Public Finance magazine - March/April 2023 by PressPad

THE JOURNAL FOR THE CHARTERED INSTITUTE OF PUBLIC FINANCE & ACCOUNTANCY

IS THE PARTY OVER? The UK says it wants a conscious uncoupling from China. But at what cost?

MARCH/APRIL 2023 PUBLICFINANCE.CO.UK

BEAUTIFUL GAME Corruption has tainted football’s image, but new governance is in the offing ALL SHOPPED OUT? Why there’s hope for the high street despite a three-pronged attack CARBON CHALLENGE The rocky road to meeting net-zero targets

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$*1'"TUBUT /FX %BUB ] /FX 1MBUGPSN ] /FX *OTJHIUT Gain a clear understanding of how your frontline services are performing to make robust and sustainable decisions. With a comprehensive collection of dashboards spanning a range of frontline services, CIPFAstats+ gives you access to powerful data insights ƥĺîƥ ČîŠ ĺĚŕƎ ĿŞƎƑūǄĚ ǋūƭƑ ǛŠîŠČĿîŕ ƙƭƙƥîĿŠîċĿŕĿƥǋȡ îƙ well as community outcomes. New for the 2023/24 subscription year: new dashboards will be added to cover the following areas, Levelling up, Cost of Living, and Grants. We will be enhancing the quality of the analysis across all our dashboards by the inclusion of new statistical techniques, visualisations and key indicators. And, for ƥĺĚ ǛƑƙƥ ƥĿŞĚ ūŠ ƥūƎ ūĲ ƥĺĚ ƎƑĚƙĚŠƥîƥĿūŠ ūĲ îŠîŕǋƙĿƙ ūĲ historical data Predictive Analytics will be included, using machine learning algorithms , to build a model capable of generating evidence-based, robust predictions of a ǅĿēĚ ƑîŠĳĚ ūĲ ǛŠîŠČĿîŕ îŠē ŠūŠȹǛŠîŠČĿîŕ ēîƥîȦ Book your demo visit cipfa.org/services/cipfastats email customerservices@cipfa.org call +44 (0) 20 7543 5600

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EDITORIAL

WELCOME Redactive Publishing Ltd, 9 Dallington Street, London EC1V 0LN publicfinance.co.uk

CHRIS SMITH

@public_finance_

Plus ça change…

EDITOR Chris Smith 020 7324 2796 chris.smith@publicﬁnance.co.uk GROUP EDITOR Jon Watkins 020 7324 2788 jon.watkins@publicﬁnance.co.uk

REPORTERS Oliver Rudgewick 020 7324 2768 oliver.rudgewick@publicfinance.co.uk Calum Rutter 020 7324 2794 calum.rutter@publicfinance.co.uk SUB-EDITOR Caroline Taylor caroline.taylor@redactive.co.uk LEAD DESIGNER David Twardawa 020 7324 2704 david.twardawa@redactive.co.uk PICTURE EDITOR Claire Echavarry 020 7324 2701 claire.echavarry@redactive.co.uk SENIOR DIGITAL CONTENT EXECUTIVE Daniel Kelly 020 7324 2745 daniel.kelly@redactive.co.uk SALES 020 7880 6203 advertising@publicfinance.co.uk RECRUITMENT SALES 020 7880 7621 pfjobs@redactive.co.uk PRODUCTION MANAGER Aysha Miah-Edwards 020 7880 6241 aysha.miah@redactive.co.uk ACCOUNT DIRECTOR Joanna Marsh 020 7880 8542 joanna.marsh@redactive.co.uk PRINTING Warners Midlands To subscribe to Public Finance at the annual UK cost of £100, call 01580 883844 or email subs@redactive.co.uk. International annual subscriptions are in the £130-£205 range. Public Finance is editorially autonomous and the opinions expressed are not those of CIPFA or of contributors’ employing organisations, unless expressly stated. Public Finance reserves the copyright in all published articles, which may not be reproduced in whole or in part without permission. Public Finance is published for CIPFA by Redactive Publishing Ltd. Public Finance, Redactive Publishing Ltd, 9 Dallington Street, London EC1V 0LN

