The roots of a more radical shift

This article was originally published by LGC.
The government needs an overarching strategy for public service reform that dispenses with traditional Whitehall ‘business as usual’ assumptions, writes Jessica Studdert.
Entering office amid tight finances and public services in crisis meant the new Labour government’s inbox was not an enviable one – something to which many in local government will relate.
This has required a balance between urgent response with steps towards longer term reform. This “double running” of short-term measures while shifting to sustainable, preventative ways of working is a feature many in the sector will recognise too. So although a necessary pragmatism has dominated the early months of the administration, the roots of a more radical shift are being established.
On one level – and ideology aside – it is undeniably refreshing to have a government that recognises the state has a positive role to play. The 2010s were characterised by the pursuit of less state and creative ways of bypassing it. The Labour government is clear that public services, however “broken” in practice, are a core lever for achieving economic and social progress. The chancellor’s autumn Budget shifted the dial on immediate investment, the deputy prime minister has hailed a council housing revolution and the health secretary has initiated a new NHS 10 Year Plan.
This is a welcome shift in principle. But so far this has yet to fully translate into an overarching strategy for public service reform and renewal. Despite the Budget’s commitments, spending remains uncertain beyond 2025-26. Some traditional Whitehall ‘business as usual’ assumptions dominate: future plans for 2% productivity targets for each department show the persistence of a Treasury mindset that intends to squeeze out efficiencies within service silos, overlooking the potential for greater impact when looking across spending lines. The prospect of the next Spending Review retaining the split between “protected” health and education budgets and other “unprotected” public spending departments indicates the need to better understand the knock-on effect of withdrawing support for early intervention and prevention on rising acute costs.
the promise of multi-year settlements, reduction of competitive bidding and the longer-term funding reform are all much needed
For local government specifically, some positive shifts are emerging on the funding front – the promise of multi-year settlements, reduction of competitive bidding and the longer-term funding reform are all much needed. Yet there is a risk that local government’s funding challenge is viewed narrowly as a problem for the sector itself. Unless and until we open out a wider discussion about how public funding is allocated from the centre across places for maximum impact on the communities, there is a risk that discussions about local government finance and reform become ever more circular.
To take the issue of redistribution. Deputy prime minister and local government secretary Angela Rayner has set out a policy statement announcing the targeting of more funding towards deprived areas and a longer term “fair funding” plan to rebalance funding away from more affluent areas. As Rishi Sunak’s infamous Tunbridge Wells brag revealed, an underlying feature of previous government policy was to remove needs-based funding. The Labour government’s rebalancing measure is therefore politically inevitable. There will undoubtedly be new winners and losers – albeit there is a commitment to no council ending up with reduced spending power.
what is “fair” in today’s context? Losers will lose harder, and the winners won’t win enough to be game-changing
The challenge is that before 2010, local government funding was characterised by both needs-based ‘fairness’ and relative sufficiency overall. Fifteen years later, no-one can argue local government has sufficient funding in relation to volatile demand pressures like social care and temporary accommodation – so what is “fair” in today’s context? Losers will lose harder, and the winners won’t win enough to be game-changing.
We need to ask more ambitious questions about how effectively power and resource flow through our governing institutions and across public services for impact with communities. In this regard, the English devolution white paper is an important opportunity to address the deep-seated centralisation that has gripped our country, and its ability to respond to stark regional and local variations in outcomes, for decades.
Our top-heavy governance tradition undervalues the role of scale for impact – national, regional, local and neighbourhood are all important convening tiers for different purposes. There will be an inevitable fixation on structures, but we need to maintain a clear focus on purpose: function alongside form. So, for example, how can an emergent sub-regional tier develop to add value to the activity of councils and create more resilient local systems? Initiatives like regional care cooperatives could establish more collective capacity to invest long term in children’s care homes – increasing public sector purchasing power vis a vis high-cost, low-quality private providers.
Rather than a zero-sum wrangle between tiers, we need to ensure empowered, confident governing institutions emerge and evolve to face out to communities – rather than being expected to primarily operate upwards in a governance hierarchy. The rich diversity of locally-led innovation over recent years involves many similar features – embedding strengths-based practice, deep listening to communities and active co-production to shape-responsive services. In an era of declining trust in our institutions, how the regional and local state is resourced and required to draw in the participation and insight of communities at all levels – from strategic to hyper local – is not a “nice to have”: it is essential for the health of our democracy and society.
The next step will be to ensure a more coherent place-based reform agenda emerges
In the context of the prime minister’s Plan for Change, there is an opportunity for a mission-driven national framework to really drive a new energy across the system – mapping onto clear collective and tangible outcomes across public services locally. There are a number of big set-piece reforms being driven by different departments – such as the NHS 10 Year Plan, which envisages a neighbourhood health service and the Department for Work & Pensions’ employment reforms. Each have strong “place-based” emphases, aligning powers and provision locally to respond to specific area needs. The next step will be to ensure a more coherent place-based reform agenda emerges – so that where separate departmental initiatives land in an area, they are more than the sum of their parts.
In this regard, one of the most interesting initiatives to emerge is the £100m Public Sector Innovation Fund that was announced in the autumn Budget. This has real potential to invest in testing new ways of working at place level, ensuring learning is captured to catalyse further, deeper reform. Former leading local government figures are now in key positions across Whitehall – Jim McMahon as local government minister and Georgia Gould at the Cabinet Office, for example. So there is an opportunity for an exciting, mission-driven reform agenda that galvanises energy and partnership nationally and locally, and gets behind those pursuing public service innovation to inform system change.
New Local has advocated a new era of Total Place-style place-based public service budgets, an idea that has been gathering momentum from policy-makers and practitioners. This would be a crucial foundation to rewire funding around communities and places, so that new models of working can be developed that align the costs of upfront investment in prevention and early intervention with the rewards of savings from reduced acute costs in a shared budget envelope.
This approach relocates accountability locally and envisages a core role for local authorities as first amongst equals alongside other public sector partners. In this scenario, funding more effectively follows a need to support more empowered, responsive local systems, and performance is understood as progress towards broad outcomes such as reducing health inequalities or boosting child literacy rates.
At this point, still in the foothills of a five-year parliament, there is an important opportunity to combine short-term, pragmatic necessity with longer term vision and ambition. There will be many events along the way that disrupt the best-laid plans, but keeping a focus on building adaptability into our institutions is the best route to future resilience.
