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Cutting to the quick: beyond 2015

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While local government has dug deep to limit the effects of cuts on services, will a further round of reductions from 2015 be the breaking point that triggers a public backlash? Mark Smulian reports on LGC’s roundtable in association with Newton Europe.

Despite some pain, local government has surprised itself by coping with cuts since the last comprehensive spending review.

Costs have, so far, fallen without services collapsing or provoking public outrage - except in cases such as library closures. Predictions of armageddon have proved premature and money has been saved via means fewwould have considered prior to 2010.

Councils have learned new tricks, but the financial climate shows no signs of becoming more benign.

With additional cuts due for 2015-18, will the sector hit a wall, after which there is nothing more to cut without ending some service provisions altogether?

LGC convened a roundtable of senior officers with efficiency specialist Newton Europe to discuss how councils might emerge from the next round of cuts, if not unscathed, then at least in decent shape.

Participants

  • Jayne Francis-Ward, corporate director, Nottinghamshire CC
  • Stephen Hughes, chief executive, Birmingham City Council
  • Irene Lucas, senior adviser, Newton Europe
  • Laura McGillivray, chief executive, Norwich City Council
  • David McNulty, chief executive, Surrey CC
  • John Mothersole, chief executive, Sheffield City Council
  • Gillian Norton, chief executive, Richmond upon Thames LBC
  • Steven Phillips, business manager, Newton Europe
  • Tim Shields, chief executive, Hackney LBC
  • Martin Smith, chief executive, Ealing LBC
  • Nick Golding (Chair), acting editor, LGC

Newton Europe senior adviser Irene Lucas, former director general for local government and regeneration at the Department for Communities & Local Government, said the current spending round’s 28% cut had been managed in different ways but “the perception is that councils have responded professionally and well”.

Chief executives had targeted cuts in areas that were “the most obvious and least sensitive, and the public do not appear to be feeling it yet”, she said. But with demand-led spending on adult social care, children’s services and waste disposal rising rapidly, other resources were bound to reduce.

“In a climate of diminishing resources, we want to focus on whether we continue to deliver the services we always have differently, or cut some services out altogether, not just cut back,” said Ms Lucas, who was a previous chief executive of South Tyneside MBC.

Surprise savings

There was agreement that the volume of savings already found had been a surprise.

Richmond upon Thames LBC chief executive Gillian Norton said: “We’ve had to do some difficult things, but if four years ago someone had told me we would take the amount of money out that we have, I would have said it was impossible.

“The system has not fallen over and our projections show for two years we will be OK. I’m uneasy about the post-2015 period, as we feel we have run out of ideas, but I felt like that two years ago.”

There had been a similar experience in Norwich City Council, according to chief executive Laura McGillivray. “We lost £6m and thought: ‘Where will we get it from?’ We haven’t really cut back on things the public notice. It is extraordinary how far you can stretch things,” she said.

Nottinghamshire CC has taken £150m from its budget over three years but its public satisfaction ratings have actually increased.

Its corporate director Jayne Francis-Ward thought a council tax freeze, coupled with publicity about cuts, caused the public to feel they were getting better value.

However, she sounded a note of caution: “I think we will stop delivering certain things in the next round. We so far haven’t stopped any services - that is when it will be interesting to see public reaction.”

Elected members will feel under pressure if they are lobbied hard or subject to protest demonstrations in light of any cuts.

Birmingham City Council chief executive Stephen Hughes stressed the importance of having a framework, against which the services that mattered most could be tested, when making tough spending decisions.

“If you have not got that, there will be a backlash. If you have, it enables you to have quite difficult conversations with members,” he said.

He suggested councils could find substantial savings by breaking down jobs into those parts that genuinely required a qualified professional to perform them and those that did not.

Ealing LBC chief executive Martin Smith warned that the climate of benign public perception could not continue indefinitely.

“The perception lag is interesting,” he said. “Four years ago we did not know how to achieve savings, and if you look at the next four years, we will probably find more ways we have not envisaged. Yet there must come a point where something big has to give.”

Cuts to social care, housing, welfare reform, acute hospitals and police stations would affect perceptions of the whole public sector.

“And there must come a point where that has an effect,” he said, warning of public feeling becoming hostile just when councils had to make difficult decisions to reduce service provision.

Surrey CC chief executive David McNulty said his county had sharply improved public satisfaction by a small increase in spending on road improvements, because this was a service visible to all.

It had also saved a substantial sum by participating in a rationalisation of the local public sector estate. But he feared the impact of increased demand for adult social care, amid other cuts, on the council’s standing.

“We spend a vast proportion of funding on a very small number of people and ask the whole adult population to pay for that,” he said.

“If you separate the majority from services, what does that do for the democratic role of the council? If the community does not see a benefit, it is hard to justify.”

Sheffield City Council chief executive John Mothersole said local government should use the credibility it had gained from handling cuts well to convince Whitehall to work with it to co-design policy changes, so that public sector resources could be better used, avoiding unpleasant surprises from unintended consequences.

“Our offer must be not to oppose but to sensibly co-design. It could help deliver what is deemed necessary, without in five years’ time needing other policies to sweep up the mess caused,” he said.

