Public Finance December 2017 by Redactive Media Group

PublicFinance PUBLICFINANCE.CO.UK Issue 12 December 2017

DECEMBER 2017 • ISSUE № 12

A PUBLIC FUNCTION

Mike Driver on leading government ﬁnance TWO BECOME ONE

Examining the case for council mergers TESTING TIMES

Play PF’s Christmas quiz of the year

HOT PROPERTIES

Taking the temperature of the NHS estate

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December 2017

CONTENTS

COVER STORY Land the heart The NHS has an extensive estate, much of it old and not used well. With money tight and PFI out of fashion, could selling sites help the health service generate cash to improve facilities and provide homes for its staff ?

At the fulcrum Head of the government finance function Mike Driver tells PF why finance needs to be at the heart of decision making, the benefits of an inclusive approach and gaining support across departments for his defined vision for government

Christmas quiz It was the year of Article 50, an accountancy ﬁrm shining as an Oscar star, the mystery magic money tree, a wobbly time for the government – and PF’s ﬁrst awards for innovation. Test your knowledge of 2017’s events and win a prize

4 Editorial Frauds and fortunes 5 News Fraud hub beats forecast; recovery after Grenfell; another league table for NHS; MPs call for anti-tax dodging law 8 Brexit watch EU doctors may leave; UK states kept “in dark” 9 International news Social benefits standard draft issued at long last 10

Watchdog watch

12 Voice of the nations Scotland’s call on EU fund replacement; NI tops recycling target; Wales’ ministers named 14 Scottish debate Ageing is a bigger threat than Brexit, vote finds

16 Feedback Readers against PFI; dodgy career advice 17 Opinion Amyas Morse on Brexit’s priority; Steve Goodrich on the Paradise Papers; Stephen Sutcliffe on automation; Ileana Steccolini on types of financial resilience 22 Cover feature Could the NHS earn from selling its estate? 28 Interview Head of the government finance function Mike Driver speaks to PF 32 Fraud round-up CIPFA’s local authority fraud tracker paints a detailed picture

The implications when councils combine 40 PF Innovation Awards Belfast’s broadband governance 42 Christmas quiz How well do you remember 2017? 42 On account Stash some cash in a sophisticated approach to risk 43 Technology watch Deluges of data from the Paradise Papers 44 Management development Ward off workplace wars 47

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CIPFA events

48 Numbers game 34 Feature Mergers most horrid?

50 Recruitment

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editorial: Vivienne Russell

Frauds and fortunes In a year marked by the dishonesty of fake news and tax evasion by the rich, the public sector can forge trust by targeting fraud

ake news. That was the word of the year, according to the people at Collins dictionary. Reithian ideals appear to have given way to Russian bots. Theresa May suggested as much recently when she told the Lord Mayor’s banquet that Russia

was “weaponising information”, laying a complex trail of false stories stoked by social media trolls to undermine public trust in the international order. 2017 has been a year in which public trust in once comforting and competent authority has been profoundly shaken. In London, the Grenfell Tower fire tragedy uncovered a wide gulf between the local council and the community it serves. Rather than settling a question, the Brexit vote has split the country into two camps – Leavers and Remainers, or BeLeavers and Remoaners if you prefer – each increasingly hostile and mistrustful of the other. The snap general election delivered a Commons that reflects this lack of consensus; the government is shored up only by the Democratic Unionist Party and remains vulnerable to fairly modest pressure. Cabinet discipline appears to have fractured if Priti Patel’s extracurricular diplomacy in Israel is anything to go by. Michael Fallon departed amid scandal, and other issue of the year as we highlight the findings of political careers may not survive the new scrutiny on CIPFA’s latest Fraud and Corruption Tracker report. sexual conduct ushered in by the Harvey Weinstein affair. While the number of cases may be down, the value The Paradise Papers have once again turned the of local government fraud detected appears to be spotlight on offshore tax and the complex mechanisms climbing, reaching £336.2m in 2016-17. that exist to shield the wealth of the rich and powerful. But it might not be all doom and gloom – there And, perhaps, this time the public has had enough. is good news about a public sector that is Dame Margaret Hodge, chair of the All-Party increasingly alert to fraud risks. The model used by Parliamentary Group on Responsible Tax, is calling for London Counter Fraud Hub (see opposite) could greater transparency and urging the government not to promise large-scale success if copied elsewhere. roll back on commitments made by David Cameron and This is not just about recovering money for the George Osborne (page 7) to introduce country-by-country public purse, as welcome as that may be. As Rob reporting for corporations. Whiteman noted at CIPFA’s Counter Fraud Summit, Scams and swindles feature in others ways in our final it’s about restoring reputation and morale at a time when these have taken some serious blows. The world is changing fast, new risks are developing, old certainties are being challenged. Public bodies need to be beacons of stability and trust. ● Vivienne Russell Editor

PF is taking a seasonal break but will return early in 2018

vivienne.russell@

with the next edition. We wish all our readers a merry

publicfinance.co.uk

Christmas and a happy new year

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news

Catch a thief: Ealing Council led on the fraud project, which could be implemented throughout London

Data-sharing project identified nearly five times as many cases of fraud as expected By Vivienne Russell

ALAMY

The pioneering London Counter Fraud Hub has uncovered far more cases of potential fraud than anticipated, early results show The hub is an ambitious data-sharing project led by Ealing Council and London Councils. CIPFA runs the project together with partners including BAE Systems and Ordnance Survey. A pilot phase was launched in June involving four London boroughs – Ealing, Camden, Islington and Croydon – to test the concept in three areas: single-person discount council tax, housing tenancy and business rates. Preliminary results from the four councils show a total of 5,658 cases of potential fraud were identiﬁed, almost ﬁve times the 1,213 minimum cases anticipated. Of these: ● 5,066 were single-person discount council tax cases, against a minimum standard of 887

I was very confident we were going to get better results

Hub exceeds expectations in finding council fraud ● 451 were housing tenancy cases, against a minimum standard of 150 ● 141 were business rates cases, which was below the minimum standard of 176. Ian O’Donnell, executive director of corporate resources at Ealing Council, conceived and leads the project. He said performance on business rates was relatively poor because, when the analytics were run, the data in the hub did not yet include Ordnance Survey’s point of interest data, which provides commercial property details. O’Donnell said that once this had been included, he was conﬁdent more cases would be uncovered. The hub also found 660 potential housing waiting list fraud cases, although these are not officially part of the pilot and will not be included in the formal evaluation. O’Donnell told PF the results needed to be tested further but described them as “good”, exceeding results found when the data was examined with the Cabinet Office’s National Fraud Initiative. “This

exactly what we wanted to hear,” he said. “The results are in line with what I expected because I was very conﬁdent that using the new technology we’ve introduced, and also by sharing data, we were always going to get better results.” The pilot is nearly completed, O’Donnell said, although further work remains to be carried out on automation and administrative processes. “I would imagine we are targeting early in the new year,” he said. Assuming the pilot is deemed a success, the Counter Fraud Hub will be rolled out across London in three waves. The fraud hub result came as CIPFA’s annual Fraud and Corruption Tracker report showed a rise in the estimated total value of local government fraud, up to £336.2m in 2016-17 from £286m the previous year. Housing remains by far the biggest area of fraud, accounting for 78.2% by value. Local authority fraud survey, page 32

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news Housing associations now private

Cabinet changes

The ONS has reclassified English housing associations as private bodies, wiping £66bn of debt off the public sector balance sheet. Communities secretary Sajid Javid said the move would make it easier for associations to borrow to build more homes and also “freed them from the shackles of public sector bureaucracy”.

Gavin Williamson, MP for South Staffordshire, formerly the chief whip, was appointed defence secretary following Michael Fallon’s resignation. He was replaced as chief whip by Julian Smith. Penny Mordaunt, MP for Portsmouth North, formerly minister of state in the Department for Work & Pensions, replaced Priti Patel.

NHS hospitals are to be ranked by expenditure on goods and services, health secretary Jeremy Hunt announced at NHS Providers’ conference in Birmingham in November. The procurement league table is intended to reduce how much the NHS is charged by suppliers and to help save up to £300m a year. “There is still baffling variation in the prices that hospitals are paying for supplies, with many paying over the odds for the same products sold more cheaply at a neighbouring trust,” Hunt said. Despite continued efforts to make procurement more efficient, the Department of Health said prices varied widely, with some trusts paying twice as much as others for items such as surgical scalpels.

RBKC spots signs of Grenfell recovery Kensington and Chelsea recognises it has a long way to go but “green shoots” are appearing, after the Grenfell recovery taskforce identified areas for improvement By PF reporters The Royal Borough of Kensington and Chelsea said the “green shoots of recovery are growing” after the communities secretary released a report saying it had “failed its community” on the night of the Grenfell Tower fire. Sajid Javid warned he was still “not taking any options off the table” regarding the council’s future, as he presented the Grenfell taskforce’s first report to parliament last month. Kim Taylor-Smith, deputy leader of RBKC, responded: “We still have a huge amount to do [but] the green shoots of recovery are growing. “We understand the need to change the council, the way it works, the way it listens, and the way it acts.” The independent taskforce, set up to oversee the council’s efforts to recover from the tower block fire, said before the fire on 14 June the council was “distant from its residents”. It also said it was “highly traditional in its operational behaviours” and “deficit in its understanding of modern public service delivery”. The report recommended the pace of the recovery should be leader  Deptuty Kim TaylorSmith: “We understand the need to change the council, the way it works, the way it listens, and the way it acts”

increased, the council ought to show more empathy and emotional intelligence, staff skills needed to be improved and it be more innovative. Javid said although the taskforce – including housing and public services experts – recognised “progress is being made” he would continue to monitor the situation carefully. This came just before the Chartered Institute of Housing launched its major project into examining the future role of social housing. As PF reported in August, the CIH was looking at ways of “filling the gaps” left by the Grenfell public inquiry, after Sir Martin Moore-Bick, head of the Grenfell public inquiry, said he would not include wider social policy while looking into the causes of the blaze. The professional body has teamed up with a range of organisations, including the Joseph Rowntree Foundation, the National Federation of ALMOs and Newcastle and Oxford councils, to gather housing sector views that will feed into the government’s housing green paper. Terrie Alafat, chief executive of the Chartered Institute of Housing, said: “We want people who live and work in social housing to lead the debate about where it goes next.” The Rethinking Social Housing project is expected to publish first findings early next year with a final publication in June next year. Police in November formally confirmed the Grenfell death toll was 71.

ALAMY / REX

Hospitals to be rated on buying practices

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Grant fraud biggest global risk Grant misspending is seen as the top public sector fraud risk by accountants, according to CIPFA and Moore Stephens. Nearly half (48%) of 150 partners in 37 countries said this posed a ‘high or very high risk’. This was followed by money laundering (42%) and payroll fraud (41%).

Big stash, big names Those linked to the Paradise Papers include the Queen and a US government official

Trouble in Paradise

Paradise cost: Margaret Hodge said tackling tax avoidance required a strong political will

➊

MPs call for laws to end tax dodging in UK and abroad Government told to legislate to ‘stamp out an injustice that is both unfair and offensive’ before the next scandal erupts

REX

By Simone Rensch The government must step up its efforts to tackle tax dodging to ensure funding is not lost to public services, Labour MP Dame Margaret Hodge said at an emergency Commons debate on the Paradise Papers. During the 14 November debate, MPs called on the government to legislate to increase transparency to address tax avoidance, in both the UK and overseas territories. Hodge, the former chair of the Commons Public Accounts Committee, said: “It is our responsibility as lawmakers to do all that we can, in the UK and with our international partners, to stamp out an injustice that is both unfair and offensive. “The government can take action that will make a difference, and it simply needs a strong political will to make that happen.” During the debate, Treasury minister Mel Stride said the government had a

“very strong track record” in tackling tax avoidance and stressed that tax revenue was “necessary to fund our vital public services”. The emergency debate followed a meeting convened by the All Party Parliamentary Group on Responsible Tax, which is chaired by Hodge. At the 7 November event, Katy Chakrabortty, head of advocacy at Oxfam, called on the government to “get ahead of the next scandal” and treat tax avoidance as a serious public issue. She said “transparency isn’t easy and it can create a rocky ride at ﬁrst” but is “by far the best strategy in the long term”. While European measures on tax transparency have stalled, the UK should build on the leadership it has already shown by introducing public country-bycountry reporting for UK companies, Chakrabortty said. Large-scale corporate tax avoidance was costing the world’s poorest countries £130bn every year. At the same event, Hodge said: “Our aim and objective is to try to build a consensus around how we can move forward into creating a responsible tax system that

➋

Caching cheques The 13.4 million leaked documents revealed how the rich, including politicians and officials, stored their wealth in offshore tax havens.

Paper tale The papers were obtained by German newspaper Süddeutsche Zeitung, which called in the International Consortium of Investigative Journalists to oversee the investigation.

➌ ➍ ➎

Royal wrongs The Queen’s private estate was found to have invested about £10m offshore, and Prince Charles’ private estate had offshore interests that would benefit if changes to climate change agreements he was promoting were successful.

Caught red handed One of president Donald Trump’s top administration officials was found to have a financial stake in a firm whose major partners include a Russian company.

It’s all legal Many files were from law firm Appleby, which advises on how to set up and register companies in offshore jurisdictions.

seems to be fair to everybody.” The APPG meeting took place just a day after the leak of the Paradise Papers revealed wide-scale international investments made in offshore tax havens. See opinion, page 18

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brexit watch

UK states kept ‘in the dark’ over negotiations Devolved governments have complained they have been sidelined by UK ministers in the Brexit negotiations. Ahead of the biannual British-Irish Council summit in Jersey on 10 November, Scottish first minister Nicola Sturgeon accused Westminster of having deliberately kept the devolved administrations “substantially in the dark” in spite of its promise of genuine participation. This followed a plea from Scottish Conservative leader Ruth Davidson, in a speech to small business leaders on 9 November, to “step up the pace” of progress in the negotiations. The UK government denied the criticisms, saying there had been “an unprecedented level of engagement” with the devolved administrations, which would continue.

Thousands of Brexit civil servants hired

NHS England chief executive Simon Stevens has called on the government to make good on Vote Leave’s promise to direct £350m a week sent to the EU into the NHS. “Rather than criticising these clear Brexit funding commitments to NHS patients …the public want to see them honoured,” Stevens said.

Thousands of extra staff have been recruited to the civil service to help with Brexit. A Downing Street spokesperson said: “Nearly 3,000 new posts have now been created in support of EU exit across the government – including in specialist functions.” This includes 300 lawyers for the government’s legal department.

