The Leisure Review: April 2009

Round the table:

Paddy Corcoran
Chief executive of Tees Valley Leisure Limited, a leisure trust operating in the Redcar and Cleveland area. Paddy is also a trustee of the Institute of Sport, Parks and Leisure, and an executive committee member of Sporta, the association for trusts and cultural enterprises in the leisure and cultural sector.

Steve Philpott
Chief executive of DC Leisure Management Limited, a company delivering leisure services on behalf of local authority clients across the UK. Steve is a governor and founding trustee of REPs (the Register of Exercise Professionals), a trustee of the Health and Fitness Foundation, and is chairman of SkillsActive’s sports and fitness employers group.

Martin Ling
Head of development in the London Borough of Hackney’s community services directorate.

The debate:

Can we start with the perspective of the last ten years? What have we achieved from your own perspectives in a decade?

Martin: My perspective is that we have moved away, I hope, from the bottom line and more towards introducing activities that are more health-orientated; away from leisure in its broadest sense and towards providing opportunities for healthy activity. I think that is the key and will be what leads us on to the next stage, which is about social objectives. It’s about improving people’s lives. These are big words, I know, but it is massively important.

Paddy: I think we’ve recognised that leisure in its widest sense has got a part to play in a whole range of partnerships and it can deliver against a massive range of outcomes. Where we’ve not achieved particularly well, in my view, is in the fact that we haven’t made the case yet and I think that’s hampering us quite significantly when we look at things like securing capital funds. It has not helped in bringing the separate elements of the economy together and so we, the trust sector, are still falling out with the private sector instead of recognising the need to jointly contribute to making the case.

Are we still having to ‘make the case’?

Paddy: I think so.

Steve: I think at a national and local level that’s still very clear. In ten years we have made huge strides forwards but we’re still fighting for every penny when it comes to really convincing people that we can make a difference. This is a huge frustration because everybody in the industry – if you can call it that – clearly understands the benefits, whether that’s pure ‘leisure pleasure’ benefit – and there’s nothing wrong with people simply enjoying themselves – the whole activity and health agenda, or a whole load of other things that spin off in terms of social advantages. These are the benefits, broadly speaking, of sport and activity but I don’t think that we’ve won the debate. We have moved forward hugely in the last few years in terms of convincing politicians at both national and local levels that this is really important but I don’t think we’re necessarily winning the argument when it comes to funding.

Have the aspirations of ‘leisure services’ changed or have we as a sector put different labels on what we do to meet other people’s agendas?

Paddy: We still have an issue around terminology: whether ‘culture’ or ‘leisure’ is the right description, whether ‘sport and physical activity’ is the right description. They all have different connotations and if you say ‘sport’ to someone they might think it’s a very traditional activity around team games or perhaps individual participation. If you work in sports development you may see it largely as physical activity and not tied to competition. ‘Culture’ for many is an arts, museums, theatres context, whereas chief leisure officers who have culture in their title will see it as much wider than that. This difficulty around terminology doesn’t help us to sell our case to at least three government departments: the DCLG [Department for Communities and Local Government], the Department of Health and the DCMS [Department for Culture, Media and Sport]. I think that is a challenge for us to get that terminology right.

Martin: I think that is absolutely right. I’ve never agreed with the word ‘leisure’. The label has carried on but it’s really not descriptive of what we try to do and it is hard to get this across.

But has what you do changed?

Martin: We recognise that what we do now fits into other areas. Our provision has moved towards those areas and away from the traditional leisure activities. I think what we do, although labelled ‘leisure’, fulfils lots of obligations on the social side and we’ve taken our services towards that.

How relevant are those labels to you, Steve?

Steve: It is a bit of a dilemma but at the end of the day we set out to do a lot of different things and there is not one label for that. I don’t fret too much about it but it does make it quite difficult to make the case in a co-ordinated fashion. As Paddy said, we’ve got different agendas with different departments and different parts of government, both local and national. We do span sport, which is one single agenda, then there’s the move towards physical activity and the move towards health. The engagement of young people then brings you into contact with the agendas for education, social services and the justice system. I don’t think we can pretend that all this is easy and I don’t think you can find a single label to describe what we do. We do actually touch a lot of things that are important in government and it does make it quite difficult to make our case.

