Working together

Taking care of business

Since the beginning of austerity in 2010, government policy has encouraged greater self-reliance among councils.

It is planned that revenue support grants will end in 2020, leaving councils largely reliant on council tax, fully retained business rates and any other income streams they can create.

There is a wide variety of options. LGC’s snap poll of 38 council chief executives and finance directors (overleaf) shows that councils are exploring more than 20 lines of business – and this is among just a small selection of authorities. The vast majority of councils responding to the poll said they plan to increase their commercial income in the run up to 2020.

The poll suggests that councils are at various stages on the road to commercialisation. Below, LGC has brought together four case studies – from a seasoned firm with a century’s history, to the modern city making waves in energy and technology, to the districts looking for simple ideas that benefit both the council and residents.

Respondents who sold services to members of the public

92%

Kent CC

Commercial Services is an arm’s-length organisation split into two private limited companies in which there is only one shareholder, Kent CC.

The business began in 1902 when Kent CC created a supplier for the county’s schools, and has since ventured into recruitment, landscaping, vehicle maintenance and energy.

John Burr, chief executive of Commercial Services, says the companies offer services to Kent CC, other councils, local public and private sector organisations and individuals.

He says the key to the company’s success is knowing its market and anticipating need: “We recognise what our customers want and need – sometimes before they do.

“When austerity started to affect council back-office roles, we increased our management services department, offering to do more of the administration and management on behalf of our clients.

“We also formed an LED lighting team, which currently has a diary full of appointments for surveys for schools and councils across the UK.

“With the deregulation of the water industry coming in 2017, we are developing a range of services that will use the bespoke systems we already have in place.”

Mr Burr says encouraging the right culture is important, even though this can be new territory for some employees.

“We employ more than 600 staff. Some have come from the private sector, others have transferred from Kent CC; it’s roughly 50:50. I won’t pretend that a few employees don’t remember their council days with fondness but I think most people accept that the local authority landscape is very different from 20 years ago,” says Mr Burr.

“With personal experience of both sectors, I believe we offer the best of both worlds: we call it ‘private sector by head, public sector by heart’.”

Respondents who traded with other public sector bodies

42%

Wolverhampton City Council

Wolverhampton created Yoo Recruit in February 2014, opening for business in April of that year.

Sukhvinder Mattu, human resources business partner at the council, says: “Yoo Recruit is wholly owned by the council. Any profit that Yoo Recruit makes is reinvested in the council. In addition, Yoo Recruit offers workers to the council at competitive rates.

“Yoo Recruit also does not charge the council when temporary workers apply for and secure permanent positions; this is an additional saving for the council. The majority of our business is completed with the council.

“We can and do however deploy agency workers to external businesses, where we charge for the service. The minimum hourly rate of pay to our agency workers is £7.70; this is the ‘Wolverhampton living wage’ as opposed to the national minimum wage, which means we attract strong candidates.”

Ms Mattu says that since inception, on average 43 people have registered each week with the business, without any direct selling or marketing. It has helped save the council £455,000 since 2014 in ‘temp to perm’ fees, where the council must pay fees to temporary recruitment agencies if hiring workers on a permanent basis within a specific time period.

Yoo Recruit has a turnover of £7.5m with an annual net profit of £185,000 and is now the main provider of temporary social workers, semi-skilled and unskilled staff to the council.

Respondents who think commercialism will allow them to deliver services better

69%

Peterborough City Council

Peterborough has a variety of commercial projects and services ranging from energy supply, generation and efficiency, to highways, to foster care.

The council’s energy recovery facility, for example, processes waste that would otherwise have gone to landfill to create energy.

The council retains the income generated from the sale of that energy to the National Grid, while Viridor, the firm contracted to build, maintain and operate the facility, retains the income raised from the treatment of the residual waste.

John Harrison, corporate director of resources, has devised a number of the schemes that provide income for Peterborough but have also been rolled out to other councils or public sector bodies. These are offered at lower cost to the other councils and much quicker than procuring those services themselves, but with profit for Peterborough.

