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PublicFinance PUBLICFINANCE.CO.UK Issue 11 November 2017

NOVEMBER 2017 • ISSUE № 11

SENIOR MOMENT Time to tackle the crisis in social care SAVING PRIVATE FINANCE

Is the PFI funding model fit for the future? PERFORMANCE ANXIETY

Tracking latest public service spending trends ENTER THE DRAGON

Mark Drakeford says Wales is ready to flex its fiscal muscles

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November 2017

CONTENTS

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28

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COVER STORY On their own? Political parties are arguing over rather than confronting the social care funding crisis. While progress on social care is bogged down in the political quagmire, some of the most vulnerable members of society are being badly let down

Wales blazes a trail Mark Drakeford, Welsh cabinet secretary for finance and local government, talks exclusively to PF about the country’s direction, budget setting, why regaining tax powers is a “landmark” moment and why austerity is a failed policy

PFI revisited The private finance initiative has become deeply unpopular, blamed for long delays in projects and saddling the public sector with exorbitant costs. However, it could still have a future – which would need a different approach

4 Editorial Time waits for no plan – whether it’s Brexit or social care funding 5 News Halt or slow down universal credit rollout, say councils; CIPFA and AAT offer joint training; CIPFA tracker warns over reactive approach 8 Brexit watch Halt Brexit to boost economy, says OECD; procurement free of EU constraints may boost local economies

Scotland; Wales’ budget under new tax regime

36 Feature A potential future for PFI

16 Feedback NHS too quick to pay out for negligence

36 PF Innovation Awards Derby Homes takes the stage

17 Opinion Liam Booth-Smith on Theresa May; Seb Klier on rent control; Javneet Ghuman on student debt; Scott Corfe gets an Uber 22 Cover feature Politicians are not addressing the social care funding crisis

9 International news Raising top tax rates will not stymie growth, says IMF chief

28 Interview Mark Drakeford talks about Wales and how it will use its new powers

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32 Feature Implementing strong financial systems amid conflict and corruption

Watchdog watch

12 Voice of the nations Spinning the stats in

42 On account Making codes fit for purpose in a complex world 43 Technology watch After WannaCry, the NHS is in an arms race with the bad guys 44 Professional development Be a show-stopper by crossing the sectoral divide 47

CIPFA events

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48 Numbers game 50 Recruitment

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editorial: Vivienne Russell

Time waits for no plan There’s little sign of a deal over Brexit or social care, as politicians at home and abroad quarrel rather than decide what to do

T

o do a deal or to walk away? That’s the question that has been exercising politicos in recent weeks. Brexit talks have not been progressing as planned to say the least, and the “no deal” option – under which the UK

wrenches itself from the regulatory frameworks of the EU to go it alone – is increasingly being talked up as a credible option. Advocates say it would give business the certainty it craves, while propelling Britain into an exciting global future. Sceptics, such as home secretary Amber Rudd, suggest such an outcome would be “unthinkable”, grounding planes, collapsing supply chains and turning Kent into one massive lorry park. The art of the deal, with apologies to Donald Trump, is to find some middle ground, and that requires both sides giving way and the humility to learn the lessons of the past. Little sign of this so far on Brexit. Deal making is just as crucial to policy and politics at home. Our feature on page 36 recaps the PFI controversies of recent years. PFI is now viewed by many as a failure, emblematic of the shabby compromises of the New Labour (page 22). Without adequate pitch rolling, the period, and it’s true that its use has waned considerably. Conservatives’ bold plan for a “dementia tax” So shadow chancellor John McDonnell’s pledge to bring all helped sink Theresa May’s hopes at the June contracts back in house was music to Momentum’s ears. general election. One unfortunate consequence has Of course, Labour may come to regret this potentially been to reinforce the subject as electoral kryptonite extravagant promise. A press release rushed out after and just “too difficult” to address. McDonnell’s speech struck a more nuanced tone, It’s hardly a topic that has been setting public suggesting contracts would be reviewed and only bought discourse alight ahead of the autumn Budget and out “if necessary”. there’s little optimism that the promised green As our article shows, many experts believe PFI can work paper will appear any time soon. As Richard well if the business case is sound, performance is Humphries of the King’s Fund notes, with Labour monitored properly and there is good faith on both sides. and Conservatives “knocking seven bells out of each A policy area entirely lacking in good faith at the other” it’s hard to see them crafting the cross-party moment is social care, the subject of our cover feature consensus that’s needed to crack the problem.

Vivienne Russell Editor vivienne.russell@ publicfinance.co.uk

Time is running out. Local authority budgets are under ever more pressure and not likely to be helped by the imminent rollout of universal credit (see facing page). The sticking plaster solutions offered so far – specifically £2bn in the March Budget and the 3% precept – are welcome but weedy responses. Social care is surely one area where a deal needs to be struck – before it’s too late. ●

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news

Oldham: the council is shelling out extra to pay landlords rent on temporary accommodation as claimants are not doing so

Councils see rent arrears rise and set up emergency funds as universal credit is introduced By Anthony Barej

ALAMY

UK councils have called on the government to pause or slow down the rollout of universal credit as they divert their scarce funds into helping struggling claimants. Four authorities contacted by PF said they were braced for rising rent arrears and were siphoning off resources to put into emergency hardship funds. The call came as MPs approved a non-binding Labour motion to halt the rollout on 18 October after Conservative whips instructed Tory MPs to abstain. The government had already bowed to pressure by agreeing to make the 55p-aminute universal credit helpline free within the month. Authorities in Oxford, Birmingham, Oldham and North Lanarkshire, which have piloted elements of the scheme, told PF they were concerned about it, with one council branding the problems “unacceptable”. Oxford City Council, which has been

The deliberate policy to delay payment causes a lot of problems

Halt or slow universal credit rollout, say councils trialling universal credit since April 2015, said it expected rent arrears to rise after full rollout in October. To prepare for this, it has allocated £50,000 to an emergency fund to help people whose payments are delayed. Susan Brown, deputy leader of Oxford City Council, said: “Waiting periods and payment delays mean that universal credit leads to debt, rent arrears and the risk of homelessness, and this is unacceptable.” John Campbell, North Lanarkshire Council’s financial inclusion manager, told PF that most UK councils saw rent arrears rise after the benefit was introduced. Campbell said in Scotland most council tenants paid rent fortnightly so a six- or eight-week delay in payments could lead to significant arrears. Of the 3,500-4,000 universal credit claimants in North Lanarkshire, some 900 are council tenants. Of these, around 500 are in rent arrears compared with 241 in March 2016, Campbell said. Through the Convention of Scottish

Local Authorities, North Lanarkshire has also called for halt to the rollout. The council has earmarked £580,000 a year to pay exclusively for extra staff to work with people affected by universal credit. Abdul Jabbar, deputy leader of Oldham Council, where live universal credit has run since 2013 and the full scheme since April this year, said “the deliberate policy to delay payments is causing a lot of problems for claimants. Payment should be made as soon as applications are assessed.” The council’s housing budget was being squeezed because it was having to pay landlords rents for temporary housing when claimants failed to do so. Birmingham City Council is also asking the government to avoid “disastrous consequences” by, for example, slowing its implementation and other safeguards. Cllr Tristan Chatfield said shifting from a system of multiple benefits paid in stages to a single monthly payment created “too much of a cliff edge”.

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news Conference goes back to Bournemouth

Inflation hits a high while wages fall

CIPFA will be heading back to the seaside for next year’s annual conference and exhibition. After two years in Manchester, the 2018 gathering will be held at the Bournemouth International Centre on 11-12 July, so save the date in your diary. Find out more at www. cipfaannualconference.org.uk

Inflation hit 3% in September, its highest level since March 2012, sparking concerns about living standards. The Office for National Statistics said the main drivers of inflation were rising prices for food and recreational goods, as well as transport costs. It also revealed that real wages fell by 0.4% over the last year.

Graduates gain at a cost if pay threshold raised Proposed reforms to student finance will save graduates a significant amount but cost taxpayers around 40% more, Institute for Fiscal Studies analysis has revealed. Prime minister Theresa May said at the Conservative Party conference that graduates would not have to start repaying student loans until their earnings reached £25,000 a year – up from £21,000 a year. The IFS said this would save middleearning graduates up to £15,700 over their lifetimes, but it would add around £2.3bn a year – 40% – to the public cost of providing higher education. The changes would mean around 83% of graduates would not have paid back their student loans by the time the debt was written off, it added.

Partnership to offer study pathway Joint venture between CIPFA and the Association of Accounting Technicians will allow apprentices to qualify in accountancy before progressing to CPFA status By Vivienne Russell CIPFA has teamed up with the Association of Accounting Technicians (AAT) to deliver an “end-to-end” qualification pathway for accountancy apprentices working in the public sector. The apprenticeships will be delivered by the CIPFA Education & Training Centre. As part of the apprenticeships, students will study AAT’s advanced (level 3) and professional (level 4) diplomas in accounting, before progressing to CIPFA’s established public sector finance qualifications. CIPFA chief executive Rob Whiteman told PF that the institute was very supportive of government policy on apprenticeships and efforts to boost skills and productivity. The partnership offers a “whole career solution” to both employers and students, he said. “Trainees are able to qualify with AAT and go on to CIPFA under one scheme of study, but we can cover all of that within the apprenticeship levy arrangements,” Whiteman told PF. “We think it gives employers and trainees a great option to plan career training and to go straight on to CIPFA, or to take a break at AAT and go on to CIPFA later on.” Whiteman  Rob and Mark Farrar: the CIFPA/AAT collaboration will allow employers and learners to plan their career training

Mark Farrar, AAT chief executive, added that his association’s long standing in apprenticeships and technical education, together with CIPFA’s public finance expertise, made a “great offer” for public sector employers. “I believe in giving people the right rungs on the ladder to achieve their capabilities in life and by putting our offering and package alongside CIPFA’s offering we do just that,” he told PF. He added that apprenticeships and vocational pathways towards qualification would help improve social mobility and gender balance. “Two thirds of our members are female and it’s the same in our student intake, so it can also help in the long term with gender balance in professional roles. Many of our students who complete our levels will go on to achieve chartered status.” CIPFA’s partnership with AAT follows joint ventures with the Institute of Chartered Accountants of Scotland and Chartered Institute of Management Accountants. Whiteman said it was important for accountancy bodies to collaborate and “do what’s right for our members and our organisations”. He added: “CIPFA will always lead the way in making the accountancy profession more collaborative … As a public sector body, it’s in our DNA to always think collaboration is more important than competition.” For more information on the pathway, go to: ww.cipfa.org/ qualifications/aat

ISTOCK

CIPFA and AAT trainining

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Company house builders Local housing companies are becoming important providers of homes and could be building up to 15,000 homes a year by 2022, a think-tank has said. There are now about 150 LHCs in England and this is likely to increase to 200 by 2020, the Smith Institute suggested.

Spend without thrift The report said £10bn is due to be spent over five years “just to keep troubled services going”

Where it’s been spent

Nicky Morgan: “The conclusion that irrespective of the economic weather this reactive approach is misconceived is a good challenge for Whitehall”

MP: pay heed to tracker warning Treasury committee chair highlights CIPFA/IfG tracker’s criticism of a lack of long-term planning by the government

GETTY

By Anthony Barej The UK government has failed to plan for spending in the long term and identify “efficiencies” before hitting “crisis points”, the chair of the Treasury select committee has said, endorsing the findings of the second Performance Tracker report. Speaking at the report’s launch on 19 October, Nicky Morgan agreed “the Treasury could have analysed further efficiencies in some public services instead of waiting for potential crisis points”. She said: “The conclusion that irrespective of the economic weather this reactive approach is misconceived is a really good … and very useful conclusion, and a good challenge for Whitehall.” The report, produced jointly by CIPFA and the Institute for Government, found the government would be spending £10bn over five years to 2019-20 “just to keep

troubled services going”. The tracker, which examined 100 data sets from nine public services, found the government was “trapped in a reactive spending cycle on public services” and warned any “good decisions” made by the chancellor in the autumn Budget “would not solve the

underlying problems”. The Treasury needed to improve how it made spending decisions, the report said, and bring in a framework so the balance between funding, quality and efficiency could be assessed. The report authors suggested the department created its own performance tracker, which would record assumptions about demand, inflation, efficiency and quality for at least the next three to five years. This should be subject to independent scrutiny, perhaps by a body for public spending similar to the Office for Budget Responsibility. Responding to a question about whether such a body would become politicised, Emily Andrews, a senior researcher at the IfG, said the new body would forecast outcomes based on the assumptions and would not make recommendations on spending decisions, which would remain with politicians. She said the body would “scrutinise the assumptions that underpin spending decisions” and avoid the “really strong temptation for optimism to be worked into these assumptions”. Rob Whiteman, CIPFA chief executive, said: “The government must go beyond moving from one reactive cash injection to the next, because this fails to assess the sustainability of many public services.”

➊ ➋ ➌ ➍ ➏ ➐

Fall overall Spending on public services and benefits in the UK – around 85% of government spending – has fallen by about 1% since 2010.

GP gains GPs in England have gained nearly 12% in public cash since 2010 but “challenges remain” – for example, the government is struggling to employ enough GPs.

Hospital health Hospitals funding has increased about 15% (£10bn) since 2009-10 – but so has demand. In the quarter ending June 2009, 829,637 people visited A&E; in the same quarter in 2017, that figure was 1,078,329.

Banged up Prisons in England and Wales have received 22% less since 2009-10 (from £3.48bn to £2.71bn in 2016-17). There are a quarter fewer prisons than in 2010 and violence in prisons is rising, with the number of assaults on officers 124% above 2009 levels.

Social care squeeze Adult social care in England funding has fallen by 5% since 2009, while the number of people aged over 65 between 2009 and 2016 grew by 17.7% to 9.9 million.

Roads, rubbish, reading Spending on local road maintenance in England has fallen by 26% (£2.88bn to £2.18bn), waste collection by 19% (£1.37bn to £1.11bn) and on libraries by 31% (£1.17bn to £805m).

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brexit watch

Contracting free of EU rules may be a local boost Brexit brings an opportunity to harness public sector buying power to revive local economies, the Centre for Local Economic Strategies has argued. The CLES has been working with Manchester and Preston councils to successfully direct procurement pounds into local businesses. The think-tank called for a shift in the way procurement is viewed, particularly in a context when the UK will be free of EU rules. Matthew Jackson, CLES deputy chief executive, said there was a sense of frustration among public procurers that current procedures were overly rigid and bureaucratic. “There is a real opportunity, post-Brexit, to make procurement more socially responsible and more aligned to the wider local economic, social and environmental challenges,” he said.

