1. Cost reduction The danish experience CEO Peter Gorm Hansen, Local Government Denmark

2. Overview I.Annual negotiations between the Government and LGDK II.The role of LGDK III.Tools developed by LGDK IV.Examples “Trafic light indicators” Sector specifik benchmarking tools Benchmark of municipal book keeping and wage administration Cost reduction through more efficient public procurement Agreement on increasing public tenders Reduction of local government bureaucracy The right to challenge legislation LGDK’s programme of Management and Efficiency The Common Local Government Quality Project The rise and fall of accreditation in Denmark V.Does the Danish Model work?

3. I. Annual negotiations between the Government and LGDK

4. The Danish Model: Negotiations between the Central Government and LGDK A long tradition of managing local governments through negotiations between the state and LGDK LGDK playing a major role in the implementation of the agreements Benchmarking and efficiency improvement advice is central elements in the implementation proces

5. Annual negotiatons between LGDK and Central Government – I Negotiations instead of legislation Contains both economic and material targets (for ex abolishment of waiting lists) Some agrements set a (minimum) level for all local governments Other agreements set a level for the local governments as a whole (tax-rates)

6. Annual negotiations between LGDK and Central Government – II (central elements) Economic consequences of new legislation Expenditure level (public consumtion) Investment expenditure Access to borrowing and use of liquidity The overall tax level Annual themes Eg.: Take control of cost development (vulnerable children and youngsters, disabled adults, special education) Eg: Streamline the public sector (more efficient workflow, less administration, less bureaucracy, increased competition, it-self service etc.)

7. II. The role of LGDK

8. The role of Local Government Denmark Setting a strong local government agenda on the interior policies in Denmark Encouraging and convincing local goverments to comply with the annual agreements Providing local goverments with the tools and the knowledge nessesary for a high performance Taking responsibility of the implementation of national initiatives and policies - eg. The Local Government Reform and the Quality Reform

9. Coordination of the budgets In the last 3 years LGDK has played an increasingly larger role in the coordination of the municipal budgets During August and September the municipalities report their expected budget-results (taxes and expenses) to LGDK The reports are added up – enabling comparison with the agreement between LGDK and the government – and enabling the comparison of the contribution of each local government The mayors discuss the prognosis on 2 meetings in September – and commit themselves to work for the necessary adjustments in their budgets

10. 2008-agreement: Mutual agreement on efficiency 2009-2013 Starting point: Efficient production is seen as a major source for better local economy Through better use of resources there has to be released resources in the economy of local governments amounting to € 135 mil. in 2009 rising to € 675 mil. in 2013. The national government is committed to initiatives which can provide 50 % of the agreed amounts The released resources stays in the local governments  more service to citizens! The strategy of the national government : cutting down on bureaucracy digitalization allowing the local governments to join the national public procurement contracts An effective way to force the state to actually deliver a framework for more efficient local governments 22-06-2016

11. III. Tools developed by LGDK

12. LGDK benchmarking tools Sector specific tools benchmarking municipalities on key indicators. An underlying model makes it possible to compare with other municipalities with similar social and geografic profiles. Trafic light indicators – supports the coordination of budgets (see seperate pp on trafic light indicators) A new ambitious benchmarking tool is being developed – initiated by LGDK: “FLIS”. The system creates a common infrastructure of data from the many local government data systems and makes it possible to compare on key indicators. A large number of local governments are involved in the design. National indicators for local governments – negotiated between LGDK and the state. To be used for the dialog between LGDK and the state.

13. Other LGDK tools Collections of good cases – in publications and individually on our site www.kl.dk Analysis’ and recommendations Consultancy work in individual local governments Education of local government officials and politicians Conferences

14. IV. Examples

15. ”Trafic light” indicators As a part of the coordination of the municipal budgets, LGDK compares the local governments on significant economic indicators. The 98 local governments are sorted on each indicator The comparison supports the discussions between the mayors. The local governments are compared on liquidity, growth in tax base, growth in expenditures etc.

