Place-based budgets

the future governance

of local public services

Local Government Association

June 2010
Contents

Executive summary 3

The problem 5

Section one: the case for place-based budgets 8

Section two: what places for place-based budgets? 18

Section three: the scope of place-based budgets 24

Section four: the form of devolved governance 30

Section five: cutting out the middlemen 41

Conclusion 44

Summary: devolved governance: implementation 45

Annex - public spending: reporting and accounting 46

Executive summary
The new government needs to do three
key things:
• reduce public spending
• tackle entrenched social, economic and
environmental problems and
• rebuild trust in democratic accountability.
Public services will have to become more
transparent, more effective, and cheaper.
This simply will not happen without a
significant change to the way funding is
allocated and decisions are made.
This paper proposes a significant shift in
accountability which would make local public
services genuinely local both in the way
funding is allocated, and decisions about
services are made and accounted for.
Building on experience of what works –
and what doesn’t – we set out a model
for place-based budgeting which would
allow:
• a multi-billion pound reduction in the
overheads of the existing arrangements
for oversight, performance management,
regulation and policy development
• powerful, enhanced local accountability to
local people for services delivered locally
• continuing full accountability to Parliament
for money raised through Parliamentary
taxation.
The core proposition is this:
• commissioning responsibility for a set of
local services should rest with a locally
accountable governance body
• exactly how this body is constituted would
be a matter for local decision but it would
need to have a legal form and be fully
democratically accountable locally; in most
cases it is likely to be based on a council or
councils working together
• if it were taking on a range of strategic
commissioning decisions around economic
budgets, natural economic geography
points to a sub-regional geographic scope
– councils working together based on
cities, counties or county-sized group of
districts or boroughs
• if it were taking on health and police
commissioning responsibilities, the
geography might be sub-regional or more
local, as the existing configuration of
services suggests
• the local body should be fully accountable
for the budgets it holds: where the budget
is funded by local taxpayers, it need only
account locally to electors; where the
budget is funded by national taxation
voted by Parliament, the body should be
able to account both to its local electors
for outcomes, and directly to Parliament
for that money, rather than needing to
be regulated and performance managed
by the current plethora of intermediary
bodies.
3
The role of this place-based budget-holder We consider the place-based budget model
is a commissioning and enabling role. It is has a huge contribution to make to meeting
possible that the government will wish to the core challenges the government faces.
move to funding models for many services
which do not rely directly on public sector
organisations holding budgets and instead
allow money to follow citizens’ choices. We
expect that, as well as holding a placed-
based budget, the local body will be
responsible for ensuring the conditions are
in place locally to make sure choice-based
models work effectively (so, for example,
addressing constraints that prevent the
development of a responsive supply side and
encouraging the growth of the voluntary
sector).

Under this model:

• the taxpayer would make immediate
administrative savings of £4.5 billion a year
from rationalising the way local services are
centrally controlled
• value for money gains through better
targeting, increased investment in
prevention, and better local synergies
between services, could be worth several
times as much again over the lifetime of a
Parliament
• those value for money gains also represent
the possibility of significant improvements
in outcomes
• accountability, transparency and
responsiveness to local electors would be
massively improved.

4
The problem
The government faces three significant
and interlocking challenges:
• how to restore confidence in public
finances
• how to rebuild trust in politics and
• how to tackle entrenched economic, social
and environmental problems.
These mean that public services will have
to offer:
• much better value for money
• more transparency, and
• more effectiveness.
For a decade, public service organisations
have undergone continual review, avowedly
in pursuit of these objectives.
But those reviews have all reflected the
fundamental assumption that an expansion
of state machinery, combined with continual
attention to process efficiency, will deliver
better services and higher satisfaction.
These ten years have produced a significant
body of empirical evidence which shows
that the top-down target-driven approach
to improvement and efficiency has delivered
neither uniformly better outcomes, though
many outcomes did improve, nor higher
public satisfaction, while the view has
grown that public spending has reached
unaffordable levels.
We nevertheless enter the next decade with
a public service architecture created on this
flawed and over-centralised model, with a
public budget and bureaucracy for every
issue, and an inspection and control regime
for each one. That means only radical reform
can make possible the necessary savings in
public expenditure, if frontline services are
to be protected. If the current model is not
deliberately reshaped, it risks catastrophic
collapse under the pressures it now faces.
The way public services are funded, delivered
and regulated will have to change. A lot.
New ways of running services:
more responsive, more
accountable
We believe the reshaping of the public
sector which is necessary to allow
reductions in public spending will have
five components:
• a move away from command-and-
control provision to more citizen-driven
mechanisms
• greater aggregation and simplification
among the existing multitude of budgets
and bureaucracies
• greater devolution of managerial
responsibility and decision-making
• greater transparency
• greater democratic leadership and outward
accountability for decision-making to local
people.
5
These changes will need to affect both
central and local government, but they will
also affect the boundary between them.
In particular, there is a number of existing
public services which are delivered through
a range of public bodies which have weak
accountability and transparency. It is likely
that the governance of those services will
need to change significantly.
This paper proposes that many decisions
currently taken by central government and
quangos will need to continue to be taken,
but are not effectively made centrally. There
will therefore be a need to develop a new
kind of governance for those budgets and
services which is fully and transparently
democratically accountable – local
democratic accountability for local public
services. In most parts of England, this new
form of public service governance will be at
the level of cities or counties, or – in jargon
– sub-regions. When we refer to sub-regions
in this paper, we mean councils working
together on a geography based on cities,
counties or county-sized groups of districts or
boroughs.
By governance, we mean:
• where public money is being directly spent,
strategic decision-making about what
services are delivered and by whom, either
through contracting or through holding
public sector delivery bodies to account for
outcomes
• where market mechanisms are operating
and public money is following consumer
6
decisions – for example, through a
per-pupil funding formula for schools -
decision-making about the public sector’s
regulatory role in ensuring the efficient
functioning of the market, the fulfilment
of public policy and securing redress for
citizens.
In London, which has unique and devolved
governance over many issues already, and
a greater degree of service coterminosity at
the borough level, change may need instead
to be based on a mixture of regional, sub-
regional, and borough-based approaches.
This may also be the case in one or two
regions which are committed to working
together through regional bodies; in some
urban areas outside London it may also make
sense to handle some decisions at the level
of the councils working together around the
sub-region and some at the level of individual
boroughs. The precise geography of how
councils and partnerships come together is in
any case everywhere best determined locally,
and will be driven by the natural geography
of the issues about which decisions are
being made. It is unlikely to be mapped out
with any success by following a nationally-
prescribed template.
This paper builds on experience of sub-
regional decision-making though the Local
Area Agreement and Multi-Area Agreement
mechanisms, the evidence from the Total
Place Pilots that are exploring how the
totality of public resources in a place can be
used more effectively to improve services at
lower cost, the valuable contributions to the
localisation debate from local government
such as those of Kent County Council1, Local
Government Yorkshire and Humber2 and
London Councils3, and the insights on public
service reform from organisations such as the
Institute for Government4.
• the key challenge has been finding
workable ways to make these models
democratically accountable for their
expenditure both to Parliament and to
local taxpayers; this paper suggests a viable
solution to this issue.

