Local government finance: CIPFA speech

Secretary of State's speech at the Chartered Institute of Public Finance and Accountancy.

‘It is my business to know what other people don’t know.’

Those were the words Sir Arthur Conan Doyle put into Sherlock Holmes at the start of The Adventure of the Blue Carbuncle.

This year, Westminster Council made it their business to know what other people didn’t know.

When a number of people failed to respond to a survey - they had good reason to suspect a whole host of unusual goings on. So Westminster launched an investigation. Their nose for suspicious activity led them to a trove of sub-letting and non-residency crimes. Not only did their efforts cleanse a clogged up council register - but their investigation resulted in 9 more fraud investigations. If all 9 cases are prosecuted, they will recover a potential saving of nearly half a million pounds.

This success story is all down to the pioneering tri-borough initiative - between Kensington and Chelsea, Hammersmith and Fulham, and Westminster. Better transparency and cooperation has already saved them a huge £33 million a year, as well as the time and money of the half a million residents they represent.

Now, we can’t all employ the extra-sensory perception of Sherlock - but what you can all do is use all the powers you have – to deliver a better service for taxpayers.

Big picture

Over the past 4 years we have asked public sector, both accountants and councillors, to think in new ways.

Westminster is just one example of how councils are managing their money better - something I will talk about more later.

You will have heard me say before that local government accounts for a quarter of all public spending - so it must play its part in reducing the deficit, cutting waste, and finding more ways of doing things slightly different.

Gone are the days of the begging bowl mentality - where Whitehall would bow to the demands of councils - who would trash-talk their area to secure more funding.

Without abandoning the most deprived areas, we have encouraged councils to talk up their area to bring in more business and encourage growth.

The previous government spent more on interest payments for public debt than on schools. It borrowed 1 of every 4 pounds they spent. We walked into government as recipients of Britain’s largest peacetime deficit.

Councils still have some way to go to make that link, between the success of their local economy - and the council’s bank balance. But necessity breeds invention - and this has also been one of the most progressive periods of local government finance.

Whilst working to stricter budgets, every single council has managed to issue a balanced budget for 2014 to 2015; in part because for the first time, finance officers control 70% of their income - and, more importantly, the best councils have rewarded taxpayers faith by freezing Council Tax for a fourth year. That is all thanks to our reforms of public finance.

In practice, that means like Westminster, you need to approach finance differently.

Now all the main political parties agree that public spending is going to remain constrained well into the future. So number crunching alone isn’t enough - it’s time for some genuine financial innovation.

Today I would like to focus in on 2 specific ways of doing that, tackling fraud and better asset management.

Tackling fraud

For too long council officers have been in the mind-set of ‘where can I get more money?’ not, ‘how can I use the money much better?’

Tackling fraud should be your first port of call. It costs hardworking taxpayers £2 billion per year - money they - and local councils cannot afford to lose. More than that though - it is about councils being more financially responsible. Because quite simply, councils should not be haemorrhaging that amount of hard earned taxpayers’ money.

Rather than cutting front line services, or loading up the Council Tax bill to unacceptable levels to pay for it, you owe it to good honest people who do the right thing - to go after those who do the wrong thing.

We are supporting councils to go further in catching fraud felons, and today I am proud to commit £16 million over 2 years to ridding this scourge. This challenge fund will be allocated to the most innovative local authorities - who plan to use new counter fraud endeavours to generate the most effective savings. Whether is it better detection, prevention or deterrence.

These bids should put the taxpayer at the heart of their plans - who want to see unnecessary waste erased and their community services improved. These plans should be ambitious in tackling non-benefit fraud, too, and recover the money that is rightfully yours and mine.

There are 79 councils who claim to have identified no non-benefit fraud - that’s not a single case of procurement fraud, not a single case of Council Tax fraud - something I find rather difficult to believe.

Places like Stoke have got it right. They clawed back £1.8 million from more than 3,000 benefit cheats - thanks to their Spot the Cheater Campaign. That’s not all though - from Blue Badge bluffers to sub-letting scam artists, Stoke are well and truly cracking down.

Much like the money lost to fraud - Council Tax collection rates is another area where lost income remains too high. Yes, councils are doing well - but when more than a billion pounds still goes uncollected each year - that is placing an unfair extra burden on honest, hard-working taxpayers.

You have the power to address that.

Asset selling

Local authorities should be turning idle assets into money for frontline services. So the second place I want you to channel your energies - is getting surplus property and land off of your books.

I know that CIPFA already run workshops on good asset management - so perhaps I am already preaching to the choir. However, with £220 billion worth of assets - and £2.5 billion of that earmarked as surplus - you have got to start asking yourselves - ‘what good is that empty office block to my taxpayers?’

As of March 2013 - the value for sale was £781 million. That’s a lot of money - but still just 31% of the amount you could be selling.

And we are allowing flexibility to use £200 million of receipts from these sales - to help pay for the one-off costs of service transformation. This is an even bigger incentive to join-up and find efficiencies - where we know they are in abundance.

I’ll give you a great example of how you can make this happen - Worcestershire and Bromsgrove knew they could work together to be more efficient. They co-located county and district offices, the library, job centre plus, everything including the kitchen sinks. Capital receipts in the region of 3.5 million paid for this transformation - and now Bromsgrove also has a town-centre that’s not stuffed full of council offices.

By allowing cash from asset sales - to directly cover the cost of transformation activities - there can be no more excuses to delay modernisation.

The Council Asset Programme is now open to local authorities - where up to £40,000 is available to kick-start your savings and build more homes and jobs.

If that’s not enough encouragement, then the Transparency Code will really shine a light on those clinging to wasteful assets.

Empty or unprofitable office space or redundant brownfield land that you own - things that the taxpayer shouldn’t be footing the bill for - will be published for all to see.

Housing and brownfield

Savings aren’t just about stripping away though, they are about building up, too.

The UK needs more homes, there is no denying that fact. By building more homes for our communities, you’ll get more money thanks to the New Homes Bonus.

Since 2011, over £2 billion of New Homes Bonus has been allocated. That’s money for growing communities to use as they see fit - whether that’s building more doctors surgeries or schools or making improvements to road and rail.

If you aren’t sure where to start, then why not consult your planning colleagues? They will point you towards how much land is available to sell to developers and house builders.

We estimate there is enough suitable brownfield land to build up to 200,000 new homes. Currently, that land is yielding nowhere near as much as it could for taxpayers.

And by selling what you don’t need, you’ll be killing 2 birds with 1 stone - getting cash for land, and cash for house building.

This ambition is supported by the creation of new Housing Zones - where £400 million of funding has been directed to remove planning blockades to support the development of new communities.

Summary

It seems simple doesn’t it? Don’t spend what you haven’t got. Don’t waste the taxes you don’t need to have.

You have so many avenues open to you - without doffing your cap and begging from central government. You no longer need to do that. You have already shown that this is not an impossible task.

What I suggest is that you carry on thinking outside of the box - stop looking towards Whitehall for all the answers - and make local government the guardians of the public purse.

It is, after all, elementary my dear CIPFA.