One scenario outlined in the ‘Future Councils’ report suggests that a lack of funding and new rights for citizens over planning and service delivery could by 2020 leave local authorities in the same kind of position as the Californian state government: struggling to provide services in the face of high demands, low income and increased direct democracy.

Drawing on an analysis of anticipated and emerging trends across the sector and in national politics, the report predicts that councils of the future will take on substantially less direct responsibility for service delivery. In particular the report suggests there will be an increasing emphasis on commissioning services and more devolution of power to neighbourhoods and individuals.

NLGN Director and report author Simon Parker, said:

“Local authorities are quietly preparing to transform the way they work in response to budget cuts. Some services will change radically as councils become commissioning hubs. Expect councils to redesign everything from social care to street cleaning, more delivery by the private and voluntary sectors, and an increased reliance on personal budgets.

“This is a time of risk and possibility for local government. Town halls could find themselves becoming less relevant as direct democracy and consumer-led services start to bypass local democracy. The key for councils who want to remain at the heart of their communities is not just good service delivery, but strong political leadership to drive economic and social growth for their residents.”

In a foreword to the report, Northumberland County Council Chief Executive Steve Stewart said:

“The scenario-based approach taken here is essential. It’s not just the preserve of think tanks and academics. It’s essential for practitioners, especially over the next few years if we are to sustain any kind of economic and social resilience in our places. None of these scenarios might actually materialise, but is likely that elements of all of them could.”

Based on a scenario planning exercise involving senior figures from local government and an analysis of existing council plans for change, ‘Future Councils’ highlights a number of ways town halls could be transformed over the next eight years to 2020 as the cuts bite. These include:

1. Councils in areas such as the north east clustering together into new regional federations to manage economic growth and share their services – with some having Boris Johnson-style ‘metro mayors’

2. Councils introducing ‘pay as you go’ public services for residents and selling their services to neighbouring boroughs, allowing them to cut council tax and perhaps even pay dividends to poorer residents

3. A handful of local authorities that try to commission most of their services might become ‘residual councils’ – a commissioning hub that directly delivers almost no public services.

The new report, Changing Behaviours, has identified a number of innovative case studies and pilot projects where councils have afforded citizens an increased role in re-inventing services, resulting in cost reductions for councils of between 15 and 20 percent.

However, the report also warns that government itself must radically change to initiate and maximise these approaches. Greater resources and emphasis need to be invested in effective communication with residents and in putting support measures in place to enable a more active role for individual citizens in designing their public services.

Report author and NLGN’s Head of Research, Nigel Keohane said:

“With local government facing the daunting challenges of dealing with massive budget reductions whilst renewing their relationship with citizens, councils need to take the lead in adopting behaviour change techniques to make the Government’s ‘Big Society’ agenda a reality.”

“Our research shows that identifying ‘Citizen Pioneers’ who are prepared to initiate and lead increased public engagement with service design can encourage wider participation among communities as these practices become part of the norm.” The report sets out practical tools available to councils to better understand citizens’ underlying motivations so that services can be personalised to their needs and values. This detailed social insight allows councils to gauge and test what support, advice and messages citizens would respond positively to.

Based on extensive research across the sector, Show Me the Money: Accounting for localism is the first comprehensive analysis of the future of local government audit and warns that the abolition of the Audit Commission could have a disastrous effect on public faith in local government if ineffective safeguards allow council finances to fail. To prevent this, the government must actively encourage the public’s involvement and allow a ‘Citizen Right of Appeal’ in circumstances where auditor independence may be compromised.

The report also calls on government to avert the dangers of an uncompetitive audit market and higher costs to councils. NLGN recommends that the Audit Commission Practice is rolled out as a mutual, to create another ‘player’ to compete with existing providers and drive market competition and quality.

Report author Olivier Roth said:

“We’re pleased to see that the government has recognized the need for a more open and less centralized system for auditing local councils, but if the new model doesn’t work and we see the deterioration or collapse of some councils’ finances, then public confidence in localism will be seriously undermined. With the audit landscape and public finances in turmoil, the best way to reassure citizens is to let them take the front seat in the drive for stable council finances.”

