Talking Business: Stephen Hughes of Birmingham City Council
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In the latest in a series of ‘Talking Business’ interviews, Stephen Hughes, chief executive of Birmingham City Council, chats to the editor of TheBusinessDesk.com Marc Reeves, and KPMG local government partner Bill Cooper COMMENT Challenges for all, but opportunities too
Many authorities have struggled to define and gain commitment to a four-year budgetary plan to deliver the 25% to 30% reductions in spend driven by the Government’s austerity programme. The challenge of turning those plans into reality seems likely to now dominate the local government agenda, and a failure to deliver in full, could result in unplanned cuts to front line services – an unintended consequence for local citizens. Adopting the financial management disciplines of the best private sector organisations will provide the tight grip on local authority finances that will be necessary to take the budgetary plans from paper to reality. Innovative approaches to funding drawing effectively on but adding to sources such as the Business and Regional Growth Funds will be needed to maximise investment. Local government must recognise the need to be more responsive and flexible to the needs of local businesses to create genuine partnership. The new local enterprise boards are critical to this, and they must define priorities, secure investment and execute their plans quickly and effectively in order to realise value at a critical time for both the national and local economies. The scale of change taking place is undoubtedly significant, and local government will have to juggle both budget cuts and the stimulation of growth. Those that get it right through innovation, applying best practice and creating flexibility, will be those that change for the better.” Bill Cooper, local government partner, KPMG
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Cool under pressure, the boss of Europe’s biggest council weathers the public sector maelstrom
FOR a man who runs Europe’s largest local authority, has spent many years battling unions over a radical business transformation programme and has just been told by the Coalition Government to deliver up to 30% cuts, Stephen Hughes is a remarkably calm man. Remarkably upbeat, in fact, and apparently relishing every new challenge that lands on the desk of the chief executive of Birmingham City Council. Hughes joined me over lunch at Birmingham’s Opus restaurant to be interviewed as part of our ‘Talking Business’ profiles run in conjunction with KPMG. Bill Cooper, the practice’s Birmingham-based local government partner was also on hand to bring that organisation’s considerable public sector experience to our conversation. So what is it that’s keeping his spirits up? What makes him most optimistic? “The thing that springs to mind is the LEP,” he says, referring to the Greater Birmingham and Solihull Local Enterprise Partnership, whose board has finally been announced, and which has already unveiled a bold plan to put an Enterprise Zone slap bang in the middle of Birmingham city centre. “I’ve always thought it had loads of potential and would be a new beginning. I’m optimistic because LEPs are a recognition that local authorities can get on with it and secondly because we have a great collection of people who want to work with each other whereas previously it felt a bit like a forced marriage. “And then we had the announcement in the budget about Enterprise Zones, effectively giving us a TIF – which is the exciting bit in my view.” Hughes was an early advocate of Tax Increment Financing – a financial instrument through which a local authority can borrow against an expected uplift in business rates as a result of the regeneration initiatives it funds. That is fundamentally the model behind the Government’s Enterprise Zones. Now it looks like it could become reality: “It means we’ve actually got the capability of achieving great things for the city,” he said. “With the city centre Enterprise Zone, the ultimate benefit is an increase in rates per annum of around £70m – once all the development has taken place in the five strategic areas in the Big City Plan.
“In effect we’ve got two EZs – the one to deliver the resources from the city centre, but the second is a ring of enterprise in key locations around the city which means we’ll be supporting business growth across the whole of the LEP area. This will enable us to deliver the ambitious targets we set out in the LEP prospectus of 100,000 new private sector jobs and £8bn of GVA growth. That’s why I’m so excited about it!” And Hughes is dismissive of critics of the appointment of Andy Street, managing director of John Lewis, as the LEP’s first chair. Although born in the city, his Birmingham credentials have been questioned by some. He said: “With Andrew Street you’ve got someone – despite what some may say, real connections with Birmingham – he sits on the board of Town Hall Symphony Hall. And John Lewis is flavour of the month as far as this Government is concerned. He’s the kind of person with national credibility who can really open doors.” But surely the cuts agenda being driven by the Coalition Government must be testing his optimism to the full? Hughes is sanguine, and among local government watchers is regarded as someone who put Birmingham ahead of the curve with the city council’s radical Business Transformation programme, which saw a mass re-grading and re-skilling exercise rolled out across the authority’s 55,000 employees. He said: “We started the transformation programme in 2006 – and that turned out to be a smart move because we were able to put in a considerable amount of resources to help drive the changes through. To make savings in a sensible way you do actually have to put investment in and we’re now reaping the rewards of that. “Most of the back office programmes have got to the end of their completion stage. It’s put us in a very strong position relative to many other authorities. Of course we’ve got to save a big chunk of money (because of the Coalition’s public spending cuts programme) but £50m per annum is coming from the further implementation of the transformation programme.” Other authorities will struggle, he says, because the new age of austerity means they will be now unable to invest in the kind of activities – notably new IT infrastructure – that underpinned Birmingham’s ahead-of-the-curve transformation programme. “One of the strange things about business transformation is that our reputation for achieving great things goes before us everywhere apart from in Birmingham. Because the agenda – partly driven by the innate conservatism of the trade unions and staff generally not wanting change – has always been to pick up on anything that goes wrong and blow it out of proportion, and totally underreport the successes. But the successes are there for all to see and we have people from all over the world coming to Birmingham to see how we’ve done it. “If we manage to pull it off completely, it will be one of my lasting legacies that we have really transformed the way the city council does business.” KPMG’s Bill Cooper, working with local authorities across the UK, knows a thing or two about the challenges they face, but is complimentary about Birmingham’s approach. He said: “Authorities that have made a head start on their transformation are better positioned than those that haven’t. They were able to reinvest some of the benefits of transformation into improving processes, but that opportunity is more limited for authorities that started later. “They also understand the cultural issues better, as well as the process of change and how to bring staff along and that can only be beneficial.” Did Hughes ever imagine there’d be this amount of change when he first became a public servant? “I came into local government on the cusp of big change at the time. The outgoing Labour Government had already started the process of drawing back on capital programmes because of the economic climate. The Conservatives under Margaret Thatcher put increasing restraints on local government. Working in local government at that time it felt like you were in a war throughout the eighties. It felt like the Government was out to get you at every turn.” Mr Hughes gained a BA Honours Degree in Economics from Cambridge University, and his first job was at the International Wool Secretariat. In 1979, looking for a move out of London, he went for a job at Lucas in Birmingham, but turned it down because his one day in Birmingham turned him off the idea of living in the city. He eventually took a job at Coventry City Council as an economist. Since then he has occupied a variety of posts including deputy secretary of the Association of London Authorities, head of finance and property services at Islington, a year’s secondment at the Department of the Environment, Transport and the Regions where he was responsible for business rates and council tax policy, and director of finance at Brent. More articles in
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“This gives you an investment pot of £700m. This is more than enough to give you the infrastructure development you need in the city centre and creates opportunities elsewhere too. And this is where our LEP is ahead of the game. It creates the capacity to put into place the necessary interventions across a range of different places, such as the connectivity on the A45 corridor, and investment in Burntwood Park in Lichfield.