- Budget settlements expected to fall further
- 100 percent of sector leaders are exploring reorganisation activity
- Successful implementation threatened by skills gap
Austerity is triggering change on an unprecedented scale within local government as new models of organisation and service delivery are being explored almost universally, despite significant skills gaps according to a KPMG survey of leaders within the sector.
Local government is gearing up for a next wave of austerity according to 90 percent of those Ipsos MORI questioned for KPMG, who expect their 2014/15 budget to decrease from the 2010/11 settlement. More than a third (35 percent) predict they will be working to budgets at least a further 25 percent lower.
In response the sector is, without exception, pursuing or considering a range of remedial action to create new sustainable organisational models. Shared services and mergers with other public sector organisations are the top activity, being explored by 100 percent of local authorities.
Asset sales and divestment of services are being undertaken or reviewed by 94 percent of those questioned while 86 percent are considering introducing additional charges for services. Further fundamental restructuring in the sector through joint ventures and the creation of social enterprise is also being considered by a noteworthy proportion of local governmental leaders at 72 and 50 percent respectively.
Iain Hasdell, KPMG’s UK head of local and regional government, commented on the survey’s findings: “A picture is being painted here of almost frenetic activity levels as those in local government demonstrate there are no sacred cows when it comes to meeting the austerity challenge of delivering better outcomes with much lower budgets and a dramatically smaller workforce.
“This is a positive approach to be welcomed and it differs markedly from some of the more modest, risk averse and incremental ambition that has sometimes characterised modernisation in the sector previously. After decades of evolution local government is now embracing revolution.”
But KPMG’s survey uncovers deep concerns within the sector about the fact it lacks the skills to successfully implement these change programmes. Nearly two thirds (64 percent) of local government leaders believe their organisation has inadequate commercial and contracting skills while 58 percent admit to a shortage of experience in organisation and process redesign, followed by 40 percent raising concerns about their abilities in project management.
Iain Hasdell said: “The relatively slow pace of improvement in workforce skill levels represents a major threat to local government’s ability to respond to and cope with its new financial environment.
“However, this is not an insurmountable problem. At a time when the labour market is, unfortunately, being swelled with unemployed people from the private sector, local government could do more to tap into that expertise; quickly deploying people with relevant commercial, financial and project management skills within its workforce, by using their restructuring and redundancy programmes more smartly to improve skills whilst at the same time downsizing.
“While challenging in the short term, given immediate budget pressures, I am convinced this is a route to explore in order for the sector to achieve its objectives.”
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About the survey
Ipsos MORI surveyed 50 local government directors and managers on behalf of KPMG during summer 2011.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.