In summary, our analysis shows that:

• there is a body of evidence that devolving
governance will deliver better value for
money, more transparency and accountability
and more effective services. We calculate the
annual administrative savings at £4.5 billion
a year and estimate other benefits at several
times as much again over the lifetime of the
next Parliament
• that evidence strongly suggests that
outcomes will be better if specific
responsibility is devolved where existing
delivery models are too costly or are under-
performing, and manageable risk can be
transferred, through the creation of place-
based budgets
• in broad outlines, workable models of
devolved governance have already begun
to develop

1  Bold steps for radical reform, Kent County

Council, 2010
2  Core principles of localism in Yorkshire and
Humber, Local Government Yorkshire and
Humber, 2010
3  The Manifesto for Londoners, London
Councils, 2010
4  Shaping up: a Whitehall for the future,
Institute for Government, 2010

7
Section one: the case
for place-based budgets
The place-based budget offer is better
services, at lower cost, more accountable to
people – with more of the tough decisions
directly democratically accountable – built on
a devolved governance model that is already
developing through local and multi-area
agreements in many parts of the country (see
map opposite).
Devolved governance provides the potential
for a democratically accountable decision
making body for a place-based budget.
Senior public sector managers would account
to locally elected representatives, and
through them to local people. It provides
these managers with powerful incentives
to prioritise working horizontally with their
local counterparts, rather than vertically
with regional offices and government
departments. It frees central and local
government from the Whitehall/Town Hall
blame game by making it clear where the
buck stops. It offers new opportunities to
integrate commissioning and maximise the
synergy between spatial planning and other
policies intended to drive economic growth.
In this section we explore how devolved
governance enables cheaper services
through:
• administrative savings in regional and
national government
• shared services, such as citizen contact
points
• asset rationalisation and savings on
running costs.
We explore how devolved governance
allows services to be more effective and
give better value for money through:
• targeting services, bearing down on the
deadweight costs associated with some
national programmes that increase the cost
per outcome
• integrating services to tackle complex
problems
• stripping out the multiplicity of bodies and
funding streams addressing the same issue
from different perspectives, and through
a whole public service approach that cuts
out waste and duplication.
We pay particular attention to how place-
based budgets can enable an investment in
prevention that is currently forestalled when
the short-term costs and long-term benefits
accrue to different organisations.
We also explore how devolved
governance makes services more
transparent and accountable, engaging
local people in how they are provided,
rebuilding confidence in government
because:
• complaints are handled locally by elected
representatives, not through remote
and inaccessible bodies such as the
Parliamentary Ombudsman
• decision makers are democratically elected
and accountable

8
 Multi Area Agreements (MAAs)
Map one: Multi Area Agreements (MAAs) January 2010
January 2010

Tyne and Wear City Region

Tees Valley Unlimited

Leeds City Region

Penine Lancashire

Fylde Coast

Greater Manchester Transform South

Yorkshire
Liverpool City Region

Leicester and Leicestershire

Birmingham, Coventry
and Black Country

Olympic Boroughs
West of England

North Kent

Partnership for Urban South Hampshire

Bournemouth, Dorset and Poole

Reproduced with the permission of Ordnance Survey on behalf of

the Controller of HMSO. © Crown Copyright and database right
Source: CLG, signed MAAs, 2010 2008. All rights reserved. 100030882.

