Repair or Renewal- an update

It’s nearly two weeks since I published my thought piece on the impact of the Coranavirus on the future of the sector published on this site. So much seems to have happened yet we are no clearer about what the future might look like. I suggested that when faced with uncertainty good leaders need to create a vision to help people through the change process even if it needs to be adapted and developed as uncertainty clears. Whilst every organisation is working really hard to deal with the urgent, I am not yet seeing that sense of shared direction and clarity of purpose emerging. Perhaps it’s still too early but it must come soon. 

So what have I learnt over this two weeks. As I expected I've heard a mixture of views on whether we should simply repair what we had and carry on as before or try to put back something that is different and better, but I have been pleased and surprised by how many are starting to ask the right question “what is the new normal?” However, these are still quiet voices very much being drowned out by the noise of the daily challenge of the urgent but from what I’ve heard and read there is definitely a gradual realisation that things will have to fundamentally change as a result of this crisis and the scale and intensity of this change will have a huge impact on the sector.

I suggested different parts of the sector would face different impacts and react in different ways which certainly seems to be the case. Whilst at one level all the main organisations are really attempting to collaborate on the big issues I’m not yet sure that vested interests have been replaced by a common purpose. Each organisation is doing well at talking to and supporting their own members with advice, guidance but cross sector communications is more disparate. Great thinking and good ideas are being talked about in sub groups but I’m not sure they are getting shared with others outside those sub groups. Andy Reed has circulated some reflective articles, Dave and Mike at Leisure Net have been doing some interesting interviews and Duncan Wood-Allum has hosted some great Zoom conferences, colleagues at Sport England have provided funding and insight and have done some discussions across the Local Delivery Pilots and we are just starting to plan some online discussions for participants from the leadership programme we run. But I’m not sure if we are yet seeing the sort of cross fertilisation of ideas and thinking that we will need. The nearest thing we have to a central hub is the CIMSPA stronger together hub which is good and starts to build a single library of advice and guidance with links to some of their partner organisations. There are still some organisations not represented on it for it to be a truly sector wide hub but with more collaboration it could become one. Also it needs a thought leadership section where those writing and developing ideas and good practice can share them and spread the learning with others either directly or by links. 

On to those sub sets. Elite sport has been pretty quite. Professional sport has taken some stick but has come through it but remains desperate to get going again for obvious reasons. Football behind close doors is an interesting concept but it could be a while coming. Katherine Grainger came out with a very constructive and thoughtful interview emphasising the value of elite sport but without the usual crowing about inspiration and medals. 

I’m currently unaware of the club sport position other than the early issue of keeping grounds maintenance functioning. If people have a feel of other issues please let me know. 

As I expected community sport has risen to the challenge and provided quick engagement with communities and many of these organisation have been nimble enough to switch to supporting food distribution and general community based interventions in the many deprived communities. They have found the furloughing policy a challenge as I have in my own comedy festival charity. Whilst the 80% wage support is a welcome relief for cash flow purposes, payment delays are challenging and the inability to utilise your staff even in a voluntary capacity limits the ability to support others and plan for the future. The most creative organisations I believe are finding ways of volunteering for each other which is great collaboration. Given many of these organisations are charities reliant on donations and sponsorships there is already a serious worry they will hit their financial problems very soon particularly if council grants are also cut again as they were under austerity. Given all the concerns now emerging about the long term social and economic need growing across the population and particularly in deprived communities this is the area which for me presents one of the biggest financial challenges but where the greatest opportunities lie, but so far it is not getting the focus it deserves, perhaps being hidden behind the bigger issue that seems to be dominating many people’s concerns. 

The biggest issue to emerge to date has been the potential failure of Leisure Management contracts. Once facilities had to close, some reluctantly, the pressure on cash flow quickly emerged. Whilst the employee subsidy scheme when announced provided some initial relief the lead time to payments became another short term problem. Notwithstanding this operators of all type have been looking to their clients to fund shortfalls and some of the figures I have heard are mouth-wateringly huge over the closure period let alone beyond and into reopening. Because contracts all vary and relationships vary the response has been different everywhere but I fear few have yet been fully resolved and national guidance and support is now emerging from Sport England and others. 

