Playing fair with the frontline

Tuesday, March 16, 2010

Public sector pay restraint won't be enough to protect and improve services, warns Local Government Secretary John Denham, who says councils are going to have to come up with some innovative ideas

The recession has sparked a culture change about pay, reward and value in our society. Excessive bonuses for bankers have come under heavy criticism – but the spotlight is also on the public sector and local government. The public are rightly not only demanding fairness, but restraint too – especially for pay and reward at the highest levels.

Over the past seven years, the average pay of a council chief executive has shot up by £40,000 while the average salary for council workers has risen by only £6,000. Most of these people have given a lifetime of public service and many are doing a good job. But in some cases this has gone too far. And the Audit Commission has questioned whether there is a clear link between the chief executive's pay and the council performance – suggesting that some councils are paying over the odds without getting the best results.

By challenging the culture of excessive senior pay, and drawing attention to the way executive salary has spiralled up, we have already started to change the terms of the debate: with councils re-evaluating what can reasonably be paid. Chief executives look likely to agree another zero per cent pay deal for next year. And we have introduced a new law that requires councils to fully disclose the pay and perks of top posts, including naming those earning more than £150,000, in an open and transparent way. The taxpayer – who is ultimately responsible for paying those salaries – has a right to see this information and to judge whether pay rewards are fair.

I have also asked the Audit Commission to look into why some chief executives walk away with big severance payouts after political fall outs, to see if practices are robust and value for money. Councils will also be included in the Budget senior public sector pay review.

This is just part of a fundamental reassessment of the way resources are used; making sure they are concentrated on the frontline.

It is clear that council tax payers will not stand for anything less than the leanest possible operation – especially if things start to impact on the quality of services or the cost of council tax.

There are savings to be made through traditional efficiency measures, but that will not be enough. It will be vital for all councils to exhaust the possibilities of these tried and tested approaches. Local people will rightly be intolerant if they are told that frontline services will be cut when their council hasn't taken tough decisions to streamline their back office operations – whether that means introducing shared services, sharing senior staff with other local authorities, PCTs or other bidders, or through making the best use of public buildings.

Of course, running the most effective and efficient operation is not the same as conducting a crude cost-cutting exercise that sacrifices all notions of standards. It is simply not good enough to offer the most bog-standard, lowest-cost service, contracted to the cheapest bulk-buy bidder. Nor should councils think that a two-tier standard of service is going to be acceptable, cutting some services back to the bare bone, then charging so high for others that most people can't afford them. I want to free councils to innovate, to shape their own communities in the best interests of their local constituents without abandoning our profound commitment that citizens are entitled to consistently good services. Indeed, that runs counter to the whole Total Place approach to drive through better services and greater value for money, by focusing more clearly on who needs the service not who runs them.

The real prize – the one which allows us to be confident we can make savings while protecting and improving frontline services – will come from our ability to change the way we use resources; that Total Place perspective to shift spending to tackle problems in the most effective ways; to stop problems arising rather than sort them out later; to challenge professional boundaries and to put the user, rather than the provider, first.

I have set up a taskforce, led by Steve Bullock, the mayor of Lewisham, and Richard Leese, leader of Manchester City Council, to identify the most innovative and ambitious ideas which could be adopted more widely.

For example, Teignbridge and Torridge are sharing a chief executive – gaining economies of scale which come from working as a larger unit, while maintaining their political independence. South Tyneside council is cutting costs without sacrificing quality by using new technology. By putting more information about waste and recycling online, they've cut the average cost of an enquiry from nearly £3 to just £1.25. This hasn't required new powers – just a willingness to think differently.

Undoubtedly, councils are facing tough choices in a much more difficult financial climate. But that does not mean that public services must inevitably get worse. On the contrary, we will be looking to strong, decisive and accountable leadership from councils to not only protect, but also continue to improve frontline services. The question is not whether, but how quickly and how effectively councils can do this.