By Richard Johnstone | 2 May 2014
A new government tool to improve the cost-benefit analysis of public service reforms could help councils make the case for local changes that improve provision and cut costs, according to a senior figure involved in its development.
The government published Cost benefit analysis guidance for local partnerships on April 2, under its public service reform programme. Developed as part of the Greater Manchester ‘whole place’ Community Budget pilot, it was the first Treasury-approved assessment of the costs and benefits of joining-up and reforming public services in local areas.
The framework was developed by New Economy, the economic strategy unit of the Greater Manchester Combined Authority.
John Holden, acting director of economic strategy at the agency, led the team that devised the methodology. He told Public Finance it would allow authorities to take public service reform plans such as Community Budgets to Whitehall with a clear understanding of where savings could be made.
‘This model provides a framework to start thinking about more holistic projects that deliver long-term outcomes but also produce short-term cashability [savings],’ he said.
The guidance sets out a standard process to determine the benefit of reforms, based on the unit cost of services, their impact and the savings that result.
For example, the analysis found that better coordination of employment and skills support to tackle unemployment could save £9,234 for the Department for Work and Pensions per person per year, but would also provide £566 of annual benefit per head to the NHS. In another example, the benefits of lower anti-social behaviour were estimated to be split between the police (40%), local authorities (30%) and housing providers (30%), while reducing crime saved an average of £609 an incident, split across at least six public sector agencies.
Holden said Treasury backing for this analysis – it has been included in Whitehall’s Green Book for policy appraisal and evaluation – was crucial to implementing reforms. It had also been added to the government’s assessment process for the latest £320m round of the Transformation Challenge Award, which provides funding to town halls to implement reforms.
‘It’s massive in terms of credibility with Treasury and across government. The methodology is generally respected and its robustness is acknowledged,’ he said.
‘You can see that in the Transformation Challenge Award, which was announced on the same day the guidance was published. The Department for Communities and Local Government took the decision to include it, and said to local authorities that if they want to make a robust case they should look to use this model.
‘That shows it’s already getting traction in central government in determining how they spend their money.’
