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The Research Brief: Why centralised funding is a waste of public money

Your weekly dose of policy thinking.

By Spotlight

Welcome to the Research Brief, where Spotlight, the New Statesman’s policy section, brings you the pick of recent publications from the government, think tank, charity and NGO world. See more editions of the Research Brief here.

What are we talking about this week? The “Place-based public service budgets” report, from the think tank New Local. Spotlight got a sneaky exclusive preview of the paper before it was published today.

It delves into fiscal devolution – or in other words, handing local government, and other local bodies, more control over how to spend their money. According to New Local, “top-down efficiency initiatives no longer produce real savings”, while “weak public finances”, high taxes, and slow growth, “constrain the possibility of new investment in the immediate future”.

The next government will have “no choice” but to “make better use of existing spending”, the think tank says. With an election likely to take place before the end of this year, mending our creaking public sector will be a major issue for a new government of any colour to solve.

New who? New Local is an independent think tank whose focus is predominantly on the power vested in our communities. Founded in 1996, and formerly known as the New Local Government Network, New Local relies on a network of more than 70 councils, which contribute ideas and share on-the-ground experience to inform the think tank’s policy analysis. Its chief executive is Adam Lent, who was formerly head of economics and social affairs at the Trades Union Congress.

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The report is co-authored by Jessica Studdert, deputy CEO at New Local, and John Denham who was local government secretary under Gordon Brown in 2009-10.

So, what’s the gist? According to New Local, the way we distribute public money isn’t as efficient as it could be, which is leading to essential funding going to waste. If we identified all the money spent in a local area and allowed it to be used more flexibly, the think tank says public spending “could be more closely aligned with communities and places” instead of “arcane Whitehall boundaries”.

OK. So, where does this idea come from? The report points to the Total Place pilots, which were announced in 2010 shortly before the end of the last Labour government. They looked to take a whole-area approach to public services, but never quite got off the ground because, according to New Local, the Tories came in and introduced a new era of austerity. The Total Place initiative therefore “never reached its logical conclusion” to move public investment and decision making further towards being more joined up locally, the report points out. Denham was secretary of state when Labour’s Total Place pilots were established, so it’s not too much of a surprise he’s calling for something similar to be reinstated.

As a result, money is wasted due to: inefficiency and duplication of services; services being designed and dictated by central government and therefore responding badly to community needs; and too much money being spent on solving problems, rather than preventing them. The report argues this centralised way of operating – with central government holding the purse strings – “creates barriers to working with communities” to deliver the support most suited to their needs.

What does that look like in practice? According to New Local some simple maths is the best place to start. The think tank recommends that all spending in specific local areas should be counted up in order to map public spending across the UK. This will require more than just the data that is publicly available and will require “proactive engagement and leadership from Whitehall”.

Collaboration is also key, and so is giving local areas responsibility for place-based budgets. This would likely mean more places having access to a government department-style budget, just as the two Andys (Burnham and Street) were promised for Manchester and the West Midlands by the Treasury at last year’s budget, as part of the “trailblazer” devolution deals.

Local accountability is also key. Last year, then shadow levelling up secretary, Lisa Nandy revealed Labour’s plans for local public accounts-style committees (PAC) to hold decision-makers to account on local spending. And New Local is very much on board with this idea. Just as Meg Hillier, chair of the parliamentary Public Accounts Committee, holds the government to account on its spending commitments, the report argues that locally led versions should do the same for councils and other local public services.

And finally, New Local concludes that none of these changes can happen without “reform at the centre”. The report argues “place-based public service budgets require changes to the culture and practice of central government”. It adds this could be achieved through a new “national-local partnership framework”.

In a sentence? By approaching public spending purely through a Whitehall-led framework, the UK is wasting money and resources – but we can avoid this by properly devolving funding down to local areas.

If you have a report, briefing paper or a piece of research that you’d like featured in the Research Brief, get in touch at spotlight@newstatesman.co.uk.

[See also: Council bankruptcy tracker: authorities under increasing financial strain]

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