ISSN 1352-9250

Tel: 020 7543 5600 Fax: 020 7543 5700 Email: corporate@cipfa.org Address: CIPFA, 77 Mansell Street, London E1 8AN

Average circulation 13,428 (Jul 19–Jun 20)

Best Magazine Launch or Re-launch Memcom Membership Excellence Awards 2021

Best Association Magazine (circulation under 25,000) The Association Excellence Awards 2021

he more things change, the more they stay the same. The 1849 quotation from French writer Jean-Baptiste Alphonse Karr is the central theme to this edition of PF, and we’re daring to be optimistic about the future. We’re thinking how challenges evolve over time and how we respond to them. If you were around in the 1970s and early ’80s, you’ll recall TV news reels about the trial of the Gang of Four in China and the Cultural Revolution. In just a few short years, what was a country largely closed to the West became a central part of our lives. Has the Great Unravelling begun? The prime minister seems to think so, and that has implications for public finances. So we’re considering if it is more complicated than a trade spat. In an earlier life, I was part of a team working on a regeneration project backed by Chinese investment. It didn’t materialise, and a new backer is now being sought – in all probability, a property developer. The local community remains left behind, and there has been no attempt to enable them to create the science or engineering start-ups we badly need. The project and the UK are in no-man’s land.

We want to know what visionary projects look like, and have been privileged to find out more about how The Clink Charity is breaking the cycle of offending. The high street also needs some inspiration, because its future is critical for communities across the UK – as well as public sector balance sheets. Internet shopping isn’t sustainable, and small traders – which make up the majority of UK employers – can’t do it all themselves. Later in the edition, we go back in time. Our quest to find the oldest copy of PF brought a response from John Harker, who shared his edition from 1976. War was driving uncertainty, a Democrat president was setting his agenda in the US, and Britain was in financial crisis. Sound familiar? John shares how public services responded, as well as some familiar issues – reporting standards were a concern. He reminds us that we’ve been here before and got through it. We can do the same again. I hope you enjoy the edition.

In 1976, war was driving uncertainty, a Democrat president was setting his agenda in the US, and Britain was in ﬁnancial crisis. Sound familiar?

CHRIS SMITH Editor chris.smith@publicﬁnance.co.uk PUBLICFINANCE.CO.UK 3

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*OUFHSBUJOH DBSF QPMJDZ QSJODJQMFT BOE QSBDUJDF GPS QMBDFT Health and care integration is not a new phenomenon but has been a constant and ƙĿĳŠĿǛČîŠƥ ƎūŕĿČǋ ƥĺĚŞĚ ĲūƑ ŞîŠǋ ǋĚîƑƙȦ

CIPFA believes that for integration to be a success, a whole systems approach to public ǛŠîŠČĿîŕ ŞîŠîĳĚŞĚŠƥ Ŀƙ ĚƙƙĚŠƥĿîŕȦ

Over time, integration has moved from ƙƎĚČĿǛČ ƎĿŕūƥƙ îŠē ƎƑūĳƑîŞŞĚƙȡ ƥĺƑūƭĳĺ voluntary partnerships with no formal accountabilities. The Health and Care Act 2022 (the Act) put integrated care systems (ICSs) on a statutory footing, and provides a legislative framework that moves away from competition in the NHS and aims to better support collaboration and partnership working.

Our recent publication, Integrating care: policy, principles and practice for places, aims to support such an approach. It provides an overview of the changes as a result of the Act and what integration is seeking to achieve. CIPFA’s Integrating care: policy, principles and practice for places is available as a free download on the CIPFA website.

Learn more: visit cipfa.org/services/integrating-care email customerservices@cipfa.org call +44 (0) 20 7543 5600

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CONTENTS

MARCH / APRIL 2023

NEED TO KNOW 7

Catch up

CIPFA to review atrisk councils; Treasury spending controls 10 News analysis

Cost of going green; children’s services reform 12 News analysis

Indian infrastructure boost; Ukrainian budget 14 Big picture

Germany ‘frees the leopard’ for Ukraine 16 Campaign 17 World in numbers

63 reoffending, asks The Clink Charity CEO 34 Whole new ball game

New governance aims to address corruption and bribery in football 40 High hopes

What does the future hold for the high street? 48 In it together

OPINION

A PF round table explores strategies to navigate the challenges ahead

19 Safety at stake

The NHS estate is crying out for capital investment

IN PRACTICE

25 The Chinese way

There are lessons we could learn from China 39 Governing by committee

CfGS takes another look at the committee system 45 Play list

Buildings that boost quality of life

55 Radical thinking

Carbon pricing solutions 57 Social ﬁx

Integrating health and social care 58 Safe as houses?

