The biggest barriers to integrating local services are financial structures that create artificial boundaries. Central government needs to reform the system of local finance and encourage greater innovation
Councils and local public services are facing monumental challenges – not least the need to dramatically reduce the cost of public service delivery. One way through this challenge is to integrate services with public sector partners.
Research published in the New Local Government Network’s Break on through report shows that 92% of people surveyed believe that service reform will lead to improved outcomes for users; and 87% agree that integration will lead to reduced long-term costs for public services. We have already seen through the Whole Place pilots the potential for huge savings through this way of working.
Despite the potential for savings and improved outcomes, however, the pace of change amongst local areas is slow. Only 2% of our survey respondents have integration activities fully operational across all service areas. Councils are not integrating at the scale and pace required to deliver significant transformation at speed. Areas are being held back by a series of barriers that are getting in the way of building better relationships locally – a key ingredient of successful integration.
Our research shows that the biggest barriers are financial structures that create artificial boundaries between organisations, and stifle collaboration. Different financial structures across sectors are getting in the way of building the sort of relationships locally that allow integration to progress at speed.
Time and time again we hear that misaligned financial incentives are hindering integration. For instance, acute hospital trusts are often paid on activity rather than outcome, which does not incentivise investment in early action.
Even where parts of the system are pulling in the same direction – to get individuals into work for example – financial structures do not incentivise coordinated action. There are no mechanisms to reinvest money gained by getting people back into work – received through increased income tax and not paying out-of-work benefits – into local authority services to prevent individuals becoming unemployed.
These misaligned structures are not conducive to integrated working as they promote a silo mentality locally and make relationships difficult to cultivate. It is no secret that however well-intentioned the Better Care Fund is, because it has to work within existing misaligned financial structures, it is largely perceived as a ‘land grab’ by local authorities, rather than a constructive and useful way of kick-starting health and social care integration.
The real problem with these financial barriers is that local areas need central government intervention in order to solve them. Financial structures and the flows of finance are directly related to central government and the way that different organisations are incentivised. Central government must reform the way in which the system of local finance operates.
While we know that if all the central barriers disappeared tomorrow, integration would still be very difficult at a local level, it is clear that Whitehall it is getting in the way of collaboration around finances locally.
Break on through makes a series of key recommendations for how central government can change. Foremost, that the Cabinet Office should make plans to establish a Cabinet Committee by the end of 2015 to drive forward integration and the Treasury should start making plans to develop shared budgets across Whitehall around key priorities for integration. This will help to support localities in building better relationships.
Whitehall needs to move away from barrier busting to supporting areas to build better relationships and encourage greater financial innovation locally. Reform needs to look at radical change in how we think about the financing of local public service and the most appropriate level and organisation to bear the risk of programmes and investment. But this will require a whole-systems approach to local public services, which needs to be supported centrally.
Laura Wilkes is head of policy and research at the New Local Government Network and author of the Break on through report
