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Realising the vision for self-sustaining councils

Source: PSE - April/ May 16

The National Audit Office’s (NAO’s)director of value for money, DCLG and Local Government, Aileen Murphie, discusses the need for careful planning to realise the vision for self-sustaining local government by 2020.

Local government has seen significant funding reductions since 2010: we have estimated that local authorities have seen a 37% reduction in support since then. 

The latest local government financial settlement indicates a fairly positive picture to 2019-20. But reductions in spending power continue up to 2017-18, and then spending power returns to growth (in cash terms). The future is for the Revenue Support Grant to disappear by 2020, for local authorities to retain all of their business rates and become financially self-sustaining. 

The financial position, changes in train for 2020 and the emphasis on increasing local economic growth mean that all authorities are looking to increase their commercial activities. On the upside, new initiatives like City Deals and devolution deals have catalysed local innovation. However, there are also risks associated with increasing commercialisation and projects. 

The NAO scrutinises public spending for Parliament and we also set the standards by which local auditors of over 950 local public bodies carry out their work, contained in the Code of Audit Practice. Through our work we seek to help public service managers to improve performance and service delivery, both nationally and locally.

Achieving value for money 

So, thinking about how to achieve value for money locally, what auditors will be assessing is that in all significant respects, the audited body takes properly informed decisions and deploys resources to achieve planned and sustainable outcomes for taxpayers and local people. 

When thinking about investing in new projects, for example, councils should consider how robust plans are. Would the project still be a good investment if input costs doubled, payback halved and it took twice as long? 

Resources need to be deployed sustainably, so income which could be uncertain poses risks. Collaborative working is common now, and here it is critical that authorities understand where the financial risk lies and make sure that governance is clear, with decision-making agreed between all parties. 

Pitfalls to improvement 

We are all keen to see improvement in outcomes. The NAO has come up with four pervasive issues which halt improvement: 

  • Conflicting priorities are continually challenging. It takes clear analysis to ensure that an authority is concentrating on the things that matter to their citizens.
  • Inconvenient facts are often ignored. There have been over 50 attempts to pool budgets locally since the 1990s for instance. What are the real barriers?
  • Out of sight, out of mind is a trap for the unwary. A new project needs regular detailed reporting on progress.
  • Not learning from mistakes is a key failing. When considering a new idea, check to see who has done this before and what happened. Someone, somewhere will have useful experience to tap into. 

Local authorities have worked hard to manage reductions in government funding at a time of austerity and authorities are now more free to allocate funds according to local priorities. But pressure on services and income will need careful thought and planning to realise the vision for self-sustaining local government by 2020.

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