Part 1: The administration costs of revenues and benefits
The Audit Commission promotes value for money in public services and this study was undertaken because of costly administration of revenues and benefits, with English councils spending £1 billion each year on collecting council tax, business rates and processing housing and council tax benefit claims.
This study examined:
- the national context of revenues and benefits - including changes in legislation and guidance
- the costs of providing the services
- the approach councils take to changing how they deliver these services
- the successes and difficulties for partnerships in delivering transactional services
- the additional cost issues facing London boroughs; and how direct debit can contribute to improved efficiency
The government's Efficiency Review (Sir Peter Gershon's report Releasing Resources to the Front Line) expects councils to make efficiency savings of 2.5 per cent per annum. Improving direct debit take-up rates alone could generate savings in transactional and administration costs totalling £15 million per annum within five years.
From 2005/06, the Audit Commission will deliver an annual value for money judgement for all councils. This will assess how councils manage, promote and improve the value for money of their services, including how well they take advantage of the opportunity to make savings in the administration of revenues and benefits.
Part 2: Costs of administering local government pension funds in London
The Efficiency Challenge reports on the higher costs of administering local government pension funds in London; highlighting the key cost drivers, potential savings available and the options for change.
The following contributory factors have been identified:
- The 'London effect' - the total pension administration costs per scheme member are on average higher in London than elsewhere in England, which can be explained by the 'London effect' (the higher cost of salaries and office accommodation in London).
- The size of scheme - the existence of fixed costs within core administration costs for pensions. For example, each fund requires a minimum number of staff to run the scheme regardless of the number of scheme members.
Other factors:
- Investment strategies adopted in London are consistently more active than those adopted by schemes outside London (active investment strategies aim to outperform the relevant market index and are therefore more time consuming and result in higher
- Fees than passive strategies, but can produce higher returns);
- Outsourced pensions administration is cheaper than administration retained in-house;
- London funds have a higher proportion of active members than funds elsewhere, which may cause higher administration costs;
- London pension funds carry out a significant amount of non-pension activity compared with non-London funds; and
- London pension funds deliver a higher quality of service than non-London funds, which cause higher costs.
This report explores options that would enable London funds to take advantage of the economies of scale enjoyed by non-London funds, and to address the London effect.