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The financial health of Local Authorities in England CIPFA Scotland Public Finance Conference 7 March 2014 Chris Moule

The financial health of Local Authorities in England CIPFA Scotland Public Finance Conference 7 March 2014 Chris Moule. Agenda. The picture in England Financial health of the sector The picture in Scotland The future?. The national picture – SR10. And then there's SR13.

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The financial health of Local Authorities in England CIPFA Scotland Public Finance Conference 7 March 2014 Chris Moule

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  1. The financial health of LocalAuthorities in EnglandCIPFA ScotlandPublic Finance Conference7 March 2014Chris Moule

  2. Agenda • The picture in England • Financial health of the sector • The picture in Scotland • The future?

  3. The national picture – SR10

  4. And then there's SR13 • Spending round for 2015/16 announced in June 2013 • a further 11.5% funding reduction for local government…

  5. And then there's SR13 • by the end of 2015/16, local government will have seen spending reduce by 35% compared with 8% in education and a 4% increase in health

  6. It is not only reductions in grant funding • reducingincome from fees and charges • demographic pressures and increasing complexity of need • welfare reform, and increases to local government welfare related spending • restrictionson additional Council Tax funding • localisation of business rates • implementing other Government policies • limitationson the ability to finance capital projects

  7. Many English authorities have predicted doom The 'Jaws of Doom' Source: London Borough of Barnet, June 2012 Source: Birmingham City Council, Dec 2012

  8. So what is the current position in England? • GT national programme of reviews examining financial health of local authorities in England • Surviving the storm (2011) • Towards a tipping point? (2012) • Challenging the current (2013)

  9. Key indicators of financial performanceSummary results

  10. Key indicators of financial performanceKey observations Good practice: • 2012/13 budget management generally good • long-term borrowing generally appropriate Risks: • challenges with volatile budgets • trend of reducing reserves • planned reductions to liquidity • unplanned absence a particular challenge

  11. Strategic financial planningSummary results

  12. Strategic financial planningKey observations Good practice: • MTFPs aligned to SR10/ 13 and corporate priorities • effective review processes • key assumptions understood Risks: • strategic finance skills • scenario planning • sensitivity analysis • corporate prioritisation approach

  13. Financial governanceSummary results

  14. Financial governanceKey observations Good practice: • financial reporting • member engagement • managing overspends corporately Risks: • cultural change required by services (financial management) • governance (third party service delivery) • transparency in reporting savings • capital programme underspends

  15. Financial controlsSummary results

  16. Financial controlsKey observations Good practice: • financial controls in place for effective performance management • internal audit risk based audit plans • RAG rating of savings Risks: • reduction in finance resource • financial systems – fit for purpose? • use of unit costs, benchmarking, trend analysis • use of countervailing savings

  17. Overall Summary results: Comparison with health Local government Health sector • Local authorities not alone • but performing better than NHS bodies • opportunity for cross-learning • importance of integrating health and social care

  18. Towards a tipping point… • our findings indicate significant challenges in the medium-term • but the sector is likely to ride out the storm until the end of 2014/15 • 80% of authorities in our survey do not anticipate a tipping point during this period • but the majority of councils felt a tipping point would be faced in 2015/16 or 2016/17

  19. Potential tipping point scenarios • decision paralysis [this has been identified as a potentially over-arching tipping point] • external– major supplier failure • industrial– strike action • civil disturbance • statutory– cannot meet responsibilities • militancy– ignoring/defying responsibilities • financial– unable to set balanced budget/pay creditors • doomsday– further banking/financial crisis • incremental– combination of smaller tipping points

  20. Responding to the challenge • some form or re-organisation (statutory or otherwise) • sustained focus on partnerships such as health integration • greater focus on generating additional sources of revenue • accelerate the trend to alternative delivery models

  21. The position in Scotland • impact of Community Planning Partnerships on planning and governance • impact of Integrated Adult Social Health Care and welfare reform on planning and costs • COSLA funding allocations (on average a real-terms reduction of 2% for 2014-15, after a similar reduction for 2012-13) – perhaps a year behind the English equivalents? • implications of the independence referendum in Sept 2014: delaying important decisions nationally and locally?

  22. What does the future hold? Challenges: • legislative changes • innovation • continuing austerity • changing delivery landscape • local government – but not as we know it! Risks: • delivering savings in the medium term • failure to meet statutory responsibilities • potential tipping points…

  23. 2016 Tipping Point? Challenging the current http://www.grant-thornton.co.uk/en/Publications/2013/2016-tipping-point-Challenging-the-current-/

  24. Questions?

  25. Chris is Grant Thornton’s national Financial Resilience Lead and has been involved with the development and implementation of the firm’s financial resilience assessment methodology for England for both local government and the NHS for several years. He has also deployed the methodology at clients. He was involved in leading the research, writing and interviewing for the firm’s recent companion report “Alternative therapy: Strengthening NHS financial resilience”, and worked on the research for "2016 Tipping Point?". • Chris Moule • Financial Resilience Lead • T 07798 826880 • E chris.moule@uk.gt.com

  26. About Grant Thornton Grant Thornton has a well-established market in the public sector, and has been working with local authorities for over 30 years. We are the largest employer of CIPFA members and students and our national team of experienced local government specialists, including those who have held senior positions within the sector, provide the growing range of assurance, tax and advisory services that our clients require. We are the leading firm in the local government audit market, and are the largest supplier of audit and related services to the Audit Commission, and count 40% of local authorities in England as external audit clients. We also audit local authorities in Wales and Scotland via framework contracts with Audit Scotland and the Wales Audit Office. We have over 180 local government and related body audit clients in the UK and over 75 local authority advisory clients. This includes London boroughs, county councils, district councils, city councils, unitary councils and metropolitan authorities, as well as fire and police authorities. This depth of experience ensures that our solutions are grounded in reality and draw on best practice. Through proactive, client-focused relationships, our teams deliver solutions in a distinctive and personal way, not pre-packaged products and services.

  27. Thought leadership reports for the sector

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