16. Sector specific benchmarking tools Local Government Denmark has developed a number of benchmarking tools for different areas Public school, child care, employment, handicap, vulnerable children, sickness absence -Focus on both activities and expenses Common method for the tools: I.Through statistical analysis (linear regression) we find the structural conditions that influence the level of expenditure, e.g. demographic and socio-economic variables II.That enables each local government to benchmark their activities and expenses with other local governments with similar structural conditions. Each local government have the following possibilities of benchmarking: -The 5 local governments with most similar structural conditions in the country or in the region -The 5 local governments with the lowest level of expenditure among the 10 most similar local governments -5 local governments after own choice

17. Benchmarking of municipal book- keeping and wage administration The analysis: The analysis was carried out by a consultancy firm on behalf of the Ministries of Finance an Interior and LGDK 14 municipalities representing different organizational forms participated Differencies with respect to: Size Outsourcing Central/decentral organization Etc. The total use of ressources in each of these municipalities was measured Efficient forms of organization were identified The results: Efficiency potential (all municipalities): 500 – 700 mio. DKK/year (80 mio. EUR/year) No single optimal model - but 13 recommendations concerning optimal organization (centralization/decentralization, IT, control systems, support etc) A benchmark tool intended for the individual municipality was developed The results of the report formed part of the budget agreement for 2011

18. Cost reduction through more efficient public procurement There is a general understanding, that public procurement can contribute to cost reduction through increased coordination at all government levels By coordination, the provider is ensured larger volume and can offer local government better conditions (prices) The efficiency gains are identified and implemented through: Benchmark analysis of prices Best practice analysis Establishment of price benchmark tool

19. Agreement on increasing public tenders Annual agreement for 2007 4 year agreement: increase in public tenders from 21,5 pct. to 26,5 pct (Public tendering not the same as outsourcing!) No new rules and regulations in the period In the first 3 years increase from 21,5 to 25,1 pct. (no increase in the previous 10 years) A succesful attempt to increase public tenders by negotiations instead of by legislation

20. Reduction of local government bureaucracy There is an ungoing national government programme for cutting down bureaucracy caused by national legislation – all ministries are involved But bureaucracy also comes from local governments themselves Reflected in the agreement on efficiency from 2008: local governments should also contribute to the reduction of bureaucracy 2009-2010: LGDK-campaign to reduce bureaucracy, including two publication with inspiration to methods and lots of cases 2009-2010: A large number of local governments has initiated their own campaign to reduce bureaucracy. Many focuspoint: lean, digitalising, innovation, smarter mangement models (less control, more performance mangement), centralisation or decentralisation between institutions and local government administration

21. The right to challenge legislation As part of the national government’s programme for cutting down bureaucracy the local governments have been given a right to challenge national legislation. The right includes all welfare services The right is a short cut to alternative methods and procedures on an experimental basis for a predefined period of time. In their applications the local governments has to challenge specific rules The idea: if an experiment is successful the next step could be to consider a change in legislation on a permanent basis for all local governments.

22. LGDK’s Programme of Management & Efficiency Task force established 2010 Networks Network about efficiency Network about managing the specialised social area Collection of examples Development of tools Benchmark of social expenditures Benchmark of salary and bookeeping Studies and analysis Status and expectations of local streamlining effort Guidance, advice and recommendations Collections of inspiration Strategies of efficiency Quality standards Implementation Networks Consulting

23. The Common Local Government Quality Project Started in January 2008 18 projects within 4 topics: –Leadership –Attractive work places –Quality in the core services –Management and documentation Corresponded with the topics in the Governments Quality Reform Initiative from 2007 94 municipalities participated in 1 or more of the 18 projects – in average 4 projects. LGDK: Facilitates and coordinates the process

