If Osborne sticks to Plan A, Councils need a Plan B

George Osborne’s announcement in the Autumn Statement that Government spending cuts would continue at least until 2017/18 on the same trajectory as the Spending Review came as no surprise;  there were plenty of people who had been predicting an even longer freeze. 

The announcement brings the realisation that, even after budgets have been balanced for 2013/14  (and balancing the budget is not always the same as delivery) the budgets local authorities are setting right now probably take us less than half way through the squeeze.

From the start the problem has been one of increasing productivity.  It’s truism that if you want to continue to provide the same level of service with less resource, then resources need to be more productive.   The trick is to improve the efficiency of the process  - creating the services that people need – without affecting the efficiency of distribution- getting the services to the people who need them.

The first few years of austerity have brought cuts, of course, but probably to a lesser extent than we harbingers of doom would have predicted back in 2010.  To a surprising degree the job of downsizing in local authorities has been helped on its way so far by tackling the ‘local governmentitis’  of the Noughties, the extent of which was not clear until we started turning over stones looking for it. 

Everyone has their own favourite example but the manifestation of the disease that I am most pleased to see go is the mountain of 200 page glossy strategies-which-are-not-a-strategies, together with the armies of people who used to write them.    A favourite example is one I discovered on a park notice board in one of our major cities which said that if anyone wanted more information on the herbaceous borders they could apply to the Council for a copy of the ‘Floral Planting Strategy’.  

The result is that the majority of local authorities look pretty much the same now as they did in 2010, just a fair bit thinner.  For most local authorities, though, these opportunities have dried up and everyone who is left appears to be working very hard.  So now for the really hard bit.   

The issue that economists call allocation – which services is it necessary for us to provide- has a political aspect which is above Chubby Cat’s pay grade, but focusing on process and distribution there are two areas where there is still a lot of benefit to be gained.

One is making the core of the business work as efficiently and effectively as we can, and the second is redesigning services around better access channels.

A big part of the answer to the first is process reengineering- making sure that the essential workings of the organisation, which includes the administration of front-line services, works using processes which make best use of automation, avoid duplication and over-engineered controls, self-monitor quality to avoid rework and minimise hand-offs.

For example, most local authorities are still heavily departmentalised, and you understand the reason for that when you look at the scale and scope of what  local authorities do.  The trouble is that the size of the back-office team in a typical local government department can look reasonably small, until you multiply that number by the number of departments and realise that much of the time those people are liaising with others in similar jobs in other departments. 

It doesn’t come as a surprise that it is so difficult for local authorities to enter into shared service agreements with other authorities when some can barely manage to share processes across their own departments.

The other potential gain is in the customer interface, and again it requires systems and processed to be redesigned to accommodate better and well as cheaper access to services.  This has the advantage for politicians of being what many people actually want. Would anyone who has experienced internet, banking for example, now go back to queuing, or sending cheques through the post in preference?

There is enormous scope for efficiency in this sphere, and again departmentalism can be a blocker.  As a former colleague of mine points out, why does the parking department need you to prove that you live at your address when the Council Tax department is satisfied enough on that point to keep debiting your bank account every month?  My friend was particularly amazed that he needed to take a photocopy of his Council Tax bill to the parking people as proof of address.

Getting the core of the organisation right and remodelling the customer experience are two sides of the same coin. Both involve fundamental review and reform of the way services work. Many authorities are on this journey, but it isn’t easy.

As well as the skills and capacity to undertake work on this scale, a practised, independent eye is also required, which means that the choice of business support partners is vital.   We don’t need consultants who borrow your watch to tell you what time it is;  we need those who can help us take the watch apart and make it work better.

Local Government’s Plan A in response to Osborne’s A for Austerity has been to cut waste,  with more than a little success, and then too often to resort to the same old cheese-paring solutions used in the past.  To address ongoing austerity we need a new sense of realism and new skills. 

It was 50 years go today....

(Chubby Cat breaks new ground with this post to celebrate an important cultural anniversary.  I couldn’t let it pass)

Fifty years ago this month,  yet another new band hit the big time,  probably to burn brightly for a few months, a year or two if they were lucky, and then just become another golden oldie on the juke box.

The band were called the Beatles, and in January 1963 their second single, Please Please Me,  was released with some anticipation and fanfare, but with little hint that the world was watching the birth of a Twentieth Century cultural phenomenon.  For those who looked closely enough, though, there was enough there to suggest that maybe the Beatles were a bit different.

The Beatles first release had kicked around in the UK charts for a couple of months at the end of 1962, peaking just inside the Top 20.   A jaunty two-and-a-half chord number called ‘Love Me Do’,  it hadn’t exactly created a stir, but for a while it had refused to go away and it got the Beatles their first national recognition.  

Nevertheless, to have heard of the Beatles by the beginning of January 1963, you would probably have to have been a particularly keen follower of popular music or a music industry insider.  Despite this, the Beatles released Please Please Me with some optimism,  buoyed up perhaps by George Martin’s throw away remark at the end of the recording session the previous November; ‘Boys, you’ve just made your first Number 1’.   The fact is the Beatles always thought they were the best and that success was only a matter of time. 

The song itself was a step up in sophistication from Love Me Do, although there are lots of similarities musically and lyrically.  This is the point at which it might have looked as if the Beatles career would follow a formula;  the simple chord sequence, the catchy opening harmonica riff, the two part vocal harmony.  Even the lyric is again about a young man pleading with his lover. 

In Love Me Do it is a simple plea for affection (“Love, love me do. You know I love you. So please love me do”).   Listen to the lyrics carefully and you realise the song is about a boy on the prowl (“Someone to love. Somebody new”)  but otherwise it comes across as the kind of non-threatening  stuff that in 1962 you would be happy to have your teenage daughter listen to.

