News & Views‎ > ‎

SPECIALBULLETIN NO 2

posted 7 Nov 2011, 08:36 by Peter Webb

FOR MEETING WITH SCC Leader Cllr David Hodge and Acting Assistant Chief Finance Officer Sheila Little on 31st October 2011

 

AGENDA item: SPENDING: THE ELEPHANT IN THE ROOM

 

1.    It may be asserted that over the past 10-12 years Surrey CC has in company with all local authorities, even if to a varying degree in comparison, shared in government fiscal incontinence, running through taxpayers’ money and then going into still-rising debt.

 

2.    Taking 1997-98 as a base SCC gross spending has by 2007-08 more than doubled and by 2011-12 has reached 136%. This implies a rate of expanding productive activity and value enhancement at a similar rate. But Surrey is still Surrey. It’s land area is the same. It’s population is largely unchanged, and miles of road are constant. How can such a cost increase be supported or understood by resident taxpayers ?. Value for Money claims are surely false.  (What is VFM ? Is it an economically delivered but unquestioned policy, or a cost benefit justified policy ? If economically, as against what yardstick ?)

 

3.    Taking Michael Frater’s finding that focus on processes, control and inputs is not matched by delivery, outcomes and achievement, one has to speculate on what might be the notional cost rise.  There have been factors outside SCC’s  control eg a step-rise in employers’ NI contributions,  and other changes. Inflation has occurred but would normally be at least partially offset by increasing productivity. However, by taking a compound annual rate of inflation of 3%, or 34% over the 10 years (SCC assessed this for me at 26%in 2008), and generously adding 16% real expansion to reach an intuitive 50% we find nearly £400m pa of ‘fat’ (actual exceeding notional cost). It was notable that at the time of the 2008 ‘Council tax unwrapped’ initiative SCC could not account for such a real value increase.

 

4.    Put another way  there is a  gap between spending up to revenue, and spending down to a level of taxpayers’ money consistent with delivery of the service and externalised value required of it. It is also possible to argue that a doubling of cost does not necessarily produce an effective and fleet of foot organisation. In fact it produced the disastrous and sclerotic situation disclosed by Michael Frater in 2009. In addition the highways contract had been mismanaged and poorly understood causing the contractors to self-protectively price and then give ex-gratia refunds. We have heard from John Glanfield on the current situation.

 

5.    At the same time the entire public asset which one would normally expect to see in the SCC balance sheet has been wiped out by the pension liability which also gives a potentially insolvent authority.

 

STAG seeks the recognition of the validity of the above as a first step towards a more positive taxpayer  orientation by SCC using the Annual Report, and a healthier decision-making and operational ‘lifestyle’ for SCC. Acceptance that there is £400m of ‘fat’ could provide a more ambitious target for  economies and changed ways of working. The PVR methodology and results look impressive but are they confined to procurement rather than the organisation and departments ordering that procurement ?

 

Associated with this contention is the observation (echoing that made by the NAO) that insufficient weight is given to financial management in Authority hierarchies and Civil Service departments.  It may be that Change & Efficiency is SCC’s way of supplementing present financial management which seems to stop short at the treasury and accountancy functions to exclude the ‘financial controller’ enhancement as normally understood in Industry.

 

 

 

Comments