Self-sufficiency ‘forcing commercial drive’
Raising revenue by charging for services plays a part in 40% of councils’ strategies – with the trend set to grow due to the abolition of revenue support grant, according to a new report.
The study is based on the results of a recent leadership forum held by private supplier Civica, supported by the Chartered Institute of Public Finance and Accountancy.
It found that local authorities are increasingly adopting commercial strategies to create alternative income streams as they look to become financially self-sufficient.
Paul Bradbury, group business development director at Civica, said: “What is new about this report is that it highlights some examples of innovation. Up until now, a lot of focus by councils has been on cost removal – shared services was never necessarily about trading models.
“Now we are seeing some very bold steps taking on the private sector in its traditional heartlands.”
Rob Whiteman, chief executive of CIPFA, said: “Local authorities will always be institutions that act in the public interest. It is not that they are suddenly becoming companies, or only thinking about a profit motive.
“But they are balancing their public interest duties with the need to maximise revenue as far as they can because of the degree of fiscal austerity they face.”
Whiteman called for a culture change in local authorities to accept more risk in financial decision making.
He said: “Companies work on the basis that not every risk works out well and sometimes you lose money and sink expenditure. We are having to get public bodies to that place.
“Where councils won’t take risk is around the public and the way they protect them, but they should accept some organisational risk and invest in some things.”
Vic Allison, deputy managing director at Wychavon District Council, agreed, saying that increased commercialisation does not necessarily rely on councils recruiting finance staff with different skills.
He said: “I am not sure it is a skill. It is a behaviour relating to your attitude to risk and thinking differently.
“It is getting politicians to understand. Providing you are doing it for the right reasons, you can justify it. Don’t be ashamed of making money and acting in a commercial way.”
Wychavon sells a number of services to other local authorities and has created a green waste collection service which raises money from charges to residents.
Peter Gillett, the former chief finance officer at Bristol City Council and now director of Cothan Solutions, said: “I think councils have little option other than to embrace commercialisation. They simply can’t continue to rely on existing funding streams to provide front line services.”
Download the Civica report: The Commercial Imperative