9
Source: CLG, signed MAAs, 2010 Reproduced with the permission of Ordnance Survey on behalf of the Controller of HMSO.
© Crown Copyright and database right 2008. All rights reserved.
Ordnance Survey Licence number 100030882
• councils have pioneered the transparency
drive, making information about their
activities available to offer better services
and improve their accountability
• decision making and funding can be
further devolved to districts, town and
parish councils and to communities
through participatory budgets
• councils have led the publication of
performance information to help inform
local people about public services.
Reduced overheads
The drive for efficiency in government has a
long history. Local government alone realised
efficiencies of £3 billion between 2004 and
2007 and is on course to make further savings
of £5.5 billion in the current spending review
period to 2011. The political leadership of
councils has provided a fundamental check
on budgetary growth, helping to make local
government leaner and more responsive. But
the opportunities to drive out further top down
efficiencies in organisational silos are narrowing.
There is a mounting body of empirical
evidence, of the potential for making
savings on public services predicated on
a new way of working between central
and local government:
• in Leicestershire alone the cost of
performance reporting has been estimated
at £3.66 million and the cost of inspection
at £3.57 million – over £7 million with little
clarity on the returns to that administrative
spending
10
• the same county counted 44 funding
streams with a value of less than £1 million
– and each of those streams has its own
administration and reporting.
At the national level, the Local Government
Association has estimated the benefit of
streamlining bureaucracy around local
spending at £4.5 billion per annum5. The
costs associated with regulating local
government, the multiplicity of funding
streams and the co-ordinating transactions
and strategising between different layers of
government are not now affordable.
• £400m from reductions in data burdens
• £250m from reducing the costs of
regulating local government
• £1.5 billion from reducing the
departmental administration costs of
7 departments with close links to local
authorities by 20 per cent to reflect a more
hands off approach
• £1 billion saving on the departmental
resource budgets through reducing
unnecessary regulation, oversight and
policy activity
• £50m savings from reduced administration
of specific grants
• £900m savings from giving councils greater
spending flexibility
• £430m from administration savings equal
5  Delivering more for less: maximising value
in the public sector, Local Government
Association, 2009
 to 0.5 per cent of total spend by non-
departmental public bodies
• £860m from reducing spending by non-
departmental public bodies by 2 per cent.
Local pilot work has illustrated the
potential for savings through sharing
services assets:
• in Leicestershire, there could be annual
savings of between £3.75 million and
£5.25 million from rationalising the
number of public service access points of
which there are 450 face-to-face service
points, 65 telephone centres and 75
separate websites6
• in Kent, the public asset base is valued at
£5 billion. They estimate asset disposals
could generate net capital receipts of
£200 to £280 million over five years,
with savings of £40 million on the annual
running costs of £300 million7.
These savings are not available without
the devolution of decision making because
they are predicated on removing a series of
regulatory roles and structures. But removing
these structures has a double dividend. A
significant devolution of decision-making is
likely to deliver much better outcomes for
the money that is spent.
6  Total Place Final Report, Leicester and
Leicestershire, February 2010
7  Total Place Pilot Kent Final Report, February
2010
Better value for money
In many places, there are pressing economic,
social and environmental challenges including
a need to improve the level of economic
performance, alleviate unemployment and
child poverty, raise adult skills levels, reduce
health equalities and demand on the health
service, and tackle low-level crime and anti-
social behaviour, reduce waste and improve
energy efficiency.
Devolved governance allows
fundamental reform in the way public
services are delivered:
• services to be targeted more effectively
on need, removing deadweight costs. For
example, there are considerable variations
in the level of adult skills between places
and a pressing need to skill up some
communities. National programmes have
failed to do this effectively. Around half of
the employers whose employees received
subsidised training through the Train to
Gain programme (which spent £876 million
in 2008-09) would have arranged similar
training without the subsidy8. Over the
lifetime of the programme this amounts to
a deadweight cost of £1.7 billion
• an integrated, whole public service
approach to intractable problems
like unemployment. For example, Job
Centre Plus is failing to get many of its
8  Train to Gain: developing the skills of the
workforce, Public Accounts Committee,
January 2010. There is anecdotal evidence
that major employers were actually invited to
cease their own funding of training and pay
for it instead through Train to Gain.
11
 clients into secure employment: of the 2.4
million Job Seekers Allowance claims each
year, around two-thirds, or 1.6 million,
are repeat claims. These repeat claimants
typically experience barriers to employment
– in childcare, housing, personal finances,
transport, mental health or alcohol and
substance use – that cannot be fixed by
Job Centre Plus alone. But the current
departmentalism removes the incentives
for Job Centre Plus to enlist the help of
health, transport or housing bodies, or for
those bodies to volunteer their help
• the removal of the complexities in
provision that arise from a multiplicity
of public bodies. For example, a
fragmented approach based around 49
separate funding streams and policies,
totalling around £9 billion a year, has
failed to reduce the number of young
people who are not in productive work
or learning. Around 10 per cent of young
people are not in education, employment
and training (NEET) – this is higher now
than when the previous administration’s
Social Exclusion Unit coined the term and
set a target to reduce the rate. Around one
million young people aged 16 to 24 years
old are not in either work or learning.9
As one of the Total Place reports says
“the range of bodies, programmes and
activities…is leading to multiple, unco-
ordinated interventions”. We could secure
better results with less money
9  Hidden talents II – getting the best out of
Britain’s young people, Local Government
Association, 2009
12
• innovative local approaches to
behaviour change. Progress on a number
of social and environmental issues, such
as reducing obesity or tackling climate
change, will involve individuals and
families to changing their behaviour. With
constrained public resources, there will
be much less scope to do this through
national programmes, and there will be
a much stronger reliance on local and
voluntary action. Local action works: one
of the biggest changes in recent years has
been councils success in persuading and
enabling people to recycle more.
Devolved governance allows:
• layers of bureaucracy to be stripped out
and particular services and functions
including procurement, back office and
transactional services to be integrated and
jointly commissioned, saving money
• scale economies to be brought to bear
on functions where the geography of the
problem requires it
• single assessments of the same clients,
data-sharing and client centred rather than
organisationally focussed commissioning
• budgets to be moved between
programmes, putting an end to multiple
ring-fenced budgets and the constraints
that imposes on moving funds from
budgets with under spends to those that
are subject to pressure.
Prevention
Looking at the totality of spending in a
place – even where budgets are demand-led
or allocated by consumer choice – enables
a shift towards prevention and early action
on the intractable issues that blight places
such as inter-generational worklessness, poor
educational performance, drug and alcohol
dependency, and re-offending.
It becomes possible to invest in long-term
prevention because:
• the costs and benefits accrue to the same
set of decision makers managing a place
based budget. The classic market failure of
split incentives (an entrenched feature of
departmental bureaucracies – where the
short-term costs fall to one department,
whilst the longer term benefits fall to
another) can be overcome by benefit-
sharing rather than cost-shunting
• services can be de-commissioned
safely without unintended costs and
consequences passed from one part of the
public sector to another. Cuts in spending
can be viewed in terms of their wider
impacts and costs rather than their impact
on a single organisation’s balance sheet.
Local areas have already identified
several themes where services could be
rebalanced towards prevention securing
value for money over the long-term:
• in Birmingham, 93 per cent of public
spending on employment is on out-of-
work benefits and less than 7 per cent on
supporting people into work10
• in Manchester, the Early Years pilot is the
subject of longitudinal cost benefit analysis
to determine the long-term savings of
early intervention, exploring the financial
efficiencies of ensuring children that begin
their schooling “school ready”, reducing
expensive specialist support (a place in a
pupil referral unit costs £22, 873 per year)
with wider savings to the criminal justice,
health and benefits systems11
• in Leicester and Leicestershire the
estimated costs to the public sector of
dealing with alcohol misuse are £89.3
million annually, compared to just £4.9
million to prevent misuse12
• In Bournemouth, Dorset and Poole the key
to improving services for older people at
lower cost is to shift provision from acute
care (emergency admission to hospital)
and an over-reliance on secondary care for
older people to investment in well-being,
early intervention and prevention (including
telecare and telemedicine)13.
The boxes overleaf illustrate other
inefficiencies in the way we currently
organise and govern our public services
and the potential for significant savings if
the local proposals from those areas were
replicated in all other places.
10  Birmingham Total Place Pilot, February 2010
11  The Manchester City Region Total Place
Report, February 2010
12 Leicester and Leicestershire Total Place Final
Report, February 2010
13 Bournemouth, Dorset and Poole Total Place
Final Report, February 2010
13
 Example:
In 2009, there were just under 5000 looked after children in Greater Manchester14. A
programme of prevention and early intervention that reduced that number by just under
one per cent enabling 50 children to remain with their family and helping those families
cope and then thrive would generate annual savings of £2 to £3 million.
Saving:
Nationally there are 60,900 looked after children. Using Manchester’s costs, a 1 per cent
reduction would generate cost savings in the range of £24 to 30 million.

Example:
In Gateshead, South Tyneside and Sunderland15 co-ordinating the campaigning and
interventions on the consumption of alcohol could account for a 5 per cent reduction in
alcohol misuse. This would save the local NHS alone £1.6 million, and reduce the costs of
alcohol related crime.
Saving:
Across 150 upper tier local authority areas the savings would be over £200 million.

