APPENDIX 1
|
APPENDIX 1 |
POLICY COMMISSION BLUE PAPER
|
RESPONSIBLE BODY Policy Commission for Safer Communities |
|||
|
ENQUIRY NAME VFM exercise on the
future of the crematorium |
REFERENCE NUMBER Saf 6/05 |
||
|
1. PURPOSE OF ENQUIRY AND PROPOSED OUTCOME 1.1.
To ensure that cremation facilities are
available locally which suit the needs of the island community at a price
that is considered fair and reasonable. 1.2.
To ensure that a Council strategy is in
place that secures the long term future of an island based cremation service. 1.3.
To map out a Council approach to delivery of
Bereavement Services that demonstrably provides value for money to all
stakeholders including the bereaved, funeral directors and faith leaders. |
|||
|
2. RECOMMENDATIONS The Commission are satisfied that the crematorium delivers value for money as an asset that contributes significantly to the Council’s budget annually and which is valued by service users and stakeholders universally. The Commission have concluded that on a stand-alone basis the crematorium would be self-funding and capable of increasing its levels of surplus revenue whilst making provision for any further capital requirements in the future. Members of the Commission therefore recommend that: 2.1
Cabinet adopt Option
E - retain the crematorium
as an IWC service and take action to increase revenue. 2.2
Cabinet instruct the
Chief Financial Officer to identify the most efficient means of funding the replacement
of a minimum of two cremators incorporating emissions abatement technology in
2011/2012. 2.3
Cabinet instruct
Bereavement Services to prepare a full-form business case for the crematorium
based on, but not limited to, the measures identified in subparagraph 6.5.3. 2.4
The Council
acknowledges the need for provision to be made to meet future capital
requirements when such requirements are identified to Members by services and
that Cabinet instruct Bereavement Services to include a contingency fund for such
capital requirements within its crematorium business case. 2.5
Cabinet instruct
Bereavement Services to monitor developments with respect to ‘Promession’
technology and related legislation to assess the viability of such a scheme
in future years. |
|||
|
Councillor David Williams Commissioner |
|||
|
3. BACKGROUND TO ENQUIRY THE NATIONAL CONTEXT 3.1. This Council has a statutory duty to maintain 10
closed churchyards and like other Councils, discretionary powers to provide
cemeteries. In the event that a Council like this Council provides
cemeteries it then has a duty to maintain those cemeteries.[1]
The Council has a power to establish and administer crematoria if so desired.[2]
There are 251 crematoria in the United Kingdom, 193 of these are in Council
ownership, 58 are in private ownership.[3] Most privately owned crematoria have been
built by the private sector, some crematoria formerly owned and operated by
local authorities have been externalised. 3.2. All
crematoria must operate within a strict legal framework. That framework insofar as emissions
control is concerned is to be strengthened in 2011/2012.[4] The sponsoring government department for
emissions control legislation, the Department for the Environment, Food and
Rural Affairs (DEFRA) has stated that quantities of mercury released into the
environment from UK crematoria must be reduced. Broadly, this new regime will require investment in new
technology by cremator operators to reduce emissions, or as an interim, offer
crematoria operators an emissions trading option allowing continued release
of mercury into the environment if a fee is paid. It will cost approximately £150k to reduce emissions to new
levels, per cremator. 3.3. A
scheme has been put forward by the Federation of British Cremation
Authorities in association with the Cremation Society whereby participating crematoria would be able to “trade”
in mercury emissions in order to achieve an overall reduction in emissions of
50% by 2012. The scheme is known as
CAMEO (Crematoria Abatement of Mercury Emissions Organisation) and will
involve each member crematorium paying a per cremation contribution of £25 to
the scheme in order that the emissions reduction burden is shared throughout
the cremation industry.[5] There is no compulsion on crematoria
operators to participate in this scheme.[6] 3.4. Cremation
first became legal in the UK in 1884 (The Isle of Wight Crematorium was built
in 1961). Prior to 1884 convention
had been to bury our dead. A network
of cemeteries had been opened across the country often operated as commercial
enterprises. As cemeteries become
full, particularly in urban areas, income streams reduce and such sites
become financial liabilities. When cemeteries are considered by proprietors to
be full an application can be submitted to the Home Office to have them
declared closed, if successful their upkeep becomes the legal responsibility
of the local authority. The local
authority will be consulted and will have the opportunity to object if
necessary.[7] 3.5. Cremation
has been hailed in the past as a solution to the spread of disease linked to
poor sanitation in cemeteries. Over
the last century interest in cremation has grown. Following death, 70% of
UK bodies are now cremated.[8] 90% of Island bodies dealt with by the
Council are cremated. It should be noted, however, that the cost of cremation
in most areas is considerably cheaper than burial.[9] 3.6. Those
environmental concerns that have driven mercury abatement legislation have
stimulated interest in alternative methods for safe and ethical disposal of
human remains. A number of local
authorities, particularly those where burial space is limited are considering
a process developed in Scandinavia known as “promession”. Promession begins with cooling a coffin
containing a corpse using liquid nitrogen.
