When businesses face financial losses, they look at ways of bringing in income through new products and services or innovation as well as cutting costs. During times of financial austerity in local government, we have tended to focus only on reducing costs. Income generation is usually not considered to be part of the first response. But it can be a way of spreading the burden of public sector spending cuts without penalising those least able to pay.
The history of charging and trading in local government is chequered by case law that undermined confidence in using powers that exist to generate much-needed additional revenue. The advent of the Local Government Act 2003 swept away much of that uncertainty for English and Welsh local authorities. Councils are increasingly turning to the powers to charge and trade enshrined in that legislation as a means to bring in funds that can be ploughed back into either an individual service area or on a council-wide basis.
Councils should certainly not introduce ruthless reviews of fees or charges that could see prices disproportionately hiked for service users. But there are some services that could be provided on a charged-for basis to ‘mop up’ capacity that might otherwise be lost.
Examples include councils carrying out tree inspections for insurance purposes, charging for dropped kerbs to private households, and working with housing developers providing advice on a range of areas such as street lighting. In other areas, council vehicle maintenance specialists have helped private mini-bus operators carry out disabled passenger adaptations and some councils charge out expensive plant and equipment to neighbouring authorities helping to offset their own capital outlay on machinery.
Charging is a really simple mechanism and will help councils spread the overhead costs of services by ensuring the workforce, depots, plant and equipment are all used to maximum capacity. Trading companies are also increasingly commonplace and provide an umbrella arrangement where work becomes ‘profitable’. Trading companies that are wholly owned local authority companies can ensure that any profits are invested in a tax-efficient way to provide a local community benefit.
Some critics have suggested that charging or trading by local authorities might create an unfair barrier to local businesses, but in reality the council service often fills gaps in the local market place and works hand in glove with local businesses. During the harshest winter on record for decades, for example, highways services across Britain were able to provide snow-clearance services to private businesses.
Charging and trading is not about ‘squeezing’ the local economy but enhancing and developing local innovation. In any event local marketplaces are safeguarded by EU competition law that requires councils to be mindful of the impact on the marketplace of their activities. Councils also have an on-going Duty of Best Value and therefore charging and trading in services, which allows them to maximise the use of their assets, is consistent with providing value for money for local citizens.
Done fairly and considerately it is a further option for councils to help square the difficult financial circle.
Mo Baines is principal advisor at the Association for Public Service Excellence (Apse)