14 The Manchester City Region Total Place Report, February 2010

15 Total Place across Gateshead, South Tyneside and Sunderland, Final Report, February 2010

More transparency and of these complaints could be resolved locally

accountability
Localising governance also improves
transparency and accountability, re-building
public trust in government, for six principal
reasons.
Firstly, when they have a complaint about
public services 48 per cent of people go first
to their local councillor compared to 29 per
cent who go to their MP. The arrangements
for complaining about non-departmental
bodies and the health service are opaque.
The Parliamentary and Health Service
Ombudsman received over 16,000 individual
complaints last year but has said that many
– “essentially, we want people to be able to
make the right complaint at the right time
to the right organisation, and to achieve a
good outcome. It is evident we are nowhere
near that position yet.”16 What we need
is a simple system for complaining about
public service failure – after a complaint has
been raised with an organisation direct, if
the complainant is not satisfied with the
response, we would like people to look
automatically to the local councillor to
complain about the local services, and to
their MP for national services.
16 Parliamentary and Health Service
Ombudsman, Annual Report 2008-09

14
Secondly, local councillors are democratically
accountable in a way that non-departmental
public bodies (quangos) are not, for example:
• the 20,000 plus local councillors in England
are directly elected
• the average Member of Parliament
represents 78,000 people, the average
councillor represents only 1,400 of their
neighbours
• local elections demonstrate the power
of local democracy to generate political
pressure on specific issues, such as council
tax competition in London
• councils are best placed to act as
community leaders and advocates across
the range of public services
• many councils discuss key issues directly,
for example through citizens’ panels.
Thirdly, councils are at the forefront of
making information about their activities
available to offer better services and improve
their accountability:
• most councils now provide real time
information about the arrival of bus
services, the availability of parking, and
park and ride schemes
• Westminster City Council provides real-
time information about crime prevention
• many councils enable residents and
businesses to track their planning
applications online
• many council meetings, including meetings
of council cabinets, are now webcast to
the public to improve the transparency,
understanding and accountability of local
decision-making.
Fourthly, decision making and funding can
be devolved to districts, town and parish
councils and through participatory budgets17
to neighbourhoods and local people. There
are now 85 councils using participatory
budgets. In addition, 64 per cent of councils
hold interactive budget consultations and 30
per cent have ward budgets for individual
councillors18. By contrast, no central
government departments or quangos do this.
Examples include:
• in Birmingham, ten constituencies each
have a constituency committee that has
a delegated budget of between £10
and £15 million for delivering services
and all wards have a ward committee,
chaired by a councillor, with a community
chest of £100,000 to spend on local
initiatives or delegate to one of the 70 plus
neighbourhood forums
• in Newcastle, a participatory budgeting
scheme known as Udecide, is running in
five wards with young people’s groups
providing up to £60,000 to spend in
each ward and for thirty-five years ward
commitees have had ward budgets with
which to address local needs
• in Salford a highways budget has been
delegated to eight community committees
17 For case studies on participatory budgeting,
please see www.participatorybudgeting.org.
uk/
18 Community empowerment in local authorities,
Local Government Association, 2007
15
• in Northamptonshire, the ‘You Choose’ • councils such as the Royal Borough of
initiative is shaping the future of the Windsor and Maidenhead and Mid Sussex
council’s spending in consultation with District Council are pioneering transparency
local voters as it prepares for tough about spending (see case study below).
decisions.
Fifthly, councils have pioneered the
publication of information about public
services to help people use local services
and in some cases inform their choices, for
example:
• the publication of service specific
information, such as school leagues tables
for state schools and data on the re-cycling
of household waste
• the availability of local government
performance data
• the regular publication of councils’ agenda,
minutes and papers online and public
access to council meetings, and

Case study:
Royal Borough of Windsor and Maidenhead - Transparency Initiative
The Royal Borough of Windsor and Maidenhead have taken a number of steps to provide
detailed information to local people about the work of the council and local councilors
including:

Every item of expenditure over £500 is published (except things like individual residents’
payments for personal care);

Smart Metering allows residents to see, in real time, how much power is being used in
public buildings;

Tables are published of the meetings councillors have attended and missed;

The number of Overview and Scrutiny Committees has been increased from one
to five and they comment on every Cabinet decision;

Every expense claim by councillors is published, no matter how small.

16
Sixthly, councils have well-established
scrutiny arrangements, the reach of which
is being extended to other public services,
and across local authority boundaries. The
five Tees Valley local authorities (Darlington,
Hartlepool, Middlesborough, Redcar and
Cleveland and Stockton-on-Tees) undertake
joint scrutiny of any issue relating to regional
or specialist health services. From April
2009, councils in England have been able to
scrutinise crime and disorder partnerships,
which include the police, police authority, fire
and rescue services, probation and the health
service, on what they are doing to reduce
crime in their area.

To summarise, localising governance enables

services to be transformed – releasing costs
savings, improving outcomes by targeting
more effectively and enabling investment in
long-term prevention, and giving citizens a
stronger voice on public services.

In the next section, we explore the

geography of decision making – why joint
working between local authorities in sub-
regions matters for many of the decisions
that need to be localised, including
getting best possible fit between strategic
commissioning and the distinctive needs of a
place.

17
Section two: what places
for place-based budgets?
Why is it important that the decisions about
policy issues are taken at the right spatial
level? For two reasons: first, the fit with the
way the real economy functions, and second
to effectively commission public services.
Taking the real economy first - below the
national level, the economy functions sub-
regionally19. There is a fit between sub-
regions and the real economic experiences
of people’s lives – patterns of travelling to
work and learning, shopping, house moves
and the clustering of economic activity. But,
at the moment, there is only limited decision-
making about public services at that level.
In Vive la Dévolution, the Local Government
Association analysed these key economic
patterns to identify around 50 sub-regions
or functional economic areas (see map
opposite).
study across it as within it. Similarly, most
people’s movements regularly cross district
and borough boundaries. Sub-regions are
a much more accurate description of the
labour and housing markets, and many other
economic patterns. Although there are some
infrastructure issues, such as major highways,
ports and airports, where the regional
dimension is relevant.
We have argued therefore that governance
of many economic interventions, for
example of regeneration, skills and
employment support, should be consistent
with the sub-regional level at which the
real economy operates, aligning decision
making with those who are best placed to
understand the economic needs of a place
and achieving much better targeting of
public expenditure.