This makes a body very brittle.
The coffin and contents are then subject to a gentle vibration
eventually turning the body into an organic powder. Surgical parts and dental amalgams can be removed. The organic powder from promession can
then be placed into a biodegradable coffin and buried in a shallow grave.[10]
According to Susanne Wiigh-Mäsak of
Promessa Organic, the promession process has been legalised in South Africa
and Germany but there are as yet no “promators” in operation. Promession is not yet
legal in the UK. 3.7. Funeral
directors and local authorities across the UK have identified the impact of
improved healthcare provision leading to increase in average lifespan. People are generally living longer. Health experts and population projections
suggest that death rates, unless worst fears of pandemic or some other
unforeseen circumstance arises, will remain low for another two or three
years. Numbers will then increase
sharply ‘as the large cohorts born immediately after the Second World War and
during the 1960s baby boom begin to reach elderly ages’.[11] 3.8. The
Institute of Cemeteries and Crematorium Management (ICCM) collates fees and
charges data. The most recently
published price comparisons indicate that the Isle of Wight was the 42nd
most expensive crematoria in the UK for a basic cremation.[12] 3.9. Indications
are that all crematoria operators will be implementing significant cost
increases in the next 3 years to fund investment in technology to satisfy
emissions control legislation.[13]
Fees are also being increased to meet rising energy prices and a 150%
increase in statutory fees payable to medical referees who must formally
authorise every cremation.[14] 3.10. An
increase in cremation fees can be militated against by consumers through the
purchase of funeral plans. Currently
around 6% of all funerals are paid for by funeral plans.[15]
According to the Funeral Planning Authority (FPA), registered
providers sold 56,803 funeral plans in 2004.[16]
The FPA is the self-regulatory organisation
for the funeral planning sector in the UK and was created following the
introduction of regulation by HM Treasury to ensure proper consumer
protection for the security of customer's money and delivery of the funeral.[17]
Along with a number of large companies, Help the Aged and Age Concern
offer funeral plans and advice over choosing products. Although the FPA exists to ensure proper
consumer protection, funeral plans
are not covered by the Financial Services Authority and, as such, there is no
protection should customers’ money disappear. THE LOCAL CONTEXT 3.11. The
Isle of Wight crematorium was built at Whippingham in 1961. In the first year of operation there were
308 cremations. The number of
cremations peaked during financial year 2001/2 at 1496. In 2003/4 there were 1493 cremations. In 2004/5 there were only 1382
cremations. In the 2005/6 the number
of cremations at Whippingham was 1330.
The downward trend needs to be set alongside a downward trend in the
island death rate mirroring the national picture. The population of the island however, is forecast to rise to
about 175,000 by 2028.[18]
At that time we can reasonably expect about 2000 island deaths a year, an
increase of almost 400 from that forecast for 2005/6. 3.12. The
crematorium is a net contributor to the Council’s budget. Last year, notwithstanding the significant
reduction in the death rate recently, the crematorium made a net contribution
of £131K to the Council’s budget.[19] 3.13. The
Isle of Wight Council is custodian of 12 cemeteries and has statutory duty to
maintain a further 10 closed churchyards.
Accurate income forecasts are fraught with difficulty because of the
variable death rate described elsewhere in this blue paper. Nonetheless, the broad management
principle adopted several years ago has been to set fees and charges at
levels that were similar to those set elsewhere in the UK whilst allowing
surplus from the crematorium to balance the deficit incurred providing and
maintaining cemeteries. 3.14. The
Bereavement Services element of a wider Council grounds maintenance contract
costs approximately £250k per annum.
The contract is due to run until December 2007. 3.15. The
Council has three cremators at the crematorium. They were installed in 1997.
