Managing the age of uncertaintyThe 2017 Scotland Local Authority CEO report

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Foreword

Amy Brettell Head of Public Services Zurich Municipal

2017 is a year of radical change for public services in Scotland, and Local Government is uniquely placed to lead this agenda. At Zurich Municipal we were delighted to meet with a number of Scotland CEO colleagues to discuss their particular challenges and initiatives. Whilst uncertainty was a certainty, opportunity was a key theme; risk is not to be avoided in transformation, it needs to be embraced. This report seeks to summarise these views and to present a snapshot of Local Government in Scotland during the Spring and Summer of 2017. We hope you find this a useful adjunct to your discussions at conference.

Fiona Lees Chair of SOLACE Scotland and Chief Executive of East Ayrshire Council

Leading Transformation is one of the key themes at this year’s SOLACE Scotland Conference. In recent months, colleagues from Zurich Municipal have been taking the opportunity to meet with some of Scotland’s Chief Executives, to discuss the future of our public services and to learn more about the key challenges that we face and how we are addressing them. Those conversations have informed the production of a new report on how we are embracing risk. I am delighted that this report is being launched at our conference and look forward to discussing the findings.

Front cover photo – V&A Museum of Design: Image kind permission of Dundee City Council.

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1. http://www.gov.scot/Publications/2017/08/7201

Forethought

“The only certain thing is uncertainty,” is how one CEO describes the complex web of financial and demographic pressures their authority faces – and it’s a sentiment shared by many of her peers.

The transformation of public sector service delivery in Scotland is dominated by ambiguity. When will the effects of austerity reach their peak? What kind of grant settlement can local authorities expect in the future? Should they embrace commercial ventures, or shy away from them? How best to make Health and Social Care integration work? These are just a few of the issues with which CEOs are grappling.

Local authorities face challenges from all sides. Budgetary pressures are complicating the decades-old challenge of addressing poverty and social inequality. Recently published figures1 show that Scotland has a public sector spending deficit of £13.3bn, representing 8.3% of its GDP; by contrast, the deficit for the UK as a whole (£46bn) represents 2.4% of total GDP. “Scotland is not a Tiger economy” said one CEO.

The integration of health and social care is a mammoth logistical task – leading some to question whether the visions, not to mention the business models, of the NHS and local government can ever be aligned. The Scottish Government’s education reforms are another area of significant contention and uncertainty.

The will to re-shape the delivery of public services is there, but are the structures?

One CEO talked of the governance frameworks that can stymie efforts to bring about real change. “There’s institutional porridge – when things need doing, the answer is to chuck more oats in the porridge.”

In addition, Scotland’s system of proportional representation means that political coalitions have become the norm, and it is proving more difficult to get things done.

And yet, despite these hurdles, this is also an age of innovation, transformation and extraordinary possibilities. There is ample evidence of ambition, vision and entrepreneurship. How will it be best harnessed?

City Deals offer the promise of much-needed investment in jobs and training. The close working relationship local authorities have with the Scottish Government – despite some reservations about being “micro-managed” by Holyrood – is another potential source of strength. There is concern, however, that the dialogue is one way, and there is a need for much greater co-creation.

Despite demographic and geographical differences, there is more that unites Scotland’s local authorities than divides them, and the value of SOLACE Scotland in providing a coherent managerial view of local government, is helping to ensure their voice is heard in these uncertain times.

The only certain thing is uncertainty”

Zurich Municipal has spoken to chief executives of local authorities across Scotland, and gained fascinating insight into how they are managing an age of uncertainty.

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Education reforms – where do they leave local government?

When the Scottish Government unveiled its strategy for education reform – Education Governance: Next Steps – earlier this year, Deputy First Minister John Swinney explained that the Government’s vision was “to close the unacceptable gap in attainment between our least and most disadvantaged children, and to raise attainment for all.”2

To say local authorities are sceptical about whether the Government’s strategy can actually deliver on that promise would be a significant understatement.

One CEO was adamant that while the ambition to bridge the educational attainment gap could not be criticised, “the proposals brought forward will not do that.” There was also anger that concerns from head teachers, parent councils and other stakeholders, seem not to have been taken on board. “The Government hasn’t listened,” said one interviewee.