“Without the Audit Commission Practice acting as an additional player in the market, there are real concerns that the market could become a closed shop, barring new business entry and raising the costs faced by councils. NLGN’s new model of audit would not only reinforce local accountability but also provide a unique chance to ensure an open, competitive and inclusive audit market”

Show Me the Money also argues that barriers to entry for small and medium tier firms should be removed by reducing the complexity of audit requirements and clear guidance introduced to guard against appointing on current ‘experience’.

Below researcher Olivier Roth discusses the details of his new report on the proposed shake up of local government auditing and accounting.

Councils are looking at grant cuts of 26% in the period to 2014, with some expected to save as much as 8.8% of total expenditure in the first year, and a median expectation of 5.8%. The NLGN report, Shared Necessities: the next generation of shared services, concludes however, that even in a best case scenario, sharing back office services will limit savings to 3.6% of expenditure; with a more realistic expectation of 1.8%.

The report, carried out by the think tank’s research unit, recommends councils adopt a presumption in favour of sharing services, incorporating the concept within service redesigns and all transformations being used to manage the impact of cuts.

Launching the report, NLGN’s Tom Symons said:

“These are tough times for local authorities but a narrow focus on how best to make efficiency savings will be insufficient if they are to handle the lasting impact of spending cuts. Those councils that boldly go beyond the back office when considering shared service agreements will emerge in time as leaner and sharper organisations better able to deliver the services people need.”

The report authors conclude:

“New models of shared services, from sharing chief executives and senior management teams to virtual centres, are aimed at helping local authorities with the practicalities of sharing, as well as fitting them into much broader strategies for organisational change. There are implications for the nature of local authority workforces, and potential for reform of organisational structures to more generalist pools of employees, coupled with targeted incentives, to help combat the ‘human’ barrier to sharing.”

“Sharing services also brings questions about the nature of local authority boundaries to the fore. We are keen to preserve existing democratic structures but there is a vital debate to be had about the potential for the majority of council services to be merged together across economic geographies. It is also apparent that the ‘market’ for shared services is underdeveloped.”

The NLGN report also includes a toolkit for local authorities and their partner organisations looking to embark upon the shared services journey; and recommends the development of an ‘eHarmony-style’ market place for councils looking to share and trade services, as well as the piloting of ‘invest-to-save’ bonds to finance wide-scale transformation and service redesign.

The NLGN shared services survey results can be downloaded HERE

This report was kindly supported by Bevan Brittan, Capgemini and SAP.

Next Localism: Five trends for the future of local government explores how a new relationship between State and Citizen could make a reality of the freedoms needed to fulfil local government’s ambition, shape the future of local democracy and ‘lock in’ localism into the wider public service reform agenda.

The report demands three key reforms from central government that would herald a new era of localism:

• Greater financial reform: to reduce local government’s dependency on Westminster by letting councils raise more than half of their own money from local sources, up from less than 40% at present.
  
• New management powers: to improve local services, with councils able to bid to manage elements of budgets currently controlled by Whitehall, such as health, police and jobcentres, so councils can help design more efficient and personalised local services.
  
• Greater Whitehall reform: with central government better joined-up on policy, localism integrated into the decision-making process, and ministers and their officials set more hurdles to stop the micro-management of localities.

Report author, NLGN’s new Director Simon Parker said:

“The Localism Bill sets out an important direction of travel, devolving some key powers to councils and their communities. But the framework in which our Town Halls operate is still severely limited, and the latest financial settlement ties one hand behind their back.”

“NLGN is today calling for greater financial freedom, more devolved power and a redefined relationship between central and local government to bring about a new era of truly sustainable localism.”

“At a time of challenging cuts, there is a real danger of localism becoming associated with low cost and low value public services. Councils themselves must rise to this challenge by meeting budget cuts with innovative and ambitious thinking”

NLGN has also identified five shifts for how councils can be more ambitious:

1. A shift from retrenching to redeveloping. Once the first wave of cuts is over, councils must decide whether they want to become less ambitious, or whether they will transform their services and develop new roles in their communities.

