PublicFinance P UBLICFINANCE .CO.UK
Issue 11 November 2018
TA ST E R E D I T I O N
RED MISTS OF TIME
Remembering Liverpool’s Militant moment TALK OF THE TOWN
Who will champion the new regional agenda? NOTES FROM DOWN UNDER
NOVEMBER 2018 • ISSUE № 11
Keeping things pitch perfect at the Sydney Opera House
A deep dive into local government pension pooling
INVESTMENT SPECIAL
news Crossrail budget tops £15bn
Recycling ban has rubbished costs
The government will give London’s troubled Crossrail project a £350m short-term repayable loan for 2018-19, announced transport minister Jo Johnson in October. This is on top of the £590m of public funds – £300m to Crossrail and £290m to Network Rail – handed to the project in July, taking the budget to £15.4m from £14.8bn.
Councils have claimed the Chinese ban in January on processing 24 types of unsorted mixed paper and plastics has added £500,000 to their average recycling costs. The survey of 14 English and Welsh councils was released by the Local Government Association, which warned other countries were looking at a similar ban.
Local government’s desire to outsource public services is in decline, according to a think-tank. A survey by the New Local Government Network found 39% of council chiefs intended to outsource less over the next two years, while 15% planned to outsource more. The think-tank’s report From Transactions To Changemaking: Rethinking Partnerships Between The Public And Private Sectors, released last month, said that “dwindling confidence” in outsourcing suggested councils were seeking control over service delivery. NLGN said highprofile failures like the collapse of Carillion have “dented public confidence”. Councils were exploring new forms of partnership, such as trading companies and joint ventures, the report said. A total of 191 council leaders, chief executives and mayors responded to the survey, which found that 46% of councils expected no change in the number of services they outsource.
Pressure builds for more local spending scrutiny Urgent need for local PACs to ‘follow the public pound across a local area’ to get a real picture of the value of services By Dominic Brady The chair of the Public Accounts Committee and a think-tank have been working to garner support for an extra level of scrutiny into how local government spends money. Meg Hillier told PF last month that she had been speaking “behind the scenes to persuade various players” to make local government more transparent. “There isn’t the same level of transparency locally” since the Audit Commission was dissolved in 2015, she said. There was a need for such bodies, because “the British public are much more savvy about things – they don’t trust the authority to spend things well”, Hillier said. Separately, the Institute for Government think-tank suggested the government should “review the case for setting up local public accounts committees” in a report last month on accountability in modern government. It suggested such bodies should be trialled by combined mayoral authorities “to serve as a forum to
�Clearcut case:
‘There isn’t the same level of transparency locally’ since the Audit Commission was dissolved, said PAC chair Meg Hillier
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6 PUBLICFINANCE MONTH 2018
convene the local leaders responsible for different services to discuss service performance and the links between services”. While Hillier suggested local PACs might not be the answer because they would require “huge infrastructure”, she agreed devolution provided a real opportunity for an extra level of scrutiny of local government finances. “At metro mayor level or at a bigger regional level, there is an opportunity for value-for-money audit and analysis, because there are certain discreet pots of money coming down for very particular projects, so it’s easier to track it through from the day-to-day budget value for money,” she told PF. Ed Hammond, director of the Centre for Public Scrutiny, which has long been an advocate of local PACs, told PF that there is an “urgent need” for them. “Local PACs will be bodies led by elected councillors, empowered to follow the public pound across a local area, cutting across different organisations to get a real picture of the value for money of public services,” he suggested. “In a world of increasingly complex decisionmaking, and with greater pressure on finances, there is an urgent need for these bodies to give the public the assurance they need on the services they rely on.” James Palmer, Conservative mayor of Cambridgeshire & Peterborough Combined Authority, told PF he believed there was already enough local authority financial scrutiny in place. However, he suggested if more fiscal devolution was handed down to metro mayors, then “that of course must come with the necessary level of local governance and scrutiny”. “Whether that comes in the form of a local public accounts committee is, of course, a discussion that would need to be had as part of further devolved powers,” he added. Shadow communities secretary Andrew Gwynne told the Labour Party conference in September that his party would set up “local authorities public accounts committees to improve local government spending decisions”. Local PACs were part of a 2015 Labour Party manifesto pledge, so that “every pound spent by local bodies creates value for money for local taxpayers”.
