Local councils should radically reform the way they approach budgeting, focusing on outcomes rather than outputs, a new report is arguing. This will mean managers having to adapt the way they plan and budget.
The report Smart Budgeting Integrating Financial and Strategic Planning For Outcomes, published by the New Local Government Network (NLGN) in association with the ACCA and Mazars, calls for local councils to stop following old patterns of budgeting based on traditional incremental budgeting for individual departments. It says a smarter approach would ensure every pound spent goes towards meeting outcomes instead. This will require managers to think carefully about how to plan and manage finance, budgets and resources.
As local councils are increasingly focused not on outputs but outcomes, traditional incremental budgeting no longer fully reflects the strategies and needs of councils and the public they serve. Instead, councils need to consider the adoption of ‘smarter’ approaches to budgeting, making sure the strategic value of every pound goes towards meeting outcomes. Future spending patterns need to be based on outcome needs rather than on historical trends.
This shift of focus will use and integrate both financial and non-financial evidence, and will integrate long term planning into the budget process. It is argued that this is where future productivity and efficiency gains will be generated.
With over 80% of local councils surveyed being open to new approaches to budgeting, it looks like officials and managers will need to reflect this in the way they plan and make decisions. Already, Exponential is seeing this shift the way managers are planning and working. Currently, Exponential Training are working with management teams from a number of local councils including Hampshire, Haringey, Luton, Nottinghamshire, Newham, Rotherham, Sandwell and Wakefield. One thing is strikingly clear – achieving more with less.
I am increasingly spending more time in performance coaching sessions on how to plan to achieve results and outcomes. This will be an on-going challenge for public sector managers for many more years as the austerity measures look set to go on for much longer than everyone thought. The implications for management are considerable and require some different thinking and approaches which might be why Exponential Training is seeing an increased demand from councils for our Chartered Management Institute (CMI) professional qualifications.
The report is structured into five main sections:
Chapter 1 — Current Practice: This chapter outlines the traditional budgeting approaches taken by local authorities and sets out the argument that local authorities need to adapt their budgeting processes to better reflect and support their council’s strategic objectives.
Chapter 2 — Towards An Alternative Vision: explores three local councils which are already starting to change their budgeting models to understand how they are trying to do things differently.
Chapter 3 — Appetite For Change: uses survey data to examine how far the innovative practices highlighted in the report’s case study areas are being adopted by local councils more widely.
Chapter 4 — Overcoming Challenges: discusses the challenges and barriers that local authorities can, and have faced when changing their budgeting processes
Conclusion: The conclusion makes recommendations for central government and for local authorities. This report has two key recommendations:
Local government should integrate their strategic and planning process into a ‘smart budgeting cycle’. This cycle comprises of a number of elements including:
- Focusing on outcomes
- Engaging members, officers and residents
- Utilising and integrating financial and non-financial evidence
- Planning for prevention
Central government needs to give more certainty about expected levels of funding over the medium to long term. The report argues that the principle barrier to innovation in budgeting is the uncertainty of central government funding for local government. It is suggested that knowing the parameters within which they need to operate would enable members and officers to be more creative with both their budgeting process and also with service innovation.