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City council financial planning sets standard for Scottish public sector

Audit Scotland has highlighted Aberdeen City Council’s financial management and budget processes as models for the rest of Scotland’s public sector.

The watchdog body has featured the City Council’s financial forward-planning in a major new report, ‘Scotland’s Public Finances – Addressing the Challenges’.

The report scrutinises the extent to which public sector organisations are budgeting sustainably and managing their workforces to address the severe financial challenges caused by the economic downturn – and finds that few have undertaken detailed long-term planning.

Aberdeen City Council’s priority-based budgeting process is featured as a special case study in the report, which says the approach adopted by the council is the best way of responding effectively to a climate of severe financial restraint.

The City Council decided early last year to move away from traditional budgeting, under which the previous year’s budget is adjusted on the assumption that services and spending should remain broadly the same.

Instead, a ground-breaking new approach was adopted to allow the council to focus on the key services which deliver the best possible outcomes in terms of its agreed priorities at a time of reduced finances.

The views of city council staff, trade unions, Aberdeen citizens, public sector organisations, businesses and the academic sector were gathered to inform the new budgeting process, in one of the biggest consultation exercises ever mounted in the city.

The result was a Priority-Based Budgeting document published last autumn, detailing potential savings options totalling £150 million over five years. City councillors adopted options amounting £90 million in savings at council meetings last December and in February. A flexible Five Year Business Plan to guide spending until 2015/16 was agreed by the Full Council earlier this month.

Aberdeen City Council Leader Councillor Callum McCaig said: “Audit Scotland has clearly recognised the City Council’s exceptional work to re-establish Aberdeen’s finances on solid foundations and to plan effectively for the future.

“This has been the result of a quite unprecedented joint effort by our own staff, our senior officials, our trade unions, the citizens of Aberdeen, and organisations from across the city to get to grips with the tough financial realities and to establish shared priorities for spending and investment.

“By working closely with our partners in the public, private and voluntary sectors we are developing new ways of providing services that deliver on our priorities. We are now better prepared than almost any public body in Scotland to face the future.”

Deputy Leader Councillor John Stewart said: “We recognised very early that we needed to be ready and able to meet the challenges ahead of us – and the Audit Scotland report shows that Aberdeen City Council‘s far-sighted financial planning is the model for the whole of Scotland’s public sector. It is a testament to the strong leadership of this Administration and the constructive engagement of everyone involved in the consultation process.

“It has been an incredible achievement by the City Council to make so much progress in so short a time to identify some £90 million in savings and income against a projected shortfall over five years of £120 million.

“We have done so in the context of a clear set of priorities which are broadly shared across Aberdeen. Despite the tight squeeze on finances, we are committed to provide this vibrant city with the first-class services which its people, its organisations and its business need.”

Aberdeen City Council anticipates that its government grant will be reduced by at least £80 million over the next few years and will face some £40 million of additional cost pressures over the same period.

The priority-based budgeting approach allowed the council to map out hundreds of savings options based on transforming the way services are delivered, on finding further efficiencies in the way others are provided, and on stopping or reducing some services.

The fundamentally new way of planning future spending and investment in the city has been based on six priorities:

• provide for the needs of the most vulnerable people;

• ensure all schoolchildren reach their potential;

• manage waste better and increase recycling;

• encourage the building of affordable housing;

• ensure a sustainable economic future for the city;

• and ensure efficient and effective delivery of services by the Council and with its partners.

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