Paul O’Brien on LGSS, City Deals & Mad Science

Paul O’Brien is chief executive of the Association for Public Service Excellence. He has worked in and with local government for 30 years and joined APSE as principal officer in Scotland in 1999.

Room 151: How does APSE work with councils?

Paul O’Brien: We’re an unincorporated association and local authorities own us. We have 235 member owners and provide services; research, advice, the UK’s biggest local government benchmarking system, training, events and lobbying.

Room 151: Are councils doing the most to make the most out of their properties? What sorts of amounts of money are to be made there?

PB: They’re waking up to it now. Ten to fifteen years ago people were starting to get their act together on asset management and putting integrated registers into place: that was the beginning of the recognition of the values of assets.

In the last two to three years that has galloped in pace because of the cuts situation. Another driver is the climate change agenda. Look at something like the fact that in England and and Wales local government’s property portfolio is worth £250bn. Then you consider that you can rationalise that and make savings selling off properties, but also if you can ‘green’ those properties make them more energy efficient, you can make savings on top of that.

Currently one fifth of revenue expenditure in local government goes on managing property portfolios. A thirty percent reduction in space would equal £7bn of annual savings. When you also consider that some estimates say that energy prices could rise 80% by 2020 there’s extra potential there.

Room 151: Do councils talk enough to each other enough about innovation?

PO: In APSE circles they do. We put them in touch with each other, from our advisory group network to our events. That is the focus of the organisation: looking for best practice, innovation, trying to share that with each other. There are 20,000 people participating in our network that are engaged in trying to improve, gain in efficiency and drive value for money.

In our research projects there are a whole raft of programmes we’ve undertaken on innovation and entrepreneurship. In service redesign for example, some would claim that you can save as much as 25% by redesigning a service.

We’ve been doing these things for years, 10-15 years ago it was called business process re-engineering, but to give you an example, under compulsory competitive tendering you had to have client/ contractor splits. People had to commission the contract and people had to deliver it. So in housing for example a tenant would phone up to say that a washer needs fixing, in the old days they would have sent an inspector out who would say, yes, a washer needs fixing on that tap. He’d go back to the office, write a line to the contractor, who would send someone out to measure up for materials, then they’d go back and order the materials, then send out an operative to do the work, he would come back and report to the management team and the office would send notification to the client that the work was completed. The client would then go out and inspect the work and say it was of appropriate quality and issue a line back to the contractor who would issue an invoice to the client who would sign it off and transfer payment to the contractor.

That process back then took 15 steps in the supply. By merging the client and contractor you could get that down to five steps. There didn’t need to be this false split in the authority. That’s not even factoring in new technology like handheld technology which makes it even easier. In an authority I worked in there was a great example of that where an elderly person phoned up for a repair, they issued an emergency response straight away and had vehicle tracking so were then able to get a van to turn up outside the tenant’s door while they were still taking details on the phone – that’s the difference you get if you take that type of approach.

With innovation that requires investment you have to go to the S151 officer to get sign off and there are lots of examples where making that investment really pays. In Wrexham they have just fitted solar panels requiring £20m in investment but they will make £25m over 20 years because of the feed in tariff.

Another example of that is at Preston where the council are looking at putting up wind turbines which will have £12m capital investment, £5m in borrowing costs then as soon as the turbines start spinning there is something like £52m return over 20 years, a net benefit of £35m to the citizens of Preston.

Room 151: Do councils talk enough to other organisations about their asset management strategies?

PB: The problem I have with it is that it is still talk. That’s not the councils’ fault. Local government has tried to push this over the last five years and brought ideas to the table about Total Place working, that sort of concept. But you get so far and it comes to committing budget and the other services have reverted back to their own priorities.

I think over the last two years when the cuts started coming down the line across public services a lot of people retrenched – their budgets were cut so they weren’t willing to open up budget to other organisations. This year with the scale of cuts and how it continues to hurt, it’s something that people need to come back to.