To what extent is there a commonality among the three approaches we have round the table? Are we all ostensibly trying to achieve the same ends or do we have different objectives?

Paddy: As a social enterprise, we are different in structure from the private sector but I think we’re all heading in the same direction. For me there’s perhaps a disappointment that we are still having debates about procurement – although that’s not a suggestion that there shouldn’t be a role for procurement – but we are still querying the different structures when it’s really the outcomes we should be interested in. It goes back to the making-the-case scenario. It means that the private sector should be sharing in some of the governmental schemes but they’re not. I think there is a legitimate case for the private sector to be recognised as delivering the same sort of things that we are but while we focus the debate on whether social enterprises have unfair benefits or whether procurement is as rigorous as it might be we are not focusing on making the case.

Steve: That’s all absolutely right but it is all very well to say it when you’re not operating, as we are, with one hand tied behind your back. It’s that simple. It is very hard to come together when you have such a fundamental difference at our core and that difference is what I certainly regard as unfair tax advantages on a significant proportion of the activity we are engaged in. The argument that I would make is that we, as a private company running local authority leisure, are in a sector that is being squeezed by an unfair VAT & rates situation. That is an inefficient use of central government funds because we do all the things that we do without these tax breaks and our outcomes are, by and large, as good. I’m not saying we’re better than everybody but what we deliver is delivered without any tax breaks. That is a fundamental difference that makes it very hard to then sit down and talk about common objectives.

Martin: And, of course, I’m in the middle. I understand both sectors and I understand the issues around tax advantages. However, local authorities will consult with local people. Local people have opinions, as they should do, and local authorities are made up of politicians who have affinities with certain areas. It’s horses for courses: some areas will prefer a particular option and others will take another option. Quite a lot of it is not just to do with the bottom line.

Steve: I certainly agree with that but I would disagree that it’s not making a huge difference in the decisions that councils are making with a view to procurement. There are clearly some councils who think going down the trust route is the right route but there are a lot of councils who are making the decision purely based on the tax advantages. That is fundamentally wrong and, as a tax payer at a national level, I think it is an unreasonable use of government funds to effectively subsidise something that delivers more or less the same outcomes.

Paddy: From my perspective it seems entirely right that central government uses its tax take against a whole range of things and if that secures benefits through leisure or physical activity because it’s part of governmental ambition than that’s entirely right. If government wants to subsidise on that basis it does so on the understanding that any benefits that accrue are retained within the system. I would perhaps challenge you and say that when the private sector gets involved, irrespective of the model, there is a leaking out of stakeholder benefits or profits which are lost to the system. If you balance that out within the equation you might look at it a little bit differently. With the social enterprise model none of the financial resource available for leisure leaks out. With the private sector model some of it leaks out to shareholder benefit because that’s the raison d’etre for them investing in that entity.

Steve: Where you say ‘leaks out’ I would say that the shareholders earn their returns on that money and it only gets to the shareholders if they have succeeded in delivering the objectives of their customers. If we look at the commercial end of the activities that you are engaged in, what you have is a straight forward VAT subsidy to compete against the private sector – which doesn’t get that subsidy – to deliver exactly the same thing. That is simply not a level playing field. I wouldn’t dispute that there are very good arguments for government subsidy, whether it is through VAT or other examples such as free swimming that are in the public interest but this should be done by the best provider.

Paddy: I understand the point you’re making. I was going to go on to make a second point that if contracts have been lost by the private sector some of it will be down to the fact that they are not very good at delivering those contracts. We all know of examples where contracts have moved back in-house or to a different provider, which may well be a social enterprise, because whoever was delivering that contract wasn’t up to it and was not meeting the standards deemed acceptable these days.

Steve: That may be true but I’m not aware of a single contract we’ve lost for that reason. We have lost contracts because of price and that has come down to the VAT subsidy. There are good operators in the private sector; there are poor ones. There are good operators among the trusts; there are poor ones. There are good council operators; there are poor ones.

Martin: That’s a valid point. In the 1990s under CCT [compulsory competitive tendering] DSOs [direct service organisations] lost out all over the country to the private sector. It is now the turn of the trust market to be the one that is increasing, primarily because the perception is that money is recycled back into the pot.

