Andrew Larner
Over the past five years councils have experimented with new ways of working. Nationally there have been more than 1,000 efficiency projects.
If the government now wants to cut costs by 25% then the logic based on this learning is clear: do the basics to reduce third party costs; re-engineer your business to be leaner and fitter and release assets; share services between councils and between the public sector and release more assets; stop doing things and where possible get the customer to do them for themselves or the community on their behalf.
Cumulative effect
The easiest place to start and the quickest to show results, is "external" spend on bought in goods and services. The cumulative effect of saving more quickly means we need to cut less. In total, public sector external spend is £220bn. Some £50bn of this is spent by local government – half its total spend, and more than double the £20bn spent by Whitehall departments.
A third of local government's external spend is on simple commodities from pencils to refuse vehicles. At a basic level we can use transparency in the same way that we do at home to get the best deal.
The tools to do this exist, including a "price check" facility and electronic procurement systems, are cheap to implement and are largely underused.
Lowering our commodity pricing by about 10% is essential but will deliver only about 2% of the 25% savings we need. Lowering our partners' commodity costs will help more, but to make major savings we need to reshape the major markets. Over 96% of local government's external spend is in four areas: construction; corporate services; adult and children care services; and waste management.
Major success has been achieved in reshaping the construction market.
An understanding of our spend and the state of the market has led to codesigning new ways of working with other public bodies and the private sector.
This has delivered a minimum of 5% savings and, as we collaborate and coordinate our efforts, has the potential for up to 25% savings. Our next challenge is to bring these savings to corporate services and waste management.
Back office and frontline
The other half of spending is on the services, back office and frontline, that councils still deliver themselves. Whether or not these are outsourced, the start point is to make the existing business leaner, followed by doing this in partnership with other public bodies. The evidence is that simply making what we currently do leaner can reduce costs by up to 10%.
If done by redesigning the business around the customer and, even better, with other public partners, council services become simple and transparent to the customer and property assets are released.
However, costs can go up as well as down.
In social care and waste, costs are doubling. The reality is that while local authorities can reduce prices, reshape markets and redesign services, ultimately councils will need to stop doing things and the resident and community groups will need to fill the gap.
One large area of cost we can get the public to do is the audit and inspection of public service. Opening up the costs of the public sector to the public and business has the benefit of reducing the need for inspection.
A reduction in the costs of audit will save money and help us engage with the public on how we prioritise our spending.
But the biggest potential area in which responsibility and money could be transferred to the customer is adult social care. This would give the customer real choice but means they need the knowledge to get the best deal. Transparency in this area will also help the service users, often the majority, who fund their own care.
Comparison sites are already starting to emerge. Beyond this, web portals for making offers to provide services, from formal to informal care, are already being piloted in two areas of the south east: a kind of eBay for care services. But most of these services avoid the thorny question of what is a fair price.
However, it is possible to put this knowledge, currently the domain of the professional, in the hands of the customer. The "care funding calculator" allows the customer to simply calculate the fair price for a tailored package of care in a specific part of the country.
Undoubtedly the financial challenge before us is huge. However, local government is far better prepared to meet this challenge than it has ever been.
Andrew Larner is managing director, Improvement & Efficiency South East, one of the sponsors of the Future of Public Services supplement
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