About the local government Value for Money agenda

Local authorities are crucial to the challenge of creating sustainable communities - places where people want to live and work. They deliver the day-to-day services upon which people depend and which improve people's quality of life. Self-evidently, where more resources can be made available to support these activities, there will be significant benefits for everyone.

The aim of the local government Value for Money agenda is a simple one. It is to ensure that the resources available to local government are used in the optimum way to deliver better public services according to local priorities.

It is important to recognise from the outset that Value for Money and efficiency are not the same as economy. The challenge of the Value for Money agenda requires a very different response compared to a simplistic cuts agenda. Instead of cuts in services and budgets, the response to the Value for Money agenda includes innovation in service delivery, investment in technology, rationalisation of back office functions, and organisational development.

There are examples of good efficient practice in local authorities, where councils have adopted these kinds of approach to getting more from their resources. Our aim as central government is to facilitate the spread of good practice and to support the adoption of innovative solutions. We do not want to impose 'one-size-fits-all' policies on councils, but help to make available the information that authorities need to select the right answer for them from a range of options.

There is already a good record of achievement in this area. As part of the 2004 Spending Review (covering the years 2005-06 to 2007-08 inclusive), all parts of the public sector were required to achieve 2.5 per cent annual efficiency gains. For councils in England, this amounted to a target of £3.0bn, of which at least half had to be cashable, meaning that cash resource would be released which could be reallocated to spend in priority areas or used to hold down Council Tax. Non-cashable gains normally represent improvements in productivity or greater service quality from the same level (or a proportionately smaller increase) of resources.

Councils significantly exceeded this target. More than £3bn efficiency gains were delivered by the end of 2006-07, a year ahead of schedule, and by the end of 2007-08 the total value of cashable gains alone was greater than £3bn. These gains represent real improvements to the way that councils do business - and the services that local people want.

The 2007 Comprehensive Spending Review has set the public sector a new challenge: to achieve three per cent annual efficiencies, but this time all gains must be cash releasing. For councils in England, this amounts to a target of £4.9bn by the end of March 2011. While there are no mandatory targets for individual authorities, each council will be required to report their progress through National Indicator 179, part of the National Indicator Set, and where there is evidence of underperformance, this will be followed up by the local Government Office.

The Department has published a Value for Money Delivery Plan for local government, to set out where gains can be achieved, and the National Improvement and Efficiency Strategy, to set out how we will work with the local government sector in partnership to help deliver the gains. The network of Regional Improvement and Efficiency Partnerships, which are led by and serve the local authorities in each region, are central to this strategy, and they have each produced their own regional strategies to ensure that they are responding to local needs.

Scope

The information in this section of the website covers only the arrangements, achievements, activities and assistance relevant to councils.

Guidance and information about the Value for Money agenda in Schools, the Police and Fire authorities are provided by the Department for Children, Schools and Families (DCSF), the Home Office, and the Fire and Resilience section of Communities and Local Government respectively. Information on the broad Value for Money agenda as it applies to the whole public sector can be found on HM Treasury website.