The overall aim of this study was to gauge the attitudes of local authorities (LAs) in England and Wales to private sector funders (PSFs) and the private finance community in general.
The specific objectives were to:
(i) Explore the nature of local authorities' experiences to date and their views regarding private sector funders.
(iii) Identify barriers to successful working relationships and the means to overcome them.
(iv) Identify areas for improvement in internal management in line with the best value initiative.
Summary of findings
The significant response rate to the survey provides a valid and reliable basis for the findings presented in this report. These findings are based on both the experiences to date of Local authorities (LAs) and their perceptions of the private funding community together with their suggestions for improving relationships with private sector funders (PSFs).
The majority of LAs in England and Wales have had some form of contact with the private sector funding community. Predominately this has been to explore opportunities for alternative forms of finance or to negotiate funding.
Contact has generally been through intermediaries such as accountants, solicitors, specialist consultants and brokers, largely because LAs felt ill equipped to negotiate directly with PSFs. LAs which had experience of dealing with PSFs recognised the limitations of their own knowledge, skills and understanding of the private sector funding community, whereas those with no contact displayed a certain amount of naivety regarding the complexity of the market.
Certainly those with experience declared a more positive attitude towards private sector funders and the opportunities offered by establishing sound relationships with them. In contrast, those with little or no direct experience were more likely to hold a negative attitude, not only towards funders but to the private sector in general.
The acknowledged lack of knowledge and skills has pinpointed significant areas for training for members and staff within all types of LAs. These may be grouped into three distinct areas; understanding of the PSF market and how it operates; internal skills required to prepare and negotiate successful financial arrangements; and technical financial skills. Both the LGMB and Public Private Partnership Project (4Ps) may be able to help bridge the training gap.
LAs identified culture barriers that exist both within LAs and between LAs and PSFs and recognised that these need to be addressed if they are to take advantage of alternative forms of funding that are currently available and those that may be offered in the future. Successful completion of a number of flagship projects would encourage and confirm the market potential to both LAs and PSFs. In addition, closer working relations between representative bodies of LAs and PSFs would offer greater opportunities to encourage understanding and trust through joint training initiatives, networking and sharing of experiences.
The current legal operating framework is viewed as complex, constraining and cumbersome, and as a result, LAs felt they appeared unattractive to PSFs. Calls for government to simplify rules and remove legal barriers were consistently voiced across the spectrum of LA types. LAs were also self critical and recognised the need to alter their internal systems to improve operational efficiency.
Although building relationships with the private sector funding community was considered costly in terms of time and staff resources, LAs felt this investment would prove valuable over the long term and result, in improvements to the services delivered.
Smaller LAs expressed feelings of exclusion, due to their lack of resources and skills to develop relationships with PSFs, but also the perception that their finance requirements would be of little or no interest to PSFs. Consideration to the setting up of a funding intermediary was proposed, to channel and combine these smaller funding packages. It was not clear from their proposals whether this should be a central or regional body.
- The results of the survey demonstrate clearly that LA/PSF relationships are in their infancy. Although there is a recognised degree of naivety currently, there is a willingness to develop a greater understanding of the market and what it can offer now and potentially in the future. This will require support from Central Government and representative bodies of LAs and the PSF community. However, LAs need to understand more fully the implications of developing relationships with PSFs and to determine how the barriers that exist can be removed. Practicable solutions need to be formulated from a position of knowledge and understanding.
- The overall level of LA experience of the private sector funding community is relatively limited. Although the majority of LAs have had some contact with the market this has tended to be at a superficial level, to explore opportunities. As there is no free access to the market due to current regulations, only a small number have been working with private sector partners on PFI and other specific funding projects. Other contacts have been for short term leasing arrangements.
- Generally LAs do not have the knowledge and skills to negotiate private sector funding and training is required across a spectrum of related topics to promote understanding and to provide specific skills.
- LAs perceive cultural differences both internally between members and officers, and externally between LAs and PSFs. Currently these differences create a major barrier to the success of productive working relationships, fuelling ongoing mistrust and miscommunication. The need to develop closer relationships between the two communities as well as at individual level is proposed, regardless of the resource implications. This desire to work together demonstrates the importance LAs place on the potential opportunities available through private finance.
- LAs expressed concern that central government rules and policies were unnecessarily complex and a major contributor to LA inertia in developing relationships with PSFs. However, they also admit to a need to improve internal systems which they perceive PSFs consider to be over rigorous and time consuming.
- Certain patterns of behaviour have been established for the LA community as a whole and these were set out in the report. However, it has been possible to provide a general profile for each type of local authority. It is based on the most common responses to the survey for each authority type and should not therefore be attributed to all authorities in that type.
- COPIES of the report are available from LGMB publications; tel: 0171 296 6600; fax: 0171 296 6523; price:£25.