Commercialisation Alternative Models of Service Delivery CIPFA in

Commercialisation – Alternative Models of Service Delivery CIPFA in the North East Professional Update Day Gavin Barker, Senior Manager Wednesday 16 March 2016, Rivergreen, Durham

What we’ll consider today • What is commercialisation / and do we have commercial skills? • The drivers for commercialisation in local government • Some of the alternative models of service delivery that have emerged • Governance and risks • The role of the public finance professional Commercialisation – Alternative Models of Service Delivery

Do we have the commercial skills we need? • Does the public finance professional have commercial skills (compared to the private sector)? - Less than - About the same - More than Commercialisation – Alternative Models of Service Delivery

What is commercialisation / what are commercial skills? • Commercialisation /commercial skills; • What do these terms mean for you? Commercialisation – Alternative Models of Service Delivery

Definition of commercialise • “Manage or exploit (an organisation, activity, etc. ) in a way designed to make a profit” (Oxford English Dictionary) • Public sector context – use business methods including profit motive to do something that has social value as well, and is sustainable? Commercial skills: • Different skills or a similar skill set with a different set of terminology? Commercialisation – Alternative Models of Service Delivery

What will commercialisation be like? • • • More business planning Financial forecasting with many assumptions and unknowns Focus on keeping costs low / generating more income More timely management accounts / monthly balance sheets - cash flow becomes critical Profit and loss v income and expenditure Producing / considering company accounts Needing to be more responsive, innovative and seize new opportunities Constant change Is it really that different to what we do anyway? Commercialisation – Alternative Models of Service Delivery

The drivers for commercialisation in local government? • Public sector austerity Commercialisation – Alternative Models of Service Delivery

• “Local government and the wider public sector is facing greater change and transformation than ever before, driven by austerity, significant cuts in public spending and a sharper focus on improving services and achieving better outcomes for local people. ” • Self financing – council tax and business rates • Less central support for areas of deprivation • Devolution Commercialisation – Alternative Models of Service Delivery

Significant changes are likely to include: • new and innovative models of service delivery • commissioning services rather than directly providing them • making services more self financing and sustainable • managing demand reducing reliance on the public sector • working more closely with partners and the voluntary sector • building community capacity and resilience Commercialisation – Alternative Models of Service Delivery

Some of the alternative models of service delivery that have emerged Commercialisation – Alternative Models of Service Delivery

What are the options? • Create a new entity or work within existing parameters? • • Keep things in-house Shared services Private sector outsourcing Local authority trading company Mutualisation Local asset backed vehicle Joint venture partnership Commercialisation – Alternative Models of Service Delivery

Governance and risks • Governance and risk management starts with the public body • Option appraisal and developing the business case • Consider appropriate models and structures • If creating a new entity, align its objectives with what the public body is seeking to achieve • Although a new entity may bring benefits, its likely to create more complicated governance arrangements • When choosing a preferred option, ensure the governance framework is fit for purpose … from the outset Commercialisation – Alternative Models of Service Delivery

Make sure you address • Legal structures and governance arrangements • Articles of Association / Shareholder Agreements • Depending on the model, may exercise control or influence; or just a contracting relationship • Strong leadership – the Board / Managing Directors • Wider Board representation to bring different perspectives • Consider conflict of interest risks, and address them • Trading issues – Teckel exemption / State aid • Tax – Corporation tax / VAT • Contract monitoring / reporting progress to the Council • Appropriate financing / asset base Commercialisation – Alternative Models of Service Delivery

Pressure points • • Culture Motivated, skilled, empowered workforce More competitive workforce TUPE? Reduced terms and conditions? Voluntary or compulsory redundancies? No more final salary pension contributions? Support services Commercialisation – Alternative Models of Service Delivery

Do we have the commercial skills we need? • Having discussed this further, have your views changed of the public finance professional’s commercial skills (compared to the private sector)? - Less than - About the same - More than Commercialisation – Alternative Models of Service Delivery

Any questions? Commercialisation – Alternative Models of Service Delivery