Appendix 7

Annual Efficiency Statement (AES): 2006/07 backward look

1 Introduction

1.1 The Gershon period covers 2005/06 to 2007/08. Efficiency improvements of a continuing nature reported in 2004/05 nonetheless count towards the County Council's cumulative target.

1.2 The AES: 2006/07 backward look must be submitted to Communities and Local Government (CLG) by 5 July 2007. The backward look will confirm efficiency improvements sustained since 2004/05 and additional gains achieved during 2006/07.

1.3 This report

· summarises the efficiency improvements contained in the County Council's proposed submission

· reviews efficiencies achieved and planned during the Gershon period

· includes (Annex A) variations to the 2006/07 forward look estimate

· includes (Annex B) the submission in the form specified by CLG

1.4 Approval is sought to submit the 2006/07 backward look to CLG.

2 Background

2.1 For 2006/07, the County Council's indicative cumulative efficiency target excluding schools is £30.5m, 5.0% improvements achieved and sustained, half of which must be cashable efficiencies.

2.2 Inflation is to be calculated using the GDP deflator currently at 2.48% except for certain areas. Service areas approved to use alternative deflators include Adult social services with a latest index estimate for 2005/06 of 3.8% and within Environment, the road construction index Roadcon is currently estimated at 7%. All figures quoted in this report have been uprated to 2006/07 prices.

2.3 Supporting statements are required for the backward look if:

· The cumulative total value of efficiency gains is less than the target for that year.

· The cumulative total value of cashable efficiency gains is less than the target for that year.

· The quality crosscheck data entered indicates that service quality has declined compared to the previous year.

3 2006/07 efficiencies achieved

3.1 The backward look contains £17.4m additional gains achieved in 2006/07, this represents 2.9% of the baseline. Cumulative efficiency improvements of £48.7m total 8.0% of the baseline and this surpasses the 5.0% target by £18.2m.

3.2 Of the £17.4m improvements identified in the backward look, all gains are expected to be ongoing. £11.1m is cashable and £6.3m is non-cashable, in accordance with CLG definitions and measurement guidelines.

3.3 Cumulatively, of the £48.7m total achieved by the end of 2006/07, £33.1m is cashable and £15.6m is non-cashable. The minimum cashable gains required by the CLG have been exceeded.

3.4 It is planned to include staffing efficiencies from the absorption of the cost of increments (£2.0m) in all services and, for presentation, to report the cashable corporate procurement savings (£0.6m) by service on a pro rata basis rather than as cross cutting improvements.

3.5 The main improvements achieved in 2006/07 are:

Adult Services (£5.0m)

· older people: modernisation of domiciliary care (£0.8m)

· Supporting People (£0.8m)

· absorption of increments (£0.6m)

· younger adults: continuing care and reprovision of client packages from residential care to supported living (£0.6m)

· negotiation of contracts for supplies, services and IT (£0.5m)

· older people purchasing savings: additional in house capacity from nursing beds opening in 2006/07 (£0.5m)

· absorption of turnover allowance within existing staff budgets (£0.4m)

· integration of management and administration roles with Health partners (£0.4m)

· keen contract and price negotiation: day care, supported living (£0.3m)

· corporate procurement (£0.1m)

Children's Services (£1.8m)

· absorption of increments (£0.7m)

· additional planning, monitoring and admissions absorbed (£0.4m)

· Early Years inflation absorbed by providers (£0.2m)

· kinship care (£0.2m)

· home to school transport (£0.1m)

· new managed accommodation service (£0.1m)

· corporate procurement (£0.1m)

Environmental Services (£6.1m)

· non-cashable improvements arising from accident reductions attributable to deployment of safety cameras (£2.9m)

· highways maintenance withstanding inflation (£0.9m)

· revenue impact of use of developer contributions and contractual rebate to finance capital expenditure (£0.6m)

· selling excess Materials Recovery Facility capacity and improved recycling (£0.5m)

· absorption of increments (£0.4m)

· combined A3 corridor contract (£0.3m)

· construction lean improvement programme (£0.1m)

· capital programme review (£0.1m)

· engineering design package (£0.1m)

· network management (£0.1m)

· corporate procurement (£0.1m)

Policy and Resources (£3.2m)

· revenue impact of the disposal of operational land (£0.8m)

· HR resourcing centre (£0.6m)

· IT Services efficiencies, including renegotiation of contracts and prices kept at 1% below inflation (£0.6m)

· absorption of increments (£0.5m)

· SAP benefits realisation (£0.2m)

· Regulatory Services management restructure (£0.2m)

· Legal Practice (£0.2m)

· corporate procurement (£0.1m)

Recreation and Heritage (£0.7m)

· absorption of increments (£0.3m)

· redirection of policy fund (£0.2m)

· IT efficiencies (£0.1m)

· corporate procurement (£0.1m)

Unallocated corporate procurement (£0.6m)

4 Comparison with the 2006/07 forward look

4.1 Efficiencies totalling £17.4m exceed those estimated in the forward look by £2.0m. Annex A summarises significant variations by service.