Inquiry into effect of EU exit on councils

An end to reciprocal healthcare arrangements between the UK and EU could cost the NHS an extra £500m a year, the Brexit Health Alliance has warned. Some 190,000 pensioners live in the EU and an unknown proportion may have to return to the UK if a deal over healthcare is not struck, the group warned.

The communities and local government select committee is to investigate the impact of Brexit on councils. An inquiry will consider what EU powers could be transferred to town halls and the steps the government could take to provide more certainty and stability for local government during the Brexit process.

Stop Brexit to boost economy, says OECD Maintaining close links with the EU is essential for good future living standards and the pound and the UK’s credit rating will be hit if no deal is struck By Simone Rensch Cancelling Brexit would have a “significant” impact on growth and boost the UK economy, the OECD has said. In a controversial intervention, the Paris-based think-tank said maintaining close ties with the EU and implementing policies to improve productivity would be “crucial for maintaining future living standards”. The OECD Economic Survey of the United Kingdom 2017 warned that “no deal” would result in low investments, the pound plunging to new depths and a credit rating cut. OECD secretary general Angel Gurría said: “The United Kingdom is facing challenging times, with Brexit creating serious economic uncertainties that could stifle growth for years to come. “Maintaining the closest economic relationship with the European Union will be absolutely key for the trade of goods and services as well as the movement of labour.” The OECD report highlighted rising uncertainties and risks as a result of last summer’s vote to leave the EU. Sustained economic progress will rely on the outcome of Brexit negotiations with the EU and other countries, the OECD said. It also urged the government to address the productivity divide Gurría  Angel with Philip Hammond: the former warned that Brexit was “creating serious economic uncertainties”

between UK regions. Other suggestions included better rights for people on zero-hours contracts, higher income taxes for the selfemployed and indexing state pensions to average earnings. Chancellor Philip Hammond said the UK would consider the report and act where possible. He said: “[By] delivering a time-limited transition period, avoiding a disruptive cliff-edge exit from the EU, we can provide greater certainty for businesses up and down the UK, and across the European Union.” But the Treasury rejected calls for a rethink on the vote, saying: “We are working to achieve the best deal with the EU that protects jobs and the economy. “We are leaving the EU and there will not be a second referendum.” The OECD’s intervention came amid concerns that the first phase of Brexit talks were making little progress. Michel Barnier, the EU’s chief negotiator, said the bloc was “very disturbed” by the deadlock over the amount the UK would pay to the EU after the exit. According to the negotiation timetable agreed by both sides, the issues of the “divorce bill”, citizens’ rights and the Northern Ireland border need to be settled before talks can move on to future trade arrangements. Speaking in Brussels on 20 October, prime minister Theresa May said the UK was going through the Brexit divorce bill “line by line”. She highlighted her Florence speech where she made “firm commitments” on payment and said no EU members would receive less or have to pay more because of Brexit.

GETTY

the BREXIT debate

NHS could pay £500m for expat care

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international news New Zealand sets another surplus New Zealand has achieved a third fiscal surplus, worth NZ$4.1bn. However, this “should be interpreted with caution” as it is a “one off”, finance minister Steven Joyce said. The operating balance before gains and losses was NZ$2.2bn more than it was last year.

Growth charted Some highlights from the October 2017 World Economic Outlook

Upbeat outlook

 Christine Lagarde: getting more women in work would be a “global game changer” and “increase growth”

Rich countries should raise tax Increasing the top rate of tax would not damage growth but help address ‘excessive inequality’, says IMF chief

REUTERS

By Vivienne Russell and Simone Rensch Rich countries could raise their top rate of tax without damaging growth, the head of the IMF has said. In her address to the annual IMF-World Bank meeting in Washington DC on 13 October, Christine Lagarde said “excessive inequality” needed to be tackled. Strong safety nets providing direct support to vulnerable communities and fiscal tools were key, she said. “Our research shows, for example, that some advanced economies could raise their top tax rates without slowing growth, which would provide resources for priority needs or debt reduction.” There was also a need to realise the potential contribution of women – “an economic no-brainer”, according to Lagarde. Empowering women and encouraging

their participation in the labour market would be a “global game changer”, the IMF chief said. “It would increase growth, reduce inequality and support diversity,” she said. Young people’s concerns also needed to be addressed. Corruption and climate change top the list of their

concerns, according to a global youth survey. Lagarde said the IMF had committed to stepping up the fight against corruption, which undermines growth in government and reduces the potential for growth. “Our analysis shows that moving from high to low perceived corruption levels can increase public investment efficiency by 50% – and raise real per capita income by nearly one percentage point,” she said. Lagarde’s counterpart at the World Bank, Jim Yong Kim, stressed the importance of social protections, such as health and education, in driving economic growth. In an address to the Development Committee of the World Bank Group and IMF, Kim said more investment in “human capital” was desperately needed. There was a clear difference between the economies of countries that invest in human capital and those that do not, he said – as much as 1.25% of GDP a year. “We need to do more work and more research, but this suggests that investments in human beings have had a huge impact on economic growth,” he added. “We’re trying to create conditions where heads of state and finance ministers cannot resist investing in their people,” Kim concluded. The publication of the IMF’s biannual World Economic Outlook at the annual meeting

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Economy strengthens Global economic activity is strengthening, with growth projected to rise to 3.6% this year since and 3.7% in 2018.

Better prospects The IMF revised up its forecasts for the eurozone, Japan, emerging Asian and European economies and Russia.

But not so good here There was less good news for the Anglosphere with the growth outlook revised down for both the US and UK.

Not there yet The recovery is still not complete. Growth is weak in many countries and inflation remains below target.

Remaining risks Possible rising interest rates, financial turmoil in emerging economies and any rolling back of global financial regulations are medium-term risks to growth.

in Washington revealed a generally more upbeat outlook for global growth. At 3.2%, growth in 2016 was at its weakest since the financial crisis but it is expected to rise to 3.6% this year and 3.7% in 2018. However, the IMF warned that medium-term risks were still “tilted to the downside”. IMF chief economist Maurice Obstfeld urged policymakers to act while “times are good”. He added: “If the strength of the upswing makes the moment ideal for domestic reforms, its breadth makes multilateral cooperation opportune.”

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► Watchdog Watch

WHAT’S GOING ON IN AUDIT AND REGULATION

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£1.6bn Costs of clinical negligence in 2016-17, up from £400m in 2006-07

“The provision for clinical negligence is one of the biggest liabilities in the government accounts, and one of the fastest growing” T H IS WI L L H U RT: AMYAS MORSE’S HEALTH WARNING

The year ended with an £85m underspend on the £33.96bn budget, more than covering a £38m shortfall against projected revenues from the devolved property transaction and landfill taxes. The resource budget was underspent by £28m and the capital budget by £57m. The auditor general reiterated her warnings that greater powers would require better controls. “The arrival of substantial new financial powers and potential changes arising from Brexit mean it is critical that [the Scottish Government] continues to strengthen its approach to public financial management and reporting,” she said. Gardner suggested a number of reforms, notably an expanded set of consolidated accounts that would cover the entire public sector in Scotland and allow public scrutiny of total assets, liabilities, borrowing and investment. She also recommended that ministers prepared a five-year medium-term financial strategy setting out their spending plans, and that they firmed up policies for managing new powers over borrowing and reserves devolved to Holyrood by recent Scotland Acts.

O FSTE D ⦁ Ofsted has published a five-year strategy, pledging to take an intelligent, responsible and focused approach to its

UNP / ALAMY

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⦁ Scotland’s auditor general Caroline Gardner has given the Scottish Government a clean bill of health for its accounting and the management of its £34bn budget in 2016-17. However, she warned ministers they would need stronger controls as Holyrood’s fiscal responsibilities increased. In her annual report on the Scottish Government’s consolidated accounts, Gardner found that last year’s performance showed it had continued its “good record” of financial management and reporting.

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Care report. High demand, a lack of access and cost pressures were all taking their toll, the watchdog said. People were waiting for longer than four hours in A&E, more planned operations were being cancelled and patients were waiting longer for treatments. In addition, the number of nursing home beds had decreased in most of England and domiciliary care contracts were being handed back to councils because providers said the funding was insufficient. Despite this, the majority of health and care services were rated good, including 78% of adult social care services, 55% of acute hospitals and 89% of GP practices.

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⦁ Health and social care standards are in a “precarious” position, according to the Care Quality Commission’s annual State of

the Scottish Government continues to strengthen its approach to public financial management”

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CARE Q U AL ITY C OMMI S S I O N

Gardner:  Caroline “It is critical that

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watchdog watch

Coming up… Ofsted’s grades The National Audit Office is looking at how well Ofsted does its job of examining schools. Last year, it inspected more than 5,000 schools in England, producing reports relied on by the Department for Education and councils as well as parents and carers. An NAO report, set for publication in spring, will consider whether Ofsted inspects schools efficiently and effectively and knows if its inspections are having a positive impact, as well as if it is providing value for money.

Green bank value Separately, the NAO is looking at the UK Green Investment Bank, established in 2012 to invest in green infrastructure projects. This autumn it is due to report if the Department for Business, Energy & Industrial Strategy achieved the objectives of the bank and if the sale of the GIB to Macquarie Group for £2.3bn in April this year provided value for money.

Short school inspections Ofsted is seeking further views on changes to short inspections for good schools and academies. It wants to reduce the number of short inspections that convert to full section 5 inspections. It is proposing to give schools more time to improve if inspectors raise concerns at a short inspection. Schools rated “good” and likely to progress to “outstanding” status would also be given more time to consolidate success before undergoing a section 5. Changes are set to take effect from January.

inspection and regulation work. Inspections would be evidence led and the inspection framework would be fair and not overburdensome, it said, and resources targeted where they could most directly lead to improvement. Chief inspector Amanda Spielman said the corporate strategy would set Ofsted’s direction for her tenure. “By really drilling down on how, where and why we inspect and report, we can ensure that inspection and regulation are more than the sum of their parts,” she said. She said the watchdog would do more to aggregate findings from individual inspections to improve all areas. Meanwhile, a highly critical Ofsted report has led the Department for

more than doubled from 2,800 to 7,300. NAO head Amyas Morse said: “At £60bn, up from £51bn last year, the provision for clinical negligence in trusts is one of the biggest liabilities in the government accounts, and one of the fastest growing. “NHS Resolution [the NHS litigation authority] and the Department of Health are proposing measures to tackle this, but the expected savings are small compared with the predicted rise in overall costs.” Morse said curbing these growing costs would require “significant” activity in policy and legislation. In a separate report, the NAO said efforts to improve teacher training and retention had not been shown to have had a positive impact or value for money.

Education to appoint a commissioner for children’s services at Croydon Council. Ofsted said there were “widespread and serious failures” in its children’s services, in a report published in September. Commissioner Eleanor Brazil said she would work with the council to raise standards within children’s services.

Although schools were spending about £21bn a year on training teachers, staff retention remained a problem, it said. The NAO noted government spending on training and support for new teachers declined from £555m in 2013-14; in 2016-17, £35.7m was spent on programmes for teacher development and retention, of which just £91,000 was aimed at improving teacher retention. Morse said: “The trends over time and variation between schools are concerning, and there is a risk that the pressure on teachers will grow.” Meanwhile, the NAO accused the government of having a “light touch approach” to the growing problem of homelessness. The watchdog said that, while the government required local authorities to have a homelessness strategy, it had not monitored these plans or progress towards carrying them out. Morse said homelessness had increased significantly yet the government had neglected to evaluate the effects of its reforms. “It is difficult to understand why the department persisted with its light touch approach in the face of such a visibly growing problem,” he added.

N ATI O NAL AUD I T O FFI CE ⦁ The National Audit Office has urged ministers to rein in the spiralling costs of clinical negligence claims, which have quadrupled over the past decade. Costs have surged from £400m in 2006-07 to £1.6bn in 2016-17, according to the watchdog. In addition, the number of claims where damages were awarded has

Powering down: efforts to improve teacher training and retention did not have a positive impact or provide value for money

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► Voice of the Nations

DEVOLVED ADMINISTRATIONS AND BEYOND — S C OTL AN D

Call to end political spin on statistics Keith Aitken in Edinburgh ⦁ Ministers are coming under growing pressure to depoliticise Scotland’s economic statistics to restore public trust in the data as Holyrood takes on new fiscal powers. In evidence to Holyrood’s Economy, Jobs & Fair Work Committee, which is looking at Scotland’s economic data collection, the Royal Statistical Society and right-ofcentre think-tank Reform Scotland have raised concerns about the amount of political spin to which figures are subject. The RSS argued for Scotland to follow the rest of the UK, and deny ministers and civil servants advance access to data ahead of publication to curb this. “We believe that such privileged access undermines public trust in official statistics as … it creates opportunities for figures to be ‘spun’ to the media or ‘buried’ beneath other announcements,” the RSS said. “The rules in Scotland have long been a cause for particular concern as they allow no fewer than five days of pre-release access to a wide range of official statistics.” A Scottish statistical unit, set up in the wake of devolution, was widely welcomed, yet several submissions argued that Scotland’s economic numbers still fell short of what was needed to inform policy making.

