Comparative Analysis of Financial Sustainability in Local Public Service Sectors under Austerity

1. A COMPARATIVE REVIEW OF FINANCIAL SUSTAINABILITY, ACCOUNTABILITY AND TRANSPARENCY OF LOCAL PUBLIC SERVICE BODIES IN ENGLAND UNDER AUSTERITY Dr Laurence Ferry (Newcastle University Business School) and Mr Peter Murphy (Nottingham Business School, Nottingham Trent University)

2. THE 4 PUBLIC SERVICE SECTORS • Local Authorities • Health and Social Care Services • Fire and Rescue Services • The Police

3. THE STRUCTURE OF EACH SECTION • Review of accountability and transparency literature • Accountability and transparency arrangements • Information and its interrogation tools available • Governance, leadership and strategic alignment of • Reporting, scrutiny and intervention • Potential value for money risks • Final Section : Themes Commonalities and Differences

4. OUTSIDE OF THE REPORTS’ SCOPE • It is a high level overview of the sectors and not a detailed analysis nor a full literature review. • There are considerable variations in the application of performance management and financial assurance regimes within sectors – partly as a result of the level of development, maturity and extent of other (complementary and non-complementary) parts of the different regimes not covered by this review (e.g. individual service evaluations and the establishment of standards and benchmarks) • Although it covers intervention it does not review innovation, best practise or systemic improvements to infrastructure • It does not cover any international comparisons – although there is a lot of cross European and international interest in organisational and financial resilience.

5. LOCAL AUTHORITIES • Accountability and Transparency – in a more complex landscape - financial conformance, no vfm capability and sector led improvement – accountability has been reduced and not adequately replaced by transparency changes • Information and Interrogation – Significant loss of capacity in both information and interogation and armchair auditors have not materialised • Governance, Leadership and Strategic Alignment – adopted theory and practice of cutback management - new arrangements provide challenges for strategic alignment in managing risk, ensuring transparency and demonstrating accountability. • Reporting, Scrutiny and Intervention – reporting partial, scrutiny variable, and quality assurance is reducing but intervention available.

6. CHANGES FROM 2010 TO 2015 – LOCAL AUTHORITIES 2010 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

7. CHANGES FROM 2010 TO 2015 – LOCAL AUTHORITIES 2015 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

8. LOCAL AUTHORITIES POTENTIAL VALUE FOR MONEY RISKS • No flexibility in funding arrangements to meet unforeseen circumstances. • Financial reporting – short term – neglects short, medium and long term sustainable management of financial and other resources. • Performance management and financial assurance demonstrably poorer than previous arrangements. • Insufficient and inadequate information robust VfM judgements not possible. • Major capital funding arrangements are inadequate, inflexible, expensive – and dependent on significant increases in Business Rates.

9. FIRE AND RESCUE SERVICES • Accountability and Transparency – audit and accountability arrangements very similar to LAs, transparency is poorer although Peer Challenge and Operational Assessment coverage more comprehensive (although still partial, voluntary, and discretionary) – as with LAs accountability has been reduced and not adequately replaced by transparency changes. • Information and Interrogation – reducing capacity means collection, analysis, availability, transparency and interrogation increasingly difficult. • Governance, Leadership and Strategic Alignment – collective leadership fragmenting, CFOA, – driven by short term cutback management, rather than VfM or economic efficient and effective management and governance. • Reporting, Scrutiny and Intervention - reporting partial, scrutiny variable, and quality assurance is reducing but intervention available

10. CHANGES FROM 2010 TO 2015 – FIRE AND RESCUE 2010 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

11. CHANGES FROM 2010 TO 2015 – FIRE AND RESCUE 2015 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

12. FIRE AND RESCUE: POTENTIAL VALUE FOR MONEY RISKS • Performance management regime fragmenting, diminishing evidence base, and loss of systemic improvement infrastructure. • Over-reliance on, (partial, voluntary, discretionary and subject to ‘gaming’),Peer Challenge and Operational Assessment. • Short termism and conformance in financial reporting rather than sustainable resource management. • Major capital funding arrangements are inadequate, inflexible, and expensive. • Non capture of inter-agency value for money gains.

13. POLICE SERVICE • Accountability and Transparency – PCCs, NAO and HMIC changes mean these are improving from a very low base. Police Effectiveness Efficiency Legitimacy (PEEL) and VfM in (advanced) developmental stages • Information and Interrogation – historically data rich and information improving but interrogation becoming more difficult. • Governance, Leadership and Strategic Alignment – within policing it is improving; across criminal justice delivery organisations and network it is under-developed. Cutback management starting to be replaced by short and long term improvement in performance, management, assurance and governance. • Reporting, Scrutiny and Intervention – HMIC are using their considerable discretion to promote open and transparent approach. New PCC scrutiny arrangements in their infancy; Intervention available.

