Who can answer this for me? MGMT410 "Business and Corporate Strategies"

196 CHAPTER 6 BUSINESS STRATEGY

ILLUSTRATION 6.1

easyCouncils: a not so easy low-cost strategy

The London Borough of Barnet has chosen a budget airline model for

its services, on the lines of easyJet.

In 2008–9, with pressures on budgets increasing,

Conservative-Party-controlled councils in the United

Kingdom were looking to save costs by adopting

the low-cost model pioneered by airlines such as

Ryanair and easyJet. Barnet, a borough council in

North London with a population of over 300,000, is

one of the pioneers.

The Conservative borough council was led at the

time by a former PwC management consultant, Mike

Freer. In a context of falling central government subsidies,

and wanting to save local taxes, the council was looking

to cut costs by £15 m (~b16.5 m; ~$22.5 m) a year.

In 2008, the council launched a consultation process

on radical reform called ‘Future Shape’. In 2009, it

declared its intention to adopt a budget airline model,

which council officials dubbed ‘easyCouncil’.

Mike Freer gave some examples. Just as budget

airlines allow passengers to pay extra for priority

boarding, in future householders will be able to pay

extra to jump the queue in order to get faster responses

on planning applications for new buildings or house

extensions. Similarly, as airline passengers can choose

whether to have a meal or not (and pay accordingly),

users of adult social care will be allowed to choose

their own options. Freer explained to the Guardian :

‘In the past we would do things for our residents

rather than letting them choose for themselves. We

would tell them they need one hour help shopping,

or one hour cleaning, meals-on-wheels, and they

would get it, like it or not. Instead, we will assess

what level of personal care they need, place a

value on it and give them the budget. If they say,

“Frankly, I’d like a weekend in Eastbourne [a

holiday resort]”, they can have it.’

Opposition Labour leader Alison Moore warned in the

Guardian :

‘There is a real danger of problems in the local

community and that vulnerable people will lose

out. People who are dependent on care services

may find that they aren’t there at the same quality

as before.’

None the less, the new low-cost strategy was launched

in 2009. Unfortunately, the costs of retraining staff,

building an in-house delivery team, hiring consultants

and closing facilities were higher than originally

projected. The council estimated it spent £1.5 m on

delivering the first year of the reform programme. On

the other hand, savings were slower to come through

than expected, with a series of strikes by council

workers resisting job cuts and the transfer of many

employees to private-sector subcontractors. Savings

in the first year were just £1.4 m, less than half

of what had been projected. Alison Moore, leader of

the Opposition, commented: ‘Barnet claim that easy-

Council is all about a relentless drive for efficiency, so

it is absurd that in the first year, they’ve spent more

money than they’ve saved.’ By this time, Mike Freer

had moved on to become a Member of Parliament.

However, Lynne Hillan, the new council leader, said

it was too soon to judge. Big savings would come

soon: ‘The programme took longer to establish than

planned because we took the decision to develop an

in-house team of officers. I’ve no doubt this will give

us the most efficient process and the greatest long-

term savings.’

Sources : Guardian , 27 August 2009; Guardian , 26 October 2010;

The Economist ; 22 September 2012.

Questions 1 What are the advantages and disadvantages

of this approach to low-cost council

services?

2 In what sense do borough councils

‘compete’?

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