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. 

Too small to fail

Perhaps this blog ought to be called ‘Too Small to Succeed: Too Important to Fail’.    The saga of the small District Councils the sustainability of which has been called into question by cuts in Government grants rumbles on. 

I wrote a few weeks ago about West Somerset, the nation’s smallest District  Council which has revealed that its finances are unsustainable in the long term because the pressures for growth on its expenditure cannot be matched by an increase in income.   This is the problem for the whole of local government in microcosm unless grants one day start to increase again, although some lucky authorities with growing Council Tax and Business Rates tax bases may escape the ultimate consequences.   The smallest Districts are hit first because their overheads are highest in proportion to overall spend.

 

Since what may become known as the ‘West Somerset Question’ was posed, the Government has come up with its chosen solution, which it is reported is to suggest West Somerset become a commissioning Council, outsourcing provision of services to others and reducing its overhead costs to a minimum.

This kind of things works- up to a point.  Clearly larger providers, such as neighbouring authorities or the private sector  can spread costs more easily and arguably the private sector has more acumen and more leverage when it comes to reducing costs.    But this can only be a temporary solution if austerity continues because it does not address the fundamental issue of growth in demand outstripping growth in income. 

Which underlines the problem, not just for small Districts but for all local authorities, that the often expounded solutions such as outsourcing and shared services in themselves do not do much more than buy time. There are limits to what even the most enterprising provider can do to keep making services more and more efficient.  Two other downsides to arms length provision- the cost of contract management and a risk of loss of democratic accountability are worth mentioning in passing and perhaps we will return to them in the future. 

Economists make the point that service industries, being people based, find it difficult to become more productive other than by managing access channels and moving to greater self-service.   Thus the doctor no longer visits you; you visit the doctor, and the bank offers better terms on investments if you agree to manage the account online.   Productivity improvements in services come from redesigning processes and asking people to do more for themselves.   This is the way forward, in my view, but in the public sector there is a limit to the pace at which this kind of change can be accomplished, the main blockers being ‘The Two V’s’ –the vulnerable… and votes.  

That doesn’t mean arms length providers are not worth considering, of course, because bringing in commercial expertise and the capacity to innovate can help find the longer term solutions, but simply changing the name of the provider is not going to be enough.

Just because a local authority is small in size doesn’t mean that is not vital to its community, and it would be shame if local authorities were forced to become less local in order to become more efficient.  Chubby Cat’s initial suggestion for the small Districts, which was to provide extra grants subject to the small authorities showing they had taken certain efficiency measures has been scotched by Government.  No more money.  Instead we have a solution which kicks the can down the road again – perhaps far enough for the economy to recover and bail us all out. Let us hope so.