Austerity Measures Overhauling Local Governments

Michelle Remo, “Big 4″ observer
November 14, 2011 /

Belt-tightening measures have triggered unprecedented changes within local government as new models of organisation and service delivery are being explored almost universally, despite significant skills gaps according to a KPMG survey of leaders within the sector.

Local government is gearing up for a next wave of austerity according to 90 percent of those Ipsos MORI questioned for KPMG, who expect their 2014/15 budget to decrease from the 2010/11 settlement. More than a third (35 percent) predict they will be working to budgets at least a further 25 percent lower.

In response the sector is, without exception, looking to consider a range of remedial action to create new sustainable organisational models. In fact, 100 percent of local governments are exploring shared services and mergers with other public sector organisations as the top activity.

Asset sales and divestment of services are being undertaken or reviewed by 94 percent of those questioned while 86 percent are considering introducing additional charges for services.

More fundamental restructuring in the sector through joint ventures and the creation of social enterprise is also being considered b 72 and 50 percent of of local governmental leaders, respectively.

“A picture is being painted here of almost frenetic activity levels as those in local government demonstrate there are no sacred cows when it comes to meeting the austerity challenge of delivering better outcomes with much lower budgets and a dramatically smaller workforce,” said Iain Hasdell, KPMG’s UK head of local and regional government.

“This is a positive approach to be welcomed and it differs markedly from some of the more modest, risk averse and incremental ambition that has sometimes characterised modernisation in the sector previously. After decades of evolution local government is now embracing revolution,” Hasdell added.

But KPMG’s survey shows alarming concerns within the sector, particularly the lack of skills to successfully implement these change programmes. Nearly two thirds (64 percent) of local government leaders believe their organisation has inadequate commercial and contracting skills while 58 percent admit to a shortage of experience in organisation and process redesign, followed by 40 percent raising concerns about their abilities in project management.

“The relatively slow pace of improvement in workforce skill levels represents a major threat to local government’s ability to respond to and cope with its new financial environment,” said Hasdell.

Hasdell added: “However, this is not an insurmountable problem. At a time when the labour market is, unfortunately, being swelled with unemployed people from the private sector, local government could do more to tap into that expertise; quickly deploying people with relevant commercial, financial and project management skills within its workforce, by using their restructuring and redundancy programmes more smartly to improve skills whilst at the same time downsizing.

“While challenging in the short term, given immediate budget pressures, I am convinced this is a route to explore in order for the sector to achieve its objectives.”


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