Reform Scotland is also concerned that the data may not be broad or detailed enough for sound decision making

Strathclyde University’s Fraser of Allander Institute, an influential forecaster, said: “Some of the data that underpins core elements of Scottish economic statistics relies upon apportionment of UK figures rather than bottom-up, Scottish-specific data.” It called for more “bespoke” Scottish figures. Reform Scotland’s evidence was led by Ghill Donald of its economic advisory group. He told PF the think-tank had two main concerns: that the generic nature of most statistics turned them into debate fodder rather than useful policy inputs; and that there was too little systematic effort to bring together national and local authority figures. Scotland’s most hotly debated data set is the Government Expenditure & Revenue Scotland (GERS) figures, which purport to compare Scotland’s public finances with

those of the UK. Ironically perhaps, they have an expressly political origin, having been created by the Westminster government in the 1990s to demonstrate the fiscal benefits to Scotland of the union. “When it comes to political point scoring, everyone’s a winner on GERS day,” Donald said. “This should concern us. First, it shows us that we need more meaningful data that leaves less room for creative interpretation. “Second, if the data on which policymakers make decisions is neither broad enough nor detailed enough, then it stands to reason that those decisions may be based on false fundamentals.” This was, he added, a concern as the Holyrood parliament took on significantly greater fiscal responsibilities. Donald said that instead of arguing over whether numbers showed Scotland doing better or worse than the rest of the UK, ministers should set quantifiable ambitions such as small business growth

“Privileged access to data undermines public trust. It creates opportunities for figures to be ‘spun’ to the media or ‘buried’ “ ON LIE S AND STATI STI C S R OYAL STATI STI CAL S O C I E TY S P E AKS O U T

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voice of the nations

In brief… E N E RGY

Scotland bans fracking The Scottish Government has imposed what amounts to a total ban on fracking, a decision that has put it at odds with UK energy policy and the owners of Scotland’s biggest industrial complex. Business minister Paul Wheelhouse told MSPs that a public consultation had generated more than

SHUTTERSTOCK

60,000 replies, some 99% of which were in opposition. “It is clear that people across Scotland remain firmly opposed to fracking. This government has listened and taken decisive action,” he said.

G OV E R N A N C E

Reach agreement, NI parties told Northern Ireland secretary James Brokenshire has appealed to Northern Ireland’s parties to reach a political agreement. In his address to the Conservative Party conference, he said it would be difficult to deliver city deals and corporate tax devolution without stable politics and governance. “Now is the time to look beyond the issues that divide you,” he said. “Show the resolve you have demonstrated in the past.”

Withdrawal Bill to protect the Welsh and Scottish administrations’ devolved powers. The UK government has said it intends that any powers not incorporated into UK frameworks will be passed to the devolved parliaments. E M P LOY E E A B S E N C E

Sick leave rises as workforce cut 20%

The first ministers of Wales

Civil servants in Northern Ireland took an average of 12.4 days off sick last year, up from 11.7 days in the previous year, according to the Northern Ireland Statistics & Research Agency. Rob O’Neill, assistant general secretary of the FDA union, which represents civil servants,

and Scotland have urged the government to work with them to ensure powers are devolved to them after Brexit. Carwyn Jones and Nicola Sturgeon have published 38 proposed amendments to the EU

said the figures should worry ministers, managers and unions and needed to be seen in the context of a 20% cut in the workforce. He said it was clear that initiatives to reduce sickness absence were not working.

BREXIT

Protect powers, say Wales and Scotland

or research spend, and order statistics to compare them against regional data from south of the border. “Statistics like GERS are a gift to politicians because they can pick or ignore whatever they want,” he told PF. “What we are saying is: be a bit more honest and measure outcomes against your own business plan targets.” On the need for better comparisons with UK regional data, he said: “The Scottish Government needs to be making these comparisons in order to get its decisions right. I would have more respect for the Scottish Government if they set themselves quantifiable goals and then measured progress. You need to look at data through the other end of the telescope.” Reform Scotland also called for greater synergy between national and local authority data. For example, Donald said, council home rents did not appear in the total GERS figures – at £2.4bn in 2015-16, they were higher than council tax income.

WALE S

First budget set for new tax regime ⦁ Wales’ draft budget has been issued along with a pledge to provide greater certainty for public services as austerity continues. It is the first budget to coincide with the country’s new tax-raising powers, which take effect from April 2018. Welsh finance secretary Mark Drakeford issued two-year revenue plans for 2018-19

99% Percentage of those responding to a consultation who objected to fracking in Scotland

and 2019-20 to provide stability for local government and the health service. Alongside these, three-year capital plans, worth almost £5bn, were published. Drakeford criticised the UK government’s “flawed policy” of austerity, which was putting Welsh spending under continued pressure. By the end of the decade, the Welsh budget would have been cut by £1.2bn or 7% in real terms since 2010, he said. “On top of this, the UK government’s £3.5bn of unallocated cuts to public spending for 2019-20 continue to cast a shadow over our plans for the future – this could mean a further cut of up to £175m to the Welsh budget depending on where the unallocated cuts fall,” he added. The budget included an additional £230m for NHS Wales next year and a further £220m for 2019-20, protection for social care and education spending, £70m over two years for childcare and an extra £10m to tackle homelessness each year. Drakeford also unveiled the rates for the two new devolved taxes – land transaction tax (LTT) and landfill disposals tax (LDT). These will replace stamp duty land tax and landfill tax from next April. Residential rates for LTT will see average first-time buyers pay no tax and those spending up to £400,000 on a home will pay the same or less than they would under the stamp duty land tax regime. For homes sold for £400,00-£750,000, a tax of 7.5% of the price will be levied. This will rise to 10% for properties costing £750,000-£1.5m, with a top rate of 12% for properties valued at over £1.5m On LDT, the standard and lower rates will remain the same as landfill tax for two years, but a new unauthorised disposals rate will be introduced, set at 150% of the standard rate. Drakeford said: “The devolution of tax powers provides us with the opportunity to reshape and make changes to improve existing taxes to better meet Wales’ needs and priorities. “We are being bold but balanced and leading the way in creating a fair and progressive tax system.” Mark Drakeford interview, page 28

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feedback

contacts

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

NHS should defend itself

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

⦁ The level of medical negligence claims is worrying and a huge drain on NHS resources (NHS clinical negligence claims “one of the government’s biggest liabilities”, http://bit.ly/2yRKKPI). It seems that there is often inordinate haste to pay out rather than defend. I’m not sure the comparison with the US is reasonable. Without knowing how many procedures take place on a per capita basis, there is no way of gauging whether medical quality in the US is lower or higher than in the UK. Also, in the US there has been a big pushback at judicial level on the amounts of compensation payable. It is a highly fragmented system and some individual states have brought in caps, sometimes very controversially, which has led to some doctors moving between states to minimise their personal liability exposure.

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 Shamil Bhoyroo 020 7324 6234 shamil.bhoyroo@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

Whose fault? Medical negligence costs are rising but the NHS could be too quick to pay out

Ian Jones

Take cover ⦁ On medical negligence, the bottom line is that doctors need to make fewer mistakes. Given their level of earnings, I fail to see why doctors are not compelled to provide some degree of insurance cover and that would take a lot of pressure off the NHS.

Council lotteries against gambling ⦁ Maybe some of the proceeds of council lotteries (What not to forget if you’re setting up a lottery, http://bit. ly/2x5QQYk) could be spent on combating gambling addiction?

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.

Savage Llama

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

Martin Thomas

No hypocrisy on fracking, please

⦁ Did John McDonnell actually say “Labour ... would bring all existing PFI contracts in house,” (Labour’s shadow chancellor vows to end PFI, http://bit.ly/ 2hNXCLz) or did he just leave it to people’s imaginations that he said it?

⦁ The Scots can cut off their “economic nose” if they want to (Scots impose ban on fracking, http://bit.ly/ 2yx hsV5), provided they are consistent and don’t buy any fracked oil or gas from elsewhere.

David Evans

Mike Keene

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ISSN 1352-9250

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

ALAMY

Hearing things

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

20/10/2017 16:20


opinion

opinion

► Liam Booth-Smith

May could flower Criticism of Theresa May appeared to peak after her disastrous conference speech. Yet this relentless negativity about her leadership may be overblown

I

just feel like a dog that can’t be kicked any more,” said an unnamed Labour staffer at the height of the Gillian Duffy debacle during the 2010 general election. I’m sure they also spoke for prime

Words fail: the negativity about May’s leadership is faintly reminiscent of criticism of Jeremy Corbyn some 18 months ago

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GETTY

minister Gordon Brown and his beleaguered party that day. Watching Theresa May splutter her way through her party conference speech, I remembered this. After a while, the jibes, insults and opprobrium begin to feel like too much. Here stands a woman, 61 years old, experienced, a life committed to public service, making her case for the British dream of the promise for the next generation being greater than the last. The sniping and disloyalty from her own side, the hatred of her opponents, as she fought through to her final lines all seemed, well, deeply un-British. I agree with the Daily Telegraph’s Tim Stanley: I too have never felt more concerned for the prime minister’s personal wellbeing. Yet, with a visible sign of her move from imperial to underdog, just maybe the kicking might stop and we can begin again to judge Theresa May for her ambitions, not just her failures. As for the main policy announcement of her speech, her instincts on housing are correct but I question her solutions. The affordable housing announcement was badly briefed. On the morning of the speech, Damian Green had the unenviable task of talking up a policy he didn’t seem to understand on the Today programme – and which bore little resemblance to what was actually in her speech. We are not going to see a dramatic expansion in council in Canterbury. Securing 42.4% of the vote but losing her majority. house building, as promised in The Sun. Instead, we will see Perhaps the contradictory results reflect her nature. After all, she £2bn – about £400bn a year – put into affordable housing. began her speech extolling the virtues of the free market and You don’t need an expert to tell you that isn’t enough. There ended it insisting on more regulation and cost capping. was also too much focus on technocratic policy answers. This doesn’t need to be a problem. The best political leaders are The organ donation changes are welcome, but they a) have able to hold competing positions, much as they must hold already been announced and b) are hardly big-ticket party together competing groups in an electoral coalition. The question conference ideas. I thought this was a poor speech. I’m left asking is whether we hold May to a higher standard. Her tendency is clearly more interventionist than any A decent slug of the population is willing to put an X next to recent Conservative prime minister. To paraphrase Margaret the Conservative Party candidate. This is not to downplay the Thatcher, under May the Tories have less loosened the corset serious issues facing the Tories, a profound crisis of intellectual of socialism than drawn it tighter. The energy price cap is an confidence and its capacity to organise electorally being but two. Ed Miliband hangover, council house building is straight However, I cannot help but feel the relentless negativity about her out of the Corbyn playbook, workers on boards and caps on leadership or the party’s prospects are, if not wrong, then affected executive pay are tunes from the early and overblown. It is faintly reminiscent of the way Jeremy Corbyn May catalogue but are essentially was berated, particularly by his own side, only 18 months ago. cover versions from circa 1983. The stage set began to degrade around Theresa May, yet with However, she is operating in a her main message decomposing, she stayed standing. Even with Liam Booth-Smith political climate her predecessor little to say, by the end this seemed like a small triumph. The is chief executive could not have predicted. Winning faithful rose to their feet. I think the Conservative Party has of Localis in Stoke-on-Trent South but losing finally forgiven May. ⦁ @liamboothsmith

20/10/2017 17:25


opinion ► Seb Klier

Flat broke no more

O

ne of housing’s great controversies re-entered public debate this year after Jeremy Corbyn pledged at the Labour Party conference to reintroduce rent controls if elected to power. While rent control confuses and divides the housing sector, politicians and commentators, it is enduringly popular with the public. The arguments against rent control are well rehearsed: the system in the UK until the late 1980s (where there was a legal maximum that could be charged on a property) meant the sector shrunk as landlords sold up, and those who remained were unwilling to invest in maintenance. This, we are told, led to poor-quality homes and meant fewer homes were available. Despite this being the orthodox opinion for many years, many of its assumptions are deeply questionable. The shrinking of the private rented sector in the postwar era was not a fall in supply – those homes didn’t suddenly disappear. There’s plenty of evidence to suggest it was the mass building of council housing and the increased availability of home ownership that made private renting less attractive to tenants. Furthermore, the growth of private renting over the past 25 years has not added new homes – it’s just that buy-to-let landlords are outcompeting first-time buyers, while healthy returns can be made from rent by those who inherit a home. Unfortunately, a market where any rent can be charged and go up annually by any amount has had many negative results. Private renting is once again the home of poverty in high-value

with rents:  Down scrapping rent controls pushed the housing benefit bill to nearly £10bn a year without providing any more homes

areas like London, and the ending of a private tenancy is the leading cause of statutory homelessness. The cost to the state has also ballooned; close to £10bn a year in housing benefit goes directly to private landlords. Should we be considering some form of rent control as part of the solution to the housing crisis? If we did, it wouldn’t be unusual. Most European countries (including those with much larger private rented sectors) have some form of rent control. This is often in the form of “rent stabilisation”, where rises are limited over a period of years – pegged perhaps to RPI, wage growth or some other index. While this would be a step forward, it has two central flaws. First, in many areas, rents are already unaffordable and will remain so, even if limits are imposed. Second, it doesn’t address the real need to redistribute some of the huge gains landlords have made in recent years towards solving the housing crisis. Savills recently found renters paid £54bn per year to landlords, more than double the amount that homeowners paid in mortgage interest. Private rents are going into the hands of a small proportion of the population, rather than circulating in the wider economy or being invested in more productive ways. Generation Rent has proposed a system whereby a “living rent” is set (at 30% of local earnings) and any rents charged above that are subject to a large levy. Enforcement would take place through a licensing system, and the receipts from the levy would be ringfenced for building genuinely affordable social housing. This would push down rents while ensuring that those who benefit from high rents are helping to solve the housing crisis. Despite the prime minister’s pledge of an extra £2bn over five years for affordable housing, we know there is a crisis in funding for truly affordable homes, and this would provide an income stream. It would also put a spotlight on renting and tax in general. Newham Council recently found that up to half of its landlords were not paying tax on their rental income. It’s time for those who’ve benefited so much from rising house prices and high Seb Klier is rents to make a larger contribution. London campaigns Rent controls could go beyond helping coordinator at individual tenants to creating the social Generation Rent @genrentuk homes the country desperately needs. ⦁

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It’s time to revive some form of rent control – a levy on excessive rents could generate income to address the housing crisis

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opinion ► Javneet Ghuman

College costs and lost opportunities Student finance has at last become an electoral issue. This could provide the impetus for an overhaul so everyone can afford to go to university

T ALAMY

he general election brought many changes. Theresa May’s slim majority vanished, while Jeremy Corbyn solidified his position as Labour leader. YouGov analysis of the vote revealed some stark generational differences. Labour was 47 percentage points ahead among first-time voters, while the Conservatives had a 50 percentage point lead among the over-70s. The issue of student finance and Labour’s promises undoubtedly played a part and the result has ushered a new dialogue on tuition fees. The result was a wake-up call for the Conservatives, who have for a long time fostered policies to appeal to their base of older voters but done little for younger ones. Where the Conservatives ruled out a review of tuition fees, Labour promised to abolish them altogether and make education free for all. Disillusion with the fee system has been building for some time. Sutton Trust research shows English students had the highest levels of debt in the English-speaking world, owing around £44,000 when they graduate. When the government revised the system, turning maintenance grants into loans, this increased debt at graduation to around £50,000 on average – £57,000 for the poorest students. In turn, our research highlights that most graduates will not pay back this debt until well into middle age, with many never paying it back in full at all. This creeping debt adds to the growing number of difficulties that young people face, especially those from disadvantaged backgrounds. It is already difficult for young college leavers to be hired into graduate roles immediately after university or to take their first step on the housing ladder and, for many, £50,000 of student debt acts as a further barrier to getting on in life.

