In search of commercial solutions

At the Public Sector Show in Manchester on 20 November, APSE Chief Executive Paul O’Brien was kindly invited to chair a panel discussion looking at how local government can develop commercial strategies for revenue generation. Joining Paul on the panel was Tim Reade of CIPFA; Cllr Russel Bowden of Warrington Borough Council; and Fliss Mercer of Telford & Wrekin Council. We bring you the highlights from what was a lively and timely debate.

Under the iconic vaulted arches and station clock of Manchester Central, visitors, speakers and exhibitors gathered in their hundreds to share ideas on how to deliver smarter, better and more efficient public services. The exhibition hall boasted five different content-streams - in technology, leadership, infrastructure, the state of local government and corporate solutions - each offering indepth case studies, lively panel debates and insightful interviews.

It was to the corporate solutions theatre where Paul was asked to debate and moderate a discussion on whether local government commercial activity can be a viable means of safeguarding service delivery. And if it can, examples of where this has been achieved across the UK.

The venue itself provided a classic example of shrewd local government investment. The once disused and derelict former train station, purchased by Manchester City Council in the 1980s, has developed into a highly successful convention complex and commercial enterprise, earning almost £19m in revenue for the authority in 2016/17. Delegates in attendance were eager to hear of how they too could identify and leverage the potential commercial assets of their respective organisations.

To a theatre teeming with delegates, Paul’s opening address welcomed the Prime Minster’s October announcement that austerity would be coming to an end, though cautioned that it may take a long time before this feeds through to frontline services; cuts to funding are set to continue through 2019 and the next comprehensive spending review (2020-2023) may well offer more belt-tightening for councils. Compounding this problem, particularly for English councils, is the fact that by 2020, over 90% of local government finances will be raised through either council tax or business rates. The pressures on frontline services show no sign of abating any time soon.

With that in mind Paul added, commercialisation provides local councils with a vital means to offset these funding pressures. With UK local government expenditure dropping down to 5.7% by 2020 - the smallest amount that has been spent on or invested in local government since 1948 - authorities have had to reestablish their thinking around municipal entrepreneurship. Initial innovations in trading and charging have now spread to major investments in housing with 200 housing companies now established.

However, it is important to acknowledge that these investments are not simply about revenue generation, but have also been done for a public policy purpose - whether it is mitigating the housing crisis, or tackling fuel poverty and climate change. What has been termed the “New Municipalism”. Paul rounded off his opening address by saying that though commercialisation on its own will not be enough to tackle the budget cuts, it certainly helps pull some of those frontline services together that have been squeezed by austerity and the ever-growing demand on adult social care services.

Fliss Mercer was the first of the panelists to speak, giving her thoughts on what make the key ingredients for commercial success. For Fliss, the first key ingredient is leadership. As well as getting support from senior management team and elected members, Fliss’s experience in Telford & Wrekin was for the need to attract the middle level of management; the staff who deliver these commercial services on the frontline. It is really important that layer feels supported to take calculated risks. Second is capacity: There’s lots of people in authorities who have commercial acumen. The job of people like Fliss is to support those people and free them up.

Fliss’s final ingredient was organisational fit. It is important for councils to do things that they are good at and that they do the easier things first, even if its very low profile and not very exciting. Councils also need to make sure it sits well with the organisation’s values. Telford and Wrekin’s most successful projects have been the win-win projects; those that deliver social value as well as financial value.

Paul provides examples of effective municipal entrepreneurialism (click to enlarge)

Up next was Tim Reade, who turned to property investments. For Tim, those authorities that are ahead and using their property base effectively are the ones who are thinking strategically. It used to be the case that asset management planning was done as a mandatory activity. However, this is not the case any more as a result of cuts and the accompanying erosion of skillsets in property teams/specialists. That has led to a conscious decision not to spend the time and money in doing strategic thinking that would link corporate objectives with that which authorities are trying to achieve with their asset base.

Cost is a big barrier; for many authorities property is their second biggest cost (after their staff ). For Tim, local councils need to see their property as an opportunity to generate income; whether that’s through investment, through the authority’s tenanted residential portfolio, or whether it is working with other services to find ways to use the space better. Ultimately for Tim, it is vital councils regularly familiarise themselves with CIPFA’s Prudential Code, and link their strategic asset management policy with their overall strategy/plan; ensuring that thread runs from the top to the bottom of the organisation.

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