4.2 Although total efficiencies reported surpass the 5% cumulative target set for the end of 2006/07, supporting evidence of quality cross checks must be provided to demonstrate performance has improved or remained stable.

5 Quality Cross Checks

5.1 The CLG's measuring efficiency guidance states:

· If any crosscheck shows that service quality has not been maintained, an explanation must be provided as to why the action is an eligible efficiency gain.

· Local authorities are not required to use the same quality cross check in

succeeding years. However, if the cross check for a given sector or work stream is changed from the previous year's AES, then the value for the previous cross check must also be shown. In subsequent years, the value for that cross check need only be shown if it has deteriorated (see below); and

· Local authorities may choose to use a quality cross check that shows deterioration in service quality. In such circumstances, an explanation should be provided in the accompanying text box as to why the actions taken have not impacted adversely on service quality and are thus eligible to be counted as an efficiency gain.

· Councils will be allowed to change their quality cross check between years but are required to show in their backward look statement both the new cross check together with the previous year's different cross check and demonstrate that service standards have been maintained in both.

5.2 Omitting relevant supporting evidence to demonstrate the quality cross check could mean the reported gain becomes invalidated.

5.3 Not all the quality cross checks originally selected by the County Council in 2004/05 have continued to show stable or improving performance to 2006/07, but this is due to

· Government changes in assessment criteria, or

· County Council changes in policy having implications for performance indicator data.

5.4 These changes could not be predicted at the start of the Gershon period when quality cross checks chosen were considered both stable and reasonable indicators of performance for each service.

5.5 The comprehensive performance assessment (CPA) score for cultural services fell from 2005/06 to 2006/07 as reported elsewhere. The CPA score is included in the AES with a supporting note to explain that the apparent deterioration is due to the impact on the overall score of one indicator, stock turn in the Library Service, rather than a general fall in performance caused by the efficiency improvements.

5.6 Stock turn in the Library Service was adversely affected by Library closure due to refurbishment and redevelopment. If all Libraries had been operating their usual service it is estimated conservatively that stock turn would have been up 3%.

5.7 All other indicators within the cultural service block, including 10 further Library Service composite indicators have maintained or improved performance. It is proposed that lower stock turn in Libraries that are being improved through refurbishment does not invalidate efficiencies as the quality of service has been otherwise maintained across all cultural services.

5.8 The Adult Services primary quality cross check for 2006/07 is now the Commission for Social Care Inspection (CSCI) star rating for Adult Social care. This has replaced the previous Quality Cross Check, Direct Payments per 100,000 of the population. The CSCI star rating better reflects the overall performance of the department than Direct Payments, as it encompasses all aspects of Adult Services performance including efficiency.

5.9 Future national policy drivers and local charging policy changes were unforeseen. Direct Payments performance fell this year, due to other options being available such as voucher schemes, Occupational Therapy Direct & self directed care, none of which can be counted in this indicator but are a reflection of the wider choices service users expect. In addition, charging policy changes required all service users to be financially assessed resulting in 150 people making their own care arrangements, a positive alternative to dependence on publicly funded care. The Council is committed to improving the uptake of self directed care through an assertive strategy for change and as one of nine councils taking part in a national project. Adult Services plans improvement to increase Direct Payments uptake with stretching performance indicator targets for 2008/09.

5.10 2006/07 performance results will not be announced by CSCI until September 2007. Overall the department's performance in 2006/07, as measured by the Performance Assessment Framework (PAF) indicators, has improved with 90% of the indicators better than last year, for example:

· 113 more people were provided with intensive home care in 2006/07 to help them live at home, 2,039 in total. This is reflected in improved C28 performance of 9.5 (per 1,000 population aged 65 and over), from 9.1 in 2005/06.

· A further 500 older people were helped to live at home in 2006/07, 17,861 in total (C32 PAF indicator).

· Overall Adult Services helped 93,700 people in 2006/07, 10,000 more than in the previous year.

5.11 Environmental Services previously used the Annual Progress Report score as the primary quality cross check for Local Transport (Highways) improvements. In 2006/07, the Department for Transport did not provide an assessment figure despite an approval letter stating progress was "very good".

5.12 The CLG recognise this indicator can no longer be used and advises councils previously using the Annual Progress Report score to select another indicator for this year's backward look statement. This will not be treated as a changed primary quality cross check since, clearly, it can no longer be reported against.

5.13 The CPA score for the Environment block will replace the Local Transport Annual Progress Report as the primary quality cross check from 2006/07. This measure is strategic covering the main service areas and is potentially less volatile than the other highways quality cross checks included in the AES such as numbers of people killed or seriously injured in road accidents each year.

5.14 Quality Bus Partnership passenger numbers have been restated to correct figures previously included in the AES. This quality cross check demonstrates improved performance for Local Transport (Non Highways) efficiencies.

