Communities and Local Government Committee - Mutual and cooperative approaches to delivering local servicesWritten evidence from the Department for Communities and Local Government

Summary

The Government is committed to decentralising power to communities and neighbourhoods. The Localism Act and abolition of bureaucratic target and inspection regimes allows Local Government more freedom to act in the interests of their communities.

The co-operative model is one of a number of different approaches which local Government is taking to respond to the challenges facing the sector. This involves running the council using the principles of the co-operative movement. This might include opening service delivery to not-for-profit organisations and encouraging employees to establish mutuals to run services.

Local Government spends £62 billion annually on third party payments. There is significant scope for major savings in local authority procurement, to save taxpayers’ money, pay off the deficit and to commission better frontline services.

The Open Public Services White Paper sets out the Government’s commitment to open up public services and procure a greater proportion of services from the Voluntary and Community Sector and Small and Medium Enterprises.

The Government welcomes the committee’s interest in innovative models for transforming local Government such as the co-operative council.

Introduction

1. Decentralisation of power and decision making is at the heart of the Government’s agenda. The Department is responsible for driving decentralisation across Government and is committed to pushing power to the lowest practical level—be that a local authority, a neighbourhood council or a community.

2. The Localism Act sets out a series of measures to achieve a substantial and lasting shift in power away from central Government and towards local people. They include: new freedoms and flexibilities for local Government; new rights and powers for community and individuals; reform to make the planning system more democratic and more effective, and reform to ensure that decisions about housing are taken locally.

3. The Localism Act and Local Government Finance Bill, along with changes we have made to remove ring-fences on Local Government grants and dismantling of the National Indicator Set, give councils much greater freedom and flexibility to act in the interests of their residents and to develop new ways of discharging their functions. We want local Government to be a visible leader of their communities, listening to local concerns, supporting local action and holding others to account on behalf of local communities.

4. The general power of competence is now in place for all English local authorities, including eligible parish councils. Councils can innovate and legally do anything an individual could do unless specifically prohibited by law. This gives councils more freedom to work together act creatively and innovatively to improve services, drive down costs and enhance their local area.

The Changing Role of Local Government

5. Over a number of years, the perception of the role of councils has moved towards that of a service provider as they have been required to deliver an increasing number of “one size fits all” services and to shoulder a growing burden of compliance. By returning autonomy to local Government, we are giving them the freedom to focus on representing the wishes of their communities and providing leadership in their area. It is for individual local authorities to decide how they exercise this freedom and Government is not dictating a specific model.

6. These freedoms give councils greater scope to respond to the challenges presented reductions to their spending power, the greater cost of providing social care in the future and the opportunities that come from the devolution of the public health budget to local Government from 2013.

7. Progressive councils across the country are already revolutionising the way they operate, by giving councillors and communities more control over budgets and commissioning or encouraging small businesses, charities and social enterprises to bid for contracts. These approaches to running councils are becoming more common as local Government addresses the challenges of rising social care costs, the need to cut the nation’s deficit but also the need to engage with communities and increase trust and confidence in public services and local democracy.

8. Many councils are empowering their ward councillors to discharge their core role—as representatives of their electorate. The freedoms we have introduced on Governance, such as allowing councils to return to the committee system and clarification of the pre-determination rules are designed to allow local Government to act to revitalise local democracy in this way.

9. One model which has been taken up in the last two years is that of the co-operative council—running a council along the lines of a co-operative or mutual society. As with other progressive models, the co-operative model places emphasis on empowering residents and reduces the role of the council as the provider of first resort.

10. The 17 local authorities and opposition groups who have adopted the co-operative council model have taken a variety of approaches to achieve this, including passing ownership and responsibility for assets to communities; creating employee led mutuals to run services and establishing council services at neighbourhood level, with a view to involving communities more closely in their work. Oldham Council is encouraging staff to spend three days a year volunteering in the borough to lend their skills to local groups.

11. The Committee’s call for evidence asks for views on the benefits of commissioning services from not-for-profit organisations such as co-operatives or mutuals. Whilst this is obviously an approach that councils following the co-operative model may choose to take, it would be one part of a wider change in their philosophy and business plan.

12. Other authorities are transforming their services along different lines. For instance Selby District Council intends to de-couple the council’s core democratic decision making function from the physical provision of services by transferring the majority of its staff to a new “service delivery vehicle” called “Access Selby” with the aim of reducing the overall budget. Access Selby is not currently a separate legal entity, and its officers are still council employees, but it could potentially become a mutual, a business (either privately owned or partially or wholly owned by the council), or some other form of joint enterprise. The intention is that eventually around 70% of the staff previously employed by the council will work for Access Selby.

Local Government Procurement

13. Some councils are keen to improve the way goods and services are commissioned and harnessed their buying power to secure better deals to help drive down costs, encourage innovation and support local businesses. Local Government’s own Productivity Programme also shows there is more that can be done to address this area and identify savings.