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With that in mind, the Sutton Trust welcomed the prime minister’s Javneet Ghuman is parliamentary and announcement to raise the repayment public affairs officer threshold from £21,000 to £25,000. We at the Sutton Trust have long called for an increase, especially given that the freeze in the threshold was a retrospective change to student loan terms. This will make a real difference to those on lower salaries. However, the changes do not go far enough and do little to lower the overall debt burden. Our polling has found debt puts poorer young people off university. Half (51%) of young people intending to go to university are worried about the cost and, more worryingly, the proportion of those from “low affluence” households (61%) planning to attend university is the lowest in seven years for which we have data. The student finance changes have a big price tag for the Treasury of around £2bn a year, with the resource accounting and budgeting charge – the difference between the cost of creating student loans and the estimated value of repayments – rising from 31% to 45% from 2017. Not only do the changes do little to reduce student debt, but they also come at a time when public finances are under immense strain. The existing student finance system does not work – that much is clear. It urgently needs review to include the case for mean-tested fees. We know that the access gap at top universities is stubborn and wide, with those from disadvantaged backgrounds being less likely to go to university and, when they do decide to go, graduate with more debt than students from more privileged backgrounds. With fees back in the spotlight, politicians have a chance review fee levels and assess whether the student loans system, in its current form, is contributing to this. A radical overhaul of student finance is needed if we are to improve social mobility and ensure everyone can access the same educational opportunities, regardless of their background. ⦁

students  English graduate with

around £44,000 of debt – the highest in the English-speaking world

20/10/2017 16:30


opinion ► Scott Corfe

For hire and fired Corporate and working practices in the gig economy need tackling – addressing the problems with an outright ban will just make more people worse off

ransport for London’s decision to deny Uber a renewed licence to operate in the capital led to a public outcry. Hundreds of thousands signed a petition calling on the London mayor to rethink the decision, highlighting how at odds it seems to be with public sentiment. For many Londoners, Uber provides access to affordable, convenient taxis that are far cheaper than black cabs. Transport for London argues that Uber has failed to act responsibly, particularly with respect to ensuring passenger safety by properly checking drivers’ backgrounds. Others suggest that the decision to deny Uber a new licence has more to do with politics, with Sadiq Khan needing to preserve the support of anti-Uber union officials who helped fund his campaign. Either way, the decision has riled Londoners and led to claims that policymakers are protecting the interests of a minority (black cab drivers) over a majority (people trying to travel around the capital). We are in a time of great ambivalence about technology and its impact on our lives, and the furore over Uber reflects this. On the one hand, consumers are seeing huge benefits from technology and the gig economy it is enabling. AirBnB and Uber allow people to take holidays and travel around cities far more cheaply than before, and drivers, Uber drivers are not required to have “the Knowledge” – a mean drivers and property owners can boost their income. detailed awareness of London’s roads and points of interest. At the same time, the gig economy is associated with a Tackling the perceived excesses of the gig economy in a more precarious labour market. Some perceive the TfL positive way will be difficult. There is a risk that new regulations ruling as the start of a fightback against this. Uber drivers and restrictions, while well intended, could lead to worse and the like have uncertain incomes. Compared with staff outcomes for both gig economy workers and consumers. An and entrepreneurs, they often have the worst of both worlds outright ban on Uber and similar platforms could lead to job – lacking the guaranteed income and rights of employees, losses for tens of thousands of drivers. Consumers would have to and the genuine flexibility of the self-employed. Social pay more for a black cab or use inconvenient public transport. Market Foundation research shows that they are also much The gig economy is not perfect, and there is clearly scope for less likely than staff to receive training, limiting their ability improvement. Uber has questions to answer on passenger safety to improve their skills and longer-term earnings potential. and drivers’ rights, and it is not unreasonable for TfL to want it to The blurred world of the gig economy often enables revamp some of its practices before granting a new licence. As companies to avoid the tax and the Social Market Foundation has noted, there is a case for doing regulatory obligations of traditional more to ensure the “self-employed” in the gig economy have businesses, leading to claims that access to more rights, such as sick pay, and training opportunities. they are competing unfairly. By But outright bans and heavy-handed restrictions on Uber and treating drivers as self-employed, other parts of the gig economy would be madness. Gig-oriented Scott Corfe is chief economist at Uber reduces its tax burden. Until technologies are boosting incomes and helping to reduce the cost the Social Market now, it has got away with lax safety of living at a time when household finances are under the cosh. Foundation checks. In addition, unlike black cab Let’s not make people poorer. ⦁ @ScottCorfe

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T

Cheap and convenient: but Uber has been criticised for treating its drivers as selfemployed to avoid tax

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cover feature

CALLING TIME ON CARE FUNDING

SUTTERSTOCK / CRAIG ZADUCK

Tech & Tools

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S By Judy Hirst

SUTTERSTOCK / CRAIG ZADUCK

ocial care wasn’t just the dog that barked in June’s general election. It went on the rampage, tore up the furniture and nearly mauled its owner to death. The bright sparks who thought it a good idea to alienate vast swathes of middle England by inserting a so-called “dementia tax” into the Conservative manifesto have long since been shown the door.

Politicians are not confronting the social care funding crisis. This failure is letting down older people, now and in the future

But the mess they left behind – particularly after Theresa May’s U-turn on the subject – not only helped lose the government its majority. It also landed her fragile administration with a huge dilemma: how to solve a problem like social care funding without earning the opprobrium of older voters and their offspring. The ill-fated manifesto proposals, which ditched a future cap on care costs and created new liabilities for home care charges, were greeted with even more uproar than Labour’s 2010 “death tax”. So can politicians ever say anything meaningful about care charges, winter fuel allowances or triple-lock pension entitlements without instantly undermining the all-important grey vote? Previous governments have generally opted to play dead on the issue. Or to set up a commission and ignore its findings, which amounts to the same thing. Given the choice – particularly after the June debacle – this administration would like to follow suit. Recently appointed care minister Jackie Doyle-Price has been keeping an even lower profile than her predecessor David Mowat. Both the Department of Health and the Cabinet Office, which is leading the consultation process, have maintained near radio silence on the long-promised social care funding green paper. The topic was off limits at the Conservative party conference. Although there is some expectation of an announcement in the chancellor’s autumn Budget, local government insiders say the issue has been downgraded by Whitehall. Ministers are far more preoccupied with intergenerational fairness and courting the elusive youth vote. Even so, forgetting about the care costs conundrum is not an option, not least because of its impact on the NHS. Ironically, the manifesto meltdown has had an upside. “The good news is there is growing public recognition of the issues,” says Izzi Seccombe, chair of the Local Government Association’s community wellbeing board. “The election debate showed that, and the vast majority of MPs agree there needs to be a cross-party solution. This momentum must be maintained.” Numerous commission and inquiry reports have spelt out just how inequitable and unsustainable existing funding arrangements are. Sir Andrew Dilnot – and before him Lord Sutherland, Sir Derek Wanless and Dame Kate Barker – have all made the case for a new social care funding settlement (see ► panel overleaf ).

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13.5%

FALL IN COUNCIL SPENDING ON ADULT SOCIAL CARE SINCE 2009-10 Sutcliffe, Care Quality Commission: the adult care sector is  Andrea “fragile” with “23% of services previously rated ‘good’ deteriorating”

The problems they identified – rising demographic pressures on services, particularly for the over-80s, soaring levels of unmet need and unjustifiable postcode lotteries of care - are intensifying by the decade. Above all, there is the division between health and social care funding. This determines, for example, that an older person with cancer will be provided for by the state whereas the one with Alzheimer’s will not. It was this recognition of the potentially “catastrophic costs” of long-term social care that prompted the Dilnot Commission, in 2011, to propose a cap of £35,000 on lifetime (non-hotel) care costs. And it was the cap’s proposed replacement with an asset floor of £100,000, collectable after death, that caused such outrage and the use of the

term “dementia tax”. In the election debate, Dilnot said the manifesto proposal would have left people “helpless” and “completely on their own”, unable to pool their risks to plan for future care costs. On paper – or at least until the green paper consultation – the government is still committed, under the Care Act 2014, to introduce a “Dilnot-lite” care costs cap of £72,000 in 2020, along with a raised

need. But it’s interesting to note that we don’t apply the same argument to healthcare. We rejoice in the fact that it’s a universal system. Meanwhile, the boundaries between what is health and what is social care are becoming thinner all the time,” he says. This tension between affordability and equity was thrown into sharp relief by the quickly rescinded manifesto proposals, says CIPFA chief executive Rob Whiteman. “The government must face up to finding a realistically costed balance between adequately funding care services, capping individual exposure to care costs,

means test floor for publicly funded care. However, the constant pushing back of this deadline – and the casual way No 10 advisers tried to dump the cap in June – does not instil confidence in it ever happening. The truth is that many local government leaders are conflicted over the issue of a care costs cap. Both the LGA and the Association of Directors for Social Services have questioned whether the priority should be further extending eligibility for publicly paid-for care – which the Dilnot reforms would do – or sustaining services in the here and now. King’s Fund senior fellow Richard Humphries recognises there are arguments on both sides. “Yes, an intellectually elegant case can be made for focusing on those in most

and maximising the savings people can retain,” he notes.

A

chieving that balance will be a big ask. Estimates vary, but the LGA reckons that, even taking into account the one-off £2bn for social care announced in the 2017 spring Budget, English local authorities will face an annual £2.3bn care funding gap by 2019-20. This includes the £1.3bn the LGA says is needed immediately to avert widespread provider market failure, which is a real and present danger according to Seccombe. This comes at a time when

Governments have been able to get away with delaying action because inaction doesn’t bring down the system. It’s care users and their families who bear the financial pain Rob Whiteman, CIPFA

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cover feature

► FIVE STEPS TO PREVENTION

Tech & Tools

change:  Sea Sir Andrew

Publicly funded older social care users

ALAMY

Dilnot (below) proposed measures to pool the risks of “catastrophic” care costs

Direct payments Home care Care homes

Millions

0.6

0.4

0.2

0.0 2015

2020

2025

2030

2035

Source: PSSRU

Public expenditure on older people’s social care In England 20 Asse Assessments Residential Resid Community Com

16 £ billions

social care experts are predicting a shortfall of up to 100,000 care home places over the next four years. The implications are worrying, says the Care Quality Commission, which describes the state of the adult care sector as “fragile”. Andrea Sutcliffe, the regulator’s chief inspector of adult social care, tells PF: “We are seeing some concerning signs. Services are struggling to improve. A quarter of the ones classed ‘inadequate’ are not improving, or there’s been a slight deterioration. Only half of those ‘requiring improvement’ are doing so. And 23% of services previously rated ‘good’ are deteriorating,”” she says. Sutcliffe is equally worried by the huge are quality across the country variation in care her and poorer authorities, – between richer and between different sized organisations g staff turnover, particularly – and by rising mes, leading to an expensive in nursing homes, gency staff. reliance on agency “People are living longer, but we are not crease in care provision that seeing the increase

In England 0.8

12 8 4 0 2015

2020

2025

2030

2035

Source: PSSRU

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is a  There predicted shortfall of up to 100,000 care home places over the the next four years

With all the parties knocking seven bells out of each other, it’s hard to see them collaborating on a cross-party approach Richard Humphries, King’s Fund

spend more of their own money. However, given all the uncertainties surrounding local government funding, these shortterm measures “barely touch the sides”, says Humphreys. Cuts to revenue support grant already exceed the benefit from any extra income via the precept, points out the LGA. Plus, as the communities and local government committee has noted, local taxes “cannot be the main funding solution” for adult social care. There is no way, particularly in the most deprived areas, that they can keep pace with demand. would respond to that. I am concerned about the rising levels of unmet need, and its impact on family carers. It’s a downward spiral,” she says. “We are not seeing the investment in adult social care that you would want.” Some providers, albeit a minority, are cutting corners; and growing numbers are handing back contracts to councils. Adult social care, which covers services for younger as well as older adults with care needs, is the biggest area of discretionary local authority spending in England, responsible for a £16.8bn spend in 2015-16. However, council spending on adult social care services per adult fell by 13.5% between 2009-10 and 2016-17. This, combined with the impact of an ageing population, has contributed to a drastic narrowing of eligibility criteria for social care support, with serious knock-on effects for the NHS. Avoidable hospital admissions and delayed transfers of care (DTOCs) from hospital are major problems, partly because of the lack of care packages in the community. There are “grave and worsening issues” on this front, says Humphries, with a predicted winter flu crisis ahead. The chancellor’s additional £2bn for social care has of course been widely welcomed, as has the decision to let local authorities boost their social care precept by up to 3% – even if it only lets councils

As for the Improved Better Care Fund (worth £1bn this year), a measure that was meant to promote health and social care integration is now widely seen as part of the problem – little more than a stick for the NHS to beat local authorities with if they fail to achieve their DTOC targets.

