Council spending with external suppliers has increased significantly above inflation over the past four years, analysis of data shared exclusively with LGC reveals.
Lgc following the money final
In 2015-16 local government spent more than £55bn on outsourced and bought-in services such as waste, residential care and management consultants. This is up 13% from 2012-13, over which time inflation was just 3.3%.
This is the first in the Following the Money series of articles which will explore council spending with external suppliers using data from Porge Research’s Illuminator tool. The tool aggregates publicly available data on all local government invoices above £500. Councils were ordered to start publishing this information by former communities secretary Sir Eric Pickles, who in April 2012 said he wanted to “mobilise an army of armchair auditors”.
Data from the first four years shows that despite swingeing cuts to council funding, spending with external suppliers has increased in every region of England and across all service areas except ICT and back office outsourcing.
However, the rise is less than that seen in central government and the NHS, which are required to publish data on invoices greater than £25,000.
Central government’s expenditure increased by 35% to £93.4bn. NHS spend with external suppliers rose by 14% between 2013-14 and 2015-16. A comparison over the four years is not possible for the NHS as clinical commissioning groups’ predecessors’, primary care trusts, did not report the information.
Regionally the south-east saw the largest percentage increases in spending with external suppliers, up by more than a fifth from £814m to £988m.
Decisions to outsource services can often be politically fraught, with some sections of the public resistant to private sector involvement in public sector services.
It is notable that regions with a larger proportion of Tory councils generally saw higher increases in spend than those with a larger proportion of councils run by Labour administrations. The exception to this is the West Midlands, although this may be complicated by the fact it has a small number of big spending Labour councils and lots of Conservative-run districts.
Among classes of council, districts overall saw the largest increase in spending on bought-in services at 17%. However, their spend accounted for less than 8% of the total. Among upper tier authorities, increases ranged from 11% in London boroughs to 14% among unitaries.
However, an increase in spending may not always be due to rising costs or because councils are buying in more services as some spending could be for one off capital projects.
The chart above distinguishes between areas with high and low capital spend. Health and social care saw the largest percentage increase. Some of this is likely to be driven by councils becoming responsible for public health as the data records invoices paid to NHS and other public sector suppliers as well as the private and voluntary sectors. Porge managing director Alice Watson told LGC there was not a single area driving the increase but growth in spend on a range of areas including residential care, home care, children’s social care and special educational needs.
Following health and social care corporate services, which includes recruitment, saw the largest increase in spending, perhaps driven by the increased reliance of many councils on agency social workers.
LGC will explore what is behind these headline figures in future articles in the Following the Money series.
Comment from Alice Watson, founder and Managing Director of Porge Research
“Over the past four years there have been some big changes in the way that the public sector spends money. Budget cuts have necessitated change. Publicly owned companies and Trusts have sprung up and are now competing against the private sector. Temporary staff agencies and management consultants have blossomed over the period, providing flexible staff solutions and advice during turbulent times. When compared with its public sector siblings, local government continues to show prudence and restraint. Yes its expenditure on bought in goods and services has increased by 13%, but central government’s increased by 25% over the same period.
”The really impressive change though, is that we can see all this data. This analysis is only possible because Local Authorities have been so diligent in publishing their transparency spreadsheets which detail the invoices they have paid. Here at Porge we analyse approximately 15 million invoice records every year. As the years go by, the historic data set gets even richer, and our ability to see trends and changes gets even greater. Local Authorities can now reap the benefits of their investment in transparency, because they can now see how their peers spend their money, and in so doing they can learn lessons and improve their own commissioning behaviour.”