Resolved: the Committee endorsed the report and welcomed the contribution from Andy Mudd. It highlighted the importance of member accountability and the necessity of operational clarity for any future commercial service activity.
It was also agreed that the Committee would share its views with Mayor and Cabinet as follows:
In order to allow for the tracking and development of income generating activities the Committee believes that, for the appropriate services, officers should be tasked with considering the reimplementation of trading accounts.
4.1 Andy Mudd (Head of APSE Solution, Association for Public Service Excellence) introduced a presentation (included with the minutes). In addition to the information provided in the slides, the following key points were noted:
· The Association for Public Service Excellence (APSE) was a networking organisation, which supported the sharing of best practice.
· Changes in the law meant that there were more commercial services opportunities open to councils. However, there was still a reluctance to embrace the agenda, particularly in London.
· It was important to understand that commercialisation was different from charging fees (which councils already did for a range of services). To be commercial mean that services had to be provided in a market – in which customers had a choice of providers.
· There were very few authorities that were producing income from purely commercial services (as opposed to gaining income from fees, charges and investments).
· One of the drawbacks of councils’ increasing moves to commercialisation was that they had inadvertently created markets for private businesses in services that were previously the preserve of councils.
· For example, increases in charges for bereavement services meant that it was now profitable for private companies to offer services previously only provided by councils.
· Councils were tentative about charging for services to make money but ultimately, commercialisation was about making profits to offset costs.
· There was a lot of property investment activity in London (as opposed to trading and commercial services).
· A number of authorities had embarked on projects to develop commercial services, including: Oxford (which had set up a trading arm); Nottingham (which had created an energy company and had a profitable parks department); Birmingham (which was making money from digital advertising); Spelthorne (which had heavily invested in commercial property); Wandsworth (which had created a commercial property portfolio); Hackney (which had invested in housing) and the City of London (which owned approximately £26b of property in central London); Westminster (which made money from parking).
· Lewisham was ahead of many other London authorities in its approach to commercialisation.
· London boroughs had not faced the level of financial pressure being felt by other councils (particularly those in the north).
· Elected members had to create the conditions for officers to change council culture.
· It was important that councils encouraged the development of the right skills amongst officers.
· There was sometimes tension between the focus on providing ‘societal good’ and focusing on serving customers.
· Council commercial activities could support wider ambitions for public good by providing local employment and developing local markets.
4.2 Andy Mudd responded to questions from the Committee, the following key points were noted:
· Councils did not collect standardised information about the money they made from commercial services.
· London councils had significant opportunities for generating income from parks due to the density of populations as well as the quality and accessibility of green spaces and good weather.
· Public perceptions (and business perceptions) of councils acting in a commercial way had to be anticipated and managed.
· It was important that councils were open and transparent in their operations in order to avoid perceptions of unfairness/public subsidy of commercial activity.
· It was important that councils had a good understanding of the income being generated by their services – which was why trading accounts (that allow the tracking of funds between services) were important.
· Rather than separating commercial services from democratic oversight – it was important that there was strong governance for commercial activities. The most successful commercial activities by councils had strong political leadership and clear operating parameters.
· Other public sector organisations provided lots of opportunities for selling services because they required all of the same services that the Council was already supplying.
4.3 Katherine Nidd (Strategic Procurement and Commercial Services Manager) introduced the report, the following key points were noted:
· The income generation strategy and fees & charges framework (presented in draft to the Committee in December 2018) had been approved by Mayor and Cabinet.
· The focus would now move to developing officers’ commercial mind-set as well as changing the Council’s culture and enabling Council officers to use the tools developed as part of the income generation strategy.
· The work that was being carried out on fees and charges would feed into the next budget setting report for February (2020).
· Mayor and Cabinet had approved a growth budget for procurement and commercial services. This would enable the hiring of officers to support and develop this area of work.
· Mayor and Cabinet had also agreed the procurement social value policy.
· The Centre for Local Economic Strategy (CLES) had been commissioned to carry out work at the Council on income generation, community wealth building, procurement and other initiatives. Work would also take place with Lewisham’s public sector partners (including Phoenix Housing; Lewisham Homes; Lewisham and Greenwich Trust; Lewisham Southwark College and Goldsmiths University)
4.4 Katherine Nidd and David Austin (Head of Corporate Resources) responded to questions from the Committee, the following key points were noted:
· Updates could be provided throughout the year on progress with the fees and charges framework.
· The income generation strategy provided a set of defined terms in order to provide clarity.
· The income generation strategy also related to the cuts programme – which included a number of income generation proposals.
· A new post had been proposed to support fees and charges work.
· One of the areas that the new appointees to the procurement and commercial service team would consider was contract management, which was historically a difficult area to get right.
· Work had started on exploring opportunities for future insourcing.
· There were proposals to reintroduce trading accounts for some services. They had been removed as part of previous rounds of efficiency savings but the deployment of Oracle Cloud provided an opportunity to re-implement them.
· Work was ongoing to develop the Council’s approach to fees and charges. This incorporated demand modelling and activity based costing. It would be difficult to provide targets for income from fees and charges at present.
· Current commercial activity fitted within the Council’s governance structures and was aligned with its principles.
· It would be three to six months before the income generation approach would become widely recognised by officers and begin to deliver on its ambitions.
4.5 Councillor Amanda de Ryk addressed the Committee, the following key points were noted:
· There was an appetite amongst Council officers for change.
· If officers were asked to take risks and innovate – there also had to be an acceptance that some projects would fail.
· Any commercial activity had to work for the Council culturally as well as financially.
· There were options for the Council to work collaboratively with partner organisations in the public sector and with other councils.
· It might be necessary for the Council to appoint specialists to support this work.
· It was important that the Council moved quickly and learnt lessons from new initiatives as well as failures.
4.6 In the Committee’s discussions (which included members attending under standing orders), the following key points were also noted:
· Transport for London had significant investment in commercial advertising which limited opportunities for London Councils.
· There were risks from doing nothing (in contrast with the risk of developing more commercial services and projects).
· Lewisham’s Mayor and Cabinet needed to support the change in Lewisham’s culture.
· Councils were not known for the effectiveness of their contract management. The Public Accounts Select Committee should consider scrutinising the effectiveness of contracted service providers (including the parks service and providers of highways maintenance)
· Members were concerned about the complexity of Council contracts and the level of enforcement that was carried out.
· It was felt that the Council should strongly enforce contracts to save money and improve the quality of service delivery.
· Members would welcome additional information about the opportunities for the Council to operate a ‘VAT shelter’ for commercially provided services.
· Consideration could be given to isolating commercial activity from democratic oversight – or to ensuring that decision making could be made quickly.
· Officers were asked to review the sequence of programming of service reviews through the fees and charges framework. It was felt that increased trading of building control, environmental services, cleaning should be priorities alongside the creation of a public services staffing agency.
· It was noted that the Committee would receive additional information during the next round of cuts on the work taking place to deliver income generating activities.
4.7 Resolved: the Committee endorsed the report and welcomed the contribution from Andy Mudd. It highlighted the importance of member accountability and the necessity of operational clarity for any future commercial service activity.
It was also agreed that the Committee would share its views with Mayor and Cabinet as follows:
· In order to allow for the tracking and development of income generating activities the Committee believes that, for the appropriate services, officers should be tasked with considering the reimplementation of trading accounts.