The MJ/Localis study puts spotlight on income generation as local authorities look to commercial methods to secure financial stability
In what is hoped will become the first of an annual barometer of how councils are responding to the shift towards independence from government grant, The MJ and think-tank Localis heard from more than 250 senior and other officers.
Our research found almost one in five senior managers expect their council will be generating up to 30% of revenue through commercial activity in four years’ time.
And just under half expect their authority will be generating between 11% and 20% of revenue from commercial activity by 2019/20 – up from less than 10% for 90% of senior managers in the current financial year.
Previous research by Localis found that without the income from commercial activities, eight out of 10 councils would have to cut services and/or raise taxes.
Localis chief executive Alex Thomson said: ‘Nearly half of councils anticipate that between a tenth and a fifth of their income will be derived from entrepreneurial sources.
'It is therefore not surprising that survey respondents highlight the need for a commercial mindset to be prevalent throughout the upper echelons of local authorities.
‘The survey underlines the profound effect these changes are having on the ethos of local government, and the challenges that council officers and members face in adapting to a far more entrepreneurial world than was the case only a handful of years ago.
‘The results of this The MJ/Localis survey show once again that the sector is undergoing massive and irrevocable change.
'By running this survey annually, we will be able to track the magnitude and speed of this ongoing revolution.’
Director of the Society of Local Authority Chief Executives, Graeme McDonald, said: ‘It’s unsurprising when grants are being cut and there are restrictions on the ability to raise income from council tax that councils are looking at the only other source of income to protect services.
‘This enables an organisation to develop quite a wide range of income streams and therefore it isn’t over-reliant on one.
'Some authorities will be very good at this and some won’t be.
‘Those councils that have responded best to the financial crisis are the ones that are not over-reliant on one income stream, so it’s certainly something that the sector should be encouraged to do, but any commercial activity has risks associated with it and therefore it’s important that councils enter this with their eyes open.
'We need to accept that some commercial ventures are going to fail.’
Local Government Association chairman, Cllr Gary Porter, added: ‘It’s a variable picture at the moment but income generation is something that all councils should be trying to do.
‘I think probably in the next two years we’ll see the first councils breaking away from revenue support grant.’
Currently, about half of those who took part in our research said their council had at least one post dedicated to encouraging their authority to be more commercial.
But there was little discernible pattern in the types of roles or seniority of positions charged with taking responsibility for developing councils’ commercial business.
Some called for all managers to think and work commercially and for it to become a ‘mainstreamed approach’.
Others expressed concerns that becoming more commercial would not be the panacea of the body blow of cuts to come, and warned the sector not to underestimate the change in culture and mind-set that would be needed.
Is your council generating income in an innovative way? Email d.peters@hgluk.com to tell us more.
For in depth analysis of our findings, click here.