The recent National Audit Office report on local authorities’ finance indicates that many councils do not expect them to return to normal for several years, creating a massive funding gap.
The headline figures make alarming reading: 94% of top-tier councils expect to cut service budgets in 2021/22, and 75% of councils report a funding gap between COVID-19 cost pressures and government support in 2020/21.
The report suggests that only 45% of top tier, and just 35% of district councils, see revenue returning to pre-COVID levels by 2023/4. The gloomy prediction is echoed in the prediction by international ratings agency Moody’s that local authorities ‘have limited scope to increase revenue’ and ‘potential gains from further efficiency measures’.
The impact is that, for 2021/22, councils are having to implement unplanned use of capital resources and generate savings from service budgets to address COVID-19 financial pressures.
Yet a route that could have significant positive impact on these pressures is only being employed by 13% of top tier councils and 24% of districts. That option is to increase income generation.
While higher local taxes are unpalatable to both local residents and elected members, revenue raised from commercial activities can provide an acceptable and important source of additional funding.
More than 20 councils have found a groundbreaking way to generate income by working in partnership to sell services, sharing in the profits. Norse Group has been pioneering a joint venture model for more than 10 years, bringing a more commercial approach, not only trading to bring in cash, but also driving efficiencies in the councils’ operations.
Using Norse’s central sales and marketing operation, the partnerships tender for contracts covering cleaning, building repairs, FM, waste and other services. Clients include local schools, housing associations and private sector companies. Profits from the jointly-owned companies are shared equally with the partnering council, providing much-needed income without compromising on service quality or social value.
This type of arrangement is seen as ‘in-sourcing’ rather than traditional outsourcing, as Norse is wholly owned by a local authority and its profits are recycled back into the public purse, not to private investors.
The freedom to trade in the open market is a significant factor when councils evaluate alternative options for services provision; opportunities to share in growing profits helps to bridge the funding gap. Norse local authority partnerships around the country have returned more than £100m to the public sector over the last five years.
Geoff Tucker is Marketing Director at Norse