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Operating more commercially in the public sector

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With local authorities and public bodies under more pressure financially than ever before, they need to find new ways of better utilising their assets and delivering services so as to generate income and become self-sustaining financial entities.

There are several pressures that make this a necessity.  The most obvious imperative is the reduction in government grants up to 2019-20. But there are other factors such as demographic changes, with people living longer and a generation of baby-boomers coming up to retirement, meaning there is growing pressure on health and social care services.  Health and lifestyle issues such as childhood obesity are putting further strain on services too.  Meanwhile, with 2.4 million homes needed by 2031, we are in the midst of a housing crisis.

The good news is that local authorities have the opportunity and the powers to operate more commercially than perhaps many realise. There is something of an urban myth, for example, that authorities can’t trade or provide services outside their own area without setting up a trading company. But in many circumstances, this is simply not true.

There is a wide range of services under the Local Authorities (Goods and Services) Act 1970 and other powers that an authority can provide outside of area: professional services, works of maintenance, drainage, catering etc. 

Housing and property hold major commercial possibilities too. Authorities have very wide powers to buy, sell or develop land where it is for the benefit or improvement of their area; some are developing land themselves, while others are entering into commercial arrangements in partnership delivery vehicles. Not only does regenerating land ease the housing shortage, but it creates jobs and training opportunities, making the local population less dependent on welfare and council services, recirculating the money into the local economy, as well as providing business rates income from commercial property development.

Renewable energy is another massive opportunity.  Authorities can sell energy from renewable sources to the Grid as well as providing themselves with cheaper power.  Some are brokering deals with the major providers in order to bring cheaper energy to their communities – showing community leadership.

Investing in technology is also key, to enable more of the population to self-serve through the web and mobile apps, thereby reducing the cost of delivery.

Authorities need to be clear what opportunities they want to pursue and why.  From there, they have a high degree of discretion around how they look to achieve it – whether by themselves, with a partner, or through a separate legal entity.  The adviser’s role is to help them find a path through the key questions in order to establish the right model for them.  If that happens, authorities have plenty of scope to make their assets work harder and generate greater income, thereby better sustaining their communities.

Judith Barnes, partner, Bevan Brittan

Column sponsored and supplied by Bevan Brittan

Bevan Brittan logo June 2015

 

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