Full Report

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CONTENTS
Introduction Executive Summary 1. Terms of Reference 2. Wandsworth Councils Budget 2.1 2.2 2.3 2.4 2.5 Budget frameworks Where Wandsworths revenue spending goes Where the money comes from Limited scope to increase the Council tax The 2013 Spending Review and Autumn Statement, and the 2014/15 Local Government Finance Settlement 2.6 Key risks 2.7 Wandsworths Budget Formula 2.8 Closing the General Revenue Budget gap in 2014/15 3. Could a new Council administration in Wandsworth maintain the low Council tax policy and implement new policies? 4. Policy changes for early implementation 4.1 Introduction 4.2 Criteria 4.3 Proposed policy changes 4.4 Proposed policy changes: summary of costs 4.5 Proposed policy changes: sources of funding 4.6 Proposed policy changes: summary of funding 4.7 The priority measures: balancing the budget 5. Towards a new kind of Council 6. Building blocks for change 6.1 6.2 6.3 6.4 Shared services Shared procurement Office accommodation IT

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7. Housing and the Housing Revenue Account 7.1 7.2 7.3 7.4 Housing Revenue Account Reform Council rents Housing supply Leaseholders

Recommendations

Annexes
1. Membership of the Commission

2. Local Government Finance: some definitions

Figures 1. Wandsworth Council: net revenue spending 2013/14 2. London Borough of Wandsworth; Gross Revenue Budget 2013/14 Excluding HRA and Schools grant 3. London Borough of Wandsworth; Gross Revenue Budget 2013/14 Including HRA and Schools grant 4. Wandsworth rents, retail prices and average earnings

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Tables

1. London Borough of Wandsworth; Net revenue spending 2103/14 by service area 2. London Borough of Wandsworth; Net Revenue Budget 2013/14 3. London Borough of Wandsworth; Gross Revenue Budget 2013/14 Excluding HRA and Schools grant 4. London Borough of Wandsworth; Gross Revenue Budget 2013/14 Including HRA and Schools grant 5. London Borough of Wandsworth; Forecast income from Revenue Support Grant 6. London Borough of Wandsworth; Use of reserves 7. London Borough of"Wandsworth ;Council Tax Requirement, 2013/14 2016/17 8. London Borough of Wandsworth; Contractors staff paid less than London Living Wage February 2014 9. London Borough of Wandsworth; Potential implications for the General Revenue Budget of staff employed by contractors moving to London Living Wage on a phased programme 10. Priority measures - costings 11. Bonuses: London Boroughs making other payments to staff 2011/2102 highest individual payment 12. London Borough of Wandsworth; Performance Related Pay payments; 2011/12; 2012/13 13. Priority measures funding 14. Priority measures balancing the budget 15. London Borough of Wandsworth; Comparison of indices of LBW Council rents, prices and earnings

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Wandsworth has a very distinctive management style and ethos, evolved over many years and not found elsewhere. Councillor Lister, former Leader of Wandsworth Council, September 2010

Wandsworth has always been reliant on government grants because of the low council tax so the impact on us is often greater when it is reduced. Councillor Govindia, Leader of Wandsworth Council, October 2013

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Introduction

This report is submitted by the Independent Commission on Wandsworth Council budgeting. The Commission was appointed by the Leader of the Opposition on Wandsworth Council, ahead of the 2014 municipal elections, and included members with experience of both business and the public sector. The brief of the Commission was to recommend an alternative Council budget that would enable a new Council Administration to implement new policies and set new priorities while maintaining the Councils established policy on the level of Council tax. The Commission was asked to report independently of party political considerations. These are difficult times for local government. All Councils are finding it hard to keep vital services running, and Wandsworth is no exception. It would be over-optimistic to think that the days of austerity will soon come to an end. But the health of local democracy depends on the willingness of candidates to contest local elections in the belief that things could be better. The Commission recommends a two part approach: An immediate programme of a small number of fully costed priority measures, to be paid for from identifiable savings in the financial years 2014/5 and 2015/6; A radical transformation of the Council, learning from good practice and innovation elsewhere, in both private and public sectors, achieving value for money through partnership, cooperation and staff empowerment.

The Commission wish to express their thanks to: Wandsworth Councils professional finance staff, who with great integrity provided speedy answers to many detailed questions on the budget submitted to them by the Minority Party Finance Spokesperson; The Audit Commission, whose excellent Value for Money profiles provide an indispensable research tool for comparing different local authorities; The Secretary of State for Communities and Local Government, whose 2012 pamphlet 50 ways to save money appears to have been surprisingly little read in Wandsworth Town Hall.

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As Chair of the Commission, I would like to express my thanks to the other members of the Commission Gareth Daniel, Stephanie Elsy, George Kessler and Martin Pilgrim who gave their time and commitment to attending our meetings, drafting sections of the report, carrying out research, investigating arcane points of local government law and practice, and reviewing the final report. I am very grateful to them for sharing their knowledge and expertise.

Michael Ward Furzedown February 2014

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EXECUTIVE SUMMARY Wandsworth Council has lost its way. Once radical and innovative it is now dangerously inward-looking, complacent and over-reliant on government grants. This report shows that the Councils distinctive low tax approach could be unsustainable without a new strategy. Among the key findings are: Top managers salaries and bonuses must be curbed A two year Council rent freeze for tenants could be achieved One oclock clubs and school crossing patrols could be reprieved

The Commission was established by, but is independent of the Labour Party in Wandsworth. Its brief was to come up with an alternative Council Budget that will keep the low Council Tax while enabling the new administration to set new priorities and policies. The Commissions job was not to set policy; it was to say whether, and how, proposed new policies could be accommodated within the Councils existing Council tax policy. The Commission proposes a two-stage approach: Immediate priority measures financed from identifiable savings in the financial years 2014/5 and 2015/6. They should be small in number and fully costed. A radical transformation of the Council based on best practice elsewhere. This will achieve value for money through partnership, cooperation and empowering staff.

The Commission focuses on two budget frameworks: the General Revenue Account and the Housing Revenue Account. Current Budget Approach Wandsworth has evolved a distinctive approach to its budget: A very low council tax, second in the league of local councils in 2013/14. High receipts from business rates distributed by national government High levels of government grant although this is now changing High charges to local residents for using services especially social care and parking The highest rents in the country for Council tenants High levels of reserves
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Very high pay for top managers

Wandsworths Budget Gap In each of the last two years, 2013/14 and 2014/15, the Council has only been able to finalise its budget by making a substantial drawing on the reserves. While the reserves remain high when compared with other councils, and the Commission is recommending a modest further call on the reserve to fund priority projects in future years, given the reduction in government grant this option will not remain available much longer. For many years Wandsworth benefitted from exceptionally favourable treatment in successive annual financial settlements. What began as a brave and radical experiment in reshaping local government has ended in dependence on the vagaries of an arbitrary grant system. They are subsidy-junkies: reliant on the continuation of government funding. The prolonged austerity programme means that this is no longer sustainable. Because Wandsworths Council Tax is so low, and because it pays for such a small proportion of the Councils activity, even a large increase would only bring a modest increase in revenue Key Budget Risks The Council faces some key budget risks, identified by its own Director of Finance Uncertain future levels of government grants Volatile parking revenue Rising levels of homelessness Impact of welfare reform Possible shortfall in staff pension fund that would have to be plugged

There is barely any scope for increasing Council Tax even if the council wanted to. Just 900,000 would be realised by the maximum 2% rise permitted without a referendum. Strategy The Independent Commission recommends: Keep the existing council tax policy Accept the current administrations plans for cuts, savings, efficiencies and service user charges now being implemented.

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Make a small number of immediate policy changes to be funded from identified savings Launch a major transformation of the way the council operates to ensure that the Boroughs public services are sustainable in the long term.

Immediate policy changes Any policy changes must meet the following tests: They fulfil a clear and identified policy need; They are fully costed; They are fully funded. This means 2014/15, and full year costs in 2015/16 and subsequent years; They have a realistic and achievable timetable for implementation.

The Commission recommends that the following changes meet these tests: Reinstate four axed one oclock clubs. This would improve services for preschool children; Reinstate school crossing patrols. This would make roads safer for children; Increase front line inspection staff for highway and neighbourhood complaints. This would give a better and faster service to local residents and businesses; Immediately pay the London Living Wage to all directly employed Council staff; phase implementation of the London Living Wage for staff employed by contractors; this would help eliminate poverty pay. Provide twenty more apprenticeships. This would increase opportunities for young people.

Key Budget Savings The Commission identified the following savings to pay for priority measures Phase out bonuses and private medical insurance for senior Town Hall managers (3 million); Stop printing Brightside magazine (100k); Withdraw 0.5 million from the Councils General Revenue reserve in Financial Year 2014/15 to fund initial costs of new policies. This would still leave Wandsworth with one of the highest levels of reserves in London.

These modest measures will signal that the new administration will operate on new priorities but it doesnt mean the old days of a flexible and buoyant local tax system are coming back any time soon. All public services and all councils are adjusting to a new world. These are facts that face the opposition party as well as the party in power.
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All councils find themselves in the same position with grant income going down and demand for services rising. Councils like Wandsworth that are heavily dependent on Government grant are particularly vulnerable. This has been pointed out by the Audit Commission and the council itself. Radical Transformation A radical transformation to create a new model Council should therefore be launched by the incoming administration. It should be based on seeking out the best practice in business and other councils in achieving transformation and value for money.

Wandsworth: the old model

Inward-looking Never ending salami-slicing cuts Council knows best Wandsworth can go-it-alone High chief officer salaries
Low staff morale

A new model Council needs to be put in place: Wandsworth: the new model Outward looking Radical view of service needs and priorities Build cooperation and partnerships Work with: ! Other public services ! Neighbouring boroughs ! Business ! Third sector Empower staff Flat, lean structures

Savings from Transformation The Commission believes the programme of transformational change would produce savings of 20 million over a four year term.

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The Commission observes that Wandsworth has been slow and reluctant to explore the potential economies from sharing services with other councils and public bodies. Many Councils, Conservative and Labour, have achieved major savings in this way. A new administration should pursue this urgently. Social care, for children and vulnerable adults, is now the largest area of spend in the revenue budget. Much of this work is now undertaken via contractors. Experience elsewhere has shown that there are major gains to be had from running procurement jointly with other authorities. It is uneconomic for councils to duplicate their procurement activity. A new administration would expect major savings from joint procurement arrangements with other public bodies. The Commission considers Wandsworth Councils Information technology policies wasteful. In 2013/14 its IT spend was over 11 million. A move away from traditional systems towards cloud-based ones would cut this substantially. There are significant savings and efficiency gains to be achieved from a radical change in the Councils use of office accommodation. The incoming Council should urgently examine locating all its headquarters functions on a single modern office site. The disposal of surplus sites, possibly including the present Town Hall, would provide capital receipts used to fund the rationalisation programme. Housing and the Housing Revenue Account The Commission considers there is a possibility of freezing council rents for two years. The complexity of Housing Revenue means that at present it is impossible to be categorical on this point. It recommends that a new Council administration should encourage plans for new private, Council, social and intermediate housing, and aim to sustain and create mixed, resilient communities. The last government initiated, and the present government has continued, major reforms to the financial arrangements for Council housing. These potentially give the Council greater control over its housing resources. In the long run, Wandsworth should have a significant surplus on its Housing Revenue Account (HRA), which would enable the Council to build and invest in housing on a significant scale. At present, Wandsworths rents are the highest in the country. After a decade of above-inflation rent increases, the current administration now proposes to freeze rents for one year. An incoming Council would seek to continue the freeze for a second year, provided this could be accomplished within the framework of the

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HRA business plan, and then ensure that Wandsworths rents are no higher than the average Council rent in Inner London. The Council should use the resources of the HRA, and in addition borrow where necessary (as the current administration has) to build new social homes on Council owned land. A realistic target would be 1,000 new social homes in a four year term. The Council should also work with Housing Associations, and use its planning powers, to ensure maximum delivery of affordable rented housing. The Council will welcome all new housing, but will expect private housebuilders to provide social rented homes alongside owner occupied housing.

