11 November 2005
The Audit Commission this week accused Whitehall of hindering local government's efficiency by tampering with regulations that impose huge costs on councils.
Steve Bundred, the Audit Commission's chief executive, has called on central government departments, in particular the Department for Work and Pensions, to stop adjusting local authorities' revenue and benefit structures. Then councils could share administration services without having constantly to upgrade IT and retrain staff.
Bundred told Public Finance that English councils have been forced, on average, to change administrative structures once a week when dealing with housing benefits alone.
Other administrative requirements imposed by the likes of the DWP and the Office of the Deputy Prime Minister have escalated costs and hindered efficiency, he said.
'IT systems have to be reprogrammed, staff have to be retrained and some greater stability would be of enormous benefit,' he said. 'It is a problem, for example, that the housing benefit regulations change so quickly. We would welcome some greater stability.'
In 2004, the DWP issued 53 circulars to councils advising them of changes to HB regulations relating to fraud, revenue collection, government subsidies and case law.
The DWP will shortly roll out another major change, when HB is replaced by the local housing allowance.
Other Whitehall-imposed administration costs for councils include new arrangements for business rates relief, the deferred planning for council tax revaluation and a DWP-led customer relationship management system.
But the DWP hit back at the criticism. A spokeswoman said: 'While we accept that some of the circulars sent to councils lead to administration costs, we try to keep them to a minimum. The vast majority are sent to simplify or clarify situations across councils and to help them to find efficiencies.
'We are not here to complicate matters for councils, as the proposed roll-out of the simplified LHA indicates. And the Audit Commission… indicates that councils should still meet their efficiency [Gershon] review administration target of £75m in savings annually until 2008.'
But Francis Done, the commission's managing director of local government, said that councils' revenue and benefits departments alone could save at least £140m per year – 14% of the total £1bn cost of revenue and benefits administration across English authorities – if central government and local authority leaders encouraged shared services.
Those figures were revealed in a commission report The efficiency challenge, published on November 10. This assesses councils' ability to contribute large parts of the local government efficiency savings identified in the Gershon review through improved benefit administration, such as shared services and increasing the number of benefits paid by direct debit.
Done's study concludes that if all councils outside London reduced their administration costs to the average for authorities outside the capital, they would save £70m per year.
Small district councils, auditors calculate, would save £70,000 each per year simply by merging administration functions with one other council.
Additionally, the capital's boroughs could save at least £70m if they reduced costs to the average for metropolitan organisations.
However, Done said: 'We're not suggesting this could be achieved overnight.' She cited 'considerable barriers', such as the low appetite for change among councillors.
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