News from the CIPFA conference in Manchester Councils must learn from private sector

16 Jun 05
Local authorities must substantially improve their financial management arrangements in the 'brave new world' of reformed public services, James Strachan told the CIPFA annual conference in Manchester.

17 June 2005

Local authorities must substantially improve their financial management arrangements in the 'brave new world' of reformed public services, James Strachan told the CIPFA annual conference in Manchester.

The chair of the Audit Commission, addressing delegates on June 15, warned that in future public bodies would need to produce private sector-style annual reports and accounts to meet the demands of greater transparency and accurate and timely information.

As more 'market lubricants' are introduced to public services, local authorities will need access to the same kind of up-to-date financial information that well-run private firms produced to ensure effective decision-making, he said.

Private firms could produce accounts within weeks of their year-end, even if they operated internationally, 'but most of local government still takes months to produce a set of accounts', he complained.

Strachan also highlighted local authorities' failings in collating the information they are already required to produce, saying that 26% of accounts had had to be resubmitted because of errors.

But, in a comment from the floor, Nottinghamshire County Council chief executive Roger Latham challenged Strachan's comments, arguing that the two sectors were different and it was misguided to import private sector practice.

Speaking to Public Finance after his session, Strachan explained: 'It does not need an edict saying everyone must produce their accounts on time, but the increasingly complex relationships, such as tracking the effects of the Private Finance Initiative, all drive a need for accounts that give timely information.'

Strachan also noted 'warning bells ringing' in the NHS, where some bodies faced significant deficits in 2004/05. The Audit Commission is due to publish a long-awaited report on the state of NHS finances next week.

'The current state of NHS finances is not cause for immense concern, but it does require tighter management if it is to be kept in control,' he said.

Finance directors' work would increasingly change from 'the simplistic question of "are we still within budget" to a more sophisticated tracking of whether you are maximising the impact of your work on those you serve'.

But he acknowledged that it was not just public bodies that had to change. He said the consolidation of inspectorates had still not solved all the duplication problems. Inspection needed to be 'forcefully co-ordinated if the regulatory burden is to be reduced,' he said.

Public bodies should seize their own destiny, says Birt

The prime minister's strategy adviser has urged public organisations to 'seize your own destiny', but warned managers that they must achieve lasting reforms in service delivery and efficiency.

Lord Birt told CIPFA delegates that finance professionals must play a key role in helping public bodies to deliver 'transformational change'.

In a speech heavy with the 'blue sky thinking' for which he is famed, the former director general of the BBC said the public sector had 'made enormous advances' from the days when organisations were bloated, bureaucratic and resistant to change.

But he said that they had not completed their improvement journey and that modern economies, with their focus on the consumer, demanded more of organisations delivering local or national services.

He warned that organisations must now undertake the 'intellectual grind' of developing clear strategies that would continue to make them successful.

Organisational reform is likely to be a key focus of the government's third term and, although Birt could not comment on specifics, he indicated what ministers would expect.

He urged organisations to define 'clear outcomes' to guide the way they operate and to reform their internal structures in line with what is required to achieve those aims.

'I cannot envisage a successful public organisation that does not have full competency in finance,' he later told Public Finance.

Indicating a possible solution to workforce opposition to reforms, he also said: 'We must engage with staff, listen to them and adjust reform programmes where appropriate.

'But that must all be undertaken with a view to achieving your broader strategy.'

Johnson to stay at helm of pension panel

Former work and pensions secretary Alan Johnson has been retained as the informal 'chair' of the government's public sector pension reform panel, despite his post-election move to Trade & Industry.

Whitehall sources confirmed this week that Johnson would 'continue to co-ordinate the government's discussion with public sector trade unions' over controversial retirement planning proposals.

Sources said that new Work and Pensions Secretary David Blunkett was prepared to take on the role, but Prime Minister Tony Blair and other senior MPs view Johnson as the politician most likely to negotiate a solution to continuing trade union opposition to reforms.

As expected, John Hutton, new Cabinet Office minister, will chair the wider Public Services Forum.

Johnson managed to stave off widespread strikes over pensions before the election when, backed by Blair, he offered a 'fresh start' to negotiations with unions.

Ministers want to increase the public sector retirement age from 60 to 65 and ease the spiralling cost of pension provision by changing the local government, civil service, fire service, NHS and teaching schemes.

Union leaders view the reforms as an attack on employee benefits and have warned that they could still co-ordinate walkouts.

Mark Serwotka, general secretary of the Public and Commercial Services union, said he expected to meet with Johnson shortly to discuss the civil service pension scheme.

Addressing the CIPFA conference on June 15, Serwotka claimed that the government's plan to slash Whitehall costs by £40bn by 2008 was 'flawed'. He produced evidence of the impact on the public sector's ability to deliver key services. Citing the Revenue and Customs department's inability to chase up bounced cheques for tax payments, and problems delivering benefits to non-English speakers, he warned that 'no effort has been made by the government to analyse the impact on services'.

The savings drive was 'purely political', he added, and based largely on a 'crude head count reduction' across what politicians mistakenly believe to be a 'hugely inefficient' civil service. The real impact of the targeted 84,000 job cuts, he said, would be negative.

Councils should 'work better with voluntary sector'

Local government inspectors should start to consider how well councils are working with the voluntary sector, the chair of the Charities Commission told CIPFA delegates.

Including an assessment of the so-called compact between local authorities and charities would be a 'very obvious and simple mechanism' to stimulate greater co-operation between the two sectors, said Geraldine Peacock.

'If there was more pooling of resources in the voluntary sector and public sector alike, we would do so much more,' she added.

The 1998 compact was designed to foster greater collaboration between government and charities but Peacock said that, although it had been a good idea, it had never really taken off, particularly at a local level.

The appointment last year of compact champion Stephen Pickford at the Treasury presented an opportunity to make it work, she said, but added that if not: 'We have to get rid of it.'

There was much to do to educate local authorities about the potential opportunities and benefits of partnering with charities, she said.

Speaking to Public Finance after the session, Peacock said: 'The voluntary sector is much more sophisticated than the public sector gives it credit for. It is streetwise and unrestricted in a way local authorities are not. We can help local authorities break out of their straitjackets.'

But she acknowledged that the voluntary sector also had to do more to promote itself.

'We're not out there singing our own story. We need to show that not all charities are run by people in open-toed sandals singing about flowers and San Francisco,' she said.

Past failures should not impede merger, says ICAEW head

CIPFA's proposed merger with the Institute of Chartered Accountants in England and Wales would create a body with clout among government, regulators and accountants worldwide, the ICAEW'S chief executive Eric Anstee told delegates.

Anstee, addressing a session on the proposed integration, said the present split of the profession into six bodies was 'confusing for regulators and does us no favours on the international stage'.

Professional opportunities would widen as qualifications became more portable across the public and private sectors, reflecting the closer working between the two bodies, Anstee said.

He urged CIPFA members not to be deterred by the unhappy history of failed attempts to consolidate the profession.

'The past is not as important as how we see our future,' he said. 'Scepticism should be replaced by a pragmatic response.'

Answering questions, Anstee said that the ICAEW envied the flexibility of the CIPFA Education and Training Centre. But he said that the qualifications would remain separate after the merger because that was what employers wanted.

Anstee added that, if the merger went ahead, he expected consolidation talks to begin soon afterwards with the Chartered Institute of Management Accountants.

PFjun2005

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