14. CHANGES FROM 2010 TO 2015 – POLICE SERVICE 2010 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

15. CHANGES FROM 2010 TO 2015 – POLICE SERVICE 2015 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

16. POTENTIAL VALUE FOR MONEY RISKS - POLICE • Police Effectiveness, Efficiency, Legitimacy (PEEL) and associated assessments and methodology still in development. • Short termism and conformance in financial reporting rather than sustainable resource management. • Under-exploitation of evidence base and under-development of systemic improvement infrastructure • Major capital funding arrangements are inadequate, inflexible, and expensive. • Non capture of inter-agency value for money gains. • New PCC scrutiny arrangements essentially untested but intervention arrangements in place.

17. HEALTHCARE • Accountability and Transparency – complex, variable, fragmenting and changing organisational landscape mirrored in complexity of performance management and financial assurance arrangements with multiple regulators and some parts (local audit) unresolved. Integration of health and social care problematical. Quality, quantity, robustness and accessibility of financial information at risk. • Information and Interrogation – traditionally good at national and local levels – interrogation capacity remains substantial. • Governance, Leadership and Strategic Alignment – PAC 2014 had concerns on coherence, transparency and navigability for patients; arrangements for leadership and strategic alignment more complex and less robust • Reporting, Scrutiny and Intervention – reporting complex and variable, and despite recent initiatives less amenable to public and stakeholder scrutiny than previous regimes – new measure for public participation, openness and transparency in development. Intervention arrangements in place.

18. CHANGES FROM 2010 TO 2015 - HEALTHCARE 2010 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

19. CHANGES FROM 2010 TO 2015 - HEALTHCARE 2015 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

20. HEALTHCARE POTENTIAL VALUE FOR MONEY RISKS • Rising demand, early intervention and behavioural change are significant enduring challenges. • Performance management and financial assurance regimes command less confidence than previous arrangements – quality of financial and performance data is poor and opaque and amenable to gaming. • NAO 2014 – regulatory bodies need to work more closely with a more integrated understanding of each others roles. PAC accountability relationship between DoH and NHS needs to be clearer and better integrated. • Increasing demand, ageing population, financial arrangements and complex nature of provision generates a wide range of VfM risks.

21. THEMES COMMONALITIES AND DIFFERENCES • Heavily centralised nature of funding and lack of flexibility means financial and organisational resilience is weak. Accountability structures vary across sectors but are a mixture of local and national accountabilities – with health the most complex. • Some variation in audit and scrutiny regimes but audits concentrate on financial conformance rather than the achievement of strategic objectives. Initiatives to increase transparency and compensate have been slower off the ground or ineffective (armchair auditors). • Capacity to interrogate data sets has been reduced in every sector since 2010. HMIC compensating in police and this is less of concern in the health sector (apart from financial information). • Reporting is fragmenting (except police), scrutiny is varied and mostly at local levels. Powers to intervene now available in all 4 sectors.

22. CHANGES FROM 2010 TO 2015 - OVERALL 2010 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

23. CHANGES FROM 2010 TO 2015 - OVERALL 2015 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

24. OVERALL POTENTIAL VALUE FOR MONEY RISKS • There have been increases in the VfM risks (not least from structural changes) in all 4 sectors over the last 5 years. • A culture of budgetary stewardship, together with the legal requirement that each LA must produce a balanced revenue budget, means that financial considerations are likely to take precedence over service delivery. All local public service bodies now have very little control over their income streams. • The decline in standardised performance management arrangements since 2010 has been accompanied by a corresponding drop in capacity to analyse public data and support evidence-based decision-making. • Local public managers no longer have sufficient tools to identify where risks might exist, and therefore cannot take economic, efficient and effective action to mitigate them.

25. CHANGES FROM 2010 TO 2015- OVERALL 2010 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

26. CHANGES FROM 2010 TO 2015 - OVERALL 2015 Red Red/Amber Red/Amber Amber Green/Amber Green/Amber Green Accountability /Transparency Information/ Interrogation Governance/ Leadership/ Alignment Reporting/ Scrutiny/ Intervention

27. QUESTIONS? Contacts Mr P Murphy Nottingham Business School Newton Building, Burton Street, Nottingham. NG1 4BU Tel: +44 (0)115 848 8092 Email: peter.murphy@ntu.ac.uk Dr L Ferry Newcastle University Business School 5 Barrack Road, Newcastle upon Tyne, NE1 4SE Tel: +44 (0)191 208 1500 Email: laurence.ferry@ncl.ac.uk