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Agenda item 1 is the taking of oral evidence as part of our local government finance inquiry. I welcome Sir John Arbuthnott, chair of the Clyde valley review of joint working and shared services; Councillor Michael Cook, spokesperson for strategic human resources management with the Convention of Scottish Local Authorities; Rory Mair, chief executive of COSLA; and Colin Mair, chief executive of the Improvement Service. We have only one panel of witnesses, so we are prepared to accept brief introductory remarks if anyone wishes to make them.
It would be helpful to make some. I thank the committee for asking us to give evidence on shared services and efficiencies. We are happy to provide information on those issues, and if we stray into other areas we will seek to respond to questions on them. If any information is not to hand, we might need to revisit it.
Thank you for the invitation to come here today. As I made clear in my brief written submission, the review of joint working and shared services is on-going. It was initiated by the leaders of the eight local authorities that constitute the members of the Clyde valley partnership. Other partners are associated with the partnership in a looser way.
Thank you.
I will respond. It was agreed at the outset between the Government and Audit Scotland that efficiency statements would be published alongside councils' annual accounts and would be auditable. As far as I am aware, no auditor has challenged figures that have been put forward locally, but I am not sure what priority the issue has in the overall process of considering council statements that are in the public domain.
Efficiency statements are available for audit, but no audits have been carried out.
It was agreed that the statements should be available for audit and that it would be for the audit bodies and local auditors to determine their approach.
Would some testing of the claims that are made be useful for you and other people who are working in the field? Would such audit be of benefit to you?
The Improvement Service and COSLA undertook a bit of work in partnership on getting an independent body to look at a complete breakdown of the first round of statements, which was in 2006-07. That work highlighted a range of challenges, including the underreporting, rather than the overreporting, of so-called non-cash-releasing aspects of councils' statements, such as productivity and other gains made by councils. As I said, the statements are available for testing, but I am unaware that any to date have been challenged.
I understand the difference between being available for testing and having been tested.
Of course, departments' and services' various statements on efficiency gains will also be examined by councils' internal audit bodies.
I hope that you think that such work is important, given the suggestion made by the Chartered Institute of Public Finance and Accountancy and others that we need proper benchmarking, monitoring and so on to assess the achievements that have been made. I note from the 10 or so attachments that came with COSLA's submission—I am not sure what the environmental lobby will say about that—that a lot is going on and a lot is expected from what is being done. However, of the 24 key shared services projects throughout Scotland that are listed in one of the appendices, only six come with figures for projected savings—ranging from £2.75 million, £3.9 million and £6 million to £200 million in the diagnostic pathway project—with the actual savings that have been set out coming nowhere near those ambitions. Given that, do you understand the concerns of a wide range of expert witnesses who have given evidence to us, including people who run local authorities, CIPFA and others, about the pace of the productivity gains that might be made?
I will come at the question from one direction, and the other witnesses might approach it from another.
But even though £46 million of savings have been projected for one project, it has had to be abandoned because of £20 million start-up costs and the fact that it would have taken six years to break even.
Absolutely. The fact is that councils need to make a judgment about such projects. As I said in my opening remarks, the yardstick is always best value and it might well be that a local authority cannot invest the up-front costs in a particular project or that, in view of all the other pressures that exist, the project's delivery timescale is far too long for it to get where it needs to get to. Local authorities routinely make such judgments not only individually but collectively.
So you accept the criticism on the pace of change—you accept that it is a problem.
I would not call it a criticism; I would call it a simple recognition of reality.
Fine.
From COSLA's recent public statements as reported in the press, I think that you know our position on this. If we are told that the pace of change is not quick enough and that we are not doing things that we should be doing, we ask questions such as, "What pace would be quick enough?" and "What should we be doing?" When we do that, people say, "We can't tell you that." That is the cause of some frustration.
Are you aware of the evidence on the subject from the David Hume Institute? Has any work been done on whether people in the field should look at Scottish Water—not like for like, but as an example—given the progress that it has made? Have you examined that, Sir John?
Only about 10 days ago, I spoke at a meeting of the Society of Local Authority Chief Executives and Senior Managers—SOLACE. The Scottish Water model was given serious consideration on the day. Obviously, all those who are involved in this work—whether in my review or other reviews—will take on board good exemplars. Indeed, in my work, we are actively looking at exemplars south of the border that are in place or under rapid development. A number of innovations are being introduced south of the border.
For some time, individual local authorities have made a significant drive for efficiencies. In large measure, that work is reflected in the submissions to the committee. I could reel off numerous examples from my authority; our experience is similar to that of other authorities. In the past, we may not have characterised that work as shared services and we may not have waved the flag strongly enough to signal our success in driving forward efficiencies, but those examples exist nonetheless. We need to understand the local dimension in all of this. Local, small, unilateral examples are part of driving efficiency.
To return to my question, what about Scottish Water?
There has been significant interest in Scottish Water recently, which to some extent reflects how Scottish Water has achieved its transformation. The presentation that was made to local authority chief execs dealt with the unfortunate—or fortunate—legacy that had been left and the rapid progress that has been made. There has been a pay-off from the necessary investments that have been made in the water infrastructure, which in itself has driven efficiency.