S

o what is to be done? All the evidence points to the need for a long-term solution, not more sticking plasters. “Social care funding faces a perfect storm, with increasing costs, providers increasingly in trouble and rising pressure on care packages. There are growing levels of unmet need,” says Seccombe. Most MPs, whatever their differences, are inclined to agree; only 10% think the social care system is fit for purpose. “Everything must be on the table when it comes to the social care green paper,” argues Seccombe. “How we pay for the care people need, and who contributes – it should all be up for discussion, without political point-scoring.” The policy zig-zags on the issue have been unfortunate, says Sutcliffe. Like everyone else, she is awaiting the green paper. “We need a long-term, sustainable solution that enables people to have

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cover feature

£2.3bn SHORTFALL IN CARE FUNDING ANNUALLY FOR ENGLISH COUNCILS BY 2019-20

ALAMY / PA

confidence in adult social care going into the next 20-30 years.” To get there, she says, we need to start from a different place. “We need to ask what kind of system people want, at what level of coverage and quality – and the most appropriate way to achieve it.” The CQC is examining different stages of social care in 20 local authorities to help inform future decision making. An interim report to the DH and the Department for Communities & Local Government is due by the end of the year. Behind the scenes, plenty of serious thinking is going on about future care funding models. CIPFA is participating in discussions with the King’s Fund and the Health Foundation. The LGA is offering to host national cross-party talks. All the old issues are back in play: the balance between what the individual and the state pay; the role of taxation, hypothecated or otherwise; the merits of a “stop loss” costs cap; the potential for long-term care insurance; and the impact of all of the above on intergenerational wealth. The problem, though, is not a lack of reviews of social care funding, but an absence of political will to make things seriously change. All the signs are that, after getting badly burnt in the election, the government views social care as politically toxic, says Humphries. “And with all the parties knocking seven bells out of each other, it’s hard to see them collaborating on a cross-party approach.” Nevertheless, one is urgently needed. While progress on social care is bogged down in the political quagmire, some of the most vulnerable members of society are being badly let down. “Past governments have been en able to get away with delaying action,” ,” says Whiteman, “because inaction doesn’t re users and bring down the system. It’s care ancial pain.” their families who bear the financial nded us, Old age, as Bette Davis reminded either, it ain’t no place for sissies. But neither, g to secure turns out, is the long hard slog serve. ● older citizens the care they deserve.

PAST AND PRESENT

The long road to funding reform Successive governments have wrestled with the mounting funding crisis in social care. Numerous independent commissions, reviews, consultations and think-tank reports have highlighted the unsustainability of the current system. They include: 1999 Report of the Royal Commission on Long Term Care, headed by Lord Sutherland 2005 King’s Fund review of social care funding, led by Sir Derek Wanless 2006 Joseph Rowntree Foundation report on new cofunding social care model 2011 Report of Sir Andrew Dilnot’s commission on sustainable care funding 2014 Economist Kate Barker’s report of commission on future of health and social care Aspects of these and other reports’ proposals have been incorporated into legislation, including the Care Act 2014. However, Labour, Conservative and coalition governments have all rejected more far-reaching reforms. The fundamental divide between the provision of NHS services, which are free at the point of use, and that of social care by local authorities, which is means tested, remains. This whole issue has become politically explosive as demographic change, growing medical needs and rising property wealth have taken ever more people above the means-tested capital threshold. It is further complicated by regional differences in the proportion of people who depend on state support for their care needs and wealthier “self-funders”. The ill-fated “dementia tax” – brainchild of former No 10 joint chief of staff Nick Timothy (below) – was an attempt to address this thorny issue. In a rare public appearance, care minister Jackie Doyle-Price has indicated som some version of this tax may still be on the table. It would req require more people to pay for care through the value of their assets – a move that could prove popular with ministers seeking see to champion intergenerational equity. An alternative a approach is being promoted by Manchester mayor Andy Burn Burnham. The former Labour health secretary is lobbying the ch chancellor to allow for a levy to pay for “free” social care in the region.

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Austerity simply cannot work. You cannot cut your way out of a recession and that’s what, since 2010, chancellors have tried to do, and it hasn’t worked

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interview

WALES BLAZES A TRAIL Mark Drakeford, Welsh cabinet secretary for finance and local government, talks exclusively to PF about taxes, budget setting and why austerity is a failed policy

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esigning a spending programme in what is the ninth year of austerity gets ever more difficult, says Mark Drakeford. Speaking exclusively to PF shortly after publishing the Welsh Government’s By Vivienne Russell draft budget for 2018-19 in October, Drakeford, who has held the finance and local government briefs in the Cardiff administration since last summer’s elections, does not mince his words. He has a very clear message for chancellor Philip Hammond ahead of the autumn Budget in November. “Our general request remains to move away from flawed and failed policies of austerity,” the Labour politician says. “Austerity simply cannot work. You cannot cut your way ►

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interview / mark drakeford

£100m into frontline services. Agreement with Whitehall on a 5% funding floor for Wales generates another £47m and the country’s two new devolved taxes, which take effect next April, are expected to bring in a modest £10m, rising to £20m the following year. The devolution of tax-raising powers to Wales – the first time the country has had control over any taxation for 800 years – is a “genuine landmark moment” in Wales’s devolution journey, Drakeford says. The two taxes that will come into force next year – land transaction tax (replacing stamp duty land tax) and landfill tax – represent only a modest start, he adds. Decisions over the partial devolution of

“I think that just demonstrates the incredible impact of austerity. Public services in the United Kingdom grew every year in line with the economy from 1945 to 2008-10,” he tells PF.

income tax will devolve to the finance secretary next year, passing over control of a potential £4bn in revenue raising. “In future years, I believe the practical impact of fiscal devolution is only likely to grow,” he predicts.

“Even when things were being cut in the 1980s, if the economy grew, public services had their share of that growth.” Still, he says, the Welsh Government is working hard to try to fulfil its commitments, particularly around health service investment. The draft budget also found the funds to support the ambition to build 20,000 affordable homes over the current assembly term. Drakeford has continued his predecessor Jane Hutt’s policy of sharing the burden of cuts equally. Wales has eschewed England’s example of loading local government with cuts in order to, relatively, protect the NHS. The objective is to protect public services in the round, especially at the interface between health and social care. “We’ve always said there is no point in us artificially looking as though we were inflating health service budgets if Welsh hospitals are just filled to the rooftops with patients who cannot be discharged … because social care services have collapsed,” he says. Wales’ policy of trying to “share out the pain” in the fairest way possible has included some careful handling of reserves, which has released an extra

T

he new taxes are a better fit for the specific needs of Wales, Drakeford maintains. A new 150% rate on unauthorised landfill disposals is the first of its kind in the UK and should help tackle the problem of illegal dumping. “On land transaction tax, I was able to raise the starting rate of tax from houses worth £125,000 to £150,000 and, in Wales, that means the vast majority of first-time buyers or people at the very modest end of the housing market will be taken out of tax altogether,” he explains. “We want to stimulate that part of the market to make it easier for people to get on the property ladder.” There has also been considerable and unexpected enthusiasm from the Welsh populace over the potential for other new Wales-specific taxes, something now possible following passage of the 2014 Wales Act. Work will soon start to scope out the potential for taxes on vacant land,

A series of ideas involve using taxation to tackle social and environmental issues to help shape future behaviour

MATTHEW HORWOOD

out of a recession and that’s what, since 2010, successive Tory chancellors have tried to do, and it simply hasn’t worked.” In September, a report from Cardiff University’s Welsh Governance Centre and the Wales Public Services 2025 Programme warned that public services in the country faced a painful future, and raised questions about the future sustainability of some service areas. Drakeford confirms this bleak picture. Had Cardiff ’s budget grown in line with the economy, the finance secretary would have an additional £4.5bn to spend. If it had not grown but retained its real-terms value, there would be an extra £1.2bn. On a total budget of £15bn-£16bn for Wales, that is a significant amount.

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from the sector and assembly members and the administration had to compromise. The “headlines” are now agreed, Drakeford says. The 22 local authorities will remain as a “front door” for services, and will remain unchanged for a minimum of two five-year terms, but there will be systematic and mandatory regional working behind that. There’s still a lot of “nitty gritty” work to do on governance and scrutiny arrangements as well as financial flows before the proposals can be taken further, but the minister stresses that he’s committed to talking – and listening – to local government leaders to find consensus before he brings a bill forward. Given his background in local

tourism and disposable plastic, as well as a levy to support social care. Drakeford offers the caveat that these are only modest proposals and any ideas need to be considered by Whitehall and Westminster before they can be taken any further. However, “keen to test this new machinery”, he hopes to put one forward to the chief secretary to the Treasury early next year. Drakeford says he has been surprised by the high level of interest from Welsh citizens. “Uniquely in my experience, while I was standing up in the assembly chamber [in July] making the statement, members of the public started emailing me with ideas. We’ve had a far bigger response that we anticipated.” Rather than an aversion to any extra taxation, it seems there is an understanding that public services in Wales have been starved of resources and many, particularly pensioners, are happy to pay a bit more, he says. “There were also a series of ideas, which may be partly about raising money, but are also using taxation to tackle social and environmental issues to

help shape behaviour in the future.” Drakeford is well grounded in public services, having worked in the probation and youth justice fields before going on to an academic career as a professor of social policy. He also served as a councillor on South Glamorgan County Council in the 1980s and 1990s, something that has stood him in good stead for the local government half of his brief. The cabinet secretary has been trying to steer through the delicate issue of structural reform of the sector. A proposal put forward in the last assembly term would have slashed the numbers of councils in Wales from 22 to eight or nine. The idea was met with fierce opposition

150%

TAX RATE ON UNAUTHORISED LANDFILL DISPOSAL – THE FIRST OF ITS KIND IN THE UK

government, Drakeford says it is a sector he understands and empathises with and he stresses that collaboration and cooperation are key to the way he approaches both parts of his job. “I am very committed to finding solutions to these really challenging things by collective ways of doing things, getting round the table, doing the hard work of trying to hammer out ways forward,” he tells PF. “It’s always the way I’ve believed politics is best conducted and I’ve tried to apply that way of doing things to the responsibility so far.” Outside politics, Drakeford is a keen cricket fan, and has been a member of Glamorgan County Cricket Club even longer than he’s been a member of the Labour Party. “Anybody who’s been a member of Glamorgan knows suffering,” he jokes. And, like UK Labour party leader Jeremy Corbyn, Drakeford confesses to a fondness for his allotment, close to his home in the centre of Cardiff. The work of a politician doesn’t really have a beginning and end, he explains. “It’s not always easy to see where you’ve been, whereas on an allotment you can say to yourself, ‘I am going to dig that bit there,’ and you can start it and finish it and you can see where you’ve been. It has all those simple satisfactions. I have always felt it’s very restorative to be able to do that.” ●

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feature Tech & Tools

FINANCIAL STABILITY IN

TURBULENT TIMES Implementing strong financial systems after conflict and where corruption is rife gives rise to major issues around culture and stability By RACHEL WILLCOX

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ow does a country in the midst of conflict implement a public financial management system that is fit for purpose? What are the cultural obstacles to reforming public sector financial management when corruption is so firmly entrenched in its modus operandi that it has becomes an accepted part of public sector operations? In part two of PF’s international focus on public financial management reform in challenging contexts, we look at projects unfurling in Afghanistan and Bangladesh. These have delivered some tangible benefits in boosting accountability and efficiency in the management of public resources and service delivery despite some incredibly difficult circumstances.

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he US-led war in Afghanistan was a response to the September 11 terrorist attacks on America. Although coalition forces toppled the ruling Taliban in 2001, stabilising the country is proving difficult as almost 40 years of conflict have left Afghanistan one of the poorest and most fragile countries in the world. International development secretary Priti Patel told PF: “The UK is leading the way in helping Afghanistan to build stronger, more accountable institutions and open governance to help it better manage its public finances and stand on its own two feet. This will help ensure Afghans see improvements in the delivery of public health and education services, helping to save lives and reduce poverty. “The UK’s vital support is helping to build stability in one of the most fragile countries in the world, which is firmly in our interests.” The change of government in late 2001 gave rise to hopes of stability, with the combination of the drafting of a new

Afghanistan: better  Kabul, revenue collection and stronger controls in the country were effective

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AFGHANISTAN

Rebuilding after the war amid humanitarian struggles Public financial management had to start effectively from scratch following years of conflict in Afghanistan. The country, which still relies heavily on foreign aid, had to stamp out waste and corruption, and secure sustainable sources of growth. It has now moved from a hand to mouth existence to a far more strategic approach systems to make them more sophisticated and fit for purpose. Meanwhile, 2002 also saw the establishment of the Afghanistan Reconstruction Trust Fund to provide a coordinated financing mechanism for the government of Afghanistan’s budget and priority national investment projects, managed through the World Bank.

half of what the country realistically needs to function effectively, it signifies a remarkable turnaround story. The government has since been able to deliver publicly funded schools and clinics alongside infrastructure improvements. Community development councils across the country today hold the purse strings for small-

management perspective, the bodies involved were effectively starting with a blank sheet of paper and, less helpfully, a knowledge black hole. The reform programme took the form of targeted support delivered through UN agencies, in particular direct support for government budgeting systems. Previous budgets used to roll forward – a practice that has since been stamped out. A much tighter system linking the main spending departments to the ministry of finance has been introduced alongside improvements to expenditure

In 2004, Afghan government revenues were just $250m, around 4% of GDP. Afghanistan’s biggest economic problem was finding sustainable sources of growth against a backdrop of high dependency on foreign aid. The introduction of a performance element linked to improved revenue collection and improved PFM performance due to better controls proved to be an effective strategy. By 2017, domestic revenue had jumped to $2.1bn, representing 10.5% of GDP. While this figure still represents only about

scale infrastructure projects. However, locals do not tend to associate these with the government. Despite huge efforts to stamp out waste and corruption, including bold policy steps by government, they remain a very real problem for the country. In 2014, the inquiry into the Kabul Bank was reopened. The bank collapsed in 2010 after losing almost $1bn, mostly deposited by international donors. The Anti Corruption Justice Centre was set up in 2016 by Afghanistan’s National Unity Government as one of its

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constitution, presidential elections and the creation of a legislature resulting in a large inflow of aid and impressive economic progress. In 2002, then development secretary Clare Short agreed to a proposal for fiscal support provided in conjunction with the World Bank. The political turmoil meant that, from a public financial

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Public financial management remains more of a political rather than a technical issue. Despite a degree of dependency on external advisers brought in to reform PFM, the past couple of years have seen a shift to providing bilateral assistance. In 2016, the government of Afghanistan endorsed a five-year fiscal performance improvement plan for the PFM system, using its own resources with ad hoc support from international experts. The need to further enhance robust expenditure control systems and budget planning continues but the ministry of finance has moved from a hand to mouth existence to being much more strategic about planning its budget and having a far better grip of the pattern of expenditure flows and better systems for tracking that in real time. IMF endorsement for the government’s macroeconomic management shows just how far PFM in Afghanistan has moved and will no doubt go a long way to boosting confidence among foreign investors. However, qualified accountants remain thin on the ground. A capacitybuilding project originating from the International Federation of Accountants is on the radar and is seen as key to meeting the public interest and giving confidence that any taxes paid are properly collected and used to deliver the services so desperately needed in the country.