For many councils although they may be reluctant to provide additional funding they will be legally obliged to honour their contracts under the change in law principle but they are looking to extra funding from central government to support them. Last night it was reported that councils were to receive a ￡1.6 billion bail out to support them but so far it is unclear if this will cover these contract liabilities and if so how the funding will be distributed between councils. Clearly upper tier councils are facing huge social care pressures but many districts have lost all their income streams. One thing is certain, our problem will have to sit alongside many other financial pressures. But as every day passes the problem will become more acute and even where councils have negotiated a solution if the operator has multiple sites, failure to agree elsewhere could still create problems for everyone. If financial support does emerge I doubt it will be able to cover all the operators are seeking and will initially only cover the situation up to the end of lockdown so the underlying problem will continue for some time. Whilst councils with in house operations may at first sight have an easier route to a decision it is also clear that many councils particularly district councils will simply not have sufficient cash to subsidise their own operations for long and the more difficult decisions will emerge as with external contracts in the budget process starting in the autumn. 

It is also clear from discussions that relationships and trust is already featuring heavily in these discussions. There is a strong desire to enable these discussions to take place on “open book” terms. But what does this mean, does it include just the individual contract or the financial standing of the whole company where they are responsible for multiple contracts across the country. Are people being honest or hiding things? What is a fair settlement? Are operators treating each council the same? These interim negotiations alone are a minefield but one thing I am clear about is that how people behave now will dictate the relationships going forward. Are we seeing real collaborative leadership or more traditional competitive behaviours. It’s here where I think the very future of our sector could be being shaped and in this context two fundamental issues are at the forefront in my thinking

Firstly, the exit strategy. 

The strategy that is emerging suggests we deal with this problem in three phases. Phase one as I describe above is the interim period between closure and reopening. The second is the reopening period which could as a minimum be the rest of the financial year but I suspect much longer. Thirdly is just being defined as the future but I would perhaps call it the renewal phase. There is a view in some quarters that the first phase is so pressing and our capacity so limited that even thinking about phase one and into phase two is all we can cope with, so we will leave the future until later. I get the sentiment but it does have huge risks. Already I have heard councils suggesting that if they put extra money into contracts now to stabilise them it can be recovered later over the duration of the contract. It sounds a nice simple solution providing a council has the money to do so, but what happens if things don’t recover and more importantly what does this action do to my next issue. By the time you come to think about the future it will already have additional inbuilt financial constraints and more risk that will make more radical change and renewal difficult if not impossible. 

Secondly, is the balance between efficiency and effectiveness. 

We know that the pressure of austerity forced many councils to fundamentally review their funding for sport and leisure particularly their facilities. Some decided to simply reduce provision by closing some outdated facilities or even offloading all their facilities to private buyers or community groups. Others invested heavily in new more efficient buildings or rationalised their stock completely, replacing them with a smaller number of new buildings. Many changed their provider partner after re-tendering or renegotiating their contracts. Although the market still remains mixed in terms of in house, trust and private operators there has been a steady drift away from in house and a drift away from smaller local trusts towards bigger operators who have gradually expanded their portfolio of contracts because of their economies of scale and their ability to offer capital investment as part of new longer term contracts. 

Common to all these arrangements has been the gradual reduction in council subsidy levels as both costs have been reduced and income and use levels increased. In many cases councils have been able to replace subsidy with a financial return. Sport England’s National Benchmarking Service (NBS) which compares the performance of facilities across the sector has tracked this increasing efficiency over the last decade. Last years annual report showed the median for cost recovery now stands at 107% an increase from 91% in 2014. Although there are still variables between the type of provider and the nature of facilities, this is an average shift of 16% from subsidy to return. 

But we perhaps at this point need some honesty. Councils because of austerity have driven the market to deliver cheaper and more efficient contracts. The bigger operators have taken their chance to expand their footfall in the market by driving down margins in the pursuit of business growth. Smaller trusts have been forced into replicating these performance levels simply to remain in the game whilst in house operations have also been encouraged to reflect the same trends even when protected by political policy. So we are all responsible for how we got here but, behind these praiseworthy trends to greater efficiency lies a major unintended consequence. 

