The Wandsworth guide to value for money

Cllr Edward Lister, the Conservative leader of Wandsworth Council will present a report to Hammersmith and Fulham Council's Value for Money Scrutiny Committee on Tuesday. Here is a sneak preview.

Wandsworth Council has a long and continuous record of pursuing value for money for its services. In fact this goes back for some 30 years: the majority control of the Council changed from Labour to Conservative in 1978, and some key policies, such as the pursuit of value for money and efficiency, and house sales and diversification of tenure started then. Other specific economy and effectiveness measures soon followed, and the Council was one of the first to experiment with competitive tendering, adopting a general policy of embracing competition for procurement of all its services, where feasible, in 1980. By the late 1980’s and early 1990’s thorough going work on quality monitoring and clear charters with standards for all services were well advanced.

As I therefore have 31 years to cover in a reasonable time and allow questions I will have to be succinct and cover Wandsworth’s case history in a light-touch way. A more detailed summary was presented in the excellent recent Localis booklet “Big Ideas” edited by Stephen Greenhalgh last year. I will cover the Wandsworth story in 3 main sections – achievements, political management and decision taking on policy, and finally our seven main approaches to ensure savings and effectiveness.

Wandsworth’s Achievements

• It is probably almost unique for a large organisation to have a track record of 30 years of continuous improvement of its quality of service delivery and cost/efficiency. However our CIPFA returns and our accounts, shows that is what we have achieved.
• Our results were achieved by sticking to a clear and simple set of objectives, and enjoying stability of key members and managers over a long period. Our central mission can be simply described as
  “distinctively high quality services with the lowest possible Council Tax”.
• Cumulative savings at current prices from our total budgets from 1980 to this current year are £3.8bn, achieved through consistent application of various approaches that I will summarise later. Only a handful of large commercial organisations (e.g. Arnold Weinstock at General Electric and Lord Hanson at the Hanson Trust) could have claimed similar consistent long term records of financial achievement. Sir Martin Sorrell of the world advertising giant corporation WPP could possibly lay a claim too, although much of his growth record came via acquisitions.
• Over the same period capital receipts of £1bn have been realised by our Council via continuous rationalisation of property portfolios and from home sales programmes. The latter have involved disposing of some 16,000 flats to leaseholders and 8,000 freeholds or just under 60% of our original municipal stock. A good proportion of these receipts were invested back in estate improvements, giving us now 100% of our stock above decency standard. This policy also generated improved community cohesion on estates and greater community engagement. It has also contributed to the Council now having virtually no external debt.
• Service quality has been demonstrated objectively via 86 Charter Marks (the highest number of any authority) a consistent excellent/4 star rating from the Audit Commission, top (perfect) score in the country on the Use of Resources rating, and the highest public satisfaction level of any authority in the recent Government ‘Place’ survey this Summer.
• We currently, and quite regularly, have the lowest Council Tax in the country, and over the last 25 years or so have the lowest average local taxation imposition on residents of any U.K. Council.

Political Management and Decision Taking

• The absolutely vital ingredient in ensuring consistent success is stable control and involvement of the whole team. This is probably true of any organisation which shows a record of long term success, whether it’s a football team, a company, a Government or a Council. Within a Council, it is vital both among the Members and the officers.
• I speak unashamedly of a team approach, as that is what we have had over the last 30 years, with various sizes of majority and various strengths of opposition. We have essentially kept a cohesive
  political group with initially an informal (and latterly a formal) Cabinet, and a backbench kept firmly involved in all the big and difficult decisions. We are not interested in an elected Mayor.

The Cabinet’s Regular Policy-Making Role

• At the top, the Leader holds a regular Cabinet meeting once a fortnight. This covers all ten portfolio holders, and we expect them to monitor their performance and budgets and report on problems and issues in their area. The Cabinet also gets regular top line performance figures once a quarter or more regularly for problem services. It also must give initial informal agreement to any major policy changes, capital projects or revenue developments over £50,000 p.a. Sensitive areas are always reported on to the majority party group for discussion and views before being finalised and fed into the formal approval process (i.e. formal Executive meetings).
• In fact we have stuck out of preference to the old ‘Committee style’ system – even over the last 8 years when legally decisions are actually taken by the Executive. All decisions can be debated and
  pre-scrutinised by our 7 OSCs, which bear an uncanny resemblance to the old Committees we had before the Labour Government’s 2000 Local Government Act. Keeping this system has ensured full group and minority party involvement, with open and transparent decisions. It has given all elected Members a chance to have a say. We do value the involvement and debate from our minority party: although they may not have much influence on flagship policies they do make valid and positive contributions to our decisions on occasions, and also ensure we are kept up to the mark.