Co-design could avoid any future occurrence of the problems about to face councils as a consequence of ill-considered changes to welfare reform and universal credit, panel members said.

Effects on families Ms McGillivray said she was “really worried about multiple effects on families from welfare changes” where, even with a vast housing stock, Norwich could not move households around to match them to the number of bedrooms for which they would receive housing benefit in future.

Mr Hughes called universal credit “a disaster waiting to happen”, based on a combination of giving money and responsibilities to those unfamiliar with budgeting, and a reliance on data that employers were unlikely to provide.

Co-design could have avoided some of these pitfalls, Ms Norton said, while Mr McNulty thought service users should be involved.

“The people meant to benefit from the services should be involved in designing how they are delivered, and they invariably design a better way than we come up with,” he said.

“When somebody who works for us interacts with members of the public, benefit is derived, and we have not tapped into that enough.”

Mr Mothersole said the City Deals programme was an example of effective co-design, which had, significantly, started with ministers rather than with civil servants.

It had allowed Sheffield to cease its own minimal skills provision while, in effect, taking control of the entire public sector budget for this.

Faced with demands for savings, many councils had turned to private sector outsourcing on long contracts, but the panel largely felt that approach had run its course.

Mr Hughes said: “The private sector has not necessarily adapted their models to current circumstances.

“Traditionally, they would say they could do what we did 10% cheaper, and they probably could. Now we are asking them how to do it for 30% less and they are not very good at answering that.”

Steven Phillips, Newton Europe’s business manager, said local authorities could be more open to the experience of the private sector.

“I often get asked by local authorities whether we have worked for another local authority of exactly the same size - and if not, that conversation ends quickly - rather than who else we have worked with and what solutions and innovations could be applied from other sectors,” he said.

Ms McGillivray said a contractor’s collapse had led Norwich into a joint venture with a public sector partner, and now “we get benefits from local apprenticeships, jobs and supply chain; we share surpluses and members get a handle on future strategy they could not before”.

Norwich now sought ways to generate income, as well as save money.

“We’ve looked at building housing for rent to create an income stream because we are thinking: ‘How can we make up what government will take away?’ And if we work hard we could replace a chunk from our assets.”

The council needed a shift away from a psychology of “don’t spend a penny to: ‘Why don’t we borrow £150m?’,” she said, which required officers to learn new skills.

Hackney LBC chief executive Tim Shields said his council took a similar approach to income generation and “buys property to make money”.

He added Hackney had brought information technology services back in-house because the private sector had been unable to keep up with changing demands.

“They could not do it quickly enough to support the system,” he said.

“Document management and customer relations management are moving at such a pace, they could not keep up.

“We’ll bring recycling back in-house too, as they could not change rounds, so we did not have refuse, recycling and cleansing following each other. That will take £1m a year out.”

Mr Mothersole said the private sector too often offered the “‘best of the current’, not ‘first of the new’”.

He added: “Most game gamechanging innovations start life in the public sector and we should not be shy of that.”

He said councils were unnecessarily “incredibly respectful of contracts”, even when these were unreasonably long, and that contractors would expect challenges since such lengthy contracts were never found in the private sector.

Turning back in-house

If the traditional private sector solutions were now of limited use, what about those within the public sector?

A succession of attempts to draw together all the public resources in an area - Total Place, strategic partnership, community budgets - had yielded only limited results.

Mr Hughes asked: “How do we get better collaboration across the public sector?”

He added: “We’ve not cracked that. Everyone knows it’s a prize but we have not worked out how to get at it. Even the latest [community budget] pilots do not give an answer - just more evidence there is a prize to be had.”

With more cuts on the way, the panel pondered if staff would co-operate or be punch drunk by perpetual change.

Mr McNulty said: “Councils have asked our staff to do an enormous amount of change in the past four years and will ask for more. None of this happens if we don’t keep the workforce focused on delivering public benefit.”

Many management layers had gone and Mr Hughes feared that while much of this had been justified, it meant managerial capacity to tackle change had been lost.

Working patterns might need to change, Mr Phillips said, having had experience in advising councils.

“There are cases where 70% of frontline time adds no value to end users and you can have a very hard-working workforce that the system is forcing to be unproductive,” he said.

Ms Francis-Ward felt local government employment was still too rigid for the challenges ahead.

“We find ourselves stuck with our terms and conditions, which mean we cannot recruit the kind of people we want at a particular grade. So the market says: ‘Why should I work for you at that price?’,” she said. “You fall back on consultants and it ends up costing twice as much, which has always struck me as absolutely crazy.”

Ms Lucas concluded by urging councils to look hard at how they provided services, saying she had “always been passionate about the ability of the public sector to innovate and find its own solutions, and there are new tricks to be learned”.

The sector will surely have many more tricks to learn to meet coming challenges.

This roundtable discussion was sponsored by Newton Europe. The topic was agreed by LGC and Newton Europe. The report was commissioned and edited by LGC. For more information, see LGCplus.com/Guidelines

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Cutting to the quick: beyond 2015

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