Commercialisation in the public sector is one of the hottest issues in local government, with councils’ ventures increasingly coming under greater scrutiny.
Members of Public Sector Plc’s Local Government Council Consortium Group met in London recently for The MJ's round table debate, which also discussed the importance of place-making and the dearth of affordable housing.
With debate in the sector very much live over the role and extent of commercial investments in councils’ financial plans, many delegates to the round table hosted by The MJ and Public Sector Plc’s Local Government Council Consortium, described encountering scepticism within their authorities.
One said: ‘There’s a need for a culture change. Certain parties have changed and are anti-commercial. It takes time to change the culture of senior officers as well.’
Another agreed: ‘All councils have to be careful of political dogma – that shouldn’t come into it, but unfortunately it does. We shouldn’t be basing decisions on that.’
But this is far from a uniform picture. Some authorities have embraced commercialism, mainly to counter financial pressures. ‘This trend has been increasing over the years as funding has gone down,’ noted one delegate. Another said: ‘If we are not business-minded, services either cannot be provided or improved.’
One participant revealed: ‘Every service knows they have to wash their own faces or they will be outsourced. It’s quite brutal. You either buy into the ethos and what we are about, or you work with another authority. We don’t let politics get in the way of doing business – we do what’s right for our residents.’
It is not just among the officers and members where a culture change is under way, but in the electorate as well.
One participant told the meeting: ‘Since we got into that way of working – maximising the income we generate for a purpose – people have come around to it. When we demonstrate to people what we have done, and that we couldn’t do it any other way, people are less afraid of it.’
Another added: ‘The message that has been portrayed to residents is to invest to save, rather than cut costs. It has been politically driven, to maintain services rather than relying on the revenue support grant.’
However, one delegate warned of ‘some powerful organisations that stand in the way of commercialisation’.
They highlighted an issue where the council was trying to make use of land that had been donated to the local authority on the death of the owner. ‘If you wanted to do anything with that land, the Charities Commission gets involved. But there has to be a degree of commercialisation to make it viable.’
Where attitudes are not necessarily opposed to commercialism as a whole, some in the consortium felt they nevertheless had been held back from realising its full benefits by an overly risk-averse approach.
‘There’s an ingrained conservatism in the way authorities are run,’ one delegate said. ‘We can’t afford to blow £10m on a risky investment, but things are changing – there’s an appetite to be more creative in one’s thinking. There are things we all want to do, but sometimes the reins are holding us back.’
Another participant agreed: ‘There was a risk-averse culture – coming up with all the reasons you can’t do something, rather than ways it can be done. That was frustrating. If people are enthusiastic, we have got to nurture that rather than constantly saying “I’m sorry, you can’t do that”.’
Another participant said: ‘If you are in business, you take risks and you rely on officers to tell you what that risk is. Is this a risk you believe you will profit from? Some investments you will lose on, some you will gain from.’ But another delegate countered: ‘The difficulty is understanding how much services cost. It has been an incredibly difficult exercise and I’m not sure we have got there yet. When it comes to being competitive, that can be incredibly difficult.’
Another bone of contention within the sector has been whether authorities should invest beyond their boundaries. But it held no fear for one of our delegates. ‘Some councillors are afraid of looking outside the borough,’ he said. ‘If, in the long-term, more residents will benefit and more towns will benefit, why don’t we invest in it?’
Proponents of local authority commercialism have long held up the regenerative potential of commercial investments, particularly in flagging high streets. ‘There should be more confidence in the ability of officers and members to invest for the good of their town,’ said one participant.
Although the ailing fortunes of the retail sector have made investments less attractive in purely financial terms, our delegates had found success in the past through town centre property purchases, and were inventive in their approach to financing them.
‘We didn’t expect taxpayers to pay for it, we used a dividend and it has been a catalyst for other developers to say: “You have shown confidence, we will show confidence too”,’ one delegate explained.
Another participant, explaining their purchase of a facility, said: ‘It wasn’t active enough for the private sector to step into. We were reluctant to step in to invest, but worked with our local enterprise partnership (LEP). I would recommend exploring what LEPs can do.’
As the delegates moved on to discuss place-making, the plight of town centres and how to turn them around came to the fore.
While delegates agreed there was no ‘one-size-fits-all’ solution and that each location faced different challenges, there were some emerging trends.
All were in agreement that diversification was key, and councils could take a leading role in encouraging non-retail uses.
One delegate said: ‘Town centres have got to change as a whole, with more leisure uses, more family uses, or they are not going to survive.’ For others, the solutions were more elementary. Another delegate said: ‘We have offered free parking and the retailers are telling us people are coming back.’
Turning to the issue of housing, many delegates shared frustrations over rules preventing development within green belt areas without special circumstances.
Yet some authorities lie almost entirely within green belts. ‘We are not building nearly enough on brownfield sites, so we are going to have to build them in green belt areas,’ said one participant. But they faced significant hurdles when trying to provide homes in villages that lie within the boundaries of National Parks, which are covered by stringent planning restrictions.
‘There’s a problem with building affordable homes to keep small villages alive,’ they added. Another delegate said: ‘Not everywhere that is green belt should be classed as green belt – you need to make the case.’
Delegates were in agreement that provision of affordable housing has become essential. But there was scepticism of the ability of local authorities and even central Government to have an impact on the open market. ‘We have got a major problem with enabling people to buy houses as they are priced,’ a participant said. ‘There’s no point just trying to force house prices down – it won’t work in a market economy.’ Another agreed: ‘It’s a big stretch to get from where we are now to 300,000 homes per year by the mid-2020s.’
Some highlighted the counter-productive impact of other policies, including Right to Buy. One delegate said: ‘The issue of Right to Buy has affected the market. Far from creating a home-owning society, it has created a boom in private rentals.’
The route to commercialisaiton can be fraught with difficulties, but the adoption of innovative ways of financing investment can pay dividends. Diversification is key. Town centres must offer more incentives to their residents
Alongside these measures, local authorities are being stymied by a lack of affordable homes which are being held back from being built by too much regulation.