Week 35.10 31st August 2010

Tendring Topics………on Line

An Expensive Mistake

I always felt that Tendring District Council’s previous Tendring First administration performed pretty well on the whole. I have no doubt that its members had the well-being of the district and its inhabitants as their first concern. They were acknowledged by the Government’s Audit Commission to be ‘the best’ local authority in Essex, far outshining the County Council despite the latter’s constant self-congratulation.

They made one or two silly mistakes though. One of the most disastrous was
INTEND, the private company set up to perform the miracle of ‘regenerating’ the Tendring District. I imagine that its name was considered to be clever play on words. All it did for me was to remind me that ‘The road to Hell is paved with good intentions’. The sole reason for its existence was the idea that, as a private company, it would have access to funds that were not available to a public authority. Why should it? I can’t think of any grants that a private company could apply for to which a public authority has no access.

Nor, I think, are there any such loans. I would have expected a private company to have more, not less, difficulty in raising loans at a reasonable interest rate. If I were in the money-lending business I’d certainly prefer to lend to a public authority. The directors of limited liability companies can declare themselves bankrupt and walk away from their debts. With a local council there might be bureaucratic delays, but payment will always be made in the end. Since INTEND has been established, it has identified areas of the Tendring District where regeneration is badly needed and suggested how this might be done – and that’s about it. Lots of local residents could have done that for free. It cost the Council £1.26 million!

Now, it seems, even Councillor David Lines, leader of Tendring First and former director and chairman of the company, has conceded that the whole enterprise may have been an expensive mistake. We all make mistakes but it is refreshing to hear someone prominent in public life admit that he may have been wrong! I don’t believe that there is anything that INTEND has done, or indeed could have done, that couldn’t be done at least as efficiently and cost effectively by the Council itself and its own staff.

There is an ingrained popular belief, fostered by the popular press, that ‘the private sector’ is always more go-ahead, more efficient and more cost-effective than the public sector. The public sector is populated by desk-bound bureaucrats, swathed in red tape, who spend their days sending each other memoranda suggesting ways in which enterprise can be frustrated and hopes dashed. The private sector on the other hand comprises groundbreaking scientists, thrusting entrepreneurs and eager hard-working factory workers all intent on making us wealthier, and the world a happier place to live in.

I have worked in both the public and the private sectors and I know that this simply isn’t true. Where public sector work is farmed out to the private sector (marking national school examinations and paying student grants come instantly to my mind) it has, as often as not, failed dismally. The public sector, providing schools, hospitals, emergency services, the highways, street lighting, law and order, parks and gardens, cemeteries and crematoria, public health, housing standards, clean air, safe food and drink, is responsible for all the services that make for civilised life. The private and the public sectors both have an important role in modern society. It is, I believe, a serious mistake to suggest that one is more important than the other or that one should be sacrificed for the sake of the other.

I told you so!

When the terms of the Coalition Government’s Emergency Budget were first announced my immediate reaction was that, as usual, the really poor, dependent on Government services, would be hardest hit. The comfortable off and the wealthy would suffer less and the seriously rich wouldn’t experience the least inconvenience. This, I thought, would become even more obvious in the autumn when the cuts would really begin to bite.

The prestigious Institute for Fiscal Studies (IFS) is Britain’s leading impartial authority on financial matters. It has no association with any political party or movement. I was glad to discover that its professional assessment of the Budget and its likely effects is much the same as my thoroughly inexpert one. The poor will pay a higher proportion of their income than the wealthy toward reducing the deficit, and the lower the income the higher that proportion will be.

Needless to say the Government doesn’t agree. As David Cameron was on holiday in Cornwall it was left to his deputy, Nick Clegg to refute the IFS assessment. I can’t believe that he enjoyed doing so and his argument certainly failed to impress. He claimed that the IFS gave a one-sided assessment of the situation. They didn’t take into account the effect that the Budget would have on getting people off benefit and into paid work, and therefore improving their situation. I suppose that that argument might have had a little validity if there were work waiting for those who came off benefit. But there isn’t – and the employment situation is destined to worsen as the cuts in public services really come into effect. A news bulletin recently reported that 5,000 small private enterprises were already failing because they relied for their survival on contracts with local authorities.

The hope that the private sector will be able to offer employment to the thousands likely to lose their jobs in the public sector is a vain one. Cut public sector finance to the bone and the first to suffer will be their private sector contractors. Public and private sectors are inextricably linked. They are like conjoined twins? Anything, positive or negative, that you do to one will inevitably affect the other.