Nearly half of EU doctors could leave More doctors are considering leaving the UK than before, with around one in five citing Brexit as the reason, the British Medical Association reports By Anthony Barej Uncertainty over Brexit is driving EU doctors to think about leaving the UK, according to the British Medical Association. A survey by the doctors’ trade union found 45% of 1,700 European Economic Area doctors were considering moving to another country, while a further 29% were unsure if they would stay in the UK. This was an increase on the results of a survey the BMA conducted earlier this year, which found that 42% were thinking of leaving and 23% were unsure. Brexit was the main reason given by these doctors for their potential move, cited by 19% of respondents. This comes after repeated assurances from Theresa May that EU citizens could stay in the UK. However, only 9.5% of doctors said they were conﬁdent of a positive outcome for their rights as citizens and more than three quarters (77%) said that, if there were negative effects on their rights following the Brexit negotiations, this would make them more likely to consider leaving the UK. The BMA noted there are approximately 12,000 EEA doctors working in the NHS in England – 7.7% of the UK medical workforce. Further ﬁndings from the survey showed that 15% of doctors said work:  Hospital BMA says more EU doctors could leave the NHS – but government says EU staff numbers are up

that continued uncertainty over their future immigration status was driving their decision to potentially leave. In August, the government pledged to train an extra 1,500 doctors a year by 2020 but concern has been raised that more needs to be done to ensure EU doctors currently working here feel encouraged to remain. BMA treasurer Andrew Dearden said: “We need clarity on what the future holds for EU citizens and their families living in the UK, and an end to the uncertainty and insecurity that could see many voting with their feet.” Saffron Cordery, director of policy and strategy at NHS Providers, said: “[The government] should provide assurance on immigration policy so trusts can continue to recruit overseas while we strengthen our workforce here.” The Department of Health disputed the BMA’s ﬁgures citing recent data from the General Medical Council, showing a slight year-on-year rise in 2016-17 in the number of EEA doctors joining its medical register. A government spokesperson said: “This survey does not stand up to scrutiny. In fact, there are actually more EU doctors working in the NHS since the EU referendum, more EU graduates joining the UK medical register and 3,193 more EU nationals working in the NHS overall.” Danny Mortimer, coconvenor of the Cavendish Coalition, which campaigns on Brexit-related health and care staffing needs, called the BMA’s ﬁndings “alarming” and said the UK needed to remain an attractive place to work.

GETTY

the BREXIT debate

Give us the £350m a week, says NHS chief

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international news Sovereign risks research A business school and philanthropic body have joined up to find ways to identify the risk of governments becoming unwilling or unable to pay loans. The Columbia Business School and the Charles & Agnes Kazarian Foundation are looking at sovereign risk using financial statements.

Complex costs The single set of principles is intended to cover a wide range of social benefits

Social benefits

standard  The defines social benefits, which include state but not public sector pensions

Standard issued but far from set A draft standard for social benefits has been issued after years of preparation – but includes an alternative view

ALAMY

By Simone Rensch An international accounting standard has been released for consultation after almost 16 years of preparation but – in a first – an alternative view is included. The International Public Sector Accounting Standards Board released its social benefits accounting standard on 31 October. It has been working on the standard since 2002 but publication was delayed because board members could not agree on the model. The IPSASB as a whole decided to finally publish the standard – which aims to improve consistency, transparency and reporting by governments of social benefit schemes such as retirement, unemployment and disability – although it had not reached a consensus. An alternative view, prepared by three

dissenting board members, was published within it. IPSASB principal Paul Mason told PF that an alternative view on a proposed standard is unusual for the board. However, he said this reﬂected the complexity and diversity of social beneﬁts.

“There’s a whole range of benefits you’re trying to cover in a single set of principles, and that makes it complex,” he said. The draft presents a set of standards with a single “recognition point” – when an individual becomes eligible for benefits. In the alternative view, the way pensions are accounted for would be similar to the way employee pensions recognise liability of individuals – typically from when they start working. Because social benefits are so diverse, ranging from long-term pensions to short-term job seeker’s allowance, the impact of the two approaches could also be very different, Mason explained. “It would have a big impact on government balance sheets if you went for the alternative view – that you should have benefits accounted for from the moment people start contributing or they retire,” he said. “There is not so much of an impact if you go for the view that it’s just for the ‘next’ benefit; it’ll still be fairly large numbers, but it won’t have the same impact on the balance sheet.” IPSAS do not currently provide requirements or guidance on how governments should account for social benefits, which means there is not enough information to assess performance.

➊ ➋

Definitions Social benefits are defined and include state pensions, disability pensions and unemployment benefits, but not universal health or education services, or defence services.

Disclosure The standard proposes disclosure requirements so users will have all the information they need to evaluate the effect social benefits have on state finances.

➌

Documenting The standard is intended to improve consistency and comparability in how social benefit schemes are reported by public sector entities.

Mason said the proposal “won’t become a standard until we’ve got all the comments back”. Comments are requested by 31 March 2018 and the board will analyse and discuss the responses at its June meeting. Meanwhile, the international standard for cash basis accounting has been revised to make the transition to accruals more “achievable”, IPSASB said. Revisions also address the main obstacles that have resulted from its current requirements including the requirement to prepare consolidated ﬁnancial statements and disclosure of information about external assistance and third party payments. IPSASB said that, although the standard has an important role in the board’s standard-setting strategy, it was not widely adopted. The revised standard will be effective from 1 January 2019, but earlier adoption is encouraged.

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watchdog watch

WHAT’S GOING ON IN AUDIT AND REGULATION — N ATIO N AL AU DI T O F F I C E ⦁ Government borrowing has increased by 61% since 2009-10 and, while costs have been kept down, the size of the debt poses

public bodies faced difficulties in balancing potentially competing procurement priorities, responding to new

a significant risk to the public finances, the National Audit Office has warned. Auditors found that, of the £1,986bn liabilities on the government’s balance sheet in 2015-16, £1,261bn was debt from borrowing. This was equivalent to £47,000 per household. In total, £222bn has been spent on debt interest since 2009-10. The watchdog also noted that uncertainty around revenue and spending, as well as economic and policy changes, had had a considerable impact on borrowing levels. For instance, in last year’s autumn statement, the Treasury asked the Debt Management Office to raise an additional £21bn for the final quarter of 2016-17 because of delays to planned asset sales set out in the March 2016 Budget. In a separate report, the NAO probed the government’s response to the WannaCry attack that hit the NHS in May. It found warnings about a likely cyberattack were not heeded and that the Department of Health had no clear idea how much the disruption to services cost.

policy, legislation and technology, and in recruiting and retaining key personnel. The watchdog found that, of the £6bn spent through procurement in 2015-16, £880m was through collaborative procurement managed by the three main Wales-based consortia and public buying organisations. While these organisations were reporting ﬁnancial savings and other beneﬁts, public bodies have mixed views on their effectiveness, the auditors said.

⦁ Welsh public bodies need to improve how they procure goods and services to ensure the £6bn spent annually achieves value for money. A report from Welsh Audit Office said

The equivalent of government liabilities from borrowing per household

CAR E QUALI TY CO MMISSION

“It is particularly encouraging to see services reaching out to groups they had little contact with in the past” OUTSTANDING HOSPICES: P R AI S E F R O M AND R E A S U TC L I F F E

⦁ Hospices in England provide more outstanding care than any other service regulated by the Care Quality Commission, the watchdog has found. In all, one in four English hospices are rated outstanding and 70% as good. Just 6% of NHS acute hospitals, 4% of GP services and 2% of domiciliary care agencies were considered outstanding. Inspectors said hospice staff displayed a strong commitment to person-centred care to patients and their families and developed strong relationships with local services. “It is particularly encouraging to see services committed to continuing improvement in reaching out to groups they had little contact with in the past,” said Andrea Sutcliffe, chief inspector of adult social care at the CQC.

ALAMY / REPORTDIGITAL

WAL E S AU D IT OF F I C E

£47k

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Coming up Adding value Third NAO council cash study The National Audit Office is asking for evidence for its next study into the financial sustainability of local authorities. The watchdog has issued two reports on the impact of funding changes on councils’ financial viability and a third is due to published in the spring. This will reassess conditions in the sector as well as the Department for Communities & Local Government’s stewardship of the local government finance system.

Medical supplies accounted for the largest area of expenditure and 35% of health procurement, the Wales Audit Office report said

College consumers The higher education market is the subject of a separate inquiry by the NAO. Auditors will look at how well the market is operating and if students are able to make informed choices as effective consumers. The study will also examine whether the Department for Education understands the financial or other incentives offered by HE providers and whether complaints structures offer students adequate redress.

NI homelessness review

 provided

Hospice staff

person-centred care to patients and families, the CQC found

In Northern Ireland, auditors are preparing a report on homelessness. Around 20,000 households each year present to the Northern Ireland Housing Executive as homeless, of which around half are accepted as statutory homeless. The study will look at how well the NIHE has been reducing homelessness, as well as its governance and oversight arrangements, performance measures and targets and spending in key areas.

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Midlothian Council Forward Funding for the Council’s Capital Programme £ 20 million

Centre Hospitalier de Sambre Avesnois Construction of the hospital € 80 million

Long Term Loans United Kingdom February 2016

Long Term Loan France March 2017

Comunidad Foral de Navarra Public Investment Projects € 100 million

Investment Loan Spain March 2017

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► Voice of the Nations

DEVOLVED ADMINISTRATIONS AND BEYOND — S C OTL AN D

Call to act now to replace EU funds Keith Aitken in Edinburgh ⦁ UK ministers should bring forward a replacement for European structural funding as soon as possible – and ensure it is generous and flexible enough to fit Scotland’s circumstances, Scotland’s economy secretary has said. Keith Brown, cabinet secretary for economy, jobs and fair work, told an audience of economic development professionals in November: “The biggest cloud on Scotland’s investment horizon remains the Brexit negotiations so it is vital that the UK government provides clarity.” He also urged Scottish local authorities to maintain and develop their European links after Brexit – even if it exposed them to media criticism for junketing. Brown claimed that a policy had arisen in the 1980s of channelling economic development to the English Midlands, where the most votes were to be gained: “The North of England lost out, along with Scotland, Wales and Northern Ireland. What helped that situation were the European funds that came in and took up that slack. “European structural funds have been of immense benefit to Scotland over the past 40 years,” he said, citing in particular their importance to infrastructure investment in the highlands and islands.

Keith Brown said Scotland should have autonomy over how funding is allocated under any new system

UK ministers have guaranteed funding for projects contracted before Britain’s departure from the EU. Brown demanded an assurance that whatever ultimately replaced structural funds would provide “no less than the current level of funding, and [give Scotland] the autonomy over that funding to align it with Scottish priorities”. He told the Economic Development Association of Scotland meeting in Perth: “You all know very well how much advance notice you need if you want to take full advantage of funding streams, and that is why we have urged the UK government to move on this as quickly as possible. “Half the programmes for which I’m responsible that involve European funding are already committed,” Brown added. “We have to take advantage of the Treasury guarantee and commit as much

as possible to those programmes before Brexit happens in 2019 – that is, assuming that Brexit happens in 2019.” He defended the controversial decision to create a national strategic board to oversee all of Scotland’s economic development and skills provision, both national and municipal, which some have criticised as a centralising power grab by the Scottish government. “The aim is to drive common values and a common culture. It’s not to insist on uniformity, but it does insist that we have to have alignment between the various agencies that are working towards the same aims,” Brown said. “We want to have a Team Scotland approach, in the same way that Team Ireland is so effective for Ireland.” He urged local authorities and other organisations to retain and, if possible, strengthen their links with continental partner communities and institutions, while acknowledging that such partnerships provided an easy target for

“The biggest cloud on Scotland’s investment horizon is Brexit. So it is vital the UK government provides clarity” ON REPLACING STRUCTURAL FUNDS K E I TH B R OW N

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voice of the nations

In brief… H E A LT H CA R E

Benefits of protecting health cash disputed Health and wellbeing in Wales is at risk despite budget plans to continue to ringfence NHS spending, the Institute of Welsh Affairs has told the country’s government. The thinktank said this decision was “increasingly challenging to justify”, given the government’s commitment to early intervention and

REX

long-term planning. It added that cuts to areas like housing and social care, made so healthcare spending could rise, “arguably pose as much of a threat to our nation’s health as cuts to the NHS”.

TAXAT I O N

Scotland could put up income tax “Modest” tax rises may be on the way in Scotland in the December budget, according to hints from first minister Nicola Sturgeon. Arguing that tax rises could be necessary to maintain public services, Sturgeon outlined a range of options in November to raise the tax paid by middle and high earners. “As the impact of austerity, Brexit and changing demographics bears down even harder, it is now time to ask ourselves some tough questions,” she said. EC O N O M Y

Wales pushes for air passenger tax power The devolved parliaments in Northern Ireland and Scotland have set their own flight tax, and the Welsh government is pushing for powers to do the same. Westminster had argued

media scorn. Scotland, he noted, sold just 7% of its produce overseas, against Bavaria’s 75%, which showed the potential for export growth. The meeting heard an analysis of Scotland’s economic outlook from Professor Graeme Roy, a former head of the first minister’s policy unit, who now runs Scotland’s best known economic forecasting body, the Fraser of Allander Institute at Strathclyde University. Roy admitted that the economy had faced many difficulties, observing that GDP per head had grown by 20% in the first seven years of devolution up to the onset of the banking crisis, but by only 2% in the subsequent 10 years, well behind the rate of growth in the rest of the UK. Fiscal devolution made the effects of this much greater, Roy added. From next year, half of Scotland’s public finance budget would depend on the country’s economic performance.

that the move would put Bristol airport, which is just over the Severn Bridge, at a disadvantage. However, the National Assembly has presented fresh evidence showing this would have only a negligible effect on Bristol airport and the economy of the South West. HOUSING

NI consults on social housing allocation Northern Ireland’s Department of Communities is seeking views on ways to improve how social housing is allocated, which has not changed since 2000. A public consultation has been launched to review the system for assessing housing need and make it fairer and more transparent. It aims to reduce waiting times, improve choice and address the needs of vulnerable people. The consultation runs until 21 December.

N ORTHER N I R E LAND

Recycling hits target in advance ⦁ Household recycling has hit the 50% mark for the ﬁrst time ever in Northern Ireland – three years ahead of schedule. Waste management statistics showed the recycling rate for April-June 2017 was 50%, up from 46.4% in the same period last year. Philip McMurray, head of recycling policy at the Department of

50%

Recycling rates of household waste in Northern Ireland – a target hit three years ahead of schedule

Agriculture, Environment & Rural Affairs, praised councils and residents for stepping up their efforts but added there was no room for complacency. “Keeping food waste out of landﬁll not only helps prevent climate change but also the waste can be turned into a valuable resource for our parks and allotments, and the process has already created jobs,” he said. Mervyn Rae of the Northern Ireland Local Government Association said: “I am delighted to see this improvement in recycling rates in the latest Northern Ireland statistics, which puts us ahead of England and Scotland. “Members of our 11 district councils want to build on this great result.”