On the principles that have been outlined, benchmarked and meaningful outcome targets have received some criticism from witnesses in relation to the lack of sufficient drivers in single outcome agreements or in the concordat to make progress. We have discussed figures this morning, but they are not audited, and we cannot establish whether they are robust.
My review is a short-life review, which started at the beginning of April, as I have said. I end my evidence-gathering process in the middle of next week. In the following month, I will write the report, which will be presented to the eight commissioning council leaders for discussion. I am anxious to leave not a precise recipe—I cannot do that in the short period for which I have been working on the review—but a framework to take things forward, not just in the next year or two but in the longer term, too.
Productivity gains are not necessarily a result of the current financial situation. They should have been being made, and they should continue to be made right through and after the recession.
Absolutely.
There is a bit about the convener's characterisation that I do not fully agree with.
Good morning. I want to follow up what has been said about shared services. Appendix 3B of the submission from the Convention of Scottish Local Authorities lists examples of the development of shared services by local authorities, whether within the local authority or across public sector bodies. It is clear that other examples will come; I hope that the Clyde valley review will give us more. However, I accept what Councillor Cook said. The drive should be as much about effective and efficient service delivery as it is about simply saving money. That said, we are faced with pressures on the resources that are available to local authorities. What other measures are local authorities considering that will bring about efficiency savings so that the money can be used more effectively elsewhere?
That is a pertinent question. We know that we are moving into exceptional financial territory, that burdens are increasing, that pressures will be greater than they have ever been before, and that we are faced with unprecedented challenges at a time when the available resources are declining. We need to bridge the gap. As I have already observed, shared services are one dimension of the efficiency approach to bridging that gap.
So, will it be for councils themselves to decide which services they may no longer provide? Who would then provide those services?
Ultimately, local authorities will be governed by the requirements of statute, to a large extent. If services are mandatory, local authorities will have an obligation to continue to provide them. They will need to make judgments about non-mandatory services. The building block is local authorities, and they will need to make those judgments. Wider national commitments, their scale and their timescales will be the subject of on-going discussion with the Scottish Government.
Can you give me an example of services that local authorities might consider no longer delivering?
It would be a risky enterprise for me to hazard that today. The matter would need to be considered by the 32 local authorities.
Okay. One of the ways in which local authorities have approached the issue is by looking to the third sector to provide services instead. When is it right for that to happen?
That is a matter of judgment for the local authorities. I am not going to pre-empt or gainsay the deliberations of local authority committees that have considered the evidence in relation to such situations. It would be foolhardy of me to endeavour to deduce whether they had made appropriate judgments. Perhaps Rory Mair can add to that.
We have recently worked with the third sector on the issue. The concern is that, given the financial situation that we are in, we might dump services on the third sector on the basis that that would be cheaper. However, that is not a reason for using the third sector; we should use the third sector when it has the best skills to offer the service that communities need, and it should be properly financed. It should not be a case of getting a service cheaper from the third sector, and we should not put the third sector under the financial pressure that we do not want to be under ourselves. The view is that we must have a rational and sensible discussion with the third sector when it can do the job and that we must make arrangements to enable it to do the job, which means financing it properly. We should not see use of the third sector simply as a way of saving money.
I have tried to be straightforward about exactly what Mary Mulligan encapsulated in her question. Essentially, three factors are involved. The first is cash, which is represented by tax and grant, by transactional income, by the value of resources—what we get from selling our services—and by investment. That is the money that local authorities will have to spend.
Discussion must be as open as possible, so that people's priorities are recognised. I was pleased to hear Rory Mair say that we should not contract out services to the third sector just on the basis that doing so will drive down costs. How do you reconcile that view with the position of local authorities such as the City of Edinburgh Council, which has briefed MSPs that it intends to put out to contract all its home care services simply because the third sector will deliver those more cheaply? The council is just passing the burden on to the third sector.
I do not know on what basis the City of Edinburgh Council made its decision, so I cannot comment on it. My point is that, if the same service can be provided more cheaply somewhere else, that is fair enough, but we should not always assume that the third sector is a mechanism for delivering cheaper services. The third sector has skills that we need, but those skills need development. It should be treated like any other serious partner in community planning. The arrangement that COSLA and the third sector have recently agreed is that we must seek to deliver that partnership, instead of just using the third sector as a cheaper way of delivering services.
Should local authorities consider responding to the pressures that they face by introducing fees or charges for services, instead of cutting them out altogether or passing them on to someone else?
COSLA has debated the issue a number of times. The view is that councils must decide the level of fees and charges that they levy—that is one aspect of the cash issue that Sir John raised. In the work that we have done on the economic downturn, most councils have pointed out to us that revenue from the fees that they charge drops off during downturns. Charging additional fees for necessary services may just put more pressure on people who are already suffering because of the downturn. It is not enough to ask whether we can charge for a service. As Sir John said, if we are putting the citizen first, we must ask whether they would expect us to charge more for a service or to impose a new charge at a time when they are already being hit by the effects of the downturn. We need to strike a balance during this period. However, we realise that there is a debate about charging and that we must engage with it.
