LG 2 - Auditor General for Wales
Consultation: Proposed Local Government Measure Committee – Auditor General for Wales Response
1 Thank you for your letter of 17 October inviting me to submit written evidence to assist the Committee’s deliberations on the proposed Measure. I am grateful for the opportunity to contribute to this debate about what I consider to be a significant development in the National Assembly’s drive to improve public services.
2 I welcome the proposals outlined in the Measure. Without qualifying my support for the thrust of the Measure, I do, however, have some comments which I believe have the potential to enhance the legislation and any subsequent guidance put in place to implement the arrangements.
Is there a need for legislation?
3 Yes. I see the proposed Measure as an opportunity to bring greater clarity to the duty of local authorities to secure continuous improvement. In particular it presents an opportunity to move away from the focus on risk which has tended to be at the centre of the current framework, towards driving improvement in services and functions. It is right to move away from risk for many reasons but mainly because improvement in service is not associated with any particular risk profile: some improvements stem from reduced risk, others from actually increasing risk but managing it more effectively. Risk does not provide a clear objective basis for action to secure improvement.
4 I also welcome the Measure’s reinforcement of the need for effective collaboration among regulators in delivering their activities. Regulators have a duty to balance, on the one hand, the need for independent assurance that public services are being delivered to appropriate standards with, on the other hand, the need for managers of public services to be given sufficient space in which to get on with their jobs. In recent years, we have made progress in this respect through a variety of formal and informal arrangements that allow us to develop joint approaches to regulation where appropriate and negotiate changes to programmes where necessary. But there is scope for further improvement and a statutory duty is a helpful development.
How will the proposed Measure change what organisations do currently and what impact will any such changes have in terms of service improvement and community planning?
5 The Measure has the potential to change three key aspects of the current regime.
6 First, it will remove the potentially confusing and inappropriate emphasis on risk which underpins the current arrangements and which, if interpreted as demanding risk reduction, actually conflicts with authorities’ drive to deliver service innovation. Local authorities’ business and improvement planning arrangements should, therefore, focus directly on improvement objectives rather than on risk.
7 The tendency to focus on risk reduction also constrains my ability to comment on service improvement given that there is no direct correlation between risk reduction and improvement. Consequently, the second change should be a regulatory framework that is more rigorous in assessing improvement against key objectives and reporting on progress. I should be able to direct my work more effectively at those areas where improvement is most needed, ensuring that the regulatory response is proportionate to circumstances.
8 Thirdly, the Measure’s intention that authorities must set clear improvement objectives should support more effective engagement with stakeholders and citizens. Greater clarity and transparency of objectives and more effective reporting mechanisms should lead to increased public engagement and therefore better local accountability.
Are the sections of the proposed Measure appropriate in terms of reforming the statutory basis for service improvement by local authorities and reforming community planning and strategies? If not, how does the proposed Measure need to change?
9 In general, the proposed Measure is appropriate in terms of reforming the basis for service improvement, though the terms of any supporting guidance will be critical to its interpretation and, therefore, to its implementation.
10 There is one particular point in the draft Measure that is ambiguous in a way that potentially undermines the whole point of the legislation. In the current draft Section 2 requires local authorities merely to put in place “arrangements to secure continuous improvement”. That formulation is unsatisfactory because the word “arrangements” is open to a narrow interpretation that refers merely to the existence of arrangements rather than their effectiveness. If a local authority could comply with the Measure merely by establishing arrangements, for example in the form of committees, written strategies and reporting structures, no actual improvement of services would be required.
11 It is therefore essential that Section 2 be amended to require authorities to put in place effective arrangements. I would then be required, by virtue of Sections 18 and 20, to assess and report annually on whether each authority would be likely to deliver effective arrangements for continuous improvement.
12 I have some concerns about the categories against which authorities will set their improvement objectives (section 3). Section 3 is complicated but nevertheless appears to leave out some important aspects of improvement. To judge from the Assembly Government's consultation paper of February 2008, Section 3 has been drafted to avoid using the terms “economy, efficiency and effectiveness” that have been used in previous legislation on the subject. The consultation paper claims that those terms are interpreted narrowly as implying “least cost”. There is a very considerable body of international practice established over many years that shows that such a narrow interpretation is unsustainable. My own powers, and those of all the other UK audit bodies, include powers to examine economy, efficiency and effectiveness, and those powers have always been interpreted widely to include overall value for money that might well mean spending more to achieve more.
13 If Section 3 is not replaced by a straightforward reference to economy, efficiency and effectiveness, it should certainly be amended to include “economy” which, alongside efficiency and effectiveness is an essential component of a fully rounded assessment of value for money that incorporates qualitative and quantitative aspects of delivery. More generally, the definitions of the categories (section 4) need further thought and debate and it may be unhelpful to include them in the Measure itself; they might more usefully be included in separate statutory guidance.
