Opinion: the challenge for local government

The shape of public services will change radically over the next five years. How can management accountants help organisations through the massive challenges ahead? By Dr Phil Barden, CEO Centre for Organisational Productivity and Performance.

In the public sector, there has been a plethora of improvement initiatives that have produced disappointing results. These have no evidence of improved outcomes at the same or lower costs; or of lower costs for the same or better outcome. Public sector finance professionals now desperately need to recognise the cynicism that is felt by the general public and service users about the disconnect between talk of improvements and the results.

We need a new sense of openness in the way that we discuss change in the public sector. There is little point in introducing new initiatives and developing services if they do not result in demonstrably improved outcomes.

Meanwhile the public sector is facing massive challenges. Whether central government departments, the National Health Service, or local government, it is unlikely that the shape of public services will remain recognisable over the next five years.

Meeting the challenges
The challenge will be how to build and retain the enormous benefits of a coherent public service while coping with substantial reductions in real terms of investment. The answer lies in linking policy approaches to finance, performance, and innovation in new and structured ways.

To demonstrate this, I will consider the role of local government initiatives arising from so-called Total Place, RIEPs, or other initiatives for service improvement and partnership based service delivery.

Total Place is a new initiative that looks at how a ‘whole area’ approach to public services can lead to better services at less cost. It seeks to identify and avoid overlap and duplication between organisations.

I will also assess the extent to which the relationships between finance, performance, and innovation will have to be rethought if a supportive infrastructure for such initiatives is to be developed.

A response to the challenge
From Total Place to RIEPs (and the many initiatives between and beyond these) there are three driving forces in the new wave of local government change:
a) the requirement for better value
b) an awareness of the impact of systemic linkages on service outcomes
c) developing partnerships to address some of the issues in a and b.

There is no doubt that these forces are central to improving local government services. But they are often phrased so generically that they sound a lot like rehashes of previous improvement initiatives. So we need to ask a lot of questions about each of the three forces.

Better value
What does better value mean in the delivery of services? Do we mean more for the same or more for less? Do we mean rearticulating the value proposition so that, for example, a set of core services will be provided but that anything beyond the core will have to incur additional charges? Surely a route to improved value is using a choice option for creating increased revenues? This might involve different levels of service - so value becomes that which people are willing to pay for.

Or, do we simply mean reengineering our processes to ensure that, for example, agencies coordinate their activities related to the same service objective. Innovative examples include one stop shops and councils sharing resources with other councils.

Understanding linkages
In recognising the need for better systemic linkages we need to ask radically difficult questions about budgets, control, and the inter-linkage of information systems. Do we have any idea of what the costs to local government will be as we continue to move increasing numbers of patients from acute hospital environments to the community?

Do we understand the differences in policing that may be required as we have increasing numbers of frail and elderly people living on their own in increasingly anonymous estates? There is little point in fommunity centres if older people cannot reach them, so have we assessed the costs of integrating increasing transport requirements for improved transport facilities?

Are we prepared to cost the savings made through eliminating park keepers and park security guards against the costs arising from the epidemic of childhood obesity arising, in part, through lack of exercise? Do we realise the costs of developing whole systems for better outcomes? Are we prepared in local government to do the calculations and show clearly the options?

Partnerships
Effective partnerships are central to improving outcomes, improving value, and improving performance. However are we prepared to change the business and structural model under which so many local government and public sector partnerships are frequently managed? Participants in many of the surveys and workshops carried out by my own organisation regard partnerships, as presently structured, as the least effective ways of working together for improved outcomes. The difficulty is designing new partnership structures that actually work.

Can the local government challenge be met?
Increasingly the skill set required to improve services will change. The new skills could be encouraged by the following framework.

a) If value is to be improved, local government must recognise that improved finance without improved performance is empty, and that improved performance without financial control is blind. Without better integration of financial and performance management, innovation in service delivery will remain aspirational.
b) The systemic improvements required for improved outcomes require new approaches to budget management that see the outcome as the ‘budget owner’ rather than the department or agency. The probability of successful systems is directly related to what each of the system partners is prepared to give up to achieve the outcome. 'Outcomes owning budgets' is increasingly part of the argot of central government. It is intended to get across to potential partners in the delivery of social goods that they must cease to regard their own departmental views on how best to allocate resource and instead determine only what is required to achieve the desired outcome.
c) Partnerships are projects. They have end points, they have milestones, they have critical paths, they have budgets. Local government needs to be seen as a set of mutually reinforcing projects, NOT as a set of optional relationships.

All of these issues will be tackled in detail in the CIMA conference 'Local Government: rethinking the boundaries' in July. For more information contact: Philip.barden@btinternet.com