Speech

Chartered Institute of Public Finance and Accountancy annual conference 2011

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Draft text of the speech - may differ from the delivered version. Many happy returns to CIPFA on its one hundred and twenty fifth annual …


Draft text of the speech - may differ from the delivered version.

Many happy returns to CIPFA on its one hundred and twenty fifth annual meeting - celebrating century and a quarter of leadership, education and advocacy on behalf of public finance professionals.

It’s appropriate that a grand anniversary should coincide with a momentous time for your members.

Because public finance professionals are facing a moment which calls on all their skills, expertise, and entrepreneurial zeal.

This Government inherited Britain’s biggest ever peacetime deficit.

Getting public spending back within sustainable levels is non-negotiable.

You only have to look at the turmoil in Europe to see the alternative.

And let’s be clear, whatever the outcome of last year’s election, the Government would have been reducing public spending.

No-one is under any illusion about the scale of the challenge that adapting to tight budgets presents.

And don’t be in any doubt that looking very closely at the quarter of public spending represented by local government was and is vital. I want to thank you for your hard work.

But every stage we’ve sought to protect the most vulnerable.

And - as you know well - despite what certain parts of the media might suggest, the money hasn’t somehow vanished into thin air.

Councils have £53bn of spending power this year.

£53bn to control and spend as they see fit, procuring local services.

But when taxpayers are looking hard at their own family budgets, it’s even more important to make every penny of that money work as hard as it possibly can.

So what you do.

Getting the basics right. Counting every penny. Getting more for less. Has never mattered more.

And you play the vital role of helping councils look not to short-term fixes, but long-term reform.

Trimming a corner here and there in the hope that things will go back the way is not a route to the sunlit uplands but to a cliff edge.

The right response to tight budgets is to innovate. To provide services in a different way. To transform them.

Now it feels like we’ve been talking about this for years.

Before Sir Philip Green there was Sir Michael Lyons, before him there was Sir Peter Gershon.

We’ve aced the theory. Some councils are getting on with the practical.

Cambridgeshire and Northamptonshire have begun sharing legal, IT and HR services, cutting costs by more than a million pounds each year.

Six councils, including Cornwall and Dorset, have joined forces with the Environment Agency to reduce the admin costs on their pension funds. They estimate that they could cut overheads by around ten per cent. And on this topic, I’m grateful to CIPFA for the work your pensions panel has been doing with my Department to improve financial management across the Local Government Pension Scheme.

Meanwhile Hammersmith and Fulham, Kensington and Chelsea, and Westminster are looking to save thirty-five million pounds and improve services by bringing together the front line.

I’m not saying change is easy. If it were easy, every council would be doing it already.

But these places show it can be done.

And the best councils are never content. They keep asking themselves the hard questions.

Such as: are we doing all we can to crack down on fraud?

Cheshire East Council investigated and found that nearly two thousand people had wrongly claimed council tax benefit. That investigation is helping them recover up to half a million pounds.

Councils are asking themselves - are we procuring in the most intelligent possible way?

Leeds City Council have held “procurement open days.”

Hillingdon, like many other Boroughs, use the “London Tenders Portal” to invite suppliers to bid on-line.

And here in Birmingham, the council has been using e-auctions for some years: helping firms large and small, from national names to local social enterprises, understand what services and goods are needed, and giving the council the option of choosing from a wide range of quotes.

And councils are asking themselves, are we managing our assets as sensibly as we can?

Lancashire County Council have moved to flexible working, and in doing so have been able to rationalise their office space, saving over one million pounds each year and cutting carbon emissions.

All of these examples show that with your expertise. Your understanding. Your leadership. Councils can make the leap to smarter, more effective ways of working.

So as we look ahead, we want to give you more scope to show that leadership. More scope to put your expertise to good use.

In order to make localism a reality, greater legal freedom needs to go hand in hand with greater freedom over finances.

In this first year we’ve started down the road. Radically cut ring-fencing. Freed up two point one billion pounds from restrictions, comparing this financial year to last.

And simplified over 90 separate funding streams to fewer than 10.

This is just a small start. We are poised to go much further.

Our review of local government resourcing has looked at how we can restore freedom and accountability to a local level. Our starting point is that local funding should be more and more a local issue, determined by local initiative.

In the first stage of the review, we have confirmed that we will repatriate business rates. No more councils forced to come to Treasury with a begging bowl.

Let’s be clear, we will make sure that more deprived areas continue to receive support and receive proper reward for the growth they generate.

But I am determined that councils should see a link between the success of local firms and the state of their own coffers.

Giving them even stronger reasons to work in partnership with the private sector. Even stronger reasons to create the conditions for enterprise for flourish.

Following the Localism Bill currently before the Lords, there will be a Local Government Finance Bill to put the local retention of business rates into practice and introduce Tax Increment Financing.

But if our work on business rates is about giving you greater control over the money you collect… our work on community budgets is about giving you greater control over the money that flows from central government.

Councils from Hull to Salford have led the way with the first round of community budgets, looking at problem families.

That is, the one hundred and twenty thousand or so families across the country who account for more than their fair share of calls on the police, the probation service, truancy officers, social workers, and A+E.

Instead of asking a dozen different people in a dozen different agencies, each in their own little room, to think about those families, let’s bring those services together.

Giving a better result for those families. A better result for the communities they live in.