Although the reforms aim to give head teachers greater freedom to decide how their schools should be run – for example, by allowing them to decide on staffing structures and manage greater proportions of school funding –there is a concern about whether many head teachers are ready for these extra powers and responsibilities, or if indeed they want them.

One remarked that: “Head teachers don’t want the responsibility of becoming budget holders, of managing bureaucracy as well as running schools; they want to teach.”

While Education Governance: Next Steps includes an attempt at reassurance – “we will not turn head teachers into chief-administrators of their schools; they will be the leaders of learning” – doubts remain.3

Some respondents compare the situation in Scotland to the introduction

New education reforms aim to bridge the “unacceptable” attainment gap between the least and most disadvantaged children – but local authorities fear these reforms could instead drive a wedge between themselves and the Scottish Government and destroy the integration of children’s services.

of academies in England, with one noting that while English schools were given the option of becoming academies if they wanted, there is no such choice for those in Scotland.

In addition, as the aim of the Government’s reforms is to give head teachers greater control over running their schools, where does that leave local authorities? One questioned whether local authorities would be relegated to an administrative role, with individual head teachers responsible for educational attainment and reporting directly to Education Scotland.

Another said: “Local authorities will have responsibility on spend, but no influence on policy.”

Local authorities also fear the proposals could affect the integration of education and children’s services – and potentially put children at risk of harm.

2. http://www.gov.scot/Publications/2017/06/2941/342157

3. http://www.gov.scot/Publications/2017/06/2941/342158

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One interviewee wondered how their authority’s system of providing integrated child protection training might be affected by the Government’s proposed education reforms. “There is a real risk of children falling through the gap,” they said. “The social welfare of children should be among the statutory duties of a head teacher, but will it be?”

There is a broader concern too, that if local authorities become less accountable for educational standards, their close working relationship with the Scottish Government, as well as with other areas of local public services, could also be affected.

While the Government insists that local authorities will “have a vital role to play in enabling and supporting schools”, one of our interviewees voiced concerns shared by other local authorities:

The good relationship with the Scottish Government is at risk.”

“Education - don’t get me started.”

“ The good relationship with the Scottish Government is at risk.”

“ Local authorities will have responsibility on spend, but no influence on policy.”

“ It seems the Government hasn’t listened.”

“ Head teachers don’t want the responsibility of becoming budget holders; they want to teach.”

“ We have integrated training at present and a joined-up approach to child protection. With the proposed changes to the education structure, there is a real risk of children falling through the gap.”

“ The purpose of the proposals is to narrow the educational attainment gap. You can’t argue with that, but the proposals brought forward will not do that.”

“ In England, schools were given the option to become academies if they wanted; the Scottish system seems to be all or nothing.”

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When too much governance gets in the way

Integrating health and social care services was never going to be easy, but some local authorities feel cumbersome governance structures are making the transition harder than it should be.

Whilst most local authorities have greeted the Scottish Government’s education reforms with bewilderment, and perhaps even anger, efforts to integrate health and social care services across the country have received a rather mixed response.

Here, the feeling among local authorities is more one of frustration – that organisational and bureaucratic barriers are holding back progress.

Integration Joint Boards (IJBs) were launched in April last year to oversee a more seamless relationship between health and social care services, but the jury is still out with regard to their effectiveness. While some CEOs agree that IJBs “make a lot of sense in theory”, others lament the cumbersome governance structures that make it harder to bring about meaningful change.

“So far, it seems to be all about getting organisations up and running, and very little change,” said one CEO, while another commented: “With Integration Joint Boards, an inordinate amount of time is spent on governance; there’s no focus on outcomes.”

One of the biggest challenges is that local authorities and the NHS have very different priorities. Funding for health and social care is channelled through the IJBs, but there is often no clear agreement on how money should be spent, or on the crucial issue of accountability.

“Working together is forcing us to confront the difficulties in bringing the local authority and NHS business models together,” reflected one interviewee.

Integration Joint Boards (IJBs) were launched in April last year to oversee a more seamless relationship between health and social care services…

One CEO sounded a note of cautious optimism.

