Memorandum by the Institute of Value Management
(LGR 04)
SUMMARY
1. The Institute has no views as to the
balance, sources, collection methods, absolute level or purpose
of local government funding.
2. We do believe, however, that for given
units of local government activity a ceiling relative to inflation
should be set such that unit costs do not rise above inflation,
if at all. We believe this is quite feasible and that central
government should exercise greater influence to ensure that it
is achieved.
3. We believe that if council costs are
allowed to rise faster than inflation it will cause insoluble
problems for whatever form of revenue is decided upon. Put quite
simply taxpayers will not tolerate unending demands for more revenue
when there is limited evidence of effective action to contain
costs and improve services. Accordingly, any new tax/revenue arrangements
should be accompanied by the requirement that all best value authorities
have an effective value programme in place so that expenditure
is contained within inflation limits.
THE INSTITUTE
4. The Institute of Value Management is
the representative and qualifying body for value management in
the UK. We were established as the Value Engineering Association
in 1966 with the assistance of the Ministry of Technology to encourage
and develop good value practice. The Institute's current name
was adopted in 1972 to reflect the growing use of value methods
outside of industry and construction.
5. Value management is about the programmed
review of products and services and their means of production
to secure and sustain best value for customer and stakeholders.
The term best value has long been used in value management, with
the same meaning as for the best value policy for local government.
In value management there is a heavy focus on teamwork, staff
involvement, empowerment, creativity and innovation. To give further
information on value management copies of a DTI booklet on the
topic were sent by post.
YOUR TERMS
OF REFERENCE
6. Your terms of reference comprise seven
points. The first five relate to the balance of funding, forms
of taxation, etc: areas about which the Institute has no views.
It is the last two questions that concern us. They comprise:
— Should there be a ceiling on local
government expenditure and taxation, and if so how should controls
operate?
— To what extent does central government
control or influence contribute to local government expenditure
and taxation?
7. In respect of the first point we believe
that the unit costs of councils should not rise above inflation—indeed,
we would expect unit costs to reduce in absolute terms. Of course,
if Ministers want councils to take on more duties then these will
need to be paid for, but the same principle should apply—unit
costs should not rise above inflation, if at all.
8. To secure this we would expect all best
value authorities to have an effective value programme. If these
programmes are to be monitored, then any assessors should be suitably
trained in such regimes. Their role should be to disseminate good
practice not apply a bureaucratic audit regime that strangles
innovation and encourages box ticking. There are key benchmarks
that could usefully be taken on board. They comprise:
— Outcomes—a well run value programme
normally delivers benefit, in cash and/or kind, worth 10 times
the cost of the programme.
— Practice—there is a BS EN 12973:
2000 standard that delineates good value programme practice, and
which facilitates the audit of programmes.
— Skills—there is a well established
European system of training and certification for practitioners
available to secure best practice.
9. The Institute believes that such regimes
are provided for in the 1999 Local Government Act—the best
value legislation. Sadly this was not implemented as effectively
as it might have been. This is particularly disappointing given
that the linkage between best value and value management was noted
in the Environment, Transport and Regional Affairs Committee's
eleventh report Implementation of the Best Value Framework
of 22 July 1998 (Ref 705-1).
10. The Institute respectfully invites the
ODPM Select Committee to examine paragraphs 8 and 9 of the above
DETR Select Committee report and the evidence to which it relates.
Also, paragraph 103 under Conclusions and Recommendations.
Had timely action been taken in respect of these paragraphs the
best value policy would have been significantly more effective
and local government costs kept within inflation. It does not
follow that had costs been kept within inflation council tax would
not have gone up faster than inflation. That is a matter of grants
and their distribution, a topic on which we have no views.
11. In respect of the ODPM Select Committee's
last question relating to "central government's control or
influence" the Institute believes that central government
needs to be much firmer and more decisive when asking councils
to improve performance. The scale of performance improvement required,
inevitably means changing both what and how work is undertaken.
This requires not only a vision of what is possible but an understanding
of the means to achieve it. Councils, like all our public services,
are run by hard working, intelligent and conscientious men and
women. They, however, lack exposure to world-class performance
improvement practice to know what works and what can be achieved
and they are unlikely to find adequate guidance from within public
services. They need guidance and practical support as to what
does work rather than what does not.
12. For example, the Cabinet Office/DETR
publication Guide to Quality Schemes and Best Value noted
in February 2000, the "Quality schemes will not in themselves
guarantee Best Value". These topics do not lie at the heart
of improving productivity to the degree that value management
does and indeed they have a different role and are not alternatives
to value management. In fact value management is not included
in the quality schemes, yet it is from this topic that the best
value policy borrows its core principles.
13. We believe that all public services
should run a value programme that is subject to stringent audit.
Ministers may feel that to advocate value management is "prescriptive",
but the consequences of not being prescriptive have contributed
to unacceptable council tax increases. We are not aware of an
alternative to value management that is equally effective in respect
of public services, and value management does fill in the gaps
of the best value policy. In the final analysis, widespread application
of value management will prevent the continuous rise of council
costs above inflation that would undermine whatever system of
taxation is decided upon.
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