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ANALYSIS - SAVING THE EFFICIENCY MESSAGE

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>> Statements will be incorporated into the Audit Commission's value for money assessment for CPA...
>> Statements will be incorporated into the Audit Commission's value for money assessment for CPA

>> Finance directors admit there is a degree of creative accounting in the process

>> Many savings will take two years to feed through

By Kerry Lorimer, finance editor

LGC's survey of top-tier councils' annual efficiency statements reveals£1.025bn of savings across the country, with adult social care and the corporate centre the areas likely to be squeezed hardest.

The hitlist for each council - as well as the level of detail provided on how the savings will be made - varies significantly from council to council.

But concerns have been raised about the delivery of these ambitious statements, which were submitted amid uncertainty about how success would be measured.

Tim Byles, chief executive of Norfolk CC and the national procurement champion, says local government has responded well against the backdrop of national expectations.

'This is an encouraging start which shows local government is taking efficiency seriously, but there is still a lot more to do,' he says.

The 'very substantial' challenges in adult social care would need further work with health to turn aspiration into reality, says Mr Byles.

David Berry, director of finance and business services at Bexley LBC, believes it is dangerous to focus exclusively on streamlining the corporate centre to the exclusion of other areas of the council.

'The thrust of Gershon is the emphasis on back office and support services. [But] all services have back and front office functions and an element of administration, and the savings should be made across the board,' he says.

Having submitted the statements, councils question the usefulness of having been forced to draw them up.

Those who claimed their efficiency plans were already well advanced found the process of putting the statements together an unwelcome burden.

Peter Rogers, chief executive of Westminster City Council, says councils are ultimately accountable to the electorate for how efficiently they are run.

'Putting in a system with cashable and non-cashable and all the other stupidities that come up in terms of definitions is an additional burden,' he said.

'It's not especially onerous, it's just unnecessary.'

Mr Berry says the main bureaucratic difficulty was with the calculation of non-cashable savings. These include improvements to services - such as greater library usage or faster claims processing - for the same cost.

'You have to either rely on service managers to tell you about them, or tease the information out of them and put a figure on it,' he says. 'You need to set up systems to collate that information, and that's where it becomes a form-filling exercise.'

Councils were not helped by the fact that government guidance was late and lacking in consistency, he adds.

'The guidance was late, which was a bit disappointing, and the goalposts moved a bit. It would have helped us to be efficient if the rules had been set in the first place.'

However, Mr Byles says the process of drawing up the statements is in itself a useful one, not least as it allows a reasonably accurate impression to be formed of the national picture.

'There's a lot of anecdotal evidence in this business, so it's helpful to have objective data on the good things that are happening and where we need to boost capacity,' he says.

To what extent do the statements reflect actual savings? Finance directors privately admit there is a degree of creative accounting in the process.

One says treasurers had sought loopholes to stretch the definitions of what counted as a saving. 'This makes the whole exercise a joke,' he says.

'Many of the statements I have seen are very speculative and claim savings in the current year that depend on vague programmes of looking at how they might achieve savings.'

Some councils were including plans for, say, shared service centres for payroll. The savings from these will not materialise until further down the line.

'It takes two years of planning to get near a saving,' he says. 'Basically, they haven't a clue.'

Whatever the weaknesses of the statements might be, it is unlikely they will be picked up by the Audit Commission, which has made clear it will not be formally reviewing this year's statements.

Frances Done, managing director for local government at the commission, says this is because planned savings pre-date government guidance. 'We will not be formally reporting on councils' efficiency statements this year because the statements will be retrospective and reflect activity prior to the final ODPM guidance being issued.'

However, the statements will be incorporated into the Audit Commission's value for money assessment of each council, a judgment which will feed into the use of resources element of the comprehensive performance assessment. The precise methodology for measuring use of resources is due to be announced next week.

'We believe this approach minimises the additional burden on councils as they can use their efficiency statements to answer the relevant part of our VfM assessment criteria rather than asking them the same question twice,' says Ms Done.

However, some in local government suspect the commission is deliberately distancing itself from the statements because it believes they are too vague and aspirational.

'They're washing their hands of it because they know it's a crock of crap,' says one finance director.

'When they talk about taking a light touch approach, it means it will put the statements into the next room and think about them for five minutes.'

Another factor clouding progress to date is the significance of recurring savings

from 2004/05.

These must be measured by each council and sent to the ODPM by mid-June.

Efficiency timetable

Next week Audit Commission is due to issue methodology for measuring use of resources as part of CPA. This will explain how efficiency statements feed in to CPA.

June 15 Councils submit backward-looking statement for 2004-05

November 2005 Single-tier and county councils that do not have excellent status provide a mid-year update to ODPM

April 2006 Councils submit planned savings for 2006-07

June 2006 Councils report on savings achieved in 2005-06

December 2006 Audit Commission issues assessment on councils' efficiency performance for 2005-06

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