Memorandum from the Chartered Institute
of Public Finance & Accountancy (CIPFA)
EXECUTIVE SUMMARY
- If local agencies and specialist agencies are
given access to the necessary levers, they are well placed to
make decisions which best serve the public interest and the needs
of local communities.
- Where Central Government feels that there is
a compelling need to regulate the conduct of the public bodies,
CIPFA would recommend the use of codes and guidelines rather than
resorting to costly legislation.
- CIPFA believes that the Government should use
the Comprehensive Spending Review to fully explore the potential
of place-based budgets to enable more efficient and effective
public services.
- It is important that localism is about more than
subsidiarity. Local agencies working in silos is not a recipe
for improved services. There must be incentives to encourage joined-up
working wherever appropriate. Measures of performance should be
focused on outcomes from the perspective of citizens and service
users. Value for money should be considered from the perspective
of the public purse as a whole. Local authorities have a central
role in terms of ensuring effective democratic accountability.
- Effective dialogue and trust across Whitehall
and between the centre and local public bodies is key to developing
high performing decentralised public service delivery.
- The key focus should be on equipping local residents
with the tools and information they need to challenge local decision
making. As part of this drive it is essential to make data available
in a way that enables citizens to help shape future choices rather
than merely contest past decisions.
- Government should introduce disciplines to ensure
that its conduct does not inadvertently impair the accountability
arrangements of local services to local communities.
INTRODUCTION
1. CIPFA, the Chartered Institute of Public Finance
and Accountancy, is the professional body for people in public
finance. Our 14,000 members work throughout the public services,
in national audit agencies, in major accountancy firms, and in
other bodies where public money needs to be effectively and efficiently
managed. As the world's only professional accountancy body to
specialise in public services, CIPFA's portfolio of qualifications
are the foundation for a career in public finance.
2. We also champion high performance in public
services, translating our experience and insight into clear advice
and practical services. They include information and guidance,
courses and conferences, property and asset management solutions,
consultancy and interim people for a range of public sector clients.
3. Globally, CIPFA shows the way in public finance
by standing up for sound public financial management and good
governance. We work with donors, partner governments, accountancy
bodies and the public sector around the world to advance public
finance and support better public services.
The extent to which decentralisation leads to
more effective public service delivery; and what the limits are,
or should be, of localism
4. In 2009, CIPFA and the Society of Local Authority
Chief Executives and Senior Managers (SOLACE) undertook a series
of workshops with senior managers from across the public sector
to consider how the public sector should react to cuts in spending
and what the implications of such cuts might be.
5. One of the issues raised during this work
was the need for significant delayering of the public sector with
many more decisions taken locally with minimal oversight. If deep
cuts in public services are necessary it is best to make many
of those difficult decisions at local level where they can have
regard to local needs and circumstances. That means a shift away
from the uniformity of national prescription and targets, in favour
of different service offers and standards in different communities.
6. Difficult spending choices will still be necessary
of course. However, if local agencies and specialist agencies
are given access to the necessary levers, they are well placed
to make decisions which best serve the public interest and the
needs of local communities
7. That said, though much maligned as skewing
outcomes, targets and guaranteed service levels are important
tools to encourage more consistent standards and practices across
the public services. Despite their bad publicity, they help to
set users' expectations and to ensure that the user experience
aligns with expectations. So in this shift away from prescriptions
from central government, there may be circumstances when the Government
will wish to set a central minimum standard, although it would
be hoped that central prescription could be kept to a minimum
8. Where Central Government feels that there
is a compelling need to regulate the conduct of the public bodies,
CIPFA would recommend the use of codes and guidelines rather than
resorting to costly legislation. The Government has made public
its desire not to manage public services from the centre and the
use of codes and guidelines is very much in line with this thinking.
9. The introduction of the Prudential Code for
Capital Finance in Local Authorities in 2004 provides a concrete
example of how localism's benefits can be maximised within a clear
framework of best practice. The code allowed an additional £3
billion of capital spending in the first two years of its introduction
whilst ensuring that capital investment remained affordable to
individual local authorities. The removal of central controls
has allowed local authorities to work in partnership with health
and other local service providers to support joined up local public
services.
