Local authorities: New ways of working - Back to the future?

A large part of our local authority practice for the past few years has been advising our council clients on new ways of working. This covers a spectrum of new models of service delivery and funding. Many of these are innovative and genuinely seeking new ways of operating. But, as we will see, there is an element of déjà vu about some of the projects we are now helping councils deliver.

This is the first in a series of alerts linked to a Bevan Brittan seminar on 20 May 2015 in our London office reviewing the range of models being used in the market, the key legal challenges encountered and opportunities for the future. The four alerts following this introduction will be issued over the next few months and will cover four areas of local authority activity under this overall theme.

1. Commercialisation

The pressure on local authority finances is relentless. In these circumstances it is not surprising that seeking opportunities for generating revenue is high on many councils' agendas. We have seen a sharp increase in the number of trading companies being set up for all ranges of services including professional back office as well as more traditional direct services, e.g. highways maintenance. Many authorities are taking this a step further and developing businesses which have sale potential in order to generate capital receipts. Operating in this arena involves careful consideration of vires, state aid, tax and company law issues.

2. Corporate structures to drive innovation

In addition to the setting up of corporate vehicles to trade in the commercial market, many councils are exploring what other benefits corporate models can bring. We have been involved with new delivery models for children's services which used a corporate structure (a CIC) as a neutral shared platform for a shared services arrangement, with the additional benefit of enabling new employment and pension flexibilities. We have also advised councils on radical reconfiguration plans involving shrinking the council to an irreducible core of officers. We are supporting a number of councils who are leading the development of new vehicles to address market failure e.g. energy companies and council owned banks.

3. Working differently

Even those councils without an appetite for radical organisational change are having to operate differently within their existing service template. For example we are heavily involved with supporting local authorities robustly renegotiate contracts which are no longer affordable or fit for purpose. Councils are systematically reviewing their contract portfolio to flush out potential savings and opportunities for change/flex. Local authorities entering new contract arrangements are changing the basis of specifying services to build in flexibility and payment by results.

4. Engaging differently across the public services landscape

Local authorities are increasingly enmeshed into the services and finances of their public sector neighbours, particularly other local councils in LEPs and regional arrangements, as well as health. The horizontal and vertical integration of service lines to create economies of scale, better use of the public purse and (ideally) better outcomes for service users and citizens is possibly the most exciting agenda to emerge from the challenge of austerity.

Conclusion

It is tempting, amidst all this change, to think that we are in an age of radical new thinking. It is therefore salutary to reflect on a few examples:

Take a local authority, running out of patience at gas utilities constantly digging up the city's roads to lay new mains and not providing cost effective energy to its citizens and businesses. The authority decides to buy the two companies, runs them itself and generates a profit. A cutting edge example of the use of the General Power of Competence? Actually Joseph Chamberlain's Birmingham City Council in the 1870s.

From more recent local government history, it is fascinating to recall that in 1940 the largest hospital authority in the world was the London County Council (40,000 general hospital beds and 35,000 mental health beds).

So some new ideas may not be as new as we all think. But it is certainly true that the current financial pressures are generating significantly more and various new ways of working and this will be the position for the foreseeable future.

Look out for the next four articles which will explore some of these new ideas in more detail and also register for our seminar on this theme on Wednesday 20 May 2015 in London.