Things aren’t going too badly; prevention is much better focused.”

while another reflected:

The proposition makes a lot of sense, but we need to address the demand curve, which is growing..”

There is also a feeling that, for IJBs to succeed, they need more teeth. “We need to give IJBs proper power so they can effectively integrate health and care,” observed another CEO. “At the moment, power is still with the Scottish Government.”

That is not to say that no progress has been made. Whereas in England, the integration of health and social care is very much in its infancy, Scotland is much further down that road, with a great deal more working experience.

The Highland way

While most local authorities in Scotland have formed Integration Joint Boards with the NHS to manage health and social care integration locally, Highland Council has taken a very different path.

Under a system established in 2012, Highland Council acts as the lead agency for children’s services – receiving the NHS’s children’s health budget and delivering an integrated service for children, which includes health, education and social care. The NHS does the same for adult services and healthcare.

This lead agency approach removes some of the tensions that can exist between agencies. Savings made by the NHS by keeping people out of hospital can be invested directly back into prevention.

It is not without its challenges – the biggest of which is how to ensure a smooth transition, in terms of commitments and costs, when a child becomes an adult. There is also an acknowledgement that this model may be less effective when resources are scarce, something that could prove a challenge as the impact of austerity really starts to bite.

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It’s not just about mechanically delivering services. We need good data to provide insight, and we need to redesign services to meet customer needs.”

4. http://www.gov.scot/Resource/0051/00515392.pdf

Can the gap between the ‘haves’ and ‘have-nots’ ever be bridged?

Poverty and social inequality is not a new problem – but over the past 40 years, how much has really changed?

None of the challenges local authorities in Scotland face today can be understood without considering the wider context of poverty and social inequality.

Government figures4 show that, after housing costs are accounted for, one in five people in Scotland are living in relative poverty. In-work poverty, which has been rising steadily since 2009 due to a combination of low incomes and an increase in part-time working, is a particular challenge.

How to tackle poverty and inequality was a theme all our interviewees focused on, with the stark difference between the richest and poorest sections of society highlighted in the bluntest of terms.

“A quarter of our children go to private schools; another quarter live below the poverty line,” said one.

The challenge local authorities face isn’t always obvious. One interviewee remarked that poverty is often well-hidden – and therefore “easy to ignore”. Equally, poverty and inequality don’t always manifest themselves in the same way across Scotland.

Referring to his city, one CEO described how 40% of children were living in poverty. “We have large numbers of children on the child protection register, and significant drug and alcohol problems,” he observed.

Rural areas suffer from a very different kind of deprivation. As well as the increased cost of, and decreased access to, services and facilities, rural communities can occasionally suffer

from a fragility which one interviewee describes as “supersparsity”.

“In very remote areas,” says this interviewee, “the withdrawal of one essential service, for example NHS midwifery, a post office, or a doctors’ surgery, can potentially lead to the collapse of a whole community. A community which is thriving today could be failing tomorrow; things change very quickly.”

The recent Grenfell Tower fire in London was a consistent topic of conversation and felt by all to be a stark example of the disparity that exists. One particular CEO commented “It exposed the inequality of society, and that’s how it is felt here.”

These challenges are nothing new, of course. As one observed: “Forty years of tackling inequality has made little progress – are we doing the right things?”

While there is a sense of frustration from some, that the same barriers to progress remain, there is an acknowledgement that there are no quick fixes. One CEO talked about working towards rebalancing their economy, with a 2050 view.

While solutions aren’t easy to find, it is clear that local authorities see innovation and investment in jobs and training as key to making progress. Some CEOs highlighted how specific programmes have been put in place to tackle youth unemployment, which have benefited from EU grant funding.

There is also a recognition that perhaps local authorities need to understand their people better.

“The Government wants us to be able to demonstrate that our decisions are informed by community engagement and analysis, and you can see evidence of this analysis very clearly in our corporate plan,” said one interviewee.

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Walking the tightrope of transformation

CEOs aren’t watching passively as the world changes around them. Instead, they are leading the change in their authorities for a new age.

