Finance: End to divide and misrule?

It's called Best Value and it's set to undo the internal market in local authorities. Paul Gosling reports

The internal market within local authorities is being dismantled as a result of the Best Value programme being introduced by the Government. Eradicating the client/contractor split in councils would be a significant rolling back of the public sector management reforms introduced by the Tories and is in keeping with the abolition of the internal market within the National Health Service.

Although the Conservatives claimed that compulsory competitive tendering (CCT), which created the client/contractor division, achieved savings of around 20 per cent, many local authorities said that CCT created bureaucracy and led to additional costs associated with tendering for contracts. Some councils found it difficult to monitor contracts, and there have been reports that some service standards have fallen.

One of the Best Value pilot schemes is being rolled out by Birmingham City Council, where the housing department is abolishing the client/contractor split. The council believes the new arrangements will empower tenants by allowing them to decide on the service standards they want on each estate, while cutting costs by avoiding bureaucracy.

"Best Value is much better than CCT in terms of tenants being allowed to set standards, and doesn't get locked into tendering processes which could lead to services being provided that tenants did not want," says Pam Lockley, Birmingham's assistant director of housing. She believes that overseeing contracts within a line-management context will be more effective and cheaper than maintaining an artificial division between contract providers and supervisors.

At the heart of the Best Value regime will be the obligation on all councils to improve strategic management and set performance targets for each service. Should standards fail to improve in line with targets, councils will be under pressure to externalise those services and, if a council fails to act, the Government will hold over it the threat of sending in a special management team.

In the case of Birmingham, the tenants will have the right to trigger emergency action by formally complaining. Should standards not improve after a second complaint, the matter will be referred to an external auditor - possibly, though not necessarily, the district auditor - who may initiate action to contract out the service that is causing the problem.

Another pilot Best Value authority is Leeds City Council, which is also considering ending the internal market, but whose priority is to put an end to the traditional departmentalism of local authorities. In its pilot inner-city area, Leeds is arranging for integrated service delivery in grounds maintenance, street cleaning, highway maintenance and refuse collection.

It is envisaged that this will allow Leeds to make major savings in contract monitoring by rationalisation, while improving service standards. Across the country tenants have alleged that grounds maintenance teams have pushed litter from lawns on to paths, and street cleaning teams have then shovelled it back on to the grass. Such nonsense should be ended in Leeds.

Another element of the Leeds attack on departmentalism is through its Best Value pilot one-stop shops, where staff will be able to answer customer queries relating to any council service. This follows the council's being awarded pounds 7.5m last year under the Capital Challenge scheme for new information services, much of it based on electronic delivery which, by its nature, also requires a cross-departmental approach to services.

One of the other core principles of Best Value is that no council should fund a service simply because "it has always been provided". All authorities will now be expected to question each and every service as to why it is provided, to whom and how, and to what standard it is delivered. Warwickshire County Council, another pilot authority, is now conducting that review into every council service, focusing on management processes and performance outcomes.

Before the Best Value consultation paper was published in March, many critics had claimed that it would be a soft option compared with CCT. It is now clear that by demanding constant service improvements, backed by tough monitoring systems, Best Value will in fact be a much more rigorous regime, which should achieve real improvements in standards. The consultation process ended last week, and the signs are of a generally positive response. It is not yet clear, though, how quickly legislation will be passed, or when the new regulations will apply.

While councils might be forgiven for not welcoming yet another change to the way they operate, their representative body, the Local Government Association, supports the proposals. But its chairman, Sir Jeremy Beecham, the former leader of Newcastle City Council, has put forward one amendment. If it works as well as he expects, Sir Jeremy believes Best Value should also be applied to central government.

The permanent secretaries may do well to start reflecting on whether they will find Best Value easy to live up to.