Why the public prefer to believe Pickles

by Craig Dearden-Phillips 24/12/2014

Council leaders across the land took to the TV screens to announce the end of services as we know them, that all the fat is cut and that the most besieged councils might well go bust. 

Meanwhile, communities secretary Eric Pickles is telling voters that Town Halls can and will cope, as they always have, and should stop crying wolf. Satisfaction-levels, he reminds us, remain stable, despite 37% cuts since 2010.


So who is right? The answer may, actually, be both. That councils are facing a mountain of demand without the means to pay for it is beyond debate. The Barker Report of September 2014 shows that social care on its own has the potential to push councils to their financial limits very quickly very soon in certain parts of England. But it is also the case that the cost of council services, when compared to identical services provided in the private sector are far, far more expensive, reflecting the productivity gap between sectors which has been widening uninterrupted since 1997.  

In no place is this clearer than in social care.  Council funded care typically comes out at least a third more expensive than what is provided in the private sector.  While 80%+ of care is provided in the independent sector, there is still significant in-house adult services operations in many English councils.  In children's services, which has seen less use of other sectors, far more remains in-house, all at higher cost than in other sectors.  

Much of this, of course, reflects the higher pay in the council sector for care which, arguably, is the right thing to do.  But there is no real evidence that this, on its own, leads to better care and the public sector generally has been no less prone to collapses in care standards than the private sector in recent years.  

Then there are overheads, or 'on costs', as they are termed in local government. Coming, as I do, from a commercial background, I am still flabbergasted at the size of these in most of the services I look at in my work preparing council units to become independent businesses.  The amounts being charged to services for basic HR, IT, finance and estates were of a completely different order to what you would find in most businesses.  

Even allowing for the 'costs of democracy', this has always smacked of a lazy approach to overheads.  In the worst cases I have seen councils protecting these functions as part of some muddle-headed idea of helping jobs and the economy in their area. 

So what can councils do in this next stage of their existential fight? There are three important things that must happen in all councils between 2015 and 2020.

Firstly, councils should test all their own services against the market, especially remaining in-house adult and children's services, which is where a lot of money still goes. If important functions can be provided cheaper and better outside the council then there is no defensible reason this should not happen.  Until this has been done, councils cannot truly say they have looked at everything.  

Secondly, and linked to this, councils must, if they want to stay in the game as providers, commercialise their services so that a market-test can be met. This is happening in many places and there are now examples of great new companies coming out of councils that are doing well. This is particularly true where these companies bring in expertise and investment from other sectors like Independence Matters in Norfolk which is a joint-venture between the Council and its own staff.

In their efforts to commercialise, councils need to cut right down their use of TECKAL exemption (which allows councils to award uncontested contracts to their own owned-businesses).  TECKAL doesn't help true commercialisation – it's a form of commercial methadone allowing an addiction to high costs and outdated practices to be reproduced in the new trading companies. Better, really, that local authority trading companies go cold-turkey as quickly as possible – and face the market.

Thirdly, councils need to stop protecting their own back and middle office.  While the council may be the biggest employer in many parts of England, it is helping nobody to maintain a back and middle office that is making the council's own services deeply uncompetitive. HR, IT and Finance support services now work in an entirely different way outside the public sector.  Going into many councils is now like stepping back in time.  As councils increasingly digitalise and self–service becomes increasingly the norm, councils need to simply do away with most of their current back office operations.  Hard, I know, but true.

Until all of this happens - open markets, true commercialisation and the axing of the traditional back-office - Mr Pickles will always, to some degree, be right in his view that there is more councils can do.  

The public, for now, believe Mr Pickles more than they believe you. 

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