2. Local government needs to move from simply piloting new approaches to transforming services on an industrial scale. Over the coming years, local and central government will need to be much bolder, working together to rapidly bring approaches such as early intervention, prevention and community-based budgeting into the mainstream.

3. A shift from wholesale to retail provision as services are increasingly sold directly to individuals. This trend is most obvious in social care, where the government is preparing to shove councils down the route of personal budgets. But other services such as health and education are also being marketised.

4. A shift in the political role of councils from being primarily service providers to becoming democratic hubs. As the shared or commissioned services approach strips members of their role as elected service managers, they will need to embrace a role that combines traditional voter advocacy with community capacity building and social entrepreneurship.

5. Local government will have to move from place-shaping to community development. Instead of planning better places from the town hall, councils will need to help citizens and communities make better choices for themselves by providing them with information and advice, and by building up intangible assets like trust and social capital.

The New Local Government Network has drawn up a list of proposals and safeguards to create better working practices between the Commissioners and Police and Crime Panels (PCPs), the body established to hold the new elected post to account. Amongst them include:

• Imposing a duty on Police Commissioners to regularly engage with partners
  
• Giving elected councillors, through PCPs, a role to influence the budget-setting process
  
• Allowing PCPs the power of veto, requiring a two-third majority, over certain key decisions, such as setting the budget and the appointment of chief constables
  
• Handing over Police Commissioner powers to newly elected city mayors
  
• Allowing chief constables to appeal to PCPs should they feel their operational independence is threatened.

The report also warns against greater politicisation of local law enforcement. Author Olivier Roth said:

“While directly elected Police and Crime Commissioners should improve police visibility and give citizens a channel through which they can address their concerns, there is a risk that electoral considerations could influence the actions and focus of Police and Crime Commissioners, and that these will become too politicised. As a repository of local democracy, and a link to partners responsible for tackling the broader drivers of crime, Police and Crime Panels should play an important part in this process, and have their functions commensurately increased”.

The report also argues that:

“Police and Crime Commissioners will therefore have to work in partnership with local authorities and other public bodies, with citizens and communities, and with the newly created National Crime Agency in order to deliver positive policing outcomes. Police and Crime Commissioners should not be able to circumvent these partnership workings, many of which tackle the drivers of crime, and should therefore be required to consult and work with these entities on a regular basis. This engagement should provide further opportunities for neighbourhoods and citizens to participate in the improvement of crime outcomes.”

In a new report the think tank urges the Government to abolish the ultra vires principle – in place to ensure that councils do not stray beyond their powers – and allow them to implement actions unless they are expressly forbidden by law.

With parliament shortly to consider legislating for a General Power of Competence for local authorities, NLGN’s report sets out a series of innovative activities that councils could consider adopting and makes recommendations on how the reform should be enacted.

In the context of local authorities losing a third of Central Government funding over the next four years, the research argues that councils must be freed to develop new revenue streams and income, and allowed to work more innovatively in partnership with the private sector, local community groups and other public bodies to drive out savings and re-design services.

The research analyses possible new ventures and activities for local authorities to consider, including

• offering banking, insurance and credit services to local businesses and residents;
  
• grouping together in innovative partnerships to drive efficiencies and generate income or to devolve powers and responsibilities to the neighbourhood level;
  
• trading and selling a wider range of products and expertise (such as recruitment services, energy, communication and business services) to the private sector as well as other public agencies;
  
• varying charging rates for planning and licensing fees to reflect local circumstances and costs;
  
• adjusting tax rates and reliefs to incentivise behaviour on recycling, business development or property usage.

In legislating for change, the report calls on the Government to consider a series of additional freedoms to make the reform meaningful. These include allowing councils to act as they like in the interests of their local communities as long as their action is not specifically illegal, permitting local authorities to flex and vary taxes within the existing tax regime and carrying out a thorough examination of current laws to remove inappropriate legislation.

Report author and NLGN’s Head of Research, Nigel Keohane, said:

‘This power has the potential to be a major piece of reform that heralds a new era of localism. For too long, democratically-elected councils have been restricted in what they can do and vulnerable to legal challenge for adopting innovative responses to local challenges.