WALES

Ministers named in cabinet changes ⦁ Alun Davies has taken on the local government brief from Mark Drakeford in a shake-up of the Welsh Cabinet announced by first minister Carwyn Jones in early November. Drakeford retains the other half of his role as finance minister. Dafydd ElisThomas and Hannah Blythyn joined the cabinet as ministers for culture, tourism and sport, and the environment respectively. Jane Hutt has left the government after more than 18 years of ministerial office and was replaced by Julie James as leader of the house and chief whip. Jones said his new ministerial team provided “a balance of experience and stability, with new drive and energy”. The reshuffle followed communities and children’s minister Carl Sargeant’s departure from government over sexual abuse allegations. Sargeant was found dead just days later and Jones has been under fire over his handling of the affair. Paying tribute to Sargeant, Jones said: “Wales has lost a person of great warmth, ability and charisma.”

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17/11/2017 16:26

the scottish debate / sponsored by UBS Asset Management In association with

Demographic changes and public expectations of state support will put more of a strain on the public sector than leaving the EU, say experts By Vivienne Russell The ageing population is a bigger challenge to public services than Brexit. That was the verdict of Scottish ﬁnance directors at CIPFA Scotland’s annual public ﬁnance debate in Edinburgh on 9 November. Participants voted by a margin of more than two to one in favour of the statement that demographic challenges outstripped those resulting from the UK’s decision to leave the EU. The vote was preceded by a lively, wide-ranging discussion in which three expert panellists and the audience considered demographic issues through the lenses of health, social care and pensions. Panellists observed that there was a poor level of understanding about the challenges of ageing and that politicians often lacked the will to address problems head on. There was widespread agreement that the public had unrealistic expectations about what the state c0uld do and a more honest debate was needed. Professor Alex McMahon, executive director for nursing, midwifery and allied health professionals at NHS Lothian, kicked off the discussion with the observation that structural reform alone would not be sufficient to address demographic challenges. “Reform of public bodies isn’t in itself an answer,” he told attendees at the event, which was sponsored by UBS Asset Management. While no one would disagree with the principles of greater collaboration and integration set out by the 2011 Christie commission on future public services, he said it was a “sad indictment of Scottish society that we couldn’t drive that change without legislation having to be imposed”. Jackie Irvine, chief social work officer at West Dunbartonshire Health & Social Care Partnership and vice-chair of Social Work Scotland, said public expectations around changing care models needed to be managed. “People far prefer to be in hospital. They see that as the solution to their ills and, if they’re not admitted to hospital, there’s an assumption they’re not getting the best quality care. That’s a real cultural issue we need to play with.” Rather than being hostile to or in favour of more integration between health and social care, Irvine said the public simply did not understand it. “We’ve not communicated with the public effectively about the premise of health and social care integration … I don’t think we’ve sold that message.”

tax  Pensions, and public

expectations of “free” services were among the issues debated by the panel; top (l-r) Keith Aitken, Jackie Irvine and David Davison; below: Professor Alex McMahon

24yes 11no VOTE RESULT

The ageing population is a bigger challenge than Brexit

populist government [in Scotland], who like to make everything free at the point of delivery. I think that’s an aspiration that died many years ago that, as public servants, we struggle with because we know the cost that’s associated with that.” Budgets were under tremendous pressure, he said, which would only intensify without new money from Westminster. NHS Lothian’s efficiency programme for next year involved saving £90m, he said. “No one system in the UK has ever delivered that level of efficiency savings recurrently. That is the reality… but that’s not portrayed outside in the public.” Irvine said she worried about continually squeezed local authority budgets, which could have a negative effect on service quality in as little as three years. She noted that councillors were reluctant to take difficult and potentially unpopular decisions: “There needs to be a level of honesty there but it’s not going happen.” She agreed there needed to be a shift in the balance between state support and the role of families and communities, noting that, in some cases, state-funded care was being delivered to people living with a healthy adult who could do more. People without any network of support needed to be the public sector’s priority. “It comes back to false expectations that the state will always provide,” Irvine said. McMahon observed that

FRASER BAND / UNP

Ageing population is a bigger threat than Brexit

Audience members agreed there was a lack of realism among the public about what the state could provide, especially in Scotland where many services continued to be provided free at the point of use. One participant commented that citizens were not aware of the ﬁnancial difficulties facing public bodies and politicians were reluctant to deliver honest messages. The third panellist, David Davison, who leads the public sector, charities and not for proﬁt practice at pension consultants Spence & Partners, highlighted the triple lock on the state pension. People reacted “very negatively”, he said, to proposals during the general election to reduce this. McMahon added: “We’ve got a very

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17/11/2017 16:24

“It comes back to false expectations that the state will always provide” JACKIE IRVINE W EST DU N BA RTONS H IR E H EA LT H & S OC IA L CA RE PA RTNER SH I P

politicians would not be elected if they told the electorate the role of the state in their lives would have to shrink. “I don’t think a sense of community exists any longer,” he said. Younger people needed to be encouraged to be self-reliant and support each other rather than turning to the state, he suggested. Irvine countered that people were working longer hours, which limited their ability to provide additional care. Davison said there was a need for greater public education about finance, particularly among young people. Children came out of school with no financial education and little understanding of how society worked, he said. “If we got some educational resources around the core curriculum … where children were taught at a young age about how finances work, I think there would be much greater awareness of a lot of these issues.” Pensions, Davison said, had become a “political football”. He suggested a pensions commission be set up to make independent recommendations to be considered on a cross-party basis. “It’s something we as a country need to deal with.” McMahon highlighted the debate in Scotland on taxation and testing whether

people would want to pay more. The Scottish Government has issued a paper on income tax, putting forward scenarios for tax hikes on middle and high earners. “We’re living in a false world where everything is literally free – childcare, prescriptions, the Forth Road bridge.” But this was not sustainable, he said, and an open and honest debate was needed, and now was a good time for that. Davison agreed the debate about higher taxes was “very healthy” but it needed to be made clear to people what they were getting for their higher taxes and that their money was being spent efficiently. The ﬁnal part of the debate considered pension arrangements and whether these needed to be adapted for an ageing

population and the effect of Brexit on the public sector workforce. Davison said the debate had to get beyond politics. “The triple lock has to go. I cannot see any logic in pensioners being entitled to a 2.5% underpin.” Pensioners now had higher average weekly incomes than working-age people, he noted. There was potential for more ﬂexible models, so people could vary how much pension they took and when they took it, he said. Older pensioners often struggled to spend their ever-increasing incomes, he said, whereas more money could be more desirable at earlier stages of retirement. “A lot can be done to make what is available more attractive,” Davison said. On staffing, McMahon observed: “We don’t have the workforce in social care or health to meet the demand.” He said there were more nurse vacancies than nurses, and many were in their 50s and choosing to retire and top up their income with bank shifts. “Brexit will compound it,” he warned. Irvine said there was a need to make care work more attractive and valued. “People who go into caring tend to be people who can’t do anything else,” she said. “We need to see caring as a worthwhile and rewarding job.”

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17/11/2017 16:25

feedback

contacts

► Please air your views by commenting at publicfinance.co.uk or email feedback@publicfinance.co.uk

Basis of PFI was flawed

Level 5 78 Chamber Street London E1 8BL +44 (0) 20 7880 6200 redactive.co.uk @WeAreRedactive

⦁ Why does Chris Everden think PFI is conceptually brilliant? (PFI Revisited, PF, November, page 36). The public sector can borrow more cheaply and the DBO (design, build, operate) can function as well. In practice, hospitals are designed with signiﬁcant input from doctors. Why cannot all these alleged

Editor Vivienne Russell 020 7324 2788 vivienne.russell@publicfinance.co.uk Associate editor Judy Hirst 020 7324 2769 judy.hirst@publicfinance.co.uk Deputy editor Emily Twinch 020 7324 2796 emily.twinch@publicfinance.co.uk Reporter Anthony Barej 020 7324 2768 anthony.barej@publicfinance.co.uk Reporter Simone Rensch 020 7324 2794 simone.rensch@publicfinance.co.uk Contributors Christy Lawrance, Keith Aitken Senior designer Gene Cornelius 020 7880 6227 gene.cornelius@redactive.co.uk Picture editor Akin Falope 020 7324 2713 akin.falope@redactive.co.uk Digital content production manager Amy Lawless 020 7880 7662 amy.lawless@redactive.co.uk Sales manager Alex Turton 020 7324 2750 alex.turton@redactive.co.uk Sales executive Jonathan Adebayo 020 7324 2778 jonathan.adebayo@redactive.co.uk Recruitment sales executive Kristina Kruusma 020 7324 6234 kristina.kruusma@redactive.co.uk Senior production executive Aysha Miah-Edwards 020 7880 6241 aysha.miah@redactive.co.uk Publishing director Joanna Marsh 020 7880 8542 joanna.marsh@redactive.co.uk Printing Warners Midlands

advantages be obtained without all the strings and expensive risk transfers that were necessary to meet the accounting requirements of an operating lease? The accounting requirements drove decisions – not what would provide good value for money. I write as a public sector audit partner in the heyday of PFI who examined a number of schemes and undertook research for an Audit Commission paper on PFI.

With PFI, accounting requirements drove decisions – not getting value for money

Chris Vanderweale

⦁ Mark Williams says “with government debt hovering close to £1.7trn, it has ‘no alternative’ other than to rely on private ﬁnance”. This is ideology. What signiﬁcance does any given level of national debt have relative to government’s capacity or need to borrow? None. This assertion should have been challenged.

David Walker

I’ll do the sums on PFI payoff ⦁ Tony Hazell’s commented that to pay off the private sector at this stage

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would be to give money away and leave the risk with the public sector. This can be dealt with by reducing the amount of money given back to allow for this. I will do the risk assessment and calculation if you like.

Roger

To subscribe to Public Finance at the annual UK cost of £100, call 020 8950 9117 or email redactive@abacusemedia.com. International annual subscription are in the £130-£205 range.

Exposing yourself can be a bad move

Public Finance is editorially autonomous and the opinions expressed are not those of CIPFA or of contributors’ employing organisations, unless expressly stated. Public Finance reserves the copyright in all published articles, which may not be reproduced in whole or in part without permission. Public Finance is published for CIPFA by Redactive Publishing Ltd. Public Finance. Level 5, 78 Chamber Street, London E1 8BL Tel 020 7880 6200 Fax 020 7324 2790

⦁ Regarding recent developments at Westminster, can I suggest that the advice in Professional Development (Be a showstopper by crossing the divide, PF, November, page 44) to “expose yourself” to people of any sector is not good advice.

Chris Thompson

ISSN 1352-9250

Average circulation 15,410 (Jul 14–Jun 15)

IKON

Stop the ideology

Tel 020 7543 5600 Fax 020 7543 5700 Email corporate@cipfa.org Address CIPFA, 77 Mansell Street London, E1 8AN

17/11/2017 16:27

opinion ► Amyas Morse

 Whitehall departments may

In light of the UK’s plans to leave the EU, the government should now prioritise the interests of the nation above those of Whitehall departments

Deal with Brexit first

ALAMY

unning the government is more technical and complex than it used to be. In terms of driving efficiencies, the easier things have been done. To deliver further efficiencies or, indeed, just to move forward, we are now talking about very large, complex change processes. There are numerous, complex projects designed to transform ways of working within the public sector. It is easy to get lost in those complex projects if you don’t have very good management information in place and professional skills for interpreting that information. That is why talent management and building professionalism are so important and why we have put such emphasis on it in recent reports. There has been progress in talent management and building professionalism, thanks to the efforts of John Manzoni, the civil service’s chief executive and permanent secretary to the Cabinet Office. His aim is to give standing to professional judgment and I support that. Alongside this, the public sector environment is still characterised by ﬁscal targets and spending restraint. It is delivering large-scale, complex transformation and change programmes while reducing in size and resources. Through our value for money reports over the years looking at capacity and capability in the civil service, we have built up a picture that shows the civil service is often being asked to do more than

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not have the capacity to fulfil existing commitments while managing the EU exit is the priority

resource plans allow for. Projects often draw on the same skills pool and many contain an optimism bias that they will be able to meet their skill needs at an appropriate cost in the current funding climate. Against this backcloth, civil servants are implementing the decision to leave the EU. Last July, in a speech at the Institute for Government, I said that the decision to leave would cause a major upheaval for the public sector, and described it as an “abnormal challenge”. I urged the government to plan to manage its priorities across all its entities. Unlike other projects where the usual answer is for timetables to slip and reductions in scope, leaving the EU could have an immovable, hard deadline. Implementation of the programme to leave the EU requires clear focus and priority. We now need to act in the interests of the nation, not those of individual departments. Tough decisions and effective prioritisation are needed. This is the government’s role – it is not the role of individual departments. This means reviewing its existing commitments and assessing how many of them can still be managed, and what resources are really required for the priority tasks at hand. The government needs to be nimble in reallocating its people and resources across departments to wherever they are most needed, and getting people with the right skills. It also needs to act purposefully in managing risk and take a view about where as a whole it is willing to accept risk, and where to act quickly and decisively to lessen it. I am by no means alone in Whitehall in recognising this challenge. Let me cite Jon Thompson, HMRC permanent secretary, who said at a Public Accounts Committee evidence session in early November that it was not “credible” for HMRC to continue with its transformation programme of 250 projects given the demands placed on it by the decision to leave the EU. He – and others doing similar exercises – are right to prioritise. ⦁ Sir Amyas Morse KCB is comptroller and auditor general Amyas Morse was due to speak at the CIPFA at the National Audit Office

central government conference on 23 November

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17/11/2017 16:30

opinion ► Steve Goodrich

Mystery money

ate in October, global financial advisory firm Appleby posted a curious statement on its website, stating it had been contacted by the International Consortium of Investigative Journalists (ICIJ) regarding a massive data leak from its offices. The strength of the statement, robustly denying any wrongdoing, and the mention of the consortium showed something big was afoot. A year earlier, the ICIJ had coordinated the biggest ever exposé of the secretive offshore finance industry – the Panama Papers – which toppled governments, kick-started criminal investigations and led to global outcry. On Sunday 5 November, 95 ICIJ media partners worldwide exposed their revelations. They called them the Paradise Papers. The Paradise Papers are 13.4 million files leaked from two firms that provide professional financial and corporate services to global elites. The companies worked with a global network of accountants, lawyers and bankers to help manage and hide eye-watering amounts of money from tax collectors and law enforcement agencies. Many of these complex networks are based in Britain’s overseas territories and crown dependencies. Alongside low tax, they provide secrecy through “anonymous” companies – entities with no public record or trace. The disclosures have brought the real owners of these companies out of the shadows. Many of the Paradise Papers concern the legal but ethically questionable practice of tax avoidance, which has cost tens if not hundreds of millions of pounds to national budgets around the