“I had a contract, which just ran out in January, to build solar photovoltaic panels on commercial roofs, town halls and leisure centres,” says Mr Harrison.

“As well as building solar panels on all of our properties, we built them on schools, and charged the schools for the use of the green energy. The price of the energy for the next 20 years would be no more than the increases in RPI providing the schools with energy certainty.

“We also built solar panels for other councils: Basingstoke & Dean BC, West Oxfordshire DC and Colchester BC. There was an access fee to use our contract, which was much cheaper than the procurement cost for councils.”

The vast majority of councils responding to the poll said they plan to increase their commercial income in the run-up to 2020

Peterborough also rolled out the first scheme in the UK to install solar panels on private properties.

Mr Harrison explains: “The resident gets £200 free energy per annum and after all the costs are paid out there is a profit share, where half goes to the council and the other half goes into a charity, Empower Community Management, set up locally for local purposes.”

Peterborough runs Peterborough Energy in partnership with Ovo Energy, which was only the second operation of its kind to go live in the UK. Mr Harrison says it was a far more efficient route to partner with Ovo than for the council to set up its own energy company.

Peterborough controls the tariffs, while Ovo provides the energy services. Its aim is to make simple, affordable energy plans available to city residents to tackle fuel poverty.

“Typically the savings for people who are switching to our tariff are about £260 per person per year. It’s commercialism because I’ve got £800,000 of benefit into the community, tackling poverty, and it’s cost the council very little money,” Mr Harrison explains.

Despite the high-profile nature of the energy projects, Mr Harrison says the council does not brand itself as ‘commercial’ in communications with residents as this is not necessary. “We do commercialism beneath the radar; we don’t try and brand it as that. It is part of transformation and income generation as part of an overall plan,” says Mr Harrison.

Mr Harrison says that finding a unique selling point or a new approach is essential to a commercial operation’s survival.

The council even plans to bring commercial nous into its foster care operation. Peterborough’s aim is to create its own recruitment organisation for foster carers to avoid the estimated £2.5m it spends each year on external agencies that provide this service. The agency would be a joint venture with a third sector organisation, for which Peterborough is currently tendering.

Mr Harrison says councils can spend too long deliberating over the risks of a commercial venture, or fail to research their market adequately.

“You look at things and you know whether it works or it doesn’t,” he says. “Councils have spent too long going to the nth degree. You don’t have to have a 300-page business case to decide whether you do this.”

Respondents who are concerned about reputational risk in charging for sevices

1 in 4

Aylesbury Vale DC

Aylesbury Vale owns a limited liability company, called Vale Commerce, which delivers services under two brands: Limecart, for consumers, and Incgen, for businesses.

Andrew Grant, chief executive at the district, explains: “Limecart is a council-to-household business, which works through subscriptions. It’s developing on the work we did in setting up our garden waste disposal service but is branching into products for the garden and will eventually also focus on homes.

“Incgen is a council-to-business service, which launched on 15 June. The aim here is to offer support to local companies in a variety of ways, from hiring office space to providing a phone and post service.”

These are just part of the council’s income generation masterplan, Mr Grant says.

“There are 12 projects including Vale Commerce, which are already bringing returns, in terms of income generation or cost savings,” he says. “The old model of local government is broken. Aylesbury Vale DC is about becoming more entrepreneurial and commercial for our communities.”

The old model of local government is broken. Aylesbury Vale DC is about becoming more entrepreneurial and commercial for our communities

In November 2015, the council created Vale Lottery, which residents can pay £1 per week to play. Of that £1, 58p goes to local good causes (compared with the National Lottery’s 28p) while the rest is spent on running costs and the prize fund.

Mr Grant is encouraging other councils to think about starting their own. “Vale Lottery is on track to generate more than £60,000 this year for local causes. It took a small dedicated team to get it up and running who are now offering an advisory service to other authorities,” he says.

“We’re also focused on improving the offer to our residents and have become a serious property developer. We’ve used our prudential borrowing capability and New Homes Bonus to invest £110m in the regeneration of Aylesbury town centre, including building a university, theatre, hotel and supermarket. This area is providing us with a healthy return on investment though our role as landlord.