What is going on at County Hall?

A few weeks ago I commented in this blog about the County Council’s plan to make £300 million of efficiency savings by 2013. This was to be achieved by ‘buying better’ (£150 million), by ‘working with partners’ (£25 million), ‘sharing and trading services (£10 million), ‘working smarter’ (£85 million) and 'thinking ahead on IT '(£40 million).

Crucial to this ambitious programme (which seemed to me more like a wish list than a plan of action) was a multi-million pound deal with international computer and software giant IBM, with its headquarters in the USA and its tentacles worldwide. Lord Hanningfield who, a few weeks earlier had been demanding that Essex jobs should go to Essex men and women, announced this deal for which he claimed personal credit, not long before his retirement from the Leadership of the County Council.

Effects so far have been the axing of 275 line manager posts at County Hall and a rise in the sum paid out to 'outside consultancies’ from £14.4 million in 2005/6 to £25.3 million in 2008/9. I look forward to learning how much the County Council paid out for these consultancies in 2009/10 – and how much saving has so far been accomplished to justify this outlay.

In charge of the transformation scheme, and on a six figure salary, has been Chief Information Officer Mark Briggs, an IT whiz kid who is claimed to have had experience in updating software at 300 council sites and in the USA, his wife Victoria, also an IT expert, was Project Manager, Solutions Development Executive and Senior Programme Officer. (Isn’t it just a little unusual for a wife to hold a senior position – or is it three senior positions? - in a local government department of which her husband is head?) Another senior member of the team was Gareth Allen, Chief Software Architect.

Now it seems that the whole programme – and the County Council’s hopes of saving £300 million – may be in jeopardy. Mrs Briggs resigned her post (or posts) in July after only two years service, and both Mark Briggs and Gareth Allen are believed to have been relieved of their duties and are on indefinite leave. An anonymous inside source is reported to have told the Coastal Daily Gazette that Mr Briggs ‘was escorted out of County Hall last month’.

A County Council spokesman said, ‘Essex County Council does not comment on individual staffing matters. In line with best practice guidelines, we use a leave of absence as part of our resolution procedures’.

No doubt all will ultimately be revealed. In the meantime I shall be ruefully reflecting on the fact that it is that lot at the County Hall who receive by far the greatest share of the Council Tax we pay each year. What a pity all this didn’t emerge before the County Council elections.

An ‘insider’s’ knowledge

Unlike the Gazette, I don’t have an anonymous source within the County Hall. I do though have a very knowledgeable and experienced inside source of information about local authority ‘outsourcing’ IT services.

He says that typically the Managers and Councillors of an authority are approached by the ‘outsourcers’ salesmen and, ‘are first wound up over the cost of the impending need ‘to refresh’ all their PCs, Servers and Software. Then they are offered a deal that really only spreads the cost of this over the full period of the contract, instead of as a one-off expense. Under the deal offered by the ‘outsourcer’ the Council has to define all its IT needs at the start. The answer to these is priced very competitively, probably at less than the running cost of the existing in-house team.

However the contract, which typically is quite long (seven years for instance) specifies that all additional IT needs must be met by the contractor at an additional price. Because of the speed of progress in IT development, it is a very safe bet that over a seven year period lots of new IT needs will surface, and will be charged at a premium rate in a non-competitive way. This means that the outsourcer makes a huge profit from the additional hardware and systems.

Users also discover that while their previous IT department was flexible and tried to be helpful, the new company (which may be operating a help desk from a call centre in Scotland or the like) will do exactly what is in the contract. Anything else is chargeable. The new supplier is likely to be totally rule-bound (often by the ‘good practice’ that the Council thought was a good thing to build into the contract!) and as a result quite unhelpful, whereas the previous in-house team will have been pragmatic, putting the needs of the council and its staff first.

Strategically, Councils who outsource in this way lose completely their own IT expertise and have no choice but to renew the contract when it ends. There may be a rollover clause to re-award it or it may have to go out to tender again. If it does the incumbent will be at a huge advantage and very likely to get it again.

Of course, the County Council's outsourcer may not be like that at all. Let’s hope that its quite different from some of its competitors, because the funds that the County Council is using for this experiment in outsourcing came from our pockets, handbags and bank accounts.

It is beginning to look though Lord Hanningfield’s coup may not have beensuch a triumph after all. The saved £300 million seems to be receding further and further into the distance!