BANGLADESH

The professional road to end corruption Bangladesh’s public finances were already suffering because of poor economic management, political crises and corruption, when it took on the cost of its huge support to Rohingya refugees. Bangladesh has received international help to improve financial management. CIPFA senior trainer Jade Quarrell was the project leader for the professional training part of a programme to make its Office of the Comptroller & Auditor General more professional Strengthening Public Expenditure Management Program (SPEMP) is a World Bank-funded project to provide training to auditors in the Office of the Comptroller & Auditor General (OCAG) in Bangladesh. The three-year project was won by accountancy firm BDO but provided by CIPFA and the National Audit Office and its development objective was to modernise the business processes followed by the financial oversight committees of the parliament of Bangladesh. As part of that project to help professionalise the OCAG, we delivered CIPFA PFM accreditation courses to more than 300 Supreme Audit Institution staff, including three level 1 certificate courses, eight level 2 diploma courses, four level 3 advanced diploma courses and two level 4 professional courses, which were delivered at OCAG’s Financial Management Academy. The CIPFA team also provided “train the trainer” support to the local Bangladesh government training school. Although individuals do a competitive exam to enter the civil service in Bangladesh, they are allocated a specific job in the audit team without having professional qualifications. The accounts they audited didn’t follow international financial reporting standards and the audits did not comply with international public sector auditing standards. Audit team members needed professional training to be able to deliver ISSAI compliant audits. We have also introduced an audit methodology based on standard auditing practice, which included making recommendations for entity wide auditing. There was definitely an appetite and an enthusiasm for change because people could see the benefits. There’s a real need to prove that funds are being used effectively. Strengthening the management of public expenditure means not only can you make money work better but also it will hopefully lead to more of a willingness among foreign donors to invest. To date, 10 people have passed professional level CIPFA qualifications and a further 23 have the advanced diploma; 40 have passed the diploma and 176 are qualified to certificate level. Given the very hierarchical nature of the environment, qualifications have been instrumental in giving staff the confidence to question things. The NAO introduced an audit manual and led a number of pilot audits.

GETTY

commitments to the international community in addressing high level corruption in the country. It has successfully prosecuted and convicted senior officials. Bearing in mind the huge scale of poverty in the country – 38% of the population live below the poverty line – there isn’t much in the way of fiscal space for a government to provide the services it needs. This is combined with the fragility of the country’s political system; despite a peaceful transition of power in 2014, the election was contested. The coalition government brokered by then US secretary of state John Kerry has survived but remains fragile. Afghanistan’s reliance on foreign aid, albeit diminished, remains significant. Including security aid, it peaked at an estimated $15.7bn in 2010-11, almost equivalent to the country’s entire GDP that year. Although Afghanistan has become something of a poster child for PFM reform, that journey is far from over.

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feature

They provided train the trainer courses to further roll out the audit methodology. Although HR and training tend to be managed centrally, the auditor general has now allocated part of his budget to training. It shows a real commitment to getting these skills. There are safety and security challenges – during the 18 months when I was in Bangladesh, there were attacks targeted against foreigners, including the massacre at Holey Bakery and people were advised not to travel. So, in terms of foreign aid, there is a far greater focus on programmes being delivered by local staff, partly because it’s harder to get expats out there. There was a concern that, once they qualified, staff might be tempted to leave the country but there has been very little attrition so far. CIPFA is now working with a private sector accountancy college in Bangladesh to continue provision of exams. There are ongoing issues around the democratic authority of the government and there is a reluctance to give funds directly. It’s about having processes in place to enhance accountability. Implementing change is a challenge; the size and scale of the government cannot be overestimated. There are many departments running different systems and processes. Many officials have a vested interest in keeping things as they are and, even amongst those who are willing, getting people to change at

public financial management meant the government was lurching from crisis to crisis without the resources to provide resilient infrastructure such as roads that can withstand the frequent floods. Long-term planning is difficult for government as a large amount of funding comes from outside. Cooperation between different aid agencies is very important.  There is a huge informal economy and a lot of people who work aren’t registered. Due to the security issues, there has recently been much more focus on people getting national registration cards. Knowing that they exist does at least make it easier to link them to the tax system, but that is very much a work in progress.  What’s also true is that corruption is a big issue in the public sector, particularly when it comes to high-profile foreign donor projects. Instances of public officials

the same time is difficult. The scale of change is overwhelming. There are still offices full of paper bundles tied with red tape, and cash pay packets are still distributed to many government employees. Infrastructure is a challenge to change in Bangladesh. It is very difficult to travel around the country with poorquality roads, heavy traffic and trains packed to breaking point. In a region plagued with monsoons, the absence of any meaningful

being bribed by firms that want to work on infrastructure projects are well reported. The situation was exacerbated by low levels of public sector pay, which led to it being culturally acceptable for civil servants to accept bribes or extra payments for taking on extra responsibilities. It is hoped that a pay review of civil service wages in 2016 will help stamp that out but trying to deal with that cultural expectation is quite difficult. The audit department is certainly conducting better audits and creating better findings in terms of corruption and, while I think there’s marginally more faith in the numbers produced by government, it’s a long-term project. The next step is to roll it out more broadly across government but one of the big problems is the reliance on donor-funded projects for funding and expertise. In an ideal world, PFM reform would be embedded to the extent where the Bangladeshi government was less reliant on these projects. But the good news is that culturally things are certainly moving in the right direction.

over a half a million Rohingya refugees have fled into Bangladesh since late  Well August, causing a humanitarian crisis

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PFI REVISITED 36 PUBLICFINANCE NOVEMBER 2017

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A

IKON

t the Labour conference in September, shadow chancellor John McDonnell made the bold announcement that he would bring private finance initiative projects “back in house”. He promised to stop any new deals being struck and to terminate existing ones. A press release issued immediately after his speech, however, said the existing deals would be ended early only “if necessary”. But, despite this caution, the intention to end PFI deals By Anthony Barej would have been music to the ears of some. Many of these projects have been beset by problems, which has made the financing model hugely unpopular. Countless headlines tell tales of delayed projects and public bodies being saddled with exorbitant costs. The Centre for Health & the Public Interest think-tank said government money was “leaking out of the NHS” through profits made by PFI companies in a report it released in August. It claimed companies contracted to build and run NHS hospitals between 2010 and 2015 made pre-tax profits of £831m and were expected to make

The private finance initiative is deeply unpopular, blamed for delays and exorbitant costs. However, it could still have a future

another £973m over the next five years. John Major’s Conservative government started the initiative in 1992 but it really took off under Tony Blair’s New Labour. At its height in 2004, 65 contracts with a capital value of more than £7bn were finalised. The number of new deals then began to decrease, although they did continue to be struck. Conservative chancellor George Osborne, while critical of PFI in opposition, was negotiating 61 deals in 2011 with the aim of signing off 39 that year, with a total worth of £6.9bn. But it is in recent years that the number of new contracts has considerably tailed off. Treasury documents show just two PFI deals were signed off last year. The number of PFI contracts in existence has gone from 728 on 31 March 2014, to 722 on the same date in 2015 to 716 at the end of March last year. Yet there is a still small trickle of deals being struck and a Ministry of Defence deal was extended last year (see case study). So, is PFI’s unpopularity and relative decline just the result of its bad reputation? Or is there something positive to be said for the model? And does it have a future? Mark Hellowell, an academic at the University of Edinburgh, has studied PFI. He believes the “buy now, pay later” approach creates a “perverse incentive” for public sector organisations. PFI’s concept of “off-budget financing” means the public sector, and NHS trusts in particular, invest in deals that are not affordable, he argues. Public bodies were too tempted by the initial investment – although it could mean huge long-term costs – and made “really heroic assumptions” about the efficiencies they could secure through PFI, Hellowell thinks. They also overestimated the income that would come in to pay for their PFI deals. “Where those forecasts have been found to be overly optimistic, many of those authorities have run into difficulty. That is most obviously the case in the NHS,” he says. “There is no getting away from the fact that, if we really want to invest properly in the public estate and social and economic infrastructure that remains within the public sector, we have to increase capital budgets through a combination of additional borrowing and increases in taxation.” However, not everyone is as pessimistic about PFI as Hellowell. Tony Hazell, a member of CIPFA’s PFI advisory service, remembers the public sector’s track record on procurement was “frankly abysmal” before PFI came along. ►

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feature Number of signed projects per year and corresponding capital values 70

7

65

60

“The private sector would get their returns paid up and they would take the money and retire to the Bahamas. They would have all their returns paid up without any risk of deductions for non-performance,” he states. “All you do is take back all that responsibility onto the public sector balance sheet and you’ve still got to provide the service – and who is going to pay for that?” Richard Murray, director of policy at the King’s Fund health think-tank, notes PFI enabled “an awful lot” of hospitals to be built that might otherwise not have been. He explains although many in the health service say PFI is a “nightmare”, trust chief executives usually admit it was better to bear the PFI expenses than not to have the hospitals built at all. Murray adds: “It is not easy to see that if it hadn’t been for PFI the government would have stumped up the traditional public capital. I think the answer is probably not.” He points out that the health service has started to turn to other ways of funding infrastructure, such as selling its assets, as recommended by the Naylor review of the NHS estate published earlier this year. This suggests the government could raise billions for capital projects and backlog maintenance by redeveloping or selling off NHS land. PFI can still be part of the mix, Murray

55

50 5

Number of projects

45 Capital value (£bn)

He cites the case of Chelsea & Westminster Hospital, which opened in 1993. It started with a purchase price of just over £100m but ended up costing nearly three times as much under the traditional procurement process. “The original purpose of PFI was to get rid of some of the inefficiency of public sector procurement processes for major pieces of infrastructure,” he explains. PFI was intended not just to pass the upfront cost and risk of projects onto the private sector but also to harness its skills in areas such as design, build and finance for the public sector. Hazell believes Labour’s proposals are “naive” because bringing contracts back in house means the public sector would bear the cost of paying off the private companies.

6

40 4 35

30 3 25

20 2 15

1

10

0

0

5

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Year of financial close

Key Capital value Number of projects Source Figures are based on departmental and devolved administration returns. Current projects only – does not include projects that have expired or terminated. Notes Signed refers to when the project reaches financial close Capital values are normally calculated at the financial close of individual contracts

Take back all that responsibility onto the public sector balance sheet and you’ve still got to provide the service – who is going to pay for that? Tony Hazell, CIPFA

says. “What you hope is that the public sector, including the NHS, would have a menu of options [for funding].” Chris Everden, managing director of FMS Consultancy, who has worked with CIPFA in reviewing PFI contracts, believes that, conceptually, PFI is “brilliant”. But he gives it only four out of 10 for delivery. He and Murray both agree earlier deals were poorly negotiated. Hazell argues “there was a naivety around” these agreements, which would later see public bodies lose out on economic gains from successful PFIs. The private sector would make significant amounts of money from these contracts but be under no contractual obligation to share profits with the public

sector, something Hazell states was a “huge flaw” in many early deals. However, he says this been addressed in PF2, a successor model launched in 2012 with the aim of addressing some of the concerns with PFI. Everden says: “I think anybody of a certain generation who walked into an old school or old hospital could not be anything other than impressed by the physical structures that are now there in terms of places for teaching and getting people better.” Much of PFI’s bad name, Everden explains, was because of the breakdown in relationships between the public and private sectors, which could become “ugly and aggressive” on both sides.

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He explains that, after the 2008 crash, public bodies began to “forensically examine” their PFI contracts and disputes soon arose over petty things, such as the length of grass on playing fields. “You have two bodies with absolutely opposite objectives and motivations and it just got adversarial,” he says. This means the full potential of PFI has not been realised, he argues. Everden, like Hazell, also believes that the situation before PFI was worse. There was an “astronomical” backlog of maintenance of the public sector estate and, because this was not addressed, maintenance costs “may have been artificially low”.

CASE STUDY

‘Garrison commanders’ on MoD contract watch

here has been a “massive”

learning curve regarding PFI contracts, Everden points out, a view Hazell shares. One lesson Hazell highlights is the need for public bodies to invest in performance monitoring, rather than rely on private sector self-reporting. “The fundamental flaw in these [deals] is that they require positive management by the public sector but in the absence of that you have self-monitoring arrangements, where the private companies look at their performance and report any shortcomings. But they don’t do that,” he says. Mark Williams, a director at PA Consulting and a member of the CIPFA Governments Faculty board, suggests there are good PFI deals and bad ones, which, he notes, stands to reason considering the number of contracts there have been. “There will be a distribution of great deals and deals that aren’t so strong,” says Williams. But, he adds, with government debt hovering close to £1.7trn, it has “no alternative” other than to rely in part on private finance. Is it just a question of whether that is through gilts or public private partnerships, he suggests. Hazell correctly surmises that the future of PFI depends on politics. If Labour wins the next election, “PFI is dead”, he says.

design and service delivery,” he says. So PFI is still here, for the moment and into the near future, even if only through the deals already struck or in the pipeline. What is important, if public bodies do enter new deals, is that they to go into them with a robust business case and do not lose sight of lessons from the past. ●

A PFI contract to build homes for the armed forces in Salisbury Plain was going so well last year that the Ministry of Defence extended it, putting in £1.1bn of its own money. Although the private partners of a project normally pay the upfront costs, the government sometimes adds to it. The original 35-year, £8bn Project Allenby Connaught contract to build or refurbish 562 buildings and demolish 496 started in 2006. It had run 10 years when it was extended in November last year to create an extra 2,600 bedspaces to accommodate troops from Germany, who must be withdrawn by 2020. Mark Williams explains this renegotiation has been possible because of the positive relationship between the Ministry of Defence and the private organisations. He says the secret of the MoD’s success with the project – and its PFI contracts generally – is getting a good deal then “very actively” managing the contract. The private company does contract manage but the MoD will “also have its garrison commanders out there too”, Williams says. Aspire Defence, the special purpose vehicle set up to deliver the project, is responsible for building, improving and maintaining the soldiers’ living and working accommodation on the site until 2041.

