Report to Cabinet
Subject Local Government Efficiency Targets
ndDate 2 December 2004
Author Chief Executive
The Office of the Deputy Prime Minister has recently issued to all local authorities an ‘Information Pack’ and a ‘Technical Note’ setting out in greater detail what the
efficiency target is for local government, what local authorities will be expected to do and the approaches to measuring efficiency gains which are currently under consideration and evaluation by the Audit Commission.
The Information Pack outlines a number of ways in which the government considers that efficiencies can be achieved in the provision of corporate support services, the procurement of services, the management of property and the re-organisation and automation of transactional services such as Housing Benefit and Council Tax Benefit. The document emphasises in particular the need for authorities to look closely at joint service delivery and procurement, flexible and home working, increased use of information and communication technology and more sophisticated procurement practices, all of which are under active consideration within the Council.
I attach a copy of the technical note to this report for Members information. The note confirms that ‘each council has a target to achieve annual efficiency gains of
2.5% of their 2004/5 baseline, of which at least half should be cashable’. The note explores issues to do with the management, measurement and auditing of this and, again, officers are giving consideration to the implications of this for the Councils own service planning and budgeting processes.
Members are asked to note this report.
in Local Services
by Nick Raynsford, Minister for Local and Regional Government
The actions of local government are crucial to the challenge of creating sustainable communities –
places where people want to live and work. With this goal in mind, it is in everyone‟s interests –
national, regional and local – to work in partnership to promote efficiency, getting the most from
available resources to enhance our service to local people.
As you are aware, the Chancellor of the Exchequer announced the results of the 2004 Spending Review in July this year. This included a target for efficiency gains in local government of 2.5% per annum, to deliver at least ?6.45 billion by 2007/8 and, working together with your support, more than this may be possible. If you achieve more, it is a „win–win‟ for your authority and the people you
serve as councils are free to use every ?1 of cashable efficiency gain to reinvest in local services or to hold down Council Tax.
I am pleased to introduce this Information Pack, which provides further information about what this announcement means for local government, what local authorities will be expected to do, and how the Government plans to support your efforts in achieving efficiencies. It also sets out when more detailed information will be available, as there is still more work to do within Government departments to finalise their efficiency delivery support programmes.
The first part of this pack provides an overview of the efficiency agenda being pursued by the Government, putting the local government element in its wider context. It explains who is involved in supporting your work to secure efficiency gains, including the vital role that we envisage for Regional Centres of Excellence. It also sets out the timetable for putting in place the system to measure efficiency gains by authorities.
The second part looks at how greater efficiency can be achieved in different services. This includes the basic approaches to achieving efficiency gains in local services, and contact details for further information. There is also a Frequently Asked Questions section, which provides the answers to many of the key concerns that I know people have currently.
This is an ongoing agenda and I will be sending you further information packs giving practical information and advice as work progresses. Nonetheless, I hope that this first pack will answer most of your initial questions and concerns about what the efficiency target means for your authority and local government in general.
Once you have read through the pack, if you have further questions, or good examples of action your authority has taken that has resulted in efficiency gains, or you have suggestions for future work in this area, please get in touch. Key contact details are given in Chapter 5 and the sections on each service sector.
I would like to emphasise here that finding efficiencies is not about cutting frontline services for users. Local government is uniquely able to deliver many of these services that people value most highly. This is about finding efficiencies in functions that are not unique to local government but are part of operating the business and any business – public or private sector – should be looking for this sort and
scale of efficiency gain.
I know that there is already a great deal of experience within local authorities of successfully looking for and achieving efficiencies. Indeed, this is part of the Best Value duty to have regard to economy, efficiency and effectiveness to secure continuous improvements in performance.
We want to build on this existing good practice with you to deliver even better, more efficiently organised, public services.
Minister for Local and Regional Government
Comment from the
LGA and IDEA
Local government has an impressive track record of finding efficiencies. This has always been integral to the achievement of value for money and it forms an important component of the Best Value regime.
The Government‟s Efficiency Review challenges the sector to accelerate the drive for efficiencies while continuing to invest in, and improve frontline services. To achieve this, authorities will need to collaborate to an unprecedented extent. The LGA, IDeA and fellow central bodies (EO, 4ps and LACORS) will work with Barry Quirk and Tim Byles to help deliver an integrated local government response to this challenge.