Political Cohesion

• Keeping political cohesion and commitment to the vision has to be worked at energetically. It will never be 100% successful: some will feel too strongly on some issues (possibly very local ward ones) to show loyalty at all times. Members of a political group will understand the balance between their support and commitment to the strategic vision, and their personal and local views of specific issues. Even on our most major and controversial policy decisions, over 3 decades, we rarely had more than 2 or 3 abstentions or defectors, and keeping a unified approach at this level meant that for most of the time there were no disagreements on the interpretation from strategic vision to more detailed policy.

Keeping Close to the People

• In fleshing out our low tax/high quality mission into local policies and programmes, we have always followed a business-style approach of seeking to understand (and to supply) what our customers want. Genuinely representative local views are important to us and we have spent a great deal (relatively) on market research and surveys.
• Surveys regularly show residents want quality of life through clean and safe streets and parks, consistent trouble-free and accessible services, and low crime and ASB levels. Through this approach, pictures of local priorities can be developed and services moulded to fit. Partnership working, though difficult, is obviously needed in some areas: police partnership is the vital one because the public expect results, and – on occasions – Council resources may be needed for partnership programmes – e.g. CCTV, Neighbourhood Watch, Victim Support.
• Sometimes tough and unpopular decisions are inevitable because the needs and costs of a service or facility no longer provide a viable business case due to changes in circumstances. However, sometimes there is a possible radical alternative – floating off a service for a Trust to run for example. Generally however our experience of small-scale local management (e.g. housing co-ops or TMOs) is that it is poor, and prone to abuse or even corruption.
• Surveys can give useful fine-grain information on public attitudes to various service decisions e.g. Sunday opening of Libraries, keeping some charges subsidised and below a fully economic level (such as for Swimming Pools).

Wandsworth’s Seven Approaches to Efficiency and Value for Money

Procurement and Competitive Tendering. This is our No1 focal point (out of seven) for cost effective running of our services: six other key areas for success are also described later.

• We achieved the first actual competitive tendering of blue collar services in 1981 and thereafter secured great benefits (both financially and on quality control). We extended the approach to White Collar services in the late 1980s and early 1990s with similar benefits. We were fans of the Compulsory Competitive Tendering approach brought in by the Conservative Government.
• Unfortunately those days are gone. CCT was repealed by the incoming Labour Government in 1997 and replaced by the Best Value regime. This was too broad and cumbersome to be effective and new Workforce Directives and Pension Transfer requirements greatly reduced the scope for financial savings flowing from productivity of the workforce. There may be still benefits from outsourcing services but one now has to be selective, and then skilled and disciplined in procuring the contract, and subsequently managing it tightly.
• If a contract is not properly drawn up and tightly managed, it will not be possible to enforce high quality, or to deal with inevitable problems and changes that crop up. Nor will it be possible to ensure that new local requirements can be added in to keep residents satisfied.
• It is worth stressing that our experience over nearly 30 years is that outsourcing packages should be almost invariably kept to single services to allow effective control. Even some single services (e.g. IT Services) need to be spilt up to retain sufficient control. Big blocks (e.g. Departments) just don’t work we have rarely found that combining two large contracts for different services gave us saving. With just under 300,000 population however we have found single borough-wide contracts for five years or more are generally the most cost-effective, rather than having two or more small area-based contracts for the same service. Economies of scale therefore appear to operate for a single service, but not generally across different services and workforces.
• Procurement is therefore still a vital element in running an effective Council. We now have some 200 main contracts, plus many in-house contract-type services (which have been all tested competitively and won). We have a Procurement Strategy, a more detailed Code for Procurement, and a senior officer team who vet all our procurement exercises for compliance. There are also procurement protocols for all supplies. Wherever possible we build quality requirements into the
  contract specification and award all contracts on a 100% lowest price criteria.
• Over the years, perhaps up to a third of our savings have come from this source: further savings are harder to find (e.g. new areas for buying supplies or services via consortia) but the huge gains we have made would quickly slip away if we didn’t work hard continuously on procurement.