The cremators were purchased with a view to operation for 15
years. A rapid response maintenance
contract is in place with the original equipment suppliers. Recent discussions with those suppliers
confirmed that it may be possible to extend the life of the cremators for a
further two or three years. At
current prices the cost of purchase and installation of a single new cremator
will be approximately £150k. 3.16. Over
recent weeks trials have been conducted at the crematorium to determine the
viability of operating the crematorium using just two of the three
cremators. These trials have been a
success in that at current operational demand only two of the three cremators
are required. Milton Keynes
Crematorium carries out approximately 1600 cremations per annum using only
two cremators.[20] Officers are satisfied that in the event
of investment in new cremators, even with an increase in demand to levels
forecast by 2028, two cremators will be sufficient for the Isle of Wight
crematorium. The caveat to this
approach will be a greater level of risk to business continuity in the event
of a cremator failure. 3.17. Land
holding allocated for burial purposes on the island and in the ownership of
the Council are considerable, some 36 hectares. Without further land purchase it has been estimated that we have
sufficient burial space at current rates islandwide for at least 75 years of
burials. Some of our cemeteries are
unlikely to be full for at least 125 years.
3.18. The
Council are not the only providers of cemeteries. In
terms of "disposal of bodies" on the island there are alternative
providers. Parish Councils and
Parochial Churches add considerably to the overall space available for
burials. However, by comparing the
number of registered deaths on the Island against the number of cremations
and burials carried out by the Council it can be determined that at present
the Council deals with approximately 87% of the Island’s bereavement needs. 3.19. The
basic cost of a cremation at the Isle of Wight Crematorium is currently set
at £420. The cost of a cremation
generally constitutes 25% of the total cost of a funeral. |
|||
|
4. CONSULTATION 4.1
The commission has consulted widely through
formal and informal meetings, site visits and correspondence with: · Funeral
Directors · Faith
Leaders · Council
officers · Trade
Union (Unison) · Other
crematoria operators · Private
consultant – Mr David Holmes · St
Mary’s Hospital 4.2
Commission meeting notes, written responses
and the written report from the consultant engaged to advise in this enquiry
are identified in the appendices 4.3
Legal advice has been obtained from a
Council locum solicitor concerning a Bereavement Services Trust. |
|||
|
5. ISSUES IDENTIFIED (Financial, Strategic, Operational, Legal) 5.1
Praise for Council staff responsible for operating
the crematorium has been universally high from all stakeholders during
this enquiry. Without exception it is
perceived that an excellent service is provided by this Council. 5.2
The crematorium is well run, prices charged
do not appear to be unreasonable but there are major challenges ahead. 5.3
This Council in respect of the crematorium
is a monopoly provider. In the event
of dissatisfaction with a mainland crematorium because of past experience, the
bereaved can realistically purchase future services from another crematorium,
often within a short driving distance. 5.4
The notion of Bereavement Services as a
budget neutral package provided by this Council wherein a surplus or profit
generated by the crematorium subsidises cemetery maintenance costs has been
tacitly accepted but never formally adopted as policy. 5.5
A prudent Council as with a prudent business
should plan for and invest for the future.
In the case of this Council, investment for the future of Bereavement
Services, to prepare for investment in new technology to abate emissions or
replacement cremators, has not happened.
5.6
The crematorium lodge is currently
empty. It could be sold and a capital
receipt obtained. It is estimated
that in the present market this sale could realise between £220k and
£250K. There are other assets
currently held, or until recently, held in the Bereavement Services portfolio
of assets that could be sold or managed more strategically in a way that
supports the Council’s value for money agenda. It is acknowledged that this Council has a policy not to ring
fence capital receipts to discrete service areas in the event of an asset
disposal. 5.7
This enquiry has shown that the crematorium
already contributes significantly to the Council’s budget and that an
opportunity exists to further increase income at the crematorium through
innovation and through adopting a more commercial approach. The consultant engaged by the IW Council
to inform the enquiry has suggested that the income target set by crematoria
operating in the private sector for memorialisation will be up to 20% of the
income stream. In the case of the
island’s crematorium memorialisation income is approximately 7% of the total
revenue received. 35% of all IW
crematorium cremation service sales result in some form of memorial
sale. In contrast, 10% of Basingstoke
Crematorium’s cremation service sales result in some form of memorial sale,
the income derived from such sales, however, equates to 30% of the total
revenue received.[21] A rough calculation based on figures
provided by Bracknell Forest Borough Council (BF) suggests that 30% of
cremation sales result in a memorial sale.