Steve: I don’t have a problem with that. The problem I have is that my money as a national tax payer is being recycled through a trust at a local level to subsidise something that may or may not be an efficient deliverer. I’m sure we don’t want to spend too long on this because there are other interesting points to get out but we cannot have a debate about this sector without raising it. The private sector is being seriously squeezed. This is possibly, in some instances, as a result of poor delivery but there is absolutely no doubt that there are many instances where the private sector is losing out because of tax subsidies.

Martin: From my perspective it is horses for courses. Local authorities will choose an option that they prefer to choose. A lot of that is about local people and local politicians.

Steve: But you can have all that without a tax subsidy. If councils were in a situation where they are choosing between a company that sets out to achieve great results but delivers profits to its shareholders or an operator that is set up to deliver results for its community and recycle all of its resources then great. I don’t have a problem with that. What I have difficulty understanding is why that model gets central government tax subsidies through VAT. I think councils should be able to make that choice.

[The conversation continues with a discussion of quality assurance models and monitoring tools, including the various benefits of customer service audits and internal monitoring systems.]

To what extent is the number of people through the door the only indicator that matters? Isn’t the issue simply whether people use the centre that you manage?

Paddy: It’s not, because you have to decide what your long-term outcomes are from the services you provide. For us it has to reflect the national, regional and local agendas that we all think we’re working against. The local ones are set through the local strategic partnership and the local area agreement; the regional ones are set through things like Sport England; the national ones are set by the governmental departments that we have talked about. Out of that come the indicators that you measure yourself against. While we are driving standards up – and there is evidence that things are improving – the challenge for us in terms of public leisure centres is that we are still dogged by the state of the fabric. There is the immense challenge of where the investment will come from to lift the centres to the point where we can say to our customers, ‘This is a quality service.’ Very often despite our best efforts we are working with centres that are forty years old. At Tees Valley Leisure we are in the middle of three-year, £2.5 million investment programme but that is tackling years of neglect rather than moving facilities on towards the 22nd century. Until we square that circle we’ve got a huge problem. Part of the challenge is being able to say to government these centres are of value because they hit so many things that you want to see done. If you look at the huge amount money that was put through Building Schools for the Future and the limited amount of PFI credits that were out there I don’t think we’ve made the case.

Steve: I totally agree with the point that standards are at least in part dictated by the quality of the fabric that we have and when you’ve got forty-year-old buildings it is that much harder to maintain and deliver a quality experience. It was Sport England that said in 2002 there was a £10 billion black hole; and that has grown since then. In a sense that means that this industry hasn’t really won that argument at all; quite the opposite. Whereas five years ago there was lottery money coming through and then there was PFI, both of these have all but disappeared because of the Olympics.

Hackney has at least been able to demonstrate how vocal people will be about their local centres and what a big political issue it can be locally.

Martin: It is quite interesting because we have had a massive amount of investment over the last three years. I think that is the point both Steve and Paddy have been making, that sometimes an organisation is given a facility that is actually below par but the client is still expecting a top-level service. In Hackney over the last three and half years there has been a massive amount of investment and it has been a wonderful experience to be part of. At the beginning it wasn’t so wonderful. The 2006/07 Mori survey had 35% of Hackney residents ‘very satisfied’ or ‘fairly satisfied’, which was the lowest in London. In 08/09 it was 53%, an 18% rise in perception and that rise will continue because that is a lag indicator. That is the result of the council actually taking responsibility to put something right and then working with an operator to improve the quality of service. That is partnership. It’s about sharing risks, not pushing the risk one way.

Was that as a result of the council biting the bullet over the problems surrounding the Clissold leisure centre?

Martin: It was the result of enormous public dissatisfaction with what was being provided for the community from the money that they were paying. I think the council sat up and listened. It acknowledged mistakes and took action to put them right. We can now see bright lights at the end of the tunnel and we’re ready to move onto the next stage.

Steve: The frustrating thing about all this is that we know the answer is very simple. We know that where centres are renewed it makes a huge difference to activity levels, social wellbeing, everything. I’ve got a number of examples within our portfolio of where we have had the right investment and projects have come to fruition to make a massive difference. We’ve got all the data to back that up so we’re not lacking in the argument about how we can make a difference. The problem is that the scale of the problem nationally is so enormous. I don’t think we’re winning the argument at a national level to get the sort of funding we need.

