Councils are becoming ever more business-like. Every council with responsibility for social services is facing its own Jaws of Doom of declining government grants and rising demand for services. So, looking for lessons from dominant commercial models makes sense. Or does it?
It’s not like the privatisation of adult social care has been a resounding success with the recent CLG Select Committee report warning of the collapse of the market due to chronic underfunding. Perhaps some public services are meant to be not for profit? Martin Vander Weber wrote a good piece in The Spectator this week supporting renationalising the railways. But make sure you choose nationalised industries from countries that are good at running them; Deutsche Bahn or MTR, operators of the Hong Kong metro. The same goes for councils; there are good and bad commercial models to choose from.
Undoubtedly, there is plenty of scope for councils to be more commercial in their outlook; becoming sharper in their procurement and contract management, in exploiting all their assets to the full, and achieving an organisational culture and systems which nurture innovation and creativity.
Some councils are already adopting new commercial models. The question is how to accelerate adoption of successful experience by 300 plus councils. Over the last few months, Caja have been developing a commercial council offer to help councils think strategically about these issues and take practical action to support the whole organisation. We think there are a couple of specific opportunities; firstly, working with all councillors, especially members of scrutiny panels, to ensure they are bought into, or at least understand, the council’s commercial ethos, goals and model; secondly to develop a council-wide development programme – it’s not enough to delegate to a Commercial Directorate while everyone else carries on as normal or equate procurement with commercial – while delivering tangible results.
Councils could consider how they balance public sector and commercial goals, e.g. do you limit your property portfolio to your own locality or go wherever the best returns are to be made -and take the risk of getting embroiled in planning rows in another council’s patch?
While there are big choices to be made, most councils’ concerns are more practical. They have long been buying and managing contracts with the private sector to provide local public services. They want to do it better to get the most from their contractors – whether value for money or new thinking.
Councils are also looking at all their assets to maximise value. Many councils have re-entered the property market over the last couple of years – whether to start building homes for rent or to support local regeneration. Can you maximise other assets such as information and reputation in a similar way?
They are also setting up companies to run existing services. Often there is a strong social ethos to this – whether handing a library or park over to a community trust or supporting existing staff to establish mutual companies. Both can generate new thinking and a fresh burst of energy to revitalise a vulnerable facility. But there are also instances of companies floated on over-optimistic revenue forecasts of winning business from other councils. Which takes us the council’s ethos and appetite for risk; given most new businesses fail, how likely to fail is a floated off LA company? If it did would the council step in bail it out? Library? Possibly, adult social care service? Definitely. Could the council be liable to claims from former staff who believe they were misled into joining what was always a shaky commercial proposition?
The 40% decline in government grant and the retention of business rates has given all councils the burning platform to think radically about how they operate. For better or worse, over the next few years, all councils will surely adopt a more commercial approach. Doing that will not close the resource gap, but it must be better to do it well.
