Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 580 - 599)



Mr O'Brien

  580. Moving to comprehensive performance assessments and the fact that the best value system fell into disrepute, what are you doing to ensure that the comprehensive performance assessment does not lose credibility before we introduce it?
  (Mr Raynsford) I do not think that the best value system has fallen into disrepute: I think it has helped to achieve a focus on improving standards of performance, but there have been downsides that I freely shared with this Committee when I gave evidence some time ago and we have been working to try and tackle those. The excessive numbers of inspections, the focus perhaps on process rather than on outcomes, have been key themes that I have been very keen to address not just in relation to best value but also in introducing the new comprehensive performance assessment. The CPA will build on the existing best value regime because it will make use of the results of best value performance indicator information and inspections, but it will also add one crucial missing element which was the overall assessment of the corporate performance of an authority, because the best value regime has focused really on individual service areas, whether that is education, social services or other services, rather than on the corporate performance of an authority. It has become very clear to us, where authorities have been facing difficulties, that it has often been a weakness of the corporate centre, either in terms of senior management or for financial planning or human resources planning, that has contributed to those service failures. So that is what is the new element under the comprehensive performance assessment.

  581. On the question of services and values to local authorities, who decides the weighting given to a particular service? How is this consistent with best value and local democracy? Who decides, in social services, housing, highways, on the weighting?
  (Mr Raynsford) In terms of the weighting to be given in the assessment?

  582. That is right.
  (Mr Raynsford) We are not proposing to give a separate weighting; we are proposing a framework in which there will be assessments under each of the blocks and then there will be rules that will determine how an authority's overall performance should be assessed.


  583. Can you explain those rules?
  (Mr Raynsford) Yes. The rules are the subject of consultation at the moment so we have not taken final decisions, but giving weighting would have inherent difficulties, and let me give you an illustration. The education budget is by far the largest single one but the vast majority is spent by schools rather than by an authority. If one were to give a weighting only on the local authority education department's budget it would be relatively small in relation to education as a whole. If it was based on the total education budget, then the performance of schools could well result in the authority benefiting disproportionately, so that is why we believe that a weighting system is probably not the right one. The principle of the rules is that three services in particular are seen as so important that an authority that fails to deliver a decent standard of service in one of those three should not be entitled to be classified as a high performing authority, and those three are education, social services and the financial administration of the authority.


  584. There is more worry about being in the regulation side.

Mr O'Brien

  585. If they are cast as being weak or of poor performance, then the whole authority has that stigma.
  (Mr Raynsford) No, that is a misconception, put around by some people in local government who have not fully understood the proposals put forward by the Audit Commission. The proposal is that if an authority is classified as weak or poor performing in one of those three key areas, it would not be possible for it to be described as a good or excellent authority but it would not be prevented from being classified as a medium or fair authority depending on what terminology is used.

  586. Do you think there should be an appeals system, then? If it should not apply to the whole authority and this is happening and the Audit Commission are the people who make the recommendations, should there be an appeals system to ensure that an authority is not given a stigma if it gets a weak mark?
  (Mr Raynsford) Let me take that stage by stage. There is a system for moderation in the case of each of those service assessments, so it is possible for an authority to challenge an assessment of its social service performance or its education performance and that is part of the system.

  587. What happens if an authority challenges?
  (Mr Raynsford) That is considered by the Audit Commission and that is then determined and forms part of the assessment of that service.

  588. And if the local authority agreed with that and wishes to present a case, who is the referee?
  (Mr Raynsford) The Audit Commission itself has a procedure for moderation but that involves a different assessment to the one that has been made by people who form the initial assessment, so it is within the same body but it is not the same people who have carried it out.

  589. If one officer of the Audit Commission presents a report and the local authority are wanting to question it and it goes to another officer of the Audit Commission, where will the support be given?
  (Mr Raynsford) This is wider than just the Audit Commission because part of the whole process is that the inspection team should comprise a senior councillor and senior official from another local authority, so it is not just the Audit Commission; there are other peers of the local authority forming part of that assessment. They will be involved obviously in consideration of the assessment. When those assessments have been made for each of the service areas under the proposals the Audit Commission has put forward, the final assessment is based very rigorously on putting together all of those assessments. If you were to have an appeal system on that final assessment, what you would be doing is appealing against the earlier decisions on the individual service blocks that have already been subject to a moderation, so it would be undermining possibly the outcome of the earlier appeal system. That is why it would not in our judgment be sensible to have a final appeal procedure.

