It’s utility that counts to residents

IT’S A sad indictment of my life that I was thinking about local government funding one evening at about 11pm.

I’ve been trying to think what is odd about it in the context of where I used to work in utilities and I had eureka moment ... I am hoping you might challenge that, or even agree.

My theory is that the Scottish Government is acting like a regulator, but ignoring lots of the good practice that regulators have learned and are adopting (please bear with me).

The Scottish Government (the regulator) tells local government (the industry) what to do in an effort to ensure it delivers what is best for customers (residents around Scotland).

In almost all industries, regulators set out a five-year funding allowance (a price review) and if the industry (eg water company) outperforms by getting more revenue or being more efficient, they keep the benefit.

In most cases, they share it with shareholders through dividends for example.

As time goes on, the regulator encourages better performance by comparing companies against each other.

So where do we fail with local government?

Well firstly, funding budgets are set annually giving no longer term incentives.

Secondly, there is no real incentive to increase revenue or efficiency as the shareholders don’t really benefit.

For example if economic activity increases and business rates rise, they go straight back to Holyrood.

Why can’t we keep that outperformance and give it to our shareholders (residents) through improved service?

Perhaps the biggest flaw is the lack of customer input.

In the water industry, customers are now asked what they want and - in theory - if they want, more companies can raise prices if customers agree and this gives better service.

Imagine if we wanted something in the North-east, perhaps we might pay for it but there is no way to achieve this.

So ... what I am saying is that it looks to me as though there is much that could be done, pretty simply to drive local government performance but these opportunities are being ignored.

Unless I am missing something.