They matter for the way people live and

work - in the Greater Manchester area 88 per
cent of people who work in the area live in
the area, in the Leeds region 94 per cent and
in Liverpool 88 per cent20.

By contrast, regions have little economic

relevance, though this varies between
regions, and people who live near a regional
boundary are as likely to travel to work or

19 With a fuzziness that reflects the nature of

the market, for example the distance people
travel to work correlates positively with their
wage rate. For a full analysis see Vive la
Devolution, LGA, 2007

20  Cities Outlook 2010, Centre for Cities, 2010

18
Map two: Functional economic areas in England

19
But many economic issues can also be
highly localised – around a particularly
neighbourhood or estate. The map
below illustrates this point – it shows the
employment rate in Thanet District Council –
in Minster fewer than 50 per cent of people
of working age are in employment, while in
the neighbouring area over 75 per cent of
people are in work.
Getting the right balance between the
issue, the solutions and the need for
decision-making capacity and a measure
of geographical redistribution in budgets
is not an exact science. Wide variations
on economic, social and environmental
outcomes are more likely to occur the bigger
the spatial area, but everyday experience tells
us that they can occur even within a district
council’s boundaries.
Map three: Thanet District Council (Kent) – employment
rate by ward
20
What about commissioning for other
services? Is there a spatial level, at which it is
logical to locate and integrate commissioning
because the citizens’ needs have a distinct
geography?
An analysis of crime shows that crime is
greater in more urban areas. Because of this,
both sub-regions and regions exhibit wide
ranges in values – in each case, urban districts
have high values while rural districts have
lower values.
Regional-level data conveys far less
information about crime patterns than sub-
regional and particularly district-level data –
the regional picture simply conveys that crime
is a little higher in the north.
Employment rate, 2001
76.15 to 83.38
71.31 to 76.15
66.16 to 71.31
46.75 to 66.16
46.73 to 46.75
Map four: Recorded crime per 1000 population
Recorded crime per 1,000 population
2008-2009 England and Wales
2008-09 England and Wales
Regional
Sub regional

Newcastle upon Tyne

Carlisle

Middlesbrough

Greater London
York
Blackpool Leeds Kingston upon Hull

Liverpool Sheffield

Wrexham
Nottingham
Stoke-on-Trent
Norwich
Peterborough
Birmingham

Ipswich
Milton Keynes
Gloucester
Oxford
Swindon London
Cardiff Bristol

Southampton
Brighton
Exeter

Plymouth
MAAs
Districts_and_unitaries_EW

recorded crime per 1,000 population

9 - 32
33 - 46
47 - 63
The Recorded crime BCS comparator is a sub set of recorded crimes
which can be aligned to categories in the British Crime Survey. 64 - 102
The following crimes are included in the recorded crime/BCS comparator measure: 103 - 223
Theft of a vehicle, theft from a vehicle, vehicle interference and tampering,
domestic burglary, theft of a pedal cycle, theft from a person, criminal damage,
common assault, wounding and robbery (of personal property not business property).
This set of crimes covers about 60% of all recorded crimes.
Source: Recorded Crime for seven key officences, Home Office, 2009 Digital Map Data © Collins Bartholomew Ltd (2008)

21
 Some sub-regions have a number of local seeking joint boundaries – coterminosity –
authority areas with high rates of recorded wherever possible. Police Basic Command
Recorded crime per 1,000 population
crime, including Greater Manchester. Units with in London and metropolitan
me per 1,000 population 2008-09 England and Wales
Geography clearly matters for volume crime. boroughs often demonstrate this synergy.
But it falls short of the compelling evidence
England and Wales for governance at a particular spatial level.
Geography matters for health commissioning
Regional
Sub regional
Instead the principal reason for joining up the too – of community, hospital-based
Regional
ub regional governance of the police with other public and specialised care. At its simplest, the
services is that tackling volume crime cannot demographics of particular places will
be done successfully in isolation. Rather it determine the demand for certain forms
Newcastle upon Tyne
Carlisle
requires a whole public service approach of health care – for example, some places
Newcastle upon that
Tyne takes account of the inter-dependencies have high concentrations of young children,
Middlesbrough
Carlisle
between crime and unemployment, poor others have more older people, some ethnic
Middlesbrough
housing, alcohol and substance abuse and groups are more likely to experience particular
Greater London
York
low educational attainment. With these Blackpool conditions such as coronary heart disease,
Greater London Leeds Kingston upon Hull
York
issues, governance should be pragmatically diabetes, sickle-cell anaemia and thalassemia.
Blackpool Leeds Greater ManchesterLiverpool
Kingston upon Hull Recorded Sheffield Crime

Liverpool Sheffield
per
Map five: Greater 1,000 Recorded
Manchester population, 2008/9
Crime per
Wrexham
1000 population, 2008/9
Nottingham
Stoke-on-Trent
Wrexham Rochdale Norwich
Nottingham Bury Peterborough
Stoke-on-Trent Birmingham
Norwich Bolton
Peterborough
Birmingham Ipswich
Milton Keynes
Gloucester
Ipswich Oxford
Milton Keynes Oldham
Gloucester Swindon London
Cardiff Bristol
Oxford
Wigan
Swindon London
Cardiff Bristol

Southampton
Brighton
Exeter
Southampton
Brighton
Exeter Plymouth Tameside
MAAs

Plymouth Salford Districts_and_unitaries_EW

recorded crime per 1,000 population

MAAs
Districts_and_unitaries_EW
9 - 32

recorded crime per 1,000 population 33 - 46

9 - The
32 Recorded crime BCS comparator is a sub set of recorded crimes 47 - 63
33 which
- 46 can be aligned to categories in the British Crime Survey. 64 - 102
Trafford
The following crimes are included in the recorded crime/BCS comparator measure: Stockport
47 - 63 103 - 223
rator is a sub set of recorded crimes Theft of a vehicle, theft from a vehicle, vehicle interference and tampering,
s in the British Crime Survey. 64 domestic
- 102 Manchester
burglary, theft of a pedal cycle, theft from a person, criminal damage,
in the recorded crime/BCS comparator measure: 103common
- 223 assault, wounding and robbery (of personal property not business property).
hicle, vehicle interference and tampering, This set of crimes covers about 60% of all recorded crimes.
l cycle, theft from a person, criminal damage,
Source: Recorded Crime for seven key officences, Home Office, 2009 Digital Map Data © Collins Bartholomew Ltd (2008)
obbery (of personal property not business property).
0% of all recorded crimes.
en key officences, Home Office, 2009 Digital Map Data © Collins Bartholomew Ltd (2008)