Local Government Association
Lucy de Groot
Improvement and Development Agency
The Challenge of the
Efficiency Agenda –
by Barry Quirk
As „efficiency champion‟ my role is to assist in the delivery of local government‟s efficiency gains target for the coming three years of ?6.45bn – acting as a point of liaison between central and local
government alongside the Local Government Association (LGA). To this end I will support Councils in their drive for enhanced efficiency so that they can more readily release resources for re-direction locally.
In total, local authorities spend more than ?86 billion each year in delivering services to improve both the quality of life and the quality of life-chances to people across the country. The new agenda of delivering identifiable “efficiency gains” provides Councils with a fresh discipline that will ensure that we focus on how best to get the most from taxpayers‟ money. This will be achieved through the
adoption of leading edge management practices, exploiting the potential of new information and communication technologies, and developing more focused delivery vehicles with private and voluntary and community, as well as public, sector partners.
For most local authorities achieving efficiency gains is already part of our everyday work as we try to improve our organisations to deliver more community value in a context of ever constrained resources. Many local authorities are already securing substantial efficiencies through innovation and investment in technology and rationalisation of corporate service and procurement functions. The efficiency gains agenda will encourage this work to be assessed and acknowledged across all Councils for the first time.
The Government‟s Spending Review statement effectively sets every local authority a target for efficiency gains of 2.5 per cent per annum for each of the next three years – with the current year
acting as the baseline. A key point with the overall target is that at least one-half of efficiency gains should be “cashable” (i.e. resources actually able to be redirected rather than securing improved efficiency through heightened productivity). This is a challenging target, but one that can be achieved and exceeded if we are to continue to build on our existing efforts to improve the overall efficiency of our organisations.
I realise that every Council has unique circumstances and distinctive challenges that will impact on its local approach to enhancing efficiency. My aim is to work with others, such as the Regional Centres of Excellence (RCEs), the LGA, the Improvement & Development Agency (IDeA) and the Office of Government Commerce (OGC), to assist Councils to deliver this agenda together.
The accompanying pack has been devised by officials at the Office of the Deputy Prime Minister (ODPM) and other government departments to assist you to come to grips with the new agenda.
Should you wish to contribute to the ongoing work in developing the efficiency delivery plans or have any outstanding queries left unanswered by the material in this pack, please do not hesitate to contact the key people at ODPM and those listed as contacts throughout the pack.
Finally, I believe that local government has the edge on other institutions within the public sector in delivering this agenda. There are brilliant examples of excellent practice in Councils across the country – we need to know more about what works well and share effective approaches to efficiency gains and resource re-direction.
Chief Executive LB Lewisham and
Efficiency Champion for Local Government
Efficiency Review and
2.1 In August 2003, the Prime Minister and Chancellor of the Exchequer asked Sir Peter Gershon to undertake a review of public sector efficiency. It focused on the Government‟s key objective to release resources to fund the front line services that meet the public‟s highest priorities by improving the efficiency of service delivery.
2.2 Sir Peter Gershon and his team worked closely with departments and other stakeholders and published the results in July 2004. The report identified auditable and transparent efficiency gains of over ?20 billion in 2007-08 across the public sector.
2.3 The report emphasised the need to ensure that efficiency gains are not delivered at the expense of quality of service delivery. Service cuts will not count as efficiency gains. Rather, efficiency in the public sector involves making the best use of the resources available for the provision of public services. Efficiencies are achieved through reforms that:
; Maintain the same level of service provision while reducing the resources needed or
deploying fewer staff;
; Result in additional outputs, such as enhanced quality or quantity of service, for the same
; Remodel service provision to enable better outcomes.
2.4 Over half the gains identified by Gershon are “cashable”. These can be defined as those where there is a direct financial saving or benefit, with money released that can be spent elsewhere or recycled within a service to deliver better results. For example, it would ordinarily include gains through reduced property costs or re-engineering corporate services.
2.5 The remainder of the gains are “non-cashable”; those where the gains do not necessarily lead to
lower costs, but which lead to improved performance for the resources used. For example, it would include improved outputs, reductions in fees and charges, and frontline staff using their time more productively.