10. The Prudential Code provides a robust and
transparent framework for local authority borrowing and replaced
the previous complex regulatory regimes. It succeeded in removing
a mass of detailed regulation by replacing it with a principle
driven regime requiring local decision and its application in
local circumstance. The Code has consistently proved that local
authorities can and do manage their borrowing prudently and in
accordance with local needs and priorities whilst the application
of the best practice framework provides reassurance that effective
governance arrangements are in place.
11. The Prudential Code has laid the foundations
for the current Housing Review which seeks to free up local authority
social housing provision from central controls and constraints
and allows for a future in which social housing can be properly
planned and adequately funded.
The lessons for decentralisation from Total Place,
and the potential to build on the work done under that initiative,
particularly through place-based budgeting
12. CIPFA believes that place-based budgets offer
scope to rationalise and align public services to allow more effective
joint working. The challenge is to maintain the alignment of responsibility
and accountability for budgets that is both meaningful and practical.
Local authorities must be given sufficient influence over budgets
for functions for which they have strategic responsibility to
allow them to exercise that responsibility, otherwise it becomes
meaningless.
13. Total Place pilots have shown that where
budgets for an area are looked at across organisations significant
savings can be delivered and services improved as innovative approaches
can be applied to intractable problems.
14. CIPFA believes that the Government should
use the Comprehensive Spending Review to fully explore the potential
of place-based budgets to enable more efficient and effective
public services.
15. A key to the success of place based budgets
will be to ensure that localities are empowered to work across
traditional organisational budgets and maximise the impact of
resources. CIPFA's work on pooled budgets has shown that when
local public bodies have a real will to come together to manage
resources value for money can be significantly improved.
16. The Government may itself wish to consider
the potential to use place based resource allocation models to
send out a clear signal that silo based thinking cannot be allowed
to dominate as public expenditure cuts begin to bite. This would
be supported by removing a large element of the ring-fencing of
resources that encourages silos between functions within organisations
as well as between them.
The role of local government in a decentralised
model of local public service delivery, and the extent to which
localism can and should extend to other local agents
17. Local authorities have a democratic mandate
for the decisions they make on behalf of local areas. This gives
them a unique accountability with which to deliver the aims of
localism. If localism is to be extended to other agents then we
would want to see them encouraged to work with local authorities
in their local leadership role to ensure that local accountability
remained.
18. Freedom for other agents to work closely
with local authorities based on local priorities will be an important
factor in extracting the maximum benefit from place based budgets
and opportunities for coordinated public services.
19. It is important that localism is about more
than subsidiarity. Local agencies working in silos is not a recipe
for improved services. There must be incentives to encourage joined-up
working wherever appropriate. Measures of performance should be
focused on outcomes from the perspective of citizens and service
users. Value for money should be considered from the perspective
of the public purse as a whole. Local authorities have a central
role in terms of ensuring effective democratic accountability.
The action which will be necessary on the part
of Whitehall departments to achieve effective decentralised public
service delivery
20. As well as considering new responsibilities
which might be delegated to local public bodies, Government should
consider the case for new powers to enable local bodies to respond
imaginatively to local need. CIPFA welcomes the Government's announcement
to grant councils a general power of competence aimed at encouraging
innovation and remove uncertainties. We hope that the power will
be drawn as widely as possible to remove any ambiguity. Similarly,
the recent announcement to enable tax increment funding of development
schemes, recognises the importance of initiatives to continue
to stimulate local economies.
21. Effective dialogue and trust across Whitehall
and between the centre and local public bodies is key to developing
high performing decentralised public service delivery; the introduction
of the Prudential Code has given local government a proven track
record that it will not use additional flexibilities irresponsibly
but will use the opportunity to provide more responsive services
to local needs.
The impact of decentralisation on the achievement
of savings in the cost of local public services and the effective
targeting of cuts to those services
22. CIPFA believes that decentralisation of power
to local authorities will help achieve savings in the cost of
local public services, improve the effective targeting of cuts
to minimise the impact on essential services and maximise cost
savings where possible.
23. Despite similarities between many public
bodies, there is no standard template of cost-saving solutions
that is right for all circumstances. Much will depend on the requirements
and wishes of the organisation's users and customers, the current
state of its services and its strengths and weaknesses in bringing
about change. The size of the organisation and nature of any partnership
it is in or could enter into will also be key determinants.