The building safety levy 59 Déjà vu

1970s local government 60 Pensions

IN DEPTH

Three vital updates for LGPS schemes 61 Jobs and careers

20 Exit the dragon?

The UK may be ‘standing up to’ China, but how much is political rhetoric? 28 Interview

Why won’t the UK fund services proven to reduce

Crypto roles at Treasury 63 Speak easy

Encouraging staff views 64 Events 65 On account

Improving police finance 66 Last word

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1SPDVSJOH XJUI DPOEFODF .BYJNJTF UIF WBMVF PG FWFSZ QPVOE TQFOU Robust and compliant procurement is key in the delivery of public services as organisations need to meet statutory obligations and deliver value for money for taxpayers. CIPFA is committed to helping public sector organisations reduce the costs and risks associated with procurement to improve outcomes. We offer:

• Advisory and consultancy: CIPFA offers end-to-end support for systems, outsourcing and service procurement – from market testing and business case ēĚǄĚŕūƎŞĚŠƥ ƥĺƑūƭĳĺ ƥū ǛŠîŕ ĚǄîŕƭîƥĿūŠ and selection. • Lifelong learning: CIPFA offers several training courses to help upskill staff and strengthen good procurement and contract management practices.

Find out more: contact us to discuss how we can help you tackle your procurement challenges.

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• CIPFA Procurement and Commissioning Network (CPCN): The CPCN is a leading and popular forum for public sector procurement practitioners, offering valuable guidance, updates, networking and training on a wide range of procurement areas. • CIPFA Property Networks: Whether building homes, hospitals, schools or roads, CIPFA’s property networks will keep you up-to-date with the latest thinking, helping you with your procurement journey.

visit ČĿƎĲîȦūƑĳȬƎƑūČƭƑĿŠĳǅĿƥĺČūŠǛēĚŠČĚ email chris.tidswell@cipfa.org call ɤǪǪ ȳǦȴ ǭǮǨǫ ǧǯǦǩǨǧ

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N E W S / A N A LY S I S / O P I N I O N / D E B AT E

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WHITEHALL POWERPLAY ‘Levelling up’ could fall prey to capital spending restrictions

GANG CULTURE Kids in care remain vulnerable despite service reforms

‘ZERO-TOLERANCE’ Ukraine targets corruption as it budgets for rebuilding

INSPECTION

CIPFA reviews set to tighten intervention process

he government has chosen CIPFA to scrutinise select councils’ finances and governance, to inform any intervention it then decides to make. The institute, along with Grant Thornton and the Good Governance Institute, will carry out “targeted external assurance reviews”, aiming

to present a comprehensive picture of the challenges, risks and issues local authorities are facing, revealed the Department for Levelling Up, Housing & Communities. These will include the impact of rising inflation, economic uncertainty, increased service demand and the continuing effects of Covid-19.

By Calum Rutter

CIPFA conﬁrmed that its programme is separate from its discussions with Warrington Borough Council

Photography: Alamy

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NEED TO KNOW

CATCH UP

MARKETS QUESTION BANK OF ENGLAND DIRECTION Reductions in some long-term gilt yields have come despite Bank of England interest rates hikes. David Blake, director at treasury adviser Arlingclose, told PF: “The assessment from the markets was that the [Bank] might end up over-egging the pudding, putting rates up to too high and having to correct them.”