‘In the difficult financial landscape ahead, local authorities need full discretion to engage in new ways with their community, to save money through efficiencies and to develop income to safeguard frontline services.

‘To work it will require a leap of faith from national politicians to give local areas the necessary latitude for innovation to thrive. It will then rest on the ambition and aspiration of local communities to determine how best to improve the lives of their residents.’

Publishing a on the future of public service inspection, NLGN warns that wholesale abolition of assessment regimes could risk “throwing the baby out with the bathwater” and instead suggests that inspections of key services should move to a ‘risk-based’ weighted approach that would offer intensive support to underperforming councils but much more infrequent and lighter inspection to those performing well.

Having only been in place since 2009, CAA has been criticised for being too expensive and overly burdensome. A number of local authorities have publicly announced that they will limit the amount of time afforded to collating data for the inspectorate. Government plans to scrap CAA may lead to local authorities only being held to account through elections and through more transparent listing of their spending and decision making.

Under NLGN’s model, citizens would be encouraged to take a greater role in service provision and in holding their public services to account. They would be able to petition the LGA if they feel that the quality of a specific local service is declining or is not up-to-standards and if the internal procedure of the council or service is not satisfactory. Citizens would also be given access to more transparent information on how council money is spent, as a means of strengthening local democracy, and be invited to act as “bare-foot” assessors of local services.

The report also points towards a redefined role for the Audit Commission, which would focus more on financial auditing functions and on being a gate-keeper for other inspectorates such as OFSTED and the Care Quality Commission.

The local government family, led by the LGA, would take on a greater role in supporting underperforming councils and providing peer-led reviews.

Author of the report and NLGN Researcher Olivier Roth said:

“Each year local authorities spend around £150 billion of public money and it is therefore fundamental how we assess our public services and allow citizens a fair voice in monitoring them. We should enhance the role that citizens can play in holding their local public services to account through transparency and increased citizen engagement. Transparency and clear accountability must sit at the heart of the response, so that citizens have the necessary tools with which to hold elected politicians and officials to account. Effective assessment can underpin local democracy.

“One of the lessons of CAA is that adversarial and external inspections can only take improvement so far. For improvement to be real and lasting, it has to be embraced by the organisation attempting to improve. It is local government that possesses the experience, the skills and the mindset to identify possible improvements, and to find the right solutions to enable them. The assessment process should be owned by the local government family, as it possesses the required democratic legitimacy, buy in, and know-how needed to implement real and substantial changes.”

At the report launch, Cllr David Parsons praised the report as “a timely contribution to the debate on the future of audit and inspection.” Gareth Davies affirmed the report’s thesis that “independent local audit is fundamentally important” and Dr. Ita O’Donovan declared that we need to be “much more imaginative at the local level” as we decide upon the future of audit and assessment.

NLGN’s latest paper, Making Sense of Entitlement, argues that the use of entitlements and guarantees to citizens replicates many of the problems of traditional performance targets and restricts the ability of services to focus on the needs of their local communities. It concludes that users would benefit and better outcomes could be achieved more efficiently if public services were subject to less central instruction, as long as the necessary safeguards of transparency, scrutiny and accountability to local citizens are in place.

Entitlements offering public service users a number of guaranteed commitments from public services were a prominent feature of policy under the previous government. They included:

• Maximum waiting times in the NHS
  
• Free care at home for older people and the disabled
  
• ‘September Guarantee’ offering all 16 and 17 year old school leavers a guaranteed place in education or training
  
• One-to-one tuition for all school children falling behind in English and Maths

NLGN’s report highlights the considerable evidence that uniform entitlements distort the priorities of frontline staff away from providing the best possible service, towards fulfilling specific entitlements at the behest of civil servants in Whitehall. Entitlements such as the NHS waiting times are also vulnerable to manipulation, for example holding A&E patients in ambulances so as to process them within the four hour maximum wait.

