œ100 off every council tax bill by 2020 predicts think-tank

Author: Localis   |   25/03/2015

A report published today (link) by the think-tank Localis predicts that growing commercial activity in local government could cut œ100 off council tax bills by 2020.

The prediction comes from a survey of 150 key local government stakeholders ? including chief executives, leaders, cabinet members and chief finance officers ? who project that earnings from entrepreneurial activities will rise from comprising 6% of budgets today to 18% by 2020. This could generate up to œ2bn of additional savings each year; a sum equivalent to cutting œ100 off each 2019/20 council tax bill, or subsidising the construction of 80,000 homes across England.

The report, which explores how local government has responded to austerity in the past few years, finds that many councils across England are increasingly operating entrepreneurially, both acting like and partnering with the private sector. The report finds that:

• More than half of councils (58%) own a trading company, and at the rate it is increasing, full coverage by 2020 is a possibility;
• A majority of councils (57%) operate a joint venture with the private sector;
• Without entrepreneurial activities, 8/10 councils say they would have to cut services and raise taxes

The report contends that with austerity showing no sign of relenting whoever forms the next government, and with inexorable demographic change ahead, councils should further this entrepreneurial agenda. To facilitate this, Localis recommend that:

• Councils and appropriate professional bodies increase the focus on commercial and financial skills as part of officers’ professional development;
• Councils are given ‘Earn Back’ powers to stimulate local investment in a similar vein to Greater Manchester’s devolution deal;
• The government use departmental underspends to fund a three year corporation tax holiday for new council owned trading companies to assist them in their start up;
• The General Power of Competence is expanded to other parts of the public sector to enable councils to act more like businesses.

Commercial Councils will be formally launched on Wednesday 25th March at 1:30pm in the Ideas Space, Clutha House, 10 Storey’s Gate, London, SW1P 3AY. Speaking at the launch will be noted local government expert Prof. Tony Travers on ‘The strange death of local government’.

Launching the report, Alex Thomson, chief executive of Localis said:
?Councils have borne the brunt of austerity, but they have responded with striking innovation to minimise the impact of cuts on their residents. In particular, our research shows councils becoming ever more commercially savvy, bringing in money to support vital local services.?

The report has attracted support from a range of cross-party figures:

Bob Neill MP, Vice-Chairman of the Conservative Party
?Given that an estimated 70 per cent of council income is now raised locally, all authorities must become more innovative, entrepreneurial and, when appropriate, business-facing to ensure they are firing on all cylinders.
This report is invaluable in showing the full potential of local government through this approach, encouraging us to reassess our expectations of the sector and to think big and bold in what we can achieve. A must read for anyone working in government, at any level.?
Councillor Keith Wakefield, Leader of Leeds City Council
?As this report shows local government has had a long history of enterprise, leadership and innovation. We decided in the face of increasingly difficult financial challenges to aim to recapture the spirit of civic enterprise to help Leeds forge forward for the future. Building on the success of existing services and developing a more flexible model gives us greater capacity to support local employers and create local jobs. We must work creatively if we are to maintain services within our communities.?
Rob Whiteman, Chief Executive of CIPFA, the Chartered Institute of Public Finance and Accountancy
?[T]his report successfully outlines how local government can secure its finances and boost local growth prospects by developing entrepreneurial approaches. Many councils are already doing an excellent job in exploring these commercial spheres to mitigate against the pressures, but this report recognises that more needs to be done.?

ENDS

Press enquiries:
Jack Airey, Researcher
07890 318730 (mobile) or 020 7340 2660 (office) | jack.airey@localis.org.uk
Archie Maitland, Research Fellow
07884 380342 (mobile) or 020 7340 2660 (office) | archie.maitland@localis.org.uk

Notes to Editors:
1. Commercial Councils has been sponsored by Capita’s property and infrastructure business
2. The full findings of the report are as follows:

• Our survey points to significant existing entrepreneurial activity in local government:
  – 94% of councils currently share a service with another council
  – 91% of councils use assets such as land in an entrepreneurial manner
  – 62% of councils operate joint ventures with a neighbouring council, as well as 57% with the private and 54% with the voluntary sector
  – 38% of councils invest money in private sector enterprises
• Our research also shows that no sector is off the table for entrepreneurial activity. There were no areas we surveyed where a majority of councils could not at least see the case for greater entrepreneurialism.
• Across the board, between two?thirds and four-fifths of councils do or would provide energy (73%), facilities (75%), IT/Back Office (73%), legal services (67%), and waste commercially (77%). Future boom areas look likely to be legal services (24% of authorities currently, 43% considering), facilities (25% of authorities currently, 50% considering) and waste (46% currently, a further 31% considering).
• Over half (58%) our respondents indicated their council currently operates a trading company which, if reflective of the national picture, would indicate 205 authorities are currently utilising these powers.
• Our survey shows 24% of local authorities have spun out employee owned mutuals.
• Our survey indicates that in-house skills are certainly an issue. Over half our respondents indicated that in-house skill sets were the biggest barrier to councils being entrepreneurial. That said, they also indicated that these were already improving. 8 in 10 suggested that ‘prior experience of the entrepreneurial activities’ this report discusses had ‘helped [their council deliver better outcomes during subsequent commissioning processes.’ Likewise, 9 in 10 believed improving in-house skill sets to be a key factor when considering ‘a more entrepreneurial approach.’
• Whilst 21% councils are in constant and 45% in regular contact with their local Chamber of Commerce, 13% have limited or almost no contact. 21% of councils maintain ‘sporadic contact.’ A third of authorities had the potential to increase their contact, therefore.

3. The full recommendations made in the report are as follows:

• Government departmental underspends fund a three year corporation tax holiday for new council owned trading companies. 73% of councils back this, and we estimate it would cost no more than œ72m, œ86.4m and œ103.4m in successive years up to 2018;
• A counterparty clause is added to the General Power of Competence whereby other public sector bodies become subject to its purview when trading with councils;
• Councils are given ‘Earn Back’ powers to stimulate particular markets (including child care and transport); they should also press for a ‘Right to Earn Back’ all receipts above an agreed budget line threshold;
• An annual survey is set up to assess local authorities’ municipal endeavours, highlighting best practice and entrepreneurialism within the sector;
• Councils and appropriate professional bodies increase the focus on commercial and financial skills as part of officers’ professional development

About Localis
Localis is an independent think-tank dedicated to issues related to local government and localism. We carry out innovative research, hold a calendar of events and facilitate an ever growing network of members to stimulate and challenge the current orthodoxy of the governance of the UK. Please visit www.localis.org.uk for more information.