REX / CROSSRAIL
Outsourcing falls from favour
international news Accounting shift ends Malaysian ‘excesses’ Malaysia will shift to accrual accounting by 2021 as part of reforms to stop the “excesses of the past”, finance minister Lim Guan Eng confirmed. The move is part of wider fiscal reforms within the government, which came to power in May. The aim is to increase revenues, spend public money better and deal with its debts.
Facing facts
Italy has pledged to cut taxes and increase pensions, but can it balance the books?
the boot �Sticking in: the Italian
populist government’s first budget is under fire from Brussels
➊
Italy busts EU budget guide Brussels rejects high spending plans that backtrack on earlier commitments to debt and deficit reduction
SHUTTERSTOCK
By Simone Rensch The European Commission told Italy to revise its budget for next year in order to rein in spending – the first time it has taken such an action. Italy was given until 13 November to submit a new draft budget to Brussels. The populist coalition currently governing Italy has pledged to implement both tax cuts and increases to pensions and welfare payments. This contravenes pledges made in the summer by the former government to reduce debt and target a deficit of 0.8% of GDP. The draft budget, agreed on 27 September, sets out a deficit three times higher, at 2.4% of GDP. Pierre Moscovici, EU commissioner for economic and financial affairs, taxation and customs, said: “The opinion adopted by the commission should come as no
surprise to anyone, as the Italian government’s draft budget represents a clear and intentional deviation from the commitments made by Italy last July. “However, our door is not closing: we wish to continue our constructive dialogue with the Italian authorities.” Italy’s debt stands at more than 130% of GDP and is the second largest in the EU, after Greece. Its economy is also still smaller than it was in 2008, before the financial crash. In response to Brussels decision, Italy’s deputy prime minister Luigi Di Maio said on Twitter: “This is the first Italian budget that the EU doesn’t like. No surprise: this is the first Italian budget written in Rome and not in Brussels!” In a letter despatched to Brussels ahead of the commission’s decision, economy minister Giovanni Tria defended the high spending plans, saying they would be in the interest of the “entire European economy”. Tria said he would like “constructive” talks with Brussels and claimed the plans would “not expose the financial stability of Italy” or other EU member states to
➋ ➌ ➍
Roman numerals Third but fighting Italy is the eurozone’s third largest economy, but the country is hobbled by high public debt and is dealing with corruption and poor management of public finances.
Doubled up with debt Government debt stands at 131.8% of national output, second only to Greece. EU rules state that a country’s total debt should account for no more than 60% of economic output, while the deficit limit is 3%.
Downward trajectory The OECD has projected that Italy’s growth will edge down to 1.4% in 2018 and 1.1% in 2019. GDP growth in 2017 was 1.5% and 0.9% in 2016.
Spend, spend, spend The populist government’s spending pledges could cost up to €100bn. They include introducing a basic universal income for the poor, a ‘flat’ tax rate as well as pension reforms.
risks. “We believe, in fact, that the strengthening of the Italian economy is in the interest of the entire European Union,” he said. In October, Brussels also flagged concerns about France’s spending plans. It warned in a letter that the planned debt reduction in 2019 does not respect the proposals that www.publicfinance.co.uk/subscribe Paris had previously agreed with the EU.
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performance tracker
Honesty is the best policy now As the opportunity for efficiency savings dwindles, experts call on government to be explicit about the cost of public services
A By Dominic Brady
fter eight years of relentlessly plucking low-hanging fruit, it is time for the government to have an honest conversation about the true cost of public services. That is the conclusion of the Institute for Government and CIPFA’s annual public services Performance Tracker report, published in October. Since former chancellor George Osborne delivered his emergency budget in June 2010, claiming the government had “laid the foundations for a more prosperous future,” public services have been through a rigorous process of streamlining, but CIPFA and IfG’s research argues that further efficiency savings may prove hard to come by. Discussing the report’s findings at an IfG event, Emily Andrews, associate director at the think-tank, said that, while public services have become more efficient, “we are reaching the end of the road for efficiency savings”. Streamlining has been effective in seven out of the nine public services analysed by CIPFA and IfG (see panel, above right) but “demand is set to grow in almost all these services”, Andrews claimed. Efficiency has been achieved largely as a result of the public sector pay cap, which has kept the wage bill down. But this year the government loosened the cap with pay rises of between 1.5% and 3.5% for the police, prison officers, doctors, nurses and teachers. The time has come “to be explicit about the cost of public services – vague promises about thewww.publicfinance.co.uk/subscribe end of austerity are not productive,” Andrews argued.
