The directors present their strategic report on the Group for the year ended 31 March 2022.
Principal activities
The Local Government Association (LGA) was incorporated on 30 January 2018. On 1 April 2019 the LGA took on the business, assets and liabilities of the unincorporated Local Government Association, which had been set up on 1 April 1997 following the merger of the three previous local authority associations covering England and Wales (the Association of County Councils, the Association of District Councils and the Association of Metropolitan Authorities), to provide a single national voice for local government.
On 3 December 2021, the LGA took on the business, assets and liabilities of its subsidiary Local Government Association (Properties).
On 1 April 2021, the administration of the IDeA Local Government Pension Scheme (IDeA LGPS) was transferred from Camden Borough Council to the Merseyside Pension Fund (though the funds were not merged with the LGA LGPS).
The shared objective of the LGA and its subsidiaries is to make an outstanding contribution to the success of local government working with and on behalf of the LGA’s member authorities to support, promote and improve local government.
Departure from United Kingdom Generally Accepted Accounting Principles (UKGAAP)
In line with prior years, the financial statements do not include a detailed note on the Association’s defined benefit pension scheme, instead just showing the combined Group view.
The LGA Board believe that this exception results in the financial statements still showing a true and fair view.
Report of the business
In October 2019, the LGA Board agreed a new three-year business plan, based on those issues of greatest importance to our member councils and rooted in the United Nations Sustainable Development Goals. The business plan was updated in October 2021, to reflect the changing situation and new emphasis on recovery and economic growth following the COVID-19 pandemic.
Through the work of our Boards and Task and Finish Groups, made up of members from councils across England and Wales, the LGA has continued to make progress on delivering its priorities.
Despite ongoing pressure on our core funding, we have delivered a satisfactory financial outcome in 2021/22. From 1 April 2016, IDeA become the recipient of Direct Government Funding from the Department of Levelling Up, Housing and Communities (DLUHC) to pay for improvement services to councils, replacing Revenue Support Grant (“RSG top slice”). Our income from DLUHC Funding remained steady in the year, but with revised priorities and reflecting the change to remote working practices, and while other grants and service contracts were secured, overall income increased by a total of 7 per cent in 2021/22 compared with the previous year. We continued to keep costs down and invested in reducing costs of back office services, at the same time as continuing to deliver on our key priorities and deliver direct support to councils. Both the LGA and the IDeA continued to make payments towards their pension fund deficit.
As agreed by the LGA Board, the 2021/22 consolidated operating surplus (excluding pension scheme and investment property revaluation adjustments) has replenished the risk and contingency reserve in our balance sheet. This was created to support opportunities to invest to save costs or generate additional commercial income, and also to cover the potential risks to the 3 Year plan included in the LGA’s Financial Strategy.
The LGA Board has overseen the LGA’s approach to Treasury Management and concluded that the LGA should continue to be cautious in its investment strategy. Substantial use has been made of the Public Sector Deposit Fund, a qualifying money market fund operated by CCLA Investment Management Ltd. No losses arose on treasury activities.
Following a real terms reduction in subscription income of over 48 per cent in the seven years to 2019 the LGA Board agreed an inflationary 2 per cent increase in membership subscriptions for 2021/22.
Future developments
In common with other parts of the public sector, we are taking steps to ensure we develop new sources of income as well as continuing to reduce our costs.
Our future success relies on delivering ever greater value to member councils at a time when councils will face cost of living pressures, increasing service demands and uncertain future funding levels.
During 2022/23 the LGA will continue to develop and manage its property assets to maximise their capital values and offset the liabilities arising from our pension funds and to reduce costs and deliver additional commercial income to maximise levels of support to our membership.
The impact of COVID-19 on the Group and Company’s business has been assessed and has been determined to not be material. The IDeA receives grant funding from the Department for Levelling Up, Housing and Communities (DLUHC). This funding is received on behalf of the Local Government Association and its related bodies. The level of funding has been formally determined by DLUHC for the year to 31 March 2023. Funding for some of the Company’s principal funded programmes has also been agreed by the funders, with further awards expected shortly, despite some funding now being required to be secured via competitive tender. The majority of Member subscription income has been received for the year.
For the investment property rental income streams, there has been, and is expected to be, no interruption for 18 Smith Square. At Layden House we have secured a single tenant for the office floors on a long term lease, and will begin active marketing of the two ground floor retail units during the summer of 2022, such that no material impact is expected to the Group.
