Legal services look likely to be a “future boom area” for local authorities as they seek to operate more entrepreneurially, a think tank has claimed.
In research for its Commercial Councils: The rise of entrepreneurialism in local government report, Localis found that one in four councils (24%) were currently generating external income from legal services, while a further 43% were considering doing so.
Between two-thirds and four-fifths of councils meanwhile do or would provide energy (73%), facilities (75%), IT/Back office (73%), and waste commercially (77%).
The report said facilities and waste could also be future boom areas alongside legal services. It noted how Kent Legal Services generated a £2.4m profit on £12m of activity in 2012/13.
Localis said it believed that local government, suitably empowered, could become “the engine room of the public sector”.
The report said intra-public sector trading generally was a growing trend in joined up vehicles and increasingly blurred geographies.
It added: “What we are…. seeing is a growing understanding that the provision of services will not just be divided between public, private or third sectors, but geographically within the public sector itself.
“With around half of authorities currently running some form [of] joint venture with neighbouring and more distant councils, the increase in…..areas such as procurement and legal services (less reliant on geographic knowledge than, for example, housing or waste) may well partly be in this form.”
Localis’ research found that 94% of authorities shared some services with another council. It also revealed that more than half (58%) now owned a trading company – with the think tank predicting that full coverage by 2020 was a possibility.
A majority of councils (57%) meanwhile operate a joint venture with the private sector.
Eight out of ten councils said they would have to cut services and raise taxes if they did not carry out entrepreneurial activities.
Localis called on councils to take this entrepreneurial agenda further. The report recommended that:
- The general power of competence should be expanded to other parts of the public sector (through a counterparty clause) “to enable councils to act more like businesses”;
- Councils and appropriate professional bodies should increase the focus on commercial and financial skills as part of officers’ professional development;
- Councils should be given ‘earn back’ powers to stimulate local investment “in a similar vein to Greater Manchester’s devolution deal”;
- The Government should use departmental underspends to fund a three year corporation tax holiday for new council owned trading companies to assist them in their start up.
The report argued that the entrepreneurial councils agenda could account for at least £2bn of additional revenue for local councils by 2020.
Alex Thomson, chief executive of Localis, said: “Councils have borne the brunt of austerity, but they have responded with striking innovation to minimise the impact of cuts on their residents. In particular, our research shows councils becoming ever more commercially savvy, bringing in money to support vital local services.”
Rob Whiteman, chief executive of CIPFA, said: “[T]his report successfully outlines how local government can secure its finances and boost local growth prospects by developing entrepreneurial approaches. Many councils are already doing an excellent job in exploring these commercial spheres to mitigate against the pressures, but this report recognises that more needs to be done.”
Localis’ research involved interviews with central and local government stakeholders, a survey of 150 stakeholders and a round table discussion.