EconomyLocal GovernmentReform

Pat McLoughlin

Delivering local government efficiency

Pat McLoughlin, Chair of the Local Government Efficiency Implementation Group, discusses plans to reform the sector in the short to medium term with Meadhbh Monahan.

Local government savings totalling €511 million were first identified by the Local Government Efficiency Review Group, which made 106 recommendations as to how the sector could save money in the short to long term.

In November 2011, an independently chaired group tasked with prioritising the recommendations that will yield the earliest and largest financial savings will report to Environment Minister Phil Hogan.

The implementation group’s Chair, Pat McLoughlin, also chaired the original efficiency review group. He tells eolas that there is scope for saving more than the target of €511 milllion. The implementation group will “look at further measures to enhance efficiencies and deliver services in the most efficient and cost effective means.”

Reducing numbers

In the short term, the reduction of staff is a priority for local government. The original report recommended that county and city managers be reduced from 34 to 24; directors be reduced from 240 to 190 and senior and middle managers by 15 per cent.

“We’d hope that the recommendations that were in the last report are assisting the Department of Environment in looking at what staff should be replaced,” McLoughlin comments.

The moratorium on recruitment in the public sector has been “very effective” in reducing the numbers employed in local government, according to McLoughlin. Despite local government having “many more staff on fixed-term or short-term contracts than any other public service” the moratorium has helped to “reduce budgets and head-counts.”

McLoughlin explains: “In our first efficiency review we concentrated on staff in senior management and corporate services but we are carrying out a further, much more detailed workforce analysis at the minute in relation to both grades and what functions staff are in.”

That workforce analysis is due to be completed in September and will allow the implementation group to “make more critical assessments of the numbers of staff that could be taken out of the system or how corporate services and shared services might be restructured.”

A review of staffing in Dublin City Council has established that staff numbers could potentially be reduced by 18.65 per cent from the beginning of 2009 up to 2014. McLoughlin acknowledges that council for its work on reducing senior levels and adds: “As senior management posts become vacant there’s no doubt that the department are taking the review critically [because] so far, very few senior posts have been replaced.” That means the implementation group will have a degree of flexibility in relation to any “reconfiguration” that may arise from structural changes to be decided by the Minister.

Phil Hogan is due to make a policy statement regarding structural changes to local government at some point in the autumn. McLoughlin reflects: “The Minister has announced the amalgamation of Limerick city and [county] council and Tipperary North and South. [His policy statement] should give us clarity as a group as to what the political and democratic structures are going to be.”

The last report had recommended that a move towards joint administrative areas would lead to a reduction in managers and directors and the restructuring of corporate services. “If the Minister doesn’t make a move in that direction, we’ll have to take a further look at how to reduce management costs through shared services or a shared approach to any corporate services,” McLoughlin contends.

Shared services

While local government already operates some shared services in areas such as HR, industrial relations and IT, McLoughlin points out that of the 34 local authorities “many of them configure their services on the basis of each individual authority.”

He states that in areas like IT infrastructure and applications, “I don’t think anyone would suggest you configure into 34 units in the current climate.”

The group is examining “what different structures you could bring to bear at a sectoral level” which could mean “restructuring between local authorities at a local level, at a regional level or a national level.”

Sharing services on a larger scale would bring further spending reductions, McLoughlin contends. In the medium to long term, the group will be keen to examine whether there is a better way of configuring all services rather than each local authority providing all services in its own catchment area.”

In relation to staff losing their jobs due to the implementation of shared services, “the Croke Park Agreement will be crucial in looking at any structural issues arising from shared services; how you would reconfigure corporate services [because] it has a facility for dealing with any staff that may end up being discommoded as a result,” he claims.

Value for money

Local government needs to become more efficient in terms of auditing its spending, McLoughlin continues. The original report recommended that a Director of Audit should produce an annual report containing a strategic review of financial management and audit across local government which should be sent to the Oireachtas Environment Committee and that audit staff should have suitable professional qualifications and sufficient ICT skills to allow them to extract and analyse financial data.

“What we would like to see would be a more professionally staffed audit service and a greater integration between audit and value for money,” McLoughlin tells eolas.

There also needs to be “a greater use of the performance indicators as part of a performance management system.” He recognises that “many of our recommendations looked at the efficiencies of these areas”, adding that “they are not going to make savings, but we believe they have the potential to make the service much more efficient.”

Operational efficiency such as treasury management is another priority for the group. The original report recommended that regular competitive tendering should be carried out for banking services and overdrafts, and local authorities should use their purchasing power to produce uniform overdraft rates at national level. In addition, a treasury management best practice forum should be established (including a mentoring system between local authorities geared towards those local authorities that lack specialised skills in this area), while preserving financial autonomy.

“Our basic assessment is: can the local government sector leverage more cost savings or efficiencies by operating as a sector rather than at the level of each individual authority and can we gain better terms and conditions for financial institutions by working together in banking, treasury management and those areas?” McLoughlin explains.

Procurement is another area where better value for money can be achieved. McLoughlin is keen to point out that good work has already been done on procurement but “would like to see more professional services at a regional
level and a national level.”

A procurement plan under way between regional and national teams of city and county managers and the National Procurement Agency has got the green light from the implementation group and McLoughlin is confident that “the local authority sector will make early and substantial gains on procurement.” He emphasises that procurement is important in ensuring that local government “leverage a substantial amount of resource on goods and services and ensure they are getting best value for goods and services and are using] best practices in relation to stock control, inventory management and keeping low levels of stock.”

Further efficiencies are needed in planning, housing and the roads, McLoughlin contends. However, many of these are dependent on the Government.

“We recommended that planning charges be increased but only as the planning processes become more efficient. One area that we will be anxious to have a look at is what has happened in relation to planning department staff. We had recommended a reduction in staff and that the balance of the staff would work on the issues in relation to enforcement of planning. Since the report was issued in July, we will want to see what has actually happened in relation to staff and the use of staff,” McLoughlin sums up.

In relation to roads he is keen to find out what has been done on the recommendation that there is a greater alignment of staff to the amount of kilometres of road in each county.

Government responsibility

The original report recommended that social housing rents due to local authorities should be deducted from social welfare payments in order to reduce the overheads required to collect rent and to reduce arrears. It also proposed that the online motor tax system should be expanded to allow owners of commercial vehicles to pay online; a handling fee of €10 be introduced to encourage online motor tax applications and the cost of 10-year driving licence be increased from €25 to €40.

These are “a matter for government”, McLoughlin states. Urging the Government to take action, he adds: “A lot of progress could be made on those in the short term and I expect that they are under consideration as part of the comprehensive review of expenditure.”

Ultimately, much of the implementation group’s work will be influenced by the workforce analysis that is underway in local authorities and is due in September.

McLoughlin is determined that “the figures will stack up.” Indeed, he believes that the savings target of €511 million will be exceeded.

“I think there is further scope in the area of shared services. Many areas that we included in the report, we didn’t put a figure in as to how much could be saved because they hadn’t been fully assessed. We believe in time that if there is co- operation in the restructuring of back office support services, then the figure could be increased,” he states.

Overall, the reaction from local government to McLoughlin’s cost-cutting recommendations has been “impressive”. However, “we really are in the place now where the rubber hits the road in relation to the impact on each local authority of some of these recommendations.”

He concludes: “Local government representatives have been very strong in their advocacy for shared services and have been trying to look at back office costs as a way of protecting front line services but there’s no doubt the changes will only happen if we are prepared to assess what is best practice and then implement it.”

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