22
There is now a consensus that health
care should be locally led. This is
demonstrated, for example, by:
• practice based commissioning allowing the
choices of patients and the professional
assessments of GPs to determine the
pattern of provision. This now accounts
for between 75 and 80 per cent of Primary
Care Trust budgets
• well-being and prevention services
commissioned jointly between local
authorities and primary care trusts to reduce
obesity, drug and alcohol abuse, smoking,
and improve sexual and mental health.
Is there a particular geography for specialist
acute services? These services require a
particular density of demand to be viable.
In some cases, this will occur at the sub-
regional level, for example, the development
of 4 major trauma centres in London21. The
direction of travel is to centralise specialised
care to ensure high standards, improved
health outcomes and better co-ordination22
between health and social care and
specialised care.
In many areas, this local logic has been
reflected in integration between PCTs and
councils. Examples of different models can be
found in Herefordshire, and in a number of
London boroughs.
21 The shape of things to come, Healthcare for
London, 2009
22 For example, Healthcare for London, Lord
Darzi, 2007
There will however be some specialist services
which will be best delivered through regional
centres and mechanisms need to be devised
to ensure their accountability too.
To conclude:
• for economic issues, the geography
of the issues points towards sub-
regional governance. The evidence for
policing and health services, where the
driver is the opportunity to integrate
commissioning, suggests we should
pragmatically exploit joint boundaries
to further joint decision-making in
whatever way is most practical. This
would bring a whole public service
approach to tackling complex problems
• for that reason, we cannot be dogmatic
about the spatial level of devolved
governance. Local government and local
partners must determine themselves the
best spatial geography and devolved
governance arrangements, including
the sub-regional and regional, at which
to respond to economic and social
policy issues.
23
Section three: the scope
of place-based budgets
Which services are best suited to devolved • economic regeneration
governance? In this section, we set out some
• housing and regeneration
of the most realistic candidates.
• home energy efficiency and managing
Devolved governance is going to be flood and climate risks
more appropriate where: • adult skills
• integrated commissioning and decision
• local transport
making at a lower spatial geography could
yield performance gains • primary health care

• there are not national economies of • policing and probation and

scale
• the public does not expect strong
geographical equity defined as the same
service or level of entitlement from one
place to another and
• risks, both financial and political, can be
managed below the national level.
Where there is an offer of devolved
governance, local government leaders must
take the political responsibility for remedial
action, and public criticism, on those
occasions when local services fail to perform.
• support into employment for the long-term
unemployed and workless.
It will be obvious that this list includes
both services where budgets need to be
allocated locally, and services where the
main local governance function is about
commissioning and market management,
and citizen redress. The 2009-10 budgets
(and administration costs) of the bodies
through which these functions are currently
principally discharged is shown opposite.

We have analysed a broad range of public

services against these four key criteria –
performance, economies of scale, equity and
risk, to determine those services where the
governance should be localised.

Our judgement is that realistic services for

inclusion within devolved governance, in
addition to the services currently determined
locally, are:

24
Table 1 – administration costs

Department/body Total programme budget Administration

£210 million (Learning and
Skills Funding Agency £4 billion Skills Council administrative
costs 2009-10)
Regional Development
£2.2 billion £165 million
Agencies
Primary Care Trusts £80 billion N/A
Government Offices N/A £105.9 million
£6.565 billion
(includes £3.333 billion Job
Department of Work £4.6 billion
Centre Plus administration
and Pensions (employment support)
costs, of which staff costs
are £1.784 billion)
Strategic Health
£6 billion £100 million
Authorities
£8 billion (formula grant for
Police and Police Approximately £60 million
police forces in England and
Authorities (police authorities)
Wales)
Homes and Communities
£4 billion £82 million
Agency
National Offender
£909 million £153 million
Management Service
£6.6 billion (includes
Highways Agency motorways which are not in £105 million
scope)
Environment Agency £657 million £535 million (staff costs)
Planning Inspectorate N/A £63 million

A place-based, integrated approach also
makes sense for capital allocations, allowing
the synergies between different forms
of capital investment to be maximised.
Budgets worth up to £10 billion might be
in scope here, including the Homes and
Communities Agency and Environment
Agency programmes. This budget could be
distributed on a formula basis, reflecting local
needs and the local tax base, leaving national
agencies with the responsibility for national
capital investment decisions.
Table 2 shows the services for which we
consider devolved governance to be a
realistic and sensible way of delivering
savings and better services.

25
There are four possible scenarios:
i) the budget is devolved to the place based
budget, this would be the case for most
budgets
ii) the commissioning responsibility is
devolved but the budget remains with the
senior public official locally (for example and
most likely in the case of the policing budget
where a police authority or directly elected
police commissioner might be accountable
for the budget)
iii) a combination of (i) and (ii) where
some part of the budget is devolved into
a place-based budget (for example, more
specialised health budgets might be reserved
for national commissioning, or some of the
RDAs’ business support activities which are in
practice delivered through national agencies
like UKTI)
functioning of markets. This is the classic role
of the state in addressing market failure.
Local decision makers might appropriately
exercise this market oversight role in relation
to adult skills, practice-based commissioning
of health care, and schools.
They would also exercise greater regulatory
oversight over both housing and spatial
planning. In the case of housing, ensuring
that Registered Social Landlords in an area
are working together, provide efficient and
responsive management services and join
up with other local services in relation to
tackling wider social issues. In the case of
planning decisions, there would be a much
clearer demarcation between national and
local planning decisions.

iv) those cases that do not involve actually

devolving the budget. Rather the role of
devolved governance would be to oversee
the local market for a number of services
where the funding resides with the citizen
where their choices determine the flow of
funds from the state to the service provider.

In the case of (iv) local governance would

act as a regulator and redress mechanism,
facilitate provider exit, entry and
improvement and ensure service provision
to those with more complex needs for
whom it is difficult to agree funding levels
or determine them by formula. Each of
these functions would ensure the effective

26
27
Table 2 – services in scope

Service Responsible National spend 1. Do 2. Is there an 3. Are there 4. Are there concerns about Devolution
body national expectation of financial risks current performance? rating
economies of geographical that have to

28
scale apply? equity? be managed
nationally?

