Local authority financial resilience: data led early warning systems are key

CIPFA is consulting on its plans to provide an authoritative measure of local authority financial resilience via a new index. The consultation is open until Friday 24 August and continues the trend of using available data to better predict and head off financial crisis in the public sector. 

Policy in Practice believes in the importance of early identification, intervention and tracking financial resilience over time and, as such, we broadly support CIPFA’s data led approach to understanding financial resilience. Leading councils we work with already use their own data to proactively identify, target and support the financial resilience of the families they support. Using localised predictors of risk developed from their own data, councils can predict which households may be at risk in the future, and put prevention programmes in place accordingly. 

View consultation on CIPFA index of resilience for English councils here

Unlocking the power within existing data sets

We work with over 80 councils using administrative data to model the economic status of individual households, looking at how welfare reforms and other policy changes are impacting upon their financial resilience. This gives councils the information to pinpoint families most in need, create interventions that could avert crisis and track how effective they are over time. Acting early to proactively prevent financial disruption is critical at a personal, as well as a council level.

Existing data sets from across different deparments can fuel early warning systems that allow councils to be better informed, both about their own financial health and that of their residents. 

This approach can also help drive better financial inclusion. At our recent event at the House of Lords we discussed Lord Bird’s Credit Worthiness Assessment Bill and how data could be used to better empower low income households, via fairer access to credit. 

Case studies: local authority early warning systems tackling homelessness

The objective information and insights gained from analysing data helps organisations write business cases for funding. We’ve helped a number of councils to utilise their data to drive their homelessness programmes, build holistic approaches to prevention, and target support to households most in need.

Newcastle City Council use data to identify pathways to homelessness, enabling early intervention. They analyse their data via a Low Income Family Tracker (LIFT) Dashboard to get visibility over their residents, particularly private tenants who are often previously hidden from council intervention services. One of the most common pathways into homelessness includes residents affected by the benefit cap or LHA restrictions.

For Newcastle, data helps inform the “best first” approach to helping residents with low financial resilience. Often this will be a debt advisor to ensure ongoing income maximisation and sustainability prior to other interventions, but for others employment support or help with their landlord may be more timely. Early intervention is crucial, and a data analysis tool is helping the team to target and track impact.

Luton Borough Council is committed to adopting a preventative approach within homelessness, and ultimately more broadly across the council. That is because homelessness is an avoidable process, and prevention is vital; not only is the cost to individuals considerable, but ultimately also results in further cost to the council.

This is where data can help.

Data analysis gives factual evidence

Local authorities do not have the resources to offer all the intervention and support that families may need, but they do hold incredibly rich data on low-income households, many of whom will already have presented to the authority. Councils can draw this information together from different departments, on an anonymised basis in some cases, and link it together over time. The insights gained can help councils to prioritise support and, more importantly, tailor the right support to people, before they reach crisis point, tracking the effectiveness of that support over time. 

There is an ongoing battle to fund crucial services, and while the case for early intervention is clear through eventual cost savings, it can be hard to argue for preventative support when in-year savings are in demand. Clear data that tracks the impact of early intervention can help councils make the case for early intervention to internal stakeholders. Newcastle City Council and Luton Borough Council’s work is showing that investing in effective and well designed homelessness avoidance schemes returns tangible financial as well as huge social gains.

The data needed to achieve better outcomes for families is already here. At an individual household level the data can be drawn from the administration of benefits. At the departmental level, cost and activity information can be sourced through analysis of budgets and targeted outputs, and at a full council level data exists through RO (General Fund Revenue Outturn) forms, regulators and auditors.

Analysis of administrative data can tell us what impact national and local policies are having on low income households and help us design interventions that work better for people.

Supported by Trust for London, Policy in Practice has tracked changing living standards for almost one million Londoners. We have collected 25 months of anonymised housing benefit and council tax support data on over 550,000 households from across 18 London boroughs. This has enabled us to provide a unique assessment of how the living standards of low-income Londoners have changed over the last two years, and the factors that have shaped these changes.

We have also modelled the future outlook for living standards of households in London, considering the impact that Universal Credit alone is likely to have and how other factors, such as rising rents and living costs, will combine to affect low income households.

To attend our Low Income Londoners research debrief on Wednesday 20 September register here.

Financial resilience systems fuelled by data

The intention of CIPFA’s proposed approach to measuring the financial resilience of councils is to help create a picture of how stretched council departments could manage and overcome risk. As CIPFA says, local authorities face unprecedented financial challenges. Using data to better understand and act upon these challenges early is a proven approach.

Our work brings the ability to understand financial resilience to the heart of predicting outcomes for low income households. By segmenting households into different levels of financial resilience (those who are At risk, Coping, Struggling, In crisis), the councils we work with can identify households of concern and develop the right intervention strategy for them to reduce the risks they face.

Local authorities hold valuable data sets that, analysed intelligently, can give insights to help better understand the drivers of poverty in their area. This knowledge helps them meet legal responsibilities to support their most vulnerable people. The financial resilience of councils is critically important, as is the financial resilience of the households they support. Councils can and should use their existing data to work on both.

Find out more

Following our summer Leading Lights Network event at the House of Lords with Lord Bird, founder of the Big Issue, we will continue the conversation about how to better prevent households from falling in to crisis. Join our webinar to hear stories from the frontline of creative uses of public data that tackle vulnerability early, and in a proven sustainable way.

Identifying and preventing vulnerability webinar, Wednesday 19 September at 10:30, details and register here