Tracie Langley explores the use of financial strategy to to move spending from individuals to place over a four-year period.
I like to make things simple. Fundamentally, if a council is overspending its revenue budget every year, it is spending more cash than it has put aside to spend. Raiding the cookie jar to top up the money in your purse will quickly reduce your ability to pay for a new boiler when the one in the cupboard breaks down. And then, what happens when you know you need to pay for your parents care but you are still paying your grown up children’s rent? This is a complete shift of priorities without any levers to pull.
In effect, this is exactly what is happening to council budgets. We are spending more than we have in approved budgets driven by a demand for care and we have to draw on reserves every year to top up those budgets.
At the same time, we need to shift the proportion of money spent on care so that we can prioritise making places work better. And to complicate things further, there is a shift from spending capital on buildings and IT hardware to fewer buildings and revenue-based subscriptions to digital platforms.
It is unlikely that the capital rules are going to change anytime time soon and, as finance directors, we have to negotiate the tricky dual paths of switching out of revenue baked into care services to pay for place, but also find revenue to pay for those items we used to pay for through capital.
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Driver
My solution is to use our financial strategy to drive the re-apportionment of available cash so that over a four-year period there is a push to reduce the proportion of the revenue budget spent on individuals and increase the budget available for place.
Complicated, of course, by the capital and revenue thing but, if you look at the financial strategy through the lens of total available resource, it becomes a slightly easier equation.
Whilst I agree that there is some technical work about what those proportions look like for each different council, it is reasonably easy to land on the numbers for planning purposes.
For Cornwall, and in the first instance, we are using a 60:40 individual:place split by 2025. Currently, the split looks more like 80:20. There are conditions, of course, to being able to pull off such a switch.
The first is real clarity over the outcomes you want to achieve. So, if your outcome lens is carbon neutral by 2030, a larger proportion of your budget will need to be spent on that outcome when the skew at the moment is towards healthy people.
Regardless of what your outcomes are, a relentless push to allocate resources to deliver them will start the ball rolling on finding ways to switch budgets.
Activity mapping
Exposing those activities that are not contributing to the outcomes is vital. One of the tools we have used at Cornwall is called “activity mapping” which looks to attribute every penny spent by the council to an activity. There is already a standard council activity set which is a good basis as a starter for ten.
Once the analysis is complete, the data shows exactly how the money is spent, whether there is any duplication across different parts of the council and opportunities for spending reductions.
The second of the conditions is that the organisation has to be really well run. Being able to reduce budgets relies on a lean and agile organisation so that moving resources around the council to deliver outcomes becomes second nature.
The third of the conditions is that resources need to be easily moved around so that when the delivery of an outcome is under-performing, they can be re-directed to aid delivery at short notice.
Of course, this requires a new shape of organisation with generic job roles, an understanding of who has what skills and a performance mechanism that rewards teams and not individuals. The whole scale change in the way that the council needs to work is based on people in the organisation with different skills coming together to re-design services and re-design their jobs. And there’s the rub.
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Leadership
And that brings me to the fourth condition. This whole scale organisational transformation requires extraordinary leadership.
The whole of the top team needs to buy into the change. If even one of the top team are working against it, the council change will be impossible.
As leaders, if we can get this right, it will create the most empowered and energetic of workforces who are working in multi-functional teams to resolve problems and deliver great services despite the amount of money available being reduced in real time.
Here at Cornwall, we are a very large, rural, unitary council who do some astonishing things but we have the same complex issues to resolve as other local authorities. Transforming the way we work is vital in this new world and taking our stretched workforce with us is our leadership task. But, as a team we are ready, we will be bold and we will be successful.
Tracie Langley is chief operating officer and section 151 officer at Cornwall Council.
Photo: Image by Daryl Govan from Pixabay
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