ASPIRE DEFENCE

T

But hospitals, schools, roads and communication infrastructure all need to be built. Hazell thinks that even if PFI went, public-private sector partnerships would remain in some form. “The public sector will still need private sector expertise when it comes to funding,

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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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accountability

Young people take centre stage Derby Homes recruited a theatre company and local young people to shine a spotlight on its achievements instead of its usual report

the  Telling public: Derby

By Vivienne Russell

PA

How to make annual reports and accounts accessible and interesting to the public is a constant conundrum. Derby Homes dealt with this by recruiting a theatre company and local young people to help bring outcomes to life. The arm’s-length management organisation picked up the prize for innovation in financial reporting and accountability at April’s Public Finance Innovation Awards in recognition of its efforts. Alongside its formal annual report and accounts, Derby Homes had made efforts to make the summary booklet it sends to tenants increasingly lively and accessible, says director and company secretary David Enticott. Two years ago, the Almo began to experiment with video, with the board chair and the chair of the residents’ panel making a film about what had been going on. Thinking about how to build on this led to the realisation that Derby Homes had no means of engaging with young people, who are the tenants of the future, Enticott explains. Local theatre group Mash Up was already working with young Derby Homes’ residents on a junior warden scheme, and it was thought that this combination might be able to help liven up the annual report. Through a series of interviews, the young volunteers created a portfolio of audio and video segments, with a strong focus on outcomes and results, highlighting where savings had been made and how these had been reinvested. The young people were invited to take ownership of the process and, in doing so, gain a deeper understanding of the data and why it was relevant to their lives. “I think the brave part of it was to say to Mash Up and to the kids, ‘Right, you do the whole report then and we’ll act as your guide at the end in terms of presentation’. So we effectively delegated the whole process to them to say what they found interesting,” says Enticott. The young people presented their findings to Derby Homes’ board, a valuable learning experience for them.

Homes needed to do more than issue a standard report

“Our accounts are full of really good things. It’s our one and only opportunity to shout about positive stuff that we’re doing” DAVID ENTICOTT D E R BY H O M E S

Enticott  David (centre) with Scotland’s auditor general Caroline Gardner and broadcaster Justin Webb who hosted the awards ceremony

“You could see they were incredibly nervous … but, by the end of the meeting, they were coming out with their own comments,” Enticott observes. “You could see them developing before your eyes, which was great. Hopefully, they’ve gone on to do great and better things.” Any scepticism among senior management that the project would not work was quickly dispelled, he adds. “It worked really well.” While there are no plans to repeat the project this year, Enticott says Derby Homes has been convinced to go entirely digital when it produces its annual report, and efforts to make annual reports accessible and engaging will continue. “We keep trying to find new ways of getting people to actually read [our annual report] or have a look and, if it piques their interest, they can go on to the accounts,” he says. “Our accounts are full of the really good things … It’s our one and only opportunity to shout about positive stuff we’re doing.”●

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on account ► Alison Scott

Fit for purpose in a complex world CIPFA aims to strengthen risk management and due diligence by uniting its prudential and treasury management codes

W

hen I first trained, local authorities were

consultation on the prudential code and the Treasury Management Code took place. It put forward two main changes: ● The introduction of a capital strategy to provide full council with a concise, accessible view of the authority’s approach to borrowing, investment and treasury management, with a focus on risk management ● The extension of best practice in treasury management to cover all investments to improve due diligence and ensure risks are managed effectively. Early feedback and analysis of responses has raised a number of issues where, with hindsight, the intentions of CIPFA’s capital and treasury management panel may not have been clear. The capital strategy is intended to pull together reporting requirements around both codes into a single overarching structure, not duplicate what is already required. The panel was clear it did not want to place undue burdens on local authorities – it wanted to improve councillors’ understanding and provide a

told exactly how much they could holistic view. It also accepts that, while it would encourage all borrow and, on the whole, mainly local authorities to make progress in considering their strategy in borrowed for service-based assets 2018, it is unlikely that all local authorities will be in a position to financed by loans from the Public Works produce a full capital strategy until 2019 given the planning Loan Board. How times have changed. periods for capital programmes and investment strategies. Since the Prudential Code for Capital In extending the Treasury Management Code to all investments Finance in Local Authorities was introduced, made for commercial gain, the panel did not intend that capital councils have been able to determine expenditure on income-generating assets should be brought their own borrowing limits provided that their borrowing is within treasury management teams; the aim was that the prudent and affordable. In addition, in recent years, discipline around the consideration and management of risk and ‘commercialism’ has come to the fore. enhanced governance and due diligence arrangements should What authorities mean when they talk about commercialism apply to decisions to purchase these assets and during ongoing varies considerably. For some, it is around providing services review. Treasury teams, along with property professionals, have a through different vehicles; for others, it is about using specific skills and knowledge that authorities may wish to use commercial structures to leverage investment in their areas and when they develop processes and consider investment decisions. generating income for services. The driver for all is the same – In proposing what is a more fundamental change to the two falling resources, the withdrawal of central government support codes, CIPFA’s aim is to support and complement statutory and a need to invest in their areas and support economic growth. investment regulations and guidance to provide a regime that The variety of approaches and scale of investment by some remains fit for purpose in a more complex environment. ● authorities brings with it new governance issues. It is vital that, when making decisions, local authorities have access to specialist skills and advice, understand all the risks involved and ► ensure that the total risk remains proportionate to the overall resources available. This presents a challenge for the professionals as these decisions have to be made by elected members who may have The framework established by the ● All external borrowing and other neither the background knowledge to understand prudential code should support: long-term liabilities are within the technical details nor the ● Local strategic planning prudent and sustainable levels resources to recreate ● Local asset management ● Treasury management and lengthy due diligence planning other investment decisions are processes – matters that are ● Proper option appraisal. taken in accordance with Alison Scott is head best placed with officers. professional good practice. of standards and The objective of the prudential It is against this financial reporting at code is to provide a framework for When taking decisions concerning background that the recent CIPFA local authority capital finance that the latter three points, the will ensure for individual councils: framework will ensure councils are ● Capital expenditure and accountable as the information 42 PUBLICFINANCE NOVEMBER 2017 investment plans are affordable will be transparent.

A supportive code

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technology watch ► John Thornton

The NHS learnt a lot about its defences during the WannaCry attack. It must now get ready for something more sophisticated

In an arms race with the bad guys

REX SHUTTERSTOCK

T

he WannaCry ransomware attack this year was the largest cyber incident ever to hit the NHS. While it wasn’t targeted at the NHS, it caused widespread disruption and reputational damage. Hospitals and GP surgeries had to turn patients away, cancel appointments and postpone operations. In total, over 300,000 computers were infected in 150 countries. In the UK, the NHS was the most high-profile organisation affected and, in the days following the attack, there was a lot of understandable criticism of national bodies, NHS managers and the government. Senior managers at NHS Digital describe WannaCry as the best (albeit unwanted) learning experience the NHS could have in terms of testing their plans and processes. Their “war room” was established within 60 minutes and most of the processes clicked into place. However, the attack exposed weaknesses in investment decisions, patching, communications and coordination. The King’s Fund said the attack exposed the “deprioritisation” of IT and cybersecurity investment nationally and locally. It added that the government had conflated data security with policy about data sharing and consent, which reinforced the idea that security is primarily about privacy rather than patient safety.

p043_PF_Nov17_TechWatch.indd 43

47

Number of NHS organisations directly affected by the WannaCry ransomware attack

Cybersecurity was characterised as a “governance risk”, which meant the risks associated with systems being made unusable by cyberattacks took a back seat to privacy. The government has since said it will invest an additional £50m in NHS data and cyber security. WannaCry exploited a known vulnerability. All NHS organisations had been offered a software patch that would have prevented the attack, but many had not applied it. Only 47 NHS bodies were directly affected but the cyberattack had a wider impact as trusts and clinical commissioning groups shut down their systems as a precaution, with many GPs switching off systems on the advice of CCGs. As a result, many patients were unable to access healthcare as records, appointment systems and medical equipment were unavailable. All NHS bodies have been reminded by CareCERT, the NHS Computer Emergency Response Team, about keeping patching up to date and operating high standards of cyber hygiene. At a recent cyber conference, a senior representative from NHS Digital said that perhaps the most significant learning point was the need for a more prompt response in the first 60 minutes of an incident. Obviously, it’s difficult to give advice while you are trying to work out what is going on. But you do need to be immediately visible, communicating and coordinating. As he explained, it is difficult to update and coordinate organisations that have shut down their email systems. At the same time, the press and social media are moving into overdrive. Everyone involved in major incidents needs to be able to respond to the multiple communication channels and the speed at which information (true or false) ricochets around such incidents. John Thornton is the WannaCry was a fairly unsophisticated director of e-ssential attack that was not aimed at the NHS. As Resources and an independent one ICT director put it, the NHS is now in adviser on business an arms race with the bad guys. What transformation, would have happened if a sophisticated financial management and innovation. attacker had specifically tried to bring John.Thornton@ down the NHS or steal the vast amounts e-ssentialresources. of valuable personal data it holds? ● co.uk

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professional development

Be a show-stopper by crossing the divide Experience in different sectors can raise you well above the competition when it comes to career development. Here’s how to take the steps to do it

D

uring these complex, challenging times before Brexit, business, the government and

the not-for-profit sector need to work closely together to learn from each other and create joint solutions to problems they share. It is now the norm for large and complex organisations to work closely with other sectors, and having the skills to do this effectively is becoming more of a requirement. In addition, management teams in large-scale organisations find they have more similarities than differences when it comes to the difficulties they face, irrespective of sector. Business leaders, as a consequence, will increasingly need experience of working in different sectors as well as of creating optimum value networks by building relationships with as diverse a range of individuals as possible. Cross-sector experience has until now been overlooked Scrutinise your CV as an important feature of career development. During Take a close look at your career to date and count the the downturn in 2008, recruitment became more number of sectors in which you’ve worked – public, private conservative, with organisations tending to hire from and voluntary. Three is ideal; two is acceptable; only one those in their own sector. Now, however, we are seeing means you need to redress that balance as you plan more movement in the market with an increasing your career. preference for broader experiences – and a new breed of multi-sector professional is emerging. There is growing Understand the value of cross-sector acknowledgement that candidates are more credible if experience they can draw upon a range of experiences. Look at your experience from the point of view of a head“Cross-sector collaboration has evolved from a ‘nice hunter hiring for a C-suite or non-executive appointment. You to do’ to a business imperative,” says Debbie Alder, HR may be an expert in your field of finance, but it’s the breadth director general at the Department of Work & Pensions. of experience you have, within different sectoral She suggests that the time may have come when a lack of environments with their own priorities, drivers and experience in different sectors can limit career progression. challenges that will make you a flexible, resilient leader. The talent and leadership teams at the Whitehall & Those who have leadership experience in both the private Industry Group (WIG) advise hundreds of people every and the public sectors have a high market value for the most year on how to move sectors. sought-after senior roles. Is it time you took a look at your own career through the cross-sector lens? How Prepare for a career boost could you increase your market value Speak with individuals who have made the transition and Dr Helen Emmott is and employability through cross-sector discuss their experiences of changing sectors. Some head of talent at the contacts, dialogue and experiences? Start straightforward, practical advice about likely hurdles can Whitehall & Industry with our 10 top tips below. be highly beneficial during the first few weeks in a new role. Group

NATALIE WOOD

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Top tips… Do ➊ View your experience from a headhunter’s point of view

➋ Time any move carefully ➌ Expose yourself to people from different sectors at events and discussions

Don’t ➊ Feel obliged to move for the ➋

➐ WIG can introduce you to such people, and can advise on how best to harness your skillset in a new environment. Events are also a useful way of maintaining and extending your network.

➍ ➎ ➏ ➐

Consider diversity in thought and practice Appreciate that diversity of thought – the range of thinking and operating that comes from working in different sectors – is as important now as demographic diversity in the boardroom. When it comes to crafting your non-executive offer, understanding the variety in ways of thinking and working will give you greater perspective in the boardroom.

in the room can give you a distinct sense of the differences (and similarities) between the public, private and voluntary sectors, and how they work.

➑ ➒

Time it right Be aware of the points in your career that will offer the best opportunities for you to transition between sectors. When will you be most attractive to the opposite sector during your leadership journey? Investigate the hiring strategies, structures and hierarchies within other sectors to better plan your entry or re-entry.

Find your own story Make sure you can articulate how your breadth of experience translates into commercial value. Will your previous experience better enable you to understand the language, targets and mindsets of your customers and clients? Make sure you can explain why cross-sector expertise in finance particularly puts you ahead of the crowd.

long term – consider a secondment Restrict yourself to people in your sector as mentors Forget non-executive roles as a way to develop professionally

10

Go on a secondment If you don’t want to change sectors in the longer term, consider taking a secondment of six months or one year into another sector. If you are not sure, get advice and guidance to help you through the process.

Choose a mentor from another sector While it’s normal to look for a mentor within your own organisation or sector, there is added value in having a mentor from a different sector. This will help you gain a broader perspective, avoid cynicism, assumptions and groupthink, and encourage you to broaden your horizons.

Apply for non-executive or trustee roles in different sectors Constructing a cross-sectoral portfolio of interests will make you a well-rounded and sought-after non-executive director or trustee. WIG offers a board recruitment service with a strong cross-sector candidate base, and the talent team runs a workshop for those contemplating non-executive work.

To see how WIG could help your career, visit www.wig.co.uk/leadership-development.html

Network, network, network Join roundtables and discussion groups with finance professionals that attract a cross-sector audience. Just being

See WIG’s board vacancies or get advice via www.wig.co.uk/career-opportunities/career-listing.html

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conferences for the rest of 2017 Police, Fire and Rescue Conference 8 November, London

Central Government Conference 23 November, London

Counter Fraud Summit, 14 November, London

Wales Annual Conference 23 November, Cardiff

Local Government Accounting Conference 15 November, Leeds; 22 November, London

Local Government Income Generation Summit 28 November, London

Pensions Annual Conference 22 November, London

Annual Governance and Leadership Conference 30 November, Belfast

Book now www.cipfa.org/conferences Enquiries please contact customerservices@cipfa.org

#cipfaconferences

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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 —

1 0 N OV E M B E R, LO N D O N

CIPFA South East Annual Dinner At this event, we will celebrate our successes and acknowledge support from sponsors who have helped to deliver regional events. It’s also a great networking opportunity. 1 6 N OV E M B E R, G OS FO RT H

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.