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1. Terms of Reference The Commission was appointed with the following terms of reference: The Commission is asked to examine Wandsworths revenue and capital budget. This should include: forecasting trends in the balance sheet examining the Councils treatment by central government in the allocation of grant reviewing the Councils policy on, and use of, reserves reviewing the policy on user charging reviewing the relationship between the budget and the Housing Revenue Account making recommendations for an alternative budget, structured according to clear principles and priorities

making recommendations on improving the management of the budget. In its work, the Commission is required to: address the needs of all Wandsworth citizens consult expert opinion identify credible, robust and effective budget options establish a process, policy options and widespread support for a credible, robust, restructured council budget which commands support at the 2014 Council elections while giving confidence that subsequent, especially unexpected, operational decision making will be taken within an agreed framework. present its findings to the Wandsworth Labour Party.

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2. Wandsworth Councils Budget 2.1 Budget Frameworks The Council has three main financial frameworks: " " " General Revenue Fund The Housing Revenue Account (HRA) The General (i.e., non-housing) Capital Programme

This report is concerned mostly with the first two of these. Annexe Two to this report provides definitions of some common local government finance terms. The Council does not enjoy complete flexibility on the use of its resources. The rents of Council tenants cannot cross-subsidize the General Revenue Budget, nor can the income from the Council Tax be used to cover the costs of council housing. The two budgets are said to be ring fenced. Similar rigidities exist within the General Revenue Budget. Since 2006/07, the schools budget has been met in full by the ring-fenced Dedicated Schools Grant and other specific grants. In 2013/4, these grants amounted to 213 million. In 2013/14, the Council took over responsibility for public health, and this is financed by a ring fenced annual grant of 25 million. 2.2 Where Wandsworths revenue spending goes Table 1 London Borough of Wandsworth Net revenue spending 2103/14 by service area Service Area Adult care and health Education and childrens services Environment, culture and community safety Housing Strategic planning and transport Finance TOTAL (data from Wandsworth Budget book for 2013/14)
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million 95 65 40 4 12 -1 215

Figure 1 Wandsworth Council: net revenue spending 2013/14

2.3 Where the money comes from In the financial year 2013/14, Wandsworth Council budgeted to spend over 900 million. But it only raised 45 million through the Council Tax. How can this be? The basic arithmetic of Wandsworths General Revenue budget is simple: spending in 2013/14 is funded as follows: Table 2 London Borough of Wandsworth Net Revenue Budget 2013/14 million 215 8 207

Net Revenue Expenditure Minus drawings on reserves Net revenue after reserve drawing Minus income from Local Government Finance Settlement (general grant + business rates) Council Tax requirement (Wandsworth Council Budget Book 2013/14)

162 45

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The Council Tax, therefore, covers 20% of Wandsworths net revenue budget. This simplified picture, however, is not the whole story: important sources of income are taken into account at an earlier stage, in arriving at the net expenditure figure. Some services attract substantial specific government grants. For example, responsibility for public health was transferred to the Council in 2013, and is completely funded by a 25m government grant. The net expenditure figures are also net of income from user charges. The council has developed a distinct approach to charges paid by service users: In order to maintain the real terms value of its income, the Council's charging policy is to maximise charges for specific services so as to minimise any direct subsidy from the council taxpayer, seeking wherever possible to recover the cost of service. This policy may be relaxed where there are economic, policy or statutory reasons for charging a reduced rate. (Wandsworth Council Paper 13-255) In total,16 % of Wandsworths total spend comes from user charges only two London Councils, Westminster and Kensington and Chelsea, bring in more in this way. While Wandsworth raises 45 million from the Council Tax, parking charges alone raise 29 million. But when other sources of income (primarily, specific grants and user charges) are taken into account, a far smaller proportion of Wandsworths total revenue spending is met from the Council Tax. The following figures and tables illustrate this; in Figure 2 and Table 3, the first presentation of Wandsworths gross budget adds in revenue from user charges and some specific government grants, but excludes the ring-fenced Housing Revenue Account (HRA) and the Dedicated Schools Grant (DSG) ring-fenced element within the General Revenue Budget.

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Figure 2 London Borough of Wandsworth Gross Revenue Budget 2013/14 Excluding HRA and Schools grant

Table 3 London Borough of Wandsworth Gross Revenue Budget 2013/14 Excluding HRA and Schools grant Income source million % of total Specific government grant 232.4 42 Non service specific grants 6.2 1 Start up funding Assessment 161.6 29 Total Government Grants 400.2 72 Application of reserves 8.1 1 Council tax 45.9 8 Fees, charges and other income 99.8 18 Total 554.0 100
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(Wandsworth Council Budget Book, 2013/14) This table has the advantage of coming to a total easily recognisable in the Budget Book. But, because it omits schools and the HRA, it understates the Councils gross spend. Therefore, to complete the picture, Figure 3 and Table 4 include income from the HRA and the DSG:
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Figure 3 London Borough of Wandsworth Gross Revenue Budget 2013/14 Including HRA and Schools grant

Table 4 London Borough of Wandsworth Gross Revenue Budget 2013/14 Including HRA and Schools grant

m Total Government Grants Application of Reserves Council Tax " Fees, Charges & Other Income Dedicated Schools Budget Housing Revenue Account
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% of total income 44% 1% 5% 11% 23% 16% 100%

400.2 8.1 45.9 99.8 212.8 142.5 909.3

(Wandsworth Budget Book 2013/14 pp54-55)

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This shows true gross income. (The difference between this figure and the 903,064,000 on p54 of Wandsworths 2013/14 Budget Book is the 6.2m general fund inflation (p55).) As this table makes clear, once all income sources are taken into account, the Council Tax only contributes 5% of Wandsworths gross revenue expenditure. 2.4 Limited scope to increase the Council Tax The scope for individual councils to increase the Council tax is now very limited. The government has encouraged Councils to freeze Council Tax, and has made additional grant available for this purpose. Even if Councils reject the offer of additional grant, any Council that wants to increase Council Tax by more than 2% would have to face a local referendum. So far, none has chosen to do so. This leaves Wandsworth Council in a difficult position. Because its Council Tax is among the lowest in the country, it follows that a 2% increase in Wandsworth would raise much less revenue than a 2% increase elsewhere. The maximum permitted increase for Wandsworth without a referendum for 2014/15 would therefore raise only 900,000 which is only 0.4% of net revenue spending. Wandsworth froze its own share of the Council Tax in 2013/14, but overall bills increased by 3.1% because of increased levies from other bodies. Although when finalising its 2013/14 budget the Council assumed that it would receive a Council Tax Freeze Grant of 492,000, in the event Wandsworth was ruled to be ineligible for this. 2.5 The 2013 Spending Review and Autumn Statement, and the 2014/15 Local Government Finance Settlement Three major Government announcements in the second half of 2013 help to shape the context for Wandsworth Councils budget for 2014/15 and subsequent years. In June, in the Spending Review, the Chancellor announced new spending levels for 2015/16. The Review reduced overall government spending in 2015/16 by 11.5 billion. It did not impose major additional reductions on local government for the two years 2014/15 and 2015/16, recognizing that substantial austerity programmes were already in place.
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But it did propose some changes within the overall package of support. It also implied that there would be further cutbacks (or tax increases) after the 2015 election. The November Autumn Statement imposed a further 1bn of cutbacks in 2014/15 and 2015/16, but exempted local government, in order to make it easier for Councils to freeze the Council tax in these two years. The Autumn Statement also warns that consolidation will continue into the next parliament, with the aim that there will be no net increase in real terms public spending up to 2018/19. If existing ring fences (health, schools, international aid) are maintained, this implies either further cuts in unprotected areas (such as local government) , or tax increases or probably both. The austerity drive is unlikely to stop any time soon. The draft Local Government Finance Settlement for 2014/15 appeared on 18 December 2013. In July, DCLG had issued a consultation document on the Local Government Grant Settlement for both 2014/15 and 2015/16. Wandsworth Council officers estimated that the impact of these proposals would be to reduce overall resources for mainstream support from Central Government to the Council by 23% over the two years. The key figure for each Council is the Settlement Funding Assessment (in 2013/14, Start-Up Funding Assessment). It consists of the local share of business rates and the Revenue Support Grant. 2.6 Key risks The Councils Finance Director has identified a number of key risks faced by the Council in its future budgeting. These include: Uncertainty about future levels of government grant Volatility of parking income (charges and penalties) Rising levels of homelessness Impact of welfare reform Possible need to increase the employer contribution to the pension fund (Paper 13-255 The Councils Medium Term Financial Strategy 2013-4). 2.7 Wandsworths Budget Formula Over the years, Wandsworth has evolved a distinctive, even idiosyncratic, approach to its budget. Up to now, this formula has worked well for the Council. But under the sustained pressures of prolonged austerity, the formula may no longer be fit for purpose
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The key components of the formula are: A very low Council tax in most recent years, the lowest in the country; in 2013, only Westminster set a lower rate. The Wandsworth Council Tax in 2013/14 for a Band D property (Wandsworth + GLA services) was 691.54. Relatively high receipts from nationally redistributed business rates in 2011/12 20% of Wandsworths total spending was met from redistributed business rates. Only five of the 32 London Boroughs (Southwark, Hackney, Lambeth, Islington and Tower hamlets) received more. Under the new business rate system, whereby councils retain some of their business rate income, Wandsworth continues to receive money from the national pool due to be 35 million in 2014/15. (Source: Audit Commission) High levels of government grant in 2011/12, 6.3% of Wandsworths spending came from the Revenue Support Grant. Only five other boroughs (the same 5 as for redistributed business rates) received more. (Source: Audit Commission). But the prolonged austerity programme is leading to change here: Wandsworth may not be able to rely on these high levels of grant for much longer. The Finance Director has pinpointed this as one of the key risks faced by the Council. High charges to service users Wandsworth raises more from charges paid by service users than most London Boroughs especially on social services and transport (i.e., mostly, parking). (Source: Audit Commission) The highest rents for tenants of Council housing. While the Council Tax has usually been the lowest in the country, the rents paid by Council Tenants have been among the highest. In 2012/13, the average weekly council rent in Wandsworth was 121.36, and this was the highest in the country. The average rent nationally was 78.78. (Source: CLG Statistics). If as has been proposed Wandsworth freezes its rents in 2014/15, they may as a result become only the second-highest. High levels of reserves. In the financial year 2013/14, despite drawing a total of over 8 million from its reserves, Wandsworth Council still maintained a contingency provision of 14 million. In
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addition, the Council has Special Reserves of 80 million. Audit Commission figures show Wandsworth as consistently being in the top 20 or 25 % of London Councils for the level of reserves. At the same time as using reserves to balance the General Revenue Budget for 2014/15, the Council increased its Service Transformation Reserve by 18 million Secretary of State Eric Pickles has accused Councils of sitting on the reserves, and urged them to use them creatively. In November 2013, Pickles said: There are no rules on what councils should hold in reserve and taxpayers will be amazed that while councils are amassing billions in secret stockpiles some are pleading poverty and raising council tax bills for hard working families. (http://www.localgov.co.uk 29 November 2013) Very high pay for top managers, including Performance Related Pay. The TaxPayers Alliance (TPA) is an independent organisation which was established to speak for ordinary taxpayers fed up with government waste, increasing taxation, and a lack of transparency in all levels of government. (TPA website) Each year the TPA publishes a Town Hall Rich List of Council Staff paid over 100k. The 2013 Town Hall Rich List lists the 20 highest paid local government officers in Britain (excluding those made redundant). Two of the twenty work for Wandsworth the Councils Chief Executive and Finance Director. In 2011/12, Wandsworths Chief Executive, with a remuneration package (salary + bonus + employers pension contribution) of 254,880 was the highest paid single borough Chief Executive in London (though the joint Chief Executive responsible for running the two boroughs of Kensington and Chelsea and Hammersmith and Fulham was paid slightly more). In 2012/3, the total value of the Wandsworth CEOs package was increased to 274, 224, making him the undisputed highest-paid local government officer in London.