I would like some clarity. Previous evidence indicates that, despite the important work in which you are all involved to improve productivity in the public sector, even if we increase the pace, achieve all our ambition and deliver improvements quickly, that will not be the solution to the overall dip in funding that will take place. Councillor Cook, were you alluding to that when you said that there is pressure today to meet national priorities such as reductions in class sizes and the council tax freeze?
My comments reflected the fact that we must use every tool in the armoury to deal with the situation that lies ahead, which will pose unprecedented challenges. We must engage in a discussion with the Scottish Government about national commitments. Questions about timescales and the extent of those commitments are relevant to the cost and productivity burden that they represent for local authorities. We need to think about those matters, together with all the other issues that we need to consider to bridge the funding gap that we will face.
Over the next five years and, certainly, the next 10 years, the issues that the convener raised will be at the forefront of local and national politics. In the Clyde valley, local authorities, plus policing, plus all the other things make a gigantic business. If we cannot say that we have pretty well exhausted the efficiencies that we can gain in how we run our business, it will be very difficult to justify any attack on front-line services.
Some members of COSLA have recently received the advantage of subsidised travel for elderly people and have asked their colleagues whether it is right that every elderly person should receive a subsidy for travel across the length and breadth of Scotland at a time when local authorities might not be able to offer some other services. Such questions will be asked over the next wee while. I am not making policy; I am simply saying that we will be faced with such questions.
I will pick up on the longer-term context to which Sir John Arbuthnott alluded and the commitment to certain types of outcomes. The Improvement Service's modelling suggests that there will be a sharp dip in public finances across the next four years and then almost certainly a gradual flatlining for a long time. At the same time, if we consider policy and demographically driven growth in Scotland, we see a progressively widening gap between the resource base and the pattern of demand that we have generated. Therefore, over the next four years, the challenge will be not merely to deal with what is in front of our noses—although we will have to do that—but to do it in ways that do not cripple us five or 10 years hence. That will lead people to consider fundamentally not the outcomes that they want to achieve for children or older people but whether existing patterns of services and entitlements are the most cost-effective ways of achieving those outcomes.
As an aside, I must respond to the examples that Rory Mair and Colin Mair used, particularly Rory's comment about elected members—I assume that he was referring to elected members—questioning free transport for the elderly. I will be interested to see how many local elected members start arguing for its removal within their own wards.
Best value is the most cost-effective way of achieving an outcome that is locally decided and agreed—I include its agreement with the citizens for whom the outcome is intended.
Are there any other comments on best value?
I am content with the definition that you have been given. It is important to recognise that best value is not simply about the cost efficiency that is delivered, because, as Colin Mair suggested, it must also take account of local needs and aspirations. A battery of things goes towards making that up. That is an important point in the context of the efficiencies that we are discussing today. The driver will not always be the bottom line, vital though that is to bridging the gap that we face; there will be other considerations in the judgments that local authorities make.
That leads me to outsourced services and particularly the shared services agenda, which we discussed earlier. Councillor Cook mentioned the delivery of services to local people, but the shared services agenda in the Clyde valley and other parts of Scotland involves looking at how local authorities can come together to deliver services jointly rather than concentrating on the local delivery of services. We might end up with regionwide delivery of certain services. What impact would that have on local decision-making processes? If the eight local authorities in the Clyde valley consortium decide to contract services jointly, how will the local elected members of those eight authorities interact with the delivery of those services?
Again, that is an important issue. However, the fact that local authorities, whether in my area or in other groupings, begin to think collectively about addressing the future and working together does not mean that the outcome will be what you describe. The local accountability of local authorities is incredibly important, but it is not an all-or-none phenomenon. Some services can be provided by councils or outsourced and provided locally by someone else. They might not be gold-standard services, but they are adequate and absolutely fit for purpose. They do the job—local citizens can interact with them and get the answers to their questions, and normal business can be concluded efficiently. Other services can be delivered to local communities better through the strength, capability and skills of a larger group of councils.
I agree with Sir John's comments. It is useful to describe the approach as multidimensional.
I take the point about the link between best value and shared services. In the search for best value, councils will have to look across a broader spectrum. One of the reasons why we ended up with a telephone service for trading standards that is located in the Western Isles—if you phone that number, you get through to someone in the Western Isles—was that that created a reasonable amount of jobs there. Those jobs are vital to the place where the service is located because it is located in the Western Isles—creating 10 jobs in Glasgow would not have had the same impact. That shows that people cannot just think about best value within their own council. We find that we now have to say that, if people are going to centralise a service, which brings with it all the problems that are associated with a service not being local, they have to ensure that they get best value out of the place where they decide to centralise that service. Best value, therefore, is a genuinely important consideration.
Just to reassure John Wilson, who I think was asking about governance at a local level and proper accountability, I should say that no shared service proposal could proceed without individual councils approving it, and because that initiative has been approved by the council, it will be regularly revisited and rescrutinised by that council.
