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The transformation of Local Government Finance
Cliff Dalton
Head of Local Government Faculty CIPFA
September 2016
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Story for today
Financial landscape
Understanding challenges and opportunities
A key driver of change?
Delivering services differently
Devolution, Transformation
Staff - training needs analysis
Copyright © CIPFA 2016 protected under UK and international law
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Financial context: Total spending and receipts
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Political background
No expectation of a change in funding for Local Government
New chancellor budget needs to deal with Brexit
Highlights Broken Britain and the divide within the country
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Balancing the budget CIPFA 2016
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Efficiency Returns – deadline 14th October
Anything that gives greater funding certainty welcome
What is your approach (deadline looming)
Top Tips – guidance from CIPFA/ LGA
Rob Whiteman CIPFA C.E.O: ‘A real risk of a s.114 notice being issued over the next couple of years’.
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The Challenge of a Balanced Budget - a key issue and driver of change
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Financial orientation and projection, how good are you?
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Local Government Finance - changes under localism
Reduction of Revenue Support Grant
Move towards 100% Business Rate Retention
£28 Billion
Currently 50%
Scheme to be established
Movement in Council Tax approach with 2% precept
Move towards greater commercial activity and an expectation that LG will balance books
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Business Rates (still taking shape)
Stimulating local growth
Links with devolution agenda
Connectivity of transport
Skills and training
Planning and housing
Distorted by a complicated system
Redistribution and equalisation challenges
Business rates on it’s own is only part of the self sufficiency package need by Local authorities
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Other taxes
11 Copyright © CIPFA 2016 protected under UK and international law.
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The commercial council?
85 pages regulatory powers and income suggestions/ opportunities
www.cipfa.org/publications
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Financial resilience, all this and more
Strong financial management
Effective use of reserves
Asset & B-Sheet management
Investment decisions
Treasury management
Monitoring arrangements
Effective forecasting
Behaviours
Maximising opportunities and minimising threats
Efficiency Plans supporting financial planning
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Ten potential savings work streams for local authorities (for information)
1. Management Structures: Scrutinise your management structures on a pan-organisational basis. Reduce the number of management tiers, increase the spans of control and apply this universally across the organisation.
2. Demand Management: Identify key service areas and determine how demand can be reduced. Look to the development of preventive measures in social care and channel shift in customer services. Encourage people to take responsibility for their own outcomes.
3. Transport: Critically scrutinise all provision the local authority is making for transport. Map it out , reconsider the eligibility criteria, reduce waiting times and bring in proper route planning.
4. Property: Critically consider the authority’s fixed assets, in particular ensure that all buildings and installations add value in term of service to the community. Sell off redundant assets to provide capital receipts and reduce the burden of revenue running costs.
5. Administrative resources: Centralise and rationalise administrative and other support services. Adopt a generic business partner approach to deliver genuinely flexible and responsive support services.
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6. Procurement and contract management: Ensure that all new procurement and existing contracts provide value for money and focus on what the authority really needs.
7. Information Technology: Unleash the power of the digital age to help empowerment of communities and service users. Use generic applications to take costs out of the business, look at how to save on licencing costs. Automise business processes and realise staff savings.
8. Shared services: Consolidate back office functions across the authority and collaborate with other organisations to create genuine shared service solutions to the delivery of back office functions.
9. Fees and charges: Actively review all the fees and charges that the local authority collects with a view to increasing (where legislation allows) to a rate that maximises profitability. Look for trading opportunities – but only where it will deliver a cashable profit.
10. Organisation and culture: Genuine paradigm shift can only be achieved with a vision of how the workforce can be developed to achieve top level performance in the post transformational era.
Ten potential savings work streams for local authorities (for information)
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Devolution Service
Transformation
Financial Resilience
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Devolution
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What is devolution ?
Devolution is the transfer of political power from the central to subnational or regional government.
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Three strands of devolution
1. Administrative Devolution - where limited powers are transferred. This means the devolved administration controls allocation of public funds and the nature of administration.
2. Legislative devolution - the transfer of power to make legislation
3. Fiscal devolution - the ability for the devolved administration to raise its own taxes. Most funds available come from central government in the form of grants
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NAO Devolution Deals
April 2016
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Investment funds have been agreed
Paid over 30 years
Gateway reviews every five years
Nine areas have adult education budgets
Often linked with conditions and reviews
Consolidated funding for transport
Highways maintenance
Bus franchising
Copyright © CIPFA 2016 protected under UK and international law. 21
Learn by share - But how common are devo deals?
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Understanding the numbers.
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Service Transformation
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Service transformation increasing - form should always follow function
Decide on objectives and
outcomes
Decide on the model
Decide on the vehicle
24
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Alternative service delivery vehicles - do you know enough?
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Different challenges, same baselines
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Service Transformation
Investing in staff
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Technical Skills
Changes in accounting standards
Changes in regulations
Changes in governance
Changes in legislation
Changes in policy
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Leadership Skills
From control to collaboration
Leading organisation to leading systems
Provision of time to reflect and make space for creativity
Service provider to co creator
Ability to deliver on vision and outcome
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Commercial Skills
Service costing
Options analysis and business case preparation
Financial evaluation and understanding capital structures
Taxation
Contract negotiation and exit costs
Contract management, contract testing, variations and renegotiation
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CIPFA supporting the sector
CIPFA Insight – Balancing LA Budget
CIPFA Insight – Alternative SD Vehicles http://www.cipfa.org/cipfa-thinks/local-government
CIPFA Briefing – Easing Pressure on Accounts Closedown http://www.cipfa.org/cipfa-thinks/local-government
CIPFA Suggested Publications http://www.cipfa.org/policy-and-guidance/publications
Balancing LA Budgets
Practitioners guide to Income Generation
Introduction to LG Finance
Role of the CFO
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Finance Business Partnering
Training Need Analysis
Introduction to guidance and training
CIPFA qualification
Leadership and commercial
Round Table and working groups
Transformation
Devolution
Resource Directors Network
Efficiency returns
CIPFA supporting the staff
