BDO Budget Time.. Get Smart and Think Green or Blue!

save money

It’s budget time again…

and we’re hardly expecting the Chancellor’s Autumn Statement or the Local Government Finance settlement to be putting us in the mood to don the party hats and head out for an early Christmas celebration.

There will, no doubt, be even more discussion about the need for radical review of the role and priorities of Local Authorities, their structures, their approach to the commissioning cycle and ways of managing demand for services, for example, as ways of making significant reductions in Council expenditure. There will be yet more difficult and painful decisions to be made around service delivery and staffing levels.

What much of this debate is typically prefaced with, though, is a statement along the lines of ‘we’ve done the easy stuff’ or in management speak ‘we’ve picked the low hanging fruit’, so everything now is in the ‘difficult and painful’ box. After some conversations that I’ve been having over recent weeks, however, I’m not so sure.

I’ve met with one of the country’s leading experts on renewable energy, with the chief executive of a market – leading waste and recycling products and services company and with the director of a new business which sells water and energy saving devices which fit onto taps.

One common thread across all of the discussions was that all three have great products and solutions which are easy to implement and will save a typical local authority a significant amount of money. Another common thread, though, was that all three asked the question ‘why aren’t local authorities queuing up for the kind of things that we can offer?’ All were saying that they found it really difficult to get energy and wider environmental issues on to the agendas of chief officers and leading members. Indeed, at the SOLACE Summit last month it was hardly mentioned (at least not in the sessions I was in).

There may be many reasons for this – not least, of course, the massive challenges facing authorities around social care and economic growth, which will be eating up  much leadership time. Another reason may be that when you look at  these solutions they usually require some up front investment before benefiting from  the revenue savings, and if the pressure on the authority is to make immediate savings then the year one amount can seem small and perhaps ‘not worth the effort’.

However, some of this really is easy. In a healthcare building with an annual water bill of £200,000, fitting water saving tap and shower devices reduced the annual cost to £168,000. The capital outlay was £24,000. Local authority buildings, of course, don’t typically use as much water, but authorities do have a large property portfolio and the average saving on these devices is 15% of the water bill and an associated reduction in heating costs for the reduced amounts of hot water. The capital expenditure payback period is less than one year. On the renewable energy front, a biomass boiler for a school may cost less than £1m, but generate cash back through Renewable Heat Incentive guarantees which will see the capital cost paid back in around 8 years, with a further 12 years of guaranteed cash back after that.

If availability of funding for initial investment is a problem, it shouldn’t be. One of my Corporate Finance colleagues, never a shrinking violet, appears regularly at my desk to tell me that he has funders and investors queuing up to provide up front capital and financing structures which in his words make it a ‘no brainer’ for authorities – so why haven’t I sold it to all of my local government clients?

Like with everything, there are exceptions to the rule, and there are some authorities who are doing some great stuff and making some real savings, but the opportunity to move this agenda into the mainst

ream is huge. Some of that fruit really is sat there just waiting to be picked.

Andy Mahon