Category Archives: Local Government finance

A budget round like no other

Sir Peter Rogers

The worst summer for weather has strangely produced a feeling of euphoria throughout the country because of the Olympics and the achievements of our British athletes.

However, now that summer is over, reality has resumed as local authority Chief Executives and their management teams take stock of the difficulties facing them. Last year’s financial results are finalised and with half a year over, they will know whether their ambitious plans they hatched 12 months ago are on track. Directors of Finance will be able to judge their ability to balance the books over the medium term and appreciate the effects on the budget of maintaining standards and dealing with increasing demographic pressures.

As Wilkins Micawber in Charles Dickens’s ‘David Copperfield’ pointed out:  “The ability to match expenditure and income is the only true path to happiness.”

It is natural that local authority leaders will try to protect the front line services which get them elected. Local authority Chief Executives will also endeavour to protect the standards of service that they have worked so hard to deliver.  But what is inevitable is that with the rising cost pressures of an aging population and the ever-increasing expectations of an impatient public, new ways of working will be required to enable those services to get the resources they need.

This is a time for visible leadership. It may even be too late for those Chief Executives who are yet to make the changes they require. A blind faith in central government coming to the rescue or a reliance on the sector to produce a magic solution will inevitably lead to disappointment.

Rather, this is a time for local authorities to be clear on their ambitions and their ability to fund them.  Difficult choices will have to be made and those things taken for granted may need to stop, or be done by others.  Therefore, any opportunity needs to be considered on the basis of what it produces and how long it will take to deliver results.

Local authorities can help each other but the third and private sectors offer opportunities too. Knowing best practise and how to learn and adapt is a new skill set but needs to be learnt quickly within local government. It increases the probability of success, it reduces risk and it speeds up results. It is even better if public and private partners are able to avoid the pitfalls of drawn out procurement exercises where the only parties guaranteed to win are the external advisers whose fees are guaranteed irrespective of the outcome.

Nothing can be regarded as sacred but this is a time when a council’s management team needs to be exactly that; a team that gives where it can to help others deliver what otherwise would be lost.

Corporate shroud waving and warnings of disaster have been widely experienced in the past but cannot be tolerated going forward. Instead there must be an increasing recognition that services can be delivered better internally or by others. It may be that alternative delivery structures within groups of local authorities can offer the step change in costs that is needed.

A ‘summer like no other’ followed by a budget round with a similar description will test the local government sector. Plans will be made and budgets will be created but that is just the start. The plans for their delivery will need to be robust and the risks of backsliding or failure, well managed. Council leaders and Chief Executives will need to be visible and articulate this new reality to their communities. Managing existing citizen expectations will be virtually impossible for many but setting new expectations to match and manage the new financial reality will be a real test of civic leadership.

Sir Peter Rogers

Chair of CapacityGRID and former Advisor to Boris Johnson for Regeneration, Growth and Enterprise at the Greater London Authority.

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Change for the better: David Martin’s reflections on SOLACE Scotland Conference 2012

Change for the Better

Held three weeks after the Scottish local government elections, this year’s SOLACE (Scotland) Conference – Change for the Better – took place against a radically different political landscape: 30% of Elected Members were elected to office for the first time and there have been numerous changes of administrations across the country, with some interesting coalitions formed. But while the landscape may be different, many of the challenges remain the same, and this year’s conference therefore explored what local government can and should be doing to build a better Scotland.

Local authorities were challenged, in particular, to raise the bar in promoting economic growth. Peter Grant of the Entrepreneurial Exchange called for the public sector to become a champion for business, to listen to business and to ensure that rules are business friendly.  George Black, Chief Executive of Glasgow City Council, asked whether local authorities were being strategic enough in their approach to jobs and the economy: should, for example, local authorities be looking to target the pension funds they hold for local investment? Likewise, given the projected rise in demand for social care, shouldn’t SOLACE take the lead in developing a national strategy for training the future social care workforce?

Delegates were also challenged to raise the bar by Sir Harry Burns, the Chief Medical Officer for Scotland, who asked ‘Why don’t we aim to close young offenders’ institutions?’ Challenging the preconceived notion that Scotland is an inherently sick nation, he outlined the connection between the loss of employment that Scotland suffered in the 1970s and the emergence of its poor health record. A comprehensible, manageable environment is essential for good health, he argued, because if individuals do not feel they are in control of the world around them, they experience chronic stress. To improve health outcomes, the challenge is therefore to give people control over their lives and to increase social connectedness in communities that are alienated. The correct public sector approach, he argued, is to co-produce.

But what should local authorities do to help people become more connected?One key theme that emerged was the importance of Chief Executives creating an organisational culture in which staff feel genuinely empowered to do different things and to do things differently. Senior managers must create an environment in which staff are supported and equipped with the skills they need, and are not reluctant to try new things for fear of failure.

While delegates were reminded of the important and often innovative work that local government does every day in building a better Scotland, it is clear that more remains to be done.To raise the bar, local authorities need to think more strategically,engage better with business and make better use of evidence-based practice. More importantly, though, it is not enough for local government to take action in isolation. Imposing initiatives on communities is not the way forward. Rather, it is for councils and partner organisations to work with communities, to enable them to produce their own solutions. Only in this way can Scottish local authorities and communities change together for the better.