Six Other Key Areas for Continued Savings and Effectiveness

The other key elements of our approach are harder to describe as clear and simple processes than procurement, but they fall into six broader categories and can be reasonably described as a commercial or business ethos applied to public services:-

• Keeping the organisation lean, taut, and well managed. This involves good performance monitoring and management, high staff motivation and productivity, sensible staffing policies and (very importantly) clear management accountability for performance: we use PRP, firm but fair
  rules and codes for staff and regular performance monitoring.  This does not involve micromanagement by members: instead there is regular services monitoring and performance management, by directors, cabinet members and OSCs.
• Employing an analytical, businesslike approach to planning our services. This starts with demographics and research to estimate the customer/client base, coupled with market research when needed to check what level of service is wanted by residents and their satisfaction levels: we don’t let historical patterns and service designs continue without questioning their fitness for purpose and reviewing them in depth; 
• Regularly reviewing if we can change the delivery method in any way e.g. competition, new specification (with conditions), reorganise the process, switch to predominantly on-line services;
• Working our assets effectively – keeping utilisation of buildings up, carving up sites to split off unused parts and selling them, and generally optimising our use of capital through the whole
  organisation;
• Maintaining effective financial systems backed up by clear budget responsibility and accountability , with codes and practices to prevent abuse, fraud, overspending and unforeseen problems; and
• Continually looking at our charges and ensuring where possible specific service users pay for what they receive, at a price which is ‘what the market will bear’ - even if there  isn’t any market level, there will be a level beyond which charge increase will be counter-productive i.e. when negative price elasticity kicks in.

Details of the Six Areas of their Application
Sound Organisational Principles

Turning now to details of the 6 basic components of the approach, organisational issues are key. We developed early on, and have carefully adhered to, a fairly rigid approach to the classical rules of an effective organisation:

• Clear responsibilities and reporting lines.
• Sensible ‘span of control’ for each manager or team leader.
• No dual responsibilities, so that each employee is responsible to one person only.
• Clear expected performance, with performance related pay (and appropriate monitoring and review) for the majority of staff – this is now progressively being extended down to all staff.
• Clear rules and codes for staff: disciplinary, behaviour, sickness, etc.
• Pay in the upper quartile wherever possible, to make staff feel valued and motivated to “go the extra mile”.
• A firm new procedure for sickness monitoring and reporting (introduced in 2000) brought in new terms and conditions which included monitoring limits on high sickness cases, requiring them to normally ‘work back’ the sickness absence or give up pay instead. Over 70% of our workforce
  is now on these new terms and conditions.
• A tight and regular performance management regime across all services, so that where the performance or standard of a service falls below target, focus can be quickly brought to bear to try and remedy the situation.

Over the years we have organised all our services on the above lines and it gives an enormous benefit to productivity. Where it can be readily measured and compared, this can be shown to be as much as twice as good as comparable Councils. Each year a few cases come up in our savings reviews where reorganisations are needed to downsize or change the structure. We are careful to scrutinise the new structure and make sure it fits all our standard requirements in all such cases and the new structure, if downsized, optimises the skills and competencies of the existing staff.

Planning the Right Size of Service

With the best part of 200 separate services to deliver to the public (although perhaps only 30 or 40 could be termed the key major ones), it is not surprising that at any time there will be a few where demand will have changed significantly since a positive policy decision was last taken on what level of service to provide. Changes can occur for a number of reasons – demographic factors and trends, legislative change, new alternative services provided from elsewhere, and changes in residents’ preferences. So, at least every few years, it is important to look at the current demand and use, and unit costs, and ask questions about whether the current levels are still justified in relation to other competing priorities for resources. Market research may be useful to see how much users need and value the service. Quite often a decision must be made to downsize or significantly alter the nature of the service.

Changing Delivery Methods

A review of the nature of the delivery method may follow from the above review of demand and need, or it may be a free-standing exercise. How and why should delivery change? There may be a whole host of reasons. Technology may have provided new approaches. New contractors or providers may have appeared on the scene. There may be an opportunity to combine delivery with another service, optimise online self-service by customers, re-engineer and simplify the business process, or even go into partnership with another organisation to gain economies of scale. Finally, it may simply be felt worth testing the market again if tenders have come up for renewal or it is some time since they were last were sought from the private and/or voluntary sector. Examples of these in Wandsworth have been under-five’s children’s centres, where six day centres for children in need were closed, with care capacity being relocated into primary schools. Two were changed into family assessment centres, and the other four are sold or available for disposal, giving considerable benefits and savings. Other examples came in social care where for some services for mental health and learning difficulty clients, we found via a review that it was worth specifying the services for tendering, as over the last five years new providers had entered the market. Again there were savings and benefits to the clients. Recently the personalised approach to adult social services has meant a restructuring of provision is necessary, moving away from “one size fits all” to individually tailored packages of care.

Optimising our Capital Assets

In the early days opportunities for disposal of underused sites and buildings were easy to find. Some services were obsolete and were simply closed. We gradually moved to centralised offices for social
care and housing management, releasing unneeded district offices.