offshore  Many finance companies are based in British dependencies, such as Bermuda

world. The stories also highlight an even more sinister, illicit practice. Opacity provided by anonymous companies is widely used to help launder the proceeds of corruption – money stolen from public funds, taken in bribes or made from dodgy business deals. Our research has found they have been particularly useful for laundering billions of pounds of corrupt wealth into UK property, and providing cover to those moving tens of billions of pounds in illicit funds around the world. They are also a great way to hide blatant conflicts of interest, which are often banned to prevent the misuse of public office. The UK has been taking steps to address its role in facilitating global corruption. Last year, it introduced corporate reporting requirements so people can see who controls firms registered here. It also brought in powers to make it easier to seize corrupt money coming into the UK. Prime minister Theresa May has said the government is exploring how to keep corrupt wealth out of the UK. However, the opacity provided by overseas territories and crown dependencies continues to undermine global efforts to tackle global flows in illicit wealth and block attempts to uncover wrongdoing. We propose three measures to be implemented with haste: ⦁ Introduce transparency over anonymous companies owning UK properties: lifting the veil of secrecy is key to identifying illicit wealth. The government has promised to bring in legislation on this before April 2018, but there’s no sign of it yet. ⦁ Work with the overseas territories and crown dependencies to open up their corporate registries: until the beneficial owners of companies based in these jurisdictions are made public, they have a reputation as dodgy offshore havens for corrupt individuals. ⦁ Publish and implement an anti-corruption strategy: the government was due to publish this by the end of 2016, so it’s long overdue. This is integral to ensuring the UK takes a coordinated, effective approach to tackling global corruption. If anything can be learnt from the Paradise Papers, it’s that doing nothing will only lead to more leaks, Steve Goodrich is more scandal and more embarrassment. research manager, And, as the UK renegotiates its Transparency relationship with the world, this is the International @stevejgoodrich last thing it needs. ⦁

GETTY

The Paradise Papers leak has shone more light on secret companies used by the wealthy to avoid tax and launder corrupt wealth

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17/11/2017 16:21

opinion ► Stephen Sutcliffe

Let people think and robots do Robotic process automation – which carries out routine, repetitive tasks – will free up NHS and other staff to think, add value and question

A REX

ddressing the Health and Care Innovation Expo in Manchester earlier this year, the health secretary Jeremy Hunt outlined the digital standards he expects to see in place for all NHS patients by the end of 2018. And he is right. In today’s world, where it’s the norm for many of us to be functioning online, both at work and at home, why shouldn’t we have the option to use the same modern technology to access our medical records, book an appointment or get a repeat prescription? However, away from the more headline-grabbing digital initiatives that will without doubt beneﬁt frontline patient care, there is also a – perhaps less glamorous, but no less crucial – transformational journey taking place in the NHS back office. For those of us concerned with optimising NHS business functions in light of the continuing pressures on our hospitals and other healthcare providers, the importance of embracing new technology cannot be overstated. The recent annual report from the Care Quality Commission, for instance, says the NHS is operating at “full stretch” and that there is “unprecedented pressure on the system”. It is against this backdrop that the need to introduce the most up-to-date technology to further modernise traditional NHS business processes – and to channel the consequent staff time and ﬁnancial savings into other areas – can be seen more clearly than ever. While automation has already started to replace many paper-based, manual processes, helping forward-thinking NHS organisations save money and make better use of their workforce, the introduction of robotic

p019_PF_Dec17_automation.indd 19

process automation (RPA) promises even greater opportunities for wide-scale Stephen Sutcliffe is director of finance efficiencies. and accounting RPA is the latest in processing at NHS Shared technology, using the most recent desktop Business Services @sasutty and device automation technologies and applying innovative RPA solutions to carry out repetitive data entry and processing tasks. Any process that has traditionally relied on labour-intensive manual interventions will begin to see greater consistency, better controls and improved quality. Because, guess what? Robots don’t make mistakes, robots can work around the clock and robots do the same thing over and over again without getting bored. So employing robots to carry out the simple and mundane frees up humans to do what you want people to be doing – thinking, questioning and adding value. It is inevitable, of course, that any new technology meets a certain level of resistance. But RPA should not be feared. Indeed, in many aspects of everyday life it’s already working successfully all around us. With the efficiency improvements that hospitals and other parts of the NHS need to achieve, this technology will become increasingly important to back office processing. At NHS Shared Business Services, for example, we provide finance and accounting services to almost 70 NHS provider trusts and all of the country’s NHS commissioning organisations. On this scale, the benefits of introducing RPA across some of our 500 plus prospective financial processes are obvious. Transformation is a term that is used a lot in relation to healthcare. But, in this instance, it perfectly describes how RPA – which by definition will become ever more sophisticated over time – will ensure that resources in the NHS back office are better deployed for years to come. ⦁

process  Robotic automation involves carrying out tasks where data is processed or manipulated

17/11/2017 17:03

opinion ► Ileana Steccolini

Shock answer Local authorities responded in different ways when the financial crisis hit them. Research into their responses revealed five types of financial resilience

have been involved in a project involving 45 local authorities in 11 countries to better understand how they deployed and developed capacity to deal with financial shocks and austerity following the financial crisis. The effects of these events varied, and councils responded in different ways. Responses were not explained purely by country contexts, national policies and economic, sociodemographic and institutional features. Instead, five main types of financial resilience emerged.

Leaving Lehman Brothers: local authorities responded to the financial crisis in various ways

Active adaptation

Local authorities may view shocks as opportunities for improvement and respond actively. They adapt or transform to reduce expenditure, reconﬁgure service delivery and ﬁnd alternative sources of income. In short, they appear able to develop self-regulating capacities that allow them to more successfully forecast and react to shocks, employing a full range of anticipatory as well as coping capacities.

Constrained adaptation

Reactive adaptation These local authorities have learned to deal with austerity largely by adapting in diverse ways that include anticipatory and coping strategies. Those in this group accept they need both to adapt and to implement action to do this. The impact of the crisis took some in this group by surprise and they did not – at least initially – fully realise how vulnerable they were. Ileana Steccolini is professor of accounting and finance at Newcastle University London and a CIPFA governments faculty board member

Powerlessness In this group, the crisis exceeded capacity, leading to a fatalistic mode and high reliance on buffering capacities, driven and constrained by outside pressures.

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Those in this group respond rather passively. They may also be less willing to take ownership of changes needed, deﬂecting issues back onto national governments and postponing solutions.

Contentedness The local authorities in this group are relatively wealthy and were not particularly vulnerable at the onset of the financial crisis. They may have weak anticipatory capacities, not having invested in them as they have been immune to or able to absorb financial shocks. In the long term, however, they could be vulnerable. Crises cannot only be seen as triggers for change, but also as mirrors that reveal organisational capacities and attitudes. Local authorities continually struggle to balance financial with non-financial goals, pressures with resources, and capacities with responses. Financial resilience is a way of being and behaving that needs to be better explored and understood. ⦁ Governmental Financial Resilience. International Perspectives on how Local Governments Face Austerity is edited by Ileana Steccolini, Martin Jones and Iris Saliterer and published by Emerald Insight REUTERS

Those in this second category appear to be unable to control their destinies. They constantly and actively adapt, but are constrained by external forces, usually exerted by upper levels of government. Even so, they see shocks as opportunities and have or are able to develop the abilities to change and adapt.

20/11/2017 11:36

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17/11/2017 09:47

cover feature Tech & Tools

LAND AT THE HEART 22 PUBLICFINANCE DECEMBER 2017

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17/11/2017 16:21

T The NHS has an extensive estate, not all of which is used well. Could selling sites help it generate cash and provide homes for its staff ?

he size of the NHS estate in England is hard to grasp. Provider trusts occupy 6,500 hectares of land and there are more than 7,600 GP practices, many of them in properties owned by the GPs By Alison Moore themselves. A fifth of the property occupied by healthcare providers is more than 60 years old and backlog maintenance across it could cost £5bn, with high-risk maintenance accounting for almost £1bn of this. Does the NHS use its massive estate to its best purposes? The answer is probably not at the moment. As well as unused land and buildings, the NHS often does not have the facilities it needs to deliver cost-effective, high-quality healthcare and to respond to changing circumstances. Changes in how healthcare is delivered mean what it needs now – which is not what it has – may be very different in 20 or even 10 years’ time. “There is a pressing need for capital to be made available to the NHS, not only to support transformation but also to tackle backlog maintenance,” says Philippa Hentsch, head of analysis at NHS Providers. Like many, she wonders where the money for this is going to come from. In the 2000s, changing the NHS’s estate was largely about building new hospitals using the private finance initiative. Some of what was built now looks expensive – and not particularly flexible when it comes to accommodating shifting needs. With money tight and PFI out of fashion, building has somewhat ground to a halt in recent years. Some major projects have failed to find funding: plans for a new hospital serving the North Tees & Hartlepool area, for example, floundered after neither pension funds nor public money was forthcoming. And an innovative “emergency care only” hospital in Northumbria has not been copied in other areas because the money is not available. Could this change? The NHS has lacked an overarching estates strategy for some time but the Naylor review, published earlier this year, seemed to come close to giving it one – although it’s not yet clear whether the government will adopt all of it. This focused on disposing of unwanted estate to drive investment, and using sustainability and transformation partnerships (STPs) to overcome institutional self-interest (see panel overleaf ). London is the place where land sales could be most profitable. Naylor highlighted a potential move of Moorfields Eye Hospital from its Old Street home to the King’s Cross/St Pancras area. The vacated site would be phenomenally valuable – but a new home for the specialist trust would not be cheap either. Some commentators point out the barriers to releasing capital this way. Nigel Edwards, chief executive of the Nuffield Trust, argues: “It is clear that property is not just a quick source of cash – and, indeed, it may not even be a source of cash at all if there is not better expertise brought to bear within the NHS.” He argues for investment in skills and capability around estates, at both national and local levels, and highlights the complexity of the process required to get approval for business cases within the NHS, which can limit ► swift action.

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17/11/2017 16:22

are now being built  Flats on the site of the former Queen Elizabeth Hospital for Children in Hackney

While the Naylor review has been attacked as an attempt to get the NHS to sell its family silver, one element to be welcomed is the suggestion that, when excess NHS land is developed for housing, affordable homes for NHS staff are prioritised. However, health secretary Jeremy Hunt has talked so far only of NHS staff having “ﬁrst refusal” on any affordable housing built on NHS land. This, he said, could beneﬁt 3,000 families – suggesting that fewer than 10% of the 40,000 houses the Naylor report envisaged would end up as affordable housing.

here is scepticism, at a time of extreme ﬁnancial stringency, that NHS organisations would be willing to forego greater returns on land to build staff housing. Would housing associations – most likely to develop the sites – be able to pay a market rate for the land? If not, how could trusts be persuaded to sell for less? Implementing Naylor will certainly need some extra money upfront. Some £325m was announced in the spring Budget to drive transformation in the most advanced STPs. The largest project – in urgent and emergency care hubs in

We would be concerned, given the voluntary nature of STPs and their variable development, if they were the only way providers could access capital Philippa Hentsch, NHS Providers

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ALAMY

Greater Manchester – will cost £50m, and several others are concentrating on improvements to A&E departments. However, some of the STP areas in need of radical estate changes are struggling and were therefore denied support. Welcome though this money is, it is a drop in the ocean in terms of what the NHS requires. Where the other necessary money will come from is less clear. Jon Rouse, the leader of the Greater Manchester devolution team, recently described the capital funding system as like “driving into fog”, making it hard to draw up plans for the future or to look for private sector funding. Hentsch points out that payments to providers used to give trusts an opportunity to fund capital, as any surpluses could be used to pay for buildings and equipment. As provider payments have been squeezed, even the most efficient trusts are struggling to generate surpluses for capital expenditure. Tight NHS ﬁnances also mean trusts are making capital spending less of a priority in order to support day-to-day revenue expenditure, and the message from the centre has been to restrict or delay capital spend. The Naylor report envisages STPs playing a much more inﬂuential role in capital investment. “We would be concerned, given the voluntary nature of STPs and their variable development, if they were the only way providers could access capital,” Hentsch says. If STPs are going to be the vehicle for changing estates, their plans can still feel vague. Some are reticent to talk about estates – possibly because rationalisation is likely to be seen by many as downgrading or closing facilities. Vacating some sites could mean having fewer beds overall and STP predictions around this are being subject to growing scrutiny. Cambridgeshire & Peterborough, like many STPs, has highlighted the possibility

Robert  Sir Naylor: his review provided the NHS with an estates strategy – but it has been criticised for its emphasis on asset sales

NAYLOR REVIEW

What Naylor proposed Sir Robert Naylor, former chief executive of University College London Hospitals Foundation Trust, was asked by the health secretary to develop a new NHS estates strategy. He concluded, in his NHS Property and Estates: Why the Estate Matters for Patients report: ● The NHS could release £2bn through asset sales, rising to more than £5bn in the long term, mainly though high-value sites in London. Naylor has suggested ﬁve London sites have a value of more than £1bn apiece. ● Sustainability and transformation partnership capital requirements are between £5bn and £10bn – more than the amount that could be raised from sales. The Treasury should release capital for well-evidenced plans to transform services. ● Incentives are needed to persuade NHS organisations to dispose of inefficiently used land and property. Central funds could match revenue raised from land disposals and capital funding for STPs that miss property targets could be stopped. ● Primary care facilities could be improved through private investment and linking payments to quality. ● A powerful NHS Property Board should support STPs in developing and implementing affordable estates and infrastructure plans.