24. The aims of the different projects Input for LGDK in the negotiations about the Quality Reform Performance documentation – one bad case in the newspaper must be supplemented by information about all the good cases To distribute good practice and experiences from high performing municipalities To create new solutions in joint forces with other municipalities Stronger bonds between the new 98 municipalities The aims of the different projects

25. Accreditation in Denmark – the rise and fall... Accreditation a central issue in the quality reform initiated by the government in 2006-2007. Central elements from the british audit commission was adopted (standardised measures, smileys etc.) LGDK involved in the implementation At the same time a project initiated in the Common Local Government Quality Project Goal: to formulate an alternative approach to accreditation: based on voluntary elements (The Quality Model) Result: The state has adopted The Quality Model and no longer talks of accreditation. Also 8 principles for quality models has been formulated

26. 8 principles for quality models 1. Useful in small institutions 2. Support the work with quality in the specific institution 3. Contain few and clear criteria’s 4. Have focus on results and effect – and less focus on input and process 5. Support an individual, holistic and a systematic approach 6. Support local municipalities in a ‘holistic-local- governmental- approach’, including local politicians need to make priorities and steering across sectors and policy- areas 7. Support evolving common language local 8. Support de-bureaucratization

27. The Quality Model for Danish Local Governments Theme 1 Leadership Theme 4 Methods & Proces Theme 7 Professionals- results Theme 2 Resources Theme 3 Employees- Theme 5 User- results Theme 6 Emplyee- results ActivitiesResults Development and learning Theme 8 Other key- results

28. The employment sector: high degree of centralisation One exception in the Danish Model is the employment sector The area is very highly regulated – causing lots of bureaucracy locally The system of documentation is designed and administered by the government and the major labor market organisations 500 people is employed controlling the local governments LGDK-initiatives tries to prevent this regime to spread to other areas – eg. FLIS

29. V. Does the danish model work?

30. 22-06-2016 YES: High level of creativity and efficiency High level of economic responsibility by local governments Commitment to common goals easier when negotiated than when enforced BUT: Some sectors are very centralised (employment sector) Some years – eg. in election years – the local goverments spend far more than the agreed. The control of the state is becoming tighter – the economic crisis being one factor Does the Danish Model work?

31. Appendix

32. 22-06-2016 Billions of Dkr. In year prices (left axis)Pct. of GDP (right axis) The Reality of the Danish Economy

33. 22-06-2016 We spend more and more… Public consumption 2002-2010 Total Public consumption State Regions Municipalities Social security and funds Index 2002 = 100

34. 22-06-2016 More Customers in the Store…

35. 22-06-2016 …and fewer Hands Teachers Nurses Educators

36. 22-06-2016 Crowding out effects - The special vs. normal areas

37. The landscape before and after 1 January 2007 Before: DK: 5,4 mio. inhabitants 13 counties 271 local authorities Average: 16.000 inhab. Median: 10.200 inhab. After: 5 regions 98 local authorities Average: 55.000 inhab. Median: 43.300 inhab.

38. 98 new local authorities: 66 mergers 32 continued - 7 less than 20,000 inhabitants – enter into binding partnership with bigger neighbour authority

39. The 10 principles Clear division of responsibilities between State and local authorities 1. Clear responsibilities regarding the citizens 2. Individual cases are specifically solved Agreement on the local government finances for 2008

40. The central government sets up the objectives for the local service production and each local government are responsible to fulfil the objectives 3. Clear objectives and focus on results 4. Documentation of effort and result The 10 principles

41. Political responsibility, but space for managers and employees in the performing institutions 5. Political objectives are important for the effort 6. Decentralised management, space and freedom in the choice of methods 7. Objectives and results are made visible to the citizens 8. Active involvement of employees and users The 10 principles

42. Common responsibility for de-regulation and easy documentation – more time to elderly care and teaching instead of administration 9. Systematic simplification of regulation Goal oriented supervision of local authority service tasks 10. New kinds of quality assurance The 10 principles