Local and central government organisations should be able to
collectively raise millions of pounds and drive through significant
efficiency savings if they undertake a sale and leaseback on their
fleet vehicles and adopt best practice from the private sector to
offset far-reaching funding cuts.
That's the view of Vincent St Claire, managing director of
Alliance Asset Management, following the Government's announcement
of cuts in central funding for councils that could total up to 28%
over the next four years. The average decrease for 2011/12 will be
4.4%, with no council losing more than 8.9% for any of the next
three years.
The cuts, which are the worst to be faced by councils since the
end of the Second World War, will come into effect from April 6,
2011.
Typically, the public sector uses a blend of acquisition methods
including outright purchase for their fleets, which range from cars
and light commercial vehicles to refuse trucks, snow ploughs and
grass cutters.
Additionally, the public sector collectively spends millions of
pounds on reimbursing employees' business mileage - often at rates
significantly higher than tax-free HM Revenue & Customs' rate
of 40p a mile for the first 10,000 business miles and 25p a mile
thereafter.
St Claire said: "The rule book by which the public sector has
run its fleet and transport operations in the past must be ripped
up.
"With some government organisations and councils owning hundreds
of vehicles the quickest and simplest way to replenish financial
coffers is to dispose of assets. The sale and leaseback of vehicles
has been popular in the private sector for many years and there is
no reason why the cash-raising solution should not take-off across
the public sector.
"Not only will these organisations receive a much-needed
injection of funds, but they will benefit from being able to
exactly budget for their vehicle leasing costs on a monthly basis
which will help cash flow."
He added: "Not all local councils employ full-time professional
fleet managers. In these cases vehicle decision-making is made by
the HR, procurement and finance departments.
"Those people are clearly not fleet experts so by undertaking a
sale and leaseback councils will not only be benefiting from a cash
injection but they will be able to tap into the vast knowledge bank
that their chosen leasing provider has.
"By working in tandem with a leasing company, local councils
will be able to benefit from information, advice and experience
that will drive forward operating efficiencies resulting in
additional financial savings."
With regards to staff mileage rates, Mr St Claire said: "Some
organisations are paying far too much in mileage payment rates,
thus giving staff an extra incentive to drive more business miles.
Mileage rates of 20p, 30p or even 40p a mile above the tax-free
Authorised Mileage Allowance Payment (AMAP) rate of 40p a mile are
not unheard of.
"Even taking into account the fact that petrol prices are at an
all-time high and diesel pump prices just below record levels such
figures are still unrealistic even when taking into account all
other vehicle-related costs such as maintenance.
"There is no doubt that with 2011 being the year of austerity,
the public sector must, in many cases, reassess mileage
reimbursement rates which remain far too generous. Not only do they
not deliver value for money to the employer and local taxpayers but
they are not in line with the nation's carbon-cutting agenda."
In the wake of the autumn Government Spending Review, Alliance
Asset Management offered to undertake a level of free
consultancy on behalf of individual public sector organisations to
assist them in identifying ways in which they can develop
cost-effective, value for money policies and procedures.
The service was launched as an extension of Cambridgeshire-based
Alliance Asset Management's 'health check' service introduced
earlier this year and specifically targeted at fleets running from
500 to 10,000 vehicles.
St Claire said: "A complete change in culture and behaviour is
required across the board in relation to public sector fleet
operations and travel. Collectively billions of pounds of
taxpayers' money is spent on fleet vehicles and staff travel across
the segment but, it seems, often with little accountability or
real-world knowledge of costs.
"Since extending the 'health check' to the public sector we have
been involved in a number of meetings with local and central
government bodies and there is no doubt that vast savings can be
made in terms of vehicle purchasing, fleet operation and the use of
staff vehicles."
It seems that Government ministers are also encouraging local
council to be more pro-active in operating services. Communities
Secretary Eric Pickles, who announced the funding settlement, told
the BBC that councils could still provide a 'decent service' and
save money through changes in the way they bought goods and
services.
He added: "I believe it is possible to cut significant sums out
of local authorities by simply improving the way local authorities
operate."