I accept the example that was given about the call centre in the Western Isles delivering a service that people from across Scotland can access by telephone. However, many of the services that are provided by local authorities, such as cleaning, education or health care, cannot be offered over the telephone.
Under the statutory framework for councils, councils in Scotland disproportionately have duties to make arrangements to do things. Education is a good example of an area in which provision has historically been direct—schools and teaching services are overwhelmingly provided directly. However, strictly speaking that is not required by statute. In other words, we could think of other ways of delivering a schools service if we were imaginative enough to do so.
It might help if I say that the group that I am working with, which is considering what might come through—I emphasise that we are still analysing all of that—has been talking recently about the need for criteria. We have identified criteria, which come in pairs. For example, customer outcomes, which are vital for citizens, must be set against affordability. We have also identified delivering efficiency and the capacity to deliver; delivering cash savings, which is important given the future that we face, and employee impact; local delivery needs, which we are talking about now, and sustainability; and political acceptability and risk. All those aspects must go into the mix as we consider the way forward and whether particular services are best shared, best kept to a specific local authority or best provided by someone else.
Much of the discussion has been about the on-going pursuit of efficiency savings. I was struck by comments about how plans to reconfigure services to make efficiency savings can involve up-front expenses and no yield of savings until year 3 or year 4.
I will give a couple of examples. Throughout the public sector, significant effort has been made to improve procurement performance. In local government, that has involved creating a collective body for the 32 local councils, Scotland Excel, which has just completed its first year of existence and has already made savings of about £9 million. However, now that the capacity has been put in place, there has been a hard look at where local government's big spend is. That takes us back to the governance question. As has been discussed, care is a major area of spend, with councils procuring well over £1.2 billion of care services annually. Scotland Excel has been asked to consider a relationship with providers in which we are their monopoly purchaser and they are our monopoly providers. The body is to consider whether we have got the relationship right with care providers to achieve efficiency, continuity and effectiveness of outcome. That is a good example of a capacity that has taken time, effort and cost to put in place. Its members will now look for it to start to motor. It has ambitious targets that reach up to £30 million a year.
I asked the question because councils might be reluctant, in the current financial climate, to begin new initiatives that have up-front costs but which will provide a cash or efficiency saving in year 3, 4 or 5. We have heard that we must consider our medium to long-term planning and our investment in future efficiency savings. The tracks must be laid now, despite the economic downturn. Can you give examples of new ventures by local authorities that will require an outlay in the near future but which might not provide a return for several years?
I return to the cash efficiency and delivery relationship. I am sure that COSLA colleagues and local authorities have considered that in the past, but it now becomes a critical relationship. We cannot envisage the luxury of taking steps that look as though they might be helpful but which are not properly costed and which turn out to be more expensive and do not produce the goods. We must apply strict criteria. I will not go into this in great detail, but we have all heard of the cost of the UK NHS computer system. We cannot afford to do that kind of thing any more. We must make the best use of every pound of public expenditure, and such risk must be clearly tested in the business planning process, which brings us back to the efficiency box that I mentioned.
The efficiency and reform fund that was available to the public sector in the past was very useful in providing the venture capital to kick-start certain types of shared services development. However, because of the financial circumstances, that fund will not be available in the future, and we realise that we will need to look hard at other sources of investment. For example, should we bring in private partners, who would provide expertise and capital? I have no doubt that that option will be explored. Should we, quite properly, cash in existing elements of the asset base to fund transformation towards future benefits? Scotland's public sector asset base amounts to around £28 billion and, in seeking investment, we will unquestionably have to look very hard at whether we are fully utilising all those assets and, if not, whether any elements of that asset base can be realised. Your core point is right; some of this work is about investing to save. However, if it is becoming a struggle simply to deliver basic services from day to day, it will prove difficult to liberate that investment. As I say, we have to look hard at our use of assets, occupancy levels and so on and, if we can drive hard enough in that direction, it might provide investment for transformation.
The relationship between local government and Scottish national Government is important here. The tendency in the budget process is to think year on year and to look, for example, at what we will do in 2009-10, 2010-11 and so on. During my five years running NHS Greater Glasgow and Clyde, we had to deal with decisions on issues that were not under our control such as the reward scheme for consultants, the effect of the European working time directive and the consultant and general practitioners pay scheme. Over five to 10 years, such decisions have a phenomenal impact on health boards' budget processes. As a result, we have to work hand in hand with central Government on calculating the ultimate costs of very important legislative measures that it introduces, which place a burden of responsibility on local authorities or whoever has to deliver them.
I am trying to get to the bottom of how you plot efficiency savings on a year-on-year basis when much of the strategic planning that Sir John Arbuthnott is involved with will bear fruit only several years down the line. Do we have to change the way in which we work out such savings? For example, certain actions that are taken in 2009-10 might result in efficiency savings, which will, however, not appear on the balance sheet until 2013-14. Is there a better way of accounting for such savings to ensure that local government, COSLA or whoever speaks to the Scottish Government can say, "We are showing 1.4 per cent efficiency savings for this year. They are not top-sliced but according to our forward-thinking exercise we think that they will lead to 3 point whatever per cent savings come 2013-14"? Should you be having that dialogue with Government?
