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Chartered Institute of Public Finance and Accountancy

Date of speech	25 June 2009
Location	Manchester Central Conference and Exhibition Centre
Event summary	Chartered Institute of Public Finance and Accountancy Annual Conference and Exhibition

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Draft text of the speech - may differ from the delivered version.

I am very pleased to be with you today, to make my first speech as the new Secretary of State for Communities and Local Government.

I come to this job with a deep and long standing belief in the importance of local government.

Not just because I believe, in some general way, that local democracy is important. But because of what local government can do.

Local government's ability to innovate, to create, to do new things, to show what is possible, can give it a vitality central government can find it hard to achieve.

And, at its best, local government can show how the minimum entitlements people should get in any part of the country can nonetheless be tailored to individuals and communities.

It was during my time on Hampshire County Council that - though nothing to do with me - the idea of personalised budgets for social care were first proved possible. Today, personalisation is at the heart of radical government policy.

I was more directly involved when, as Chair of Southampton's housing committee we launched one of the first and most effective strategies to bring empty private homes back into use; and introduced one of the first social housing land strategies, using every financial and planning tool to build the most rented homes. Local initiatives that today are the commonplace of local government.

I've seen too, the leadership capacity of local government. Which is why, in my last government department I gave local councils the lead in deciding how over half a billion pounds a year should be spent on English as a second Language, and on informal adult learning - because there was no one better to do the job.

So as Secretary of State, I want to defend and extend the role of local government.

Ask people what they are really concerned about and it's the issues which local government is responsible for - how good the schools are; how clean the streets are; and so on.

After twelve years of investment and reform, of rising and changing expectations, local councils have proved time and time again that they are ready and willing to meet any challenge.

Little more than a decade ago, councils were underfunded and demoralised; hampered by bureaucracy and lacking the teeth to really address local problems.

Today, you see exactly the opposite. Councils taking on a new leadership role in their communities. Reaching out to residents who've been affected by the downturn and worried about jobs and homes. And at the same time, taking the strategic decisions which shape the long-term future of an area.

It's that unique capacity to offer personal services and see the bigger picture that makes local government so important.

Yet we all recognise there are big challenges too. Just this week, the place survey showed that though many people like their area, and recognise services are improving, they are much less satisfied with their council.

This challenge, to match growing power for local councils with rising public confidence in them, tapping the huge pool of people who want more say in local affairs, is a big one for the future.

I'll be saying more on this in the coming weeks, and asking how we can make the links between local democracy and the wider need to renew our constitution and restore faith in politicians and the political system.

But at this conference I, inevitably, want to talk about money.

Despite years of rising real investment in local services, it is tough today for local government. Perhaps in particular for those authorities who rely most on locally generated income.

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Under our plans, current expenditure will rise in real terms; but there is obvious uncertainty which makes it hard to determine departmental budget for four or five years from now.

While public spending will continue to grow over the coming years, it will be at a much slower rate than in the past.

The days when councils could claim to their residents that every problem could be answered by a cheque from Whitehall are over.

Local authorities will need to make each taxpayer's pound work harder than ever. They must guarantee that every taxpayers' pound will work as hard as for them as taxpayers worked to earn it in the first place.

Because across the country, hard pressed families and businesses are scrimping and saving. Watching where every penny goes. Rightly, they want to see that their money is always and only being spent where it will make a difference.

In uncertain economic times, the best guarantee of frontline services is to increase the pace of local public service reform.

As many local authorities now accept, this means more than making efficiency savings. It means a willingness to look fundamentally at how services are provided.

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But if we make every pound work as hard as it can; if we achieve greater things with the investment that we already have, by using that money to better effect, than there is no reason why the public should suffer.

Of course, priorities will have to be chosen - they always have been - but tighter finances should not allow us to throw away the gains of recent years.

This puts a new premium on creativity and innovation to address local difficulties and drive local improvement.

Looking at whether services are really as effective as they could be, and whether they are really delivering what people want and need.

From that perspective, what at first sight is a very demanding task actually becomes an opportunity to deliver better services for local residents, businesses and communities.

