Not the total story

30 Oct 09
Much is expected of the Total Place initiative – ministers are hoping it will join up services while producing huge savings. Guy Clifton warns, however, that the consequences have not been properly thought through
29 October 2009

By Guy Clifton

Much is expected of the Total Place initiative – ministers are hoping it will join up services while producing huge savings. Guy Clifton warns, however, that the consequences have not been properly thought through

Announced quietly in the 2009 Budget, Total Place has suddenly become the watchword of the public sector. Politicians, think-tanks and academics are enthused by the possibility of achieving nirvana – the joining-up of local services and an associated fall in overall spending.

Supporters of Total Place, which is being piloted in 13 areas in England, believe that duplication can be avoided and local bodies – including councils, the NHS, police and Jobcentre Plus – will be able to offer focused and efficient services. As a result, it is hoped that millions of pounds of taxpayers’ money could be saved – £600m from the local government budget alone, according to ­Communities Secretary John Denham.

Currently, the pilot authorities are calculating the flow of public spending in their areas so as to provide a realistic view of ‘public sector Plc’. The findings will be fed back to the Treasury and reflected in the Pre-Budget Report in ­November as well as next year’s Budget.

However, in the desire to embrace Total Place as a panacea for the ills of the public finances, one thing has been forgotten – the potential impact on the wider economy. Public spending generates prosperity far beyond the public sector – for people through employment and for businesses via spending on goods and services.

Nevertheless, local authorities and other public sector bodies are under no obligation to measure the economic impact of their activities, including the impact of their spending decisions on local employment and businesses. As a consequence, baseline and benchmarking data on this are generally not available.

Total Place therefore runs the risk of creating unintended consequences if, when reviewing options for service transformation, there is no consideration of how such changes might affect the local economy. For example, what is the impact on local suppliers should procurement be rationalised across a locality? Similarly, what is the impact on local employment where a strategic partner is ­appointed to provide back-office services?

This will also mean that rational decisions will be harder to take regarding which parts of, and in what places, public expenditure should be reduced or retained due to the related ­economic impact.

The economic prosperity of all localities has already been under threat due to the recession, and this is likely to be compounded as it further affects public finances. Significant savings will be required at a time when there is an increase in demand for many public services (social care is an obvious example) and a reduction in income as a result of the downturn. The timing of Total Place during the recession means that it will be critical for the full economic impact on localities to be ­considered and understood.

Some authorities, such as the London Borough of Greenwich, do explicitly consider the impact on the local economy of their spending decisions. Recent research undertaken by Greenwich to recognise the economic multiplier effect of public spending in the local area found that 63% of its employees live in the immediate area and 87% of local businesses employ fewer than ten people.

Therefore, most employees will spend money with small businesses locally, which in turn feeds back to local levels of business revenue and helps sustain local prosperity. An understanding of this ­economic impact forms a part of the ­authority’s spending decisions.

Similarly, Torbay Council is introducing a commissioning model for its strategic partnership. Central to this is the impact of commissioning decisions on the economic prosperity of the area.

The 13 Total Place pilots have recently completed the analysis of all public sector expenditure flows relating to each locality. The pilot in Birmingham has calculated total public expenditure as £7.5bn, and approximately £4bn in Worcestershire. Therefore, even if savings of only 1% are identified in each pilot, the amount will be significant.

The next stage is for the pilots to identify innovative approaches, along with a detailed analysis of savings that can be achieved. All pilots need to submit final reports by February 2010, to feed into next year’s Budget. While this is a tight deadline, they must not lose sight of how changes might affect the local economy.

Because local authorities have different starting points, how they perform will vary widely. Regionally, public spending varies in absolute terms and is matched by employment variation.

It follows from this that economic impact also varies, and will continue to do so as overall expenditure falls. The reality is, however, that we do not yet know what this impact is at a local level, nor what it is likely to be in the future. We therefore have no way of measuring whether particular reductions in public spending have a greater or lesser impact, or how Total Place will affect priority areas.

This position needs to change, so that localities understand the influence of current and future spending decisions, by first understanding the baseline position, then by scenario-testing the impact of any proposed changes.

The tightening of public spending will put significant pressure on all public agencies not only to provide efficient and effective services, but also to use their decreasing resources to greater effect by supporting jobs, providing skills and training, and encouraging investment, ­innovation and entrepreneurship.

Many people in local government and the wider public sector recognise that Total Place will be critical to managing a collective response to the perilous state of the public finances. It should benefit local taxpayers and service users through ­savings and by improving the quality of outcomes. Indeed, a number of councils and their partners are progressing their own Total Place type activity in anticipation of a national roll-out, and in recognition of the potential benefits of the approach.

As the pilots continue to progress towards reporting to a 2010 deadline, it will be interesting to see how, and if, any of these fundamental issues concerning the economic impact and the unintended consequences are addressed.

It is clear that the ideas underpinning Total Place are unlikely to disappear with a change of government, due to the cuts in spending required next year and through to 2015/16 and beyond.

This means that the type of radical solutions expected from the pilots will need to be considered by all local authorities and their public sector partners as a long-term solution to achieving significant savings, while at the same time improving results for customers. Just as importantly, the benefits and ambitions for Total Place will only be achieved if its economic ­impact is fully understood.

Guy Clifton is an associate director in Grant Thornton UK’s Government Consulting practice   

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