Welsh councils need robust corporate wide frameworks to boost charging: WAO

The legal basis for setting and managing charges is complex and local authorities in Wales are not always strategic in their approach to charging, the Wales Audit Office has said.

In a report, Charging for services and generating income by local authorities, the watchdog suggested that Welsh local authorities “generally have a good awareness of the legal restrictions that exist for many areas of operation, but few authorities have robust corporate wide frameworks or strategies that set out the full range of issues they need to consider when increasing or introducing charges”.

The report found that just over a third of authorities had a corporate policy or strategy for setting charges covering all services. “The remainder have a range of charging policies for individual services, but because of gaps and weaknesses these do not represent an authority wide strategic approach to charging. Whilst a number of authorities have engaged consultants to support them in reviewing charges to identify opportunities to increase income, progress in delivering change from these reviews has been slow.”

Elsewhere in the report the WAO said: “Authorities’ legal powers to charge for services are wide-ranging, but they are also complex and there are particular pitfalls around whether charges can be used to generate a surplus to support general revenue budgets or whether they can only seek to recover reasonably incurred costs in providing a service.”

Authorities should have a clear rationale for how much they charge and what they charge for, it added. “Authorities should also be clear as to how charges support them to deliver their corporate priorities.”

The report’s principal conclusion was that while local authorities in Wales were raising more money from charging, they were not pursuing all options to generate income because of weaknesses in their policies and in how they used data and information to support decision making.

The report also noted:

  • The wide variation in how well local authorities generate income ;
  • The difficult challenge of balancing opportunities to increase revenue with the ability of communities and service users to pay more; and
  • How effective authorities are at evaluating charges to fully understand their impact.

The report also included some comparisons with performance and approaches to generating income from charges in England, Scotland and Wales and highlighted the impact of the different approaches to generating income that were being pursued.

The report made eight recommendations to help local authorities develop and encourage more effective plans for determining what services should be charged and how these are set.

The recommendations are:

  1. Local authorities should develop strategic frameworks for introducing and reviewing charges, linking them firmly with the Medium Term Financial Plan and the Corporate Plan.
  2. Local authorities should review the unit and total costs of providing discretionary services to clearly identify any deficits and, where needed, set targets to improve the current operating position.
  3. Local authorities should use the impact assessment checklist (Appendix 2 in the report) whenever changes to charges are considered.
  4. The Welsh Government and the WLGA should consider how best to support and encourage local authorities to act more commercially in generating income.
  5. Local authorities should identify opportunities to procure private sector companies to collect charges to improve efficiency and economy in collecting income.
  6. The Welsh Government and the WLGA should review nationally set fee regimes to ensure the levels set, better reflect the actual cost of providing services, or explain the reasons why they are different.
  7. Local authorities should improve management of performance, governance and accountability by: regularly reporting any changes to charges to scrutiny committee(s); improving monitoring to better understand the impact of changes to fees and charges on demand, and the achievement of objectives; benchmarking and comparing performance with others more rigorously; and providing elected members with more comprehensive information to facilitate robust decision-making.
  8. Local authorities should improve the forecasting of income from charges through the use of scenario planning and sensitivity analysis.

Auditor General Huw Vaughan Thomas said: “Our latest report looks at the challenges local authorities are facing in delivering services with less, and how charging for services is used by authorities to sustain services. The report provides a useful summary of the challenge faced by authorities, the complexities of the current legal basis for charging and the need for authorities to think more strategically about what they charge for, especially how their decisions impact on service users.”

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