Richard Harbord: Public service reform and the risk of section 114s

 

The National Audit Office recently produced an interesting report called Local Public Service Reform. They look at the difficulties faced by the public sector and then how eight authorities, or groups of authorities, attempt to use innovation in meeting the challenges.

This report came within a few days of the annual outturn report for 2015-16, which has already been briefly reported in Room 151, and showed that an extra  £1.3bn was taken from balances in 2015–16 to support services.

I have considerable concern that as finance gets even tighter more local authorities will find it difficult to cope and that some are now unsustainable. I expect a number of Section 114 reports. These will come about because the need to provide a balanced budget will be in direct conflict with the desire to maintain services used by communities, but not essential to their survival.

The outturn report showed that local authorities are vulnerable to unforeseen expenditure, particularly on statutory services. But it comes at a time, as the NAO report states, when there has been a 6% increase in the number of children in care (between 2001 and 2015) and that the average cost per annum for a child in residential care is more than £130,000.

Councillors were not elected to close or curtail services and are clearly resistant to removal of services valued by their voters.

Too late

The report points out that there has been a £375m fall in central government funding between 2010-11 and 2015-16. And this after council tax local authorities’ income has dropped in real terms by 25%.

In a November 2014 NAO Report the comptroller and auditor general pointed out: “DCLG clearly expected that local authorities would need to adopt ambitious programmes of service transformation in order to maintain services,” but that DCLG had not assessed if such changes could deliver the necessary funding. In many cases this is still the position. In the early years of austerity many authorities found they could save quite large sums of money without major structural change. By the time those savings prove elusive it is too late to start a vigorous transformation programme.

There have also been significant variations in the level of cutbacks required in different authorities. Basically, the more dependent you were on government grant the worse your position has been.

It is not only local government, of course, police and crime commissioners have suffered similar reductions and NHS trusts ended 2015-16 with a combined deficit of £2.45bn. One council in the report states that 60% of its budget is spent on 2% of its population.

Mean of reform

The NAO concludes that reform means:

1. Prevent or reduce demand for costly services by making people and communities more resilient.
2. Make it easier for people to get access to the support they need through digital and other means.
3. Redesign services to meet people’s needs in a more integrated and effective way.

When this is done it should result in better outcomes for service users and citizens and put public services on a more sustainable footing.

Reform is seen as reducing the need for service cuts (doing less with less) and supplementary to efficiency savings (doing more with less).

Local authorities should also be maximising all sources of income including commercial ventures and bidding for funds from central government and other sources.

However, the report also notes that the Public Service Transformation Network predicted that £1.1bn of benefits to the wider economy could be made by public sector transformation projects. Of this £370m would be cashable. But it also noted that cashable benefits would not outstrip costs until 2019-20.

This underlies a difficulty where authorities have not started transformation in time and the benefits take some years to secure. Covering the “gap” in the interim will be very difficult indeed.

Richard Harbord is a former chief executive of Boston Borough Council.