“We’re also running our planning department more commercially, which has led to us generating significant profit. This has come from additional value-adding services, both for residents and property developers, and the sheer volume of applications that come from being a major growth area. It’s about looking for commercial ventures where people with budgets can spend the money and be happy to receive a better service.”

A new breed of partnership working

In late 2014, Nottingham City Council announced a partnership that would, it said, safeguard its revenues and benefits service in the face of declining funding and provide more employment in the city.

Graham Chapman (Lab), the council’s portfolio holder for finance, says the arrangement with Northgate Public Services is a partnership that provides real benefits to the city and surrounding region – rather than being a traditional outsourcing contract that prioritises cost cuts above all else.

The partnership came about when the council faced reducing government funding and uncertainties around the implementation and eventual impact of universal credit. “We needed an alternative delivery model,” says Cllr Chapman.

“Nottingham’s default position is towards in sourcing. But if we had continued to provide revenues and benefits in the traditional manner, we would have seen a declining workforce,” he continues. “How could we protect that workforce for the people of Nottingham?”

Cllr Chapman explains that at the same time as the council was considering how to protect and improve that service, NPS was looking to create a service for revenues and benefits that could work with several councils in the region, all of whom faced similar funding challenges.

“NPS gave us a proposal to explore a partnership approach that delivered some savings but also helped us to improve the service and tackle some of the unemployment in a deprived area,” Cllr Chapman says.

Under the new arrangement, NPS and Nottingham City Council have established a service for revenues and benefits, to which other councils can outsource.

Cllr Chapman explains: “The council has contracted with NPS to provide our revenues and benefits service, and NPS subcontracts to Nottingham Revenues and Benefits Ltd for the provision of that service. That company is our wholly owned subsidiary; all of the staff previously employed by Nottingham City Council [in revenues and benefits] were transferred via TUPE to the company.”

This approach has protected the 200 jobs in Nottingham’s revenues and benefits department that would otherwise have faced uncertainty.

Additionally, as part of its commitment to create more employment in the area, NPS has created a business hub in Bulwell for its document services operation, which digitises paper records for a variety of public sector bodies. This will lead to the creation of 170 new roles, 25 of which will be apprenticeships, and the large majority of the staff are from within the city boundary.

The revenues and benefits service combines the expertise of both NPS and Nottingham’s revenues and benefits employees, Cllr Chapman says.

“This model allows us to retain skills, and [Nottingham] employees can also work on contracts for NPS,” he says.

There are further improvements to the service arising from increased investment in technology and processes. Together, NPS and Nottingham will invest £2.3m to make improvements to the revenues and benefits service, such as technology updates.

This has “enabled us to be more efficient in the way that we operate so that we can spend more time dealing with the customers”, Cllr Chapman explains.

“The response times to calls have been improved and we have implemented new technology that has changed the way we are able to process claims,” he adds.

All in all, the seven-year contract is predicted to make significant savings for Nottingham City Council, Cllr Chapman says.

“Over the life of the contract, we are saving £6m,” he says.

Cllr Chapman explains that this saving arises from NPS’s share of the investment in new technology, achieving more efficiencies than would otherwise have been possible, avoiding the cost of redundancies and protection from the reduction in government funding.

Cllr Chapman adds the longstanding relationship that Nottingham has had with NPS was a key factor in getting the new venture off the ground.

“We had an existing relationship with NPS that goes back a number of years; we use their technology and had a good working relationship over that time. We were confident that they would be able to deliver,” he says.

Building a digital future

While an inarguable definition of what exactly ‘digital’ means for councils is hard to pin down, those who can are cracking on with adopting as many of the associated traits and technologies as possible in order to maintain services to citizens while further reducing costs.

This can only be good news because, as we know, there’s significant advantage for local authorities to be gained from grasping the digital nettle.