Therefore, it is considered that the majority of the Group and Company’s income for the foreseeable future is secure and the directors have therefore adopted the going concern basis for the preparation of these accounts.
Our priorities
In October 2019, based on feedback from our member councils and agreed by our politicians, we launched a new three-year business plan that set out our priorities, which was reviewed and updated in October 2020 and again in October 2021 in the light of the pandemic:
Funding for local government
Fair and sustainable funding enables councils to plan and deliver essential public services beyond the short term, to raise more funds locally and to promote greater collective working across local public services.
Adult social care, health and wellbeing
Sustainable funding and better integration with health services enable councils to continue to support people to live safe, healthy, active, independent lives and to promote wellbeing and resilience for all ages.
Narrowing inequalities and protecting communities
Councils lead and work with diverse communities and partners to address inequalities and build safe, cohesive and resilient communities.
Places to live and work
Councils lead the way in driving inclusive and sustainable economic recovery, building the homes that people need and creating places where they want to live.
Children, education and schools
Councils have the powers and resources they need to bring partners together to deliver inclusive and high-quality education, help children and young people to fulfil their potential and offer lifelong learning opportunities for all.
Strong local democracy
A refocus on local democratic leadership, and a shift in power post-Brexit from Whitehall to local communities, leads to greater diversity of elected representatives, high standards of conduct and strong, flexible local governance.
Sustainability and climate action
Councils take the lead in driving urgent actions in their local areas to combat climate change and its impacts and to deliver zero net carbon by 2030.
Supporting councils
We support councils continuously to improve and innovate through a programme of practical peer-based support underpinned by strong local leadership and through our service delivery partnerships.
We have now begun the process of developing a new three-year business plan, which will come into effect from October 2022.
Principal risks and uncertainties
Our arrangements for risk management include the regular review of the LGA’s strategic risk register with clear responsibilities assigned to named senior officers for the management of the principal risks. These included ensuring that we deliver on our objectives and have impact for our members, ensuring that membership levels are maintained, ensuring that we have effective governance arrangements and financial sustainability, and ensuring that we maintain employee capacity and capability. We have also put in place clear governance and project management arrangements for projects designated as being high risk from a financial or operational point view.
Our principal liabilities other than those arising in ordinary day to day business relate to our combined pension deficit and four main liabilities: structural interest free debt of £8.2 million due to the predecessor Local Authority Associations and related to the purchase of the Smith Square property; bank debt of £1.56 million on separate loans due to Barclays relating to the Smith Square property, which is currently being repaid at the rate of £0.52 million each year; £20.0 million from Westminster City Council which we are using to fund the development of our properties; and a liability until 2022 for funding the District Councils’ Network (DCN), financed from cash received from the predecessor Local Authority Association.
The valuation of our combined pension deficit was £67.63 million at 31 March 2022 (£101.94 million deficit at 31 March 2021). In order to pay off the pension deficit and liabilities for past employees, we have been making additional contributions as directed by the actuaries. Following the Triennial Valuation as at 31 March 2019, these additional contributions have reduced to under £0.5 million per annum on average. Actuarial advice indicates that on reasonable long term assumptions, these contributions will be sufficient to eliminate the deficit over a period of 19 years for the LGA and 15 years for the IDeA. We have transferred the administration of the IDeA LGPS from Camden to Merseyside (administrators of the LGA LGPS) as at 1 April 2021 to align actuarial assumptions and generate cost savings.
Key performance indicators
We have reviewed the impact of our work and the delivery of our priorities through robust performance management which has included regular reports to the LGA Board. In addition we have reviewed our own efficiency and effectiveness through a number of key indicators. These include the number of organisations in membership, which has remained static in 2021/22, with only five councils out of membership at the year end. All 22 Welsh councils are in membership through the Welsh LGA’s corporate membership of the LGA.
In 2019 we carried out a survey of our members which gave us important information about customer satisfaction with 78 per cent of members indicating that they were satisfied overall with the work of the LGA. We have set ourselves the target of increasing member satisfaction and also their perceptions of the value for money we offer and we will monitor our progress with these through member surveys.
We review our financial sustainability by carefully controlling our staff costs. Currently we have 432 employees in the year ended 31 March 2022. We continue to monitor employee absence and whilst this has increased from an average annual number of sick days per employee of 2.0 days in March 2021 to 3.9 days in March 2022, it is still well below national averages for sickness (8.0 days for public sector – Source: CIPD Health & Wellbeing at Work Survey 31 March 2020).