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In Financial Year 2011/12, 33 Wandsworth staff were paid more than 100k per year. Only two Councils in the whole country had more staff at this level. Eric Pickles, in his pamphlet 50 Ways to Save suggests: Councils can lead from the top by having their chief executives take a pay cut. Ministers have taken a 5% pay cut and frozen their pay for five years. Chief executives can do the same. (50 ways to save; Examples of sensible savings in local government; CLG; 2012) Wandsworths high salaries include a bonus or performance related pay system. Only a minority of Councils reward their staff with bonuses only a third of London Boroughs, for example, pay top managers in this way. But Wandsworths scheme is unusually expensive: for the year 2011/12, the Council made Performance Related Pay payments totalling 3,059,253, and for 2012/13, 2,920,108. The Councils generosity to its senior managers is not reflected in the treatment of more junior staff. Wandsworth has declined to sign up for the London Living Wage, and as at January 2014 employed 62 staff at rates below the Living Wage. In 2013/14, for example, the cleaner at a Council-managed leisure facility is paid 15,549 for a 36 hour week for a years work. But the Councils two most senior staff were paid 19,080 and 17,040 in bonus alone in 2012/13. 2.8 Closing the General Revenue Budget gap in 2014/15 Councils are legally obliged to set a balanced budget each year. At the end of January 2014, Wandsworths Finance Director was still reporting a gap of 7 million between projected spending for 2014/15, and the forecast maximum yield of the Council tax, after taking account of all other income. One of the factors leading to this gap is the forecast steep decline in the Councils income from the Revenue Support Grant the traditional, nonring-fenced Government grant. It appears that Wandsworths ability to rely on high levels of government grant to support the General Revenue Budget is now coming to an end. Table 5 gives the details:

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Table 5 London Borough of Wandsworth Forecast income from Revenue Support Grant million 2013/14 97.1 2014/15 78.4 2015/16 55.8 2016/17 35.5 (Source: data from Wandsworth Council Paper 14-193) Up till the present, Wandsworth has been able to bridge these gaps by drawing on its reserves. In 2013/14, the Council used over 8 million from balances; in 2014/15, over 6 million. Table 6 gives the details: Table 6 London Borough of Wandsworth Use of reserves 2013/14 2014/15 2015/16 2016/17 m m m m 215,701 197.225 199.587 206.074 - 6.235 - 3.976 - 1.199 -1.786 - 0.081 -0.341 -0.241 O.605 8.12 6.344 -0.048 0.000 0.000 0.000 0.139 0.377

Council's Net Expenditure Contribution from General Reserves Contribution (from)/to Renewals Fund Contribution from the Finite Services Fund Contribution from Business Rate Volatility Reserve Contribution from insurance reserve Total drawing on reserves

Council's Net Expenditure after Drawings on Reserves 207,581 190.881 199.678 206.451 (sources: Paper 14-193 and 2013/14 Budget Book) Although, even after doing this, Wandsworth retains significant reserves, the rate at which the borough is losing grant means that it will be harder to close similar gaps in future years by drawings on the reserves. Table 7 then shows the Council tax requirement for 2014/15:

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Table 7 London Borough of"Wandsworth " Council Tax Requirement, 2013/14 2016/17 2013/14 m Net expenditure after use of reserves 207.581 Less: Collection fund surplus Total Expenditure Less: Retained Business Rates Business Rates top-up Revenue Support Grant Total Council Tax Requirement (Source: paper 14-193) -1.327 206.254 -30.184 -34.384 -97.054 -161.622 44.632 190.881 -1.380 189.502 -30.554 -35.053 -78.451 -144.058 45.444 199.678 199.678 -31.621 -36.021 -55.779 -123.421 76.258 206.451 206.451 -32.200 -36.700 -35.500 -104.400 102.051 2014/15 m 2015/16 m 2016/17 m

This again raises the possibility of very substantial tax increases next year and the year after. For 2014/15, the Council was able to compensate for the loss of grant aid by drawing on reserves. Thus the General Revenue Budget is increasingly squeezed. By contrast, the ringfenced schools budget, paid for by the Direct Schools Grant from government, is relatively unconstrained.

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3. Could a new Council administration in Wandsworth maintain the low Council tax policy and implement new priorities? The short answer to this question is yes but the scope for early and dramatic policy change is limited. Wandsworths Council Tax policy was expressed by Cllr Govindia, the Leader of the Council, in a report in February 2013: The Councils policy is to maintain a distinctively low council tax and insist on value for money services for its residents. (Paper 13-184, February 2013) Since the 2013 Council Budget, Wandsworth is no longer the Borough with the lowest level of Council Tax in the current year, Wandsworths Band D rate is 685.71, while taxpayers in Westminster pay only 680.74. But both rates are extremely low in comparison with other London Boroughs and elsewhere in the country. In fact, as para 2.4 has shown, the scope for an incoming Council administration to increase the Council Tax would be very limited. If the new Council administration elected in 2014 wanted to keep the low tax policy, but implement change, one way of doing this would be to declare its commitment to the policy; to identify a small number of key policy changes for early implementation; and to identify the means by which these changes could be financed. The new administration would also have to accept that there was very little scope to change the package of cuts and savings being implemented by the outgoing administration in the run up to the 2014/15 budget. Simply making short term changes, however, will not be enough to secure the long term sustainability of public services in the Borough. The new Council should also commit itself to a radical programme of change. Recommendation: Strategy In order to maintain the Council tax level agreed by the outgoing administration, the new Council elected in May 2014 should: (i) Adopt a formula like that of the outgoing administration (The Councils policy is to maintain a distinctively low council tax and insist on value for money services for its residents.) to define their Council Tax policy; Accept the package of cuts, savings, efficiencies and increases in user charges being implemented by the Council in FY 2013/14, except in so far as compensating savings can be identified elsewhere;

(ii)

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(iii) (iv)

Identify a small number of high-profile policy changes, to be implemented as quickly as possible, to be funded from identifiable savings; Begin the process of transforming the Council.

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4. Policy Changes for Early Implementation 4.1Introduction The scope for early action by a new Council administration will be limited. The inherited budget will be a tight one. Many of the measures needed to modernise the Council will take time to implement and will not bear fruit in the first or second years of a new administration. 4.2 Criteria The strategy laid out in the previous section imposes a rigorous budget discipline on the new administration. Before any consideration is given to any policy change, there will need to clarity about the need it would meet, what it would cost, how that cost can be met, and when the policy could be delivered. With the election in May 2014, it is unlikely that any policy change involving hiring staff or letting new contracts could be implemented before October 2014 so expenditure on such policies in 2014/15 could only be at most 50% of a full year budget. But the proposals will have to include full year costs and funding plans for 2015/16 and subsequent years. Recommendation: Criteria for early policy change Policy changes for early implementation should meet the following criteria: all such measures should be (i) (ii) (iii) (iv) 4.3 Agreed by the Labour Group as meeting an identifiable priority need; Fully costed where possible, by the Finance Department; otherwise, by the Commission using publicly available information; Fully funded from identified spending reductions or income generation measures; Have a realistic implementation timetable.

Proposed policy changes The Commissions role is not to say what the policy of an incoming administration should be. The Commissions job is, rather, to say whether, and how, alternative policies can be afforded within the overall framework of the Councils policy towards the Council tax. The Commission therefore consulted the Wandsworth Labour Group on the Labour Groups proposals for policy measures for early implementation that would fall within the criteria listed above. Following that consultation, the measures listed below are put forward.

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Recommendation: Proposed policy changes General Revenue Budget That the following measures, which meet the proposed criteria, be put forward for early implementation Reinstatement of four of the axed One Oclock Clubs, in order to improve services for pre-school children; Reinstatement of school crossing patrols as a road safety measure; Increasing front line inspection staff for highway and neighbourhood complaints, in order to provide a better and faster service to local residents and businesses; Becoming an accredited London Living Wage Employer; Providing twenty more apprenticeships;

4.3.1 One Oclock Clubs In 2012, the Coalition Government introduced a new policy on education for 2 year olds intended to provide 15 hours a week of free early education for up to 1,400 children by September 2014. Wandsworths professional staff expressed serious reservations about this approach and its implications for the Councils existing pre-school services. The Council resolved to meet its new obligations by changing or withdrawing from other forms of childcare provision, including closing some One Oclock Clubs and de-designating some Sure Start Centres. In other words, they tried to carry out their new duty by cutting back on existing services. The Government, for their part, switched money from the Early Intervention Grant (which was not ring fenced, so the Council had some discretion about how to spend it), to the Dedicated Schools Grant. One Oclock Clubs were a popular, long-standing local form of childcare provision. In general, they offered a drop in stay and play service for about three hours per weekday. This service tended to be used by parents with babies and children up to three years of age, although could be used for children up to five. The current administration, in effect, closed six One Oclock Clubs, and changed the designation of two Sure Start Childrens Centres, in order to re-use the premises for the new initiative on two year olds.
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Restoring the One Oclock Clubs is neither easy nor straightforward: the sites that were closed are now all leased under other arrangements, mostly providing services under the Coalition two-yearold initiative. But it would be possible to reinstate four of the Clubs ( Bolingbroke, Coronation Gardens, Windmill and Alton (Fontley Way)), with effect from October 2015, with a part year cost in FY 2015/16 of 143,000, and a full year cost in FY 2016/17 of 245,000. Recommendation: Bring back One Oclock Clubs That the Council should commit to the restoration of four One Oclock Clubs (Bolingbroke, Coronation Gardens, Windmill and Alton (Fontley Way)), from October 2015, the earliest practicable date, at a net revenue cost in 2015/16 of 143k, a full year cost in 2016/17 of 245k, and a capital cost of 25k per centre, 100k in total, without reducing other services for preschool children. 4.3.2 School Crossing Patrols In April 2013 seventeen sites across Wandsworth lost their school crossing patrol service. At another 19 sites the service survives with private sponsorship, from companies including estate agents and mobile phone providers. The School Crossing Patrol service was formally recognised by Act of Parliament in 1953, and was for many years provided by the police. Responsibility was transferred to the boroughs in 2000. The Councils Director of Finance estimates that to restore the School Crossing patrol service to its previous level would cost 175,000 in a full year. A new administration could restore the service with effect from September 2014, the start of the Autumn school term. At present the Council receives 37,000 in sponsorship or school contributions. However these arrangements expire in the current calendar year and there is therefore no certainty that they will continue into the future. Therefore, the full cost of the service figure for 2015/16 is used here. Up till now, crossing patrol staff have been paid below the London Living Wage, and so additional budget provision will be required for this purpose.