The NBS also measures access performance in terms of particular groups such as older people, women, black and ethnic minorities, children and lower socio/economic groups. These statistics measure comparator performance in terms of how representative the facility usage is compared to local communities and are often referred to as the effectiveness indicators. They tend to measure what most councils want to see improved in terms of addressing inequality levels in participation rates and health improvement which they now usually measure by Sport England’s Active Lives survey. This national survey has since it was launched shown the differences in activity levels across different sections of the community where the most startling difference relates to socio economic status. The last survey update in May showed this difference remains stubborn with NE-SEC 1-2 groups showing that 72% are likely to be active and 16% inactive, whilst for NE-SEC 6-8 groups only 54% are likely to be active and 33% inactive. These stark difference are also found amongst children.

Over the last few years NBS data has increasing shown that although the efficiency has improved, effectiveness has deteriorated particularly among lower social economic groups. Last years annual NBS report showed that on average across all types of contract there remains under representation in usage among a number of groups but the biggest under representation was found in the NE-SEC 6&7 group where the median was just 0.39 when 1 is representative and this has fallen from 0.62 since 2014.

So over the last decade as the importance of physical activity has been increasingly recognised as important we have seen the deterioration in access from the very communities identified by Marmot as having the greatest need in terms of life expectancy and health inequalities. If as we all hope, the importance of physical activity reaches new levels of understanding and value after Coronavirus but we have to continue to manage more income shortfalls by marketing to the better off, it will mean that those most in need will get further squeezed from the market and as a sector we will continue to fail to make any real contribution to addressing rising health inequalities. 

If our three phase exit strategy involves renegotiating the contract in phase one or even phase two by simply pushing the increased debt caused by closure upstream in the contract not only will this make future margins even tighter but there is a real danger that it will exasperate even further the inherent problem of inequality in access. This is why I would argue that now is actually the best time for councils and operators to come together to really think about the future and repurpose their contracts by agreeing what outcomes they really want to achieve, agreeing who are their priority communities to be served by what are public facilities and agreeing how this can be best addressed in a revised relationship going forward.

So there we have it, the perfect conundrum. How do we salvage the contracts without making them even less effective in terms of social value. I have been mulling this one over for days and as yet I have not found an easy solution. 

Whilst there are so many cultural and practical reasons why lower socio economic groups are under represented in most of our facilities, we know price remains the biggest barrier. Unless we can remove the price barrier we will not significantly address the equity problem. Up to now some operators have attempted to address this dilemma by cross subsidy using higher income from a growing market to support access by priority groups and by providing for them specific programmes. The Robin Hood model. But this also depends on clients leaving the potential surpluses in the contract and not creaming off profits to support other council budgets. For the foreseeable future with less income coming in and even greater price sensitivity in the market this approach will look difficult if not impossible for five years at least, so we need another mechanism now.

If councils have to put more subsidy into contracts to keep them afloat can we not agree that this extra public funding is not just distributed across the contract to support general access but is used to target directly those in most need and who will benefit most from access to physical activity. This means applying “proportionate universalism” as the new business model e.g. every body gets some activity but those in need get the most support and by doing this we are directly investing in health prevention and helping improve health inequalities. We may then start at last to achieve “physical activity for all”.

But how might we do this? The idea I am most drawn to is the one used by Karen Creavin and the Active Wellbeing Society. They have a city wide membership scheme and every venue in the city provides a free time slot in their programme. The greater the level of deprivation around a facility the greater the amount of free time available. This for me is proportionate universalism at work. If applied nationally and agreed by every council and every operator we would have the basis of not only local action but a national campaign to build on the increased interest in being active. For councils they would have a practical demonstrable offer that justifies their increased investment which underpins their health and well-being strategies. Sport England could develop National media coverage mirroring This Girl Can to maximise the public profile. The campaign would be backed by Public Health England and including all those politicians who have advocated the importance of being active throughout the crisis. It would lead to real system change and generate real collaborative leadership across the whole sector behind a single common purpose “Physical Activity for All.” Any one up for it? Tell me what you think?

Martyn Allison 

18th April 2020.

See also my previous articles.

Would leading collaboratively help change the system?

Repair or renewal, some thoughts about the future of the sector.