There have been places where people have shared properties between services and there have been a lot of people who have been at advanced stages of discussions but it hasn’t gone far enough, fast enough. I think councils have shown community leadership but just at the time when other organisations were perhaps ready to commit, huge cuts came along and people backed off.

Room 151: Where else can councils save or make money?

PB: I like to talk about a triangle of excellence: efficiency, income generation and innovation.

Efficiency is everything we have touched on already: energy efficiency, redesigning services, shared management etc. Income generation is charging and trading to make your services go further – local authorities really need to make sure they have a well thought-through charging and trading strategy in place.

Room 151: Aren’t councils making the most out of charging and trading?

PB: There was a report by the Audit Commission a couple of years ago which identified that only 50% of councils had that type of strategy in place. Something like £11bn was raised in 2008-9 through this, my view is it’s only going to increase. However, no one wants to see the public being targeted for more funds in the current climate. Where businesses are using local authority facilities and assets they should pay for it – the likes of when business digs up the roads, they should be paying the local authority for putting them right again.

There are a lot of authorities looking at whether they can work for other organisations and do partnerships, providing services. If an LA has a good property maintenance service in place why don’t they provide the service to the health authority and Job Centre Plus? They do it for police and fire in many instances but they can can provide those services on a charged-for basis.

Councils can even provide services to other councils. LGSS is Local Government Shared Services, where Northamptonshire and Cambridgeshire have shared their services but they are now providing services to Norwich, to East Northants and other authorities, about four or five of them, and they are charging for their services.

There are a lot of local authority trading companies set up now, in Shropshire they’re trying to do work for the private sector.

There have been a lot of trading companies set up to deal with social care because the market for it is so fragmented. It’s a huge issue and the largest part of councils’ budget, something has to give there, in fact we would like to see a cross party commission looking at the future funding of social care because it is just placing so much strain on all the other services.

So just going back to the triangle of things councils can do, the third side is innovation and that is all the things like the green issue, raising finance through wind power, biomass, geothermal etc.

The three main vehicles for that are the Feed in Tariff, the renewable obligations certificates that are available for wind and the renewable heating centres that gives you the financing for biomass boilers. Also a huge one is the Green Deal which is about to land in October. In our view local government has to be at the heart of that, it’s a huge opportunity for local jobs and supply and local government can help avoid leakage from local economies.

The green agenda is currently the only area you can have some growth in, its the shining light at the end of a long dark tunnel of cuts.

The S151 officer is crucial to this agenda, councils have to get political support for it and they have to get management support, it’s not something you do because it’s a nice thing to do, it’s something with a financial opportunity. Risk is obviously an issue. Some will look at their borrowing thresholds and say they can’t do anything – but it brings a government guaranteed revenue stream, you can’t get much better than that.

Room 151: Do you agree with the concept of core cities and City Deals?

PO: It’s important that authorities collaborate with each other but prescribing that things should go through cities isn’t the route I would go. Talking about LGSS again, some of those authorities are within a couple of hundred miles of each other and if it works for them I think they should be allowed to do that. We shouldn’t put all the eggs in one basket.

Having said that I have seen the good work the Association of Greater Manchester Authorities has done over the years and working together has worked for them. It can be successful but I don’t think we should prescribe it as a medicine for the whole country.

Room 151: Can different delivery models like mutuals help save money?

PO: Only on a niche basis. I have seen some good examples where authorities have worked closely with the third sector, some of those furniture collection schemes for recycling have been successful and got people back into employment as well. Is it a mass answer for the situation we’re in now? I don’t think so. Francis Maude’s idea of 25% of local government service being delivered through co-ops and mutuals by 2013 or 2014? Ain’t going to happen.

We looked at thousands of pieces of evidence and came up with only twelve examples where these had been put in place with partial success within the public sector. They require a number of things to be in place, not in the least some sort of guaranteed lifetime of contract with the local authority and ongoing support.

If there’s really no evidence base for these you can’t suddenly hand over a quarter of local government services to it, that’s a bit of a mad science experiment.

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The Local Authority Treasurers’ Investment Forum September 25th, 2012, London Stock Exchange
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