Update | Local government: Social Value Act

Local authorities and other public bodies which are ‘contracting authorities’ for the purposes of the Public Works Contract Regulations 2006 have been subject to the requirements of the Public Services (Social Value) Act 2012 since 31 January 2013. These apply to procurements of services or of services with goods, and framework agreements for these caught by the 2006 Regulations. Before commencing such a procurement the authority must consider:

? how the procurement might improve the economic, social and environmental well-being of the relevant area;

? how, in conducting the process of procurement, it might act with a view to securing that improvement; and

? unless starting the procurement is urgent, whether a consultation about these should be carried out.?

Does this mean that the significant ?buying power of a local authority will ?now be harnessed towards local regeneration, making new jobs for local people, and really bringing the benefits of localism to life? Or will it mean just carrying on in the same old way?

Best value and social value

For some local authorities the legal requirements of the new Act may just mean embedding more firmly practices already followed under the department for communities and local government 2011 Best Value Statutory Guidance. This requires social, economic and environmental value to be considered as part of the test for obtaining best value. For others, it will mean levelling the playing field in favour of social enterprises and voluntary sector organisations, which should now get a better chance to compete with large commercial service providers. It remains to be seen whether there will be a rush towards partnering between commercial service providers and smaller not-for-profit organisations. One essential step will be for local authorities to listen to what those not-for-profits and SMEs have to say about the local authority’s procurement practices – expect to hear requests for shorter, simpler tender documents and the removal of barriers preventing start-up businesses from tendering. One example is to include lots of a suitable size to be attractive to smaller bidders – not only not-for-profits but local family businesses too.

The Public Services (Social Value) Act should already have triggered a move towards commissioning for social value.

The Act requires a pause for thought before the procurement is started, so that this can be adjusted to commission social value. That is value which reflects the authority’s social value priorities and the needs of the local area, consistently with the authority’s sustainable community strategy and corporate plan. A local authority should now have a social value commissioning policy, and its officers should be clear about how social value elements can be specified in tender documents.

But there is a much bigger issue around the recognition of what social value really is. As one local authority social value champion, Ian Simpson, head of procurement at Staffordshire County Council put it in ‘The opportunity of the Social Value Act and how it is possible to get even more value for your money’: ?“The Social Value Act gives us the opportunity to measure what we value, whereas traditionally we have valued what we measured.”

Bringing derelict empty properties back into use has social value in the environmental sense; if the work can be done by individuals coming out of unemployment, social value in the economic sense is created. If the same individuals then occupy the renovated properties to strengthen the community, there will be social value in the social ?sense. How can these different types of value be measured?

Some argue that the best way to evaluate social impacts is to monetise the expected future savings to the public purse (which might be savings enjoyed by the commissioning authority or other public sector bodies). This enables calculation of a return on social investment. If a return can be calculated, comparisons can be made and hence bids with different projections of social impacts evaluated.

Likewise, social value can be scored against price and a higher priced bid enhanced by social value can be compared against a low priced bid without social value. At present we lack a universal accounting language to do this.

Providers of social value

One factor which local authorities should already be looking at more closely is the destination of the financial surplus generated out of a procurement. Here, social enterprises and charities should score higher than commercial companies. Charities must apply their surplus only in accordance with their charitable objectives; social enterprises must either reinvest that surplus in the enterprise or apply it to their identified social purpose. Both charities ?and social enterprises can commit to do ?this locally.

The government issued a consultation on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) on 17 January 2013. The force behind the proposed changes is the government’s drive to cut red tape affecting businesses. However as TUPE derives from the EU Acquired Rights Directive 2001/23 any changes to be made to the TUPE regulations must comply with the directive. The 2006 regulations were introduced with the objective of reducing uncertainty and consequential litigation but have since been criticised for gold plating the directive and going beyond what is required by EU law.

A number of changes to the 2006 TUPE regulations are proposed. One of the key proposals is to repeal the parts of the 2006 regulations relating to service provision changes. The present regulations have the merit of good clarity, however issues continue to arise in relation to determining whether employees are assigned to a service or where a service is split. Repealing these may be a retrograde step, although in the response to the initial call for evidence there was support for repeal.

The government also suggests that the regulations impose unnecessary burdens on business. If the changes are implemented, while many transfers would fall out of scope, it is likely that the legal landscape would revert to the pre-2006 position where identifying whether a transfer falls within scope of the regulations will result in extensive legal debate.

Another proposal is to repeal the specific requirements regarding the notification of employee liability information. Response to the call for evidence on this point suggested that in the majority of cases the 14-day deadline for the provision of information is not sufficient. The government is reluctant to increase burdens on business by requiring that information be provided earlier and specifying additional information to be supplied. Instead the government suggests that the information should be disclosed to the transferee (the incoming employer) where it is necessary for the transferee and transferor (the outgoing employer) to perform their duties under the regulations.

The consultation closes on 11 April 2013. It is clear that a sea change to TUPE is underway. This is likely to have a significant impact on local government procurement. The changes may give rise to complications on the transfer of employment and increase the likelihood of disputes.

New partners

Under the Health and Social Care Act 2012, a wide range of public health and health improvement functions will transfer from the NHS to local government as from 1 April 2013. These include delivery of services for dental public health, the schools medical programme and schools nursing service, sexual health, immunisation and screening, the healthcheck programme for 40-74 year-olds and prison health in addition to emergency health planning, data gathering and analysis. This transfer will bring into local government a budget allocation of £2.66bn for 2013/14 increasing to £2.79bn for 2014/15. This above inflation budget growth represents a significant refocus of resources towards prevention.

The budget allocation covers both services mandated through regulation and all other public health services that local authorities may wish to commission locally. Local government can decide what proportion of spending should be devoted to different services.

Currently, on average, about one third of spending is connected to mandated services, leaving a significant opportunity to commission services that meet the needs of the local population. Services not currently covered by the mandating regulations include obesity, smoking cessation and substance misuse. This is a major opportunity for local government to work with local partners, such as the voluntary sector, Police and Crime Commissioners and the private sector, to deliver these critical services resulting in better outcomes for your population.

New proposals, by the all party House of Commons Political and Constitutional Reform Select Committee, could rebalance the axis of power between central government and local government in England, giving local government greater independence. Key to the proposals are the introduction of a new statutory code and ?a more transparent tax system.

The select committee have reviewed the current relationship between local and central government and have started wider discussion of proposals, suggesting that local government should be considered an equal and respected partner to central government, not its subordinate. The responses received so far clearly indicate an appetite for greater clarity and autonomy within local government.

Perceived advantages of the new code are to set out where powers lie providing clarity, redressing overcentralisation of governmental powers for England and helping to provide an economic boost to the country. A first draft of the code setting out 23 principles grouped into nine articles has been included in the report. Notable among these is that local government shall have a guaranteed share of the annual yield of income tax, with this share to be renegotiated whenever service provision responsibilities are transferred between central and local government. Equally notable is that no change to the present equalisation formula for fair distribution of central government funding between councils is proposed. However it is made clear that this is only an initial draft of the code intended to open up discussion within government rather than being the only option going forward.

Another change proposed is tax transparency. This would not involve a change in the level of income tax or in the collection method; rather it would allow local people to see more clearly what their taxes pay for locally. It is also recommended that central government should consider devolving financial powers to local authorities to allow them to raise additional revenue, provided local electors have consented to this.

Although there have been previous attempts to define the relationship in government and some steps forward following the Localism Act, there is still a lack of constitutional protection for local government in England. Most of Europe already has these protections in place. With the devolution of some powers to Scotland, Wales and Northern Ireland, England is the odd one out.