Local authorities are under increasing pressure to reduce spending while generating more revenue; the LGC Capita survey reveals how being entrepreneurial is essential in achieving this. Alex Blyth reports
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The coalition government has left those running local authorities in little doubt over the importance it places on enterprise. “There’s only one strategy for growth,” said prime minister David Cameron in March 2011. “That is rolling up our sleeves and doing everything possible to make it easier for businesses to grow, to invest, to take people on.”
For Britain’s entrepreneurs this can be taken as a fairly straightforward encouragement to work harder, be smarter and make more money, but for those in local government it is more complicated.
On one level, local authorities need to encourage those local entrepreneurs creating the optimal conditions for enterprise, but on another level councils should think also about how they can become more entrepreneurial themselves.
“Faced with continued reduced central government funding, local authorities are acting to ensure their own sustainability,” says Ben Eggleston, market director of Capita’s consulting business.
“Some are looking at ways to generate their own revenue; others are doing all they can to ignite local enterprise and so boost revenue from business rates; many are trying both. Local authorities have come to terms with managing their cost lines - now they have to think about managing their revenue lines.”
So, LGC asked nearly 100 senior people in local government what they are doing about this. The survey revealed a sector that is changing rapidly, where old certainties are fading fast, and where people are having to evolve rapidly to keep up with the drive towards the entrepreneurial authority of the future.
It is clearly a priority for local authorities to feed their spending back into the local economy. Asked to rate its importance on a scale of one to 10, none rated it four or lower. Only 2% rated it five. By far the most popular response, at 41%, was 10 out of 10.
There is now an extra inducement for authorities to do this, points out Mr Eggleston. “The move to a greater retention of business rates generated in a locality by the councils gives councils a direct financial stake,” he says.
“If businesses thrive, the local authority will raise more tax revenue, and the reverse is true if businesses fail. This will give an extra edge to the competition that already exists between councils to have significant businesses locate within their boundaries.”
Despite this, local authorities that responded to the survey have little awareness of how much they currently spend with local firms; 54% have no idea how much of their total spend goes to this vitally important group. Of those that do know, nearly 70% reported less than 40% of spending goes to local firms.
Kieran Mansfield, economy and community service manager at Swale BC, says: “These results are broadly in line with my experience, but I would add that most authorities do know roughly how much they spend locally - they just tend not to have a precise figure to hand.
“And across the board we’re seeing progress in this area. Here at Swale we are improving and looking at our commissioning framework, with a view to bringing an even stronger focus on buying local.”
Barriers to buying locally
The will to buy locally may well be there, but there are many obstacles. Only 6% think it is problem-free. Interestingly, local authorities blame themselves for local businesses failing to win contracts.
While 24% think procurement processes are overly complex and bureaucratic, 15% say there is a lack of information about available opportunities, 9% that local authority staff do not prioritise local suppliers enough, 21% that local suppliers lack awareness of the process and specific requirements for doing business with local authorities, 10% say local suppliers are not interested in tendering for such work, and just 4% feel there is a lack of quality in local suppliers.
Anja Beriro, senior solicitor in the government and infrastructure team at law firm Browne Jacobson, says: “In theory local authorities are extremely keen to buy locally, and there is often a lot of pressure put on officers by elected members to do this. However, this often conflicts with the authority’s requirement to get best value for money.”
Several respondents pointed to EU legislation as a significant barrier, and Ms Beriro agrees. “For larger projects where buyers need to comply with EU or national legislation, it can seem inappropriate for them to include locality as a deciding factor.”
Taking action on the issue
Central government has been talking loudly about this issue, and the Cabinet Office’s mystery shopper scheme now provides a vehicle for local firms to raise concerns about public procurement practice at a local and national level.
Whether or not this is proving the catalyst for action, it is clear many local authorities are working on the subject. Only 2% of respondents said they are doing nothing about it. The most popular action is improved communications, with 25% providing information on how to apply for council work, and 25% advertising opportunities locally.
Mr Mansfield at Swale BC says: “There can be a degree of anti-council sentiment with businesses assuming dealing with the council involves a lot of regulations, but the onus is on us to get into very specific neighbourhoods and encourage them to tender for work. Businesses can relate to their immediate location and its issues, and we’ve seen good results using this approach.”
