The UK Experience by Malcolm Morley*
There is a question often used as an acid test for organisations: if the organisation didn’t exist, would it be missed and would it need to be reinvented?
In the case of councils the answer is definitely yes.
There is no part of the community that isn’t affected by a council. It only takes something to go wrong for this to be all too obvious!
UK Local Government has been extraordinarily resilient in coping with the challenges that it has faced. It has been recognised as the most effective part of the public sector in responding to the efficiency challenge and continues to respond with a ‘can do’ attitude to the fiscal challenges it is being faced with.
No part of the public sector has further illustrated its willingness to challenge and to change itself.
Despite it being all too easy for councils to be characterised as traditional and bureaucratic in the media, they have consistently been at the forefront of developing and trying new approaches.
It is vital that the new Coalition Government is seen not only to take money away from councils (as highlighted in last month’s article), but to provide them with the ability to continue to innovate.
This does not just mean reducing regulation, although welcome, but enabling councils to raise money in ways that the private sector can.
Calls for councils to be more businesslike need to be matched by increasing freedom to act in a more businesslike way.
There are some signs of this happening.
The proposed Tax Increment Financing (TIF), a type of securitised funding, provides the potential to use future revenue flows from development to raise money for investment now.
TIF is effectively a bet on future potential revenue flows from growth in local taxation on additional commercial building, and using this to forward fund enabling capital investment to make this happen.
Borrow now on the basis of future revenue flows.
While this creates a potential source of additional funding for councils, the risks implicit in it need to be fully recognised and managed.
Borrowing requires confidence that repayment will be possible in the future.
It also requires the ability to retain the local taxation of commercial premises – another change being pursued, as currently such taxation is centrally pooled and then redistributed to councils with winners and losers.
With innovation goes risk. What happens if the growth predicted is not achieved to the timescales predicted?
The rules associated with TIF have not yet been developed. It is vital, however, that initiatives such as TIF are developed to enable councils to be more businesslike and to take decisions locally about the level of risk and financing that they can manage. This must be done within a macro economic and local financial envelope that avoids cumulative risk getting out of hand nationally and locally.
It will be interesting to see if the Coalition Government can strike a balance between liberation and control that enables councils to innovate.
Risk management is going to be a growing requirement in the skill sets of senior managers.
*Malcolm Morley is Chief Executive of Harlow District Council and can be contacted via the Editor, email
info@lgfocus.com.au
The views expressed in
this article are not necessarily
those of his employer