We could also find unused or underused parts of depots and annexes to buildings and schools that could be sold off. We developed a Property Sales Committee that oversaw this whole process, as well as monitoring our home ownership initiative. As time went on, we did obtain huge capital receipts from selling off these surplus sites and from home sales and were progressively able to reduce our non-housing debts to zero and minimise housing debt too, and to fund a sizeable capital programme of improvements as well. Perhaps surprisingly, although sites for sale are not now so easy to find, there are still major opportunities. These arise through rationalisation of operational properties and depots, closing schools as birth rates change between localities, closing day centres and hostels as institutionalised care is downsized and becomes personalised, and from more thorough searches of backland, derelict estate or school buildings, garage blocks, etc. All these still can yield either sites for sale and development, or our own ‘Hidden Homes’ programme to build on under-utilised sites on estates.

Effective Financial Systems

These are necessary so that managers can be held accountable for managing their budgets, and up to date accounts for income and liabilities are available to check performance. In some areas this is simple, but for Adult Care for example, to keep all residential care and domiciliary services accounts up to date for commitments, and all outstanding debts to a reasonable level, can be quite challenging. Effective IT is obviously important, but the basic systems are equally important to give prompt information to managers and to Members to track performance. This will allow annual reviews to look at areas of cost pressure as well as under spending and to consider if savings or adjustments need to be made. It may seem obvious that these systems need to be absolutely fit for purpose in an organisation with a total gross turnover of some £800m per year. However, as good financial information systems are so vital for sound decisions, it is essential to put considerable effort into design and procurement to ensure effective systems are in place. Also important are initiatives to prevent fraud, theft and inadvertent overspending, and regular monitoring of progress on these. We have also put considerable effort over the years into identifying unauthorised occupants on our Council Estates: these can then be removed, releasing vulnerable property.

Review of Charges

Each year, as part of our budget review cycle, we will expect each Cabinet Member to bring forward proposed changes to the charges built on a quasi-commercial approach. Generally, we will look to increase charges as far as possible beyond inflation, so that the consumers of the service are bearing the full cost without any hidden subsidy from the other Council Tax payers. If demand is buoyant, we will expect managers to use their knowledge and feel of the market to suggest higher increases. It is worth taking a trial and error approach to see just what the market will bear in some cases. We will often want to look at across London to see what other boroughs are charging and use this market intelligence as part of the review process – a sensible business-like approach.

Three Further Details of Wandsworth Practice for VFM

I would stress however we rarely use consultants and reserve them only for technical areas where we do not have the relevant expertise. We prefer to do policy reviews ourselves, which is more effective. We also keep a very tight rein on resources put into partnership and inter-authority networking which often adds nothing for local residents: even though the discussions held are interesting, real decisions can be quite rare. Finally we do not use PFI out of preference, as it carries high cost overheads for the legal and accountancy input. There is also a high level of abortive bidding work that all contractors are inevitably faced with, which therefore ends up as a further cost overhead as it is loaded onto prices for successful bids. A PFI approach also greatly delays procurement and of course generally incurs higher borrowing costs.

Our Annual Review Cycle

Managing the budget process each year is an important system that we have evolved in Wandsworth and is worth describing in outline.

This approach has now become a general business ethos or culture in Wandsworth. All officers at a senior level, and Members, are conscious of the value for money approach that is needed, and where to go for the support and tools to deliver these elements. A number of structures and procedures support it, and over the last 15 years a continuous annual review cycle has been used as the best way of ensuring political control of the process. It is also important to recognise that there are a couple of underlying principles in the budget process. Officers are expected in the first instance to try to meet any new demand for service from their existing resources. Also all capital schemes are met from our own resources built up from capital receipts, rather than any borrowing.

Autumn Savings/Review Groups for Each Portfolio

Budget review sub groups are set up in the late summer/autumn each year where each Cabinet member reviews their whole portfolio for potential savings and changes, under each of the above seven topic heads. Directors and Senior Officers do the donkey-work for these reviews under Cabinet Member supervision but the savings/quality ethos is sufficiently well understood that there is now no service protectionism. Around the beginning of the next year, after perhaps two or three long sessions of each sub-group (which the Leader and Deputy Leader run), the whole Cabinet puts the results together, takes overall priority decisions, timetables all the necessary consultations and approvals, and discusses it in detail with the full majority party group. By the time the whole package for one year has been concluded the next cycle starts after a short breather.

To conclude – our way is a tough and time consuming regime, but I think you’ll agree the results for us have been worthwhile.