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Adult social care is one area expected to come under the greatest pressure, and the Local Government Association has identified a £3.5bn funding gap by 2025 (see graph, below, for changes in expenditure). CIPFA’s report said the adult social care sector is propped up by an “increased reliance on informal care,” from family and friends of those in need. A separate study from Carers UK in October found unpaid carers contribute £132bn worth of care support Nine services annually. This, the tracker noted, is evidence of the examined by government “quietly shifting the costs of services CIPFA and onto individuals”. the IfG in the This trend is also apparent in the UK justice system, tracker where legal aid cuts have meant more defendants ● General practice now have to pay for their own defence – or even ● Hospitals defend themselves. Criminal legal aid spending fell by ● Adult social care ● Children’s 32.1% in real terms between 2010-11 and 2017-18, from social care £1,175m to £891m in 2017-18. ● Schools Prisons are the only area where spending cuts have ● Police ● Criminal courts not been counter-balanced by efficiency ● Prisons improvements, according to the research. ● Neighbourhood Andrews noted the Ministry of Justice is “one of services the few unprotected departments” and, as such, has had to manage spending cuts through staff reductions. And despite increasing the amount of prison staff by 3,205 since March 2017, the aftermath of sustained cuts has meant an initial reduction in staff levels has left an experience gap in the sector, with 33% of prison officers having less than two years’ experience in 2018, compared with 7% in 2010. Cuts have manifested in increases in assaults on prison staff, with the number of
33%
OF PRISON OFFICERS NOW HAVE LESS THAN TWO YEARS’ EXPERIENCE
Change in adult social care expenditure in England (real terms), since 2009-10 2% 0% -2% -4% -6% -8% -10% 20092010
20102011
20112012
20122013
20132014
20142015
20152016
Source: NHS Digital, Adult Social Care Activity and Finance Report, England, 2016-17
10 PUBLICFINANCE NOVEMBER 2018
20162017
20172018
performance tracker attacks on staff almost tripling to 9,000 between 2009-10 and 2017-18 (see graph, below). Elsewhere, neighbourhood services have sustained the biggest cuts of all the nine services considered in the report. The number of authorities charging for garden waste collection rose from 88 to 199 between 2010-11 and 2018-18, reinforcing the idea articulated in the report that “where government can get people to pay directly for services, it is often doing so”. Over the same period, the number of authorities offering free garden waste collection fell from 236 to 137, according to the tracker (see graph, bottom). “We are now doing less and people are paying more for it,” commented former CIPFA president Andrew Burns, who also spoke at the event. Burns, who is director of finance and resources at Staffordshire County Council, raised the issue of disproportionate spending on certain services, specifically social care. He said: “In Staffordshire, we now spend 70% of our
(Bands 3-5) (full-time equivalent) in public prisons, as of 31 March, since 2009-10 0%
20092010
20102011
20112012
20122013
20132014
20142015
20152016
20162017
20172018
-5% -10% -15% -20% -25% -30% Source: Her Majesty’s Prison and Probation Service, ‘Workforce Statistics Bulletin’
Change to spending on neighbourhood services in England (real terms), since 2009-10 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% 20092010
20102011
Waste collection
20112012
20122013
Food safety
20132014
20142015
Road maintenance
20152016
20162017
Libraries
budget on 2% of our population,” underscoring the report’s claim that, locally, spending on social care has squeezed other services. The report found that non-social care spending now makes up only 46% of all local government spending, down from 55% in 2010-11 – a trend that CIPFA and IfG said “creates obvious potential for public resentment”. “People paying local taxes think that they are paying for services available to everyone in the area, such as waste collection and libraries. But those universal services are being squeezed by social care, used only by a minority,” the report said. Burns also alluded to the adult social care precept, which came into effect in April 2018 and allows councils that provide social care to adults to increase their share of council