Digital capabilities can provide the platform for transformational change across a council. These then need to be strengthened by a wider appreciation of the other aspects of organisational life that create a truly digital future organisation. There are challenges around selecting the optimum combination of technologies, implementing them in a controlled but pacey manner, and ensuring that technology supports the change agenda. Plus, every council will need to be assured that residents and businesses are able to smoothly transition to digital service delivery; questions of digital inclusion are as important as effortless customer experience.

Capita is able to guarantee savings for the medium term, giving the council security and the ability to focus on further service transformations

Capita has now brought all of this together to deliver digital programmes across the whole of an authority to drive efficiency and improvements to the customer experience.

Councils need to make significant savings and many have started to think about how digital transformation could enable some of this. Building on this, we can assess current services, validate the authority’s initial thinking towards digital transformation and, crucially, provide access to all the technologies and solutions needed.

In any programme there will be more than 300 customer journeys. Everything from paying for a music lesson to applying to become a foster carer, housing debt recovery to making an enforcement appeal, can be in scope to be completely automated, end-to-end. This can release significant savings that will recur every year. Also, such is the sustainability of this approach that Capita is able to guarantee savings for the medium term, giving the council security and the ability to focus on further service transformations.

What follows is just some of what we have learned about driving success in these complex but essential programmes.

Think big

The first part to becoming a digital council is to think big. Creating an online form is a small step forward, and putting all forms online is better.

However, what if you could automate the entire service catalogue? What if you could automate the entire customer experience from start to finish?

Typically this will mean a small number of large tranches of digitisation, each including a significant range of the customer journeys across the council. This might map onto a whole directorate or set of customer segments.

We have found that it is actually better to engage in wholesale transformation of the customer experience than to pick one or two journeys.

There are a number of reasons for this. Firstly, it retains a focus on the needs of the customer (the council) and is more likely to result in a product residents will want to engage in. Secondly, the scale of opportunity is greater, so larger benefits can be achieved, which also means that the internal business case is stronger.

The focus with a wholesale transformation will be on how to make the best of available platforms to support numerous customer journeys, rather than fixating on one particular technology solution or other. This is cheaper and more consistent from the citizen’s perspective. What’s more, managing change is easier because the scale of change means that ‘little things’ don’t get in the way.

Think customer

As a resident recently told us at a service design event: “I am 82. I’ve been using email for 20 years, I can’t understand why the local authority is stuck in the dark ages.”

Customers and citizens want an effortless experience, so that they are able to conduct their business with councils as easily as possible. This means digital transformation needs to anticipate what people want and how they will interact with councils, and make an online or automated process as easy as experiences offered in the consumer world; for example, buying online groceries or internet banking.

We know that most households now contain smartphone owners. We also know that similar proportions of the users of most high-volume council services have a comparable ability and appetite for getting things done digitally. Therefore, putting things online will be favoured by the vast majority of residents and service users.

We also know that, in each locality, the prevalence of smartphone use and digital skills can vary. It is possible to understand this to a very localised level and tailor the programme appropriately; for example, using customer insight to establish how to increase digital engagement by providing services and support in specifically designed ways.

However, there is more to it that just readiness for digital services. The way services are designed can be addressed too. By talking to service users, we can recognise how digital can help drive improvement and efficiency in processes; but at the same time we can increase the personalisation of that service and create an even stronger relationship between the council, its residents and customers.

Whether it is the single sign-on and personalised homepage or the pre-populating forms that mean users don’t have to enter information the council already holds about them, the level of trust can be increased while cost is moved in the opposite direction.

Challenge processes

We have found the importance of drawing in the maximum number of service areas, and being rigorous in terms of what could be automated and what can’t, cannot be overstated. By exploring fully customer journeys from the customers’ perspective, it is possible to separate out the transactional from the value-adding.

Once this is done, we can then automate the transactional and allow the professionals to focus on the latter. For example, the needs assessment process within social care could be one that uses digital tools, alongside skilled social care assessors and planners, to get value added assessment outcomes converted into transactional care package management (plan, purchase, schedule) and these then move convert into value adding delivery of care.

