Save money, save face
9 September, 2005

James MacGregor, Researcher, NLGN
Public Finance

The news that local authorities are well on course to achieve government targets for efficiency savings was announced with quiet satisfaction by ODPM at the beginning of August. Understandably so, when there has been a relatively smooth transition from announcement to delivery, particularly considering the trepidation within local government when it was announced that £6.45 billion of savings had to be achieved by 2007-08. This trepidation has been replaced by a renewed confidence in the ability of local authorities to meet and surpass central government efficiency requirements. Even more impressively, local authorities expect to exceed the required £1 billion in efficiency gains for the period 2005-06.



“It is in everyone’s interests to work in partnership to promote efficiency” said Phil Woolas MP, Local Government Minister, when welcoming the news, a statement which highlights the flexibility local authorities have in choosing exactly where and how to make savings. Gone are the days when councils owned all the delivery mechanisms in their locality, to be replaced by a brave new world of working hand-in-glove with the private, voluntary and community sectors in pursuit of best value.



This is not to say that the efficiency agenda is largely complete or that the remaining tasks are not challenging. The more effective use of resources, moving them from back office functions to service delivery, has long been a stated objective of governments across the world. While it is worth bearing in mind that the Gershon requirements are not as stringent as some would have wanted, the agenda differs from these oft-stated aims is that there have been real and quantifiable results in what should be seen as, in governance terms at least, a short time.



Examples abound of effective approaches to efficiency questions across the UK. Kingston-upon-Hull City Council, for example, has been successful in reinvesting money saved in streamlining back office functions in frontline services. The authority has implemented a council-wide ICT system to help recast its business processes, which will allow it to amalgamate the previously separate back office functions of procurement, finance and HR into a single business process and transfer the saved resources to the front line.



“Gershon targets won’t be met through marginal change”, says Paul Jackson, Efficiency Manager at Kingston-upon-Hull City Council. “What will meet them is a fundamental rethinking of the relationships between a local authority and its customers. Gershon gives us the opportunity to reshape our organisational structures to respond more effectively to local stakeholders.”



By taking a creative approach, Hull City Council has freed up resources for frontline service delivery and has exposed new avenues to explore that are improving their services, raising productivity, and enhancing value for money. These laudable goals and achievements should be recognised as such across central, regional, and local government.



Productivity has historically been driven up within organisations by the effective application of technology, be it the horse-drawn plough, the spinning jenny, or the personal computer. Local authorities are no exception to this rule and the use of technology, such as in Hull, has been a powerful catalyst for increased efficiency and greater value for money.



However, efficiency savings do not just mean more bang for your buck. Their importance spills over into the areas of democratic renewal and community leadership. Historically, some local authorities were perceived by businesses and private citizens as being inefficient. The Gershon regime can provide a useful tool to enable local authorities to demonstrate, in a quantifiable way, that they are providing improved and more wide-ranging services. When effectively communicated to customers, this increased kudos can play a powerful role in enhancing the legitimacy of every council action, reinforcing the local authority’s role in community leadership, and aiding the process of democratic renewal.



In absolute terms, the recently announced savings represent huge amounts of extremely useful public money. However, when looked at as a proportion of local government expenditure, 2.5 per cent is a modest and, some might say, marginal share. While it will not be transformational in itself, it is possible to envisage a time when local authorities are able to make even more significant efficiency savings than during this first round; delivering better local services; providing better value for money; being more creative about service delivery; and promoting modernisation and democratic renewal. Essentially, this is the equivalent of being bought the cake, eating it, and not putting on a single pound. Furthermore, it is achievable.



All this striking success begs a question: where next for local authority efficiency? I would argue that local authorities should not only accept further efficiency requirements but actively covet control over the efficiency agenda, driving it forward in the way only people working at the local level know how.



When new structures are developed, deployed and refined over time, as is happening in Hull, the possibilities for other councils to adapt and use these new business models become more apparent. This process, already underway in a number of local authorities across the UK, will not only allow councils to meet Gershon targets but affect more wide ranging and permanent change, turning any given council into a more customer responsive entity.



This process of promoting and sharing off-the-peg business models can only be driven by the desires of local authorities with the support of bodies like the Audit Commission, Local Government Association and IDeA. Local authorities should embrace the Gershon agenda in order to further legitimise local services in the eyes of local stakeholders. The upcoming New Local Government Network (NLGN) efficiency conference, with Phil Woolas MP speaking, will explore in detail the possibilities for the future of the efficiency agenda.



NLGN will publish a retrospective look at the development of the efficiency agenda in October that will examine some of the issues raised in this article.



The NLGN conference, Efficiency in Local Government 2005: the Second Wave, supported by Public Finance, will be held in London on 15 September. Details from www.nlgn.org.uk/conferences