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Recommendation: Reinstate School crossing patrols That the Council should commit to the restoration of the school crossing patrol service to its previous level, with effect from September 2014, at a cost in 2014/15 of 110k, and a full year cost in 2015/16 and subsequent years of 200k. 4.3.3 Inspection and enforcement staff One of the ways in which the Council has an impact on the daily life of people who live and work in the Borough is the state of neighbourhoods, streets, and the public realm. Communities want to see urgent action on potholes, cracked pavements, fly tipping, littering and dog fouling. According to Wandsworths Finance Department, a total of 29 staff are employed by the Council, in three separate teams, to carry out these basic inspection and enforcement services. Their wages range from 19,000 to 56,000 p.a. The total annual cost of this service is 1,187,705. Three of the existing posts are trainees. It is proposed to strengthen front-line inspection and enforcement services, so that there can be prompt action to follow up and put right complaints from members of the public. Within the four year term of the administration to be elected in May 2014 there will be scope for streamlining the management structure of these services, flattening the hierarchies. But in the first six months, the new administration could strengthen front line inspection and enforcement services, adding six additional posts at a part-year cost in 2014/5 of 125k, and a full year cost in 2015/6 of 250k. At least one of the new posts should be designated as an apprenticeship. Recommendation: More inspection and enforcement staff The Council should, by October 2014, take on six new front line inspection and enforcement staff, to deal with complaints about highways, pavements etc. At least one of these posts should be an apprenticeship. The cost in Financial Year 2014/15 is estimated at 125k, and the full year effect in FY 2015/16 as 250k.

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4.3.4 The London Living Wage Policy background The nature of poverty in Britain has changed dramatically in recent years. The Joseph Rowntree Foundation, in their report Monitoring poverty and social exclusion 2013 found that: For the first time on record, the majority of people in poverty are in working families. Two-thirds of adults in these families are in work. Because of the importance of poverty pay in determining the well-being and life chances of families, campaigning groups, including Citizens UK, and the Living wage Foundation, have developed the idea of the Living Wage. The Living Wage is an hourly rate set independently and updated annually. The rate is calculated according to the basic cost of living in the UK. Employers choose to pay the Living Wage on a voluntary basis. Because the cost of living in London is significantly higher than elsewhere in Britain, there is now a separate, higher, London Living Wage. The Mayor of London has been a committed supporter of the London Living Wage, and both the Greater London Authority itself, and Transport for London, are accredited Living Wage Employers. In November 2013, the rate for the London Living Wage for the coming year was set by Boris Johnson at 8.80 an hour As Boris Johnson has said: Paying the London Living Wage is not only morally right, but makes good business sense too. There are now over 2,200 employees working for companies with contracts from the GLA who are benefitting from the London Living Wage. (Living Wage Foundation website) Linklaters, a leading London law firm, say: "We want good people and the Living Wage is an excellent way of getting and keeping them." (Living Wage Foundation website) Many London employers, including at least nine London Boroughs, are now Living Wage accredited employers.

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London Authorities which are accredited Living Wage Employers: Greater London Authority London Borough of Brent London Borough of Camden London Borough of Ealing London Borough of Enfield London Borough of Hounslow London Borough of Islington London Borough of Lambeth London Borough of Lewisham London Borough of Southwark
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Despite the bi-partisan support for the London Living Wage, from Conservative and Labour Councils, and from leading private sector employers, and despite the impassioned advocacy of the London Mayor for the policy, Wandsworth Council in 2012 voted down a proposal to become a London Living Wage employer. At this years World Economic Forum in Davos, on 24 January, Prime Minister David Cameron said, of the Living Wage: I support it, but people should pay it when they can afford it, and around the country you are seeing people like councils offering it. (Guardian, 24January 2014) So could Wandsworth afford to pay the London Living Wage? It would be a serious and costly decision to do so, and full implementation would take time. It is necessary to consider separately the position of staff directly employed by the Council, and staff working for contractors providing outsourced services to the Council. Staff employed directly by the Council With the outsourcing of many routine and manual jobs, most local authorities now employ relatively few staff at levels below the Living Wage rate. Nevertheless, figures prepared by Wandsworth Council officers in January 2014 show that the Council currently employs 62 staff at rates below the London Living Wage. In addition to the school crossing patrols mentioned

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above, the jobs concerned cover a wide range of council activities, including: Labourer Cook Cemetery Attendant Canteen Assistant Cleaner Gardener The Finance Department have estimated that the full year cost of moving all directly employed staff to a minimum of the London Living Wage would be 56k, to which 30% should be added to cover Employers National Insurance and Pension contributions. Budget provision of 75k would therefore be necessary for a full year and 55k if an incoming council decided to pay the London Living Wage from 1 July 2014. Staff employed by contractors The task of bringing staff employed by contractors within the scope of the London Living Wage would be more complex. In Wandsworth, over 2,300 staff are employed at below the London Living Wage on fourteen major service contracts. These contracts: Expire in different years; Are met from different budgets (most from the General Revenue Budget, but some from the Housing Revenue Account and the Dedicated Schools Grant); And, in the case of cleaning and catering staff in schools, the decision on wage rates is one for the governing bodies rather than the Council.

Broad details are given in Table 8 below. In addition, at Annexe 3 to the report a schedule gives full details of the dates for retendering of all the contracts concerned, the budgets from which they come, and the body responsible for taking the decision.

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Table 8 London Borough of Wandsworth Contractors staff paid less than London Living Wage February 2014 Contract No of staff paid less than LLW 3 116 1 83 636 500 90 398 95 83 1369 346 283 3 632 Estimated annual cost of bringing staff up to LLW 5,500 270,300 2,000 482,190 1,209,000 1,534,300 413,330 859,500 252,500 139,671 3,747,971 583,914 596,013 5945 1,185,872

General Revenue Budget Vehicle Removal Parking enforcement Cash collection Street Cleaning Home Care Residential care Building cleaning and attending Leisure Centres Garden maintenance Non-Schools cleaning General Fund Total Schools Budgets School Cleaning School Catering Garden Maintenance Schools Total Housing Revenue Account Estate Cleaning Garden Maintenance Sheltered Housing HRA Total

243 49 8 300

1,435,777 289,450 42,246 1,767,474

TOTAL 2301 8,121,637 (Source: correspondence with Wandsworth Finance Department) Although many councils have become accredited Living Wage employers, no Council has, and no council could, simply decide to move all contracts to the London Living Wage overnight. Implementation can only be on a case-bycase basis. Councils are obliged to obtain best value in all their contracts.

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Moving to the Living Wage should not, however, be seen simply as an additional cost. There are direct benefits to the Council, as well as to the households concerned. A report to Brent Council pointed out that: The main benefits which have been so far experienced by both Public and Private Sectors in applying the London Living Wage have been: lower staff turnover improved productivity lower sickness absence. (Report to Brent Council Executive, London Living Wage) And insofar as the implementation of the London Living Wage does increase costs, it is to be expected that some of those costs will be borne by the contractors themselves, as well as by the Council. Traditionally, while Wandsworth uses price alone as the main criterion in awarding contracts, in certain circumstances the Council uses the Most Economically Advantageous Tender (MEAT) approach, balancing a range of factors. There would need to be an extension of the MEAT approach to cover more contracts, and explicit reference in tender specifications and evaluation criteria to the desirability of the London Living Wage being paid, subject to the overall duty to secure best value. Adult Social Care Two of the largest Wandsworth contracts due for early renewal (in 2015/16) are those for home and residential social care, totalling nearly 3 million. A handful of Living Wage authorities have so far managed to extend the policy to cover their social care contracts most have had difficulty in doing so.

Extending the London Living Wage to social care contracts the experience of Islington Islington was one of the first two authorities to become an accredited Living Wage employer in 2012. 92 per cent of its contractors now pay the Living Wage, benefitting more than 500 workers. The borough is explicitly committed to rolling out the Living Wage to its social care contracts. This will happen on a contractby-contract basis rather than as a blanket requirement. The roll out is accompanied by a drive for contractors to prioritise local recruitment, maximising the subsequent benefits to the local economy. (London Assembly report, Fair pay: Making the London Living Wage the norm February 2014)
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The Economy Committee of the London Assembly recently examined progress towards the London Living Wage across the public and the private sectors. They pointed out that Frontline social care workers have been historically low-paid, despite the demanding and important nature of their work. The Equality and Human Rights Commission has identified low pay in the care sector as a driver for high turnover, a key factor in inadequate quality of care. The Living Wage Commission has also recently highlighted how difficult it can be to make an adequate living from a career as a care worker in London. (London Assembly report, Fair pay: Making the London Living Wage the norm February 2014) In their conclusions, they stated: the Committee remains concerned that most Living Wage accredited boroughs have yet to apply the Living Wage to social care services. We therefore reiterate calls on government to increase funding for social care to help councils to reward adequately and retain social care workers. (Ibid) Within London the Living Wage Boroughs are working together to address the urgent challenges of extending the policy to the social care sector. Phased Implementation The difficulty of extending the London Living Wage to the care sector has been recognised by the Living Wage Foundation. They have developed a phased implementation approach: To take up the Phased Implementation option employers will need to work with the Living Wage Foundation to ensure the Living Wage is applied to all directly employed staff and that there is a timetable in place for all contracted staff to move to the Living Wage. This can be done on a rolling basis as contracts come up for renewal and for longer contracts where there are opportunities around break clauses. (Living Wage Foundation website) A way forward for Wandsworth, therefore, would be to agree in principle to become a London Living Wage Employer, and then to implement the policy over time, according to an agreed timescale, working with the support of the Living Wage Foundation and other boroughs. The best should not be allowed to become the enemy of the good: just because a new Council could not pay the full Living Wage to all low paid employees of
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contractors at once, does not mean that they should not make a start. Such a start could include both including the full LLW in some contracts, and introducing the LLW for other contracts by instalments. The phased programme could include: Encouraging School Governing Bodies to pay the London Living Wage to their cleaning and catering staff 632 low paid staff work on cleaning and catering contracts paid for from the Schools Budget. It would be for governing bodies to decide whether to pay the LLW to these groups but the Council should encourage them to take this step. There is a 15 million surplus in the Schools Budget across the borough. Bringing forward the renewal of the housing estate cleaning and gardening contracts, and including the London Living Wage in the contract documentation Two major contracts are chargeable to the Housing Revenue Account. The Estates Cleaning contract (estimated total additional cost 1.5 million p.a. at 2014 prices) and the garden maintenance contract (estimated total additional cost 300k p.a.) do not come up for renewal during the 4 year term of the Council to be elected in 2014. When they do come up, in 2020/21 and 2021/22, these costs could easily be absorbed by the HRA. It would be sensible to renegotiate these contracts at an earlier date. Setting a five year timetable for the gradual implementation of the Living Wage for social care, working with other London Living Wage authorities to achieve this. Phase in LLW for social care from 2016/17 onwards. Including the London Living Wage in the contract documentation for non-social care General Revenue Budget contracts as they come up for renewal; evaluate on the basis of Most Economically Advantageous Tender Best Value plus quality and productivity improvements

What would phased implementation cost? Table 9 below illustrates what a programme of phased implementation of the London Living Wage might cost.

