The future is analogue – confirms local government’s Honey Man

Chris Game

Of all the reactions to Northamptonshire County Council’s controversial ‘Next Generation Model’ – abandoning service provision in favour of outsourcing everything to ‘specialist social enterprises’ – few can have been as measured and dispassionate as my colleague Ian Briggs’ reflections on the merits or otherwise of Public Interest Companies (PICs).

Personally, it came as a bit of a blast from the past. Typing that opening paragraph, I really couldn’t recall when I last consciously thought about that particular three-letter initialism that once seemed to feature in a good proportion of my lectures. Especially following the 2004 Companies Act, PICs were ubiquitous, and taxonomising them – and/or CICs (Community Interest Companies) – quite a fad: national and local, companies limited by guarantee, industrial and provident societies, limited companies owned by service users, unincorporated associations, social firms, share trusts, mutuals, co-operatives.

So, rusty as I am, I admit to being curious about how Northamptonshire’s down-sizing vision works out once it leaves the drawing board. This blog’s concern, though, is not Northamptonshire’s or any other single council’s future, but that of English local government as a whole – which, in a neat triad of happenstances, was also addressed last week, in the final report of the Independent Commission on Local Government Finance (ICLGF), Financing English Devolution.

The third part of the triad, unfortunately, is directly relevant only to those of us residing within reach of Birmingham’s fine Repertory Theatre, which also last week staged a highly successful production of Tyrone Huggins’ play, The Honey Man. So, three disparate events from which, if you’ll bear with me, I’ll attempt to draw a coherent theme.

The ICLGF was established by the LGA and CIPFA, and is chaired by Darra Singh. The former chief executive of Ealing and Luton Councils bears little physical resemblance to the St Kitts-born author/actor Huggins, but, if his report has the transformative impact he obviously hopes, he could reasonably claim in, say, a decade’s time, to have been English local government’s Honey Man.

Digitals see the world in terms of ones and zeros, black and white, right and wrong answers, clearly defined systems. Analogues understand and deal in approximations, probabilities and muddle, 50-plus shades of grey.

Successive governments – ministers and civil servants both – have tried for years to run local government as a single, centrally controlled, one-size-fits-all digital system. ‘Honey Man’ Darra Singh’s message is that, while local services will be delivered increasingly digitally, the delivering ‘system’, insofar as there is one, will be increasingly analogue.

Huggins’ Digital Projects have not been that extensively performed. Even so, it would be hard for their collective impact to have been any less than that of the first three efforts in the Local Finance Reform Quartet: the Layfield Committee (1976), the Balance of Funding Review (2004), and the Lyons Review (2007). All three started from the premiss that the status quo is unsatisfactory – lacking transparency, fairness, balance, and accountability – and major reform vital. Yet all were either ignored or, in Lyons’ case, attacked and effectively rejected by ministers within hours of publication.

This time, the reflex rubbishing was administered by Local Government Minister Kris Hopkins, who immediately dismissed the Commission’s proposals for local areas to determine the number and value of council tax bands, and for tax increase referendums to be abolished.

No change there, then – and clearly there won’t be from the present Conservative-led coalition. The question is whether the new lot after May accept that this time the Commission really isn’t crying wolf: that the future now facing many, if not most, councils – severely less money, increasing and more complex service demands, and cripplingly limited scope to raise additional revenue – really has regressed from unsatisfactory to unsustainable.  And recognise too that, following core grant cuts of 40%, radical reform is no longer urgent but imperative – if, that is, anything resembling a viable, democratically accountable, service-providing local government sector is to have a future.

There is of course, and always has been, an alternative: the wholly Contracting Council, famously envisioned in the 1980s by Conservative Environment Secretary Nicholas Ridley as meeting once a year to award all the council service contracts to private firms. A number of councils in recent years have gone some way down that road – most notably perhaps Suffolk and Barnet – and now Northamptonshire is preparing to go a good deal further.

Northamptonshire County Council, employer ten years ago of nearly 20,000 full- and part-time staff, plans in future a workforce of 150 max, with services formerly provided by the council or by council-run companies and partnerships being commissioned from external organisations: a Children’s Services Mutual, an Accountable Care Organisation for vulnerable adults, a Wellbeing Community Organisation, and a Place Shaping Company “to deliver services to improve Northamptonshire as a place”.

It’s analogue service provision alright, and pioneering, but not in the quite the form the Commission’s final report sets out. Nor last October’s interim report, although, reflecting the quite startling speed with which events have moved since the Scottish independence referendum, the two documents do have differing emphases.

The interim report, Public Money, Local Choice, underlined the need for council tax reform and for a desperately overdue property revaluation and banding revision.  But the headlines it earned were all about how, through full – rather than the present partial – retention of business rates and appropriate ‘equalisations’ between richer and poorer councils, English local government could by 2018-19 become financially self-sufficient and independent of central government grant funding.

There was an interim vagueness about how these equalisations would be managed, and a somewhat cavalier assertion (p.18) that “there is less disparity in wealth between the different parts of the country than in often assumed.”  The brief equalisation discussion, though, like the report generally, focused on individual local authorities, even down to numbers of toppers and toppees: “On 2018-19 projections, self-sufficiency would require 247 councils to ‘top up’ 106 councils. Most of this could be managed through transfers between councils in the same area.”