  590. You have not mentioned anywhere in that comment the political influence? The officers of the local authority, the Audit Commission, that the people who have to take the lead in this are the councillors?
  (Mr Raynsford) We have taken the view, and I think it is the correct one, that the assessment should be carried out by a team of people including a politician and a senior officer from another authority but that it should not be an independent assessment by the Audit Commission. It should not be subject to political decision either by ministers or by councillors because we believe otherwise there is a danger that the process will be contaminated, frankly, by political manoeuvring.

Chris Grayling

  591. I know this from a specific first hand example but you could have a situation where a council may be facing as part of the assessment team a politician who represents politically its principal opposition.
  (Mr Raynsford) That may well be the case and that applies equally across the board to all parties. One could have a system whereby only politicians from the party that happens to be the majority party in a particular authority could be carrying out the peer role in the inspection team, but if you think about the logic of that that equally is open to a degree of suspicion, that they might be inclined to be more favourably disposed. Our view is that it should not be a key determinant as to which political party they come from. Our view is the key determinant should be their ability as respected senior counsellor in local government to be able to look at the performance of another authority with both the insight of an experienced counsellor and with the degree of impartiality that one would expect from someone in that position.

  592. I was going to ask also, in relation to this issue of the single judgment, you are going to get cases, particularly apparent now given the process of restructuring of the grant systems that are taking place, where you either have today or potentially will have in the future councils that are under significant financial pressure either because government has chosen to restructure financing away from them, or because particular circumstances which could well be shortages of key workers, which could be, for example, in Kent the influx of asylum seekers, have put very substantial pressures which are largely beyond the control of the council on to the ability to deliver services. How would you reflect that in assessing the performance of a council?
  (Mr Raynsford) The first issue to cover is the change to the grant distribution formula which we have announced for consultation. When announcing that I made it clear that there would be a floor introduced so no authority would suffer a loss of grant. I cannot say at this stage what the level of the floor would be but it is our intention to avoid a position where any authority faces a reduction in its grant as a result of the change. Secondly, concerning special pressures which create very real difficulties for authorities, that is something we are looking at at all times—whether they be the example of asylum seekers or social service pressures or other particular service pressures. Our objective is to ensure that authorities do have adequate resources to cope with the pressures they face: that is a constant subject of discussion between us and the Local Government Association and individual authorities, but certainly in the case of assessing the performance of an authority an experienced inspection team would have regard to unforeseen pressurse that that authority faced for which there was inadequate provision, and that is something I know that the Audit Commission will want to ensure that its inspectors are sensitive to. That is not the same as saying one has to make allowances all the time; that would be a mistake. We want the system to be rigorous and demanding because it is about raising standards but it is also about common sense in assessing the performance of an authority and understanding the context in which they are operating.

  593. Going back to the financial point, the structure of the different options you have presented—and I take your point about the floor—leads to a number of authorities losing up to 5 or 6 per cent of their budget nominally through the formulae you are adopting. Even if you put in a floor to say those will not change you are still nonetheless implying a number of years of at least frozen grant otherwise you never build the restructuring in that you are aspiring towards. That means there will be authorities dealing with extreme financial pressures in the next few years. Will the comprehensive performance assessment take that into account or will an authority that finds itself at a disadvantage of this restructuring also find itself at a disadvantage of the future assessments of its performance?
  (Mr Raynsford) The difficulty with this issue about the revenue grant formula is that every authority sees the need for increased grant. No authority willingly says, "Actually the grant level has been pitched too high", but logically, if you think about this, the arrangements that came into place 10-12 years ago with the SSA formula are out-dated. We all recognise there has been a need to update that. Some of the indicators were perverse; some of the measures were not appropriate. As a result of those changes some authorities are going to do better than others. It is slightly difficult to believe that only those authorities that have got too little will be affected: that there will not be any authorities that have done rather well under the previous formula that will not do quite as well now under the new arrangements, but if you think about this logically that must be the consequence.

  Chairman: Unless there has been underfunding all round?