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Table 9 London Borough of Wandsworth Potential implications for the General Revenue Budget of staff employed by contractors moving to London Living Wage on a phased programme 2014/15 2015/16 2016/17 2017/18 m m m m 0 0.5 0.5 0.5

Include LLW in contract docs for Leisure Centres, vehicle removal, non-school cleaning ; evaluate on case-by-case basis Assume 50% of gross cost met by Council Include LLW in docs for Building Cleaning 1st stage in increasing social care wages Include LLW in docs for parking enforcement 2nd stage in increasing social care TOTAL

0.2 0.3 0

0.2 0.3 0.15 0.35

0.5

1.0

1.5

Assumptions for Table 9 1. London Living Wage (LLW) included in contract documentation for all General Revenue Budget contract renewals from FY 2015/16, except social care; 2. Evaluation on Most Economically Attractive Tender basis; 3. Specifications to invite proposals for quality and productivity improvements; 4. 50% of gross additional cost of LLW likely to be met by the Council; 5. 5 year phased programme to bring social care staff up to LLW
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The Commission estimates that the impact on the General Revenue Budget would be 0.5 million in 2015/16, 1 million in 2016/17, and 1.5 million in 2017/18. Recommendation: Become an accredited London Living Wage Employer That the new administration in Wandsworth Council should immediately seek accreditation as a London Living Wage Employer, and should take the following steps to achieve full Living Wage status: Immediately pay the London Living Wage to the 62 direct employees currently paid below that rate; Work with the Living Wage Foundation to develop a Phased Implementation Plan to extend the protection of the London Living Wage to the 2300 low paid staff employed by Council contractors, working on a case-by-case basis, and reviewing all
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existing contracts, subject to the requirement to secure best value, including improvements in quality and productivity; Use the Most Economically Attractive Tender approach more widely in tender evaluation and contract awarding; Include the payment of the London Living Wage in future contract specifications, and as one of the non-financial factors in future Most Economically Attractive contract evaluations; For those contracts where hourly payments are currently substantially below the London Living Wage, phase in the London Living Wage over several years, to mitigate any cost impact. Cooperate with other London Living Wage employers to ensure full LLW coverage for social care workers; Encourage school governing bodies to pay the London Living Wage to low paid contract employees in their schools; Seek to bring forward the reviews of Housing Revenue Account contracts for estate cleaning garden maintenance, and sheltered housing, so that the London Living wage can be extended to these groups of staff. Work with London Councils to persuade government to increase funding for social care to help councils to reward adequately and retain social care workers.

4.4 Proposed policy changes: summary of costs Table 10 below summarizes the costs of the policy measure proposed in Section 4.3, showing the year in which the additional expenditure is forecast to begin. Table 10: Priority measures - costings 2014/15 m oclock 0 0.110 0.125 0.05 0 2015/16 m 0.143 0.2 0.25 0.1 0.5 0.1 0.285 1.293 2016/17 m 0.245 0.2 0.25 0.1 1.0 0.1 1.895 2017/18 Capital m m 0.245 0.1 0.2 0.25 0.1 1.5 0.1 2.395

One clubs Crossing patrols Additional front line inspection Staff Living Wage council staff Living Wage contractors staff 20 more apprenticeships TOTAL

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(2014 prices; figures in this table are estimates by the Commission based on information supplied by Wandsworth Council Finance Department) 4.5 Proposed policy changes: sources of funding The Commission carefully reviewed possible funding sources for the priority measures. The aim was to free up resources to enable new initiatives to proceed without further reducing funds for front line services. Three areas were identified from which resources could be diverted: 4.5.1 Phasing out of Performance Related pay for senior Town Hall managers The bonus culture that has grown up in Wandsworth Council since 1978 is extraordinary. It is certainly without parallel elsewhere in London local government, and probably without an equal elsewhere in the public service. It is incompatible with traditional public service values. Not only is a Wandsworth officer the highest paid local government employee in London: another, who received a bonus of 21,185 in 2011/12 (the most recent year for which comparative data are available) received the highest bonus. Relatively few London Councils use Performance Related Pay or Bonus schemes; Wandsworths distinctive approach involves paying bigger bonuses to more managers than other Councils Table 11 below is derived from the Town Hall Rich List, which is compiled by the TaxPayers Alliance from a study of local authorities published accounts. The category other payments covers payments other than salary, pension contributions and redundancy payments.

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Table 11 Bonuses: London Boroughs making other payments to staff 2011/2102 highest individual payment Borough Bexley Camden Harrow Havering Kensington & Chelsea Redbridge Wandsworth Westminster Highest other payment - k 13 13 1 6 8 3 22 (21k bonus; 1k insce.) 20 (18k bonus; 2k insce.)

(Taxpayers Alliance, Town Hall Rich List 2013; details from Wandsworth and Westminster published accounts) In the case of Wandsworth, the other payments cover two elements the bonus, and payment by the Council for private medical insurance for senior managers. Table 12 below provides details of the bonus payments made by Wandsworth Council in the last two years. In 2011/12 these amounted to just over 3million; in 2013/14 to just under 3 million. Table 12 London Borough of Wandsworth Performance Related Pay payments 2011/12; 2012/13 2011/12 (paid July 2012) Hay Band (ie Chief 368,431 Officers) PO Grades 1,918,561 Other Grades 772,261 TOTAL 3,059,253 2012/13 (paid July 2013) 345,895 1,825,329 748,884 2,920,108.

(Information provided by Wandsworth Council Finance Department)

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No payments have yet been made for 2013/14; these would normally be paid in July 2014. Many management experts question whether Performance Related Pay even works. A study for the Work Foundation found, for example, that: There can be no doubt that PRP during times of low inflation has not been as effective as was originally hoped. The evidence suggests that most individuals find PRP at least a neutral influence on motivation, and most often a negative influence. Recent studies have shown that some PRP schemes are discriminatory. (Bevan, S; Smart Incentives; The Work Foundation, 2003) Wandsworths bonus culture is deeply inappropriate. An orderly and phased end to the PRP system as it currently exists in Wandsworth must be negotiated. Recommendation: Scrap the bonuses (i) The incoming administration should give notice immediately after the May elections that the Performance Related Pay policy will cease to have effect; Notice should also be given that the payment of private medical insurance premiums will stop; Payments due in respect of performance in 2013/4, to be paid in July 2014, will be honoured, but thereafter the Council will negotiate an orderly and phased end to this system; The Council will revise its remuneration strategy in consultation with staff, as well as with local residents and businesses, and will seek to agree a new strategy in the year 2014/15.

(ii) (iii)

(iv)

4.5.2 Ceasing to print Brightside magazine Wandsworth Council continues to produce its civic newspaper, Brightside, as a printed publication and distributes it to 140,000 households in the Borough. Many other councils have moved to web-only publication. The Finance Department estimates that printing and distributing the six issues planned for 2014/5 will cost 125,000 gross. This is offset by an estimated 24,000 advertising income.
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By ceasing to print and distribute the paper, an incoming Council could save at least half this amount in FY 2014/15, and the full amount in 2015/16. This course of action would be in line with the advice of the Secretary of State, who in his 2012 study 50 ways to save examples of sensible savings in local government, urges councils to Scrap the town hall Pravda. Eric Pickles goes on to argue that Local authority newspapers undermine an independent local press. Council departments also sometimes use Brightside for their own advertisements for example, for carers, or foster parents. These could, however, continue to be placed in an on-line edition. Recommendation: Stop printing Brightside The Council should cease to print and distribute Brightside, relying instead on web based media. 4.5.3 Drawing on Reserves Section 2.7 noted the high levels of reserves carried by Wandsworth Council. In both 2013/14, and 2014/15, the present Council administration has made substantial drawings on reserves in order to balance the budget - 8 million in 2013/4, and 6 million in 2014/15. In order to enable work on priority new initiatives to begin the Commission believe that a limited further drawing on reserves, of up to 500k in 2014/15 should take place. Given the other opportunities for expenditure reductions identified in the preceding paragraphs, the Commission consider that further drawings on reserves would not be required to fund the immediate programme of policy change. In due course the incoming Council should review its overall policy on reserves, having regard to: The Councils overall budgetary position; The budget risks identified by the Director of Finance (para 2.7 refers);
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The inherited level of reserves

Recommendation: Reserves The new Council should be ready to use reserves to fund up to 500k of expenditure on new projects in FY 2014/15 4.6 Proposed policy changes: summary of funding Table 13 draws together the information on the various funding sources: Table 13 Priority measures - funding 2014/15 m 0 2015/16 m 2 2016/17 m 3 0.101 0 3.101 2017/18 m 3 0.101 0 3.101

Ending performance pay Stopping 0.05 0.101 printing Brightside Drawing on 0.5 0 reserves TOTAL 0.55 2.101 (Source: Wandsworth Finance Department)

4.5 The Priority Measures: balancing the budget Finally, Table 14 brings together the information on costings and sources of funding, showing how an incoming administration could fund its priority measures without increasing the Council Tax.

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Table 14 Priority Measures: balancing the budget 2014/15 2015/16 2016/17 2017/18 Capital m m m m m 0.285 1.293 1.895 2.395 0.1 0.550 0.265 2.101 0.308 3.101 0.706 3.101 0.706

Extra spend on policy priorities (from Table 10) Identified funding (from Table 13) Balance

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5. Towards a new kind of Council The old days are not coming back any time soon. Whatever government is in power after 2015, it seems highly unlikely that there will be any increase in the resources available to local councils. Austerity seems set to continue. Local government cannot look forward either to increased government grant, or to a more flexible and buoyant local tax system. All public services, all councils, are having to adjust to a different world. It is as necessary for the opposition party to recognise this as it is for the party in control. All councils find themselves in the same position: Grant income is going down; Demand for services is going up; The ability to raise revenue is constrained.

A generation ago, Wandsworth was at the forefront of innovation in local government. One of the pioneers of outsourcing to the private sector, Wandsworth successfully cut its spending. Under the rules in operation at the time, this enabled the Council to maximise its grant income, thus enabling the Council to maintain low levels of taxation. The advantages of this approach persisted through changes in the local government finance system, from rates to poll tax to Council Tax. But a record of innovation in the 1980s is not enough when responding to the challenges of the second decade of the twenty first century. Wandsworth Council has become inward-looking and complacent, over-dependent on government grant, and reluctant to learn from best practice elsewhere. The Audit Commission, commenting on the levels of financial stress now being experienced in local government, say: The effects of these funding reductions and other financial challenges are not felt equally by councils. Some councils are more dependent than others on government income to fund services. (Audit Commission, Tough Times, November 2013) The same point is echoed by Wandsworths Councillor Govindia: Wandsworth has always been reliant on government grants because of the low council tax so the impact on us is often greater when it is

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reduced. (Wandsworth Guardian, 13 October 2013) The message is clear: over-dependence on government funding decisions leaves councils vulnerable. Over the years the Council benefitted from exceptionally favourable treatment in successive annual financial settlements. What began as a brave and radical experiment in reshaping local government has ended in dependence on the vagaries of an arbitrary grant system. They are subsidy-junkies: reliant on the continuation of government funding. The prolonged austerity programme means that this is no longer sustainable. Because Wandsworths Council Tax is so low, and because it pays for such a small proportion of the Councils activity, even a large increase would only bring a modest increase in revenue. An incoming administration, which aims to stop the slow, relentless erosion of basic services, will have no option but to launch a process of radical transformation. There is plenty of good practice available elsewhere from which the Council can learn, and that experience can be found in councils of all political persuasions. We propose a new model of local government to replace the old: Old model

Inward-looking Never ending salami-slicing cuts Council knows best Wandsworth is different High chief officer salaries Low staff morale"

New model Outward looking Radical look at service needs and priorities Based on cooperation and partnership Work with: ! Other public services ! Neighbouring boroughs ! Business ! Third sector Empower staff Flat, lean structures

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Recommendation: Transformational change (i) Rather than accepting the continuing erosion of basic services, a new administration will carry out a radical transformation of the Council, drawing on good practice and innovation in business and the public sector to ensure: (ii) Responsiveness to local needs; Efficiency; Value for money.