tax by up to an extra 3%. He said: “There has been a shift from national to local taxation to fund social care, but this shift is not the solution.” With central government funding for local authorities falling by 49.1% between 2010 and 2018, according to the National Audit Office, councils have had to think of creative ways to bolster their finances. “Councils are increasingly looking at income generation, but that is only a marginal contribution,” Burns said. The Performance Tracker highlighted the fact that “trade-offs” were necessary within public services if the government fails to increase taxes. “It is clear that demographic pressures and other trends will prove unsustainable without a significant change in the scope or nature of public services, a change in the degree to which people pay directly for those services, or a much higher level of taxation,” the report said. Polling conducted by Ipsos Mori on behalf of Deloitte recently found that 62% of people in the UK would be open to higher taxes to support increased public spending – up from 40% in 2009. But when this notion was put to the panel, panellists agreed that, in reality, increasing tax would be difficult. However, CIPFA and IfG’s report notes that “tough decisions will have to be made: whether tax increases, or lower expectations of services, or more individual contributions, or radical service changes”. The government needs to be explicit about the realities, it says. www.publicfinance.co.uk/subscribe “Th ey need to begin telling people clearly that they face a national choice.” ●
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Source: Ministry of Housing, Communities & Local Government, ‘Revenue Expenditure and Financing England’
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watchdog watch
WHAT’S GOING ON IN AUDIT AND REGULATION —
AUD I T S C OTL AN D ⦁ Auditors have raised “serious reservations” over the finances of two Scottish health boards. Auditor general Caroline Gardner warned both NHS Highland and NHS Ayrshire and Arran they faced significant financial challenges. Neither had been able to meet their savings targets, and a significant proportion of their savings to date had been achieved on a one-off basis. NHS Ayrshire and Arran, which has a budget of £800m, received £23m in loan funding, or brokerage, from the Scottish Government last year, with more required this year to help meet a projected shortfall of £22.4m. The board had no plans to repay these loans, and would not be able to balance its budget by 2020-21. NHS Highland, with a budget of £780m, also required a loan of £15m last year, and this year was expected to face a funding gap of between £19m and £23m.
CAR E Q U AL ITY C O MMI S S I O N ⦁ The Care Quality Commission should develop a more bespoke approach to inspection in the light of frustrations from the sector, a think-thank recommended. King’s Fund analysis found “significant differences in how CQC’s inspection and ratings work across the four sectors it regulates” – acute hospitals, mental health, general practice and social care. Report author Ruth Robertson said: “We recommend CQC develops its approach in different ways in different parts of the www.publicfinance.co.uk/subscribe health system with a focus on how it can have the biggest impact on quality.”
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12 PUBLICFINANCE NOVEMBER 2018
scare: �Health NHS Highland
faces significant financial challenges, along with NHS Ayrshire and Arran
Inspections should be more regular and less formal, while more should be invested in recruitment and training of staff. CQC chief executive Ian Trenholm said changes were already under way.
O FSTED
£22.4m NHS Ayrshire and Arran’s projected shortfall
“We recommend CQC develops its approach in different ways in different parts of the health system” ON DEVELOPING A MORE BESPOKE INSPECTION APPROACH: R U T H R OBERT S O N, K I NG’ S F U ND
⦁ School inspections will relax the emphasis on grades and focus instead on the wider ‘quality of education’, according to Ofsted head Amanda Spielman. The chief inspector proposed four new inspection judgements focused on the substance of education and a broad curriculum as opposed to exam results. Speaking at a summit in Newcastle, Spielman said: “Our inspections have looked hardest at outcomes, placing too much weight on test and exam results.” Spielman said Ofsted would consult on a new judgment for ‘quality of education’.