►

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Eye  Moorfields Hospital: the site near Old Street is valuable – but a new home for the hospital in the King’s Cross area will not be cheap

Councils have access to capital we can only dream of Lois Wreathall, West Suffolk CCG

partner with the NHS on both short-term aims, such as investing in new facilities, and longer-term goals around public health and social value. However, Hentsch describes collaboration with local authorities on estates as “still being in the foothills”. One attraction is local government’s access to funds – through the Public Works Loan Board – at far cheaper rates than those available to the NHS. In West Suffolk, a number of schemes could see health and other services co-located using predominately council capital funding. of rationalising the number of buildings used and developing new primary and community hubs to house clinical, community and social care staff. Within the area are plans to develop a £150m health campus at Hinchingbrooke Hospital. However, this is being reviewed for value for money, as projections for income from selling off part of the site for housing may be unrealistic. This underlines a broader issue for developments predicated on selling off sites; a downturn in the property market could destabilise many plans. Another issue is the attractiveness of redundant sites. Island sites may not sell if NHS buildings surround them, while merely vacating a ward or admin space in the middle of a hospital is not going to save NHS organisations much money. NHS Property Services, which owns much of the NHS’s community-based estate, offers a way to hand back some unused accommodation but this is subject to conditions – including whether it is “separable” – and at a cost. It has been selling off small parts of its estate since 2013, generating around £50m a year. Unused health centres and community hospitals could also offer scope for sales. A more innovative possibility is co-location with other public sector services, in either existing facilities or new builds. Local government could

“They have access to capital we can only dream of,” says Lois Wreathall, head of primary care at West Suffolk CCG.

ould NHS organisations somehow tap into more of this council money? One possibility is using council loans to pay off PFI debts – which has happened in Northumbria but has not been repeated elsewhere. There could be more imaginative solutions as well. “I don’t think we have fully tested the waters on whether our local government partners would be willing to invest,” says Michael Wood, the NHS Confederation’s local adviser, suggesting this may be down to a lack of understanding of what drives each sector. The main impetus for change has been One Public Estate, a programme to develop place-based approaches, which now involves around 250 councils. Many initiatives include health, ranging from co-locating health and social care to the development of new campuses such as the Sutton Cancer Hub. Wood says being involved in a One Public Estate scheme “isn’t going to build something for you but it will get you

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ALAMY / PA

round the table with the different sectors”. Money for pump priming is available “but it is not megabucks”, he adds. What is needed may not be capital but good relationships, Wood says. So, how good are the different potential partners at talking to each other now? Edwards says it used to be hard to know who to engage with in the NHS on innovative work but STPs may have made this easier. Wood suggests some STP areas are having mature conversations about the use of estates with partners – but not all. Universities are natural partners for the NHS but are not automatically at the table with STPs. Different governance arrangements, funding streams and cultures can also pose challenges to joined-up working. Elected councillors need to be reassured that joint schemes with the NHS are viable, and “rightly so”, says Wreathall at West Suffolk CCG. Good working relations and a can-do attitude have helped in her area, she says. Some partnerships will involve several NHS organisations, making it hard to deliver something that beneﬁts each partner. GPs often have a ﬁnancial stake in their surgery buildings and need reassurance before entering into different arrangements. And a reticence in the NHS to commit funds before the need is obvious can leave areas short of services until investment catches up. In Suffolk, for example, a co-located health hub in Mildenhall is being designed so it could be substantially extended if the nearby US air base were ever replaced with housing. “What capacity and demand is coming round the corner?” asks Wreathall. ‘There are some curveballs.”●

 Health secretary Jeremy Hunt has talked of NHS staff having “first refusal” on affordable housing built on NHS land but his comments suggest that fewer than 10% of such homes would actually be affordable

►

ONE SITE FITS ALL

All together Co-location is often put forward as a magic bullet that will lead to integrated care – but it’s only as useful as the relationships it fosters. Putting people in the same building means nothing if they don’t talk to each other. However, some innovative co-location plans are emerging. One of these is a One Public Estate project to build a healthcare hub in Worthing on the site of a car park owned by the district council. This hub is to house two GP practices, plus physical, mental health and social care teams, a pharmacy and a cafe. Homes for NHS or social care staff or for people with special needs could be included, Alex Bailey, chief executive of Adur & Worthing Councils suggests. Development costs would be funded by the council, which would wo have to meet debt charges of £629,000 a year. No Normally, the council would be looking for a 2% return on its investment above debt costs so would be seeking a yearly rent of around £1m. Howeve However, because the project has wide benefits and fits into in the council’s vision for community health an and wellbeing, a lower return is more acceptabl acceptable to both parties. Bailey notes n that just getting to this stage has been slow, slow taking 18-24 months. Ensuring the incentive incentives are in place for everyone “to make the right deci decision” is important. “Probab “Probably every finance director will suck their teeth and say ‘I’m not sure what it will do for next year’s bud budget.’ So we have to turn the conversation into looki looking at the opportunities for downstream savings,” h he says.

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interview / mike driver

M By Vivienne Russell

ike Driver has big plans for the ﬁnance function across Whitehall. He wants to organise it better, think more intelligently about its processes and introduce more collaboration. “I believe that, if we’re really going to change the way in which the function operates, we’re going to have to act in a very different way – a much more joined-up way, a much more collaborative way,” he tells PF from his base at the Ministry of Justice. Driver, who has been chief ﬁnancial officer at the MoJ since April 2016, took on the job as head of the government

finance function at the start of June after his predecessor Julian Kelly moved to the Ministry of Defence. In a move that made some question the commitment of the Treasury to the objectives of the 2013 financial management review, Kelly’s role – which combined head of the function with director of public spending – was split into two. Driver, a CIPFA member who chairs the institute’s Governance & Financial Management Panel, took over as head of the function; the director general, public spending is James Bowler at the Treasury – who is not a qualified accountant. Driver is at pains to stress that there has been no rolling back on the vision of the financial management review. As head of the government finance function, he is a Treasury official, with a seat on the Treasury board. One of his two bosses is Treasury permanent secretary Sir Tom Scholar and his other is MoJ permanent secretary Richard Heaton. “The Treasury has not, as some have said, taken a step back from owning this,” Driver tells PF. “What we’ve tried to do is put more resources into it.” Splitting the role makes it both more manageable and puts two minds on the case. “We have two people thinking about how to take things forward,” he says. ►

Head of the government finance function Mike Driver tells PF about his inclusive approach, and putting finance at the heart of decision making

AT THE

FULCRUM

TOM MILLS

Tech & Tools

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I’m much keener for our staff to be right at the shoulder of the people taking decisions – and where possible ahead of them

SEPT 2017–PRESENT MEMBER, GOVERNMENT COMMERCIAL FUNCTION OVERSIGHT BOARD 1 JUNE 2017-PRESENT HEAD OF GOVERNMENT FINANCE FUNCTION, THE TREASURY APRIL 2016–PRESENT CHIEF FINANCIAL OFFICER, MINISTRY OF JUSTICE OCT 2016-PRESENT NON-EXECUTIVE BOARD MEMBER, SHARED SERVICES CONNECTED LTD SEPT 2016- PRESENT MEMBER, CIPFA COUNCIL JAN 2016–PRESENT CHAIR, CIPFA GOVERNANCE & FINANCIAL MANAGEMENT PANEL APRIL 2016–PRESENT ACCOUNTANT GENERAL TO THE SENIOR COURTS OF ENGLAND AND WALES APRIL 2016–PRESENT COMMISSIONER FOR THE REDUCTION OF THE NATIONAL DEBT SEPT 2012–MARCH 2016 FINANCE DIRECTOR GENERAL, DWP

Driver wants a more inclusive approach, and has already widened participation in function-wide meetings. Rather than limiting them to the most senior leaders, now “everyone has a voice”, he says. In Driver’s view, the finance function stretches far beyond the traditional finance teams in each Whitehall department. His vision encompasses affiliated professions and functions such as the Government Internal Audit Agency, corporate finance experts at UK Government Investments, project finance experts at the Infrastructure & Projects Authority, Cabinet Office colleagues working on shared services, and people looking at fraud, error, debt and grants. The list goes on. “This isn’t about creating something big and structural – it’s getting people to realise they’re part of a single function and through that driving forward outcomes,” Driver says. “And, by understanding what each other is doing and building those big relationships, we can operate much more effectively as government, in a much more joined-up way.” And also become more self-reliant. Driver observes that, while he has a lot of time for the consultancy giants, central government can turn to them too often when expertise is already there in house. “But, unfortunately, people don’t know where this is and how to access it,” he

says. “So part of this is about transparency – what the function is and can be and should be as we go forward.” Over 10,000 people across the whole civil service work in finance teams and Driver wants to get them corralled around a single vision and strategy. A website, One Finance, has been set up to give government financial professionals a single point of access and information, and Driver also highlights the work of the Government Finance Academy. Setting out professional expectations and career paths, giving access to training materials and allowing people to share information and experiences are important to securing function-wide support for a refreshed, redefined vision.

he old vision – to protect value, create value and drive value – was “perfectly laudable but not particularly inspirational”, Driver says. He adds: “I’m much keener for our staff to be right at the shoulder of the people taking decisions – and where possible ahead of them – with great insight and great relationships and collaborations that allow them to get ahead.” Finance people need to be bringing ideas to decision makers and business people, Driver argues, not just taking dictation or adding up numbers. “What I have seen too often is that too many people are keeping score and, in a modern business environment, we’ve got to do a lot more than that.” Driver’s refreshed vision – driving the agenda and not keeping score – is supported by six pillars (see panel) covering everything from professional competencies around forecasting, reporting and transactional processes, to people and capability, to using ﬁnance insight to develop policy and support value for money. On people and talent management, he says the boundaries between parts of the

TOM MILLS

Mike Driver in a minute

Driver adds it is “very helpful” to have the head of the government ﬁnance function embedded in a big spending department and leading the function. As both architect and deliverer of Whitehall’s key ﬁnancial management reforms, Driver says it is important that he practises what he preaches. “I can’t take a step back from what we’re agreeing to do corporately on, for example, shared services. So I’m bound in as well to delivering … I think there’s an advantage to the way this is set up.” His vision for the function, its scope and potential, also differs from his predecessor’s. “I see the function as something bigger and different to how it was perceived.”

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►

GETTING IT RIGHT

Vision for government ﬁnance

function – between ﬁnance and internal audit, for example – need to be made more porous. “We need to allow far more porosity and ﬂexibility in terms of the way we develop people and allow them to circulate, including the way we develop trainees and apprentices, giving them the opportunity to experiment in different parts of the civil service, which for me is a really exciting place with varied and different challenges,” Driver says. He is also trying to bring in greater standardisation and harmonisation across a range of areas and minimise duplication. Work is under way to draw together services such as tax and grant administration into single centres of excellence as well as to look at how

innovation and working with private and voluntary sector partners to ﬁnd new ways of improving rehabilitation and probation services. “These are fantastic areas to be involved in, both as a leader on the departmental board and as a ﬁnance professional,” he says. Driver came to the MoJ from the Department of Work & Pensions, a department with which he has a long history, having joined the Department for

financial insights could be pulled together more efficiently. Over time, the goal is to produce a single set of management accounts for the government, but getting there requires some hard thinking about the way different departments organise their financial data. “If we can produce management accounts, we can improve the way whole of government accounts works. I think we could help to bring greater emphasis to the government’s balance sheet in terms of both assets and liabilities.” Driver makes the intriguing observation that “civil service departments traditionally concentrate on the 5% of things that make each department different, rather than the 95% of things that make them the same”. So he is trying to introduce common processes into transactional services rather than tolerate multiple systems. Regarding the rest of his job – CFO at the MoJ – Driver says the department is a “very exciting” place to work, despite some significant challenges. The department is an unprotected one and hefty budget cuts have been matched by some big rises in demand, particularly because of the rising prison population. However, he is clearly inspired by the values of the organisation: its sense of purpose and commitment to justice – “one of the cornerstones on which our society rests” – and its openness to

Health & Social Security as a school leaver in 1979. He Finance insight: an informed function with candidly admits that the a clear understanding of what we get for our public sector was then just money, using insight to drive value for somewhere that gave him money a job, but adds: “As I’ve gone through my career, Trusted adviser: the “go to” adviser to I’ve realised how special colleagues to provide expert advice and the public service and the inform decision making civil service is, and how Planning and performance: driving a strong important what we do is culture of planning and performance, to society.” integrating financial planning with Driver rose from business decisions operations to regional management before moving to headquarters, in 1998 working on the UK’s presidency of the EU. After that, he moved into finance to work on the 2000 spending or mid-career opportunities. review and was encouraged to study for a “People have different skills and professional accountancy qualification, experiences and I want to make sure we graduating from the scheme run by CIPFA have much greater diversity.” This and Warwick Business School. includes diversity of thinking as well as “Professional accountancy qualifications gender, ethnic and social mix. Some of the have been incredibly helpful in terms of a best finance teams, he reflects, are made way of thinking and a way of problem up of accountants, economists, solving, and they also give you policymakers and people with operational professional credibility,” says Driver. experience. “They all think differently, and “So I am able to say, ‘Not only is this my therefore you get a better solution to advice but this is my professional advice’.” problems.” ● Finance needs to remain diverse, Driver says, and he is keen for there to be Mike Driver is speaking at the different routes to professional status, Government Finance Function conference whether through apprenticeships, degrees in Liverpool on 23-24 January

“The government ﬁnance function puts ﬁnance at the heart of decision making. Driving the agenda, not keeping score”

1 2 3 4 5 6

Getting the basics right: good forecasting, accurate reporting, robust data, efficient transaction processing People and capability: a high-performing function, with great people in the right roles with the right skills Operating model: a modern, collaborative ﬁnance function that delivers high-quality services more effectively and efficiently

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fraud survey 1.3%

2.1% 7.6%

English, Welsh and Scottish local authorities only Source: CIPFA

78.3%

CIPFA’s local authority fraud tracker shows that councils are concentrating on higher value fraud, and housing tops the list

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Business rates Council tax fraud Other types of fraud Housing fraud

Cyber recognition

ousing continues to account for the highest value type of fraud for local authorities in Great Britain, rising from £202m last year to £263m in 2016-17, writes Emily Twinch. This is according to CIPFA’s annual Fraud and Corruption

Tracker due out as PF was going to press, which estimates that more than 75,000 cases of fraud were detected or prevented in 2016-17 compared to 84,000 last year. However, the total value of fraud went up between last year and this – from £286m to £336.2m – and the average value rose from £3,400 to £4,500. CIPFA chief executive Rob Whiteman says the number of investigations being carried out by local authorities shows “an emerging picture of resilience and innovation within the sector”. He adds: “The success of counter-fraud activities is more about saving money but covers both reputational and moral risks for an organisation.” Whiteman suggests the value of fraud is rising because local authorities are focusing on cases that are worth more. The tracker notes that adult social care has the largest growth in value, worth an estimated £5.6m in 2016-17 compared to £3m the year before. John Baker, director of consultancy firm Moore Stephens, believes this was probably due to councils focusing more on other types of fraud since they lost government funding and housing benefit staff as part of welfare changes. “Local authorities, historically, used their housing benefit arm as the investigation arm. As the housing benefit arm moved away, some councils will have smaller fraud capacity.” He says this “almost forced their arm into looking at other areas [of fraud]”. He believes there are more social care fraud investigations now as it is a “hot topic” and because funding was transferred from the NHS to local authorities in 2014-15. Rachael Tiffen, head of the CIPFA Counter Fraud Centre, says there was a concern that fraud teams were being reduced but she is “pleased to see councils are still investing in investigating fraud”. She advises councils to “carry on at the same level”. Fraud costs the public sector at least £20.6bn annually and, of this total, £2.1bn is specifically incurred in local government, according to the most recent estimates, which were released by the government in 2013. CIPFA’s Counter Fraud Centre was launched in July 2014 after the National Fraud Authority and the Audit Commission closed. This year’s tracker results were based on responses from 133 English, Welsh and Scottish local authorities. Download it at www.cipfa.org/cfact.