The principles which underpin the programme of transformational change will be: Partnership with the NHS, other public services, and other councils; Flat management structures; Transparency and openness; Maximum use of digital technology; Staff empowerment; New relationships of collaboration with business and the voluntary and community sector. The Council will aim, thorough the implementation of this change programme, to save at least 20 million over a four year term while protecting front line service delivery.

(iii)

Section six of the report examines the components of the new approach in more detail.

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6. Building blocks for change 6.1 Shared services and joint management

While the government is very keen on councils saving money by sharing services especially, but not only, back office services Wandsworth has been reluctant to go down this road. Secretary of State Eric Pickles, in his 2012 booklet 50 ways to save examples of sensible savings in local government puts shared back office functions at the top of his list of potential savings. Pickles points to the experience of Wandsworths near neighbours: The Tri-borough initiative in London (Hammersmith & Fulham, Kensington & Chelsea, and Westminster) report that they are on track to save 40 million by 2015-16 by combining back office services and management costs. It is not only Conservative Councils that have followed this approach. Labourled Barking and Dagenham Council, in East London, and Thurrock nearby in Essex, have appointed a joint Chief Executive and share a number of services. They are now considering moving on from shared services to joint management of some services. In a recent report to Thurrock Council, the joint chief executive of the two councils explains the distinction: It is important to differentiate between joint management and shared services. Joint management is where a manager is jointly appointed at two or more councils to oversee services and to provide management and direction within the existing separate governance frameworks. Shared services describes the delivery of a single service to two or more councils. Most councils now have a range of shared services in place with a range of partners. This generally achieves efficiencies and cost reduction through increasing scale. However it does not address the issue of spreading management overhead costs which joint management is intended to address. Experience in the Triborough Initiative as well as in the Barking/Thurrock case suggest that, while genuine savings are there to be made, not all the predicted economies in fact materialise. And arrangements between authorities can fail. With experience of shared services in practice, the Chief Executive of the Thurrock and Barking & Dagenham joint venture sees the joint management approach as an answer to one facet of increasing senior staff salaries:

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The opportunities to make savings amongst senior managers are limited due to the range of services that the council provides, unless the roles of each senior manager are broadened to include a number of services that are not within the professional experience of most directors. This has been the structure that this council, and most others, have adopted in the past, with the significant disadvantage that the professional expertise needs to be provided by increasingly senior Heads of Service, or Service Directors under the direction of strategic directors which is a more expensive structure overall. Wandsworths economy programme was launched in a report by the then Leader of the Council, Councillor Lister, in a report in September 2010. The report was notably cautious about shared services. Lister itemised what he saw as the disadvantages of shared services: Lack of accountability; Dilution of management expertise Increased travelling costs Shortage of highly skilled and competent managers; Finally, Wandsworth has a very distinctive management style and ethos, evolved over many years and not found elsewhere.

Listers report downplayed shared services as a possible way forward. Officer time has, for the most part, not been devoted to this option. This approach was confirmed by the present Leader, Councillor Govindia, in 2013. Traditionally, Wandsworth has been very insular in its approach, preferring to adopt a made in Wandsworth mentality at a time when councils across the country are actively developing quite radical new ways of working together. In the present financial climate facing local authorities, all councils need to secure maximum efficiency. An incoming administration cannot afford to ignore the opportunities for efficiency savings by sharing services with other councils. Two caveats are necessary. First, while there are undoubtedly real savings to be made, it will be important to guard against optimism bias over-ambitious predictions of the savings to be made. Second, Wandsworth is coming to the party so late that the most obvious synergies and partnerships may no longer be available. Shared services alone will not solve the problem but they are an important component of a solution and cannot be ignored any longer. Recommendation: Shared services and joint management An incoming administration should actively pursue opportunities for shared services or joint management of services, with other local authorities, the NHS, and other public bodies as partners, in order to improve value for money without jeopardising front line service delivery.

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6.2 Shared procurement Wandsworth Councils inward-looking culture has meant that it has also missed opportunities to commission goods and services at lower cost through greater collaboration with other partners. Here too Secretary of State Pickles has shown the way: Councils can group together to get better prices thanks to their purchasing power. (50 ways to save - examples of sensible savings in local government) The last twenty years have seen a major change in the way local services are provided increasingly, services are provided, not by directly employed council staff, but by a range of independent contractors and suppliers, many of them private sector, but some voluntary or third sector. This is not going to change in the foreseeable future but it is time for Councils to wake up to their power in these new competitive markets. With the transfer of control over much education spending to central government, the largest area of spending in most London boroughs is the commissioning and purchasing of specialist services for vulnerable adults (such as the elderly and people with disabilities) and vulnerable children (such as those with special needs and those at risk of abuse or neglect). In Wandsworth, this currently amounts to about 120 million of expenditure each year. This figure is likely to rise still further if demographic pressures continue as seems very likely. Some of these services are provided directly by the council but many important services such as residential and home care are provided by other bodies such as not-for-profit organisations and charitable groups. In these new markets, councils need increasingly to work with others to develop new forms of collaboration. Six West London boroughs have been working closely for nearly a decade as the West London Alliance to strengthen their local procurement arrangements through greater collaboration in the specification, commissioning and purchasing of a wide variety of goods and services. This is estimated to have secured many millions of pounds of cashable savings which those authorities would otherwise have spent on inefficient procurement practices.

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Innovation Case Study the West London Alliance Efficiency and Value for Money on Social Care The West London Alliance (WLA) is a cross-party partnership of six West London councils - Barnet, Brent, Ealing, Harrow, Hillingdon and Hounslow.
WLA member Councils have achieved significant financial savings or

avoided upwards cost pressures. Aggregating the cash savings and cost pressures avoided the total comes to 10,624,193. A simple calculation on the return on investment of 423,500 gives a ratio of 25 saved/cost avoided for each 1 invested. The West London Adult Social Care Efficiencies Programme is the longest running of the WLA Efficiencies Programmes. Together the councils spend well in excess of 300m a year purchasing adult social care for residents. This programme, approved by the WLA in autumn 2009 and in 2011/12 in its second year of operation, focuses on collaboration to address the two highest areas of adult services expenditure - residential care (circa 200m pa) and home care (circa 57m pa). The programme uses a variety of procurement techniques and processes to make best use of the councils collective purchasing power. These include:

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" " " " " " " " "

a restricted tender processes to address the housing related support and home care markets, including best price negotiations as part of the process the purchase and development of a new adult social care management information system creation of an approved list for residential and nursing care home placements, underpinned by the new management information system supplier negotiations to reduce costs whilst also improving the supply chain and driving efficiencies for both supplier and purchaser.

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Many current budgets and service specifications reflect purchasing decisions made in a very different financial climate to that which prevails today. Many councils have already begun to review existing contractual arrangements with their suppliers with a view to securing improved service outcomes for local residents and/or reduced unit costs and budgetary savings.

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The opportunities for shared procurement do not lie only within local government. In Wandsworth, the two largest employers are the Council and the National Health Service. Yet little serious attempt has been made by the current administration to achieve more efficient purchasing of goods and services, especially in areas such as adult and childrens care. These proposals based solidly on experience across the public sector - will not be quick or easy to implement. The renegotiation of existing contracts with suppliers will inevitably be a fraught process but it has been done successfully elsewhere. Equally, the establishment of new and very different collaborative purchasing arrangements between authorities and officers who have not previously worked closely together will be a challenge. Again, it has been done successfully elsewhere. The proposals amount to a radical change of approach, from a stance which always looks inwards for solutions to one which looks outwards and actively engages with other partners to maximise the value of every pound of public spending. Recommendation: Shared procurement Recognising the shift away from service provision by direct employment to service procurement in competitive markets, an incoming administration will make full use of the Councils power as a customer in those markets by entering into joint procurement arrangements with other local authorities, the NHS and other public bodies in order to achieve greater efficiency and value for money. 6.3 Office Accommodation There are significant savings and efficiency gains to be achieved from a radical change in the Councils use of office accommodation. At present, the Council operates from a myriad of different office locations. Moving at glacial speed, in a strategy of labyrinthine complexity, the Council is slowly consolidating its offices on two sites: the Town Hall Complex and the Frogmore Campus. These two sites are separated by the former Ram Brewery land, soon to be the scene for a large and long term construction project. The Town Hall itself is an art deco building and is Grade II listed. Despite their aesthetic and nostalgic appeal, however, traditional municipal buildings tend to be old, dilapidated, costly to run and environmentally problematic (e.g. due to high carbon emissions or over-reliance on private motor vehicles). There is considerable appeal in thinking afresh about an entirely new building which would then allow the authority to develop a state-of-the-art facility which is more flexible, fit for modern office uses, cheaper to run and also more environmentally sustainable.

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Apart from staffing costs and the purchasing of goods and services, property costs are one of the principal drivers of total spending in all councils. This is especially true in London where land and property values are very high by national standards. High land and property prices can be seen as a serious drain on the public purse, diverting funds from the provision of vital frontline services to the maintenance and upkeep of an often scattered and costly real estate portfolio. In many cases, councils are now planning to share premises with other local agencies such as NHS/CCG, further education, Job Centre Plus, police and the like. As much current debate in local government is on the need to foster stronger local partnerships and to break down professional and institutional boundaries (most notably between the health service and adult/childrens social care), this makes obvious sense. Many London boroughs such as Croydon, Southwark and Brent have taken a much more radical approach to office accommodation issues compared to the cautious and incremental approach which has characterised recent discussions in Wandsworth. Boroughs such as Croydon, Southwark and Brent have all moved towards a much greater degree of concentration and co-location on to a single major site which houses all or most of the authoritys corporate, departmental and administrative functions. Innovation Case Study Brents new Civic Centre
,Lower office costs and greater sustainability in

June 2013, Brent Council opened a new purpose-built civic centre in Wembley which enabled them to bring all their council departments together under one roof. By moving out of 14 previously separate and costly buildings, the council estimates it is saving around 4m every year in reduced office costs. The building has a fantastic new central library and is also a brilliant community facility which generates substantial additional income for the council. Its location next to the national stadium has given the whole area an economic boost and it has recently been recognised as the greenest public building in the UK. Any major private sector business would certainly examine all the options for securing value from its real estate holdings. A truly business-like Wandsworth Council should do the same. The strategic aim should be to secure a win-win
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situation whereby the council obtains improved premises which are more flexible, sustainable and operate at lower cost than the current property portfolio. The best prospects for achieving that aim are likely to be a single-site solution. Such a single site could be based on one of the existing office locations, or on a regeneration site elsewhere in the Borough. The existing Town Halls success as a venue for weddings and civil partnership ceremonies suggests that its future could be as part of a hotel development. Recommendation: Office accommodation The incoming Council should urgently examine the scope for locating all its headquarters functions on a single site, in modern, purpose built office accommodation. The single centre could either be on one of the existing central Wandsworth sites, or on a regeneration site elsewhere in the borough. Surplus sites, possibly including the present Town Hall, should be disposed of and the resultant capital receipt used to fund the rationalisation programme. In order to achieve this, the following steps should be taken: An immediate review of all office plans to ensure that they do not rule out a single site model of operation; Commissioning of a study to develop a flexible, multi-use (and possibly multi-agency) public service centre for the borough with an enhanced range of public services and facilities accessible to all residents; Early approaches to potential private sector partners Drafting of a specification for a new single site operation in consultation with all key stakeholders including local people and groups with a view to consolidating appropriate facilities in the new building while safeguarding those services which will still need to be provided at a local or neighbourhood level. The development of an outline business case with the selected private sector partner setting out the full costs and benefits of any new scheme all assumptions and projections will be subject to independent review and the scheme will only go forward if it demonstrates real and verifiable reductions in overall running costs. The initiation of an international design/design and build competition under European procurement rules to seek the highest possible level of competitive bidding for what will be seen in the market place as a highly attractive and prestigious capital project

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The selection of an experienced contractor to build the new facility to an agreed specification, cost and timescale independent project management support will be retained to ensure that all key milestones are met and the project stays on track and on budget.

