the same time spending less money?" asked one district chief executive. "Or does that just mean you lack the vision to manage your organisation properly?"

For one metropolitan chief executive, the answer was most definitely the latter. "The bad news has been trailed for enough time that local government should have put provisions in place," he claimed. "It would be very disappointing if it hasn't."

The problem is, it doesn't look like it has. No one would claim all councils are matching the performance of the best and even they have more to do.

By common consent, the answer lies in embracing the nebulous concept of service transformation. In the private sector, by changing the way you work to provide a more specific, streamlined service to the customer, waste and hence cost is reduced while service levels increase. Mail-order website Amazon and its customer-specific emails is often quoted as an example of the kind of lean, targeted levels of service provision to which councils should aspire.

Stephen Hughes, chief executive of Birmingham City Council, claims his authority would weather the next three years thanks to the joint venture it set up with Capita in 2003 to use information and communications technology to both save money and improve services.

"We have been working on our business transformation plan for a few years now," he says. "It should deliver the money we need to deliver this without too much difficulty. On the surface of things, the settlement is what we predicted and we will be able to cope."

But what about those councils that can't use the clout that comes from beingEurope's largest single-tier local authority to wring-out efficiency savings?

Clearly there is no way of simultaneously saving money and improving services without a fundamental change in the way they go about doing things. It is here that the work of Tameside MBC chief executive Janet Callender's Local Government Delivery Council will be vitally important, as will the regional improvement and efficiency partnerships that have recently been set up.

The Department for Communities & Local Government has held up procurement as the area most ripe for savings. The department's efficiency plan for local government shows an expectation that more councils will set up and utilise shared procurement services as well as use national frameworks for things such as energy and postal services set up by the Office for Government Commerce.

Councils will also be expected to carry out strategic reviews of their asset bases immediately and sell off anything deemed to be surplus to requirements.

But, perhaps most importantly, from next year councils will start bidding for funding for 'business process improvement' projects to identify ways of delivering adult social care and waste services in new ways that cost less but deliver more.

To this end, the Treasury revealed in the CSR announcement it would be providing£150m for investment in projects that will secure efficiency savings of a wholly different magnitude.

The lump sum may have been one of the more pleasant surprises in the announcement, but it does not compare so well against the pump-priming received by other departments. The chancellor's departments HM Revenues & Customs and the Treasury and its agencies received more than£300m of modernisation funding. Their combined turnover is less than£5bn compared to local government's£25bn plus.

The DCLG efficiency plan also mentions an iconic joint venture company to be set up by local government with a private sector partner which will handle a range of shared back- office functions.

Councils such as Somerset CC have already started down such a path.Somerset,along with Taunton Deane BC, recently signed a£400m, 10-year contract with consultantsIBMto create a joint venture for the provision of a range of services including HR, procurement and facilities management.

Somersetchief executive Alan Jones describes the government funding as "small beer" when spread over the whole country. But he also believes local government needs to take partnership-working much more seriously or face direct intervention from the centre.

"The spirit of independence is stronger than the spirit of partnership too many councils want to do it on their own," he says. "Of the five district councils inSomerset, only one has signed up to our partnership. They should be biting our hand off.

"The government needs to think about giving not only incentives for partnership-working but perhaps also direction."

But are there any new ways in which councils can be encouraged to put efficiency at the forefront of their thinking?

Perhaps the most counter-intuitive measure suggested at the Solace conference came again from Steve Freer. He proposes abolishing the capping of council tax rises as a move that could change the culture among councils at a stroke. The capping of council tax rises may be one of the most frequently cited examples of heavy handed centralisation but it does give councils a get-out clause. Would the prospect of having to justify annual council tax rises of more than five percent not provide the biggest incentive to make savings?

CSR in a nutshell

  • Local government to receive real-terms annual grant increases of 1.5%, 0.8% and 0.7% over the three years of CSR07

  • No individual efficiency targets for councils, but local government set target of realising cash-releasing savings of£4.9bn by 2010-11. Government to give£150m of front-funding to achieve this target

  • DCLG anticipates£2.8bn savings from smarter procurement;£1.6bn from improvement to business process;£0.3bn from better asset management;£0.2bn from increased collaboration between public bodies

  • Nine regional improvement and efficiency partnerships to be established by 2008 from merger of regional centres of excellence and local authority-led improvement partnerships. They will identify regional improvement priorities and co-ordinate efficiency activities

  • Local Government Delivery Council spun out of Cabinet Office transformational government team. Chaired by Tameside MBC chief executive Janet Callender, the council will help co-ordinate efficiency savings both across the sector and with central government

  • Government's 30 public service agreements underpinned by one service transformation agreement giving commitment to build services around the needs of the citizen

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