‘If Labour can’t spend more, here’s how we spend better to fix council budgets’

On Monday, Angela Rayner described the government’s announcement of £600m of new emergency local authority funding as a “cynical sticking plaster”. She’s right: the money is welcome but a drop in the ocean.

Almost every day another council faces bankruptcy or cuts services to the bare legal minimum, in just one part of the crisis engulfing England’s public services. Last autumn, the NHS was facing a £7bn shortfall, according to independent experts. Schoolchildren in deprived areas are falling behind. Our courts and prisons are clogged.

We must revive a radical New Labour policy

Labour’s leadership is clear that a government boxed in by record taxation, high national borrowing, and years of low growth will have no quick or easy financial fix.

A new report I have co-authored with Jess Studdert of New Local says that if we can’t spend more, we must spend better. It advocates reviving radical ideas for place-based public service budgets that were pioneered by the last Labour government.

The concept behind the ‘Total Place’ pilots launched in 2009 was simple. Find out how much money is spent on all public services in an area and work out how to spend it better. That might sound blindingly obvious, but it isn’t how public service funding worked then, and it isn’t how it works now.

Local spending is fragmented into siloes. Each silo is accountable to a different government department, each has different measures of success, and each is funded separately by the UK Treasury. Effective local coordination of spending is impossible.

This setup is deeply damaging to how our services work. The IFS recently found that the distribution of £245bn spent in England across the NHS, schools, local government, the police, and public health did not reflect local need.

Some services in some areas were relatively overfunded. Others were underfunded. The IFS concluded that “there may be benefits in providing greater flexibility to leaders to move spending between service areas”. Under the current system, that just isn’t possible.

Services lack funds or incentive to focus on prevention

Real people don’t live their lives in separate departments or services. They often know what would make a difference but instead of services shaped around their needs they find duplication and gaps. Studies have found families forced to interact with many overlapping agencies, while social workers get bogged down in administration.

An ex-offender is more likely to get into new trouble than receive joined-up support from prisons, probation, mental health, housing, and Job Centres. Almost every family has experienced the broken interface between the NHS and social care.

Too little is invested in early intervention : each service has an incentive to shift the costs of economic and social failure on to another. It is a Catch-22 which our report calls “the prevention penalty”: services have little motivation, or money, to fix problems which will later become another service’s crisis.

Some councils pioneer collaboration, despite the system

Total Place offers a way to break this vicious cycle. The proof is in those early pilots, which filled me with so much hope when I was Secretary of State.

The first-year pilots were taken up across England, by councils of all political stripes. They showed how to bring health and social care together, deal more effectively with substance abuse, create joined up children’s services, and improve access to many services. All offered better services for the same money.

The Coalition scrapped Total Place in 2010, opting for the deep and damaging austerity we have had since.

Occasional attempts have since been made to bring services together; some councils have pioneered new ways of working and enabled local people to shape services that meet their needs. These prove the principle works but they happen despite the system, not because of it.

Councils can’t save any more cash

There is no room for more savings in today’s local government. There is no scope for top-down ‘productivity’ drives which intensify the ‘doom loop’ of constant crisis fighting and prevent service improvements.

Labour sees the need for change. Shadow devolution minister Jim McMahon recently told the Institute for Government:  “The question is how do you get more bang for your buck? There is something in looking at every pound you spend in an area and really requiring every part of Government to marshal around a single plan for a place.”

It will take radical reform and  the creation of Place Based Public Service Budgets to realise that potential. All agencies would identify the total money spent in each locality and match this against the needs of local people and communities.

Coordinated by elected local authorities they would produce Local Public Service Plans that set out new ways of working – including ways of involving local people – and the improved outcomes to be achieved. Instead of working to top-down departmental targets, local partners would be held accountable for achieving the results they promise.

And instead of each service reporting to its parent department – a system that gives only the illusion of looking after public money – value for money would be bolstered by a new statutory local audit service and Local Public Accounts Committees. Together these would provide  tougher scrutiny than exists at presents.

It will take political determination to push such changes through Whitehall’s entrenched and centralist culture. But for a party committed to improved public services, there are few other games in town.

The ‘Place Based Public Service Budgets – Making public money work better for communities‘ report by John Denham and Jessica Studdert, Deputy Director of New Local, and is published by NewLocal in association with the Future Governance Forum.