How to improve local government's financial resilience

25th June 2024

Councils’ approach to buying and implementing technology is under the spotlight. 

Smarter procurement and closer collaboration with the private sector is vital to weathering this storm.

Local government finances are in crisis. Councils nationwide are caught between the rock of soaring demand for services and the hard place of year-on-year budget cuts. As Emily Douglin, Director of Local Government at Civica, starkly puts it, the situation is "really quite difficult".

She reveals: "One council told me they are spending 81 pence in every pound on social care. If they're doing that, what has to happen to all the services that are aggregated in the 19p that's left?"

The question goes to the heart of the impossible choices councils now face. "How do you decide between potentially protecting a child and collecting a bin?" Douglin asks. "It's an easy decision to make."

A strained system

The roots of this crisis are complex, but one factor that comes up repeatedly is how local government is funded. "They're in a single-year funding cycle dictated by central government," explains Douglin. And the demands for their services are growing faster than their budgets allow.

This hand-to-mouth existence makes it incredibly difficult for councils to plan for the long term or invest in transformation. Even when they know change is desperately needed, it's "hard to find the money and bandwidth to do so", says Douglin.

The result is a system under immense strain, where councils are constantly firefighting rather than planning for the future. As Douglin notes, this is a vicious cycle: "Unless we build a system together that tackles some of these stark, grave social problems, we'll never be able to address the imbalance in local government spending priorities."

So, how can councils navigate this challenging landscape? Douglin suggests that procurement and how councils approach the market are critical areas for improvement. "Local government are poor transformation experts," she notes. "They manage the contracts poorly and under-invest in implementation. This means that transformation often costs them more than moving, creating some paralysis."

Douglin argues that the heart of the problem lies in the transactional nature of many procurement processes. Rather than engaging suppliers as strategic partners to solve problems, councils often approach the market with a rigid shopping list of requirements.

Partnering for success

Indeed, councils also need to rethink their relationships with suppliers fundamentally. The solution, Douglin believes, lies in closer, more collaborative partnerships between the public and private sectors. "I think that the private sector has to take accountability for some of that," she says. "And I think we need to work in closer partnership with the public sector to share some of those outcomes."

Ultimately, though, the scale of the challenge facing local government is too big for a single council or supplier to tackle alone. That's why Douglin believes greater collaboration between councils is also vital.

By working together, sharing best practices, and speaking with a collective voice, councils can drive the changes they need to see – from reforms to funding and procurement to greater freedom to innovate.

It won't be easy, but as Douglin notes, the alternative is stark: "Right now, councils are trapped in a vicious cycle. They're constrained by cumbersome bureaucracy and inflexible, short-term funding arrangements. They're struggling to attract and retain the skilled workforce they need. And they're facing the impossible task of meeting ever-increasing demand with constantly shrinking budgets."

The road ahead may be challenging, but by buying better, partnering smarter, and collaborating more closely, local government can start to break the cycle of crisis and build a more sustainable, resilient future.

Find out more about how Civica supports local authorities on their digital transformation journeys.

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