2.6 The Spending Review 2004 translated the outcome of the report into an efficiency target of 2.5% per annum over the next three financial years across the public sector. Every local authority will be expected to meet this target and we believe that some will exceed it. Across the whole of Local Government the requirement is for efficiency gains of at least ?6.45bn per annum by 2007/08.
2.7 The achievement of the efficiency target that has been set will bring substantial benefits to local authorities. Most importantly, all the cashable efficiency gains made can be retained and recycled within local services. In short, the outcome would be to improve the quality and breadth of local services while minimising the need for increases in local taxation.
3.1 Each Government Department has the role of promoting efficiencies in the sectors for which it has policy responsibility. The table below sets out those Departments that have a role in helping authorities to deliver efficiencies at a local level:
Department Service Sectors
Office of the Deputy Prime Minister (ODPM) Fire Service, Social Housing, the Supporting
People Programme, and the cross-cutting work
streams of Corporate Services, Procurement,
Productive Time and Transactions
Department for Culture, Media and Sport (DCMS) Cultural and Leisure services (for example, libraries
and sports facilities)
Department for Education and Skills (DfES) Education and Children’s Services
Department for Environment, Food and Rural Affairs Environmental Services (e.g. waste management)
Department for Transport (DfT) Integrated Local Transport
Department for Work and Pensions (DWP) Benefits Administration (in conjunction with ODPM’s
work on Transactions)
Department of Health (DH) Adult Care Services
Home Office (HO) Home Affairs (e.g. the Police)
3.2 In addition, the ODPM has the lead on co-ordinating central government activities to secure the efficiency gains required in local services, and in measuring performance. John Oughton, Chief Executive of the Office of Government Commerce (OGC), a part of HM Treasury (HMT), has overall responsibility for implementing the Efficiency Review.
3.3 In his letter of 26 July 2004 to Chief Executives, Nick Raynsford, Minister for Local and Regional Government, set out the expectation that each local authority will achieve efficiency gains of at least 2.5% per annum.
3.4 Each council is free to choose how best to achieve that expectation. No targets have been set for individual local services, which recognises the fact that individual authorities will have made more progress in achieving efficiency gains in certain sectors than others. Furthermore, it is clear that some authorities have made better progress on efficiency than others. Nevertheless, by working together and promoting good practice methods, we believe it will be possible for all authorities to identify ways of making improvements.
3.5 Inevitably, there will be an impact on local authorities‟ relationships with their current and
potential suppliers and stakeholders, both in the private and voluntary and community sectors. We are aware of this issue, and we recognise that it is something that authorities will wish to handle carefully.
3.6 As part of this process, following Spending Review 2004, the Deputy Prime Minister appointed Barry Quirk, Chief Executive of Lewisham, to act as the „Efficiency Champion‟ for local government. His role entails working with local authorities, government departments and other partners to reinforce the drive for improved performance, sharing and promoting best practice in efficiency.
3.7 Tim Byles, Chief Executive of Norfolk County Council, has been appointed the „Procurement Champion‟. He has been a key driver in the Construction Task Force – „Constructing Excellence‟ –
and in helping to help establish the nine Regional Centres of Excellence (RCEs). He states:
“My aim is to ensure that the Centres of Excellence are key gateways to efficiency in each region, building on the excellent examples of good practice already available across local government. We can now grasp practical opportunities to deliver both direct and support services better and more efficiently, and to redirect resources into the front-line services that matter to local people.”
3.8 The RCEs are being expanded beyond the original focus on procurement, with additional resources being made available to support the increase in capacity required. RCEs will act to identify and disseminate best practice, promote partnerships, act as a focus for procurement consortia, strengthen training in procurement skills and monitor progress towards efficient ways of working across their regions.
3.9 As well as the RCEs, you will be aware of the vital contributions being made by the LGA, IDeA, the Employers‟ Organisation and its regional partners, 4ps, Innovation Forum, Beacon Councils, and ODPM‟s Regional Directors of Local Government Practice. In addition, there are a number of revised „Change Agents‟ roles to note:
; Office of Government Commerce (OGC): Following the Spending Review 2004, the OGC
has a broad change agent role for procurement and corporate services. It will provide advice
and assistance to RCEs as they continue to develop. It will also act to co-ordinate improved
procurement in specialist areas, building on the work that OGC has previously undertaken to
improve procurement and project/programme management for central civil government.
