The recent Joseph Rowntree Foundation report on ‘The cost of the cuts: the impact on local government and poorer communities’ makes for fascinating reading.
There is a lot of analysis and statistics on how the frontloading of government spending cuts on local government have hit services and communities, as well as the voluntary sector.
While there are a number of worrying issues highlighted by this report, from the point of the view of charities and the sector’s finances, the most worrying was the squeeze on spending on preventative services and the lack of capacity of local authorities to undertake full scale public service redesign.
There is a growing consensus that charities have a key role to play in delivering preventative services which can help to reduce long term service demand, both saving lives and saving the public purse. However, this can only take place when there is both investment from the public sector (or philanthropists) and when commissioners redesign services to incentivise and reward prevention.
A number of welcome noises have been made around this over the past five years; from government support for the Allen review on early intervention to the Troubled Families initiative. But when speaking to charities, it seems that central government mood music is not being translated to real change on the ground.
The pace of cuts and capacity squeeze hampering local government
The NAO’s report into local government finances in December 2014 already highlighted that discretionary services, which often have a preventative focus, had received significant cuts – in the case of discretionary social care of around 45%. This worrying trend has been back up by JRF’s study which considered three local authorities in England and one in Scotland.
In the three English authorities, the study found that local authorities most found that planned savings generated through investing in preventative spending were low, in the best performing local authority, it was less than 10% of total savings planned over the 2013-16 period. The councils in the study reported that the pace of the cuts combined with capacity constraints severely limited their ability to undertake the level of preventative work that would be required to make savings. Moreover, those that were undertaking preventative work were focused on short term ‘cashable’ savings rather than longer term projects which would likely yield a bigger impact for communities.
Although some of this may be due to the culture in local authorities commissioning, the greater portion of this slow movement on preventative spending is due to the frontloading of the cuts. Preventative commissioning takes time and resources, both of which have been in short supply for councils.
This is having a knock-on effect on the voluntary sector, which are best placed to provide these types of interventions – rather than private competitors which specialise in churning out outputs at low cost.
What can be done?
NCVO’s manifesto for the general election has highlighted the need for the government to shift more spending towards prevention through the use of targets, changing accounting rules to include a Ten-Year test of social and economic benefits and establish a loan fund for public bodies to access upfront capital for major preventative initiatives.
In a previous life, I put forward the idea of using £400m from dormant insurance policies to create a ‘Social Innovation Fund’ which would use the Social Impact Bond model to resource preventative spending (but cutting out the middle man of social finance). Better implementation of the Social Value Act would also help to shift more funding to prevention.
All of these approaches are going to be necessary to support prevention and stop the ‘pushmi-pullyu’ of local government spending whereby councils are asked to both invest in reducing demand and make significant cuts at the same time.
We also need to see a bigger roll out of community budgets, which pool resources across different public bodies in a geographical area, making it easier to free up resources for preventative spending.
Charities need to step forward to help public bodies in the midst of a tight spending environment. NAVCA’s Change for Good review into local infrastructure indicated how the sector can play a bigger role in shaping public services, and local infrastructure is crucial to coordinating these activities.
Charities should also get on the front foot and take the initiative on new procurement rules which have come from the European Union. For example, using the ‘innovation partnership’ model, which enables local councils to develop a partnership with providers to create solutions to meet a buyer’s (i.e. public body’s) needs where there isn’t an easily available market alternative without having to go through full competition. Although the UK government has (as usual) made these rules a little too tight, there is still an opportunity for charities to propose partnerships with local government and avoid bigger private competitors sweeping in to undercut sector-led solutions through open competition.
One of the great successes of the past five years has been the inexorable march of the standard bearers for preventive spending. The next five years must see the rhetoric matched by implementation and this will require relentless focus from the sector and holding government to account.