14. The Open Public Services White Paper sets out our principles for reforming public services, including making services open to a range of providers from different sectors and of different sizes, including—but not limited to—co-operatives and mutuals.

15. The Government is actively looking at ways to tackle red tape, simplify European Union legislation, and open up its contracts, tenders and procurement opportunities up to smaller firms and the voluntary sector by using of Contract Finder.

16. The Localism Act introduced a new Community Right to Challenge to open up local Government commissioning further—particularly to local communities. The Right allows community groups and parish councils to submit an expression of interest in running a local authority service. A successful expression of interest will result in the local authority running a procurement exercise, in which the community group can participate.

17. The Right will hand the initiative to groups with good ideas about how services can be run differently or better, ensure their ideas get a fair hearing and that they get the time they need to prepare effective bids to run services. Local authorities must consider how any expression of interest and subsequent procurement exercise will improve the social, environmental and economic wellbeing of the area.

18. A group of two or more local authority employees can submit an expression of interest in running a service. We expect employees to form an employee-led structure to take on running services under the Right.

19. The Government has removed the bureaucratic pre-procurement form—the Pre-Qualification Questionnaire—for deals below £100,000 which can discourage small business or the voluntary sector from bidding. Council suppliers also regularly complain about this onerous form.

20. The Secretary of State for Communities has written to the Local Government Association to ask them to press their members to reduce the red tape burden and to encourage more councils to also drop the form, share completed forms or use the simple version produced by Government for big tenders.

21. There is more that councils can do:

embrace transparency on spending, tenders, contracts and property assets, required by the Data Transparency Code to identify savings;

tackle procurement fraud, estimated by the National Fraud Authority to cost local Government £855 million a year;

use the new general power of competence in the Localism Act to remove legal barriers to greater innovation and partnership working;

eliminate duplicate spending: research by Experian estimated councils could be losing significant sums every year in duplicate payments;

introduce new checks and balances on procurement and corporate credit card use, as recommended by Sir Philip Green’s efficiency report;

commission services better so they support local business, the high street and voluntary sector. Many councils still gold plate European Procurement Guidance;

increase joint working and bulk buying, including the sharing of back office services and senior staff; and

use electronic auctions, reducing multiple suppliers, negotiating hard on contracts and promoting competition between suppliers.

Empowering Communities

22. Ten Neighbourhood Community Budget pilot areas were announced alongside four Whole Place Community Budgets pilots on 21 December 2011. These comprise the second phase of the Local Government Resource Review which aims to push greater financial autonomy out to communities and citizens.

23. The 10 pilot areas are as follows:

Newcastle (Cowgate, Kenton Bar, Montague)—local authority lead;

Hammersmith & Fulham (White City)—local authority lead;

Birmingham (Castle Vale, Shard End, Balsall Heath)—a joint local authority, Registered Social Landlord package covering three neighbourhoods;

Kingston–upon–Thames (Norbiton)—local authority lead;

Tower Hamlets (Poplar Harca)—Registered Social Landlord lead;

Westminster (Queens Park)—Voluntary and Community Sector lead;

Ilfracombe Town Council—parish council lead;

Bradford Trident (five small neighbourhoods)—Voluntary and Community Sector lead;

Tunbridge Wells (Sherwood)—district council lead; and

Haverhill Town Council—led by “One Haverhill” partnership.

24. In Norbiton, the Council is working with residents, service providers and central Government to explore alternative ways to design and deliver services to address the priorities identified by the community as part of their Local Integrated Services work covering housing, community safety, public realm, worklessness and youth activities. The ultimate aim is to pool partner budgets in line with all community priorities and to devolve more power and influence to the very local level.

25. The NCB activity fits very well with Kingston’s approach to commissioning, which is to ensure that the right service is in place, with the right provider, to meet the community need. The Council does not assume that it should be the default provider and has for some time been working with the local voluntary and community and business sectors to build their capacity.

26. The pilots will work out in practice how neighbourhoods can take more control over local public services. We have no blueprint and we expect different approaches to develop, reflecting local characteristics and issues. Each area will develop an operational plan that is ready to go live from April 2013. This will need to define the package of local services, the funds and other resources that comprise the budget, and accountability arrangements.

27. Learning and evaluation will be key features of this work, and we discussed our initial ideas with the pilot areas at the Neighbourhood Community Budget launch event on 2 February. We want the pilots to act as catalysts for the adoption of Neighbourhood Community Budgets more widely, and to establish a platform for demonstrating the effectiveness and efficiency of neighbourhood-based approaches—getting better services for less. The Treasury and other key departments support this work.

Conclusion

28. Public Services need to innovate in order to meet the challenges of the 21st century. The co-operative council approach seeks to give power to communities and to encourage closer partnership between individuals and their local authority.

29. The Government is keen to encourage such approaches and welcomes the committee’s focus on the co-operative council.

June 2012

Prepared 6th December 2012