Similarly, in a recent survey by Capita with the Association of Directors of Adult Social Services, 61% of respondents said the greatest barrier to introducing new technology was lack of staff technical skills.

In the same survey, when questioned on the benefits of using technology in adult social care, nearly three quarters (74%) said that the greatest impact would be in enabling more effective mobile working and almost 56% saw major advantages to multi-agency teams. Mobile working, including social workers, can be one of the biggest enablers of benefits in a digital programme; it allows social workers to focus on high-value activities because the low-value activities have been automated.

Share the cost and the risk

Thinking big is clearly most often accompanied by the need to invest on a large scale too. Capita can invest on clients’ behalf. This means more can be done quickly and bigger investments into infrastructure and implementation can be made.

It also means that clients will pay only when we achieve success, which ensures everyone is aligned and working together to the same ends. So we are able to guarantee a level of savings to the council and to spread the cost of implementation across subsequent years, set at a share of the savings actually achieved in those years.

Be pragmatic

There are solutions for all problems but the trick, we have found, is not to try to solve all the problems at once. For example: some line of business systems do not have the means to ‘talk to’ forms packages owing to the age of those line of business systems and the legacy of dated IT. Usually, this would mean that a manual link between the two is required or that the system must be replaced before the end-to-end process can be automated.

Taking a pragmatic approach, we can deploy technology that allows us to automate this interface. Although it is the integration of last resort (because it’s usually the least elegant) it is effective and allows the full benefit of automation to be realised.

For example, we have been able to link the ageing parking system with the new, fully automated, parking permit customer journey and remove the need for any manual handling in any part of the process. It also means that when the parking system is replaced only the integration needs to be amended rather than starting the whole customer journey from scratch.

Borrow before buying, buy before building

No one wants to reinvent the wheel (or the digital equivalent of the wheel) but the temptation is always to seek a perfect answer. When we think about it, there are numerous generic customer journeys (book something, pay for something, ask about something, report something, etc) that can each be supported by one process used across many services. For example, paying for a parking fine is essentially the same journey as paying for a squash court, so why overcomplicate the process?

By making small tweaks to well-established approaches we can maximise benefits and minimise costs. This can be minor, such as reusing the ‘report fly-tipping’ form design from another authority, or major, for example sharing the same technology and applications across five, six or seven separate councils.

Where borrowing isn’t possible (perhaps because it has never been automated before) buying is cheaper than building new systems. Typically, only 20% of the cost of building is in the development of software because there are so many other things to consider too.

We can increase ther personalisation of that service and create an even stronger relationship between the council, its residents and customers

If you are going to build, then build the smallest things required and do them quickly; create a simple solution. Ideally, we want to be building back-end integrations and not much more. This means we can create an ‘effortless experience’ with as little technical complexity as possible.

Only in exceptional circumstances is the wholesale build of a new system the preferred solution. Where there is nothing that comes close to meeting the requirement or where the terms of using it are impractical, building something new may be required.

Even in these circumstances, though, the same conditions apply:

• Think big: build something that has scale and can be used many times
• Think customer: ensure customers are at the heart of the design and development;
• Challenge processes: focus on creating the ‘effortless experience’
• Share the cost and risk: find another party who will commit effort and time to co-developing a system to meet your needs
• Be pragmatic: create an iterative development approach that matches the appropriate pace of development and investment while gaining advantage with each new release

Employing this logic, Capita is developing the ChooseCare platform (see box), a whole new solution towards creating a step change in capability for adult social care. It can be used by all authorities as a payment platform for direct payments and self-funders. It is designed to give these customers a simple-to-use means of scheduling their care and managing their finances, while at the same time giving councils new ways to understand and manage demand.

In summary, it is clear that a one-size-fits-all approach to digital transformation would not work; local authorities need local solutions to meet the specific needs of their citizens. Each council will have to approach its transformation with one eye on its existing infrastructure, and the other on the ultimate aims of improving services, generating efficiencies, and protecting the front line. Councils can be quick to see the benefits, and these will be felt by citizens across the locality.

www.capita.co.uk/transformation