1 N OV E M B E R, LO N D O N

Governance Summit “Improving governance: working across public bodies and the third sector” will bring delegates up to date with guidance and good practice as well as provide expert analysis of issues that arise when the sectors work together. Lord Bichard will be a keynote speaker. www.cipfa.org/events customerservices@cipfa.org 1 N OV E M B E R, LO N D O N

RAFAEL BASTOS

Treasury Management and Capital Conference This event will cover investing in property, developments in the economy, the CIPFA prudential and treasury management code reviews and regulatory changes, as well as commercialism and

CIPFA North East Spirited Networking Event This event has a festival feel, with gin tasting, food and live music. There will be masterclasses on distillers’ secrets, perfect serves and making classic cocktails. 17 N OV E M B E R, P R E STO N

CIPFA North West Annual Conference and Dinner This event will highlight successes forming a company. www.cipfa.org/events customerservices@cipfa.org 8 N OV E M B E R. LO N D O N

Police, Fire and Rescue Conference This event, “A new era for police and fire”, will be looking at the latest strategic and financial issues and their implications. It will be chaired by Nigel Hiller, chair of CIPFA’s police and fire panel and director of finance at South Yorkshire Police. www.cipfa.org/events customerservices@cipfa.org

LO O KI NG A HEA D Check www.cipfa.org/ conferences for details of the following and more events and members’ dedication to the region, and provide networking opportunities. CIPFA North West president Mike Thomas will look back over the year, share his future vision and, with CIPFA vice president Sarah Howard, present awards and certificates. 2 1 N OV E M B E R, P O N T E F R ACT

CIPFA/HFMA joint event: Finance and Governance in Partnership This event will discuss how health and care services can jointly create local blueprints to help implement the NHS Five Year Forward View.

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

This event draws on the experience and perspectives of prestigious speakers from a range of sectors and professions.

Members can expect the usual high-quality line-up of speakers and an agenda that reflects

www.cipfa.org/events customerservices@cipfa.org

attend to find out the latest on important changes to council finance, particularly reporting. www.cipfa.org/events customerservices@cipfa.org 2 2 N OV E M B E R, LO N D O N

Pensions Annual Conference Themed “Diving into LGPS pools”, this event will focus on the economy, good governance and reforms. Delegates will hear from experts and discuss how pooling will affect all funds. www.cipfa.org/events customerservices@cipfa.org 2 3 N OV E M B E R, CA R D I F F

These are the key events to

critical themes. Panellists include CIPFA president Andy Burns.

28 N OV E M B E R, B I R M I N G H A M

CIPFA Cymru Wales Annual Conference

Local Government Accounting Conference

Contact customerservices @cipfa.org for information

CIPFA Midlands Annual Seminar: State of the Nation

14 N OV E M B E R, LO N D O N

1 5 N OV E M B E R, L E E DS 2 2 N OV E M B E R, LO N D O N

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

Technology in Finance

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

Counter Fraud Summit At this summit, thought leaders and practitioners will examine preventing, detecting and responding to fraud. It will include cybercrime, the London Counter Fraud Hub, Government Counter Fraud Awards winners and a panel discussion. www.cipfa.org/events customerservices@cipfa.org

2 5 JA N UA RY 2 0 1 8, LO N D O N

Housing Conference

This major event offers inspiring plenary sessions and workshops, covering issues such as Brexit and Wales’ new powers. It will also feature the first CIPFA Wales Public Finance Awards. www.cipfa.org/wales2017 customerservices@cipfa.org 2 3 N OV E M B E R, LO N D O N

Central Government Conference This free event, “Brexit and Budget: what next for government

finance professionals?”, will bring together leading lights in the field of central government. It will explore preparing for Brexit and the Budget as well as economic projections. www.cipfa.org/events customerservices@cipfa.org 28 N OV E M B E R, LO N D O N

Local Government Income Generation Summit Themed “The art of a balanced and sustainable strategy”, this event will focus on sustainable income options and a balanced revenue-generating portfolio as well as on specific, short-term opportunities. www.cipfa.org/events customerservices@cipfa.org 3 0 N OV E M B E R, B E L FAST

Annual Governance and Leadership Conference This event, “Breaking the mould: Improving outcomes”, comes when leadership and governance have never been more important. Chief executives, chief finance officers, board members and senior executives will explore issues and the actions needed to deliver better outcomes for citizens. www.cipfa.org/events customerservices@cipfa.org

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numbers game

78,180households Public attitudes towards tax and spending

Living in a temporary home The number of households in England in temporary accommodation at the end of June this year, according to DCLG statistics. This was a 7% increase on a year earlier and up 63% on 2010 figures.

Support for NHS still sustained

2014: Treasury extends austerity period until at least 2018

1983-2016

2010: Coalition announces large-scale public spending cuts

70

2017: Start of global financial crisis

Support for the idea of the NHS remains buoyant, polling by Ipsos Mori for the King’s Fund has found. More than three quarters of people (77%) agreed that the NHS was crucial to British society and must be maintained, compared to 23% who believed it was a good project but cannot be sustained in its current form. Support for the NHS has remained remarkably consistent since the millennium, the pollsters observed, with an average 76% of people backing its principles.

Keep taxes/ spend same

60

50

40

30

76%

Increase taxes/ spend more

20

Reduce taxes/ spend less

10

23% 16 20

13 20

10 20

0 20

0 20

20

19

7

4

1 0

98

95

19

19

92

89 19

86 19

19

83

0

Source: Legatum Institute

Tax us, spend more For the first time in a decade, more people want tax and spending to be increased rather than stay the same, according to British Social Attitudes survey figures cited by the Legatum Institute in a report on public attitudes to capitalism and free markets. From just before the 2007 financial crash until 2016, there had been more support for keeping tax and spending levels as they were. The report authors suggest the “Overton window” – which covers the range of ideas the public will accept – has shifted, with greater support for nationalisation and state control and declining trust in free markets.

Which of these statements best reflects your thinking 77% about the NHS? Source: Ipsos Mori

The NHS is crucial to British society and we must do everything to maintain it The NHS was a great project but we probably can’t maintain it in its present form

Petrol drives prices

CPIH: % change over 12 months 2010-2017

4

3

2

20 17

16

ug A

Ju l2

20 ct O

0

15

15 20

14 20 pr A

Ja n

13 0 l2

ct O

Ju

20

12 20 Ja n

pr A

Ju

l2

0

20

10

11

0

12

CPIH is the new measure of consumer price inflation, which includes owneroccupiers’ housing costs

1

Source: ONS

Core consumer price inflation hit 2.7% in August, continuing a recent upward trend, the Office for National Statistics said. Rising prices for clothes and motor fuel were the main drivers of the increase. The depreciation of sterling following the Brexit vote could also be a factor, the ONS said, although it added that rising global commodity prices could have influenced the inflation rise. Subsequent ONS figures showed inflation hit 3% in September. This was the highest level for five years.

SHUTTERSTICK

5

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%

publicfinance.co.uk/numbers Cybercrime hits councils Just over three quarters of councils were affected by cybercrime in the past year, according to an industry survey. Responses suggested they had experienced a malware, virus or Trojan attack, while 50% had been victims of ransomware attempts.

£34bn

Degree fee debt Graduates who entered university after 2012 owe £34bn in fees. The Institute for Fiscal Studies said writing off this outstanding debt would have no immediate effect in the short term but would increase debt by £20bn by 2050.

Which top government job is the most important?

78%

Chancellor of the exchequer SoS for health SoS for defence

PROPORTION ONN OF PARENTSS WHO BELIEVE THE COST OF SENDING THEIRR CHILD TO A STATE TATE SCHOOL IS INCREASING

Home secretary SoS for education Brexit secretary SoS for justice SoS for work and pensions Foreign secretary SoS for international trade SoS for transport SoS for business, energy and industrial strategy SoS for environment, food and rural affairs

Cabinet positions that are more likely to be seen as more important than less important SoS for communities and local government

Bank off mum and dad

Cabinet positions that are more likely to be seen as less important than more important SoS for international development

Almost eight out of 10 parents

SoS for Northern Ireland SoS for Wales SoS for Scotland SoS for digital, culture, media and sport

Source: YouGov

The politics of office There is something of a disconnect between what the public regard as the “great offices of state” and what they were traditionally seen to be – the chancellor of the exchequer, foreign secretary, home secretary and prime minister – according to a YouGov poll. Members of the public are more likely to regard the roles of health secretary and defence secretary as more important than the foreign secretary position. The job of chancellor is still seen as one of the most important positions in government by 75% of people.

Relationship between perceived service quality change Detoriated

Over the last year

Sustained 90

Improved

60 50 30

10

County councils

London boroughs

Source: LGIU Survey Data

Shire Unitary districts authorities and metropolitan districts

Better or worse Elected members and senior officers in all councils generally believe service quality largely held up in 2016-17, according to polling cited by the Institute for Fiscal Studies. Council staff were more pessimistic in counties and unitary and metropolitan districts, which both have social care responsibilities. Around one in four of those surveyed said services had deteriorated. In shire districts, around 15% of respondents said services had improved.

believe the costs of sending their child to state school is increasing, according to research from PTA UK. Among the areas where costs for parents were rising were school trips, uniforms, school meals and technology such as tablets and laptops. Forty two per cent of parents said they had been asked to donate to the school fund, up from 37% last year. Parents donated, on average, £8.90 monthly to the school fund, with Londoners being more generous than those living in other regions. Michelle Doyle Wildman, acting chief executive of PTA UK, said: “Parents are reporting that they are contributing more to provide the essentials that many expect to be provided by the state. “If this is a growing trend, it’s crucial that schools work in partnership with parents to address their specific concerns, taking their views into account when prioritising difficult funding decisions, and exploring realistic alternatives with them, not in isolation.”

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recruitment / to advertise in Public Finance or pfjobs.co.uk please call 020 7880 6234 Deputy Chief Accountant

Fenland District Council Big City Opportunity in the heart of the Fens We’re looking for a CIPFA qualified accountant to join our Team. You’ll have a creditable track record since qualification, be ambitious, forward thinking & energetic with a thirst to develop your professional & management skills; in the medium term you’ll be looking for a Chief Accountant position somewhere in Local Government. We serve 100,000 residents amid 200 square miles of beautiful countryside in North Cambridgeshire. Our four market towns of March, Chatteris, Wisbech and Whittlesey are lively hubs for the local community & Ely, Cambridge & London King’s Cross are within easy reach. Fenland District Council has been recognised nationally for its unique People Culture which makes it a fantastic place to work. Our staff really do strive to make a difference for our residents. We deliver a range of quality services including Leisure, Refuse Collection & Recycling, Planning, Parks & Open Spaces, Environmental Services and Revenues & Benefits (delivered through the Anglia Revenues Partnership). The Council also fulfils the function of Competent Harbour Authority for the navigable river Nene and has ambitious plans for physical, economic and social regeneration of the District. Along with partner Cambridgeshire councils, Fenland is an active member of the Cambridgeshire & Peterborough Combined Authority and the Greater Cambridge Greater Peterborough Enterprise Partnership which are set to bring major investment to the area. We’ve progressed well on the austerity journey and have an unqualified audit opinion for 2016/17. Medium Term Financial Planning lies at the centre of our management operations as we deliver high quality services to the community within Council and Member priorities. If you’re successful you’ll work at the heart of these initiatives, developing skills to further the next stage in your career. We offer a package of up to £52,299 plus relocation and as a Council officer benefits include membership of the Local Government Pension Scheme, flexible working opportunities, free car parking and subsidised private healthcare. Of course, you could do all this in a Big City context, but why would you do so? Here you can savour the fresh air of the Fens, enjoy the wide Fenland skies, view our spectacular sunsets and appreciate our affordable property prices? And all this just 90 minutes by rail from King’s Cross. And here, on the way to work you might spot a Marsh Harrier hunting in the fields…. Interested? Please call Brendan Arnold (Corporate Director & Section 151 Officer) For an informal chat on tel. 01354 622317 or visit www.fenland.gov.uk/jobs to download an application form. CV’s not accepted. Closing date: 14th November 2017

Team Leader – Public Financial Management Cardno Emerging Markets USA, Ltd. (Cardno) is seeking a Team Leader: Public Financial Management to lead a project team of 15 members in supporting the Government of Tanzania to implement a range of PFM reforms to strengthen economic governance in Tanzania at the central, regional, and local levels affecting 26 regions and 188 local authorities. The Team Leader - Public Financial Management will perform the following duties: • Engage ministry officials on policy and technical implementation of PFM reforms at central, regional, and local government levels; • Direct and lead strategy for PFM reform efforts in coordination with relevant ministries and manage a team of up to 15 PFM experts. Minimum Qualifications: • Minimum 15 years’ of PFM experience including public sector strategic planning, budgeting and forecasting, taxation & revenue management, public procurement process implementation, governance, and internal and external audit at the central or local levels; • Experience serving as Team Leader, Chief of Party, or other senior executive level position on DFID or other donor-funded projects. • Proven success managing geographically dispersed teams of 10 or more staff and projects; • Success implementing processes and leading capacity building efforts to strengthen institutional financial management at national and regional government levels with demonstrated experience designing PFM training materials or manuals; • Knowledge of PFM reform and administrative decentralization efforts in Sub Saharan Africa; • Post-graduate qualification in finance, accounting, economics, CPA, ACCA, or other relevant field; and Professional fluency in English.

Cardno HPH.indd 1

Desired Qualifications: • At least 15 years’ experience working in Public Finance Management Reform and/or governance in Sub Saharan Africa. • Experience working as a Team Leader on a Public Finance Management Reform project. • Experience working as a Team Leader on a DFID funded project in Sub Saharan Africa. TO APPLY, SEND AN EMAIL TO recruit@cardno.com WITH YOUR NAME AND THE JOB TITLE IN THE SUBJECT LINE, OR CLICK THE ‘APPLY’ BUTTON BELOW TO BE REDIRECTED TO OUR SITE. Cardno is a professional infrastructure and environmental services company, with Advisor expertise in the development and improvement of physical and social infrastructure for communities around the world. Cardno’s team includes leading professionals who plan, design, manage and deliver sustainable projects and community programs. Cardno is an international company listed on the Australian Securities Exchange [ASX:CDD]. Please Note that selected candidates will be required to pass a background and reference screening. Cardno is an equal opportunity and affirmative action employer EEO/AA/M/F/V/D

20/10/2017 09:28

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Planning for the next generation of public finance professionals? Find out how the CIPFA PQ will continue to deliver under the apprenticeship levy. www.cipfa.org/apprenticeships

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REGISTER FREE

to join our webinar

Unlocking value from your payroll 28 November, 13:00 (GMT) Visit: publicfinance.co.uk/webinars for more information

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Public Finance November 2017