The evidence gathered will inform any further actions DLUHC believes are necessary. “Local authorities are no exception [to the pressures on the entire public sector] and are facing some tough challenges as they continue to deliver their essential services in very difficult circumstances,” said CIPFA chief executive Rob Whiteman. “I am really pleased that CIPFA has been chosen as the lead reviewer, which is a testament to our expertise around financial management in local government. “As ever, we remain committed to the public sector, and I hope that these reviews will bring about positive outcomes for those involved.” CIPFA confirmed that the programme is separate from the recently announced discussions set to take place between the institute and Warrington Borough Council. “The financial sustainability of many councils remains precarious, and local leaders are facing myriad challenges, including double-figure inflation, rising

interest rates and growing demand for services,” said Phillip Woolley, partner and head of public sector consulting at Grant Thornton. “This work represents an important step in ensuring there is a collective plan across both central and local government for helping those who are most at risk.” Professor Andrew Corbett-Nolan, chief executive of the Good Governance

This work represents an important step in ensuring there is a collective plan

Institute, said that governance is the key to financial recovery at challenged councils. “The reviews will help local authorities establish a platform to build on and enable them to better service their local communities, while at the same time dealing with pressing financial issues,” he said. The government also announced that CIPFA would be reviewing Eastleigh Borough Council in Hampshire for potential “excessive risk” from debt. The council gets income from commercial interests, including a DIY store and a sports ground. Local government minister Lee Rowley said: “The council remains one of those with [a] larger amount of debt... and a reliance on commercial income.”

I N T E R N AT I O N A L

PENSIONS

Pension reforms look uncertain for France

Dateline move for valuations criticised

Attempts by the French government to reform pensions have met stiff resistance. More than 750,000 people took to the streets across the country in February during three days of action against plans to

Government proposals to move the date for annual Local Government Pension Scheme valuations just weeks before they take place will create further administrative burdens for funds, experts have said. Under LGPS regulations, pension scheme members face paying more in tax if the change in their pension value exceeds a yearly limit set by HMRC. Currently, funds calculate yearly changes in pension values based on annual CPI inflation from the previous September

raise the retirement age from 62 to 64. It followed a national walkout in January, when a million people protested. Public transport and oil reﬁnery deliveries were part of the disruption, aimed at challenging president Emmanuel Macron. The action was timed to coincide with government debates on the legislation. Parliamentary arithmetic – and striker numbers – will clinch the issue, as the president lacks a working majority, with opposition from left- and right-wing parties.

– and apply these changes on 1 April. But HMRC currently calculates its allowance on 6 April, based on CPI inflation from the previous September. Ian Colvin, head of LGPS beneﬁt consultancy at pensions consultancy Hymans Robertson, said: “Matching the dates up does make sense. But the concern for me now is the timescale. We have a twoweek consultation and then all the LGPS funds will have to update their systems to make this change.”

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IN BRIEF Residents take hit for ﬁnancial failures Allowing three struggling local authorities to raise council tax beyond the normal limit only pushes the cost of their failure onto residents, experts have said. Thurrock and Slough will be able to increase council tax by an extra 5%, and Croydon by 10%, on top of the standard 5% rise already allowed next year, without triggering a referendum. “Council tax payers suffer, but it is central departments that dropped the ball,” said PAC chair Meg Hillier. WHITEHALL

Treasury power grab will hit ‘ levelling up’ By Oliver Rudgewick

apital spending restrictions imposed on the Department for Levelling Up, Housing & Communities will hamper local authority investment and harm the government’s flagship policy, experts have warned. The Treasury has barred DLUHC from approving new capital spending without its sign-off. A DLUHC spokesperson told PF that robust spending controls are a normal way for the government to ensure departments are delivering value for money: “The government’s central mission is to level up every part of the UK by spreading opportunity, empowering local leaders and improving public services. DLUHC will continue to deliver its existing programme of capital projects as planned.” Zoë Billingham, director of thinktank IPPR North, said the move puts the Treasury “firmly in the driving seat for many decisions on ‘levelling up’”. “The Treasury has been on a go-slow on ‘levelling up’, so this is concerning Photography: Getty

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for what is electorally still the government’s flagship agenda,” she said. “For councils, this will likely mean delays on funding decisions, but what this really points to is the impact of central government taking decisions that should be held locally. Citizens should not have to wait to have basic housing improvements because of Whitehall powerplay.” Jonathan Werran, chief executive of local government think-tank Localis, told PF that the decision marks a breakdown in trust between the Treasury and DLUHC, but said the announcement overshadows wider financing issues that councils are facing in meeting their capital needs. “It does betoken a need to have a more sustainable long-term means of investing in place,” Werran said. “It is stopping a route of capital finance for local authorities, which isn’t the entire answer, but, with the patchwork of funding needs, might be a significant gap in the defences.”