That is a good point. How benefits are attributed to costs over the years is one of the dilemmas of public accounting; it is often radically unclear and, because we completely lose sight of where something began, people who had nothing to do with the planning can claim credit for the benefit four years down the track. Fear of double counting—of savings being attributed in this year as a projection and then being claimed again in 2013-14 as a realisation—might have led to the agreement between Government and local government that savings must be reported only in the year in which they are achieved and that any projections are the councils' own business and are simply part of the planning system. That may be unduly simplistic as an understanding of investment flows and benefits, but it is a reasonably simple and robust system that eliminates any danger of large-scale double counting.
Efficiency savings may mean shared services. I will give a couple of examples, on which the witnesses may like to comment. In Glasgow, people phone one number to pay their council tax. Could people in East Renfrewshire, Renfrewshire, South Lanarkshire and North Lanarkshire use that same number? Could the office hours during which that number can be phoned be extended, thereby improving the service? Another example is Glasgow City Council's assessors department, which I believe is quite large and powerful. Would you consider clustering assessors departments similarly?
We are already considering what you suggest to make the best use of facilities and to make facilities as easily contactable by the user and as available as possible. That would be one way of satisfying one of the most important service demands, which is the run-of-the-mill things that people want to check—their council tax, registration and all the other things that affect citizens every day. That is a promising area to look at.
That is right. The customer first programme, to which I alluded, enables citizens to go online and book a special uplift or whatever. Equally, as we have just developed a security framework around the programme, they can carry out online transactions including cash transactions. The programme will be developed once and for all for 32 councils in Scotland, but it will make little sense if its scope remains just the 32 councils. It is capable of linking with a range of other public services and, if there is to be a one-Scotland portal, it might fit into that so that citizens can carry out their transactions with whomever they wish. The technology exists, investments have been made and councils are developing in that direction.
There are also generational issues. It is not particularly easy for older people, disabled people and people who are not familiar with communication systems to do things like that; we must be able to service their needs in other ways, otherwise people fall through the net. In such cases, we do not know what their requirements are and we do not meet them, and they continue to fall through the net because they cannot communicate. That is a big issue.
There are some good examples with the Department for Work and Pensions. In our casework, people have been supported very well in their inquiries through that department. When you pursue best value, you will also look at the location of services. I mentioned Inverclyde as a very good location for services, with good-value property and rents and a good, flexible workforce.
Inverclyde is a wonderful place.
Seriously, with regard to engaging with that agenda, the idea that we can centralise all the services in our cities, and that the mother ship defends itself, is a barrier and a disincentive to getting to where we all want to be.
The best place to put offshore call centres is, of course, the Western Isles.
I am not sure that I see the point of the question. The work that I am doing with the eight councils relates to the point that the convener made in a light-hearted way, although it is not a light-hearted point.
I was not thinking specifically of my own area—I just wondered whether, in entering into the debate, you have to touch on the ideological area of whether in the future councils will provide all services themselves or merely enable others to do so.
We are currently talking about that issue, and it is taken very seriously. Each month I meet the council leaders, who are all thinking, "How will this process affect my local authority and my people? We have a special emphasis on the education of younger children—will that be maintained if a more general approach is taken?" Such questions are regularly batted across the negotiating table, and the final report will have to take them into account.
The ideological debate tends to polarise around one thing or the other, but councils are already debating those things. We buy in more than a third of all services—through partnerships or whatever—so it is not that anyone is ideologically opposed to the idea of doing that, where it reflects good value and where people have leading-edge skills that we do not have. That is quite right.
I am the president of the Scottish Association for Marine Science, which is based in Dunstaffnage and is part of the university of the Highlands and Islands project. The UHI project has many challenges, but one of its great successes is that it can provide—as Alasdair Allan well knows—local education for citizens in the Western Isles and the north of Scotland through educational services that are channelled from Inverness, Glasgow and a variety of other places. That requires a lot of planning and co-ordination, but when it hangs together it means that someone in the Western Isles can do a proper degree in finance or accountancy with support coming from outside. The service is locally accountable, but it is provided from outside, which shows that that approach works.
Good morning. I return to the point that Councillor Cook made to my colleague Mrs Mulligan about mandatory and non-mandatory services, and whether councils would be able to continue to provide those services that it is not mandatory for them to provide. Is that a live debate in local government and COSLA?
The reality is that local authorities are making individual decisions on how to cut their cloth—I am sorry; I got the metaphor back to front. They are making decisions on how to cut their coat according to their cloth. They need to make such judgments, and that is exactly what they are doing.
