New evidence shows that there is little relationship between national outcome-based budgeting and what is actually achieved on the ground. What should we conclude?
A new report from CIPFA finally provides the evidence which many commentators have long suspected to be true. Namely, that there is a disconnect between how we are funding our public services and the outcomes that we seek to achieve.
To understand the significance of this evidence it’s important firstly to remind ourselves of the shift in language from ‘inputs’ - the traditional measure of our services - to ‘outcomes’. In Scotland, we can trace the origin back to 2007. On election, the then new SNP minority government introduced the Virginia state model for public service performance. This prescribed a framework for government based on an outcomes approach.
Shortly afterwards, when the economic downturn was forcing a rethink on our future public services, the independent Christie Commission reported that a shift in public spending to ensure that it resulted in better outcomes was essential and should be based on preventative spending. Christie however reported on service delivery and did not examine the wider public management system.
The new Cipfa research firstly defines what a public management system looks like. It is essentially comprised of three simple points. Firstly, public finances determine our resource input. Secondly there is delivery; the organisations responsible for public services. The third and final element of public management is outcomes; what we want to achieve through the combination of public finances and delivery.
The starting point for examination was the Barnett formula which was initially introduced as a short term measure to constrain public spending. The formula continues to be used despite devolution and policy divergences between Westminster and Scotland. The report found, however, that it is the statement of funding that is in now place between the UK government and the devolved governments which in fact operates as a spending control.
The report then looked at the mechanism which sets the Scottish Government budget and by what formulae it is distributed to delivery bodies. In health for example, access to the use of services is taken a proxy for need and forms the basis of funding to health bodies. In local government, equitable distribution is the key objective of how funding is provided to each local authority. Despite these mechanisms, there was no evidence of any relationship between improvement in outcomes and the way in which we distribute public money
So, is this evidence enough to change the way that we distribute our funding? For example should we fund our public services in a different way? No. In fact it this next finding which was the most revealing in the report, and the one likely to be most welcomed by champions of localism and of local services. From a look at international experience, successful outcomes were more likely to be achieved when there was a closer link between national political intentions and local budget choices. This meant that the mechanics of public funding distribution mattered less than the ability to make the right choices.
The key therefore is budgeting. What this means is that the power to achieve outcomes sits closest to the point at which budget choices are made. Most local budget setting is framed around local organisational parameters rather than being structured around the programmes which are known to contribute to stated outcomes.
This means that the challenge facing public bodies lies in changing their local historic practices which have served them well, to a new process which addresses outcomes.
What we now know is that part of the solution is not to shuffle around our public money mechanisms but to strengthen our system of budget choices. This means that, at a local level, a more mature budget setting mechanism will give a clearer line of sight with the national priorities.
Don Peebles is policy and technical manager at CIPFA in Scotland
