A third party is to be drafted in by Lancashire County Council to help it “fundamentally challenge” the way it operates and put it on a sustainable financial footing.
The authority has begun the search for a partner organisation which would initially design a programme to “future proof” services delivered by County Hall. The process, which is expected to take three months, could cost up to £400,000 - although papers indicate that it may fall “some way below” that figure.
A further decision would then be required over whether the organisation would be involved in executing any of the changes which it recommends - and approval sought for the additional cost of undertaking that work.
Cabinet members gave the go-ahead to the plan at a meeting after they were presented with the latest financial forecasts for the authority. They showed that the projected budget deficit facing the county council in 2022/23 has widened by £17.4m to £64.7m.
Speaking after the meeting, Conservative council leader Geoff Driver said that the increased gap was a result of “factors beyond our control”, including wage inflation and growing demand for statutory services like social care.
He also rejected the suggestion that the move to radically overhaul the way the authority works was because it had run out of ideas about how to make savings within individual services.
His administration has identified almost £160m of budget reductions since retaking control of County Hall just over two years ago.
“Because of the measures we have already taken, we are moving into areas where it’s very difficult [to make savings].
“Lancashire County Council is a massive organisation and we are saying that we need some help from people who have done this kind of thing before. We need to ensure that not only are we providing services in the most economical way, but that we’re providing them in the right way which is for the benefit of the people of Lancashire.
“While the deficit has increased over the longer term, we are in a much better position for next year - but we won’t lose sight of the fact that the county council has an inherent deficit which must be resolved,” County Coun Driver said.
Papers presented to cabinet describe the so-called “organisational development” exercise as one designed to reduce unnecessary bureaucracy, make better use of data and make it easier for residents to access services.
However, the document also notes that some county council services “foster dependency” and that there is a propensity in Lancashire “for the public sector to step in and impose solutions rather than providing support to enable citizens and communities to be resilient in looking after themselves”.
County Coun Driver denied that the process could see some residents cut loose by the authority.
“People can be absolutely assured that we will never do that - we will always be there for the people of Lancashire and particularly those that are more vulnerable than others.
“But it is a fact that in some key areas of expenditure, Lancashire County Council is a very high spender compared to other local authorities - and we need to know why that is.
“There might be very good reasons why we’re spending more, but equally there might not - so we’re looking at this to make sure that we are there to provide the services to the people who really need them.”
Labour opposition group leader Azhar Ali gave a cautious welcome to the work to identify a partner organisation.
“We need to look at the structures within the county council - not just to save money, but to make sure that we deliver services more effectively.
“It’s early days in this process, but we do need to look at organisational development through a different lens than maybe we have done.
“However, we need to see what the council comes back with in terms of the partner which they select - to make sure that their values chime with ours,” County Coun Ali added.
But Liberal Democrat group leader David Whipp said that the proposal showed that the authority was “floundering” in its efforts to balance the books.
“Do they not pay people handsome salaries to manage the organisation and make adequate arrangements for the way it operates?
“I also think it rather hypocritical, because when the Conservatives were in opposition, they were adamantly against consultants of any kind being brought in,” County Coun Whipp said.
The cabinet meeting heard that the authority “does not have the expertise necessary” to manage an organisational development exercise on its own, because of constraints on officer time.
A decision on whether to go ahead with the full programme will be made by cabinet at a later date, once the partner organisation has identified what it believes needs to be done.
Lancashire County Council has taken only a three-year view of its medium-term finances rather than the usual four, because of “unprecedented uncertainty” about how local authorities will be funded in future.
A review of the way cash is allocated to councils has been postponed until 2021, along with a decision about whether councils will be able to retain more of their business rates in the long term. Brexit delays also led to a planned three-year comprehensive spending review being reduced to a 12-month settlement as announced by the chancellor earlier this week.
County Coun Driver welcomed as “good news” an extra £1bn promised to councils with responsibility for adult and children’s social care. Additional health and social care-related grants of £2.5bn from the current financial year will be reissued during 2020/21 to give councils some certainty in the short term.
However, a further £0.5bn for adult social care has been granted in the form of permission for local authorities to raise council tax specifically for that purpose. The government had previously allowed councils to raise bills - by a total of six per cent over and above the normal maximum increase, in stages between 2017/18 and 2019/20 - to fund adult services.
Deputy leader of the Labour opposition group John Fillis said residents would not be “rubbing their hands with glee” at the prospect of another 10 per cent overall increase in council tax bills from the county council which is what they had seen across the last two years.
“This is a national issue, with people getting older and more money required - and so there should be a national response,” he said.
But Conservative council leader Geoff Driver said that the government was simply restoring some “flexibility” which the previous Labour administration had itself used.
“You didn’t take full advantage of it in the year before the local elections - I can’t think why that was.
“But the decision as to whether we accept the flexibility is a matter for full council at the budget next year,” County Coun Driver said.
Mind the gap
The main reason identified for the £17.4m growth in the medium-term gap in the county council’s finances is increased wage inflation.
Staff salaries make up around half of the authority’s budget and, while a £1.2m underspend on pay packets is expected this year, wages are expected to increase by £11.3m over the next three years. That is because previous estimates had assumed pay rises of one per cent, whereas negotiations over salary increases have begun at around the two per cent level.
Ninety-five per cent of the savings identified to be delivered in the current financial year are rated as being on track, with the remainder proving “more challenging”, according to papers presented to cabinet. However, a small proportion of planned budget reductions have been declared “undeliverable”.
They include an initial plan to reduce the rates paid to sleep-in care workers, following a court ruling that they were not entitled to the minimum wage when they were not awake. While the authority will introduce a new flat fee for overnight carers, it will be at a higher rate than previously planned, after warnings that it could have an impact on recruitment - and that has pushed up the wage bill by £2.1m.
Elsewhere, a proposal to increase the use of in-house residential care provision has also fallen short a £1m savings target.
Meanwhile, there has been a net increase in costs from increased demand for services of £1.2m - but that figure masks much bigger pressures in certain areas, which put the gross cost of increased demand at £4.3m.
The children’s social care budget is forecast to overspend by £2.8m this year, the main reason for which is a growth in the number of agency fostering placements - up from 488 to 538 between March 2018 and June 2019.
The public transport budget is also under pressure, with an expected £500,000 hit to its income because of lower than forecast fares generated by passengers using routes subsidised by the county council. An increase in the numbers of children with special educational needs and disabilities who require taxi transport has led to an increased bill of a predicted £600,000 by next spring.
Overspends in some areas have been partially offset by significant underspends in others. These include waste management, which is set to undershoot its budget by £1.3m, partially as a result of diverting more material away from landfill. Vacancies in the children and family wellbeing service have contributed to a £2.7m projected underspend, although the service has had to “adapt” accordingly.
The authority has also benefited from a £7m budget boon following the sale of gilts and bonds and favourable rates.
However, Labour opposition group leader John Fillis told members of the ruling Conservative group at a cabinet meeting: “The budget gap has gone up, not down - even though we’re always told how prudent you’ve been.
“We had a deficit of £600m [between 2013 and 2017] and dealt with £400m of that - the current administration is still going on about £200m which they have to deal with.”
But leader of the Conservative-run authority Geoff Driver said his administration between 2009 and 2013 had “left about £300m in the bank” before Labour took control.
“You managed to squander that as well as build up a deficit of £200m for us to sort out,” he added.