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.

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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.

Why do we need a new model of public services?

Catherine Staite

Public services, including those commissioned and delivered by local government, have changed substantially in the past ten years. There have been changes in service delivery mechanisms, in relationships between users and services, in organisational structures and in partnership arrangements. It appears likely that the next ten years will bring at least as much change, if not more. One thing is clear: the old model of public services – people expect and services provide – is no longer tenable.  The growing gap between demand and resources has been described in terms of ‘the jaws of doom’.  That is one way of looking at the future.  Another way is to see the opportunities which we have to renegotiate ‘the deal’ between people and public services.

INLOGOV is working with a wide range of local authorities and other bodies to test a new model of public services. The model draws together many of the themes in current debates about the ways in which the public sector is likely  to have to change, in particular, how public services can manage demand, build capacity and achieve better mutual understanding, through the development of stronger relationships with communities as well as through co-production and behaviour change.  The purpose of this model is to support public service leaders – both political and managerial – to make better sense of a complex world.

INLOGOV’s model brings together the disparate cultural, structural, political and financial challenges facing local government and wider public services into an integrated framework, which takes account not only of individual drivers of change but also of the inter-relationship between changes in public services and the wider political and social context in which those changes are taking place. If we have a coherent model which reflects current and future realities it will be easier for us to explore possible solutions together.

We have concentrated on the challenges and opportunities for local government, in partnership with other local and national institutions.  That is not because we think local government is the most important player on the public service stage, it is because we think it plays a unique role as a convenor and mediator between conflicting interests within complex networks of players.  It is in this role that it can provide the creativity and connectivity to help shape solutions to the seemingly intractable problems of rising demand and falling resources.

The key drivers for a new model are: building stronger relationships with and between individuals and communities, increasing co-production of better outcomes by focusing on capacity, as well as need, and changing expectations and behaviours.  Before we can deliver these benefits we will need to change the way we think, plan and act.  There are many good, small scale examples of innovation which are delivering real change but now we need to scale up change to have a real impact – reducing dependency, building confidence and improving outcomes.  These are not quick fixes, so the sooner we start and the more energy we invest the sooner we’ll be able to achieve a sustainable relationship between public services and the communities they serve.

 

This blog post summarises some of the key messages in:

Why do we need a new model for public services? By Catherine Staite

Ch. 1 in Staite, C. (ed.)(2013). Making sense of the future: can we develop a new model for public services? (Birmingham: University of Birmingham/INLOGOV).

Catherine Staite

Catherine Staite is the Director of INLOGOV. She provides consultancy and facilitation to local authorities and their partners, on a wide range of issues including on improving outcomes, efficiency, partnership working, strategic planning and organisational development, including integration of services and functions.

Bring back committees – all is forgiven!

Andrew Coulson

Governance by Committees goes back to the origins of local government in the UK. It precedes the Municipal Corporations Act of 1835 which created a legal framework whereby local government can only do what central government says it can do. It is the natural way to run an organisation. The boards of directors who run companies (or quangos) are committees. The trustees of a charity are a committee. A parliament is a committee – albeit a large and unwieldy one.

Of course not everyone on a committee is equal. The Chair has a unique position, with control of agendas, public relations, and often patronage. The secretary writes the minutes – with the subtle power to play up or play down some of what has happened. The treasurer controls the money, day to day.

Committees served local government well for at least 150 years. They were the envy of public administrators in many other parts of the world. Harold Laski promoted them, in 1935, as an extension of Athenian democracy – the advantages of a city-state running its own affairs. Forty five years later, George Jones saw them as “an essential element of a pluralist society” and a bulwark of countervailing power against an over-mighty centralising state. Thousands of councillors, over the years, learnt their trade in committees, listening to officials explaining what they wanted to do, and more experienced councillors asking questions, and having a real sense of ownership in the decisions that resulted.

Why then were committees in English local government so brusquely brushed away, to be replaced by directly elected mayors (the Labour government’s clearly preferred choice at the time) or cabinets and leaders? Why, in contrast, were they preserved, in emasculated form, in Development Control and Licensing Committees, and in councils representing populations of less than 85,000? And why are they now slowly coming back, under the liberating powers of the Localism Act, through which perhaps as many as 30 councils may have moved back to governance by committees by 2014?

By 2000 the system had, perhaps, grown out of control. The desire of councillors to be involved in every significant decision led to a proliferation of committees and subcommittees. Birmingham had more than 60. Many had delegated powers. They enabled small cliques of councillors to get things done, but many of them could not be described as open or democratic. This system also meant that cross-cutting matters (and most matters in local government are cross cutting to greater or lesser extent) went the rounds of several committees before a final decision was made – a slow and frustrating process, especially for officials. The system institutionalised silos – as each committee tenaciously defended its interests and its budgets. And it was often taken over by the party-group system, which ensured that almost all the important decisions were taken in private meetings of a political party before the official meetings in public.