Now I think we’ve seen some great work, and some innovative approaches, with that first wave of community budgets.

But with the next phase, we want to be even more ambitious.

We’ll be inviting two neighbourhoods, at a very local level, and two councils, on a bigger geographic scale, to put all public funding for local services into a single pot.

Then letting how services are designed and delivered be dictated not by the shape of Whitehall funding streams, and not by Ministerial command, but by what really counts: what local people want.

And though we are starting on a small scale with these pilots, make no mistake.

This is the shape of things to come.

Local control over cash as the norm; not the exception.

If this is our offer to you, then this is our expectation: with greater local financial freedom must come greater local accountability.

You know my thoughts on the Audit Commission. An organisation that had, over time, become a creature of Whitehall, rather than a champion of local taxpayers. Intent on imposing Whitehall’s ideology on councils - with gold stars for those who ticked the most boxes.

But it also lost sight of its own mantra - “protecting the public purse”. It is often the small things that speak volumes.

How can we have confidence in a spending watchdog which has held its Board meetings in an Oyster Bar to discuss ‘improving corporate governance’, and then lost the receipt for the £800 bill?

Or which was spending £1,500 a year on flowers for the reception of its Millbank office - which only stopped in September 2010. Didn’t they sense the urgency of the Emergency Budget?

Spending watchdogs and district auditors are no position to lecture councils on financial probity - if they themselves don’t care about delivering value for money and protecting taxpayers’ cash.

Now, we have published our proposals for the future of local government audit, and we will be looking carefully at your responses to this consultation.

Let’s be absolutely clear, we need, and will always need, skilled professionals to oversee the efficient, effective and proper use of taxpayers’ money.

I welcome the report by the Select Committee today - which finds that our proposals are “…consistent with […] wider moves to localism and greater financial independence for local government.”

We’ll now be refining our proposals, looking carefully at that report, and your responses to consultation.

But it’s also clear that council finances should be much more open and accountable to local taxpayers.

After all, it’s their money. In other words: greater local financial control must go hand in hand with greater openness to local scrutiny. Extra scrutiny can help identify and eliminate duplication and waste.

Take the example of Islington. An independent audit of just 30 of the council’s top 500 suppliers found that many invoices had even been paid two or even three times over, and four out of ten suppliers had no formal contract. Spending transparency - and the act of collating date for online publication - helps drive out inefficiency, and exposes waste to the light of day.

I’m not making a political point here, by the way. This isn’t about political control. Too often, councillors are left in the dark.

I was shocked by a recent case in Barnet. The council had hired a private security firm, MetPro, which included “keeping an eye” on local bloggers - at a cost of over a million pounds. The contract had been awarded without a tendering exercise, without a written contract, and no proper invoicing. An internal audit showed there “serious deficiencies in current procurement arrangements”, and there were no guarantees that against a repeat of such practices.

Irony of ironies - this misuse of public money was uncovered thanks to the determination of local bloggers and activists, including Barnet Eye, Mr Mustard, and Mrs Angry (as she had every right to be.) Exactly the same people MetPro snooped upon.

I’ve got news for Barnet. Liveblogging from council meetings. Microjournalism. Call it what you like. It’s here to stay. In fact this citizen samizdat - local people reporting on their local council’s triumphs and shortcomings - is the perfect counterblast to town hall Pravdas.

And it’s going further. The next wave of transparency after publishing spending over £500, will be councils publishing contracts and tenders over £500 online as well.

An online list of council contracts will prevent a repeat of the likes of Islington or Barnet, and will spur on greater competition and efficiency.

It doesn’t just strengthen the hand of citizens. It strengthens the hand of ward councillors, letting them know what officials are doing on their behalf.

That’s why, looking over the Welsh border, I think Carmathen Council were out of line in having a local blogger arrested for the offence of videoing a public council meeting.

It was immensely short-sighted, too.

Because if councils can show that they can deliver what local people want, and respond to their communities, without relying on instructions, it undermines the centre’s need to control. It paves the way for further localism still.

So paradoxically - I think one of Whitehall’s important jobs now is help councils behave in ways, which, in the long term, mean we need a bit less of Whitehall.

For example: as you know, councils must by law hold a financial open day, throwing wide their books and inviting local people to examine them - deeds, contracts, vouchers, bills and receipts - the lot.

I intend to collate a central list of the dates of those open days and publish it. So that it’s easy for everyone, everywhere, to know when they can examine what their local council has been spending their hard-earned on.

I applaud those councils who have already let my Department know the date of their open day. Those councils not on the list will be conspicuous by their absence. So do let us know - we are here to help.

And I applaud the councils who have gone the extra mile. Who aren’t waiting. Who are making fuller information available online right away.

I take my hat off to Tendring District Council who have already made publicly available not just their spending over five hundred pounds… but the whole lot. Every single item. If tiny Tendring can do it - why not everyone else?

Finally, we are transferring power and freedom over finance because we have faith in councils’ ability - in your ability - to spend cash wisely. To be the guardians of the public’s money.

With that power comes responsibility. To live up to taxpayers’ expectations. Not even the best council can rest on the laurels.

When local government collectively has spending power of some fifty three billion pounds of public money each year, even a couple of per cent of improvements could unlock a billion pounds’ worth of efficiencies.

So keep doing what you do.

Making taxpayers’ money count. Making services come together. Making local government work.