Economic Regional RDA Single Budget (pools No No No Yes -regional disparities in 5

development Development contributions from BIS, economic performance have
Agencies CLG, DECC, DEFRA, increased since 1998
DCMS, UKTI) £2.2 billion
2008-09
Spatial planning Regional £63 million (Planning No No No Yes local decisions overturned by 5
Development Inspectorate costs) the Planning Inspectorate
Agencies/Planning
Inspectorate
Housing and Homes and £4.4 billion in 2008-09 No No Yes - not integrated with other 4.5
Regeneration Communities place based investment streams
Agency
Adult skills Skills Funding £4 billion Yes No Yes - Train to Gain subsidised 4
Agency administrative 50% of training that employers
efficiencies would have paid for anyway
in managing (Public Accounts Committee)
financial flows
Road transport Highways Agency £6.6 billion in 2008-09 No No No Yes - localised congestion 5
(non-motorway
trunk roads)
Domestic energy Energy suppliers, No they occur at an area No they occur No No Yes - large numbers of homes 5
efficiency Warm Front, level at an area without basic insulation measures
Energy Saving level and concerns about the ways in
Trust which suppliers meet their carbon
reduction obligations
Health care Primary Care Approx £80 billion in No Yes Yes from Yes - access to treatment and 4
Trusts and 2009-10 service failure drugs and variations in tackling
practice based and litigation differential outcomes. Health
commissioners, inequalities.
and SHA for
commissioning
specialised services
Policing Police forces £8 billion No No No Yes in relation to some 4
constabularies – see HMIC score-
cards
Employment Job Centre Plus/ £4.6 billion in 2008-09 No - consistent No Yes Yes - high levels of worklessness 4
support Department with the -aggregation and repeat claims
of Work and sub-regional provides for
Pensions economy risk-sharing
Probation National Offender £909 million No No No Yes – there are concerns about 4
Management rehabilitation, re-offending and
Service youth custody*
Environment, Environment £1.2 million No No No Yes – local concerns about flood 4
climate and Agency defences
flood risks

* Managing offenders on short custodial sentences, National Audit Office, March 2010

29
Section four: the form of
devolved governance
The previous sections have made the case for
devolved governance of a range of decisions
and discussed the kinds of geography to
which those decisions should be devolved
– the key principle is local democratic
accountability for local public services.
This section draws those arguments to
some specific conclusions about the form of
governance we need to propose.
Form should follow function. So the
question “what is to be decided?” should
be our starting point. The discussion so
far has identified the decisions as:
• the allocation of budgets from within a
place-based budget
• the integrated strategic commissioning
of services from the public, private and
voluntary sectors
• the scrutiny and facilitation of services,
and championing the citizen, where
the citizen holds an individual budget
or funding is following users.
These decisions would apply to a set of
economic services (set one):
• regeneration, house building, economic
development currently the responsibility
of non-departmental public bodies, such
as Regional Development Agencies, the
Planning Inspectorate and the Homes and
Communities Agency
• greater powers over local planning
decisions, de-regulating the mechanisms
through which national government
controls local planning including planning
30
policy guidance, regional targets, and over-
riding local decision through call-ins and
appeals
• the strategic decisions about adult skills
that remain in a demand led adult skills
system made by the Skills Funding Agency
• the decisions about employment support
currently made by the Department of Work
and Pensions and Job Centre Plus.
And also (set two):
• the strategic commissioning decisions
made by the boards of Primary Care Trusts,
in a practice-based commissioning system,
and the sub-regional commissioning
functions of the Strategic Health Authority
which it would replace
• the decisions about policing and probation.
Both primary care trusts and policing already
have governance arrangements in place –
why should they be replaced by devolved
governance that brings together decision-
making about local public services?
Primary Care Trusts (PCTs)
There are a number of reasons why improved
health outcomes would result from devolved
governance:
• accountability of PCTs and health trusts
is upwards to the Secretary of State for
Health, and in the case of NHS Foundation
Trusts to Monitor and Parliament. There
is currently no accountability to local
communities aside from health overview
and scrutiny committees
• health
and social care for older people,
and people with learning disabilities,
have strong inter-dependencies and
need to link into mainstream council
services such as housing, transport,
leisure, culture and skills in order
to use resources effectively. Current
arrangements create barriers to this -
the evidence from the IDeA’s ‘Valuing
Health’ project found that there is often a
disincentive for councils to invest in services
that improve health because the savings
accrue to the NHS23. The status quo will
not release the long-term savings from
joint commissioning of health and care
services for the elderly and people with
disabilities
• improving health outcomes and
inequalities requires a whole system
approach that takes explicit account of
the inter-dependencies between early
years services, public health, leisure
services, spatial planning and housing.
Maternity services, parenting programmes,
childcare and early years’ education should
be looked at as a whole system not from
within organisational boundaries
• the same joint approach is needed for
health related issues such as smoking
cessation, emergency planning, and
reducing the number of workless
people on Incapacity Benefit/
Employment and Support Allowance
23 Valuing health: business case literature review,
IDEA, 2010
• maximising long-term returns to public
spending requires pooling budgets to
overcome the inertia that results from
the costs falling to one organisation
and the benefits to another. This applies
especially to the care of older people
where services that promote the health,
well-being and independence of older
people prevent or delay the need for
more expensive institutional or secondary
care. But there are other examples too.
For instance, it would also encourage
PCTs to invest in housing for which there
is overwhelming evidence that it is a key
determinant of health outcomes. An
example of an area taking the lead is
Liverpool, where the PCT commissioned
Liverpool City Council to undertake home
improvements in the social housing stock
• executive and back offices functions
can be shared especially where PCT and
local authority boundaries are coterminous
and many of the administrative functions
of the Strategic Health Authority – for
example to improve services, ensure
performance and assure national priorities
– could be abolished or streamlined.
31
Local democratic accountability of The government has, in its programme,
the health service would provide proposed improving the democratic
a stronger stimulus for: accountability of PCTs by adding individual
directly-elected members to the boards
• agreeing local priorities at a time
currently composed entirely of appointees,
when difficult decisions need to be taken
and which however raises issues about
on commissioning services that most
competing local mandates The evidence
effectively meet the health challenges of
for going further and bringing PCT activity
local people
within mainstream local democratic
• performance at a time when there are accountability is very powerful. In London,
serious questions about the effectiveness much progress has already been made in
of the current governance, accountability aligning the governance of PCTs and councils
and performance of NHS Trusts and and the impact on efficient and effective
Strategic Health Authorities24 are being working is clear. In some cases joint officer
asked25. Research from the Picker Institute appointments between councils and PCTs
reported that only 38 per cent of PCTs have already been made.
said that their patient forums and local
involvement networks had been highly
influential in developing their patient and
public engagement strategies
• the implementation of market based
reforms. There are 152 Primary Care
Trusts. Their budgets are largely passed
through to practice-based commissioners
who commission primary and secondary
care based on patient need. But some
General Practitioners have resisted or
lacked the capacity to take commissioning
decisions.
24 Robert Francis Inquiry report into Mid-
Staffordshire NHS Foundation Trust,
Department of Health, February 2010
identified the failings of the trust to provide
reasonable standards of care resulting in part
from weak public accountability and narrow
focus on top-down targets;

25 60 per cent of people cannot name their PCT

and 90 per cent cannot name their Strategic
Health Authority, LGA Survey, 2009

32
Policing
There are a number of reasons why
better policing outcomes would result
from devolved governance:
• the effective prevention of and
response to crime requires close
partnership working with local councils
and other local partners on issues
such as licensing, youth work, anti-social
behaviour and nuisance, drug and alcohol
treatment, planning and development
For health, policing and probation, there
is a balance to strike between pragmatic
Basic Command Unit/Primary Care Trust
coterminosity with boroughs in London and
some Metropolitan areas, and existing sub-
regional synergies in many county areas.
The maps that follow illustrate that there is
a degree of coterminosity between upper
tier councils and PCTs and police forces,
particularly in counties.

