Blog - 18th November 2022

Blog - 18th November 2022

In this blog I consider the case of Barnet Borough Council - and my role in the demise of its ‘Easy Council’ model – and what this says about local government as a whole.

Last week an article about Barnet Borough Council by John Harris in the ‘Guardian’ caught my eye. It considered Barnet’s experiment with the ‘Easy Council’ where several services were outsourced in the belief that significant savings would materialise but then they didn’t. The result was summarised by John Harries as follows:

“Amid the borough’s mock-Tudor houses, newly built apartment blocks and arterial roads, a political project variously known as ‘easy Council’, ‘Future Shape’ and ‘One Barnet’ has risen and spectacularly fallen. It was meant to blaze a trail that Tory politicians all over the country could follow. The basic idea was to drastically shrink Barnet’s council, mostly by handing an astonishing array of local services – highways, planning, regeneration, phone helplines, even cemeteries and crematoriums – to the outsourcing company Capita, the self-styled ‘consulting, transformation and digital services business’ giant that does a huge range of work for national and local government.

“Savings were promised, but didn’t materialise. Complaints about how people were being treated soon piled up. To cap it all, there were two cases of fraud related to the Capita contracts, together worth just over £2million. Not entirely surprisingly, the story eventually reached (its) denouement.”

The ‘Guardian’ reports that the council has paid £229million more than the original contracts had set out. Consequently, Barnet Borough Council is now bringing most of these services back in-house. This process started in 2018 under the former Conservative administration and is being continued by the current Labour administration.

The reason why this caught my eye was because, in 2011, I was asked (as an Associate Consultant with the Association for Public Service Excellence - APSE) by the UNISON branch in Barnet to prepare a financial review of the Council’s business case for the externalisation of the Council’s Development and Regulatory Services. In March 2011, I provided UNISON with a 67-page report that provided an analysis and critique of the Council’s business case.

UNISON presented my report to the Council but it was dismissed by councillors and council officers. As Barnet UNISON tweeted to me recently:

“Barnet Council can’t claim that they were not warned. You provided Barnet UNISON with a report which we submitted to Barnet Council.”

To view John Harris’ article in the Guardian, please click here.

I am not ideologically opposed to councils using private contractors to deliver services. I can think of examples of private contractors providing good quality services to councils as well as bad. Equally, I can think of examples of in-house teams providing good quality services to councils as well as bad. As a local government officer and as a consultant I have been happy to support both out-sourcing exercises and in-house services. I think councils should have an open mind about whether to provide a service in-house or through a contractor and should take decisions based on evidence including a robust financial appraisal.

However, I am most certainly opposed to councils taking important decisions with significant financial implications without first preparing and considering a robust financial appraisal of options and a robust business case for the preferred option. What is more, if you don't have a robust business case it is difficult to implement the business transformation successfully.

So what does this tell us about local government as a whole?

According to the Chartered Institute of Public Finance & Accountancy (CIPFA):

“Option appraisal is about making informed choices and better decisions. And nowhere is this more important than within public service organisations, as the choices these organisations make dictate how public funds are spent and impact on how people live their lives.”

They consider that an options appraisal should include:

• An overview of the option appraisal process, including the importance of being clear about what the organisation wishes to achieve, the identification of options, the use of long and short lists, and the application of appraisal techniques to identify a preferred option
• The identification and evaluation of cash flows and the consideration of the affordability of different options
• Non-financial appraisals, including economic appraisal, cost benefit analysis, multi-criteria analysis, and impact assessments
• Consideration of other issues relevant to option appraisal, including risk, sensitivity analysis, optimism bias, peer review, and post-implementation review
• Early consideration of reporting and good reporting.

Unfortunately, Barnet has not been the only council where I have found important decisions being based on what I consider to be inadequate financial appraisals. Neither is it the only case where the result has been disadvantageous to the council both financially and operationally.

So, why does this problem sometimes occur? I would suggest that there are two common reasons:

First, situations where politicians are driven by motives such as ‘ideology’ and officers are reluctant to speak truth to power. I have worked with councils where this was the prevailing culture. In these situations no one wants a robust financial appraisal. What the organisation wants is a report that recommends the desired outcome and enables the council to tick the box. The strength of the evidence and the logic of the arguments is irrelevant.

Second, situations where there is a lack of capacity in strategic and / or financial management. Again, I have worked with councils where this has been the case. This, I think, results from the continuation of traditional approaches to the appointment of senior staff.

Chief Executives have traditionally been appointed because of their experience of bureaucratic procedures and their closeness to politicians – qualities that do not necessarily give them skills in strategic or financial management. I have met several Chief Executives who simply don’t understand their council’s finances and see no need to do so.

Finance Directors have traditionally been appointed because of their experience in preparing annual financial statements. However, a local authority, with a multi-million pound budget and operating in a dynamic environment really needs the Finance Director to be an accountant who understands financial and management accounts and who will provide good strategic financial advice rather than just 'count the beans'. Unfortunately, many local authorities don’t recognise this.

This week’s budget confirmed that local authorities are facing an even more challenging environment financially than has been the case in recent years. Several are tottering on the brink of bankruptcy. The need for better financial management has never been more apparent.

For more information about support that I can provide to local authorities, please click here.

For more information about support that I can provide to trade unions, please click here.