David Martin

Chair, SOLACE (Scotland)

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

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An insight into all our futures?

Graeme McDonald, Director of Policy and Communications at SOLACE, posts his reflections on the LGA finance report:

Two events this week may have given us an uncomfortable view into the future. The LGA’s report: Funding outlook for councils from 2010/11 to 2019/20, painted a bleak picture of the funding of local public services.

Our aging population and the rising costs of care is a well told story, but we were given a stark insight into its fundamental impact across local government. It is now clear just how social care and waste services will dominate local government finance and consume a huge percentage of the local public purse.

But this week also saw the South London NHS Healthcare Trust become officially ‘financially unsustainable’. Three hospitals have notified Andrew Lansley that they will be to be put into a form of administration within weeks and are losing around a million pounds a week. This was closely followed by serious concerns being raised Care Quality Commission, with it reporting that the hospitals were delivering unacceptable levels of care.

The blame is being placed firmly at the door of their PFI deal which is costing them £61million per year but, having already received part of a £1.5billion ‘bailout’ this year, there are some considerable underlying financial problems across parts of the NHS.

Bringing these two stories together begs the question, might the same happen in local government? Can we foresee an authority going bust?

To date many frontline services have been protected but ever more difficult choices are being made. Public concern at service closures will only be heightened as we continue along this path and this will heap even more pressure on authorities to take larger financial risks.

But if the LGA’s conservative estimates make difficult reading, it must be remembered that it focuses only on the aggregate or the average. In some authorities the funding gap will become critical far more quickly.  Different areas of the country will be affected in different ways. There is a diversity of crisis, but crisis it is.

Social care is rightly highlighted as a key driver of cost. Authorities with those responsibilities will feel the immediate impact with their demographic determining its pace. But it is simplistic to look solely at social care costs. An authority’s income base will also have a profound impact on its ability to cope with austerity. Those authorities reliant on government grant to support significant proportions of their spending will have far less flexibility to respond. The LGA report assumes council tax rises of 2% after April 2015, but if you are proportionately more reliant on the government for your income, this is assumed to continue to fall.

So should we expect headlines focused upon local council’s being financial unsustainable or put into ‘administration’? Given local government’s success in managing austerity to date, I feel we should expect the best, but plan for the worst.

The sectors self-improvement work has done much to ensure checks and balances are in place to pick up problems early. Members and officers are working closely to ensure communication channels are open and transparent, that lessons are learnt and shared quickly. The strength of local government comes from its collaboration and openness. We should encourage all in the sector to work with others, to use their networks and support those in more challenging positions.

But local government cannot solve this problem alone. Government does need to make some early policy decisions, most obviously on social care reform and community budgets. It should also support local government and ignite a real debate about the future of public services and how they are paid for. More honesty about what can be achieved is required, as is more openness to engage local communities in the production and commissioning of services. This week we have heard some sobering messages, so we must remember that from the greatest challenge, can come the greatest creativity.

 

First published on the Guardian website on Friday 29th June 2012

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

 

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Resource review risks costly two tier system

The Government’s Local Government Resource Review consultation paper asked the question:

“Do you agree that the current system of business rate reliefs should be maintained?”

Taken at face value this implies that the current mechanism, whereby central government funds local government for discretionary and mandatory relief granted to charities and not-for-profit organisations, should continue.

However, the detail of the consultation question makes it clear that the Government is only considering continuing to provide funding for current reliefs that are funded, via adjustments to tariffs and top ups. There is no guarantee that the Government will continue to offer local authorities support for mandatory and discretionary reliefs granted after the new scheme has begun.

This runs the risk of two potential scenarios:

• A two-tier system of reliefs being granted by local authorities – those granted prior to local retention of growth in business rates and those granted after. The ones granted after could potentially be subject to a much lower level of relief.

• A post implementation approach to the granting of discretionary relief which is much reduced compared to the current system as local authorities will be unable to afford to continue funding these reliefs. In order to ensure consistency, this could see organisations that currently receive discretionary relief having it removed.

With the current financial climate that Councils find themselves in, there are already some authorities who feel they cannot afford to continue to grant discretionary relief. If central government no longer funds mandatory or discretionary relief related to charities and/or not-for-profit organisations then local government will be even less able to afford this in the future.

The potential impact on charitable and not-for-profit organisations under the current proposals for the new scheme is significant. Local authorities might urge the Government to reconsider its proposals and agree to continue with the current approach of fully funding mandatory relief and part funding discretionary relief. This will ensure that invaluable third sector organisations continue to receive the levels of support that they currently rely upon.

One of the Government’s headline aspirations on coming to power was the development of the Big Society and the use of charities and the third sector to help deliver public services. If the Government no longer funds mandatory and discretionary relief for these organisations then the development of the Big Society risks being drastically reduced.

In addition, if all schools that convert to Academy status are awarded at least mandatory relief, then this could also be a significant drain on local authority resources, removing even more funding from crucial front line services.

Greater Birmingham and Solihull LEP Finance Officers

Contact: Paul Johnson, Director of Resources, Solihull Council (pjohnson@solihull.gov.uk)

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

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