14 I note that, in respect of setting performance standards (section 8), Welsh Ministers are required to consult authorities’ representatives and “such other persons...as they think fit”. I understand this would allow consultation with my office, but it would be helpful if this were to be made explicit, particularly given my own powers to set performance indicators under the Public Audit Wales Act.
15 I welcome the duty placed on authorities to compare their performance across time and with other authorities; benchmarking has long been recognised as a key driver of improvement, including through sharing good practice. It is also critical that authorities use performance information effectively to manage their services and to engage with stakeholders and citizens to enable a shared understanding of their objectives and achievements. However, the current Performance Measurement Framework is not yet sufficiently mature to support effective comparative analysis. While it has the potential to offer a balanced picture of performance, it does not currently offer a comprehensive and consistent picture and is, therefore, of limited value in driving improvement. It is an area where further work is required outside the legislative process.
16 I am broadly content with the functions provided to me by sections 17 to 20 and 22 to 28 of the proposed Measure subject to detailed discussions about the nature and scope of any supporting guidance. As I understand, for each authority the legislation requires me to:
-undertake an audit of the improvement plan to determine whether it complies with the requirements in the Measure;
-conduct a detailed assessment of the arrangements for delivering continuous improvement and of progress in meeting improvement objectives;
-publish an annual improvement report;
-co-ordinate the activities of relevant regulators as defined by the Measure.
17 I must also prepare a Statement of Practice describing how I intend to exercise my functions under the Measure and based on the principles of consistent application between authorities and on proportionality.
18 In combination, these provisions should enable me to move away from the risk-based regime currently in operation to making robust assessments of whether authorities are improving outcomes for local people.
19 I am unclear about the thinking behind the timings proposed in the Measure for local authorities to prepare material and for me to audit or assess it. It seems to me that an audit of compliance with the Measure’s improvement information and planning requirements in a particular year should be conducted as soon as possible after the end of that year, and that an assessment of the likelihood that an authority will comply with the overall improvement requirements in a particular year should take place at the start of that year or a soon as possible thereafter. Yet the draft Measure proposes a common deadline (30 November) for me to issue both the backward-looking audit and the forward-looking assessment. Moreover, that deadline takes no account of the business planning cycles of authorities that might quite legitimately differ from each other. It would certainly be helpful, pending further discussion and a clearer understanding of the practicalities of implementation, to remove from the legislation the specific dates for publishing the improvement plan and my audit and assessment reports. I have in mind some changes to the annual reporting cycle that would be helpful to, both, local authorities and my office but further discussion is needed outside the legislative process. The agreed timetable could then be set out in Ministerial orders or supporting guidance.
20 Finally, it is helpful that the proposed Measure incorporates specific requirements in respect of community planning, reinforcing the links between improvement objectives and outcomes for local people.
What are the potential barriers to implementing the provisions of the proposed Measure (if any) and does the proposed Measure take account of them?
21 I have already alluded to a potential barrier to implementation in respect of the ability of the current Performance Measurement Framework to support the requirements for comparative analysis and, therefore, public accountability. I have also highlighted the need to address the unhelpful timetabling of some outputs which I would prefer to do outside the legislative process.
22 It is clear that much of the detailed implementation of the Measure’s requirements will be through guidance which will be subject to further detailed discussion and consultation. It is important that such guidance does not constrain authorities in undertaking routine business and financial planning and that it supports the integration of any additional requirements into those processes. Equally, if I am to exercise my functions consistently across all authorities, there must be a shared understanding of what that means in practice for the organisations concerned.
23 As to the effective coordination of the relevant regulators (Section 24), there are two potential barriers to achieving an outcome that is a truly coordinated response by local authority regulators to each individual local authority. The first barrier is that Section 24 provides the Auditor General with powers to coordinate only the timetable of the relevant regulators but not their activities. That means that it would be theoretically possible, within the framework of the Measure, for different regulators to carry out duplicative work at the same local authority; the Measure would merely ensure that such activity did not happen at the same time.
24 The second barrier affecting coordination is that the Measure can only apply to regulators’ use of their powers relating to devolved functions, whereas some regulators have powers stemming from UK legislation that would not be caught by the coordinating powers conferred on the Auditor General by the Measure.
25 The effect of these two barriers is that, very much as now, effective coordination of regulatory activity in local government will depend on the good will and good sense of the regulators and would not be guaranteed by the Measure itself. As noted above, in recent years, the regulators have made great strides in achieving increased coordination through voluntary cooperation. I expect that to continue.
26 Finally, we need sufficient time to develop a coherent framework that captures the spirit of the Measure as well as its detailed requirements in a way that does not compromise the duties and responsibilities of the various parties involved.
What are the financial implications of the proposed Measure for organisations?
27 As with any change programme, it is likely that costs will arise from the additional development work required during the early stages of implementation. In addition, the different arrangements that the proposed Measure requires or allows me to put in place may also have an impact on the fees that authorities pay. However, until we have a clear idea of the guidance that will determine the details of implementation I am not able to assess the financial implications but will be revisiting this issue as things develop.
4th November 2008
