Outsourcing alone will not solve all the problems local authorities face in juggling the pressures of budget and service demands, according to a roundtable debate organised by The MJ and Interserve, reports Dermott Calpin.
The long-established, and sometimes-complex relationship between the public and private sector in local government has come under new scrutiny because of the financial problems facing councils.
Confronted by the toughest round of grant settlements within a generation, and with no end in sight to pressure on budgets with increased demand from an ageing population and a rising birthrate, many local authorities look to outsource services as a major contributor to saving cash.
Yet, as recent research by YouGov for the support services and construction company, Interserve, underlines, outsourcing alone will not save councils from having to make important decisions about service priorities, and both councillors and senior managers will still face the task of juggling local budgets with the needs of their communities.
Given the scale of budget pressures facing councils, there is general recognition that more profound reforms are needed, and that was the centrepiece of the roundtable debate under the heading 'Local services in need of transformational change' organised by The MJ and Interserve.
As one speaker said: 'We have always worked with business and invested in our communities, and there are many small things we can do within our localities that will lead to improvements. The big challenge now is facing up to the fact that there is a funding crisis and just how we need to do things differently.'
According to another participant, councils have always juggled with budget pressures and local service priorities. 'My experience has always been that we try to improve things,' they said.
'And now it is very much about what we can do for ourselves. How can we improve our services – that’s what people get out of bed for, not just to make savings.'
If there was general agreement that 'people don't just come to work to save money', there was also recognition that new approaches are needed to service delivery with a greater premium on innovation and new ideas, precisely because 'they are driven by knowing that there is less money’ for councils.
'We are making changes because they are more effective if we are to really come to terms with some of the longer-terms change that our communities face. It's not just about money, it's more often than not about persuading people that they are doing something worthwhile that will be more effective.'
The debate on innovation is crucial to both the private and public sector relationship, with both sides recognising 'many people just like to do things the way they have always done them, and that's precisely the point – we can really struggle to engage and look at things differently'.
As one participant asked: 'How do we solve this conundrum? If you go around the country, there are almost three groups of innovation – there is third sector innovation, private sector innovation, and there is public sector innovation.
'Trying to get these groups together to sit around the table together to cross-fertilise and act as a catalyst for fresh thinking is very, very difficult – and sometimes this problem manifests itself most in the procurement process and looking at procurement models.
'What we often see is that people working in procurement tend to look backward, and just compare costs rather than take a much wider view and look at outputs. There is a danger that new ideas are drawn down into a homogenous process which really does not create innovation.'
For another speaker, local government has been more creative and successful in developing new approaches to purchasing. They claimed: 'If there are problems in procurement, they are much less so in local government than in central government. Central government is a lot worse!'
But councils also face more complex judgment in making decisions on the organisation and commissioning of services. Said one participant: 'Rightly or wrongly, the reality is that when we are organising services and care for some of our most vulnerable groups, the long-term framework is very important.
'It can take a great deal of effort and it can be a really difficult process – it is not just about costs, but about how we change the whole system and come up with really workable solutions that will really help change lives.
'This is all about really big cultural change in local government. We can feel that some of the things we want to do require a great deal of change and organisation, and we couldn’t just go to the market and look only at costs.
'And even when we have some very open processes, it can be quite difficult for us to describe exactly what we want in terms of outcomes – so no wonder the private sector sometimes struggles when we have a reducing pot of money but want to spend that on the most vulnerable people.'
Communication is often at a premium and many private sector companies report they still encounter problems developing effective working relationships with many councils and representative bodies such as the Local Government Association.
'Even when there are really good ideas, even when they are wanting to look ahead at long-term outcomes, it can be difficult just to get into conversation.
'Sometimes we are keen just to share thinking and ideas without any contractual obligations at all.'
From the local authority view: 'This is not solely about public services, but about economic change. We have to be pragmatic about when and where we use the private sector. If we over-engineer a contract, then we won't get that sensible, ethical decision-making that we need in public services.'
As one speaker stressed: 'Without the right sort of relationships, you won't deliver the effective services that people need.
'We have to get to a point where it's about a shared commitment. The challenge for the private sector is to come up with something that we can use – a lot of people talk as if they do separate things, but they do not.
They work alongside each other all the time.
'We need to keep talking and have a constant dialogue and identify those people we can work with. We may have less money but we want that money to go further. We want better outcomes.
'The challenge for local government will be to close that gap between those councils which are working successfully with the private sector to transform services and those which have not realised the extent of the challenges they face.'
Results of YouGov research on behalf of Interserve:
· local authority outsourcing of services has increased by 6% to 26% over the last year and is expected to reach 32% by 2014/15
· those councils which need to make greater-than-average savings – at least 25% efficiency savings – or which have larger budgets of more than £100m, plan to outsource up to 60% of all services
· other councils aim to keep a greater share of resources in-house or share services with other public sector providers, and say they plan to outsource just 20% of services by 2014/15
· 44% of councils say local political concerns are a serious barrier to outsourcing
· 44 % of councils still haven't implemented a strategy to deal with their budgetary challenges to 2014/15, compared with 79% this time last year
· 81% said outsourcing to a commercial partner had been successful, and 82% believe that outsourcing has a role to play in achieving their targets
· councils expect only 20% of outsourced council services to be provided by the third sector by 2015, and half to be provided by commercial providers by 2015
· 57% believe community budgets will have no effect (41%) or even reduce (16%) councils’ ability to meet their targets.
This was the third annual survey by YouGov and confirmed that local authorities are still faced with budget and service reductions that range from the 'unpalatable to unacceptable', according to one respondent.
Another suggested: 'Given the scale of the savings required, we need transformational change that delivers the same or better quality at 30% less cost – not the marginal improvements usually on offer.'
The full report, Local services – in need of transformational change, is available from the Interserve website.
Interserve/MJ roundtable Attendees:
· Steven Halls, chief executive, Three Rivers DC
· Joanna Killian, chief executive, Essex CC · Robert Moran, chief executive, Elmbridge BC
· Dave Smith, chief executive, Sunderland City Council
· Robert Tinlin, chief executive, Southend Council
· Stephen Weigel, chief executive, Tandridge DC
· Mark Peat, Interserve
· Tim Smith, Interserve Dougie Sutherland, Interserve
· Hannah Simpkins, Interserve
· Michael Burton, editorial director, The MJ
· Dermott Calpin, writer, The MJ