As such NLGN recommends that:

1. 1) Priorities and policy aims should be formulated on the basis of a negotiated agreement between central government and the local authority based on policy objectives and the needs of the local community. Drawing on the findings from the Total Place pilots, NLGN proposes that such a ‘Place Agreement’ should define clear service outcomes to be achieved locally and include additional devolution of funding and powers to meet these objectives.

2. 2) To provide the necessary safeguards, both central and local government should ensure that public service outcomes are clearly transparent and accountable to citizens. This should be done through a series of measures including e-transparency, an assessment system focused fundamentally on the citizen, and greater scrutiny from the local government family. Such a system will be the focus of NLGN’s forthcoming report in July 2010 on the ‘Future of Assessment’.

3. 3) Where the Coalition Government chooses to maintain or introduce future entitlements, that these should be broad and outcome-focused, rather than narrow and procedural, to allow local bodies flexibility to meet the needs of their community. The Policing pledge commitment to spending time on the beat working to agreed neighbourhood priorities is a positive example.

4. 4) Local authorities should be given greater responsibility for services such as healthcare and policing – strengthening joined up working and giving a cohesive democratic mandate to locally-responsive priorities.

Luke Hildyard, the report author said:

‘Fears of public services suffering as a result of the abandonment of entitlements are unfounded. Equivalently resourced services ought to be capable of producing better outcomes if they are subject to less central instruction, not worse. Provided the necessary safeguards of transparency, scrutiny and accountability to citizens are in place, public service users will benefit if the coalition’s move towards a more devolved, locally-focused system of public service management leads to the scaling down of uniform national guarantees’

In one of the most detailed studies so far on Total Place, the research finds that whilst billions of savings could be achieved at the local level by better joined-up services, a lack of coherence between Government departments and a historic reluctance to devolve threatens to derail the project. The report is timed to inform the debate around the future of Total Place before further announcements are made in the Budget.

NLGN’s report argues that major change is needed at the centre to break existing top-down models and cultures of accountability and service delivery, which lead to significant inefficiency and wastage in public services. For instance, one local pilot uncovered as many as 50 different benefits each with their own form, rules and administrative machinery; another has calculated that it costs as much as £135m to spend £176m on economic development projects. NLGN’s analysis shows that major benefits can be unlocked by a more collaborative approach to public sector assets and building services around the citizen at a local level.

The report advocates the setting up of a new Department for Devolved Government to subsume CLG and the Cabinet Office and the Scottish and Welsh offices to drive devolution across Whitehall and release greater freedoms and powers for locally elected politicians to coordinate activity and decide how and where services are delivered. As part of this, accountability for public health budgets and local policing should be devolved immediately to all local authorities.

It also argues that localities and national government should come to a new series of deals on devolving public money and delivery responsibilities across a wider range of services such as employment and skills. These Place Proposition Agreements would allow local areas to set out how they could provide improved services for less money as a response to the expected cuts in public sector budgets.

Further recommendations in the NLGN report include:

• Allowing councils full discretion over spend across regeneration, transport and housing in a single capital pot;
  
• Establishing a new Joint Parliamentary and Local Government ‘Total Place Progress Committee’ comprised of MPs and local council leaders to scrutinise cross-government activity;
  
• Strengthening existing Local Strategic Partnership arrangements and moving towards more statutory, incorporated and focused Public Service Boards;
  
• Undertaking total counts of public resources and asset mapping across all local areas as a catalyst for collaborative approaches;
  
• Setting up a Collaborative Leadership Academy to develop leadership across the public sector.

‘The concept of aligning all public resources in an area around the needs of its community is simple and commonsense. Putting it into practice, however, remains a major challenge not just for local areas but also for Whitehall. The changes needed go way beyond merely removing a few ring-fenced budgets or performance targets. Our cultures of governing and our current systems of funding and accountability cut through and undermine our focus on what the citizen needs.

‘With public sector budgets under pressure, it is more important now than ever that we seek to institute reforms that can ensure the most targeted and efficient responses to our local communities. This must include greater freedoms, responsibilities and resources at the local level.’

NLGN’s report was undertaken with support from Cap Gemini, Grant Thornton, Leadership Centre for Local Government and London Councils.