The gross income from memorial sales at BF has been calculated to be
in the region of £115,000 for the 2005/6 financial year, compared to
approximately £41,000 for the same period at the IW crematorium. 5.8
The consultant has raised several
interesting issues and highlights: · Pride
of staff in the crematorium. · The
main structure, dating back to the 1960’s is described as ‘utilitarian’ and
‘is in need of modernisation’. · The
site suffers from poor drainage.
Drainage needs to be remedied (particularly if the ashes interment
area is to be improved/enlarged – this is a recently introduced service with
opportunities for development). · Interest
in freehold purchase of the site is likely to be high because effectively the
site “has a captive and constant market with no competition”; 5 potential
purchasers are identified. · Business
volume suggests a site value of £2m. · It
is not beyond the realms of possibility that a private sector operator may
consider establishing another crematorium on the island. · The
Council might wish to establish a partnership with a private sector
experienced crematorium operator but in so doing would forgo most if not all
of a potential capital receipt. · Sale
of the crematorium will leave a funding shortfall insofar as cemeteries are
concerned. · Any
outright sale of the crematorium could be met with public resistance. Public opinion should be gauged but the
consultant acknowledges difficulties in achieving such measurement. 5.9
According to the consultant: ‘It is of
course possible to conclude that the status quo is the preferred option’ and
that ‘in that eventuality the Council must make substantial new investment
necessary in the years ahead.’[22] 5.10 It
should be noted that the consultant has listed himself amongst potential
bidders should the Council choose to outsource the crematorium. 5.11 Advice
has been obtained about the merits of establishing a local bereavement
trust. The advice might best be
summarised as inconclusive. It is
clear that no Council has established a bereavement services trust into which
a crematorium and all Council cemeteries have been vested. Although considerable work has been done
in preparing advice for the Commission Mr Ross cautions against being a
pioneer in this area without further careful consideration and research. |
|||
|
6. OPTIONS APPRAISAL WITH LEGAL AND FINANCIAL IMPLICATIONS 6.1. Option A
– establish a charitable trust to run the crematorium 6.1.1.
Work undertaken to date is inconclusive
insofar as an Isle of Wight bereavement services trust is concerned. No authority has developed a similar model
elsewhere, there is no case to suggest that benefits from establishing a
trust outweighs the risk. 6.2. Option B –
outsource the crematorium 6.2.1. Outright sale is achievable and will bring a capital receipt probably in excess of £2m. The net cost to the Council in 2005/6 of providing cemeteries and managing closed churchyards was approximately £130k. This cost is currently funded by surplus revenue from the Crematorium. Should the crematorium be sold the deficit generated by cemeteries and closed churchyards would need to be funded from elsewhere in the Council’s budget. 6.2.2.
Outright sale will place the crematorium in
the hands of a private sector monopoly operator insofar as the island is
concerned. Legislation offers only
limited protection for consumers from (over zealous) private monopolies. A private sector operator would be able to
increase cremation charges significantly whilst maintaining a consistent
level of business. 6.3. Option C –
enter into a partnership with the private sector to manage the crematorium 6.3.1.
No operational example of this option has
been as yet identified. It is
difficult to identify the long-term benefits that this option would
offer. Clearly the availability of
capital funding would offer a short-term benefit that would assist with the
forthcoming capital investment required.
However, the surplus revenue that currently subsidises wider
Bereavement Services maintenance activities would be greatly reduced unless
revenues are significantly increased.
In order for revenues to increase to the substantial level necessary
to satisfy the requirements of both the IWC and a private partner, it would
be likely that prices would need to rise to levels beyond that which would
achieve value for money. If the Council
should choose to pursue this option further detailed research would need to
be undertaken. 6.4. Option D –
market (outsource or partnership) the whole cremation and cemeteries service 6.4.1.
The maintenance of
cemeteries and closed churchyards could be included within an outright sale
of Bereavement Services activities.
This would most likely diminish the anticipated sale price of the
crematorium due to the losses currently incurred by cemeteries and closed
churchyards. As the Council has a
statutory obligation to maintain closed churchyards it would need to be
determined whether this liability can be passed on to a third party in
perpetuity and whether if the third party should liquidate, this liability
would revert back to the Council. 6.4.2.
Preliminary discussions with Westerleigh
Group Plc who have taken over the management of Bereavement Services,
including cemeteries and closed churchyards, from Redbridge Borough Council
suggest that a satisfactory arrangement for the outsourcing of the
Bereavement Services function could be a possibility. It was indicated that the contract between
the parties was in some manner related to the construction of the new Forest
Park Crematorium and Cemetery facility in the Borough – there was no
crematorium facility in Redbridge Borough prior to the construction of Forest
Park. Further information with
respect to the nature of the contract between the parties and the geographic
and demographic profile of Redbridge Borough would need to be gathered prior
to a formal decision being made. 6.5. Option E –
retain the crematorium as an IWC service and take action to increase revenue 6.5.1.