The debate that we are having about finances this year and as we look into the future is different from the debate that we have had in the past. We have looked at a three-year spending review timescale, over which there might have been some growth. The point has been made that we are now looking at a 10-year timescale. For the first time, we have to ask what package of services we can sustain over that period. As Sir John Arbuthnott and Colin Mair said, we have to consider how we can ensure that the decisions that we make now do not adversely affect the direction of travel in that 10-year timescale.
The old debate about whether the provision of a service is statutory is set in the context of the much greater focus on outcomes that now exists, although that is clearly a work in progress. There is a clear acceptance of the importance of early intervention, anti-poverty measures and programmes such as equally well, and the various agreements around those. Roughly speaking—if we are serious—those are all investments in the same people, the same households and the same communities. Although some of that work is not mandatory, it is critical to the achievement of current and future outcomes. A lot of work around community capacity building and learning and development does not have much of a statutory shell around it, even though interventions in those areas might be key levers for improving the lot of some of the most disadvantaged citizens in Scotland.
Local authorities face a real challenge, because they have to do their budgeting for the coming year and the year after in the here and now. Hopefully, given that they will have been advised by COSLA and influenced by the work of the review, they will take into account the longer-term implications.
I presume therefore that once that debate starts to percolate through it will have to be accompanied by a debate on provision in particular local authorities and on how, given that the demographics and geography in each of the 32 local authorities are different, local services can be tailored to local needs. In that light, is a cross-Scotland council tax freeze sustainable? If so, how much longer will it be sustainable for?
It is sustainable at the moment because the funding to support the freeze is more or less what councils would have chosen to levy under current circumstances. The point is whether that will continue to be the case. It might be more appropriate to pitch your question to ministers than to local government, because funding is a critical element of the equation. After all, if the support was not available—which is a question for Parliament—no council would have the freeze. The two go hand in hand.
There is an onus on the Scottish Government and the Parliament to adopt a little bit of the approach that we have just discussed. We should be focusing not on this year alone, but on how the changes that Parliament recommends will impact on delivery, efficiency and effectiveness over the next period and the period after that. That discipline must pervade both local and central Government.
Sir John's observation is very helpful. Over the past few years, there has been an agreement between central Government and local government at large on what might be called compensation for the amount by which councils might have increased council tax; in this case, the £70 million is roughly equivalent to a 3.5 per cent rise. Local authorities have clearly made individual judgments on the matter, but the collective judgment has been to agree to the approach.
Patricia Ferguson's point that some very localised democratic decisions have to be made has come up at COSLA meetings. The question is how long councils will want to deny themselves the opportunity to say to their communities, "Here's what we have to do with our resources under the current council tax levels. Are you prepared to have more local taxation in return for a different level of service?" Obviously, that kind of deal cannot be done with an across-the-board freeze. However, it has been done in the past and council leaders are aware that they might wish to put that question to their community at some point in the future.
Sir John, I know that you do not want to comment at the moment on the specific findings of your review, but can you tell us whether the lessons to be learned from it are specifically for the eight local authorities in the group that you have examined or will they have an impact on, or something to say to, the local authorities that are not part of the group?
I am not sure what will happen when the review is published, but there has been considerable interest in it. For instance, yesterday, I was invited to speak to Scotland's health board chairmen, precisely because the interface between social support and support through health care in the community is so crucial that everybody will have to think about it. I am sure that I will talk to the Cabinet Secretary for Health and Wellbeing soon, because the review has general implications. SOLACE is interested and I think that COSLA will want to consider the review and perhaps use it in its planning process.
We have had a couple of meetings with Sir John about the review. We are clear that the review will be reported to COSLA generally. If other councils would find it useful to use principles and practice that are in it, I am sure that they will do that. Equally, I am sure that, when the review is published, the eight councils that are involved will still require support from the Improvement Service. We are not at odds at all. We want to make maximum use of Sir John's review to make progress throughout Scotland. That is how we will use it.
Good morning, gentlemen. The discussion has focused on two main issues—local integration, which makes perfect sense, and aggregation and shared services. We have discussed balancing the use of shared services with the needs of local diversity. That diversity is why front-line services are sometimes a bit more problematic to share, but we can consider the support or backroom services. When we do so, the first port of call always seems to be services that are provided in all 32 local authorities. To what extent have you considered outsourcing functions such as wages and payroll services, which involve huge overheads for local government and for which a lot of staff are employed? I understand that, south of the border, tremendous savings have been made by outsourcing such work to private companies.
Councils throughout Scotland have a diversity of arrangements, including in several big areas. For example, Glasgow City Council has a joint-venture partnership with Serco to provide information and asset management services, because the council thinks that that is the most cost-effective approach. To refer to an earlier discussion, I also agree absolutely that having a shared service in the public sector will not always be the best way. In a range of areas, we already outsource services precisely because somebody else can provide them more efficiently and effectively than we can.
I would ask COSLA colleagues whether they agree that, because of the work that the Improvement Service and COSLA have done in the past three to four years, there are now fewer avenues to explore. Most of the possibilities for delivering cost-effective payroll services have been looked at. We do not need to pay consultants yet more money to tell us their ideas.