Of course, what you might call the traditional efficiency agenda will still have an important role. Improvements in day to day business practice - whether that's sharing back office functions, selling off unused assets and so on have already helped saved £4.5bn since April 2004. 

That increasing efficiency goes hand in hand with improving performance. For example, since 2004, Chorley has saved £2.5m, while their comprehensive performance assessment shows their score rising from just adequate to a strong performer.

But despite many years of making efficiency changes - we were working on this in Hampshire in the 1980s - there is never a point a which the job is done.

The recent audit commission report on asset management showed that overall, councils have spent more on acquiring and maintaining property than they have raised through sales. There is potential to go much further.

Consistent use of best practice in procurement, for example, should save councils around £2.8bn by 2011.

So even on issues which would have been recognised fifty years ago, there is still work to be done.

But equally importantly, the combination of new technologies, changing needs, and rising aspirations of service users are continually creating opportunities to do things differently, and do them better.

For example, introducing personal budgets has helped some local authorities to save 10 per cent on services while also improving the quality of care.

While many local authorities are already reaping the benefits of these new approaches, others have been slower to pick up the baton.

That shows up in the place survey, which indicated that less than a third of people believe that their council offers value for money.

So I will certainly expect to see momentum increase over the following months: in order to achieve the £5.5bn savings by 2011.

But the real scope for efficiency savings lies not just in trimming the fat around the edges. But in continuing to modernise and reform the way that services are delivered. Refusing to be constrained by what's always been done, or what is most convenient.

With that in mind, one of the ways in which you can have greatest impact is by thinking not just about what to spend money on; but how you spend it.

Making decisions with one eye on the customer and the other on the future.

Your choices about how to spend that money can go a long way in your community - helping to create jobs, boost skills, foster innovation and support local businesses.

With your local knowledge and expertise, this is an area where local government can respond to local needs and circumstances quickly, in a way which central Government simply cannot.

So it's important that in making your decisions, you are alive to the wider impact of your spending on the community.

Take public procurement as one example. The public sector spends around £175bn each year. Local government alone spends £42bn: or around £688 for every single person in the UK.

And it is vital that that money is spent with an eye to the future as well to the immediate project.

There is no more important concern than the rising generation of young people. It's to local governments' eternal credit that you have agreed to create 7 500 new apprenticeships.

But these are primarily through direct employment. It takes no account of the potential for new training places created if every construction contract, every IT project, also requires a training and apprenticeship plan.

And it costs nothing to challenge all your suppliers and contractors, the housing associations you work with, about whether they are creating apprenticeships.

In this way, each taxpayers' pound can bring a benefit today, and one tomorrow.

There's a very good example of this in Woodbury Down in Hackney. Residents are getting invaluable experience not just in traditional construction skills, but in catering, so they can feed the workforce; and also in librarianship, so that local residents can help to run the new library that's being built.

Similarly, thoughtful and strategic public procurement can also help to foster innovation and support local businesses.

The importance of innovation in public services can't be stressed too highly. The increasingly complex challenges we face - meeting the individual needs of an elderly population, tackling climate change, overcoming long-term worklessness in deprived communities - can't be solved through the same old, same old, solutions.

Innovation can't be an afterthought in the public sector - it is absolutely critical to addressing the difficulties we face.

But it's not about coming up with all the answers ourselves. Instead - both in central and local government - we need to change the way we work to support innovation. Encouraging ideas and fresh thinking from people who use the services, front line professionals and suppliers.

In particular, you can spend money in ways which support innovation. But this isn't yet done consistently. All too often, contracts are written in a way which actually excludes smaller, more creative businesses. Central government is certainly guilty of this. That's a real missed opportunity.

What I'd like to see is local authorities actually asking businesses how they'd solve a problem, rather than asking them to tender for a pre-defined solution.

In that way, local government can foster innovation. Rather than always relying on the tried and tested industry standard, which doesn't necessarily provide best value for money; or even the most effective solution.

For example, Durham County Council set up a food procurement project to achieve three goals - cut the costs of providing food, improve the quality on offer, especially for school children, support local suppliers, and cut the carbon footprint of their food distribution.