Retention of the status quo should not be
viewed as an option. This enquiry
reinforces a value in the crematorium that is not seen simply in financial
terms. The term “jewel” has been used
by several of those who have been consulted to describe the crematorium. Up to 70,000 of this Council’s customers
visit the crematorium every year as mourners. The opportunity to raise the esteem with which the Councils
customers view the effectiveness of the organisation through Bereavement
Services should not be lost. 6.5.2.
It is not unreasonable for this Council to
formally adopt a policy of budget neutrality insofar as Bereavement Services
are considered. Members could direct
that all costs associated with managing our unique mix of Council owned
cemeteries and closed churchyards should be generated by the crematorium. 6.5.3.
If the Crematorium is
to remain within the management of the Council’s Bereavement Services a more
businesslike approach should be taken with respect to the management of
Bereavement Services in the round in order that a value for money approach is
sustained. Such activities could
include: a Raising the cost
of cremations to increase revenue: Although price
increases are generally unpopular, the availability of a cremation service
that is run under a public service ethos which seeks to reinvest surplus
funds to improve the service for the community makes such increases
tolerable. The Council would need to ensure that surplus revenues from such
increases are reinvested in the service to avoid the appearance of a cynical
revenue raising scheme employed in order that general Council tax increases
are minimised. It is also important
to note that 1. the cost of a cremation generally represents 25% of the
overall cost of a funeral; 2. unlike Council tax increases the cost of a
cremation is a one time expense; and 3. the most disadvantaged families have
crematorium fees paid for by the state.
Income projections suggest that a moderate increase in the price of a
basic cremation service together with the projected increase in the national
death rate would result in the realisation of significant levels of new
revenue (see Appendix 1, rows 5-13). b Promoting the
purchase of funeral plans: As part of a campaign to raise awareness
of financial planning issues the Council could highlight the benefits to be
gained by planning for the inevitable, particularly providing for the future
at today’s prices. Although
at present Funeral Plans are not protected by the FSA, the existence of a self-regulatory organisation for the funeral
planning sector, the Funeral Planning Authority, and the fact that charities
such as Age Concern and Help the Aged provide such plans suggests that it
is a viable way for people to plan for the future. The Council might choose in the future to establish a preferred
scheme with a funeral plan provider. c Increasing the
scope of memorial activities undertaken by the crematorium:
it is clear that significant revenue is raised in the private sector from
memorial activities. The bereaved
purchase memorials for their own reasons and do so voluntarily. The private sector generally use a hard
sell approach whereas the IW Crematorium staff advise the bereaved of the
services that are available to them if they should have a requirement. The fact that 35% of cremations result in
some form of memorial being purchased at the IW crematorium set against the
10% at Basingstoke’s private facility suggests that there is local demand for
such a service. The fact that such
sales locally constitute 7% of the local crematorium revenue against 30% at
Basingstoke suggests that there is scope for increasing pricing and memorial
options. If the Council chooses to
increase memorial activity the development of a business plan and the use of
realistic revenue targets underpinned by a public service ethos would be
essential. Any surplus revenue that
is not earmarked for reinvestment in Bereavement Services activities could be
legitimately invested in other Council activities as all revenue received
from memorials is provided on a voluntary basis (see Appendix 1, rows
36-72). d Reducing the
cost of maintenance activities: The IWC grounds
maintenance contract is due for renewal in 2007 when a more favourable deal
could be negotiated with contractors. The Council could also engage with Town
and Parish Councils and the voluntary sector to address local maintenance
issues. As the IWC has a statutory
obligation to maintain cemeteries and closed churchyards it is unlikely that
Town/Parish Councils would willingly undertake this obligation in view of the
financial liability attached.
However, where Town/Parish Councils already have a local maintenance
contract in place or would choose to enter into such a contract should
sufficient resources be made available, a financial arrangement might be
possible that would satisfy all parties and that might contribute to the
employment of a local grounds person.
The Council has an aspiration that Town/Parish Councils engage more
meaningfully with the voluntary sector to deal with local community
issues. There is a willingness within
the voluntary sector to contribute to the upkeep of cemeteries and closed
churchyards that could be harnessed in a more strategic way. |
|||