That was my next point. In any organisation, its staff is the best and most important asset and is usually the biggest overhead. Given the vast amounts that local authorities have spent on consultancy fees, what assessment—in order to ensure that the director level is fit for purpose—has been made of directors who earn six-figure sums? How will you ensure that local government is not too bloated and how will you make the hard decisions that have to be taken? Going back to the payroll, how will you ensure that we are balancing properly every pound in order to get best value, and that it is not merely a matter of local government protecting itself under the banner of "This could have dreadful consequences for the local community"? At the end of the line, is not the purpose of local government to deliver the best possible services for people?
None of us would dispute that last proposition, but I question the evidence base for some of your other assertions. Where do those anecdotes come from?
I can give you a written answer.
I would appreciate that because we do not recognise assertions about extravagant expenditure on consultants or, indeed, about "bloated" organisations. In my local authority—in every one of the 32 local authorities—there is constant reappraisal of such things. As we sit here, a directorate structure review is going on in my authority. We are looking again at what efficiencies we can deliver in the relationship between technical services and planning and economic development. That sort of activity goes on routinely.
I read the Official Report of the round-table discussions on 1 September, in which one of the contributors pointed out that it was relatively easy to make changes at middle-management level, but difficult at director level because of vested interests.
I do not accept that. Local authorities are member-run organisations. They make political decisions about the shape of the organisation and they have the power to determine their shape and structure. Do I regard myself as being in that position in my local authority? Absolutely. Do I think that the other 32 local authorities are in that position? Absolutely. They will determine and shape the structure of their authorities. I am sorry, but I just do not accept Margaret Mitchell's assertion.
May I respond to the question? The responses that have been mentioned are appropriate. Nevertheless, the public sector and public services are under the microscope in a way that they have never been before. We in the public sector and public services have to recognise that. Whether we think that things are done and accounted for properly and can be justified is only part of the answer. We have to convince the public that the public sector ethos of delivering services for the citizen is a truly vital job that is done professionally and monitored in an entirely accountable and appropriate way in relation to recompense, the numbers of people employed, the pension arrangements and all the other things that have been in the press.
I will make a factual observation. After the reorganisation of local government, when regions and districts were merged into unitary authorities, the average council in Scotland had 15 directors and 30 heads of service. The average council now has four directors and 16 heads of service. At the top end of the organisations the elimination of posts has been staggering—in some cases there might even be capacity issues to do with the level of rationalisation.
When I started working for NHS Greater Glasgow and Clyde there were five separate boards, each of which had a chief executive, a director of finance and a chairman of the board. Each board had meetings, with all the administration that went with that. At the end of the process we had one board, one chief executive, one finance director and one chairman. I suppose that the public in the west of Scotland do not know about that and might not even care about it, but it represents a huge transformation in how people work.
We still have to work on how we engage with the broader world of consultancy. In Scotland we are not yet good enough at ensuring that work that is done for one council is not paid for again by five or six other councils. Of course, the market has a vested interest in ensuring that work is recycled and not redone from scratch. We must be disciplined about knowing what work is being commissioned from consultants and about writing into contracts that local government can use the work for a variety of applications, instead of letting work remain in the ownership of the consultancy, which then does not have to do much more to make it available to another council.
The voluntary sector is worried that as a result of the ending of ring fencing of local government funding there has been a propensity to take services away from the voluntary sector and to subsume them into local authorities. The third sector not only has expertise and flexibility but can provide value for money, which is very much in tune with what local people need and want. Will you comment on that? It is a serious issue throughout Scotland.
I am happy to take that matter up, because I am concerned about the issue. I am a trustee of the Lloyds TSB Foundation for Scotland, which is a charitable organisation that distributes the largest amount of grant-aid support to voluntary organisations in Scotland, to the tune of about £10 million per year. The banking crisis and various other things are putting a huge strain on that. What I see from applications is that voluntary sector groups, which do incredible work in their communities, are finding it increasingly difficult to put together the funding packages that they need in order to deliver the care or support that they provide. I think that that situation is going to become critical quite soon. I am not sure what can be done about that, because the pressure will be—as is already emerging in some local authorities to which I have spoken—that an organisation's particular voluntary project will depend more and more heavily for support on the local authority; it will become almost local authority provision, because organisations cannot get the money from anywhere else. However, local authorities cannot afford to take that on. We need to look at that situation, because the voluntary sector is huge: it involves tens of thousands of citizens who work in it and many individual efforts to raise money, which it will be very difficult to do through the credit crunch.
I endorse a lot of what Sir John Arbuthnott said. It would be useful to do two things, the first of which is within the general ambit of the third sector, which includes truly voluntary organisations and bodies such as the body on whose board I sit, which is a not-for-profit organisation with a £70 million turnover. It is not the same as a voluntary organisation, because all our staff are, for regulatory and other reasons, fully paid professionals. The issue in respect of local volunteering is partly about streamlining processes for voluntary organisations. It has been made incredibly laborious to access funding, so we have to employ officers to manage the very laborious systems that have been set up.