WALE S AUD I T O FFI CE ⦁ The National Fraud Initiative in Wales has found £5.4m in public sector fraud and overpayments – £1m more than the last time the exercise was conducted. The initiative is carried out by the Wales Audit Office every two years and matches data across organisations and systems to identify anomalies. Welsh auditor general Adrian Crompton said fraud was not a victimless crime. “Uncovering £5.4m in this latest NFI exercise is a considerable help to public services facing huge financial challenges.” See page 41 for the latest from CIPFA’s Fraud and Corruption Tracker
opinion ► Peter Hetherington
Call to action If we are to stand any chance of breaking the ‘necklace of neglect’ encircling swathes of the UK, we need a heavy-hitting minister to fight for a non-metropolitan urban agenda
L
Peer pressure: Lords John Prescott and Michael Heseltine represented a bygone era of active government
ast year, the great and the good of recent governments – two deputy prime ministers, former senior civil servants, an array of council leaders – gathered in Liverpool to celebrate the achievements of one in their midst. It was a homage to a bygone era of active government in the 1980s, 90s and 2000s and the dedication of one man: Lord Michael Heseltine. While his role in the city 30 years ago has become the stuff of legend, what cannot be disputed was a passion and determination to try to address years of neglect and urban decay. Sure, we can over-romanticise an era when Heseltine famously promised to intervene before breakfast, lunch, tea or dinner in cities, regions and communities blighted by neglect. “All governments do it,” he once told me. “It’s just a question of how.” To which you might add: all governments except this one and its coalition predecessor. Ten years ago, I was writing the history of a barely remembered organisation called English Partnerships, brainchild of Heseltine. It was born in 1993 to “promote the development of vacant, derelict... land throughout England, bring [it] back into use, stimulate local enterprise, create jobs, improve the environment”. This was a very different world, yet to be engulfed by global financial meltdown. Austerity hadn’t bitten and the naysayers and small government ideologues had yet to assume control. Once they did, every element of regional apparatus – nearest council, Newcastle, estimates its funding has been cut by dedicated government offices, development agencies, £254m annually between 2010-2017. By 2020, its funding gap will regional plans – disappeared. Government retreated. rise to £283m. It gets worse. Around £2.4bn annually, which the If English Partnerships never quite matched Heseltine’s worst-off places in the UK have been receiving from so-called EU vision of a full-blown English development agency, it at structural funds, will disappear with Brexit. The government has least was a solid base on which to build an interventionist promised to replace this with a UK ‘shared prosperity fund’ – structure – something exploited by John Prescott as deputy although whether it can match EU funding is a moot point. prime minister under Tony Blair. They represented active These places, often well away from big cities and pejoratively government. They travelled, made things happen. Has any labelled ‘left behind’ or ‘post-industrial’, are crying out for subsequent minister matched their enthusiasm? attention. Across political parties, there’s a recognition that Today, we are left with a devalued, hollowed-out state, former coalfield communities, steel, seaside and mill towns have which lacks any capacity to intervene. With local been forgotten by policymakers. As a result, the makings of a government collapsing in some areas, you really despair of new, non-metropolitan urban agenda is slowly emerging. a cabinet whose chief secretary to This might explain why shadow chancellor John McDonnell the Treasury, Liz Truss, blissfully promised that a future Labour government would end Treasury’s asserts that this administration is “bias against investing in regions outside London”. Exactly how is Peter Hetherington simply giving town halls more not clear. But as mapping geographer Professor Alasdair Rae of is former regional “flexibility” to raise money rather the University of Sheffield suggested, creating a government affairs editor of The Guardian and than reducing spending. department to coordinate policy outside London after Brexit past chair of the www.publicfinance.co.uk/subscribe At least austerity is over according would represent a new start for areas wearing what he dubs the Town and Country to Theresa May. Dream on. My “necklace of neglect”. But which heavy-hitter might lead it? ⦁ Planning Association
PA IMAGES
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feature
LIVERPOOL 1985 The council that tried to set an illegal budget After Labour’s Dawn Butler recently revived memories of the row, PF looks back at what happened in Liverpool he city y in 1985 when the council refused to set n a budget within mits government limits
�Militant Tendency
TO ACCESS FULL took controlTHE of local Labour VERSIONthe OF PUBLIC FINANCE party and got councillors MAGAZINE, elected, notably SUBSCRIBE HERE ho Derek Hatton, who became deputy www.publicfinance.co.uk/subscribe ool leader of Liverpool City Council
22 PUBLICFINANCE NOVEMBER R 2018
B
etter to break the law than break the poor.” So said shadow women and equalities minister Dawn Butler in her speech at the recent Labour Party conference in Liverpool. It was an explicit reference to the slogan and tactics employed by the Militant Tendency By Vivienne faction, which controlled the city’s council Russell in the 1980s and attempted to take on the Thatcher government by setting an illegal budget. Butler’s apparent praise for the Liverpool rebels sparked controversy. It was a painful episode not just for the Labour Party, but in local government history. Thirty-three years on, institutional memories are fading. Many now working in the local government sector were children at the time, or perhaps not even born. “I don’t think you should forget history,” says Michael Parkinson, professor and associate pro vice chancellor for civic engagement at Liverpool University, whose 1985 book Liverpool on the Brink provides a detailed account of the episode. “II thi think it’s very important to remember history, to remember how far we’ve come and how much we’ve changed and how we’re not going b back there.” With this in m mind, PF spoke to some individuals involved to gather their memories o of what they described as a fraught, frightening and depressing time. The origins of tthe episode are complex. Local government in the 1980s was a very different beast. It enjoyed far more financial power, with control of bo both the domestic and the business rate, large swathes of council housing ho and rents, and directly provided a wide range of services. M Many local government leaders also enjoyed much more prominent prominen public profiles than is the case today, particularly if they set themselves up in opposition to prime minister Margaret Th Margare atcher. Thatcher’s atch Conservative government, elected in 1979, wanted p to curb public spending, and cut the local government grant. sect responded by hiking the rates, prompting the threat The sector of rate c capping by government in return. The 1984 Rates Act
Matthew Taylor is chief executive of the RSA. Previously he was chief political adviser to the then prime minister Tony Blair, and chief executive of the IPPR think-tank
approach with the explicit aim of making finance less about specialism and control and more about empowering decision makers at every level – from the executive to the front line to community groups. Successful organisations that are able to recruit and retain talented people need to have systems, including finance systems, that enable these people to take responsibility and show initiative.
