Widen council borrowing powers to aid service reform, says panel

26 Nov 14
Councils should be able to borrow from the Public Works Loan Board to fund revenue spending on projects to integrate local services, an independent expert panel has recommended.

By Richard Johnstone | 26 November 2014

Councils should be able to borrow from the Public Works Loan Board to fund revenue spending on projects to integrate local services, an independent expert panel has recommended.

The Service Transformation Challenge Panel was formed by ministers to identify barriers to reform. Former Hammersmith & Fulham and Kensington & Chelsea chief executive Sir Derek Myers and Pat Ritchie, chief executive of Newcastle City Council, chaired it.

It called for greater borrowing flexibility for town halls was needed to meet the costs of implementing improvements to local provision. Under the current prudential code, town halls can only borrow for capital spending.

Speaking to Public Finance, panel co-chair Myers said a £400m annual borrowing flexibility should form part of a £5bn investment over the five years to 2020 to redesign local services around the needs of individuals and families. This would also include a £200m annual allocation for capital receipts to be used for revenue spending, and integration of existing Whitehall transformation funds into one £400m pot.

Myers told PF that local public service providers had already done ‘the obvious things’ to save money amid funding cuts, such as improving procurement and sharing services.

‘Pretty much all of the tier-one cost-reduction activity seems to have happened, and there is an understanding that in order to cope with further planned reductions in budgets, fundamental questions about services have to be asked across agencies.

‘All of these solutions are likely to involve bringing together different agencies to make sure there isn’t duplication and there’s better join-up locally.’

To do this, people in local areas needed new tools to be able to provide the local services as well as they want to, Myers said.

‘The new tools are first of all an ability to borrow,’ he said.

‘We wanted local services, led by local authorities, to have the ability to borrow against their own plans.’

Under the proposals in today's Bolder, Braver and Better report, councils should agree local deals with other parts of the public sector to better integrate services, based on existing experience from the government’s Troubled Families programme.

Once these were agreed, authorities would be given flexibility to draw down loans from the Public Works Loan Board to meet upfront costs.

Also among the 20 recommendations from the panel was a call for Whitehall departments to design new approaches to services for people with multiple and complex needs. These should be implemented in the next Spending Review through government-wide programmes to bring together services for young people not in employment, education or training, those far from the labour market, and people who make frequent use of health and social care services.

Such reforms would help tackle ‘perennial problems’ in public services such as the long-term unemployed and frequent users of health and social care, Myers told PF.

‘If we can help these people to put their lives on a different footing then there are savings to be achieved, but often you have to have to have local spend and national savings,’ he added.

‘Part of what we’re aiming for is to create an environment where it is much more normal for government departments to be approached by local areas saying we have a good business case for spending some more now, and you and we will make savings in future years.’

Spending from the £5bn transformation pot could ‘oil the wheels’ of local plans, he added, but the panel had not recommended in detail how the borrowing would be accessed.

‘I think we want this to be borrowing for a purpose. We don’t want borrowing to be an alternative to having a proper plan. Either the PWLB would have their own delegated authority on this, or it would have to be signed off as part of a service transformation deal with a lead Whitehall department.’

The panel also proposed the creation of what Myers said had informally been called a ‘meta accounting officer’ to ensure a single person is responsible for plans.

‘This is the idea that at the level of the local state, one member of staff – it doesn’t matter what agency they come from – has to take responsibility for delivering this deal, so that Whitehall knows who to hold accountable.

‘Similarly, we expect Whitehall to organise itself in a way that would listen to those deals and get behind them.’

Responding to the report, Local Government Secretary Eric Pickles said the coalition’s Troubled Families programme had shown that bringing services together in a common sense way delivered better results and saved money.

‘This report now provides us with a blueprint as to how we can take this approach forward into other areas such as jobs, skills and early years, and as we are already doing with health and social care through the Better Care Fund,’ he added.

‘I welcome the fact that the Challenge Panel have shown us how we can continue to make that kind of progress in the future by putting people first and building services around them.’

The government said that it would respond formally to all the recommendations shortly.

Chief Secretary to the Treasury Danny Alexander said he looked forward to leading the agenda in the coming months.

‘Breaking down barriers between public services at a local level enables people to get a better, more coordinated service at less cost,’ he added. ‘That is what we are achieving through the Troubled Families programme, the Better Care Fund and other initiatives. This level of collaborative reform will be crucial to meeting the fiscal challenges of the next parliament in a fair way, that maintains high quality services.’


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