6.4 Information Technology Wandsworth Council operates conventional IT services which have recently been relocated from individual departments to the Administration Department, although a number remain separately operated by the Finance Department. The budgeted spend in the Administration department in 2013/14 is 11 million with a further capital spend of 1 million. There are probably some further scale economies to be achieved by completing the centralisation of IT. The majority of Wandsworth Councils systems are legacy IT systems which have been updated over the years but remain based on physical computers located principally in the Councils offices. There is clearly an opportunity to make improvements in both efficiency and reliability over time by moving towards Cloud based systems where servers and software are remotely hosted. These systems have been available for a number of years and are now sufficiently established that they are being increasingly used by both private and public sector organisations. Recommendation: Information Technology Wandsworth Council should formulate a plan to progressively move its IT infrastructure onto the Cloud as individual IT systems come up for review over the next five years. The result of this should be significant reductions in overall IT costs and a significant improvement in the reliability of IT systems. In parallel it should continue to shift its services from paper to online, so reducing the volume of paperwork in Council offices.

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Housing and the Housing Revenue Account 7.1 Housing Revenue Account Reform Although the Council is well known for its drive to sell council housing, Wandsworth has retained responsibility for its housing stock, despite inducements over the years to transfer it to a housing association or an Arms Length Management Organisation (ALMO). The Council now has 17,000 social rented properties, and a further 15,000 leasehold properties. In the last two years there have been major changes in the financing of council housing. These changes were initiated by the Labour Government and carried through to implementation, substantially unchanged, by the Coalition. Under the new self-financing system, instead of paying a proportion of its rental income into a national pool, Wandsworth now retains the revenue stream. In return for this, the Council took on a debt of 434 million, financed partly from Wandsworths own reserves, and partly by a loan of 224 million. Many other Councils are in a similar position to Wandsworth, although some have been debt-free from the start of the selffinancing regime. Wandsworths loan is due to be repaid in full in the financial year 2024/25. When that happens, the Council, owning the asset of the housing stock, and with the secure income stream of the rents, will have considerable freedom (headroom) to borrow to fund new housing capital investment. The Councils ability to repay the loan depends on the rents being collected; the Housing Revenue Account (HRA) Business Plan provides forward projections for both rental income and loan repayment. 7.2 Council House Rents For the past ten years at least, Wandsworth Council has followed a policy of maximizing its rental income from council housing. Across England, in 2012/13, the average weekly council house rent was 78.78. The average rent in Wandsworth was 121.36. This was the highest rent level in the country the nearest level to Wandsworths was in neighbouring Kensington and Chelsea, with an average rent level of 120.75. (Figures from CLG). Wandsworth arrived at this position by systematically increasing rents by more than the rate of inflation. Only in 2010 was there a pause. The Councils own figures make it clear that even in the depths of the recession after 2010, Wandsworth Council rents increased far faster than earnings Table 15 and Figure 4 below give the details:

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Table 15 London Borough of Wandsworth Comparison of indices of LBW Council rents, prices and earnings

(Source: Wandsworth Council Paper 14-71, Appendix D) Figure 4

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In January 2014, the Councils Cabinet member for Housing proposed that rents should be frozen for 2014/15. While the Council in its September 2013 review of the HRA business plan had assumed that there would be an average rent increase of 5.70 per dwelling, and the government guidance was that rents should be increased by CPI + 1%, and the schedule of debt repayments was based on the assumption that there would be annual increases, the Cabinet member nevertheless considered that, because the Council had achieved savings on the HRA in 2013/14, and was planning a wide ranging review of rents policy (to report in June 2014), it would be reasonable to freeze rents for the coming year. The timing of the review of rents policy to report after the May 2014 election provides an opportunity for an incoming administration to set a new course. Recommendation: Council house rents In completing the review of Council housing rents policy in the summer of 2014, the new Council should adopt the following framework: (i) Rents should be set at a level that safeguards the Councils ability to meet the schedule of debt repayment contained in the HRA Business Plan; The Council should have due regard to any national guidance on rent setting for the Council sector; The Council should also consider other social and economic issues in setting Council rents, including inflation and the cost of living, changes to the benefits system, and rent levels in other sectors; Over the four year term of the Council, the aim should be that Wandsworths rents should be set at around the average level for Inner London Boroughs with retained housing stock, rather than at the highest level.

(ii) (iii)

(iv)

As an initial step towards implementing the new policy framework, the new administration would seek to extend the freeze currently proposed for 2014/15 to 2015/6, provided this could be accomplished within the basic framework of the HRA business plan. 7.3 Housing Supply Increasing the supply of new homes, and in particular of new affordable homes, will be a key challenge facing whatever administration is elected in Wandsworth in 2014. In the owner occupied sector, house prices in the borough have risen steadily. Wandsworth is now far beyond the reach of most London first-time buyers. In the three years 2009/10, 2010/11, and 2011/12, 856 new homes were completed in the borough but only 29% of them were affordable on the London Plan definition of affordable as meaning social or
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intermediate housing. Out of the 33 London Boroughs, Wandsworth ranks as 11th for total number of homes completed but only 27th for the proportion of affordable homes. (Data from GLA, London Plan Monitoring Report no 9, 2013). In terms of planning policy, neighbouring Lambeth insists that 50% of new housing completions are affordable (and between 2009 and 2012 achieved 45% affordable). Wandsworth only asks for 33% affordable and at the flagship Nine Elms development, only 15%. Getting more homes, especially affordable homes, built is not just a budget issue. But the new HRA regime will provide, over time, a growing opportunity for Councils themselves to build new housing. Although the outgoing administrations record on housebuilding is limited, some useful initiatives have been taken. These include the hidden homes policy converting garages, laundries and other unused or underused spaces on estates into additional dwellings. More ambitiously, the Council has recently agreed to borrow up to 100 million to fund major estate-based regeneration schemes. Both these are useful precedents. A new administration seeking to kick-start a housing programme will be able to benefit from two key strengths: The Councils housing land assets; The self-financing regime.

In Wandsworth, as in London as a whole, land is scarce and expensive. But the Council itself is a major landowner. Much of that land, already developed for housing, is held for the Housing Revenue Account. The Council should review all its housing land assets in order to identify sites on which additional Council housing can be built. These will include: Small-scale, infill sites learning from the hidden homes programme; Medium-sized estates, where there may be limited opportunities for new build; Larger estates, where over time redevelopment may be considered.

This review of sites should be undertaken in consultation with tenants and leaseholders. The aim would be to improve peoples housing choices by adding to the stock of homes, while safeguarding green space, play areas and amenity land. The self-financing HRA regime has the potential, over time, to generate the resources to fund a substantial housing investment programme.
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Councils that are already trying to build new Council housing are looking to three specific sources: (i) Borrowing headroom Most councils that are repaying debt have found that, until the debt is paid off (in Wandsworths case, in 10 years time), the available headroom is almost all needed to fund major capital works to the existing housing stock. In the long run, however, this is set to be the most important funding stream for new build. (ii) Reserves Wandsworth drew substantially on HRA reserves when finalizing the HRA settlement, but there may be opportunities to make further drawings in the years ahead. (iii) Right to Buy receipts

The building by the Council of new Council homes for rent can make a significant and growing contribution to increasing the supply of genuinely affordable housing. Once the HRA is debt-free, the scope will be considerable. One thing that could be done in order to bring forward the date at which Wandsworth and other Councils could start a major building programme would be for central government to ease their restrictions on HRA borrowing - the borrowing cap. This proposal has been supported by many local government and professional bodies including the Association of Retained Council Housing, ARCH, in which Wandsworth plays a leading role; the Chartered Institute of Housing; and CIPFA. A limited relaxation of the cap was announced by the Chancellor in the 2013 Autumn Statement, but the Council will have to continue to press for greater freedom to borrow. But for the four year term of the Council elected in 2014, new house building by the Council will be only be one strand among several strategies to increase housing supply. An incoming Council should, at the earliest opportunity, revise the Core Strategy of the Local Development Framework, so as to increase the Boroughs target for affordable housing on all new residential development to 40 or 50%. Within that target, the split between social rented and intermediate housing should continue to be
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70:30. It should work with the housing arm of the Greater London Authority in order to derive maximum benefit from their affordable housing programme. It should work in partnership with housing associations and developers in order to maximize delivery. In this context, the Council should make it clear to residents and to the local business community, and the construction and development sectors in particular, that, while there is a pressing need for more affordable homes, the Council wants to see more housebuilding across the board: owner occupied, shared equity, and private rented accommodation as well as affordable. The commitment should be to mixed, sustainable, resilient communities: this will mean seeking sites for new affordable housing in more affluent parts of the Borough, as well as building shared equity or low-cost owneroccupied properties on sites identified on older estates. With a commitment to the building of new homes by the Council, an increased target for affordable housing, and new and renewed partnerships with the private sector and with housing associations, the Commission believes that the Council should set itself a target of 1,000 new social homes over the four year term. Recommendation: Housing supply (i) The Council will encourage plans for new private, Council, social and intermediate housing, and will aim to sustain and create mixed, resilient communities; The new Council administration should adopt a target of building 1,000 new social homes over its four year term; In order to achieve this target, the Council will: Take full advantage of the new flexibilities available to it under Housing Revenue Account self-financing in order to launch a new programme of Council house building; Continue to press Government to relax the HRA borrowing cap; Raise the affordable housing target in the Local Development Strategy Core Framework to at least 40%;

(ii)

(iii)

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Within the affordable housing target, retain a split of 70:30 between social renting and intermediate housing; Take full advantage of the Greater London Authoritys affordable housing programme; Establish new partnerships with housing associations and developers.

(iv)

In consultation with tenants and leaseholders, the Council will review all its housing land assets, in order to identify sites on which additional Council housing can be built. The aim would be to improve peoples housing choices by adding to the stock of homes, while safeguarding green space, play areas and amenity land.

7.4 Leaseholders Although leaseholders have exercised their right to buy, ultimate ownership of the freehold of the property remains with the Council. Leaseholders pay a service charge to cover regular management and repair costs. In recent years, the average service charge has remained stable at around 750.00. The service charge does not, however, cover the costs of major repairs. The Council has to recover these from the leaseholder. An average leaseholder is likely to face a bill of 3,000 every eight years. Many leaseholders find these bills unpredictable and have difficulty meeting them. Many private sector landlords of leasehold property cope with these costs by requiring leaseholders to make regular payments into a Sinking Fund, which is then available to meet major bills as they arise. Almost all Council leases, however, including Wandsworths, were drawn up without a provision for the establishment of such a fund. This makes it difficult to introduce such funds, and the requirement to contribute to them, retrospectively. Instead, two measures are proposed, to operate under the Housing Revenue Account: A savings scheme, possibly operated in conjunction with a Credit Union, to enable leaseholders to save for the costs of such repairs; A loan fund, enabling leaseholders to borrow the cost of major repairs from the Council.

Recommendation A new Council administration should urgently investigate the introduction of additional measures, within the framework of the Housing Revenue Account, to support leaseholders faced with substantial repair bills. These could include:
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A savings scheme, possibly operated in conjunction with a Credit Union, to enable leaseholders to save for the costs of such repairs; A loan fund, enabling leaseholders to borrow the cost of major repairs from the Council.