PADDY MILLS
Empowering citizens A second set of issues relates to individual transactional services to the public. We have already seen payment systems move online, but a great deal more can be done to enable citizens to access and pay for services without having to go through cumbersome and frustrating processes. In the face of the ever-present and continuously changing risk of fraud, the big challenge is to make identity systems work more effectively. Better data sharing, system interoperability and, longer term, the use of distributed ledger systems should help public agencies move to fully online systems for services in many areas that still rely on paper documents and in-person verification. Here, again, change should be driven by principles rather than mere organisational efficiency. Making access to services as easy as possible is a public duty – especially given that disadvantaged groups such as frail older people, migrants or those working unsociable hours tend to find complexity particularly troublesome. There is also an opportunity here for public agencies, genuinely committed to helping people, to distinguish themselves from the commercial sector. The latter too often designs processes to deter customers from finding the most economical options or exercising their rights (as anyone trying to complain to their broadband provider will have found). Using intelligent customer relationship management systems, we can reverse the lazy assumption that private sector customer service is better.
Using public money as effectively as possible is, of course, an important principle in itself. However, across public services, poor and siloed data systems are still wasting huge amounts of time and money – not to mention demoralising staff and disappointing citizens. There are currently wide differences between local practices, with managers in some places using data collaboratively while others remain siloed and risk averse. As key voices in discussions about how to save money, finance professionals understand how much is still being wasted by old technology and poor data. They should be the champions of the investment case for a step-change in data management. Standing further back, if they want to be at the centre of driving change and improvement, financial professionals need to understand and exploit the full potential of digital. The impressive London Sexual Health Transformation programme demonstrates some of the possibilities. The combination of user awareness and engagement, inter-agency collaboration (across 27 London boroughs) and effective use of digital tools enabled a much better service to be provided while significantly reducing core costs. The lesson is clear: the full potential of digital – including the potential to cut costs – is only realised when managers are willing to reimagine the service as a whole. While finance professionals help set and monitor service budgets, how fully do they understand the way these services operate?
Intelligent procurement The pace of technological change demands a more agile and experimental approach to service improvement. Intelligent procurement is an important element. Instead of inflexible long-term service contracts tied to existing models of delivery, public agencies need to follow the example of local authorities such as Hackney, sharing problems and, as far as possible, data with tech entrepreneurs and service designers. The RSA’s work on public entrepreneurship has suggested moving from an ‘invest to www.publicfinance.co.uk/subscribe save’ focus on marginal improvements to an ‘invest to solve’ approach, so that genuinely ►
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Jon Blackburn tells PF how Sydney Opera House is evolving to attract new audiences in a digital age, while a major renovation prepares the venue for the 21st century
PERFORMANCE MANAGEMENT TO ACCESS THE FULL VERSION OF PUBLIC FINANCE MAGAZINE, SUBSCRIBE HERE www.publicfinance.co.uk/subscribe
Top tips… Do ➊ Seek the sweet spot: ➋ ➌
an appropriate goal for one person will overload another Consolidate achievements before trying to push further Remember, it’s not what you do but the way that you do it
Don’t
➐
➊ Spread staff too thinly ➋ ➌
people like you!” Instead, it is more helpful to pay attention to how people go about doing things – do they solve problems effectively, what is their level of commitment?