Disabled parking concession

Cybercrime is a “growing challenge to the sector”, the tracker highlights. Only three fraud teams (2.3%) in the report say are responsible for dealing with cyber risk, whereas 106 (80%) report that the IT department or the chief information officer held responsibilities. When the survey was first carried out in 2014, three quarters of respondents told CIPFA that cyber risk was not included in the corporate plan. This year, more than half of the respondents had carried out a cyber risk assessment in the previous 12 months. Tiffen says it is important to realise cybercrime needs to be discussed “at the top table” and not just “in the IT department”.

Blowing the whistle

£3m Blue badge fraud is the highest in London – it is worth £1.4m in the rest of the UK

Respondents reported a total of 686 whistleblowing incidents in the past financial year that had been made in line with the British Standards Institution’s code of practice PAS 1998:2008. People blew the whistle because they had concerns about a range of criminal offences, not just in regard to fraud. Eighty-five per cent of respondents confirmed staff and the public had access to a whistleblowing helpdesk and 72% said the helpline conformed to the PAS 1998:2008. CIPFA recommends organisations review whistleblowing processes regularly as they “can enable teams to uncover significant frauds that may otherwise have gone undiscovered”.

SHUTTERSTOCK

Housing biggest area of council fraud

10.7% Estimated fraud by value

17/11/2017 16:30

in numbers

75,000frauds £336. 2m

Value in 2016-17, up from £286m. Average value per case up from £3,400 to £4,500

Down from 84,000 since 2015-16

Adult social care Percentage of fraud

Other types of fraud

0.6% compared to 0.4% in 2015-16

Housing Highest value

£5.6m in 2016-17 compared to £3m in 2015-16

78% Council tax Blue badge £263 m 76% 7.6% 7.6% £112m £4.3m £25.5m 1,280 5,750 £97k 1,400

value of loss - £12,500 in  Average 2016-17 compared to £8,700

in 2015-16

in 2015-16 compared to  £7m £5m in 2016-17

Percentage of all fraud

Right to buy fraud Value risen from £92m in 2015-16 to

in 2016-17

Value

£25.5m compared to £28m in 2015-16

claims for single person  False discount: £19.5m

Number of cases From around 1,260 in 2015-16 to

compared to £8m in 2015-16

Numbers

in 2016-17

Average value per case

discounts: £1.1m

In London against £81,000 in the rest of the UK

value £13,800  Average compared to £13,000 in 2015-16

Procurement fraud of total frauds  Percentage – 0.3% frauds compared to  200 430 in 2015-16 £6.2m compared  Value to £5.7m in 2015-16

Payroll, expenses, recruitment and pensions compared to £2.9m  £2.1m in 2015-16

Breakdown – 248 (compared to  Payroll 208 in 2015-16); value £1m (compared to £0.8m in 2015-16) – volume 75  Expenses (compared to 57 in 2015-16):

compared to 7,000 in 2015-16

value £0.1m (compared to £0.4m in 2015-16)

Cases in London

– volume 46  Recruitment (compared to 192 last year in

household income to  Falsified qualify for support: £4.8m claims for council  Other tax exemptions or

Insurance fraud

Value of fraud

Council tax share of the total value of fraud in 2016-17

£7m in 2016-17  Worth compared to £5m in 2015-16

frauds compared to  370 530 in 2015-16

compared to £202m in 2015-16

Detected fraud –

frauds in 2016-17  660 compared to 410 in 2015-16

Area of fraud

Highest number

of investigations

Business rates

worth £3m, compared to 4,350 worth £1.4m in the rest of the UK

2015-16); value £0.2m (compared to £1.0m 2015-16) – volume 228  Pensions (compared to 109 last year); value £0.8m (compared to £0.7m last year).

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feature

STRENGTH IN UNITY â&#x20AC;&#x201C; OR LOSS?

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hen residents in Suffolk Coastal and Waveney were asked whether their councils should merge, there was some surprise the question was even being put to them. Many were under the impression that, after nearly a decade of the district councils sharing staff and services, they were already a single local authority. The councils have shared a chief executive since 2008 and, between 2010 and 2016, merged all their departments. In November, communities secretary Sajid Javid said he was ‘minded to’ approve merger plans. By Neil Merrick A final decision will be taken in January to allow for further representations to be made. If everything goes to plan, Suffolk Coastal and Waveney will have become a single authority by May 2019, when the first elections to the new council of East Suffolk are due to be held. During the seven years since they began integrating their workforces, the two councils have saved in the region of £16m, much of it by shedding staff. A full merger, it is estimated, will save a further £1.3m per year. Stephen Baker, chief executive of the two councils since 2008, defends the fact they did not rush into merger. “Some shared chief executives were appointed with a brief to crush staff together into a single team,” he says. “We took a more organic approach.” Since 2008, the number of staff employed by the councils has fallen by 1,353 to 733, although not all lost their jobs. Some moved to private firms that provide leisure and waste collection services. “It’s not as if we sacked half our staff,” stresses Baker. Assuming the merger receives the final go-ahead from communities secretary Sajid Javid, there will be fewer councillors as well as employees. The new authority is expected to have 55 elected members compared with 90 for the existing two districts. While consultations threw up concerns about democratic representation, Waveney leader Mark Bee says there is a recognition the districts have too many councillors. “Reducing the number of councillors is a plus with the public,” he says. East Suffolk may not be the only merged district council operating by 2019. Mergers are being discussed in other parts of Suffolk as well as Devon, while two councils in Somerset are waiting for Javid to approve their merger proposal. “Everyone is waiting for something to happen,” says Bee. “Then there will be something of an avalanche.” There seems little doubt that money (or lack of it) is driving the trend towards larger councils. According to Bee, budget pressures meant Suffolk Coastal and Waveney had to “reorganise the back offices” to preserve frontline services. Both are promising residents their respective headquarters in Woodbridge and Lowestoft will remain open after the merger, with council meetings alternating between the two towns. While the authorities make extensive use of video conferencing, by law councillors can ►

OTTO STEININGER / IKON

Councils are looking at going beyond shared services to merging to form new authorities. What does this mean for finance and democratic accountability?

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Everyone is waiting for something to happen with proposed mergers. Then there will be something of an avalanche Anthony Trollope-Bellew, West Somerset

only take decisions when they are in the same room. Senior officers, meanwhile, can expect to continue making regular journeys along the A12 to maintain a physical presence in both buildings. The planning departments of the two councils were the ﬁrst to merge, in 2010. “My staff say I’m always in the other office or in a layby on the A12,” says Philip Ridley, head of planning and coastal management. Merging will mean the department will no longer serve two sets of councillors in authorities with different processes. East

 Communities secretary Sajid Javid: local authorities need Javid’s consent before they can formally merge

Suffolk will have a combined population of about 250,000, making it one of the largest district councils in England. With more homes planned, the number of council tax payers is likely to grow further. After initially losing staff, the planning department has begun recruiting again – a trend that should continue if more homes and infrastructure are built. Ridley is looking forward to making single business case presentations on behalf of the larger district. “We will be able to promote the wider economy and have a single voice,” he adds. The 2016 Cities & Local Government Devolution Act, which created the framework for combined authorities, also made council mergers easier. Others considering merging include Forest Heath and St Edmundsbury, also in Suffolk. However, West Devon rejected plans to combine with South Hams, although the latter was in favour. In Somerset, Taunton Deane and West

57%

BACK MERGER IN SUFFOLK COASTAL AND WAVENEY RESIDENTS’ POLL

£1.3m ANTICIPATED SAVINGS BY MERGING SUFFOLK COAST AND EAST WAVENEY

Somerset are waiting to hear whether their proposed merger is approved by the communities secretary. Two years ago, West Somerset lost more than £300,000 in business rates after the nuclear power station at Hinkley Point B was revalued. The council also had to pay a £1.6m refund to the government from its reserves. West Somerset leader Anthony TrollopeBellew says the council, which has one of smallest populations of any English district, had coped until 2015 through its joint arrangements with Taunton Deane. Since 2013, the councils have saved more than £7m through sharing a management team and most staff. According to Trollope-Bellew, creating a new council now looks the best option for both authorities. As things stand, West Somerset faces a £1.2m budget gap by 2020-21, while Taunton Deane, which spends nearly three times as much on services, could be short by £2.5m. “We would be in serious trouble [without the merger] but they are making savings as well,” he says. Councillors in West Somerset are sensitive to suggestions the council is in effect already a subsidiary of Taunton Deane (something that is not allowed by law) and even object to using the term merger in case people see West Somerset as being taken over by the larger local authority. John Williams, leader of Taunton Deane, says: “We can see the beneﬁts to us as well as to them.” Adam Lent, director of the New Local Government Network, says councils are increasingly aware of the economies of

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► Tech & Tools

DORSET’S DISAPPEARING►DISTRICTS

Districts oppose a unitary shift

SHUTTERSTOCK

scale as well as expansion opportunities, offered by merger. But he warns that fewer councillors and less administration are insufficient on their own. “Unless they’re closely linked to culture change in the organisation, they will have less impact than people hoped,” Lent says. Sharing services has allowed Suffolk Coastal and Waveney to recruit more experienced staff. “We have built much greater resilience and capacity across the piece,” says Stephen Baker, who was initially chief executive of Suffolk Coastal for three years from 2005. He sees the appointment of head of communities Nicole Rickard as an illustration of how larger councils can attract more specialists. Rickard’s salary is paid by the two councils and by Great Yarmouth and Waveney clinical commissioning group, for whom she works one third of the week. Rickard is heavily involved in preventive activities, including community initiatives for people with dementia and mental health issues. “Communities don’t care which bit of the public sector they are talking to,” she says. “They want help to make things happen.” Merger, she adds, will save time and money in terms of reporting. “We will be more effective with one set of councillors and one set of council services.” The telephone survey of 1,000 residents showed 57% in favour of merger and 22% against. The councils decided against a full referendum, instead opting for what it calls an “informed consultation”, with residents invited to send in views and objections. According to Baker, doubts over democratic representation will be answered by the creation of community partnership boards, including parish councils, business and the voluntary sector. Two new parish authorities were created earlier this year, including a town council in Lowestoft. “We are not going to lose sight of any community, but there will be a more powerful voice for East Suffolk,” he says.

Six district councils could be about to disappear in Dorset – three of which would prefer to continue. There are proposals to create two unitary councils from the existing nine authorities. One would cover the coastal strip between Poole and Christchurch, with the other serving rural areas. Communities secretary Sajid Javid has said he is “minded to” back the plan. Dorset County Council is backing the move, called Future Dorset, along with the unitary councils of Bournemouth and Poole. However, just three of the county’s six district councils support it. After Javid’s announcement, the leaders of Bournemouth, Dorset County, North Dorset, Poole, West Dorset and Weymouth & Portland said: “Two councils will be more efficient, save money and protect public services. Replacing Dorset’s nine councils with two new ones – structured around the established urban and rural geography of the county – will bring a strong and prosperous future Dorset.” Not everyone agrees. Those objecting include Christchurch and East Dorset, which already share services and would move into different unitary councils. Christchurch leader David Flagg says the council is working with others on issues such as council tax harmonisation, but the long wait for a DCLG decision is wasting member and officer time. Councillors recently agreed to hold a referendum on the topic. In East Dorset, leader Spencer Flower backs the reorganisation, but a majority of councillors do not. Purbeck is also against the move. Household surveys across the area found 73% of residents in favour. Matt Prosser, chair of the Dorset chief executives’ group, says business leaders are strongly in favour of fewer authorities. The number of councillors across the county is likely to fall signiﬁcantly from 330. “You wouldn’t want a unitary with 165 members,” he says. But Prosser understands the doubts expressed by some councillors, who have legitimate concerns over areas such as planning. “Across Dorset, there have always been issues around sovereignty,” he says.

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christmas quiz / sponsor: swap ► 20 2017 017 7

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A year that trumped many others 01 02 03

In January, prime minister Theresa May became the first world leader to visit newly elected US president Donald Trump. What did she offer him? a) A private tour of 10 Downing St b) A golfing holiday in Scotland c) A weekend at Chequers d) A state visit Which council planned a 15% council tax hike until talked out of it by the government? a) Devon b) Surrey c) Kent d) Lancashire There were red faces on the red carpet when a mix-up meant the wrong film was awarded the Best Picture Oscar. Which accountancy giant, which has audited the Oscar ballots for 83 years, had a starring role in the drama? a) Deloitte b) KPMG c) PwC d) EY

04 05

06 07

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The March Budget brought some cheer for overstretched council budgets as chancellor Philip Hammond announced some extra funding for social care. How much was provided? a) £2bn over three years b) £3bn over two years c) £4bn over five years d) £5bn over four years

Article 50 of the Lisbon Treaty was triggered in March, signalling the UK’s intention to leave the EU. How was the message delivered? a) Air mail b) Email c) Sir Tim Barrow handed the letter to European Council president Donald Tusk d) Dropped on Brussels from a Lancaster bomber

Which Kent district council scooped the overall prize at this year’s inaugural Private Finance Innovation Awards? a) Dartford Borough Council b) Medway Council c) Sevenoaks District Council d) Thanet District Council Andy Street was elected as West Midlands mayor. Which high street shop was he in charge of before entering local politics? a) M&S b) John Lewis c) Debenhams d) Primark

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Test y yourself on the events of 2017 wit th our with annu ual festive q qu uiz! annual quiz! The ffirst irst p prize is a £ 150 £150 M&S S voucher and the runne er-u up will will receive a runner-up bottle o hampagne off c champagne

17/11/2017 16:32

The WannaCry cyberattack wreaked havoc in the NHS, affecting hundreds of trusts and GP services and leading to cancelled appointments and operations. Who or what finally stopped the spread of the virus? a) A young hacker found a “kill switch” b) Switching the NHS IT system off and on again c) The latest software updates were installed d) The operating systems were upgraded