Some are going further - 16% are training local businesses on how to apply for council work, and 17% include locality as a factor in procurement decisions, while 6% require that at least one local firm is included on every tender list. One respondent even requires 25% of ICT contracts to be let to local small and medium-sized enterprises.
Just as they recognise the need to encourage local business, respondents realise they need to become more entrepreneurial themselves; 89% agree it is important to be entrepreneurial, but only 26% say local authorities as a whole are entrepreneurial.
A much higher proportion (53%) say their own council is entrepreneurial - clearly many in the sector see it as a problem for others to worry about.
So how are they being entrepreneurial?
Some mentioned a culture of entrepreneurialism that is increasing throughout the sector, and Brighton & Hove City Council’s CityCamp would seem to be a good example of this. It encourages entrepreneurialism by providing a place where individuals and small charities or businesses can get together to solve problems and create solutions.
But for most respondents entrepreneurialism is almost synonymous with working in partnership with the private sector, and 66% are involved in a private sector partnership.
One fairly typical respondent said: “Entrepreneurialism is about being prepared to engage in partnership with the private sector to deliver services, and being creative with our budgets.”
Another explained how this works: “We recently saved £1.3m in retendering our residential waste collection service which had been provided by a neighbouring local authority. We also evaluated the street scene contract, which had been provided by a neighbouring local authority, and brought it back in-house saving £200,000 per year with improved customer satisfaction and cleanliness of streets.”
There are signs that local authorities are beginning to take even bolder steps. The government recently made headlines when it encouraged hospitals to sell their services abroad under the NHS brand. It seems to be popular among respondents with 67% selling services to other local authorities.
This is a step forward but it means local government money is circulating within local government, so there is no net gain. Selling outside local government is more significant because it has the potential to bring money in, giving a net gain at a time when boosting revenue is important due to reduced government funding.
A significant 37% of respondents sell to organisations that are not local authorities.
For example, in 2006 six local authorities set up Scape System Build as an outward-facing trading company to provide construction and design-related services to both the public and the private sector. More such schemes can be expected: of those not selling services, 63% would like to do so.
The survey also pointed to the departments where this income/saving is likely to occur. Council properties, waste management and IT/technology are likely to be the main areas in the coming months and years where local authorities start selling their services not only to other councils, but increasingly to private companies.
Need to build skills
There is clearly a growing enthusiasm for entrepreneurialism within the local government sector. But the survey also highlighted what may prove to be the greatest obstacle to translating that enthusiasm into concrete results: 59% described the skill levels of staff as their main barrier to becoming more enterprising.
Mr Eggleston reports that Capita is increasingly being asked to work with senior teams to plan, think and work differently. For example, the company has worked with the senior team at Sheffield City Council, helping it to move to a more outward style of management, and to think of themselves as leaders within the city, not just the council.
“Councils are increasingly recruiting people with commercial backgrounds into their senior teams,” he adds. “Provided the process is well managed this can be a tremendous source of expertise and cultural injection.
“Our recruitment division, Veredus, has extensive experience of doing this. For example, we recently placed a very experienced oil company finance executive into a major county council in a top three role in the finance team.”
In the coming months and years we can expect to see the typical local authority worker becoming less of a bureaucratic manager and more of a commercially minded entrepreneur. Those currently working in local government face a stark choice between either acquiring that mindset and skills or being replaced by those who already have it.
Supporting local businesses in wyre
“Economic development is a key priority for Wyre BC,” says chief executive Garry Payne. “It has been written into our business plan for 2012-15 - we will boost enterprise, encourage investment and create jobs for local people.”
He says one of the best examples of this is the Wyred Up network, created to promote a culture of local businesses using each other’s services. It has more than 4,000 members including a core of 150 business people who attend quarterly networking meetings providing key speakers, advice and information.
The council is formulating town centre plans for each of its five main areas, and is seeking the views of local business people on what they would like done in each of those five areas.
From early 2013 the council will start to offer grant assistance and support to help businesses through the critical period between 12 and 18 months after start-up when they are unable to access other funding streams.
“We work hard to buy as much from local firms as we can,” he says.
“There are certain services that are never going to be provided cheaper locally, but to even this out services such as catering or building maintenance and repairs can be sourced locally. It’s about achieving the right mix.”
A new policy at Wyre is that at least one bidder for business has to be a local supplier. It is also in the contracts that subcontractors must be local.
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