24. Leaders should ensure that systematic arrangements
are in place to collect both quantitative and qualitative information
about the needs, aspirations and priorities of users and customers.
This should be a dynamic continuous process, recognising that
requirements will vary as the prevailing economic climate changes.
What, if any, arrangements for the oversight of
local authority performance will be necessary to ensure effective
local public service delivery
25. CIPFA believes that local accountability
is the key to effective local decision making and governance.
The key focus should be on equipping local residents with the
tools and information they need to challenge local decision making.
As part of this drive it is essential to make data available in
a way that enables citizens to help shape future choices rather
than merely contest past decisions. Local authorities extensive
scrutiny functions should be used to hold local service providers
to account. The current transparency agenda may help to support
accountability but presents three challenges:
- Turning data into information - Public bodies
must give context and meaning to their spending data before they
publish so that citizens can make genuinely informed judgements.
- Engaging the many rather than the few - It is
vital to reach out to the widest possible audience to attract
a credible level of feedback. Making online information easy to
navigate, with engaging information presented in a sensible format
is therefore key.
- Helping to shape future choices rather than contesting
the past - Creating channels for feedback that help shape public
bodies future choices rather than just contest the past is essential.
26. Local government is subject to a variety
of reporting requirements already. For instance, there are statistical
reports for national aggregation and comparison, such as the budget
summary reports that give an overview of council tax nationally
and there are reports designed to track national performance indicators
or to brigade local government towards national strategies to
name but a few. Moreover, councils must now publish all spending
over £500 online.
27. CIPFA recommends rationalising the existing
raft of reports so stakeholders are clear on where to go to find
key information on the overall performance of a local authority
whether through traditional or electronic means. To enable this,
a code or guidelines for local government stakeholder reporting
to ensure that local authorities are following best practice is
crucial. Future development in local government reporting should
therefore be about building on what is already there, to tie in
non-financial information to the currently financially biased
reporting. Any developments should also tie in with an authority's
broad communications strategy.
28. These are principles which CIPFA has long
been advocating. In May 2008, CIPFA published a discussion paper
entitled Telling the Whole Story: The Future of Stakeholder
Reporting in Local Government. It set out CIPFA's vision of
re-invigorated stakeholder reporting in local government. This
work is now coming to a conclusion and will provide a model for
producing annual reports that are tailored to each authority's
individual circumstances and will help address the information
needs of local residents.
29. The existing regulatory and professional
requirements placed on the Chief Financial Officer are designed
to ensure effective accountability for the financial performance
of local authorities. The Chief Financial Officer has an explicit
duty to act on behalf of local taxpayers and the need to provide
them with effective and accurate financial information.
How effective and appropriate accountability can
be achieved for expenditure on the delivery of local services,
especially for that voted by Parliament rather than raised locally
30. Strong and effective accountability arrangements
are a pre-requisite for good public services. Whether the decision
or action relates to policy-making or delivery of public services,
it is important to make accountability arrangements as unambiguous
as possible. Failure to do so will create a recipe for confusion
and for public dissatisfaction. Government should introduce disciplines
to ensure that its conduct does not inadvertently impair the accountability
arrangements of local services to local communities
31. Capping of local authority budgets is a good
example. Local authorities should be responsible and accountable
for their decisions in setting of budgets and council tax. If
Government gets involved to cap or freeze, or threatens to cap
or freeze council budgets, confusion arises in the mind of the
council tax payer. Both central and local government are liable
to be held accountable for spending decisions over which they
have less than full control.
32. Likewise, local accountability is weakened
by the constant failure of central government to approve the revaluation
of domestic properties for council tax purposes. Over time, out-of-date
valuations eat away at the underpinning local rationale of the
council tax and the principles allowing councils to run their
own affairs which this Government has been at pains to support.
33. Again, where central Government wants to
stipulate the conduct of the public bodies, CIPFA would recommend
the use of codes and guidelines rather than legislation.
CONCLUSION
34. CIPFA would be happy to provide further information
on any of the points raised here and indeed give oral evidence
to the Committee if requested.
October 2010
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