In this time of continued austerity, the National Audit Office (NAO) report “Financial sustainability of local authorities” raises more important questions than it answers. These are questions not solely for local government but for government as a whole.
The prospect of councils failing financially is real (the NAO cite the Audit Commission identifying 12% of local authorities as at risk of not balancing future budgets) and it is incumbent on all parts of government to act to prevent these failures becoming inevitable.
The report clearly highlights that the pressures faced by local government continue, though they are on course to deliver £4.6bn of savings by April 2013. In particular, councils face real challenges in dealing with the cumulative effect of sector funding changes, healthcare reforms and increasing demands for key services.
In response, it has been suggested that there are some easy answers. One might be to reduce councils’ 1,335 statutory obligations. While there may be some merit in that, it is not going to help in the short term. Then there is the option of using unallocated local authority reserves. These add up to £3.6bn but will not provide a sustainable answer for councils in difficulty. The nature of most council services is that they require recurring funding to meet staff and other running costs year on year. Reserves can only ever be a one-off, finite source of funding based on previous years of prudent financial management – something the Chartered Institute of Public Finance and Accountancy (CIPFA) has been very clear about. So while they might be used to cover a shortfall in recurring funding for a specific period the underlying problem will still be there.
To assist, central government should address the point raised by the NAO that Whitehall departments need to make a more comprehensive assessment of the impact of their changes on local government.
Part of that is about using data more effectively to understand costs, demand and funding allocations. Historically, the cost and time of collecting and analysing data have been almost prohibitive, but new technologies are changing that and it is becoming much quicker and easier to analyse information. This can then help all those involved understand demand better and manage it more effectively by reducing duplication of services. For example, the ten community budgeting pilots have already identified savings running into tens of millions of pounds by taking multi-agency approaches to identifying high dependency families and individuals and creating single points of access to services and providing comprehensive solutions across all services. Similarly Torbay’s work across health and care agencies has made it far easier and more cost effective to provide individual and preventative services that support people early and keep them out of more expensive residential provision – be that in care homes or custody.
A more proactive approach to data sharing, intelligent analysis and targeted but collective response strategies will allow local authorities and central government departments to avoid some of the direct service cuts already being in evidence. This can also support improvements in services for the most vulnerable but high cost users.
The NAO’s report cites adult social care and libraries as two areas where service reductions are now a reality for local government. It is therefore vital to look at alternative ways of providing services so cuts can be avoided and there are a growing number of practical examples where this has been achieved. In adult social care, Wiltshire Council’s “Help to Live at Home” service is using technology not only to give 3000 older people greater independence but simultaneously deliver an efficiency saving of £2 for every £1 invested. Hampshire CC is also in the process of radically reshaping its telecare services to improve consistency in service standards and reduce costs.
Alternative models are also being developed for libraries. The City of York Council currently runs fifteen libraries and a historic archive service, employing nearly one hundred people and now plans to form a new social enterprise to give the staff greater scope to work with the local community and more say in how services are delivered. The service will continue to receive funding from the council but will also have the flexibility to earn income.
The requirements to re-shape service delivery, join up budgets and conduct active demand analysis are not new for the public sector. What is different this time is the imperative to respond with such urgency and rigour. The early years of austerity have seen local government respond well to this imperative. Those who are least likely to appear on the NAO’s “at risk” list are the authorities that have already realised the scale of the problem and overcome political and executive challenge to simply get on with radical reform.
The rest now need to catch up and to look at new approaches which will preserve services and avoid financial failure, and central government needs to continue to look at how it can support councils in that work.
David Rees, head of local government services, PA Consulting Group
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