January 20th, 2015

The outsource of it all

7 minute read

by Phillip Ward

 

I once talked a Government Minister out of legislating for charging for domestic refuse disposal. It was 26 years ago and, in my defence, I knew nothing of waste policy, nor was recycling of much interest to most people at that time. My objections were not therefore based on waste considerations but on the fact that the Minister concerned wanted to add the provisions to the Parliamentary Bill I was managing. Since that was dealing with the introduction of the Poll Tax, my advice was that the Bill was controversial enough without opening up a whole new front. I do sometimes wonder whether, with the advantage of hindsight, I should have simply said “Yes, Minister”.

This story came back to me from the mists of history because of a very real current concern about the future of local government and because the Minister concerned was the charming, aristocratic and staunchly Thatcherite Nicholas Ridley. Apart from his enthusiastic embracing of the Poll Tax, he was known for his then radical views on local government, including the assertion that local councils only really needed to meet once a year to open the tenders for council services. We sniggered then, but it is starting to happen.

 

Non-commissioned officers

I now live in Northamptonshire where the County Council is consulting on its budget proposals within a framework that envisages passing virtually all of its activities to a mixture of private companies and voluntary or mutual organisations. Its plan is to reduce its own workforce from 4,500 to around 150 officers, who will effectively be the commissioning department. The budget consultation is long on explaining the financial pressures to which this radical proposal responds, so far as I can see, is largely silent on the implications for services. It does, however, identify support for recycling as a priority because of the much higher costs of dealing with residual waste.

This is not some obscure rural madness. The model exists already in the London Borough of Barnet, which is well into implementation. Aditya Chakraborrti in the Guardian describes how services there are now outsourced to contractors and other local authorities around the country and managed by people with little or no knowledge of the circumstances in Barnet. Although Cornwall Council ultimately rejected a proposal to outsource many of its services to a joint venture company, but did decide to transfer around 340 jobs to BT. It seems inevitable that other local authorities will opt for one outsourcing model or another.

What is driving these changes? The most immediate driver is money. Central government has severely limited local government’s local fund raising powers. The Council Tax which replaced the Poll Tax, which in turn replaced domestic rates, is not a buoyant tax, i.e. receipts do not automatically increase as house prices increase. That would require a revaluation. While the Institute of Fiscal Studies and one or two back-bench MPs regard this as long overdue, no leading politician has the stomach for it. So the tax remains based on 1990 values and local authorities’ ability to increase the rate of tax has been limited to 2% a year, unless they hold a local referendum – effectively a cap.

 

Tax attacks

Control of the business rate was removed from local authorities in 1990. They do now have some ability to retain a proportion of additional funds raised from increases in the business base, but this effectively provide a fillip to councils in more affluent areas: it will be much more valuable in Westminster than it will in Carlisle.

The other main source of local funding has been grants from central government but these have been reduced sharply and the process is continuing. While austerity has been the justification for the cuts, the rhetoric has all been about cutting out unnecessary local services and sharing in the provision of others. The Government’s giant Localism Act was not about increasing the freedom of elected local authorities but encouraging the growth of new models of delivery that move control further away from directly-elected councillors.

The Act’s so called power of general competence, gives local authorities the ability to do anything which any natural person can do. I have sometimes joked that, on the basis that two can live as cheaply as one, perhaps they could use the power to get married.

 

Deal with difficulties

A further strand in the story is, in fact, the move to joint authorities. The Government has already established “City Deals” with Manchester and Sheffield. The deal with Greater Manchester required all the local authorities in the region to join together for certain purposes and have a single elected mayor to lead it: a Boris of the North. In the case of Sheffield the joint authority goes well outside the old metropolitan county boundaries into parts of Lincolnshire. Other cities are also in discussions.

 

Manchester City Hall

A square deal? Manchester City Council will pool powers with other Greater Manchester authorities under the City Deal. Photo by Mark Andrew, via Wikimedia Commons.

 

The lure for this is the devolution of some central government funding for transport and training and additional regional development funds through the Local Enterprise Partnerships. My old boss Michael Heseltine is influential in this as he continues to press his vision for local visionary leadership and strong mayors, which he set out in consultation papers as long ago as 1990.

It’s not just cities that are moving down this route. Oxfordshire, Buckinghamshire, and Northamptonshire have announced that they plan to form a joint authority so that they can have one of these “City Deals” too. Ironically these deals seem to be replicating in large measure the role of the Metropolitan County Councils, which were abolished, along with the GLC by Michael Heseltine in the mid-1980’s because they wouldn’t toe the line on spending.

Is any of this a bad thing? Well some of the city deals may be positively good if they succeed in breaking down monolithic central control from Whitehall and creating genuine alternative power centres. It seems doubtful that this can happen without a more buoyant source of local revenue-raising to loosen Whitehall’s stranglehold on the purse strings.

 

Variations on a theme

My main concern is that because the way individual local authorities are responding to the financial pressures is very different, we are in for a giant postcode lottery over what is done and how. A growth in arm’s-length delivery will bring less openness, a reduced ability in introduce change, increased difficulties in implementing national campaigns and confused accountability. A real concern is that if activities are put at arm’s-length and not properly resourced, what is really being laid off is blame, without recourse, for service failures.

The waste and resources sector is no stranger to outsourcing from the era of compulsory competitive tendering, and many local authorities are already key customers and partners. However, the future could well be different. The ways in which councils do business look set to change. Waste services could be grouped with a range of other environmental services for an arm’s-length body to manage as part of a larger business model, with an expectation that revenue streams generated by synergies between the public service and other commercial activities will meet part of the cost. We are highly likely to see authorities banding together to share these arrangements, in search of economies of scale. In the process, they may well brush up against the boundaries of their statutory responsibilities, and possibly EU procurement rules.

Whilst what it will mean in practice remains speculative, it is clear that local government is changing, largely without discussion at the national level and not in a uniform way or at a consistent pace. There may be opportunities for the waste industry in all this or it may bring new providers to the market. Reluctantly or otherwise, as a Northamptonshire resident I’ll be in the vanguard of the changes – I’ll let you know how it goes….

 

Phillip Ward

 

Phillip Ward

 

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Ted Johnson

Phil:

Great read.

Let me know if you want my experiences added for supppot.

Ted Johnson