There was a passing reference to Combined Authorities perhaps playing a part in this redistributive process, but otherwise no mention of these institutions that since then have so dominated local government discourse – while the Pioneer Authorities that take centre-stage in last week’s final report weren’t even embryonic.

The Commission’s blueprint isn’t as immediately arresting as Northamptonshire’s and its timescale is inevitably longer. But, if even substantially implemented, the shift of the central-local balance from Whitehall and Westminster to English cities and regions would be profound. Following a 10-year devolution programme, more than £200 billion of annual public spending would be controlled at ‘sub-national’ level – or twice the current total of English local authorities’ net revenue service expenditure.

The key analogue feature of the Commission’s programme is what tekkies would call its two- or variable-speed gearbox. All councils would have multi-year funding settlements, freedom to set council tax and tax discounts, and would retain 100% of business rates and business rate growth.

But there would also be ‘Pioneer’ authorities: combined authorities wishing and judged able to reform at a faster pace. These could vary council tax bands and undertake their own revaluations, have access to new or devolved taxes like stamp duty, tourism and airport taxes, and, most significantly, would control single place-based budgets covering a full range of public services, including transport, community safety, and – starting already with Greater Manchester – health.

As the Honey Man’s Commission notes, the analogue principle of variability has already been established, with city deals and devolution packages to Combined Authorities. These latter are clearly the key – which is why the honey coming the way of Birmingham and the West Midlands so far has been mostly the unblended stuff, while Greater Manchester is already onto the organic.

Chris Game - pic

Chris Game is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.

An earlier, more Birmingham-focused version of this blog appeared in The Chamberlain Files.

Getting to Grips with Public Interest Companies

Ian Briggs

The recent announcement by Northamptonshire County Council heralding a move towards a ‘next generation model’ where four public interest companies are to be established to deliver front line services and leaving a core client organisation of around 150 employees adds to the growing number of councils (and other parts of the public sector) who are seeking to adopt this model. What is interesting here is that is goes far beyond the tired rhetoric of what is best, direct public provision or privatisation? The establishment of what are increasingly referred to as ‘public interest companies’ (PIC’s) has been slowing gathering pace in recent years, often quietly and tentatively by local authorities who may seek cost and value advantages in working with arm’s length bodies but wish to retain certain controls whilst at the same time offering freedoms to compete in open markets.

There may be a longer history to this model of provision than many may believe; however this approach does beg some interesting questions and exposes the relative lack of research and meaningful data as to the overall efficacy of the approach. Near the top of the list has to be what might this do to the market for services? Putting a potentially highly efficient, skilled and savvy organisation into the market place might be seen as a threat to any commercial provider who currently occupies part of this market space.  The example of an East Anglian council who established a comparatively small arm’s length company to manage property services some years ago has grown into a successful organisation that operates in many parts of the UK, trading services within a growing number of public and commercial clients. The efficiency returns for the growing number of public sector clients will be welcomed but it can potentially have the effect of diminishing the returns of existing commercial organisations – there may be no inference at all that the trading position is in any way illegal but where staff are transferred to public interest companies they do so with a great deal of knowledge and intelligence as to what both the client and community requirements are that can be both difficult and expensive for a commercial provider to obtain.

The second interesting question is one that can be summed as ‘mind-set’. The strategic leadership of public interest companies face unusual challenges; given that the shareholding is exclusively within the public sector that shareholder will have more than just an economic interest in success, it can and does demand more than economic viability. It must ensure that the needs of the public are met and that the social value of delivery matches the economic value, something that it can be argued is not always present in wholly commercial shareholdings. Reconciling this is a new challenge for those within PIC’s. In most recently established PIC’s most of not all staff are being transferred over from the public sector and work has to be undertaken to develop a mind-set that meets the challenge of delivering to a commercial agenda as well as a public one. Failing to do this successfully can be handicap hard to overcome and may be ultimately a cause of commercial failure. This leads to the third and crucial question. Even with a small and proficient client organisation are there the right skills there to create the conditions to enable the next generation model to prosper and provide successfully for the communities served? If the right depth of commercial analysis has been undertaken and the politicians driving the new model are confident that the model and market is correct are they able to act as an intelligent shareholder on behalf of the community? It may be no good having a fresh, hybrid mind set within the PIC if it is not matched with understanding and the correct support from the client organisation. Getting beyond a vanity decision and having a realistic expectation that anything as new as a next generation model provider will need a bedding in period to operate within the tensions between a commercial market and public expectation requires tolerance and understanding of councillors and senior managers.

With a growing number of councils actively exploring this approach there may be a lesson for those who are dithering – being late to the game could leave no space to enable PIC’s to be established as your neighbour has done it for you! Whatever direction this takes it is perhaps one of the most fundamental shifts we have seen since the days of CCT, no longer public bad – private good but a half-way house creating demands for new skills both within PIC’s and in slimmed down intelligent clients. Get in wrong on either side of this equation and retrieval could be more problematic than getting off the ground in the first place. That a growing number of PIC’s are already out there quietly getting on with it may suggest that the decision Northamptonshire has taken is not merely brave but one that is based upon sound good sense.

briggs

Ian Briggs is a Senior Fellow at the Institute of Local Government Studies. He has research interests in the development and assessment of leadership, performance coaching, organisational development and change, and the establishment of shared service provision.