In partnership with

Place-Based Public Service Budgets: Making Public Money Work Better for Communities

January 31, 2024   By John Denham
In partnership with

This report sets out a new approach to public service investment and reform in England. By identifying all public money spent within a local area, and enabling it to be used more flexibly, spending could be more closely aligned with communities and places instead of arcane Whitehall institutional boundaries.

Rather than focussing on squeezing out efficiencies within separate services nationally, a renewed approach would consider how services could be more effective by collaborating together locally, around a shared understanding of population needs and community aspirations.

Authors John Denham and Jessica Studdert introduce the report

Executive Summary

Severe challenges face public services in England. Austerity has created a ‘doom-loop’ whereby the short-term urgency to respond to crises prevents the development of long term solutions to underlying
problems. Top-down efficiency initiatives no longer produce real savings, while weak public finances, record levels of taxation, slow growth and debt repayments constrain the possibility of new investment in the immediate future.

The government of the next Parliament will have no choice but to find new ways to make better use of existing spending. Our paper argues that this can also be an opportunity: an ambitious new approach to better coordinating all public spending in a local area would enable new ways of designing and delivering services that better meet people’s needs.

Inspired by the Total Place pilots of the last Labour government, and informed by locally-led practice which work with the assets of communities, we set out how pooling existing public service budgets across a place can be a more effective use of resource which would
transform the way communities are supported to thrive. By repurposing the system to focus collectively on outcomes that are meaningful for people to live a good life, it will be possible to overcome the waste and
fragmentation inherent in the dominant model of provision.

People and businesses in the UK are held back by short-termism and a lack of co-ordination by central government. There is an urgent need for a new model to ensure that long-term investment that meets local needs, and place-based public service budgets would enable that.

Diane Coyle, Bennett Professor of Public Policy at the University of Cambridge

Problems with the current system

Our public services are provided by and accountable to separate government departments: health, education, welfare, local government, policing, for example. Fragmentation is hardwired by design: each department is funded separately by the Treasury and subject to separate reporting to departmental Accounting Officers. This means each service is bound by different funding priorities, policy frameworks and performance measures. This creates systemic barriers to coordination and collaboration at both national and local levels.

There are four core ways this model of resource allocation and accountability contains inherent costs and is not achieving maximum impact:

  1. Money is wasted by inefficiency and duplication in services that are fragmented and difficult to navigate. People with complex needs may be forced to interact with numerous overlapping professionals whilst others will find no support at all. Challenges that cross agencies, such as families in need or offender rehabilitation, struggle to find a coordinated response.
  2. Centrally directed services and structures respond badly to the divergent needs of communities and places. For example, the NHS works primarily to nationally set priorities and has failed to prevent rising health inequalities between postcodes. The match between the public spending allocated to local areas and their needs is weak and inconsistent.
  3. Too much money is spent responding to problems instead of preventing them occurring in the first place. A ‘prevention penalty’ disincentivises joint investment, because often a different service would need to invest up front in preventative support, when reduced demand which might lead to savings would show elsewhere in the system. For example, investing in youth provision might alleviate pressures on welfare benefits or the criminal justice system, just as appropriate mental health support might save policing or A&E being the last resort picking up crises.
  4. The current model of public spending creates barriers to working with communities to design and deliver support to better meet their needs. A wide range of local practice demonstrates the impact of working with communities in ways which draw in their insight and work with their strengths to generate sustainable outcomes. The dominant approach of working in vertical siloes facing upwards to Whitehall departments undermines the conditions for community-powered practice.

This paper sets out a practical and necessary reform of public policy in England. We can’t go on as we are, with Permanent Secretaries in Whitehall ostensibly responsible for outcomes in the lives of people in places they don’t know and don’t understand. It is well beyond time to put budget control and accountability where it properly belongs, at the local level, where public money can be aligned with the real needs of communities.

Philip Rycroft, former Permanent Secretary at the Department for Exiting the EU
and previous head of the UK Governance Group in the Cabinet Office

The case for place-based public service budgets

The idea behind place-based public service budgets is simple:

  • The total public spending in each local authority area is identified.
  • Different services work together and with local communities to establish priorities; identify how well current needs are being met; and set out how public money could be better used to those ends.
  • All relevant local and national agencies delivering public services are empowered and required to collaborate financially and in the delivery of services to produce better outcomes.

In this report we set out five principles for this new vision for place-based services in England. These underpin an approach to forging better services within the same spending allocations, and more effective accountability for spending public money well:

  1. Counting: All public spending in each local area should be identified, including directly from Whitehall departments, social security, and through national and regional agencies. The starting point would be ‘upper-tier’ unitary, county or metropolitan borough authorities, and layered with district level in two-tier areas. This mapping of public spend will require more than publicly available datasets and will require proactive engagement and leadership from Whitehall.
  2. Collaboration: Agencies should work together to share data and identify the needs of the populations they collectively work with. This will inform the development of joint Local Public Service Plans which will address core challenges in the area with the aims of improving outcomes for all and narrowing inequality gaps. The ability to pool budgets and the expectation to coordinate service delivery will enable more effective responses. This should also begin a shift towards more investment in prevention as upfront risk and longer term reward are aligned in joint approaches.
  3. Community power: Place-based budgets provide a firm foundation for new ways of working that work with existing local assets and involve communities more directly in decisions over the support that would make a difference in their lives. They would enable more holistic provision that is better adapted to local circumstances and community priorities, including more sustained investment in local community and voluntary provision.
  4. Accountability: As responsibility moves from individual government departments to local areas, new approaches must ensure value for money. Public services in a place should be collectively held to account for achieving agreed outcomes in their Local Public Service Plans. Local public accounts committees should have the power to scrutinise all public spending across a place. The fragmented system of department Accounting Officers should be replaced with place-based accountability and a new statutory audit service with intervention powers.
  5. Reform at the centre: Place-based public service budgets require changes to the culture and practice of central government. Based on recognition that this is a long term endeavour, there will need to be sustained leadership and commitment across government and a new national-local partnership framework.

Recommendations for action in the next Parliament

We suggest three initial steps that will enable a new approach:

  1. New powers: to give local authorities and other agencies in England the powers and duty to identify local public service spending, to collaborate and pool budgets in order to better meet the needs of local populations; to set out Local Public Service Plans and to ensure central government supports the process.
  2. Longer-term funding settlements: to enable planning and joint investment between local partners, government should ensure spending across all agencies is aligned and over a longer budget cycle to realise returns from investing in prevention up front. The next Comprehensive Spending Review should begin to immediately embed this approach, including local government financial settlements for a minimum of three years.
  3. A new framework for accountability: this would enable local authorities to ensure that all agencies collaborate in developing Local Public Service Plans. It would also ensure locally agreed outcomes are delivered and money is spent well, while replacing the fragmented system of departmental Accounting Officers.

The full implementation of place-based public service budgets will require changes to the culture and working methods of many agencies and organisations. This work will take time to develop and years to mature. This is all the more reason for the next government to start at the beginning of its term of office.

Place-based budgets should be at the heart of a new partnership between national and local governments. Our communities have enormous power and capacity which our over-centralised system too often bypasses by design. Our public services need to be forged around human relationships not transactional processes, and rewiring the funding to enable this to take shape would be a massive catalyst for change.

Cllr Georgia Gould, Leader of Camden Council, Chair of London Councils and
Policy Advisory Group member, Future Governance Forum

January 31, 2024
Authored by

John Denham
Join our mailing list