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Recommendations

1. Strategy In order to maintain the Council tax level agreed by the outgoing administration, the new Council elected in May 2014 should: (i) Adopt a formula like that of the outgoing administration (The Councils policy is to maintain a distinctively low council tax and insist on value for money services for its residents.) to define their Council Tax policy; (ii) Accept the package of cuts, savings, efficiencies and increases in user charges being implemented by the Council in FY 2013/14, except in so far as compensating savings can be identified elsewhere; (iii) Identify a small number of high-profile policy changes, to be implemented as quickly as possible, to be funded from identifiable savings; (iv) Begin the process of transforming the Council. 2. Criteria for early policy change Policy changes for early implementation should meet the following criteria: all such measures should be (i) Agreed by the Labour Group as meeting an identifiable priority need; (ii) Fully costed where possible, by the Finance Department; otherwise, by the Commission using publicly available information; (iii) Fully funded from identified spending reductions or income generation measures; (iv) Have a realistic implementation timetable. 3. Proposed policy changes General Revenue Budget That the following measures, which meet the proposed criteria, be put forward for early implementation Reinstatement of four of the axed one oclock clubs Reinstatement of school crossing patrols Increasing front line inspection staff for highway neighbourhood complaints Becoming an accredited London Living Wage Employer; Increasing the number of apprenticeships

and

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4. Bring back One Oclock Clubs That the Council should commit to the restoration of four One Oclock Clubs (Bolingbroke, Coronation Gardens, Windmill and Alton (Fontley Way)), from October 2015, the earliest practicable date, at a net revenue cost in 2015/6 of 143k, a full year cost in 2016/7 of 245k, and a capital cost of 25k per centre, 100k in total, without reducing other services for preschool children. 5. Reinstate School crossing patrols That the Council should commit to the restoration of the school crossing patrol service to its previous level, with effect from September 2014, at a cost in 2014/5 of 102k, and a full year cost in 2015/6 and subsequent years of 175k. 6. More inspection and enforcement staff The Council should, by October 2014, take on six new front line inspection and enforcement staff, to deal with complaints about highways, pavements etc. At least one of these posts should be an apprenticeship. The cost in Financial Year 2014/5 is estimated at 125k, and the full year effect in FY 2015/6 as 250k. 7. Become an accredited London Living Wage Employer That the new administration in Wandsworth Council should immediately seek accreditation as a London Living Wage Employer, and should take the following steps to achieve full Living Wage status: Immediately pay the London Living Wage to the 62 direct employees currently paid below that rate; Work with the Living Wage Foundation to develop a Phased Implementation Plan to extend the protection of the London Living Wage to the 2300 low paid staff employed by Council contractors, working on a case-by-case basis, and reviewing all existing contracts, subject to the requirement to secure best value, including improvements in quality and productivity; Use the Most Economically Attractive Tender approach more widely in tender evaluation and contract awarding; Include the payment of the London Living Wage in future contract specifications, and as one of the non-financial factors in future Most Economically Attractive contract evaluations; For those contracts where hourly payments are currently substantially below the London Living Wage, phase in the London Living Wage over several years, to mitigate any cost impact.

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Cooperate with other London Living Wage employers to ensure full LLW coverage for social care workers; Encourage school governing bodies to pay the London Living Wage to low paid contract employees in their schools; Seek to bring forward the reviews of Housing Revenue Account contracts for estate cleaning garden maintenance, and sheltered housing, so that the London Living wage can be extended to these groups of staff. Work with London Councils to persuade government to increase funding for social care to help councils to reward adequately and retain social care workers.

8. 20 More Apprenticeships The incoming Council administration will negotiate with the Skills Funding Agency for the maximum possible allocation for apprenticeships in the Borough in 2015/16, and will provide match funding for 20 additional apprenticeships with the Council itself. 9. Scrap the Bonuses (i) The incoming administration should give notice immediately after the May elections that the Performance Related Pay policy will cease to have effect; Notice should also be given that the payment of private medical insurance premiums will stop; Payments due in respect of performance in 2013/4, to be paid in July 2014, will be honoured, but thereafter the Council will negotiate an orderly and phased end to this system; The Council will revise its remuneration strategy in consultation with staff, as well as with local residents and businesses, and will seek to agree a new strategy in the year 2014/15.

(ii) (iii)

(iv)

10. Stop printing Brightside The Council should cease to print and distribute Brightside, instead on web based media. 11. Reserves The new Council should be ready to use reserves to fund up to 500k of expenditure on new projects in FY 2014/15. relying

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12. Transformational change (i) Rather than accepting the continuing erosion of basic services, a new administration will carry out a radical transformation of the Council, drawing on good practice and innovation in business and the public sector to ensure: (ii) Responsiveness to local needs; Efficiency; Value for money.

The principles which underpin the programme of transformational change will be: Partnership with the NHS, other public services, and other councils; Flat management structures; Transparency and openness; Maximum use of digital technology; Staff empowerment; New relationships of collaboration with business and the voluntary and community sector. The Council will aim, thorough the implementation of this change programme, to save at least 20million over a four year term while protecting front line service delivery.

(iii)

13. Shared services and joint management An incoming administration should actively pursue opportunities for shared services or joint management of services, with other local authorities, the NHS, and other public bodies as partners, in order to improve value for money without jeopardising front line service delivery. 14. Shared procurement Recognising the shift away from service provision by direct employment to service procurement in competitive markets, an incoming administration will make full use of the Councils power as a customer in those markets by entering into joint procurement arrangements with other local authorities, the NHS and other public bodies in order to achieve greater efficiency and value for money.

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15. Office accommodation The incoming Council should urgently examine the scope for locating all its headquarters functions on a single site, in modern, purpose built office accommodation. The single centre could either be on one of the existing central Wandsworth sites, or on a regeneration site elsewhere in the borough. . Surplus sites, possibly including the present Town Hall, should be disposed of and the resultant capital receipt used to fund the rationalisation programme. In order to achieve this, the following steps should be taken: An immediate review of all office plans to ensure that they do not rule out a single site model of operation; Commissioning of a study to develop a flexible, multiuse (and possibly multi-agency) public service centre for the borough with an enhanced range of public services and facilities accessible to all residents; Early approaches to potential private sector partners Drafting of a specification for a new single site operation in consultation with all key stakeholders including local people and groups with a view to consolidating appropriate facilities in the new building while safeguarding those services which will still need to be provided at a local or neighbourhood level. The development of an outline business case with the selected private sector partner setting out the full costs and benefits of any new scheme all assumptions and projections will be subject to independent review and the scheme will only go forward if it demonstrates real and verifiable reductions in overall running costs. The initiation of an international design/design and build competition under European procurement rules to seek the highest possible level of competitive bidding for what will be seen in the market place as a highly attractive and prestigious capital project The selection of an experienced contractor to build the new facility to an agreed specification, cost and timescale independent project management support will be retained to ensure that all key milestones are met and the project stays on track and on budget.

16. Information Technology Wandsworth Council should formulate a plan to progressively move its IT infrastructure onto the Cloud as individual IT systems come up for review
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over the next five years. The result of this should be significant reductions in overall IT costs and a significant improvement in the reliability of IT systems. In parallel it should continue to shift its services from paper to online, so reducing the volume of paperwork in Council offices. 17. Council house rents In completing the review of Council housing rents policy in the summer of 2014, the new Council should adopt the following framework: (i) Rents should be set at a level that safeguards the Councils ability to meet the schedule of debt repayment contained in the HRA Business Plan; The Council should have due regard to any national guidance on rent setting for the Council sector; The Council should also consider other social and economic issues in setting Council rents, including inflation and the cost of living, changes to the benefits system, and rent levels in other sectors; Over the four year term of the Council, the aim should be that Wandsworths rents should be set at around the average level for Inner London Boroughs with retained housing stock, rather than at the highest level.

(ii) (iii)

(iv)

As an initial step towards implementing the new policy framework, the new administration would seek to extend the freeze currently proposed for 2014/15 to 2015/6, within the basic framework of the HRA business plan. 18. Housing supply (i) The Council will encourage plans for new private, Council, social and intermediate housing, and will aim to sustain and create mixed, resilient communities; The new Council administration should adopt a target of building 1000 new social homes over its four year term; In order to achieve this target, the Council will: Take full advantage of the new flexibilities available to it under Housing Revenue Account self-financing in order to launch a new programme of Council house building;
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(ii)

(iii)

Continue to press Government to relax the HRA borrowing cap; Raise the affordable housing target in the Local Development Strategy Core Framework to at least 40%; Within the affordable housing target, retain a split of 70:30 between social renting and intermediate housing; Take full advantage of the Greater London Authoritys affordable housing programme; Establish new partnerships with housing associations and developers.

(iv)

In consultation with tenants and leaseholders, the Council will review all its housing land assets, in order to identify sites on which additional Council housing can be built. The aim would be to improve peoples housing choices by adding to the stock of homes, while safeguarding green space, play areas and amenity land.

19. Support for leaseholders A new Council administration should urgently investigate the introduction of additional measures, within the framework of the Housing Revenue Account, to support leaseholders faced with substantial repair bills. These could include: A savings scheme, possibly operated in conjunction with a Credit Union, to enable leaseholders to save for the costs of such repairs; A loan fund, enabling leaseholders to borrow the cost of major repairs from the Council.

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Annexe One Membership of the Commission Michael Ward (Commission chair) is a researcher and consultant on economic and social policy. From 2000 to 2004 he was Chief Executive of the London Development Agency, the London Mayors agency for business and jobs. In the 1970s he was a Wandsworth Councillor, and in the 1980s Deputy Leader of the GLC. He and his family live in Furzedown, Wandsworth. Martin Pilgrim has spent most of his 39-year career working for bodies representing local government. His last job before retirement was Chief Executive of London Councils, the body which brings together Londons local authorities. Martin is a member of the Chartered Institute of Public Finance and Accountancy and has a Masters degree in management from the University of Kent. Stephanie Elsy has 30 years experience working at a senior level across the public, private and charity sectors. She is a former Leader of Southwark Council, and spent nine years as director of external affairs at Serco, which holds a large number of contracts with local authorities across the country. Gareth Daniel has worked in London local government for more than three decades and served as Brent Councils longest-serving Chief Executive from 19982012. A resident of Ealing in West London, he is a qualified social worker by background. He has also served as a councillor on the GLC and was chair of Ealing Councils Planning and Economic Development Committee for four years. He now runs his own management consultancy undertaking change management and partnership development projects across the country. George Kessler is Joint Deputy Chairman of Kesslers International Limited, a London based manufacturing business employing an ethnically diverse multi-skilled workforce of 300. Kesslers are Europes leading designers and manufacturers of permanent Point of Purchase Display. George is also a member of London First, Made in London, London Economic Panel and EEFs Economic Policy Committee as well as being Chair of EEFs London region

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Annexe Two Local Government Finance: some definitions

Capital expenditure spending on acquiring, improving or constructing assets, or financial assistance to other organisations to do this. Revenue expenditure spending on recurring items, such as service operations, interest and debt repayment Ring-fenced grant - A grant paid to local authorities which has conditions attached to it, which restrict the purposes for which it may be spent. Settlement Funding Assessment - the total Revenue Support Grant plus the local share of Estimated Business Rates Aggregate for the year in question

These definitions are based on material from two sources: The glossary in Wandsworth Councils Budget Book for 2013-2014 The glossary in A guide to the local government finance settlement in England , published by CLG in December 2013

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