; e-Government National Projects: They are supporting the introduction of new technology
in local authorities to improve service delivery. A series of roadshows are underway to
; e-Government Unit (eGU) is setting up a Transactional Services Change Agent (TxCA) to
work with local authorities, RCEs and others to improve the delivery of services. The eGU is
also developing its role as the IT Centre of Excellence and will operate as the IT Change
Agent (ITCA) in securing efficiencies in corporate services.
; The Highways Agency (HA) will work with authorities to identify and deliver procurement
efficiency improvements in the area of local road procurement. It will help authorities
reassess and manage demand, shape key markets, and work to achieve collaboration to reduce
; DfES are setting up a Centre for Procurement Performance (CPP) to work with its
delivery partners across the education, skills and children and families system, including local
authorities and the nine RCEs.
; DH will look to work with a number of local authorities to identify and spread best practice.
3.10 The Performance Partnership, formed in 2002, consists of the Improvement and Development Agency (IDeA), 4ps, Employers Organisation (EO) and Local Authorities Co-ordinators of Regulatory Services (LACORS). Its aim is to help build local government capacity and support improvement in public services. Its key focus is on developing means of „real time learning‟, providing a seamless service to local government in areas including:
; Support for local authorities to work together to share good practice and implement changes
to deliver efficiencies;
; Continued provision of local support and training on a collective basis;
; 4Ps continued provision of dedicated Project Support and Gateway reviews to major PFI/PPP
; IDeA continued support to authorities to implement the national e-government strategy.
3.11 For more information on the Performance Partnership‟s work in this area, you should contact Pat Woodhouse of the IDeA, whose contact details may be found in Chapter 5.
3.12 More detailed guidance on how Departments and others will help local authorities to achieve efficiency gains will be published in December. The action plans developed by Departments and others will not remain static. Instead, they will continue to be developed in the light of experience and in conversation with stakeholders.
4.1 Work is ongoing to develop suitable mechanisms that are both comprehensive and concise. It is our intention to ensure that measurement of gains will not be onerous and, where possible, we are seeking to use existing mechanisms such as the Comprehensive Performance Assessment (CPA) and statutory indicators. In addition, it is hoped that the data gathered will be useful in identifying practices that have been successful as well as those sectors that need more attention, to make further improvements.
4.2 Information on the process for measuring efficiency is set out in the Efficiency Technical Notes (ETN) that each Department has produced. An ETN for Local Government as a whole is available from the ODPM website. Details on measurement are also available from ETNs for DCMS, DfES, DEFRA, DfT, DH and HO. These will be subject to further development and refinement following the outcome of consultation with local Government.
4.3 To help determine the measurement approach, ODPM has asked INLOGOV, of the University of Birmingham, to undertake a pilot study of 60 local authorities this autumn. The study will test alternative approaches to measuring efficiency. Authorities will be asked for their views on criteria such as ease of assessment of efficiencies and usefulness in facilitating efficiency improvements.
4.4 We will be asking local authorities to produce an Annual Efficiency Statement (AES) for each financial year. We fully recognise the importance of minimal burdens and the aim is to align closely to the budget and policy setting timetable for local authorities.
4.5 We need to get the process right, so details of timescales are subject to consultation. However, at present, we envisage that the forward looking part of the statement should be a very brief, one or two pages long, outline of key actions that will be taken during the next year and the efficiency gains that are expected to result from them. We are consulting as to whether this should be due in either April or June. The backward looking part of the statement should be submitted in the June after the end of the relevant financial year.
4.6 We have asked the Audit Commission to include an assessment of the annual statement of efficiency gains achieved in their „use of resources‟ assessment for CPA. This would be incorporated into the annual external audit. Full details of how these Statements should look will be given in the detailed guidance to be published in December.
4.7 Work is ongoing to develop an approach to assessing mid-year progress on efficiency. Our aim is that it should be informative, without increasing the burden on authorities. Details of this approach will be given in future guidance.