By Paul Cook, author of A Practical Guide for Local Authorities on Income Generation (2015 edition)
The brave new funding world for local authorities now includes 100% retention of business rates and doing away with RSG. With a self-help approach to income, authorities must make the most of their fees and charges.
The difference in budgeting approaches between expenditure and income can be revealing. Expenditure reductions are what mathematicians call a polynomial problem – not so difficult to devise potential solutions. Less staff in the structure equals lower employees budget and so forth.
Fees and charges changes are altogether less clear cut, being an exponential problem. Lots of work and effort may go into not reaching a usable conclusion. How do our fee levels compare to neighbours? How does our proposed increase compare to our neighbours increase? Do we need to consult on the increases? Even if we wanted to increase charges in a specific area, what are the regulatory limitations? Will a fee increase actually generate more income? Is the income collected efficiently? The questions are manifold.
Reluctance to tackle income issues is often reflected in coding authorities’ coding structures. Expenditure coding is usually fine-grained and great to analyse all sorts of problems. Income coding too often groups disparate income sources in a few big budgets.
At the same time authorities are pushing income generation in the sense of selling their base services to other stakeholders. That is all to the good, but carries a much greater risk and probably less income potential than getting to grip with fees and charges for bulk mainstream services.
There are so many ways now to use technology in the charging area; it’s a great way for councils to drive forward their digital agenda. This can range from smart cards for the range of council services to charging structures that encourage payment by digital means
CIPFA has addressed the problem to reduce the exponential fees and charges problem. Firstly an income generation profile provides a clear and comprehensive analysis of your fees and charges. This includes fees and charge information about the comparator group and your class of authority. How is your income as a percentage of service cost? How are you performing on the high yielding income areas? How are you performing on hundreds of different charging categories? As you would expect all the information comes in clear charts and reports ideal for presenting to decision makers.
The second component is the CIPFA Income Generation Guide now updated for 2015. This provides lots of guidance on shaping the profile into definite usable proposals. Yes - client contributions for social care are low, but have we taken account of demographics? What are the constraints in effecting any increase? The Guide covers the legal and practical considerations for all main local government charging categories.
Using the two products should give authorities a good shot at solving that wicked fees and charges problem. A comprehensive review of fees and charges offers the potential to generate additional funding or even provide new services on a discretionary income basis. Surely that is preferable to an unremitting diet of service reductions? A more proactive approach to income regeneration can add social value in encouraging appropriate behaviours and service usage such as congestion charging or low cost leisure facilities to promote public health.