Options review for increased trading capacity

Bromsgrove DC and Redditch BC received a grant from the LGA under the LGA Productivity Experts Programme. The Councils commissioned an LGA recommended expert to provide an options appraisal into how the councils can fulfil their strategic aim of generating more income.

Efficiency and income generation

The project made recommendations on key areas such as risks and benefits of continuing to operate commercial activity under the Council umbrella, or, moving to a company model. It also considers which type of company model is most appropriate for what the two Councils are trying to achieve, especially in relation to developing housing / commercial property.

The work also looked at which areas, other than the development offer, would be the greatest opportunities for increased income generation. A review was undertaken to understand the approach being taken by four working groups looking at assets, contracts, income generation (including fees and charges) and investments.

The challenge:
The two Councils need to increase income significantly and improve efficiency by reducing costs and overheads to help meet a £3 million budget deficit across the two Councils by 2021.

The solutions:

  • Derive more income from better use of our assets, both physical and monetary. This will be via setting up a housing and commercial development, investing in property and other areas that give a higher rate of return than banks.
  • Ensure that existing income generating services are maximising their potential and are run as efficiently as possible to ensure the best margin possible. An example of this is work on our business waste and cesspool emptying services where we have increased our customer base and income over the last 12 months by increasing our marketing and sales activity, being more flexible with our pricing structures and targeting customers who previously used us but had left.
  • Look at other areas of the Council who can either generate margin or make a contribution towards their costs. An example of this is a trail that our communications team have been undertaking with a small number of local businesses, to help them improve their social media presence. The companies are not willing to pay a price that would recover all our costs, but by using existing staff and spare capacity we have been able to offset some of the teams, staffing costs.
  • Ensure that all service areas understand their costs and maximise efficiency. This has been quite difficult given the way that local government accounts for its costs and we have been trialing some very detailed analysis of costs, by our finance teams, in a number of service areas including our garden waste, car parking and lifeline services.

The impact (including cost savings/income generated if applicable):
From sharing services, the two Councils have already saved over £2 million; this means that we now have to find additional ways of getting efficiencies and generating more income via a more commercial approach. The work via the LGA Productivity Experts Programme was a starting point and therefore income generated from being more commercial is small at the moment. However, the BDC trade waste service, one of the areas identified as having potential, has achieved an additional £30K surplus in 17/18. Further work has been commissioned with regard to the opportunities for the RBC Crematorium and shared Bereavement Services.  This work includes looking at:

  • The potential impact of remaining with existing facilities and allowing the wider market to expand into the local market.
  • Quantitative Need – Factual assessment of the local demographics and potential service options including innovative ways of working & generating new commercial revenue.
  • Options for expansion of existing operations with guidance on potential impact along with any associated costs and income expectations
  • Options for investment into new facilities / technology with guidance on potential impact along with any associated costs and income expectations

How is the new approach being sustained?:
Both Councils have adopted a Commercialism and Financial Strategy that lays out their approach to being more commercial. This includes an investment strategy that details how money allocated by both Councils will be invested to generate a return. We have also established a Commercialism Programme Board chaired by the CEO which gives weight to the project and shows staff that this is an important area of work. Furthermore, we have a Portfolio Holder with responsibility for commercialism. In addition, Officers have been to visit and spoken to a number of local authorities around the country to learn from them (including Cherwell and South Northants, South Staffs, South Norfolk and Telford and Wrekin) and we are working with Aylesbury Vale District Council to run a workshop for key officers in the organisations.

Key learnings from these visits are:

  • You have to fully understand the purpose of commercialism in your authority
     
  • Being more commercial requires greater agility and Members have to amend the constitution to allow this to happen
  • A significant change of culture of staff is required to make commercialisation a success
  • You need to have people with commercial expertise within the organisations but it is essential that all areas of the Council understand and take responsibility for this agenda in their service areas
     
  • Different thinking with regard to legal advice and financial management practices
     
  • Work in partnership – do what local government is good at and work with partners who have experience and expertise in other areas that are outside the local government skill set.

Lessons learned:

  • One size does not fit all local authorities because different Councils have varying drivers and local politics. Also local conditions and areas of expertise will guide the areas that we can target to be more commercial.
  • A company is only one option to generate income and all services have to be thinking in a more commercial way. We are currently looking at how we maximise our Local Government position, an example of this is that our lifeline and monitoring centre have recently won a considerable contract for another midlands authority because they liked both the price but more importantly the approach that our team took.

Contact: Guy Revans, Head of Environmental Services for Bromsgrove DC and Redditch BC g.revans@bromsgroveandredditch.gov.uk

LGA contact: Grace Abel, Productivity Advisor

grace.abel@local.gov.uk

Options review for increased trading capacity (BDC and RBC)

This case study forms part of our productivity experts resource.