22 November 2001

Speech by the Chief Secretary to the Treasury, Andrew Smith MP, at the Local Government Association Seminar on Public Service Agreements

1. We all recognise that delivering public services to a high standard is crucially important to central Government, local government and the whole country. The Government has worked hard to develop the tools and expertise to deliver on our commitment to the public, and it is some of these tools for improving performance - the Public Service Agreements - that I want to talk to you about today.

2. Because we have cut borrowing and because we have cut unemployment, and encouraged higher growth and earnings, the Government is freeing up resources for our priorities in a sustainable way. As the fundamentals of the economy are stronger, so we are able to make sustained investment in our public services.

3. Our Budget plans continue to be based on prudent and cautious management of the public finances - locking in a tough fiscal stance. Of course no economy can be totally immune to the effects of global slowdown. But let there be no doubt that this Government is determined to continue with that stance and to continue with our programme of investment in our public services, which will be affordable because it was made on the basis of cautious assumptions.

4. We are making a massive investment in rebuilding public services, and, of course, people rightly expect a return on that investment. The quality of services does not just depend on how much Government spends, and how much you in local government spend: it depends on how effectively we deploy those resources.

5. We all know that there are schools with the same social intake and vastly different results. We all know hospitals that, with the same type of patients and the same type of resources, operating in the same labour markets, perform well or perform badly. As Alan Milburn has said, these disparities are not the result of a lack of resources; they can be the result of the inefficient use of resources.

6. So we are focussing on outputs as well as inputs: not just increasing expenditure but on improving performance.

National PSAs

7. One of our key tools for improving performance is the Public Service Agreement (PSA). We have to be clear what our priorities are, and central Government PSAs set out what the taxpayer can expect the Government to deliver with the resources it uses.

8. These original PSAs set explicit goals across the whole of Government: the first attempt by a British Government to set out the standards against which it could be judged.

9. In the 2000 Spending Review we improved the PSA structure:

setting out more streamlined PSAs covering the extra expenditure we are putting in over the next three years
trying to focus harder on the things that really matter.
making the PSA targets sharper, concentrating more on the outcomes: how much crime is reduced, rather than how many extra police officers there are; real improvements in people's health, rather than simply how many nurses and doctors there are.
and we are working harder than ever before on ensuring we target the right measures of success, the things that really relate to people's day to day experience of public services.

10. We are providing extra funding : the 2000 Spending Review White Paper shows the resources we are devoting to our priorities. The PSAs explain what we will deliver in return, and the new Service Delivery Agreements set out how Departments will deliver, and how they will ensure good value for money in their operations. The new PSAs are an even more effective tool for raising performance, and they will benefit a far wider range of services now we are extending them to local authorities.

Local PSAs

11. Raising performance across Government means working very closely with you, our partners, in local authorities. Local councils are responsible for key public services: schools, transport, housing, street cleaning, planning and care for the elderly, all playing a vital role in improving the lives of local communities.

12. You control more than £60 billion of taxpayers? money and we have to work together to ensure it is spent effectively. We are committed to working in partnership with you in this project, working to ensure that high quality, cost-effective services are provided throughout the country.

13. Our approach, developed in partnership with the LGA and trialled successfully with 20 local councils, is based on agreeing with local government testing but tailored targets, and supporting delivery with the relaxation of controls and the award of new flexibilities.

14. In local PSAs I see the opportunity of an end to the divisive ?them and us? mentality that has, for too long, blighted the relationship between central and local government. I see the relationship reborn in an atmosphere of greater mutual trust, openness and transparency.

15. We in central Government need to accept that local government is just that - a part of government and not simply local administration. How can councils lead, motivate and innovate - how can they promote the renewal of disadvantaged neighbourhoods - if they're treated as no more than a local outpost of a central Department?

16. Central government must put in place a better performance management framework for local government. We need a framework that gives you the freedoms, flexibilities, incentives and capacity needed to deliver top quality services. A framework that ensures failings are tackled. A framework that provides readily intelligible information for local people, so that they know what their council is doing, and why.
17. A framework which reflects the principles of public sector reform set out by the Prime Minister:

a national framework of standards and accountability;
within that framework, devolution of power to frontline professionals, enabling local leaders to innovate and develop new services;
better and more flexible rewards and conditions of service for front-line staff; and
more choice for the consumers of public services.

18. The framework will need to acknowledge the true nature of local government and the different functions it carries out:

in many cases, acting with wide discretion to choose how to meet local priorities.
sometimes, exercising local judgement within a set of national standards - providing social services, and education;
sometimes acting as an agent of central government - for example administering housing benefit.

19. In Local PSAs we see the realisation of this vision - a national framework of standards and accountability from which key targets are drawn. And within that framework frontline professionals in Local Government given the resources and responsibility to meet the targets, delivering public services around the needs of local users.

20. Setting targets - agreed locally as well as reflecting national priorities - will allow local authorities to focus on delivering services more effectively:

our targets will free local authorities from unnecessary red tape and regulations that can prevent you from doing your jobs as well as you might.
and by setting targets we also make local authorities, like central Government, more transparent and accountable - enabling communities to re-engage with the authorities that serve them.

Pilot Schemes

21. Local PSAs were a radical departure from traditional ways of working. The 20 pilot schemes we ran were well received, and so we decided to roll them out to all upper tier local authorities. Sir Jeremy Beecham said:

"The LGA? welcomes the Government's decision to roll out the scheme nationally. Improving services is at the heart of local government, and councils taking part in the pilot scheme have found local PSAs tremendously valuable in helping them work with central government on addressing the issues that are most important to local people."

22. Over the next two years we are now rolling PSAs out to 130 upper-tier local authorities, with incentives to collaborate with district authorities.