It is sometimes said that committees were abolished because of Hilary Armstrong’s frustrations as a backbench member of the unwieldy and ineffective Education Committee of Durham County Council, on which she sat before becoming the MP who took the Local Government Act through the House of Commons. But it is also clear that much was wrong, that the system needed to be streamlined, and that it struggled in the new emerging world of partnerships and contracting out. F expressed in The Audit Commission summed up the frustrations in its 1990 pamphlet, We can’t go on meeting like this.

But the grass is not always greener on the other side of the hill. We can now see the limitations of mayors and cabinets. An over-concentration of power in a small number of hands, which may not be representative, or reflect the plurality of interests in something as complex as a city or county. A still confusing lack of clarity as to whether paid officials or politicians hold the real power. Weakness in standing up to bosses in London – and a creeping centralisation.

Above all, councillors are not content – especially backbench and Opposition councillors, who could make major contributions under the committee system but have almost no similar opportunities with cabinets or mayors.

And so the tide turned. The Localism Act enshrined a Conservative promise ahead of the 2010 election to give councils the chance to return to committee governance. There was no great rush – only four councils changed in 2012 (Nottinghamshire County, the London Borough of Sutton, Brighton and Hove, and South Gloucestershire). They brought in streamlined systems, with much power in the hands of Policy and Resources Committees or equivalent. These may involve little more than giving voting and speaking rights to Opposition councillors on what is still, effectively, a small cabinet or executive. But at least another 10 councils are likely to make the change at their 2013 Annual General Meetings. Others are talking about it or considering it.

INLOGOV is one of the few places that has been monitoring this change, and assisting councils to think through the issues – how to plan the detail to get the best out of a return to committees while avoiding the unsatisfactory practices that could be a problem in the past.

We have convened two workshops for councils or councillors considering making the change – and a third will take place on 27 June. Councillors and officers from councils which have changed will be present. We will not take a stand, that one system is right and the other wrong – it depends on the detail, and on local circumstances. But we will defend the right of councils to make the change, and to govern themselves as they think fit (in fact we would like to see a much wider set of systems open for consideration and experiment). If the previous workshops are anything to go by, the debate will be lively and extremely well informed.

To book a place at the workshop on 27th June, complete this booking form.

andrew coulson blog

Dr. Andrew Coulson is Lead Consultant on Overview and Scrutiny at INLOGOV, University of Birmingham, with wide experience of Overview and Scrutiny. He has recently launched one of the first assessed qualifications on the subject. His further research interests include partnerships and governance, economic and environmental strategies, and local government in Central and Eastern Europe.

Elected Councillors: How much influence and power are they able to exercise?

John Raine

What might we expect of the county councillors we elected yesterday? Will those elected be able to implement the various initiatives they have pledged in their campaigns? In this respect, we might reasonably be a tad sceptical for a number of reasons.

First, councils no longer occupy the core local policy-making role of previous times. Nowadays there is more emphasis on multi-agency partnering in local public policy-making so that key matters are often decided in conjunction with other local public, voluntary and private sector organisations. While this may be beneficial in ensuring more ‘joined up’ public services, without doubt it has weakened the power and influence of elected councillors.

Second, the ‘cabinet’ model, introduced a decade ago, under which an elite group of councillors lead on policy-making, has also disempowered other councillors. While some can be influential internally on scrutiny committees reviewing policy and holding the cabinet members to account, many others act mostly as ward representatives and without much opportunity at all to contribute to decision-making.

Third, many of the services are now provided as ‘shared services’ with neighbouring councils and other local public organisations; others have been contracted out or are tied up in long-term public-private-partnership arrangements. While this may have reduced costs, it has also become more difficult for individual councillors to be influential in relation to those services since any proposed changes have to be re-negotiated with other partners and may involve complex contractual issues that are expensive-to-unpick.

Fourth, the move by councils to establish front-line, multi-service, ‘customer contact centres’ and public websites that not only provide information but also allow the public to interact directly, e.g. reporting maintenance and other problems, has diluted the role of the councillor as conduit to getting matters remedied. Indeed, in the digital era of sophisticated telephony and CRM systems, the elected councillor may well be last to learn about the problems that previously they might have championed on behalf of the public.

Fifth, the on-going austere financial climate facing councils means that there are generally less resources for new initiatives unless there is the prospect of efficiency improvements and financial savings in return. Moreover, lack of money provides a convenient excuse for the political leadership and officers to say ‘no’ to other councillors whose ideas happen not to find favour.

Overall, then, one might conclude that, despite all the rhetoric from government about ‘localism’ and about the empowerment of councillors as community leaders, the power and influence of those we eleced yesterday to make a significant difference will unfortunately seem quite limited. But candidates for councillorship should not be deterred; ‘where there is a will there is a way’! And for those elected and with sufficient commitment and determination to confront the obstacles and to press their cases for change effectively, there is certainly much to be done to make councils work better and more for the benefit of those they represent.

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John Raine is Professor of Management in Criminal Justice at INLOGOV. He has been involved in criminal justice research, consultancy and teaching at Birmingham for some twenty-five years and has a strong track record of commissions for the Home Office, Lord Chancellor’s Department/Department for Constitutional Affairs/Ministry of Justice on aspects of policy and practice within the criminal (and civil) justice sectors.