5.15 Other quality cross checks demonstrate stable or improved performance, supporting the statement that efficiencies have been achieved with no deterioration in service quality.

6 Gershon cashable efficiencies producing budget savings

6.1 Of the cashable efficiencies reported in the 2006/07 backward look, gains producing budget savings amount to £4.5m. This is 0.7% of the baseline.

6.2 Cumulatively, since 2004/05, £13.3m cashable improvements that produce budget savings have been achieved, 2.2% of the baseline.

7 Cumulative total to the end of 2007/08

7.1 For Hampshire County Council, there are broadly three type of efficiencies being reported:

· Cashable efficiencies that produce a budget saving

· Cashable efficiencies relating to the avoidance of costs not allowed for in the budget

· Non cashable efficiencies

Cashable efficiencies that produce a budget saving

7.2 Where these efficiency gains have arisen they have been redeployed within the budget of the relevant service. Over the Gershon period, total reported and planned cashable efficiencies also producing a budget saving amount to £20.9m.

7.3 £11.9m, 57% of cashable efficiencies producing budget savings have been found within Adult Services. Most efficiencies were achieved through major restructuring and redesign to cope with the lack of sufficient funding to cover increasing demand and complexity of care packages.

7.4 By 2007/08, the County Council plans to achieve 1.1% of its baseline per year in cashable efficiencies that produce budget savings. This will be below the 1.25% headline requirement for cashable efficiencies under Gershon and is significantly less than the 3% being proposed for 2008/09 onwards under the Comprehensive Spending Review 2007.

Cashable efficiencies relating to the avoidance of costs which were not allowed for in the budget total

7.5 The County Council takes efficiencies seriously. Control of costs and effective planning built into the budget setting procedures predate Gershon. Where such controls and planning produce improvements that are quantifiable and of no detriment to service provision they count as Gershon efficiency improvements, even though they do not produce budget savings.

7.6 Examples include the control of employee costs through the absorption of increments within existing staff budgets, SAP benefits realisation and the use of capital receipts and developer contributions to reduce capital programme financing costs, predicted in decisions made about capital spending.

7.7 Robust corporate procurement and purchasing through the Central Buying Consortium produces real efficiencies, but in budgetary terms reported efficiency savings may be required to finance above average increases in other supplies, for example gas and electricity.

7.8 Reduced inputs used to produce the same outputs are counted as cashable efficiencies. Supporting People and the Guidance and Careers Service have maintained service levels despite reduced grant/income. The loss of grant means no further budget savings have been produced but more efficient working practices are recognised under Gershon as cashable gains.

7.9 If all planned efficiencies are achieved and sustained, cashable gains that do not produce budget savings will total £27.9m by the end of 2007/08.

Non-cashable efficiencies

7.10 Where more outputs are produced for the same inputs, non-cashable efficiencies are produced. For example, within Recreation and Heritage, existing budgets contributed to the Policy Fund at no detriment to service provision, resulting in support for new activities such as arts development in schools and working with young people in disadvantaged areas. Also services have been absorbing extra work such as admissions in Children's Services and freedom of information act responses in Environment, with no extra staff.

7.11 Non cashable efficiencies reported and planned total £16.4m for the Gershon period. The most significant non-cashable efficiencies are the economic benefits of reduced accidents, injuries and fatalities achieved through the Safety Camera Partnership, a cumulative total of £9.6m by 2007/08, but the area is considered volatile and high risk.

Total efficiencies identified and reported

7.12 Looking forward to the end of 2007/08, planned efficiencies surpass the Gershon target by £19.0m. There is a requirement to plan and achieve efficiencies of at least the cumulative Gershon target in order to retain the County Council's Comprehensive Performance Assessment four star rating.

7.13 Planning also allowed for changes in economic conditions, funding, demand or other factors outside the control of the County Council which may result in some reported efficiencies not being sustained.

7.14 Cumulatively, cashable improvements that produce a budget saving amount to 3.4% of the baseline, compared with total cashable improvements, representing 8.0% of the baseline. This surpasses the CLG's minimum requirement for cashable efficiencies, 3.75% of the baseline.

7.15 This shows there is a difference between the Government's definition of a cashable efficiency under Gershon and the reality of improvements that produce budget savings for the County.

8 Summary

8.1 The AES: 2006/07 backward look has been prepared in accordance with CLG guidelines to include efficiency improvements which surpass the County Council's target. Quality cross checks demonstrate stable or improving service quality.

8.2 The CLG's minimum requirement of cashable efficiencies has been exceeded.

8.3 Performance evidence has been included, as appropriate.

8.4 Additional information has outlined that of the efficiencies classed as cashable by the CLG only 0.7% of the baseline produce budget savings for the County Council in 2006/07 due to policies and planning that predate Gershon.

8.5 A forecast summary has outlined the County Council's position looking forward to the end of 2007/08.

Annex A