➍
➎
Boost intrinsic motivation It’s important to understand what motivates people. In his best-selling book Drive: The Surprising Truth About What Motivates Us, Daniel Pink talks about autonomy, mastery, and purpose. People are motivated when they have autonomy (they can control aspects of their work), mastery (they are on a clear path to building skills) and purpose (there is a reason behind their work). Purpose could range from wanting to make a difference to service users, providing a certain life for your family, or to having an impact in the world.
trying to calm down) performed significantly better than their counterparts.
➏ ➐
Make stress your ally We need certain levels of stress to rise to challenges, but that can turn bad fast if we have too much stress to perform effectively. So how can you make stress part of growth? One useful technique comes from theatre. When actors perform for live audiences, the physiology of anxiety and excitement are the same (fast heart rate, butterflies in the stomach). Try and help people to become ‘excited’ about their work so that they can use the energy that generates to propel themselves forwards. One study has shown that people who simply said to themselves “I’m excited” before giving a talk (instead of
at the risk of them becoming ‘scattered’ Forget to build autonomy, mastery and purpose into objectives Neglect your personal inspiration
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Build up creative tension If you want to be inspiring, you have to be inspired yourself. Make sure you know what you care about and get curious about what others are passionate about too. Understanding the principle of creative tension, developed by American author and management consultant Robert Fritz, means you know the future you want to see and stay grounded in the reality you face today, whether that’s good, bad or indifferent.
Exercise patience We often underestimate how long it may take for another person to learn new skills. For example, when an individual is asked to estimate how long it will take somebody else to become good at something they already do well, generally they under-estimate it by five times. Bear this in mind when setting goals for your team.
Embrace mistakes
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When mistakes happen, fear kicks in, and people tend to minimise damage by blaming others and pointing out their flaws. Because of this, it is helpful to create an environment of psychological safety, where everyone feels able to acknowledge their contribution. As soon as you feel able to www.publicfinance.co.uk/subscribe accept your contribution when things go wrong, learning and growth can occur.
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numbers game
bn
The Public Works Loan Board generated just over £2.8bn in interest income on its loans in 2017-18, its annual report has shown. It also collected more than 30,000 interest and loan repayments, and collected interest payments on over 15,000 loans with a carrying value of £70.8bn.
Funds still seek active value 90% actively
80% actively
managed 5 managers
1998
74% actively
managed 7 managers
managed 13 managers
2008
2018
There has been a decline in the number of funds managed actively, from 90% to 74% over the past decade, the PIRC annual report noted. However, at almost three-quarters of total assets, the proportion of actively managed funds remains high. “Although funds are focused on reducing costs, the move from (high-cost) active management to (low-cost) passive is not gaining significant ground as most funds continue to seek active value over and above the active managers’ fees,” the report stated.
LGPS income While the average return on LGPS assets was 4.5% in 2017-18, the PIRC annual report said asset returns were tightly grouped, with bonds, equities and alternatives returning 1%, 4%, and 6% respectively. There was wider variation within asset classes than between them. Emerging market equities returned an average of 9%, while UK equities delivered just 1%. Property returned almost 10% and private equity 9%.
2017/2018 Performance Total equity Global UK
4.3 4.8
1.4
Overseas
Scheme by numbers LGPS income in 2016-17 was £14.7bn, of which 27% was supplied by investment income, Ministry of Housing, Communities & Local Government statistics show. Employer contributions made up half of the scheme’s income, while employees contributed 14%. LGPS expenditure in 2016-17 was £11.8bn, equivalent to 81% of income.
mil ion
Payback time for PWLB
5.5
North America
27% investment
£14.7 bn total income
1.4
Global
50% employers’
contributions
2.6
UK bonds 1.3
UK government 2.0
UK corp
2.0
UK IL 0.2
0.1
Absolute return bonds
14%
2.7
Cash -0.2
Alternatives
5.8
Private equity
8.9
Hedge funds 2.2
Infrastructure Diversified growth
6.2
1.6
Property
Total assets 0
48 PUBLICFINANCE NOVEMBER 2018
8.8
Total bonds
Non-UK bonds
employees’ contributions
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2.6
Emerging
2016-2017, England and Wales
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8.4
Pacific
Local Government Pension Scheme
other income
5.2
Japan
income
8% transfer and
2.6
Europe
9.8 4.5
5
10
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