In Please Please Me,  the whole theme suddenly becomes more adult (“You know you never even try, girl. Please please me, like I please you”). According to Ian MacDonald,  Capitol records in the US wouldn’t release the record partly because they thought it was about fellatio- and you have to say that although the words aren’t explicit, they don’t provide  much room for ambiguity.

Please Please Me was also cleverly equipped with an ascending chord sequence that added extra drama to the insistent pleading (“Come on, come on, come on, come on”), something that Love Me Do never got round to.  There was also an exponential increase in the chord count.  Already in their second release, you could hear that the Beatles were on a musical journey. 

While we may now think of the Beatles early output as twee and unsophisticated, it never was the case.   The band had been professional musicians for a number of years (even George, who was still only a teenager in January 1963) and they had been exposed to everything that a life on the road, a growing band of adoring girl fans and three residencies in Hamburg’s red light district could offer.  That could hardly fail to come through in the songs, with the result that the band could appeal simultaneously both to teenagers and to a slightly older, more experienced audience and, crucially, to boys as well as to girls.

The Beatles ended 1962 by finishing up at the Star Club, Hamburg and then returning to Liverpool for more dates at the Cavern and a tour of small venues around Britain during January,- venues such as the Town Hall Ballroom, Whitchurch and the Assembly Hall, Mold,  with the nightly battle through one of the worst winters on record.  Please Please Me was their first single released in the US, where it made absolutely no impression at all.   As plans for world domination go, Brian Epstein’s was getting off to a slow start.

But something about the Beatles captured the imagination. There was nothing particularly ambitious about the songs- not at this stage - but they were clever and sounded fresh; nothing great about the band in terms of musicianship, but they were tight and far more energetic than a lot of  similar outfits;  nothing particularly prepossessing about the boys- the good looking one, the drummer,  had recently been dropped in favour of  a short bloke with a big nose- but they were charming and funny and the media liked them.   The package came together during the course of 1963 and by October the term ‘Beatlemania’ had been coined.

And it may be a cliche, but the rest, as they say, is history. 

Local tax reforms begin to impact

Behind the cloud of austerity that obscures so much, a quiet revolution is happening in local government finance in England. 

Authorities are currently setting their budgets for 2013/14 and they are only at the start of the formal process, but anecdotally the abolition (after eighty years or so) of a needs based general funding formula and its replacement with a system of partial retention of business rates income is having a more immediate impact than many thought it would.

Over time it is fully expected that authorities in areas where the economy is growing will do better than those areas where it is contracting or stagnant. The assumption up until now has been that the first year of the new system will see relatively little effect, because funding in year one is supposed to be the same as the funding each authority would have received had the Formula Grant still been in place.

But some authorities are already planning to collect more business rates next year than the Government ‘baseline’ predicts, while others are indicating that they will struggle to meet the baseline figure.  This is because the baseline is calculated on an average of several years past performance, and the business rates system is surprisingly volatile in the amount of cash it generates. 

This is interesting because it increases the prospect that rates retention will make a noticeable difference to local government spending decisions quite quickly – probably before the next round of Council elections, and what is more, before the next General Election.  

For authorities that see their futures are residential rather than commercial, rates retention is mirrored by the New Homes Bonus, which provides extra income on a temporary basis to authorities that grow their council tax base and again is intended to act as an incentive to authorities to allow and encourage the tax base to grow.

What is completely unknown, of course, is how the new system will change things in the longer term.  The mechanics of the new arrangements will alter the distribution of funding, but the impact of this will be watered down by periodic ‘resets’ which on the face of it are intended redress some of the balance in favour of authorities in greatest need.  This avoids the ‘Detroit’ effect in which economically moribund areas gradually lose their capacity to generate tax income.  But if the new system is kicking in more quickly than many expected, more change can be expected between resets than might previously have been assumed. 

Not that the old system ever adequately provided for need. The introduction of damping arrangements over recent years had already broken any last link between the analysis of need and the amount of money authorities actually received.  When resets take place they are also likely to be hedged round with arrangements that stop the funding of individual authorities changing too much in any one year. 

So in one sense the new system could be the worst of all worlds. It will have provide an imperfect relationship between funding and spending need but also an imperfect relationship between funding and economic growth.  Over time it is hard to see how a ‘postcode lottery’ of local authority provision can be avoided.

At least under the new system it should be clearer to local authorities what they need to do to get more money.  The Government hopes for a sea change in the way local authorities see their local economies and engage with the Government.  The old system of needs related grants was seen as a disincentive for authorities actively to manage economic development but also encouraged authorities constantly to approach the Government with the begging bowl.   In future, the Government  expects local authorities to look closer to home to meet their income needs.   That should be a considerable shot in the arm for local government.  

It would be nice to think that the changes will encourage local authorities to take a harder look at how their activities can create wealth.  Unfortunately, even in areas where the local economy is growing strongly,  the effect of austerity will mean that all authorities will still be making cuts, but some authorities will have to cut further, deeper and more quickly than others.  This probably means the begging bowl will not be consigned to the attic just yet.

Another consequence is that local government finance has suddenly become a whole lot more complicated, which will make it harder for everyone, including governments and voters to understand what is going on.

The old system was supposed to work in such a way that differences in spending choices were reflected in the relative levels of Council Tax.  Under the new system,  authorities will still differ from each other according to how they manage costs, but they will also now differ more strongly than in the past in the way they manage tax income.  This means that if my authority now sets a higher Council Tax or makes bigger spending cuts than  its neighbours, it might be because they are profligate and inefficient, or it might be because the Council next door is the one with the new estate and the out-of-town shopping centre.

Rates retention will change the way we all think about local government finance in England in unpredictable ways, and the indications are that it may have a more immediate impact than expected.