So far, a pretty standard problem which local authorities are grappling with across the country. Here's the difference: instead of deciding themselves how best to meet those objectives, they asked suppliers how to do it.

As a result, costs have been cut. Standards have gone up, with recognition from the Food for Life partnership. Small and medium companies have got more involved. And by putting sustainability into the contract, there are around 12 000 fewer deliveries - 12 000 saved van journeys.

Elsewhere, authorities in Yorkshire and the Humber have collectively pledged to adopt practical measures like prompt payment to increase cashflow; simplifying procurement practices to make it easier to contract with the authority, and making contract opportunities more transparent. All measures which could easily be adopted elsewhere.
 
I know that there have been concerns that supporting skills and businesses through public procurement might fall foul of EU legislation. It is right to be cautious. But that must not become an excuse for inaction.

Just a few weeks ago, in my previous department, I helped publish guidance which sets a very clear framework for what can and can't be done to keep you on the right track.

Simply by making clear how much importance you attach to skills development and innovation will help to change the behaviour of suppliers, shaping the market without adding to costs.

In fact, it's likely to do the exact opposite and cut costs, through more imaginative solutions.

So there is a clear role for you to exercise professional judgement and show real leadership here. Have the confidence to try doing things differently. And make sure you are looking beyond the immediate pressures to make the money you are spending go as far as possible.

Because, if you put all that together, taxpayers' money invested properly can be an investment three times over.

Getting the best value for money for a given service, but also supporting the skilled workforce and successful businesses of the future too.

In the short-term, this will be driven by the need to save money, and the need to offer real help to struggling businesses and individuals.

But the old saying about necessity being the mother of invention is important to remember.

In the longer-term, I think this more strategic approach to procurement will have a much greater impact.

Through promoting innovation, it has the potential to deliver real improvements in service delivery - and increasing satisfaction among residents.

Finally, I want to reflect on the principles of total place. This is exactly what I mean when I talk about a fundamental rethink of services which puts the customer first. Thirteen areas from Durham to Dorset will be taking a fresh look at all the money coming in, where it goes, and what it delivers.

Each will pick a priority - whether that is health, children's services, or economic regeneration and start again with a blank piece of paper. Putting the needs of local people first. And working together to figure out the best way to meet those needs.

The result should be making services much closer to the ideal, than the kind of messy and overlapping provision you get when services evolve over time.

It will provide a better service, with closer working relationships, and in turn, improve value for money.

And it's a way of making sure that local authorities don't just make best use of their own money, but of all the money coming into their area.

While Total Place - capital T, capital P - will deliver real results for these thirteen areas, I believe that the concept of total place - small t, small p - will in future be key to the relationship between central and local government.

For example, we know that despite great strides towards integration of services and pooling budgets over recent years, there are still significant barriers which prevent services working together as effectively as they could.

Not least because services are being judged against different objectives and so end up with different priorities.

Total Place will bring those difficulties into sharp relief. But it will also indicate how they might over be overcome.
 
So it indicates the direction which we should be working towards in the future.

Where individuals and communities have much greater control of how those services are delivered.

Where local areas are much more responsive and accountable to their needs.

And where local authorities have a new, more clearly defined role. In bringing different partners together. In leading change and improvement across the community. And in scrutinising expenditure and service delivery.

Let me stress that you don't have to be part of a pilot or a partnership to start thinking about how this could work in your area.

Total place is not an exclusive club. It's something which all areas could benefit from.

And of course, it's a great example of local authority innovation - since it all started with Cumbria deciding that they were going to try something really new, without waiting for permission or guidance from the centre.

So in conclusion. In these difficult times, value for money must always be among our first thoughts. The public expects nothing less.

But that doesn't mean the kind of penny-pinching which stints on quality and delivers poor results: that is simply false economy.

Instead, it means you as highly skilled professionals making considered judgements which make services better as well as cheaper. Where the public can clearly see that each pound of public money pays off again and again. I have every confidence in your ability to do that; and look forward to working with you.

Thank you very much.