LAI0029

Written evidence submitted by Reducing the Deficit Ltd

Background

1. Relevant to this inquiry is my experience of working as a senior manager in 7 different local authorities over the last 25 years (county, district and unitary councils both in London and outside) managing the property function to optimise the use of property assets in supporting the delivery of public services. In 2009/10 I worked as the Interim Director of Property at Kent County Council contributing to the Total Place project the outcome of which was reported as part of Budget 2010.In recent years as a consultant I have advised 2 local authorities on operating commercial property investment funds to generate income to offset the loss of Government funding for the delivery of public services.

NAO Recommendations

2. Based upon my experience I strongly support the recommendations in the recent National Audit Office report on Local Authority Investment in Commercial Property. Clearly in assembling commercial property investment portfolios local authorities need to operate within a policy framework and comply with the relevant financial guidance. I would anticipate that the inquiry will receive many evidence-based submissions on detailed changes that could be made to the current financial framework governing this activity.

3. My concern is that the proposals will not in themselves change current behaviours which are driven by the need that local authorities have for additional revenue to offset the loss of Government funding for the delivery of essential public services. With all due respect the Public Accounts Committee needs to look at this from the other end of the telescope. The real issue here is just why have local authorities had no choice but to invest or in commercial property to protect the delivery of local services. There is a need for radical reform of the current governance and funding structures with realistic increases in the level of resources made available to the sector. 

4. The current model for funding for funding the delivery of local public services in the UK is rooted in the 19th Century and is no longer a sustainable basis for the allocation of resources. It emphasises an outmoded vertical departmental approach to resource allocation rather than a horizontal cross-cutting approach focused on the outputs needed to support service delivery in the third decade of the 21st Century. The current model itself is a major barrier to improving the delivery of services to local communities and the Inquiry should consider the following points which I made in my submission last year to the Inquiry on the Funding of Local Public Services.

Total Place

1. The Total Place project, the outcome of which was reported as part of Budget 2010, set a new direction for local public services, based on extensive work over a 12 month period by central government, local authorities and their partners. It demonstrated that greater value could be gained for taxpayers by public authorities putting the citizen at the heart of service design and working together to improve outcomes and eliminate waste and duplication. The report[1] which outlined the way forward for places, led by local authorities with their unique local democratic mandate.

2. Total Place was developed over twelve months in 2009/10 through the work of 63 local authorities, 34 Primary Care Trusts, 12 fire authorities, 13 police authorities, and a wide range of third sector organisations and service delivery bodies. The 13 pilots involved served a combined population of more than 11 million people. The report concluded that improvement in public service delivery need greater devolvement and a place based approach incentivising collaboration between different organisations to provide a citizen centred approach to public service delivery. Unfortunately the report was overtaken by a change of administration in May 2010 and the findings were not implemented.

3. The report would seem to be particularly relevant to and, if not already done, the findings should be reviewed and considered in considering changes to the current model for funding local public services.

Data Transparency

4. A lack of transparency and reliable data is a big issue which will no doubt have been flagged up in many of the submissions received by the Committee. Fair and impartial resource allocation is dependent on the availability of high-quality data. Consideration should be given to establishing an independent national organisation (along the lines of the Office for Budget Responsibility) that will have responsibility for collecting, verifying and publishing data in respect of local publish services which can then be used by Government.

5. The Inquiry may also want to look at recent developments on budget transparency in Canada[2]. In addition, the work of Truth in Accounting in the USA which operates at all level of government provides some useful insights on data transparency[3].

Funding

6. Whilst there may be differing opinions on the extent to which individual local authorities have contributed to their own problems many of the submission received by the Inquiry will highlight the fact that funding cutbacks over the last decade have caused major problems for local government.

7. A recent report[4] by the Association for Public Service Excellence (APSE) highlighted the shift between Local and Central Government funding over the last decade.
8. In 2010/11 local government in England received £12 billion more from Central Government than the total amount it collected through council tax and business rates. By 2015/16, core spending power had fallen to the point where it more or less equalled the total amount raised locally thereby eliminating central government subsidy to local government. By 2019/20 locally raised taxes exceeded Core Spending Power by £7bn meaning Local Government is effectively subsidising Central Government.

9. Several organisations (NAO, CIPFA etc) have recently highlighted the fact that a significant number of local authorities are running into major financial problems. Whilst local authorities are very resourceful and innovative in dealing with financial challenges there are limits to what can be achieved. It simply cannot be right that local authorities have had to resort to undertaking the provision of commercial services and commercial property investment as ways of generating income to offset the loss of Government Grant.

10. Apart from the risks involved commercial property investment diverts management resources away from the delivery of public services. As mentioned above I have been involved in advising two local authorities on setting up and operating property investment funds to offset the loss of grant. Whilst appropriate governance measures can be put in place and steps taken to operate within APSE/CIPFA best practice guidance such investment will still involve a local authority in financial risk.

11. Informed by reliable high quality data realistic levels of funding need to be made available preferably as part of a rolling 5 year settlement. A place based approach should be adopted with local government, health service and emergency services budgets pooled to secure a joined up approach to service provision.

Streamline local government integrating other local services 

12. As mentioned above the underlying problem here in the UK is that we are trying to deliver public services in the second decade of the 21st Century on the basis of organisational and funding structures that are a 19th Century legacy. Increasing service demand and financial pressures will only be met through radical rather than incremental change. Historic divisions between health, emergency services, central and local government (together with multiple tiers in local government) need to be redrawn with greater devolvement and an integrated cross sector locality based approach to meeting need based on output rather than input. A single accountable body with unified budgets for every locality across the country covering all current local government and health services would be a major step in securing a sustainable future platform for the delivery of local services. Such action will also reduce duplication and overlap between services.

May 2020