It seems like only yesterday that everyone in local government was eagerly anticipating the prospect of a new Government rolling into Downing Street and the promise of a rosier future for the sector. What a difference five months make.

While no one expected Keir Starmer to immediately open the local government funding floodgates, there was hope of good news in the Budget. In reality there was little sign of champagne corks popping in town halls across the land as Rachel Reeves sat back down on the green baize.

Where there is a clear move back towards in-house provision is in children's and adults' social care. Disquiet in both local and central government about the cost of outsourced residential care provision is leading many to look at ‘intervening in the market' said one

Ultimately, this group of council chief executives and senior officers expressed a sense of uncertainty as they gazed into the future for the sector.

It is very much a picture of counties, districts and unitaries doing their best to navigate the road ahead as they see fit.

When it comes to models of delivery, the participants at this working lunch – arranged by The MJ and local authority trading company Norse Group – are still reporting a mixed approach to insourcing and outsourcing services.

There is an assumption that the political aspiration in government now favours insourcing, but many of the councils represented around the table are happy to make the call on a case-by-case basis. Indeed, many remain satisfied with the outsourcing they have embarked on thus far.

Nonetheless, one participant did point to greater difficulty with tendering services for outsourcing, as some providers become ‘very picky' about what they are prepared to take on in a ‘post-Carillion' world.

Where there is a clear move back towards in-house provision is in children's and adults' social care. Disquiet in both local and central government about the cost of outsourced residential care provision is leading many to look at ‘intervening in the market' said one.

The Government's concern in this area was highlighted by education secretary Bridget Phillipson's latest plans to ‘empower social workers… to take action against children's placements providers that deliver sub-par standards of care at sky-high costs to councils'.

When it comes to financial pressures, housing costs – in particular temporary accommodation – is mentioned most around the table. As one participant put it: ‘Housing is pervading everything.'

‘It means doing anything will cost more,' pointed out one officer.‘I worry that costs will push members to go for the cheapest option and that may not be the best.' Another concurred, adding: ‘We don't want shabby housing.'

And a fresh headache since the Budget has been the rise in National Insurance (NI) employer contributions. There is little confidence Government will cover the costs for councils as it has promised. ‘I'm not convinced,' said one. ‘It always gets wrapped up in something else. For a start, no one has asked me how much it's going to cost me. I'm super-suspicious.'

Whatever happens internally for councils, there is no doubt around the table that NI changes will push up the costs set by external service providers.

Looking at the care market, one participant said: ‘Our providers are going to be hitting up with very strong arguments for an uplift.' In addition, another participant pointed to the impact on the voluntary and third sector, which will have a knock-on effect on how much councils can ask of them. Others highlighted the consequent nervousness created among private sector investors, which will impact growth prospects – despite this being a central plank of the Government's agenda. ‘Investors are questioning whether to come in,' said one officer. ‘The business sector is pulling back saying they need to understand more.'

If uncertainty over the Government's intentions is a problem for the private sector, for councils struggling to make ends meet it is a problem magnified. And the clamour for greater certainty is getting stronger. ‘We need a three-year funding decision,' stated a participant.

And, with such tight finances, the tension is growing between tiers of local government as social care and special educational need pressures continue to bite. As one officer put it, counties are already drawing back on services that impact district authorities' abilities to provide for communities.

On top of worries about future finances the Government is now gearing up for wholescale local government reorganisation. While many see the sense in the move, there are nonetheless concerns around the table about the impact on the growth agenda and potentially even more financial pressures for councils.

‘We should have structural reform,' was one voice. Pointing out the huge potential savings, they added: ‘The numbers just work out for me.'

But another cautions: ‘Councils are in A&E and we need to be in ICU. There needs to be investment back in, they can't just take money out, otherwise we will just be back in resus.'

While another calls for radical reforms, a further voice argues the move is political rather than ‘economic in any way'.

And the destabilising impact of reorganisation, a move many believe will divert from other priorities, is unhelpful in the view of one officer: ‘Spinning everyone around for the next three years is not going to be helpful to growth,' although there is some scepticism that the extent of reorganisation will be as sweeping as promised. ‘It will get toned down. They will start with 10 and end up with about three,' they predicted. One participant cut to the chase with ‘three clear asks'. Firstly, certainty on funding. ‘Just give us three years,' the officer pleaded.

Next, on structural reform, one participant concluded: ‘They just need to mandate it, with a set of guiderails and space for freedoms.'

Finally, on growth, officers called on the Government to connect the skills agenda with any industrial strategy – ensuring local economies can utilise local talent. ‘We are massively underplaying the skills coming out of our schools and linking them to our industries,' one added.

In conclusion, half a year into a new Government and the sector is as anxious about the future as it was before the General Election. While reorganisation is recognised by many as a sensible move, there is real concern this detracts from all the existing problems already facing the sector.

If ministers want more housing and abundant growth they will need to create the conditions for this to happen. There are already concerns that the Government hasn't got the bandwidth to focus on local government, does reorganisation risk reducing councils' bandwidth and throw into question progress on much of what Keir Starmer's Labour holds dear?

 

The outsourcing debate looks set to continue

 

By Geoff Tucker, business development director – Norse Group

After five months or so since the General Election, there is still uncertainty. The new Government seems set to reorganise local government, but any changes will take many years to implement and may not address the immediate financial difficulties. While Labour clearly prefers insourcing for the delivery of essential services, there is no sign that this will be forced on councils.

This means local authorities will continue to weigh up their options and the trend away from traditional outsourcing looks set to continue. This is driven to an extent by ideology, but in our experience the desire for greater control over frontline services – and the need to drive down costs – are the main reasons councils are considering alternative delivery models. This includes setting up their own trading companies or creating joint venture partnerships with existing LATCos such as Norse.

The round table provided a stimulating discussion and an insight into current local government thinking. We look forward to continuing the conversation in the future.

 

Participants at The MJ / Norse debate

 

Scott Crudgington, deputy chief executive and executive director of resources, Hertfordshire CC

Stephen Gaskell, outgoing assistant chief executive, strategy and communities, Southwark LBC

Sarah McClinton, director of health and adults, Greenwich LBC

Richard Protheroe, strategic director, Stevenage BC

Jonathan Stephenson, chief executive, Brentwood BC and Rochford DC

Geoff Tucker, business development director, The Norse Group (sponsor)

Kasia Brzeska-Reffell, head of sales/sector head – local government, The MJ

Michael Burton, editorial director, The MJ (chair)

Paul Marinko, deputy editor, The MJ (reporting)