While one CEO talked about rebalancing their locality’s economy over the next 30 years in order to tackle poverty and inequality, budgetary pressures are also forcing councils to identify new ways of delivering services in the shorter term.

One interviewee spoke of being halfway through a ten-year period of fiscal restraint. “We are now past the point of incremental change, and it feels like services will have to be transformed to meet the next stage,” they said. Another remarked how everything that could easily be done to address their authority’s

budgetary challenges had already been carried out – “the low-hanging fruit has been picked.”

There is anxiety about how much deeper cuts could go. One council talked about needing to make further savings of 10% from its net budget. By comparison, Government grants in England have been cut by up to 40%. “Uncertainty” was a word used extensively when discussing future grant settlements.

Responding to these challenges has necessitated transformation to new models of working, based on innovation and collaboration.

City Deals are a critical part of the efforts to re-shape local economies. A number of CEOs spoke positively about the possibilities, in terms of job creation and improved economic prospects, of these deals. Indeed, there is even an element of competitiveness, with a number of interviewees speaking confidently about how they believe they have ended up with the best City Deal in Scotland!

We are now past the point of incremental change, and it feels like services will have to be transformed to meet the next stage”

CEOs recognise the potential City Deals offer for making significant economies of scale in areas such as economic development, transportation and infrastructure. At the same time, there have been some harsh economic realities to address. A number of authorities spoke about the consequences of having to make redundancies and cut services.

“We have a quarter of our working population in the public sector; if you make employee savings through redundancies, you have people out of work claiming benefits,” said one.

Some CEOs also believe they are about to arrive at a crossroads in relation to provision of services. “Do we cut services for vulnerable people, or do we embrace new ventures and accept higher levels of risk?” asked one.

Another spoke of the dilemma of trying to make savings while the nation is dominated by an anti-austerity agenda. “We’re walking a tightrope in Scotland,” they said.

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What next?

Commercialisation is now on the agenda of many local authorities, but how much change will politicians be prepared to accept?

Norse is a major national company providing property design and management services across the UK. It is also wholly owned by Norfolk County Council.

For many local authorities in Scotland, embarking on a commercial venture of this kind might be considered a radical departure from their traditional role as a public body. But, just a few years ago, that is how most councils in England felt too. Today, commercialisation has become a major topic, focussing the minds of the vast majority of local authority CEOs.

Could Scotland follow suit? Opinions here are mixed. One CEO questioned whether “our politicians would be prepared to make that significant a change.”

But for others, the first steps along this path have already been taken.

One authority has set up a number of arm’s-length companies to run services including buses and leisure centres – “there have been successes, but failures too” – while another CEO

spoke in detail about their authority’s plan to set up a company to sell electricity.

“Commercialisation is on our agenda,” said another. “We’re looking to find £100m of resources. We’ve got a long way to go to win this one, but we want to take control of our destiny.”

Other challenges are also coming into focus. Innovation isn’t just about seeking out new revenue streams in order to deliver the same services as before; it is also about finding innovative ways of delivering those services to better meet demand, such as through digitalisation. There is also huge pressure to find the right staff – particularly in order to deliver social care.

The political landscape is also shifting. One CEO said Scotland’s system of

Why would anyone want to be a chief executive?” asked one. “It’s about making a difference; it’s about the opportunity to ‘place-shape’”

Zurich Municipal would like to thank the Scotland CEOs who helped make this report possible.

proportional representation, which has resulted in an increase in the number of authorities with No Overall Control, has led to a more consensual and pluralistic approach. However, another remarked that: “Sometimes it’s difficult to get things done.”

As CEOs look ahead to the challenges of the next few years, it is notable that Brexit does not appear to be causing great concern, at this time. Rather, what is energising and agitating CEOs is the challenge of transforming services for a new age.

“I’m excited by the opportunities; we have the potential to reshape public services,” said one.

This opportunity to transform public services perhaps explains why so many chief executives feel emboldened by the challenges ahead.

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Contact Us

We would welcome your feedback on the contents of this report.

If you would like to share your views, please contact us:

info@zurichmunicipal.com

@ZurichMunicipal

Zurich Municipal

Zurich Municipal

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