Local elections: challenges and opportunities for new administrations

Catherine Staite

Following the elections, both new and continuing local authority administrations, of all political hues, will face significant challenges. The ‘irresistible force’ of increased demand is meeting the ‘immovable object’ of financial stringency, creating an annual cycle of despair, where councils struggle to do ‘more for less’ – something which becomes progressively hard to achieve. Many will manage to balance their books till 2014 but face a financial cliff edge thereafter.

These apparently irreconcilable pressures may actually be the saving of local government by creating pressure for change – if it can reimagine and reinvent itself. What local government need to do in response to these challenges is less important than how it needs to be.

Councils are moving to commissioning from direct delivery, to supporting independence rather than dependence and to better understanding of the capacity of communities to improve their own lives. Local authorities are good at working in partnership – with health, the police, education and business. They need to get three other key relationships right; with the communities they serve, with each other and with central government.

Local authorities need to develop a more sophisticated understanding of the diverse and complex capacities and needs of their communities. Engagement should be woven into the fabric of local government. There is a wealth of evidence that shows people do know and care about their local services. Without this public support no real transformation of local areas and services will be possible. The relationship between local authorities and their communities should therefore be less benefactor-to-beneficiary and more partner-to-partner – underpinned by mutual respect.

Many local authorities already work collaboratively to bring down costs and improve quality. This patchwork of ad hoc arrangements is often driven by enthusiastic individuals and is consequently fragile. Cooperation between local authorities is too often constrained by parochialism and soured by old rivalries, too much defending of council’s sovereignty and not enough drive to deliver efficiency and improved outcomes. The experience of successful collaboration tells us it should be the norm and not the exception. Councils will have to explain why they are cutting services or ceasing to invest for the future before doing everything possible to reduce costs and improve outcomes by working together.

The relationship and the balance of power between central and local government generates much debate. We have the most centralised model of government in Western Europe. Central government demonstrates a lack of trust in local government and an abiding reluctance to devolve financial control although they delegate to councils the implementation of their funding cuts. If central government acts like a disapproving parent, local government is likely to act like a recalcitrant child. Neither set of behaviours will deliver the outcomes that the Coalition and local authorities want to achieve for the people they are all are supposed to be serving.

It is time for local government to take the initiative in reshaping their relationship with communities, each other and central government. Local government is remarkably efficient and reliable. Serious service failures are only newsworthy because they are so rare. That competence confers authority and local government needs to get off the back foot, stop waiting for the green light from central government and make the changes needed to meet the challenges of the future.

Catherine Staite

Catherine Staite is the Director of INLOGOV. She provides consultancy and facilitation to local authorities and their partners, on a wide range of issues including on improving outcomes, efficiency, partnership working, strategic planning and organisational development, including integration of services and functions.

The balance between electability and visibility

Ian Briggs

Much has been made of the challenge of actually getting people to vote. The November 2012 Police and Crime Commissioners elections had a pretty dire turnout and there may be some particular issues with regard to that election; but the May 1013 local elections are somewhat different. The three major parties are turning their attention to the next general election and on the back of the Eastleigh By-election the UKIP vote is attracting some attention.

But beneath all of this we need to look more closely at some of the basics of campaigning. Political parties are not swimming with cash at the moment – resources are limited and if the truth be told nearly all parties are short of volunteers to support local campaigns.

Some recent research suggests that over 85% of the UK population have some form of internet connectivity – this of course does mean to say that all are effective users of web based communications. Can the political parties rely more on web based media, social media and electronic campaigning?

In conversations in social settings and when travelling to and from work, it is not that people are wholly disinterested, but rather it is that they say they have few opportunities to actually see the whites of the eyes of the candidates. In more concentrated urban areas it might be possible to do more door to door work but the cost and the time involved to go door knocking in dispersed population areas is a big issue for many candidates – especially as this week’s election is for mainly upper tier councils that cover significant geographical localities. This assumes that all candidates are sound of wind and limb.

A recent conversation with one candidate – a 76 year old widow – revealed that she has little financial support from her party and finds getting about a challenge. Should this in any way detract from her worthiness to stand, her ability to engage in local political and community activity? The answer has to be no, if we believe in local democracy, yet her visibility to those who she is wishing to represent is in marked contrast to the early 40s male candidate who has employer support to stand and whose political career may even enhance his professional career. He also has extensive skills to use web based and social media and can easily find the time to go from door to door in dispersed rural communities to actually talk to local people. He accepts that for many – but not all – it is the policies that he is promoting that are attractive to the electorate and not his shiny German car and sharp cut suit.

If the many who do not have strong political allegiance walk into the polls willing to vote (assuming they have the time and motivation to do so), are they more likely to offer their vote to the individual who has actually taken the time to talk to them on their doorstep? If your telephone has rung and you have been asked if you are going to vote and if so for whom, might it be the one who stood on your doorstep and engaged you in conversation? Do we think enough in the lead up to elections about who are selected to be local candidates and whether there are any inherent inequalities in the way that candidates are selected?

It might just be that sometimes the best candidates, irrespective of their party, might be the better ones to have irrespective of their politics.

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.