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For the first time ever, we know how much local authorities spend, and with whom. And the findings – the product of major areas of research carried out by the Regional Centres of Excellence – are staggering. English councils spend around £42bn a year contracting with external suppliers. Around £12bn of this is spent on buying commodities, goods and services, the everyday things which councils need to deliver services. A similar amount is spent by councils on constructing and maintaining buildings and roads, while £6bn is spent on adult social care, £3bn on waste services, and £2bn on temporary staff. And so it goes on. These figures represent a huge amount of trade with the private sector. We know that more than 200,000 companies supply councils, and yet 80% of local government spending is with 8% of these. Looking at it from another angle, just 25 suppliers account for 10% of all spend. The scope for redefining local government's relationship with these key suppliers is obvious. If we take a regional cut of the data, we can uncover other statistical nuggets. Take the North West, for example. Councils in the region spend £6.5bn a year with external suppliers, the third-highest amount after London and the South East. They process four million invoices a year, but one million of these are for values of less than £50. The regional analysis also tells us that 7,000 suppliers, representing two-thirds of the total spend, are used by more than one council. So, why does this matter and what does it mean? It's widely acknowledged that local government's performance to date on delivering efficiency savings has been second to none. It has out-performed other public services and has led the way on innovation. But the financial storm clouds in the shape of the CSR07 are gathering. Public spending, in real terms, is set to grow by just 1.9% a year between 2008 and 2011, much lower than the 3.3% growth during the previous decade. Furthermore, when the CSR07 is announced in the autumn, we can expect local government's share of efficiency savings will increase from £3bn to £5bn over the three-year period. And let's not forget that these will be cashable. At the same time, cost pressures on local authorities, particularly from our rapidly-ageing population and from growing volumes of waste, are increasing. Between 2005 and 2017, the number of people aged over 85 will increase by 38%, while DEFRA estimates that spending on waste services must increase by 10% a year over the CSR07 period, just to meet Landfill Directive targets. It's hardly surprising then that many in local government are hugely concerned about the impact on services and council tax. Putting aside whether the 3% cashable efficiency gain is achievable or not, the fact remains that the pursuit of greater local government efficiency is relentless. That's why we must continue to explore all the avenues open to us to deal with these challenges. And that's why the RCE spend analysis is so important to the wellbeing of local government. It provides authorities and their change agents with robust evidence to challenge current procurement practices, to better manage relationships with suppliers, and to develop new strategies for major areas of spend. It's still early days for these strategies but, for example, regionally-based framework contracts pioneered in the East Midlands and South East are already aggregating well over £1bn of construction-related expenditure, with savings predicted of at least 10%. Regional care costing tools are reducing variations in prices for expensive but vital care packages for vulnerable adults by giving commissioning staff the confidence to strike better deals with providers. Allied to the spend analysis is the ability of the RCEs to bring together councils and other partners in ways that would not have happened otherwise. Councils must work together if they are going to widen and deepen their approach to efficiency but, as we know, this is not a straightforward proposition. In today's local government world, for councils to prosper, they must collaborate and not just with other councils but with other pubic bodies to deliver citizen-focused services at a cost the public purse can afford. Rob Sykes is chair of the Chief Executives' Task Force

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FINANCE

Collaborate to accumulate

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