09 10 11 12

And in which country was the attack believed to have originated? a) Iran b) Russia c) North Korea d) China During a TV debate, what did prime minister Theresa May tell a nurse who challenged her on public sector pay restraint? a) “There is no magic money tree” b) “Brexit means Brexit” c) “Nothing has changed” d) “Suck it up” How many government ministers and whips lost their seats in the June general election? a) Three b) Five c) Eight d) Ten How much extra investment did the DUP secure for Northern Ireland in return for confidence and supply votes? a) £100m b) £500m c) £1bn d) £2bn

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Which cabinet minister was mired in controversy this summer after saying that public sector workers were overpaid? a) Boris Johnson b) Amber Rudd c) Philip Hammond d) Jeremy Hunt In which Italian city did Theresa May give a key speech on Brexit in September? a) Milan b) Rome c) Florence d) Venice The government made some belated efforts to woo the youth vote. What, specifically, has been proposed to help student finances? a) Free beer all freshers’ week b) En-suite accommodation c) Complimentary laptops d) Loans do not have to be repaid until graduates are earning £25,000 What did John McDonnell promise at the Labour party conference? a) All PFI contracts to be brought back in house b) Abolition of the armed forces c) Nationalisation of telecommunications industry d) 90% top tax rate

17 18

19 20

Theresa May’s keynote speech to the Conservative conference did not go well. What happened? a) A prankster presented her with a P45 b) Chancellor Philip Hammond passed her a cough sweet c) The letters on the wall behind her dropped off d) All of the above Wealthy nations can afford to raise tax on the richest without harming economic growth. Which global finance figure said this in October? a) World Bank president Jim Yong Kim b) IMF managing director Christine Lagarde c) Outgoing Federal Reserve chair Janet Yellen d) European Central Bank president Mario Draghi What activity did the Scottish Parliament vote to outlaw? a) Fishing b) Fracking c) Frying d) Flying Which project was finally scrapped after becoming mired in funding concerns? a) The Garden Bridge over the Thames b) Crossrail 2 c) Electrification of the trans-Pennine rail link d) Universal credit

Visit publicfinance.co.uk/quiz by 8 January 2017 to enter our competition. The answers and the winners’ names will be published in the next issue wi wil of PF

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17/11/2017 16:32

governance

Strong governance gave Belfast City Council both agility and assurance in a project to bring in high-speed broadband

find providers to lay cables in commercial areas, which do not offer the returns that can be achieved in densely populated areas

By Emily Twinch Good governance might seem an unlikely saviour. But that is what it was for Belfast Council’s team driving through a project to deliver super-speed broadband to their city. The constantly changing programme involved lots of partners, all with their own processes and responsibilities. Having solid governance meant they could deal with changes quickly and ensure confidence risks were managed effectively. “Governance structure came to our aid,” John-Paul McGonigle, Belfast’s digital development manager tells PF. “It gave us the confidence it was being managed in the right way.” He explains: “The criteria were changing, funding was changing. There were a lot of requests from our partners – a lot of to-ing and fro-ing. Governance structures informed us the right people had oversight of these changes and gave the assurance we were doing it in the right way.” The success of the project and the effective way of managing the fragmented nature of public sector responsibility across Northern Ireland were recognised when the Belfast City Council team won the Public Finance Innovation Award for good governance back in April. McGonigle tells PF that good governance allowed changes to be made quickly through delegated authority rather than decisions needing to go back for whole council approval. And speed was of the essence in this project, where just two business parks had fibre systems. Seventeen business parks are now served by high-speed broadband, as are public

The criteria were changing, funding was changing. There were a lot of requests from our partners – a lot of to-ing and fro-ing John-Paul McGonigle, Belfast City Council

deal with private companies and find out who owned the buildings – which was difficult because the council does not collect rates, McGonigle explains. McGonigle was the project manager for the “voucher” element of the scheme. Vouchers were given to businesses and charities to pay for better connectivity. When providing high-speed connections for business parks, the council had to find providers willing to lay cables in these areas, when they would not get the returns they would in densely populated residential areas, he adds. Belfast found local providers and created competition between these smaller firms that were keen to expand. The project was so successful the council has been given funding from Stormont to bring broadband to rural areas, working with the councils in those areas. McGonigle says they now need to think about how to use the information they have and can gather in a “reasonable way”, such as whether to improve the service in areas where lots of people log onto wifi. The council’s experience of bringing superfast broadband to the city has shown the value of good governance. McGonigle tells PF the secret of his council’s governance success. “It’s about finding a balance. [And asking] if it is rigorous enough to make sure processes are tight, with no gaps and no risks, but flexible enough so progress could be made in a timely manner.” ●

ALAMY

An eye on it all

office park:  Belfast the council had to

buildings and the city centre. In 2013, the Department for Digital, Culture Media & Sport awarded the council £13.4m out of a £100m pot set up to give 88% of the country access to superfast broadband within two years. Nine other cities were part of the Superfast Britain programme. However, because councils in Northern Ireland do not have responsibility for services such as housing, health and education, they had to liaise with central government departments in connecting the whole city. Belfast Council put in the capital money and the departments supported ongoing costs. The challenge with the city centre was to

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on account ► Alison Scott

Regulatory changes mean councils will need to look at potential gains and losses more prudently, and may mean higher reserves are needed

IPFA is about to publish its updated Prudential

Code for Capital Finance in Local Authorities and Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes. At the same time, the Department of Communities & Local Government is consulting on its amended investment guidance and minimum revenue provision guidance. These all require councils to take a more long-term view of sustainability and a more sophisticated approach to risk. The capital strategy introduced by the updated codes requires local authorities to look at how risks associated with a wide range of investments, capital expenditure, service-related guarantees and financial support to other bodies interact and the overall impact on their long-term financial sustainability. To ensure best practice, councils will need to consider local circumstances in depth and think about how risk and reward are explained to decision makers so that they are properly aware of potential risk and long-term sustainability. No two capital strategies will look the same and there can be no simple blueprint as all local authorities are different. In recent weeks, there has also been considerable debate over what effects the new financial instrument disclosure rules will have. The new standard, IFRS9, is specifically designed to increase transparency around risk, requiring gains and losses made on financial instruments to be recognised earlier, which increase volatility on the revenue account. This standard requires much more explicit distinction between investment vehicles where capital is not a risk, Alison Scott is head which will be accounted of standards and for largely at amortised financial reporting cost, and those where at CIPFA

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ministers will be to accept that one implication of local authorities acting more “commercially” to make up for funding shortfalls arising from years of reductions in government support will be an increase in the level of reserves held to ensure continued financial sustainability should some of the increased risks local authorities are taking on materialise. The new prudential code is an important first step in improving the conversation around and the understanding of cumulative risk at individual local authority level. In addition, perhaps what is also needed is a national conversation about what is meant by “commercialisation” and the overall balance of risk and return that is acceptable to the sector. As with any development, there will always be outliers that gain media attention and can, on their own, give a distorted view of the sector. The challenge for all those representing the sector, including CIPFA, is to facilitate meaningful debate and understanding and provide guidance to the silent majority who are trying to bridge resource gaps with a level of risk that is commensurate with public funds and provides for sound future financial sustainability. ●

ALAMY

A sophisticated approach to risk

capital is at risk where fair value measurement will be required. The standard further distinguishes between investments held largely for service purposes, such as those in airport companies, where gains and losses are recognised only on redemption, and those held for return where gains and losses are recognised at the end of each reporting period. While much has been made of the downside risk, the biggest challenge to local authorities will be ensuring they take a prudent approach to gains. Risk will need to be considered across the life of the instrument and a prudent approach would dictate holding back some of those gains to provide a cushion against any future losses. CIPFA has argued for statutory mitigation against signiﬁcant volatility but, even where this is granted, local authorities will still need to consider risk as, if they are to be able to realise the investment when cashﬂow requirements dictate, at some point any losses will need to be realised. Perhaps the biggest challenge for the government and

17/11/2017 16:34

technology watch ► John Thornton

The Paradise Papers isn’t just about tax avoidance. It shows how masses of data can be easily leaked nowadays – which has serious implications for governments

It no longer rains but pours data

ccording to the Paradise Papers, Formula One champion Lewis Hamilton allegedly received a £3.3m VAT refund by importing an executive jet into Europe via the Isle of Man; there is no suggestion he acted illegally. This is just one of thousands of leaked cases that have led to questions being raised in the press about the use of offshore firms by royalty, global companies, politicians, pop stars and even local councils. It also raises questions about how we use and protect data in a digital world. The Paradise Papers concerns 13.4 million files leaked from Appleby, a law and corporate services firm specialising in offshore business, plus details from the corporate registries of 19 tax havens. It covers 1950 to 2016 and consists of 1.4TB of data, the world’s second biggest data leak. The largest was the Panama Papers, with 2.6TB of data relating to more than 200,000 offshore entities. Media companies have learnt a lot in recent years, especially from the Panama Papers, about analysing and sharing the vast amounts of data that can come from leaks. There are reported to be 380 journalists in 96 media organisations in 67 countries analysing the Paradise Papers and drip feeding the findings.

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£3.3m VAT refund allegedly received by Lewis Hamilton by importing a jet into Europe via the Isle of Man

When the Watergate scandal broke in the early 1970s, journalists Bob Woodward and Carl Bernstein received snippets of information from their source “Deep Throat” and built a case gradually. Today’s technology would probably have allowed their source to hand over all the files at the outset, as happened with Chelsea Manning and Edward Snowden. Manning, a US soldier, gave WikiLeaks over 250,000 US diplomatic cables, and masses of classified army reports from the Iraq and Afghanistan wars. About 6% of the files leaked by Manning were classified at the relatively modest level of “secret”; those released by Snowden were in a different league – all “top secret” and above. As a contractor working for the US National Security Agency, Snowden was able to leak large amounts of very detailed information about the NSA’s worldwide surveillance, including its close collaboration with GCHQ. This included information on intelligence collection and analysis processes, as well as on spying on friendly nations – it emerged that the NSA had been bugging Angela Merkel’s personal phone since 2002. The size of Snowden’s disclosures is unknown, but the costs to the intelligence services have been huge in terms of exposing capabilities that had been developed over years at substantial cost to taxpayers, and affecting their ability to fight terrorism, foreign states and organised crime. These leaks, justified or not, raise serious questions for governments. The leaks are from highly secretive organisations – if they cannot protect their data, who can? Watergate’s deep throat was a deputy director of the FBI but Manning and Snowden were relatively low level. Is it right that a disgruntled employee or brave John Thornton is the whistleblower (depending on your view), director of e-ssential is able to have such a massive impact? Resources and an independent Then there is the issue of privacy versus adviser on business public interest. If Lewis Hamilton acted transformation, within the law, is it right to make his financial management and innovation. affairs public? Technology is developing John.Thornton@ faster than legal and governance structures e-ssentialresources. – what can we learn from these leaks? ● co.uk

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management development

How to address common types of unhealthy team conflict Disagreement in any workplace is inevitable, especially in the public sector where people may have strong values. How do you stop debate turning into dysfunction?

personality clashes or arguing over who gets the desk nearest the window. It’s bad for both the people and the organisation. Research by the Chartered Institute of Personnel & Development suggests four out of 10 employees in the UK has experienced some form of interpersonal conflict within the past 12 months, while the CBI estimates unresolved conflict costs the UK a staggering £33bn a year. Anyone who’s worked in a team knows that, while it can be a supportive, exhilarating experience, it also has the potential to be highly combative. Team members often have a different take on what’s most important, how work should be done, who’s responsible for what and how resources should be divided. This is often magnified in the public sector, where make matters worse, plunging people into formal people may have strongly held beliefs and values, and are processes when talking about it openly would probably under continuous pressure to deliver more and better resolve the situation. services with fewer and fewer resources. There are five main types of team conflict: Of course, a certain amount of spirited debate and ⦁ The 50/50 split: The team divides into two opposing difference of opinion is healthy. Diversity in a team is halves, who form camps aligned around a common cause. often its greatest strength. Put people with varying ⦁ All against one: The team are aligned against one of viewpoints, beliefs, experiences and skills together to their members. That person is being demonised and is drive a project and their combined effort will surpass potentially at risk of group bullying. what a group of completely like-minded folk can achieve. ⦁ Meltdown: The team is riddled with quarrels and Problems arise, however, when friendly, healthy conflict feuds. Alliances and allegiances within the team appear tips over into dysfunctional disputes that tear teams apart and dissolve rapidly. Gossiping and rumours are rife. and make any significant progress impossible. Staff get ⦁ Silo: This conflict usually occurs between rather than worn down by daily battles and become demotivated and within teams, although it can arise in multidisciplinary disengaged. There are knock-on effects on performance, project and matrix teams. The players are protective of customer service, competitiveness and even reputation. their own departments and are reluctant to share Team leaders and project managers often find information or resources with others. themselves between a rock and a hard ⦁ Inner core: A small inner core of people are in conflict place when it comes to conflict. The and are sucking in others, many of whom do not wish to organisation expects them to take be involved but have little choice but to take a side. responsibility for building and There are several steps managers can take to maintain maintaining good working relationships a happy ship. Remember, conflict can be a powerful in their teams, but typically provides little driver of growth, insight and innovation. It’s not David Liddle is CEO training or support. HR policies often something to be afraid of but something to embrace. of the TCM Group

NATALIE WOOD

onﬂict in the workplace is rife, whether it’s power struggles within teams,

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Top tips… Do ➊ Differentiate between ➋ ➌

healthy and unhealthy conflict Look into what may have caused problems to develop Set ground rules over addressing differences

Don’t ➊ Hope conflict will go away by itself

➋ Ignore early signs, such as

➐ ➊

➋

➌

Understand why conflict arises Change is at the root of much workplace strife. The work that organisations need people to do today might not be what is required tomorrow. This is confusing and unsettling for employees. New processes, revised working practices, different priorities, a lack of clarity about roles and poor leadership can all be catalysts for conflict among employees. Then there are the inevitable personality clashes, differences in working styles and daily irritations between colleagues that arise in any team. Understanding the factors that may lead to conflict is an important first step in keeping it at bay. At times of conflict or change, leaders really need to listen to people and ask the difficult questions to identify the root cause of a problem.

Recognise if conflict is healthy or unhealthy Team leaders need to understand the difference between functional and dysfunctional conflict. Functional conflict involves engaging in healthy debate to achieve the best outcome. The aim is to achieve a win-win situation through open, honest and constructive dialogue. Dysfunctional conflict is insidious, subtle and, if left unchecked, can soon descend into bullying, harassment or discrimination. This is sometimes mistakenly written off as “banter” or “letting off steam”. It is harmful and stressful for everyone involved and can have a significant impact on the team’s ability to function.