23. PSAs are still relatively new and so this is a learning process for all of us. Important lessons were learned from the pilot scheme - in a number of areas:

for councils : lessons in framing stretching targets and identifying the freedoms and flexibilities needed to deliver them;
for Government : lessons learned on handling negotiations, but also how to follow through on the flexibilities we have given to councils;
for all of us : lessons on identifying common freedoms, which could - in the future - be made available to other councils entering into a local PSA.

24. Of 130 top tier authorities, 117 have expressed their intention to participate. That is an overwhelming response to a voluntary programme - and it speaks volumes for the extent to which you share our aspirations. Four local authority agreements are about to be signed - my colleagues and I have approved them in principle. And a further 13 are expected to be completed by the end of December. Negotiations so far have been positive and the programme is running to timetable.

25. Let me stress, Local PSAs can cover the full range of council activities: raising the standard in health, education, social services and transport. To give you some specific examples:

Newcastle City Council has set a target to increase the number of disadvantaged people assisted into employment from 500 in 2000/01 to 800 in 2003/04.
Cambridgeshire has set a target to increase the number of passengers per day using buses on routes into the city from 20,000 in 1999 to 24,000 in autumn2003.
Coventry will work with the West Midlands police to cut domestic burglaries from 4,366 in 1999/2000 to 3,275 in 2003.
Kent County Council has set a target to reduce dependency and increase employment and fulfilment of the people in two deprived areas of East Kent - Shepway and Thanet. This will involve multi-agency regeneration work, working in partnership with the two district councils, as well as a range of local agencies.

26. These are concrete, targeted measures, designed by people who understand about the needs of their community, and focussed on the steps they know will make a difference.

27. It is important that Local PSAs can show that they are an initiative that can transcend Party lines, as welcome in Kent as in Bristol.

Funding and Flexibility

28. We want to see these local PSAs succeed - so we are making extra funding available:

£400million has been set aside for local PSAs and will enable the roll out of the scheme nation wide;
pump priming grants are available at the outset to help you achieve your targets - a maximum of £750,000 plus £1 per head of population may be given;
there are Performance Reward Grants for achieving targets - so we will be rewarding successful local authorities and creating incentives to raise the standard.
and an extra £300million in Unsupported Credit Approvals for capital projects was announced in June 2001.

29. We know that funding alone is not enough, to make local PSAs work we must recognise the contribution and expertise of workers in local authorities - at all levels, and give them the flexibility to deliver services based around the needs of consumers.

we agreed Camden and Middlesbrough's proposals for piloting a lane rental scheme for utilities that dig up the roads
in Stockton, Newcastle, Middlesbrough - and soon Leeds and Peterborough - litter and dog-fouling fines can be recycled locally;
in Derbyshire we agreed greater flexibility in the provision of local bus services; and
in Warwickshire we are supporting the council's drive to increase recycling and reuse of household materials.

These are all initiatives that the local authorities themselves saw as important in their areas, so we helped them to take these forward. So we are supporting these schemes with not just a sympathetic ear, but a real willingness to adapt and compromise, and a recognition that often it is local solutions that are best for local problems.

30. The flexibility to innovate, to deliver responsive local services around the needs of your communities, is at the heart of this PSA agenda. The responsibility to work with us in the renewal of the public sector goes hand in hand with the right to deliver those objectives in the way that is right for your areas. Local PSAs provide a win, win situation, delivery of national objectives, greater flexibility for local authorities, and improved services for local residents.

31. Successful local authorities will secure significant financial rewards, but the real winners will be local residents who will see genuine improvements in the services they receive.

Partnership

32. Local PSAs take their place alongside the other policies we have designed to help local authorities deliver. They take their place alongside:

Best Value : Local PSAs reinforce our attempts to achieve best value, removing obstacles to delivery and stretching performance in key areas.
Local Strategic Partnerships - bringing key local stakeholders together is essential to the process of identifying and achieving Local PSA targets.

33. Partnership working is crucial to our vision for local government. The idea of local PSAs was developed in partnership with your councils and with the Local Government Association. Nick Raynsford has rightly said that :

?Local PSAs will encourage all levels of local government to work together and with others in a genuine partnership to provide innovative ideas giving people the best local services possible.?

34. All the pilot PSA councils have involved partnership working in the process. Over time, these local PSAs could evolve into an agreement between central Government and local partnerships - co-ordinated and lead by the local council - to deliver improvements across the full range of policies. I think it will be very exciting to see the evidence of success as these develop. Partnership working will help us identify priorities, focus on outputs that matter to stakeholders, and deliver the improvements the public want to see.

Conclusion

35. The Government will build on these foundations in the forthcoming Local Government White Paper. The White Paper will outline how central and local government will work closely together to improve local services and enhance the community leadership role of local authorities. I firmly believe that Local PSAs will continue to provide an opportunity to remove constraints on good performance. The capital finance system will also be reformed, restoring local accountability and financial freedoms, through adoption of a prudential borrowing regime.

36. Working together we have delivered the framework of stability and sustainable public finances necessary to boost investment in public services. Now, as the investment starts to flow in, we need to ensure that where money is spent it is spent wisely and where that investment is needed, it is used to improve outcomes for the consumer of public services.

37. Let me stress: I see local authorities as key partners in helping us deliver on these objectives: you have the expertise and ability to turn our public services round, delivering on national objectives and tailoring outcomes to meet local needs. The Local Public Service Agreements are the framework within which we will work.

38. In them I sense an end to the old divisions between central and local government and the beginning of a new consensus: we are building a bridge between central and local government so we can build, for the future, the world class public services people expect and demand.

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