Bill Cooper of KPMG and Ben Lucas of the 2020 Public Services Trust warn that many councils are not yet fully prepared to take on the new responsibilities of place-based budgeting.
In the new public policy environment, all roads are signposted as leading to localism. But they could end up in many different destinationsThe LGA has called for place-based budgets, with local control over significant public service spending in areas such as welfare services, policing and public health, as the next step in the Total Place agenda.
Turning Point has been piloting a model for integrating the commissioning of whole family services at neighbourhood level, and citizens are to be empowered to procure the services they require using personalised budgets.
In health, local GP consortia will commission 70% of NHS spend, while in education, local groups of parents are exhorted to set up their own schools receiving their funding direct.
The new Big Society pilots which have been announced will empower local communities and the voluntary sector to run more services, and the spending cuts imposed on local authorities will require consideration to be given to handing service provision to communities or divestment to other organisations.
Local enterprise partnerships (LEPs) are being established to bring together the private sector and local authorities to drive local economic and skills strategies and to replace regional development agencies (RDAs). And local authorities are to be freed from much of the regulatory oversight and inspection regimes of the Audit Commission, as well as being given a new power of general competence.
Hovering ominously over all these divergent strands of localism is the spectre of substantial spending cuts. The overarching imperative for central and local government is to reduce the deficit by cutting public spending. In part, the 57 varieties of localism are all driven by the need to cut spending. But they also reflect the need to get better outcomes for public spending and bring decision-making closer to home.
At the recent LGA annual conference, the 2020 Public Services Trust and KPMG hosted a joint seminar for delegates on how to take forward the agenda for place-based budgets. What emerged from this was a view that the debate urgently needs a combination of realism, clarity and leadership.
The LGA has done a good job of making the case for place-based budgets, and this idea reverberated around the LGA conference. But the proposal has been presented in far too ‘Panglossian’ terms, sitting in local government’s comfort zone, rather than confronting some of the difficult issues which would need to be resolved if it is to make the transition from paper to reality.
Three specific shortcomings will need to be addressed, if it is to have any chance of working. They are:
l the need to recognise that there is a significant variation in capability across local government. Not every large local authority has the capability nor the confidence to take on these new spending powers
l a much greater emphasis should be put on giving substantive power to citizens and neighbourhoods, through their active participation and leadership of key areas of service commissioning
l the challenge of how to drive decisions which cut across the boundaries of health, social care, welfare, worklessness and community safety establishing a legitimate and credible form of accountable local leadership – as an alternative to the buck being passed back up the chain to the minister whenever anything goes wrong or where disagreements are encountered between participating local public service organisations.
We believe the effective response to each of these challenges would make the case for place-based budgets far more convincing. The answer lies in combining the principles which lie behind the various routes to localism which are currently being explored. These principles are service integration; neighbourhood focus; outcome commissioning; variable geometry; and leadership legitimacy and accountability.
Cutting expenditure through existing national and local service silos will be inefficient, hard to achieve and counter-productive. As Sir Michael Bichard’s work has shown on Total Place, there is significant duplication between services which are nationally funded and managed, when they cut across each other at local level.
There is great scope to combine services at a strategic local level around the priorities and desired social outcomes for a city or county or region. The basis of place-based budgets should be a commitment to achieve social outcomes which reflect local priorities, while reducing expenditure. This will require a negotiated autonomy deal with the Treasury, which is explicit about the terms of the ‘more for less’ deal.
At the level of city or county, the focus should be on strategic commissioning, not on building a bigger local state and further entrenching council service delivery. The real decisions – for example, about early intervention and integrating services around families at risk – should be taken at neighbourhood level, based on the effectiveness of existing social networks and community hubs.
But these networks and neighbourhoods need to be able to broker deals with a strategic commissioner of services, and it makes far more sense for this decision-making capacity to be at local level than in Whitehall.
Nevertheless, it is a plain fact that not every large authority currently has the capability or the confidence to take on such an important new leadership role. Many believe they lack the legitimacy to drive decisions which impact on the role, activities and budgets of other local public services. But it is equally wrong for the best to have to wait for the rest.
And this is where the principle of variable geometry comes in. We already have asymmetrical governance in the UK, with devolution to Wales, Scotland, Northern Ireland and London. All these devolved centres are set to gain further powers, which leaves a big question mark about the rest of England. The obvious starting point is some of the major cities and counties.
Manchester and Leeds already have city-region powers, Birmingham is a city-state in its own right, Kent and Essex have pioneered welfare reform and service integration. Why not make these places the vanguard for place-based budgets? This would require a new approach by the Treasury to allocation of budgets in key departments – for example, the Department for Work and Pensions and the Ministry of Justice – to enable their local activities in areas such as Jobcentre Plus and court services to be included in those vanguard place-based initiatives.
The final question which needs to be answered to ensure that deficit reduction can be combined with localism is about accountability and leadership. As one of the participants at our fringe meeting pointed out, it’s all very well having several public service organisations working together to reduce expenditure and improve outcomes, but someone has to be primus inter pares (the first among equals).
But this isn’t just about giving the council leader new powers. Because then, the question is, what is their legitimacy – and how accountable are they? Does the leader behave as if he or she is accountable for every major public service governance and community issue in their area?
The most important condition for a substantial shift in power from the centre to the locality is for ministers to be confident that local people will hold to account their local leader if something goes wrong in their area, rather than automatically defaulting to the minister of state.
Mayors may be part of the answer in some areas, but much will also depend on how much council leaders can demonstrate and prove their legitimacy by their actions, their authority and by their fostering of effective and sustained local collaboration and consensus.
There is a big opportunity to use the deficit as a catalyst to integrate public services around the social and economic priorities of England’s major cities and counties, and to create new models for local service provision that is driven by greater community participation, collaboration across local public providers and recognition that the private, voluntary and social sectors are central to the solution.
The alternative is silo-based departmental cuts leading to residualised and unreformed public services, where service reduction is inevitable as councils try unsuccessfully to provide the services that they have always provided, rather than the services that citizens truly value.
Some in local authorities are already grasping this opportunity, but they need to be supported by the LGA and central government, and by a Spending Review which enables those with the capability and legitimacy to run place-based budgets to get on with the job.
Bill Cooper is head of local government, KPMG, and Ben Lucas is director of the 2020 Public Services Trust