Scotland targets higher earners for tax increases Scottish government proposals for increasing taxes on higher earners to fund more generous beneﬁts are more progressive than in the rest of the UK, but are at risk of being avoided, the Institute for Fiscal Studies has warned. The draft 2023-24 budget proposed increasing the top two rates of income tax by 1p per pound, to 42% and 47% respectively, and freezing the majority of tax bands.

Hong Kong lures tourists with free flights The Hong Kong government is set to give away 500,000 free air tickets from March in a bid to entice visitors. The ‘Hello Hong Kong’ campaign will run for six months and will cost HK$255m directly, with a further HK$100m spent on promotion. After the Covid-19 lockdown and high-proﬁle demonstrations against the government, the country’s tourist trade has suffered. PUBLICFINANCE.CO.UK 9

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NEED TO KNOW

NEWS ANALYSIS

This is about pounds, shillings and pence as much as environmentalism

TA C K L I N G C L I M AT E C H A N G E

It’s not easy being green The political and ﬁnancial costs of meeting net-zero targets are becoming clear By Oliver Rudgewick and Chris Smith

ndications of the challenges ahead in reducing carbon emissions have emerged as work gets under way to meet the legal target of net zero by 2045.

Political wrangling over UK delivery has begun

The UK government announced the creation of a new Department for Energy Security & Net Zero, tasked with securing our long-term energy supply. Prime minister Rishi Sunak said: “The move recognises the need to secure

more energy from domestic nuclear and renewable sources as we seize the opportunities of net zero.” But two Conservative mayors, Andy Street and Ben Houchen, said devolving more money was the way to create more green jobs. “This is about pounds, shillings and pence as much as environmentalism,” said Street. And Whitehall expert Jill Rutter warned that curbing the Treasury’s power had to come first. She said: “[I’m] not clear this is the answer if you

are serious about energy and climate change. The Department of Energy & Climate Change made a lot of progress decarbonising power, but was too weak to influence beyond that.”

New York has started phasing out natural gas from housing developments – and that could move domestic markets. New York governor Kathy Hochul passed a bill that effectively bans gas in new buildings, starting in 2024 for those under seven stories and in 2027 for anything taller. The New York Post claimed the ban “would affect oldtimers and millennials, who are obsessed with castiron pans”. A 70-year-old Brooklyn resident told the paper: “We lost electricity… during Hurricane Sandy. The only thing we had to heat up our food was gas. What if that happens again?”

New York state will phase in a ban on gas in new buildings, starting in 2024

Behavioural change in a city isn’t easy

Scotland the brave?

Cannock Chase District Council changed its netzero goal from ensuring the entire area was carbon-neutral by 2030 to simply the authority’s own operations, because a report estimated that the former would need more than £4bn of investment. Scotland’s net zero, energy and transport committee said that while councils are best placed to fight climate change, wider funding constraints are seeing authorities prioritise resources to support services.

Infrastructure reboot is too slow

Clean air brings a ﬁlthy row

Campaigners and industry argue that the pace of green energy development is glacial. In England, just two wind farms were built last year, generating less than 1MW. The Energy Networks Association revealed that up to 600 projects in England and Wales, with a combined capacity of 176GW, are waiting to be connected to the National Grid – up to 2036. “Nobody can hold a project for that long,” said one industry insider.

The capital’s streets are gridlocked, but plans to charge motorists with older cars are deadlocked. The Ultra-Low Emissions Zone expansion has turned into a flashpoint for London mayor Sadiq Khan. He wants the scheme live in August, but 11 London boroughs are either against the expansion or are calling for a delay. A court battle looks likely, a protest group has formed, and there was even a petition for a referendum. Harrow leader Paul Osborn shared his concerns for the future of ULEZ if the expansion is given the green light, suggesting that it would be unwise to move ahead with the plans amid the cost-of-living crisis. “Expanding the zone when inflation is at 10%, when energy bills are going up, when fuel bills are going up, when people’s food prices are going up; it’s not the right time to do it – even if it was the right solution,” he said.

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