We continue to pay close attention to the collection of outstanding debt. The percentage of debtors over 12 months was 2 per cent of the total trade debtors at March 2022 (1 per cent 2021).
Market value of land and buildings
The market value of 18 Smith Square, which was previously owned by Local Government Association (Properties), is considered at the latest valuation in March 2022 to be £49.50 million (2021 £47.5 million) with a net increase of £2.0 million in the year reflecting rental market conditions in the Westminster area. In the Group accounts 34 per cent (2021/22 34 per cent) of the above market value is reflected as an investment in the Group’s balance sheet. The remainder held as an operational asset at the current net book value of £16.5 million.
Layden House is classified as an investment property and has a market value at 31 March 2022 of £66.0 million (2021 £63.0 million), an increase of £3.0 million reflecting the recovering strength of the Farringdon rental market.
Environmental matters – minimising the impact of climate change
Through the General Assembly in July 2019, the LGA declared a climate emergency, and aligned its priorities to the United Nations Sustainable Development Goals.
The LGA is committed to minimising the environmental impacts of its activities, reducing pollution and CO2 emissions and contributing to a healthy future for all. The past year has demonstrated that working and attending remotely now provides a real alternative to travelling to 18 Smith Square, both for staff and for the elected members who are actively engaged in the work of the LGA.
Flexible working
Our interim flexible working policy brought added flexibility for office-based staff to vary their work locations, subject to their role and to the needs of the business. For those who do not need to be based in 18 Smith Square, we offer home-based contracts. This means less journeys to work and a better work-life balance. Longer term it may enable us to further reduce the amount of office space that we occupy.
Our ICT is designed to support flexible working, enabling staff to log in from home or other venue with a secure wifi connection, or from public transport when they are on the move.
Head office - 18 Smith Square
All meeting rooms at 18 Smith Square are equipped with videoconferencing facilities, cameras and sound bars to support virtual or hybrid meetings and events.
Secure cycle facilities and showers are provided for those who prefer to cycle or run to work. There are no car parking facilities.
Following its refurbishment 18 Smith Square’s EPC rating moved from F to B – a significant achievement for a heritage building in a conservation area. Lights are energy efficient LEDs, with motion sensors that switched off when not required. Windows that do not face the conservation area are triple glazed to reduce energy loss. Recycling bins are provided on every floor.
Travel
Where staff and members need to travel they are encouraged to use public transport wherever practicable to reduce the impact on the environment.
Procurement
The LGA has a robust procurement policy and process, which underpins the importance of all our contractors being able to demonstrate a commitment to sustainability and combatting climate change. Our policy has undergone a full review during 2021/22 in the light of our renewed commitment to equality, diversity and inclusion and will be relaunched during 2022/23. Our procurement documentation states:
“In adhering to our commitments, the contractor should have systems in place to account for and minimise environmental impacts in all areas of contract delivery”.
Community and social issues, respect for human rights
At their meeting on 11 March 2020, the LGA Board agreed to adopt the International Holocaust Remembrance Alliance definition of antisemitism.
The LGA’s Public Duties and Volunteering policy makes provision for colleagues to take time off for approved public and community activities.
A significant strand of our policy work is targeted at improving social cohesion, adult and children’s social care, and enhancing communities.
The LGA recognises that it has a responsibility to take a robust approach to modern slavery and human trafficking. The organisation supports the Modern Slavery Act 2015 and opposes modern slavery and human trafficking. It is committed to ensuring that such practices have no place within its supply chain or other activities.
In addition to the LGA’s responsibility as an employer, it also acknowledges its duty to notify the Secretary of State of suspected victims of modern slavery or human trafficking as introduced by section 52 of the Modern Slavery Act 2015.
Anti-fraud, bribery and corruption matters
The LGA has an anti-fraud, bribery and corruption policy and response plan which is reviewed annually. The Audit Committee receives an annual report on any instances of fraud, bribery or corruption. No instances were reported in the past year.
Section 172 statement
Section 172(1) of the Companies Act 2006 states that directors of a company must act in the way he/she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
- the likely consequences of any decision in the long term
- the interests of the company's employees
- the need to foster the company's business relationships with suppliers, customers and others
- the impact of the company's operations on the community and the environment
- the desirability of the company maintaining a reputation for high standards of business conduct, and
- the need to act fairly as between members of the company.
At the commencement of all Board meetings, directors are reminded of their responsibilities in regard to this requirement, and agree to abide by it in their decision making.
By Order of the Board
James Jamieson OBE, LGA Chairman and Chairman of the LGA Board
8 June 2022