Before I ask the question that I intended to ask, I have one that arises from the replies to Margaret Mitchell's point on consultancy fees. I know of a local authority in Central Scotland that has had very high consultancy fees—as much as £17 million over two years. Will the COSLA representatives go back and look at that situation, which is a genuine concern, given that we hear talk about local authorities having experts? Sir John Arbuthnott mentioned the public servants who deliver services, but then we hear about having to outsource to the level of the consultancy fees that I described. I wonder whether the Improvement Service also comes into that category in terms of the services that it delivers to local authorities and elected members throughout Scotland.
I feel an obligation to answer that question. The report that I wrote, "Putting Citizens First", specifically addressed that issue in 2006. I left behind a blueprint and, as you know, my motivation was to link the size of the Scottish Parliament—in terms of the number of seats—to what was happening to the size of the Scottish representation at UK level in Westminster, and also to link it to the effectiveness of representation in local communities, through local authorities, wards and so on.
I entirely agree with Sir John's observations. Always underlying the proposition that the number of local authorities should be reduced is an assumption that that will deliver more efficient, more effective services from the point of view of the customer, yet the evidence has not been garnered in that regard—the proposition has not been established.
I will be tediously factual yet again, if I may. From the early 1960s, we have gone from more than 200 elected councils to 32, through successive cullings, each one of which was argued for entirely on the ground of efficiency—they were almost nothing to do with the quality of local representation or anything else. We have already gone down a route that makes us—for a country that is committed to greater subsidiarity—peculiarly denuded in terms of institutions of local democracy compared with the rest of western Europe.
I wish to respond to the comments that were made earlier about efficiencies in local government, in particular in relation to single status and equal pay. We are now 10 years on from the introduction of single status and equal pay in 1999, but local authorities still face problems getting single status and equal pay settlements. How should we as politicians view a situation that has been allowed to drag on for 10 years without being resolved and which could, because of the way in which some settlements have been reached by local authorities, create other problems? How do we get ourselves out of the quagmire that we seem to be in regarding single status and equal pay?
There possibly was a question tacked on to the end of that, but that was largely an observation. Plainly, we have given your committee evidence on those issues on previous occasions. All but six local authorities in Scotland have single status settlements in position. There are no doubt residual issues to be dealt with, and local authorities will continue to be engaged in making individual judgments about how to respond to equal pay issues. I know that those authorities that have not implemented single status at this juncture are doing everything that they can to proceed with that agenda and to implement single status.
I do not intend to open up that debate. We are aware of your previous evidence. However, John Wilson expresses the frustration and disappointment of the committee. We took evidence and we made recommendations. We expected responses from COSLA, and we are very disappointed that, even at this stage—a week away from a debate in the Scottish Parliament, with three committees having reported on the matter—we have still not had a response. I will leave you with that. However, I do not want an extended discussion on it this morning.
Over the past few years, COSLA has not noted a reversion to type. We have heard local authorities say, "These are the resources that we have. We've now got to use them to deliver a package of services to local communities that will meet local needs." The blame game, where we tell communities that we are not to blame but somebody else is, is not the approach that we are going to adopt. We have explicitly said that that is not how we are going to behave. Leaders have said that up front and they will be held to the public statements that they have made.
That is why I asked the question. I am giving you an opportunity to rebut what they said.
The motivation is the one that Councillor Cook outlined. We expect decreasing levels of resources over the next period, which we now recognise will be quite long term, and we have to get to grips with the difficult decisions that will allow us to make good provision for local communities throughout that period. I do not see any lack of motivation to do that or any sacred cows whereby we cannot go to senior officers or talk about shared services. That might have been true when Alan Alexander was doing consultancy work with local government some years ago, but it ain't true now. If he is referring to that time, his assumptions about local government are out of date.
I am going to mention two people who were my predecessors in a particular university chair in Scotland, so I do so with some affection. On Richard Kerley's point about whether we might revert to type, I have heard him speak at conferences and I think that his point is that there is a danger that we would do that. I do not think that he was saying that it is inevitable. Indeed, the awareness of that danger seems to be higher this time.
So no regulation is required.
There is regulation.
Alan Alexander argues for greater regulation.
That reflects his time in the Accounts Commission.
He would say that his approach, which you describe as brutalist, is necessary. When will it become necessary? When will we politicians be in a position to decide whether your optimistic view of events holds? When can we expect to evaluate it and say, "Colin Mair was right. Get him in for a drink," or, "Get the firing squad out"?
You should do that year on year. Inspectorial and audit bodies produce a vast amount of data, much of which addresses best value. We are moving into the next cycle of best-value audits, which will examine partnership, not merely the internal workings of local authorities.
When would it be fair to judge your optimistic view—in three years, two years or one year?
If, in a year, we have abandoned the shared services and service integration that we are developing now and all the major public agencies have gone back into their corners, I will have been shown to be entirely wrong and you should judge me harshly for it.
As an independent person coming into this scene for a relatively short period, I am obviously aware of some of the comments that have been made and I must satisfy myself that the capability to deliver exists.
Thank you for attending. The evidence that you provided is appreciated as always.
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