Set the ground rules A good way to prevent conflict from arising is to set clear ground rules at the start of projects or when new teams are formed. It’s about acknowledging that people will not always

➌

stress-related absence and staff huddling in corners Write off dysfunctional behaviour as “banter” or “letting off steam”

agree on the best way forward and accepting that occasional clashes of beliefs, values and goals are a normal part of working in a team. As the team leader, you need to state up front that the aim is to resolve any conflict that arises constructively and collaboratively, and that you will be on hand to facilitate that process. The leader’s role is to create a safe space where issues can be resolved and where team players feel safe and are encouraged to be open and honest. These ground rules form a powerful psychological contract within the team.

➍ ➎

Spot the signs early Increased levels of stress-related absence, communication breakdowns and huddles in corners are all signs that unrest may be bubbling up in the team. Alliances and cliques begin to form and parties start to blame each other for whatever is going wrong. People adopt rigid positions and focus on what is driving them apart rather than on the common ground that brings them together.

Nip it in the bud Ignoring conflict in the hope it will go away is the worst possible approach. Early intervention will stop minor disagreements from escalating into all-out war. Invite team members to talk about how they are feeling and encourage them to hear one another in an empathetic way. Open, honest dialogue is both cathartic and healthy and will help get the team back on track. David Liddle is the author of Managing Conflict: a Practical Guide to Resolution in the Workplace, published by Kogan Page/CIPD, 2017

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crucial public finance guidance Option Appraisal: A Practical Guide for Public Service Organisations (2017 Edition) Ideal insight for finance professionals enabling them to design and undertake rigorous option appraisals. Audit Committees: Practical Guidance for Local Authorities and Police (2017 Edition) Fully revised and updated taking into account the legislative changes and professional developments needed to support audit committee members. Company Financial Reporting: A Guide for Local Authorities Detailed and practical support for local authority trading companies (LATC) and their financial statements.

Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes (2017 Edition) A title offering local authorities (including PCCs and ﬁre authorities), RSLs, FE/HEs and NHS trusts with a clear deﬁnition of treasury management activities.

Order today www.cipfa.org/publications T: 020 7543 5600 E: customerservices@cipfa.org

An Introductory Guide to Financial Reporting in the Public Sector in the United Kingdom Discover why financial reporting in the public sector matters, what form that financial reporting takes and what confidence the information provides. Pooled Budgets and the Better Care Fund: A Practical Guide for Local Authorities and Health Bodies (2017 Edition) Invaluable for those implementing or reviewing pooled budget arrangements, or seeking to ensure that they offer good taxpayer value for money. The Prudential Code for Capital Finance in Local Authorities (2017 Edition) The Prudential Code framework supports local strategic planning, local asset management planning and proper option appraisal.

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cipfa events CIPFA offers events around the UK to members and non-members alike. Our events range from small workshops for local CIPFA members through to large scale conferences aimed at professionals across most disciplines in the public sector. Below are the upcoming events in your region and national conferences. Follow us at #CIPFAConferences

REGIONS

WORKSHOPS

—

 THURSDAY 18 JANUARY, BRISTOL

NEW! Accounts closedown workshops

 TUESDAY 23 JANUARY, MANCHESTER

1 D EC E M B E R, GAT E S H E A D

CIPFA North East Conference: Wealth and Wellbeing – Rebooting the North East

CONFERENCES — CIPFA holds key conferences in a range of areas from technical guidance to debate and food for thought provided by leading speakers, experts and commentators. Search under ‘conferences’ at www.cipfa.org/events for our full listing. 2 5 JA N UA RY 2 0 1 8

RAFAEL BASTOS

CIPFA Housing Conference Fixing our broken housing market is about more than a white paper. It must be the focus of everyone involved in ensuring an adequate supply of housing. This event will scrutinise barriers and opportunities around building homes, including legislation, policy and finance. It will also examine achievable, sustainable funding, working with other providers to deliver more homes and, using the latest research, how others increase supply. The event is aimed at senior housing professionals who need a comprehensive overview of housing issues affecting councils as well as finance professionals, especially those whose role includes the housing revenue account. www.cipfa.org/events customerservices@cipfa.org

 WEDNESDAY 17 JANUARY, EXETER  THURSDAY 18 JANUARY, SOUTHAMPTON  FRIDAY 19 JANUARY, LONDON TUESDAY 23 JANUARY, LONDON

 WEDNESDAY 24 JANUARY, LEEDS (POLICE)

1 6 M A RC H 2 0 1 8, TO R BAY

CIPFA and EY are once again working in partnership to co-host a series of accounts closedown events across the country in early 2018. With accounting and financial reporting changes, it is essential that accounting practitioners are updated, prepared and focused. Choose from a variety of venues and dates from England, Scotland and Wales. www.cipfa.org/closedownevents customerservices@cipfa.org 020 7543 5600

CIPFA South West AGM and Conference

January 2018

February 2018

 TUESDAY 9 JANUARY, BIRMINGHAM

 THURSDAY 1 FEBRUARY, LONDON (POLICE)

 WEDNESDAY 10 JANUARY, CAMBRIDGE

 MONDAY 5 FEBRUARY, LONDON

This one-day conference draws on the rich experience and perspectives of prestigious speakers from a range of sectors and professions, each with a shared passion for making a difference to local economies and people.

Some great speakers have been confirmed, including CIPFA president Andrew Burns, CIPFA chief executive Rob Whiteman and the chief executive of Cornwall CC, Kate Kennally. www.cipfa.org/events customerservices@cipfa.org

 WEDNESDAY 10 JANUARY, LEEDS  THURSDAY 11 JANUARY, LONDON  MONDAY 15 JANUARY, LONDON

 WEDNESDAY 24 JANUARY, BIRMINGHAM  THURSDAY 25 JANUARY, LONDON  FRIDAY 26 JANUARY, TONBRIDGE & MALLING BC, KENT  MONDAY 29 JANUARY, LONDON  TUESDAY 30 JANUARY, LEEDS  TUESDAY 30 JANUARY, CARDIFF (WALES)  WEDNESDAY 31 JANUARY, BRISTOL

 TUESDAY 6 FEBRUARY, BIRMINGHAM  WEDNESDAY 7 FEBRUARY, LIVERPOOL  THURSDAY 8 FEBRUARY, CHESTER (WALES)  THURSDAY 8 FEBRUARY, LONDON

8 F E B R UA RY 2 0 1 8, LO N D O N

14 M A RC H 2 0 1 8, LO N D O N

 TUESDAY 13 FEBRUARY, LONDON

CIPFA/HFMA Health and Social Care Integration Summit

Treasury Management Conference

 WEDNESDAY 14 FEBRUARY, CAMBRIDGE

Financial pressures mean that creating a health and care system that can deliver far-reaching change effectively and collaboratively has become critical. The lack of joined-up services has often been raised by patient groups, and a more unified system will give communities more control over care pathways and result in better outcomes. Joint working is moving at different speeds in different areas, and new integrated systems still lack clarity. Finance leaders are working to establish and finesse new governance structures and pooled budgets to meet the requirements of their systems. The positive effects of integrated systems on patients are encouraging us to consider how lessons learnt and best practice can be shared, and how innovation can be spread rapidly. This summit is intended to stimulate discussion and help you do exactly this. http://hfma.to/int customerservices@cipfa.org

This event marks the culmination of a thorough review of the network’s role, activities and future. The treasury management network is excited to share its plans and discuss how it can support all staff involved in public sector treasury management. As we have seen already in 2017, economic and political volatility continue to dominate markets. The UK government’s reform of public services, which is intended to cut the deficit, will continue to challenge treasury decisions on long-term borrowing and investment decisions. Treasury management is now on the front line in helping the public sector manage unprecedented budget reductions. Every penny counts. Against this backdrop, attendance at next year’s free network conference is essential. The sessions have been carefully chosen to reflect the most critical issues facing treasury practitioners. www.cipfa.org/events customerservices@cipfa.org

 WEDNESDAY 14 FEBRUARY, EDINBURGH (SCOTLAND)  THURSDAY 15 FEBRUARY, NEWCASTLE  T U E S DAY 2 0 F E B R UA RY, M A N C H E ST E R  W E D N E S DAY 2 1 F E B R UA RY, L E E DS

LO O KI NG A HEA D Check www.cipfa.org/ conferences for details of the following and more events 2 2- 2 3 M A RC H , G L AS G OW

CIPFA Scotland Public Finance Conference 1 1 -1 2 J U LY, B O U R N E M O U T H

CIPFA Annual Conference 2018 Contact customerservices @cipfa.org for information

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numbers game Nearly 600 GP practices were affected by the WannaCry cyberattack that hit the NHS in May. An National Audit Office study also found that at least 81 out of 236 English trusts were infected, although the Department of Health does not know how many could not access information.

More kids in school

Percentage of emergency admissions admitted, transferred or discharged within four hours, Q1 2009 to Q2 2017 100%

There has been a 6% rise in the number of pupils in state-funded schools since 2009, the Performance Tracker showed. Primary school pupil numbers have risen by 13%, from around 4.1 million to 4.6 million. That rise is now affecting secondary schools, where numbers are 2% lower than in 2009 but have risen consistently since 2014. The tracker said there were signs this was increasing competition for places in popular secondary schools. It said: “While 90% of pupils received an offer from their first-choice primary school in 2017, 83.5% received an offer from their first-choice secondary school, down from a high of 86.7% in 2013.”

98% 95%

95%

90%

85%

Percentage seen within four hours National target

80%

June 2009

June 2010

June 2011

June 2012

June 2013

June 2014

June 2015

June 2016

June 2017

Source: NHS England

A&E target not hit for years The target for 95% of type 1 emergency hospital admissions to be discharged, admitted or transferred within four hours had not been met since the quarter ending September 2012, according to CIPFA and the Institute for Government’s Performance Tracker report. By the end of the second quarter of this year, only 85.5% of type 1 emergency admissions had been dealt with within four hours. “This trend is also true across all emergency admissions with the percentage of emergency admissions treated within four hours of arrival falling from 98.6% to 90.3% between the quarters ending June 2009 and June 2017,” the report said. This is the second edition of the Performance Tracker, published in October. It brings a wealth of insight into spending and performance trends in nine public service areas.

Change in spending on adult social care in England (real terms) 2009-10 to 2016-7 2%

-2%

-4%

-6%

-8% Source: NHS Digital and DCLG

-10%

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

46%

2015-16

2016-17

Pupil numbers in primary and secondary schools 2009-2017 Primary 5m

Secondary

2009

2011

2013

2015

2017

Source: Department for Education

Down but up again Spending on adult social care fell by almost 10% in real terms between 2009-10 and 2014-15 but has risen since, according to the Performance Tracker report. The upward trend in spending was supported by the Better Care Fund and the additional £2bn allocated in the March Budget. However, there were some significant regional variations, with authorities with higher deprivation levels and more older people struggling more. The tracker also noted recent significant growth in the older population: between 2009 and 2016, the number of people in England aged over 65 rose 17.7% to 9.9 million.

SHUTTERSTOCK

595 infections

Ransomware at the doctor’s

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publicfinance.co.uk/numbers Steaming ahead

£100bn

Railways have overtaken housing as the public’s top infrastructure priority, according to Ipsos Mori. In a survey, 46% of people chose tracks and stations as top of their investment wish list, compared to 43% who selected new homes.

Government grant data The Cabinet Office has issued data on £100bn in grants paid last year – the first time such information has been made public. However, the Institute for Government noted that some of this data lacked detail that would have made it more usable and useful.

Change in local authority net spending on waste collection, food safety, road maintenance, libraries and trading standards in England 2009-10 to 2015-16 5% Waste collection

Food safety Road maintenance

-5%

13.1 %

Libraries Trading standards

-10% -15%

PUBLIC SECTOR PAY DISPARITY

-20%

-25% -30% -35%

2009

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

Source: DLCG

Slump in local spending Local authority spending on services that affect neighbourhoods – such as waste collection, road maintenance and libraries – has fallen steeply. The above graph shows spending on trading standards has fallen by a third, libraries by 31%, food safety by 22% and waste collection by 19%. Spending on local road maintenance has fallen by a quarter (26%), although the Performance Tracker noted that a rise in capital spending suggested that large-scale maintenance activity had been protected. The report noted that local authorities have responded to planned budget deﬁcits by building up reserves. “The level of non-ringfenced local authority revenue reserves in England grew by 46% in real terms between 2010-11 and 2014-15, but then last year fell by around 2%,” it said.

Frequency of residential waste collection

Less than weekly

It’s not as often as it used to be

Weekly or more

300 250 200 150 100 50

2010 -11

2011 -12

Source: DCLG

2012 -13

2013 -14

2014 -15

2015 -16

Bin and not gone Household waste is being collected less frequently, the Performance Tracker has found. The number of weekly residential waste collections fell by a third between 2010-11 to 2015-16. “Recycling collections do not appear to have filled that gap, at least not in the last three years: between 2013-14 and 2015-16, the number of dry recycling collections – weekly or otherwise – remained flat,” the report said. The tracker also noted that the amount of household waste collected fell by 4%, while the amount sent for dry recycling rose by 3%.

Gender pay gap at its widest The gender pay gap for full-time staff in the UK’s public sector hit 13.1% this year, its greatest since 1999 and up from 11.1% in 2016, according to the Office for National Statistics. However, it is still better than it is in the private sector, where the median gap is 15.9%, and in non-profit and mutual organisations, where it is 16.4%. For part-time public sector employees, the median gender pay gap is even wider at 23.3%. In contrast, the gap for part-time private sector workers is -2.6%, which suggests that women working part time in the private sector tend to earn more than their male counterparts. Prime minister Theresa May urged employers to take action to close the gender pay gap. “We need to see a real step change in the number of companies publishing their gender pay data and offering progression and flexibility for all employees,” she said.

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The perfect place to find the latest public sector finance vacancies PF Jobs is the official jobs board for the Chartered Institute of Public Finance and Accountancy

PF Jobs has an average of jobs posted every month

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Fast, smart, accurate Accounts Closedown Workshops 2017/18 CIPFA and EY are teaming up for the second year to help accountants in the public sector. In January and February we are providing timely, invaluable and convenient workshops for those involved in closing accounts across local government and police in England, Scotland and Wales. With accounting and ďŹ nancial reporting changes, it is essential that accounting practitioners get updated, prepared and focussed. Choose from over 30 venues and dates from across three countries. Ensure your accounting at year end is fast, smart and accurate.

How to book www.cipfa.org/closedownevents E: customerservices@cipfa.org T: 020 7543 5600

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It’s time to adapt The challenges facing the public sector today are without precedent. But with change come opportunities to adapt, to enhance and to transform your organisation. From consultancy that will supercharge your change agenda to training for your team at every career stage, CIPFA can bring the unique insight and support you need to ﬂourish. It’s time to adapt; we’re here to help.

www.cipfa.org/adapt

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