Paddy: We’ve not done that yet. If you think about the nettle the government grasped around the school stock, while you might disagree with the route they chose, they made a massive commitment to it. In my own district there’s now a different landscape for schools but they haven’t done that for leisure.

Steve: The reason PFIs were cut off was twofold: one was that the government didn’t have enough money for the Olympics and second because they made a spurious excuse that the projects were too small. We went from the very early days of PFI with fees of up to £1 million a project, which obviously when you’ve got a project of less than £20 million is not a great use of public funds, to today when the fees are less than £300,000. The outcomes are unbelievable and while it might not be everyone’s cup of tea as a methodology of funding, it does actually work. Whatever the methodology for funding new buildings , they can make a huge difference.

The London 2012 bid was couched in terms of the profound impact that sport, leisure and culture can have on the lives of individuals, communities and nations. Why are we then still having to talk about ‘making the case’ when we can demonstrate that it works?

Martin: Paddy is quite right: you have different levels of ambition from different parts of the political make up. For some local authorities part of the issue is about the bottom line: can they afford it? Some of them can’t and that’s about prioritisation. It’s not a statutory service so the more we move into the mainstream – that’s one of the words we’re not supposed to use – and support health structures, the more we can tap into the monies available through PCTs, which have their own budgets, and adult social services.

Steve: I think there’s been a dramatic change in the last year. It started when Gordon Brown shifted responsibility for physical activity to the Department of Health some eighteen months ago. At the time I said, ‘This is great news. This means we’re going to get some proper funding now.’ It wasn’t going to happen overnight because the Department of Health had no delivery mechanisms, but that has changed. Now we are seeing at a national and a local level more and more funding being made available. Free swimming, for example, although I have been critical of the way it was handled, is some £145 million that the sector would not have had. That’s to do with a shift in thinking.

Paddy: We decided in about 2006 that if we were looking for resources to support our programmes we would be lot more successful if we went to the Department of Health and convinced them of the benefits of what we were trying to do. We’ve been hugely successful and it is great to see that they as a department are taking a lead on that.

Martin: Health professionals are very good at establishing outputs that measure improvement. I think we’ve been trying to hang those outcomes on sports development for years and never really hit the button. You can do it with some projects but not across the board. At the end of the day, providing a service through the health sector, funded through the health sector with really clear changes evidenced is what gets the funding.

Would it necessarily be detrimental to our sector if it becomes increasingly associated with the health agenda?

Steve: I think that is what has happened and I think it is good news. PCTs are all different in terms of their objectives and interests but generally they have shifted to thinking that prevention is a very important part of their long-term strategy. They are beginning to put more money into that and a very small percentage of a PCT’s budget makes a huge difference to leisure provision.

Paddy: We said to our PCT that if we could save them one percent of their prescribing budget, which then was about £5 million, would they like to use some of that for some of the schemes we were providing. They clapped their hands at that.

To bring us to a close, what key opportunities are there for the next, say, decade that we can look to?

Martin: For London it’s 2012. We’re clear that not only do we want London 2012 to be a success, we also want to use it as a springboard to increase participation and get people involved. It doesn’t have to be sport; it can be taking part in activities or volunteering. We want to make sure that the legacy provides employment and economic opportunity for local people. That’s why it was put in East London, to stimulate the local economy in what is an area of high deprivation. The key will be to see what is left behind, to see whether the legacy is something that the community can really embrace and will make a difference to their lives.

Paddy: There are three things I would suggest. Finally getting an advocate for our industry, a body that will make the case on our behalf. The second is dealing with the expectations of the Olympic legacy. If you talk to Brendan Foster where we are in the North East he just laughs at the concept of the legacy, which is why he has conceived Taking to the Streets. He will get two million people active by 2012 taking part in activities up and down the country. The third one is cracking that funding problem, which I think will come from the advocacy aspect.

Steve: All of those I would agree with, although I might have a slightly different take on the Olympics. To my mind the next ten years has to be about convincing politicians at a local and a national level of our case in order to get that funding. I don’t think we’ve succeeded in that yet. That we still have a long way to go is evidenced by the fact that we are moving backwards not forwards in terms of funding for facilities. The ray of hope is that we do seem to be winning the argument on the health agenda. I am really optimistic about our capability to do that and with a lot of hard work we can get there.

The Leisure Review, April 2009