Chris Grayling

  594. I have a specific example—my own County Council in Surrey. Surrey social services are already under very high pressure because of shortage of carers, high cost of living, etc, and the formulae options would mean Surrey losing anything between £10 and £25 million a year. Even if you put in a floor to say they do not actually lose cash, nonetheless you have a redistribution mechanism there that will move funding from Surrey to other authorities over time. However you do it, the reality is that the relative position of Surrey compared with other authorities will change as a result of what you are doing. Will that be reflected in the comprehensive performance assessment, for example, in the area of social services?
  (Mr Raynsford) My recollection of the social service exemplifications in the case of Surrey is that Surrey did rather well in the proposed changes, and rather than facing the prospect of loss it faced the prospect of—


  595. What we are really interested is in the principle: that in a sense managing contraction in a local authority is a rather different skill than managing expansion. How far will that be taken into account in the comprehensive assessments? In other words, money does have some influence on assessments, does it not?
  (Mr Raynsford) Our endeavour is to try and ensure that the financial assessment through the grant distribution formula does provide for the authority's needs in as accurate a way as possible, and I have to some extent to guard against being too precise because everyone here knows the difficulty of a formula applying. Having done that, we expect authorities to work within their budgets: we expect them to manage, whether they are facing problems of growth or contraction, efficiently and well. The comprehensive performance assessment will gauge their management performance. No authority is going to be free from pressures: all authorities will in certain areas face pressures. Whether those pressures increase demand for service or whether it is declining population needing contraction, those are pressures authorities will inevitably face like any other organisation managing its affairs, but we expect authorities to do that efficiently and the comprehensive performance assessment is about measuring whether they do or not.

Chris Grayling

  596. So is it measuring management or service? If you are in a tight financial position and you are contracting services and able to deliver less to your communities, will that be reflected as a negative, or does the ability of a council to manage that situation effectively leave them as a high performer regardless of the consequence of the services?
  (Mr Raynsford) As I explained earlier, the existing best value indicators and the inspections are measuring the performance of individual services. The new ingredient in the comprehensive performance assessment is the corporate assessment of the management of the authority as a whole. Both are taken into account in the assessment, and what the grid which the Audit Commission is developing is seeking to do is to measure both the level of service delivered, the performance of that service delivery on the one side, but also the ability of the authority to manage its affairs efficiently and improve and deliver a better service in the future.

Mr Betts

  597. It is easy to see all the good things about inspecting and assessing individual services and so on but what I am not sure about is why you have a desperate need to add these numbers up and give the same label to everything the authority does when, if social services or education are weak or failing that may lead to a very low grade for that authority but if the architects and the building surveyors are actually doing a very good job they get the same label stuck on them because that is what the public will remember. Is that a bit unfair?
  (Mr Raynsford) I do not agree. I think it is right that there should be both an assessment of the overall performance but also of the individual components. If I can be slightly flippant, as and when the Audit Commission's report on Walsall was published, the local newspaper recognised very clearly the Audit Commission's conclusions. It invited its readers to respond; on the basis of those responses they warmly endorsed the Audit Commission's conclusions with a headline which I remember to this day which was, "The bin men are wonderful but the rest are rubbish". But that identified both successes in the authority and overall weaknesses and that is what we are seeking to do.

  598. But the weaknesses which could be severe in some areas could lead to an overall categorisation in the way the points are scored. Would that not merely mean that labelling might be stuck on some bits of the services which were very good but that those bits of the services that are very good, say, like architecture or building surveyors or legal could not make some of the freedoms which would be of benefit to the authority and community by trading? Even though they are very good, if the authority gets a low score overall they will not get those freedoms?
  (Mr Raynsford) That is not the case. Again, there has been some misunderstanding on this. There will be some additional freedoms that will be only available to those authorities that achieve—

  599. Trading?
  (Mr Raynsford) If I can come on to trading in a moment, there will be some additional freedoms such as light touch inspection and greater freedom over plans that will be available to authorities that achieve the highest standards overall. There will be areas such as trading where we want to extend freedoms to those authorities who demonstrate a high performance in that particular area, so the fact that an authority is not overall doing that well would not preclude a high performing department within the authority from getting greater trading freedom.

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