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Money Worries

Local authority engineers are a pretty worried bunch as they consider the implications of what has been called the tightest government spending review since Labour came to power in 1997.

Directors of transportation and environment will have some tough decisions about spending priorities in the next few months. Local government's settlement from Government in the Comprehensive Spending Review (CSR) is just 1% up - a reduction in real terms. The municipal engineers who head up these departments have less money with which to pull rabbits out of hats over the next few years in just three of the following areas.

Firstly road maintenance budgets - an area traditionally raided to cover shortfalls in frontline services such as education - are set for a major squeeze with construction inflation running nationally at around 6.5%.

Secondly, all local authorities need to build major waste management infrastructure so as to reduce the amount they are putting into landfill in order to comply with the EU Landfill Directive which comes into force in 2009.

Thirdly, many authorities need to urgently address the now ever-present threat of flooding following last summer's floods which exposed poor urban drainage in areas such as Sheffield and Hull as a particularly acute problem.

Communities Secretary Hazel Blears has told councils to cheer up and remember that they have not fared quite as badly as some other government departments. And the bitter pill of her tight settlement has been sweetened with the promise of £150M of investment from government to help local authorities make the efficiency gains that could unlock funding for much needed infrastructure. The Gershon review called on councils to make year on year efficiency savings of 2.5% but CSR 07 has extended that target to 3%.

It is hoped that a good chunk of that money will be spent on helping local authorities develop Asset Management Plans, seen as key to ensuring that councils start to spend their money more wisely for the long-term rather than on reactive short term fixes.

The government's vision of country wide Asset Management Plans would provide robust data on the state of our public infrastructure and the backlog for repair, which, at present, is a distant reality.

The government has promised that those authorities with good AMPs are more likely to net the PFI credits needed to build the waste management infrastructure so desperately needed in the next few years.

Authorities with successfully developed AMPs are often those who have entered into strategic partnerships with private sector consultants and had the benefit of their project management skills to help put AMPs together.

The imperative to form such partnerships has been further strengthened by the continuing shortage of quality municipal engineers. Every local authority director who spoke to NCE warned that this problem is getting worse.

"Skills shortages continue to cause problems across all public sector disciplines, both in terms of attracting people into posts and ensuring that new and existing staff are equipped with the necessary skills to operate in the new customer focused, multi disciplinary service deliverymulti disciplinary service delivery environment," says the chair of the ICE Municipals Expert Panel Jim Valentine.

Mott MacDonald's director of local government services, Richard Chin, acknowledged that the skills gap was something consultants are exploiting more and more.

"Loss of skills and experience is an issue that local government continues to grapple with, indeed the skills shortage within the industry is widespread," he says. "In the past local government was a good breeding ground for graduate engineers who were supported through their training financially but that is happening less and less as the public sector thinks more carefully about where it spends its money.

"The private sector enjoys greater flexibility than the public sector and can help local authorities to manage resourcing issues by working closely with clients to help close the skills gap."

Such partnerships are nothing new but more and more are being put in place, with consultant Mouchel having partnered up with Liverpool, Knowsley, Rochdale and Oldham in the last six months. A major partnership between Somerset County Council, Taunton Dean MBC, Avon and Somerset Constabulary, IBM and Mouchel is also due to be signed imminently. Meanwhile, a joint venture of Mott MacDonald and Gifford is about to sign an extension to an agreement to deliver environmental services with Hampshire County Council.

The latest model sees an engineering consultant joining with an information communications technology giant and the local authority itself to provide the technical tools for streamlining service delivery along with the project management skills that will help develop tools such as Asset Management Plans.

Future thinking around strategic partnerships favours teaming up across wider geographic areas to deliver "multi-shared service models" that will offer significant economies of scale. One such example is in Lancashire where Mouchel's Unity and Impact partnerships with Oldham and Rochdale Metropolitan Borough Councils are set to collaborate in delivering a shared service street lighting PFI.

"There is a lot of pressure now to deliver services like street lighting and road maintenance in more innovative ways," says Bill Green, Mouchel's business services director, government services division. "A wider area based approach has got to develop that will see joining up of budgets and sharing of contractors."

Working smarter is one thing, but bidding for the resources from the increasingly numerous government funding pots is another major challenge that some councils are struggling with.

Some local government engineers told NCE they spend the majority of their time bidding for money from a plethora of government funds.

Engineers devote such an enormous proportion of resources bidding for government funds such as the Transport Innovation Fund, the Community Infrastructure Fund, Local Transport Plans, Growth Area Funding that in the end many, such as Essex County Council's Tony Ciaburro, conclude that is not worth the effort.

Ciaburro is so disillusioned that he has vowed to stop bidding for money from government funding pots altogether and is seeking approval for a private finance vehicle that would pay for much of the Essex's future infrastructure needs by bringing together private funding streams such as developer contributions and road charging revenues into one unified fund.

Other engineers complain that they seem to spend all their time explaining to the public why a much needed scheme cannot go ahead.

Says Jim Valentine: "Quite simply, there is less money to do things and more time spent explaining why you can't do them. We are less technical engineers and more managers of the public's expectations."

This broad range of "softer" skills now required is set to get even broader as local authorities come to play a key role in the development of Local Area Agreements with other public bodies such as primary care trusts, police forces and local education authorities to draw up agreement on 35 priorities for government funding to build sustainable communities.

The LAA agenda, enshrined in the Lyons Inquiry into local government and the Local Government White Paper "Strong and Prosperous Communities", is really going to shake things up for local government engineers because they will no longer be working in silos, says Mott's Richard Chin.

"It's a whole new ball game for local government. Gone are the days when essentially technical departments decide what the public want and deliver those services."
But not everyone is complaining and many authorities such as Manchester, Nottingham, Cambridge and Bristol are hopeful of newly submitted bids for the Transport Innovation Fund. TIF has been called the only show in town, and those authorities that want DfT funding for major capital public transport projects such as light rail schemes will have to develop congestion charging schemes in return.

Those not on the TIF train are perhaps understandably pessimistic but there are other options on the horizon such as new freedoms, mentioned in Alistair Darling's Spending Review statement, to levy a Supplementary Business Rate in agreement with local businesses to raise cash for a particular piece of infrastructure from which they stand to benefit.

This could help offset the disappointment felt by many after the government backed away from Planning Gain Supplement that would have seen millions of pounds from developers for infrastructure schemes that would have caused an uplift in the value of the surrounding land.

Amid all the challenges, at least the engineers that remain will enjoy higher status, says Jim Valentine. "For individual public sector engineers the immediate future is bright as the continuing skills shortage and the worth placed on good project management skills elevate the profile of the profession."

Local Government Budget

Local government's budget will rise from £10.3bn in 2007-08 to £12.1bn in 2010-11.

During this period the aim is for efficiency reforms to make savings of £880M across local government.

£1.7bn of targeted funding over the CSR07 period will be spent on infrastructure to support the Thames Gateway, Growth Areas, New Growth Points and eco-towns. This will include £300M to continue the community infrastructure fund.

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