• there would be enhanced intelligence

sharing and case working with front
line public service staff
• the cycle of re-offending could be
broken by a joined up approach to
offenders’ needs for housing, regular
employment, increased skills including
basic literacy and numeracy
• closer partnership working on other
key local outcomes, including the
effective safeguarding of children
require the close co-operation of the local
police.

These integration and efficiency arguments

point to putting as full a range of decisions
as possible together in one place; and also
enabling further devolution down to districts,
parishes and communities, where securing
better outcomes merits it. What does this This suggests either:
mean for the geography of decision making?
For the economic decisions, the arguments
point to sub-regional place-based budgets
at the level of a city, county or group of
councils.

33
Map six: Police Force Boundaries
Police Force Boundaries
Force_County

Number of LAs in each police force

Number of LAs in each police force
1

2-3

4 - 10

32
Newcastle upon Tyne
Carlisle

Middlesbrough

York
Blackpool Leeds Kingston upon Hull

Manchester
Liverpool Sheffield

Wrexham Stoke-on-Trent
Nottingham

Norwich
Peterborough
Birmingham

Ipswich
Milton Keynes
Gloucester
Oxford

Swindon London
Cardiff Bristol

Southampton
Brighton
Exeter

Plymouth

Source: Home Office police force data Digital Map Data © Collins Bartholomew Ltd (2008)

Source: Home Office police force data Digital Map Data © Collins Bartholomew Ltd (2008)

34
 Map seven: PCT Boundaries April 2010
PCT boundaries

PCT boundaries
Counties and unitaries

County and unitary authorities

Coterminosity April 2010
Coterminous
County covers more than 1 PCT
PCT covers more than 1 local authority*
PCT and LA boundaries do not match
*This is either a County and Unitary
combined (for example Yorkshire and
York City) or a collection of unitary authorities
(for example Central Bedfordshire and Bedford) Newcastle upon Tyne

Middlesbrough

York

Blackpool Leeds
Kingston upon Hull
Manchester
Liverpool
Sheffield

Stoke-on-Trent Nottingham
Peterborough
Norwich
Birmingham

Milton Keynes

Gloucester Ipswich
Oxford
Swindon London
Bristol

Brighton
Southampton
Exeter

Plymouth

Reproduced with the permission of Ordnance Survey on behalf of

the Controller of HMSO. © Crown Copyright and database right
Source: ONS PCT digital boundaries Reproduced with the2008. All rights
permission reserved.
of Ordnance 100030882.
Survey on behalf of the Controller of HMSO.
Source: ONS PCT
digital boundaries © Crown Copyright and database right 2008. All rights reserved.
Ordnance Survey Licence number 100030882

35
This suggests either:
• sub-regional place-based budgets for
economic decisions (set one), and for
other decisions on policing, probation and
health (set two) where the geography and
coterminosity makes it practical, or
• sub-regional (or regional) place-based
budgets for economic decisions (set one)
and borough governance of policing,
probation and health (set two) in other
places.
This is subject to the crucial proviso
that actual arrangements for devolved
governance should be determined locally
and that centrally-imposed arrangements
simply will not work. The most that can be
done centrally is to set out a framework;
we believe it would be unsurprising and
acceptable, however, if central government
were to establish principles about the broad
limits of service geography it felt able to
work with.
We move on now to explore the question of
how place-based budgets might work.
Releasing savings and improving services
requires a radical improvement in partnership
working between councils and between
organisations, and direct accountability to
local communities.
In some of the cases we have discussed,
responsibility and budgets could be
straightforwardly devolved to councils – for
example, were health commissioning to
36
be made fully democratically accountable
in areas where the PCT and council were
already coterminous.
In others, though, the geography of
decision making, particularly on economic
issues, points to the need for partnership
between councils in some areas. There are
many examples of these partnerships with
different degrees of formal governance and
mechanisms to give them legal form (see
below), and councils are by definition fully
accountable to their citizens.
There are a number of ways in which
councils work together in partnership:
• section 101 of the Local Government Act
1972 allows councils to assign functions
to a Joint Committee in the way that local
government is working together in Leeds,
providing sub-regional governance for
services to over three million people
• the Local Development, Economic
Development and Construction Act 2009
provides for the establishment of Economic
Prosperity Boards and combined authorities
• statutory multi-area agreements and 152
local area agreements impose duties to
co-operate. There are also 15 multi-area
agreements bringing together 103 councils
in partnership with a total population of 19
million citizens and the 2009 Act created
the possibility of putting those arguments
on a formal legal footing
• the Local Transport Act 2008 provides
for the creation of Integrated Transport
Authorities (ITAs). There are ITAs in West
 Midlands, Greater Manchester, Merseyside, spending – which means different targets,
South Yorkshire, Tyne and Wear and West performance regimes, accounting and data
Yorkshire systems and so forth. Too many public
officials working locally act on instruction
• the Local Government Act 2000 provides
from Whitehall, rather than what works best
for directly elected mayors who some
for local people. But legislative models do
would argue have the mandate, public
exist that provide a local power of direction
visibility and accountability to assume
over national bodies (see the box directly
greater powers.26 Twelve places in England
below on adult skills).
currently have directly elected mayors
• the Planning Act 2008 provides the power
for local planning authorities to produce
joint Local Development Frameworks
• On environmental issues councils are
working together sub-regionally to
manage waste (the Climate Change Act
2008 permits councils to form Joint Waste Adult skills
Authorities) and coming together to play
a much stronger role in commissioning Section 4 of the Further Education Act 2007
energy supplier-funded energy efficiency enables the Secretary of State to delegate his
programmes27. strategic powers over adult skills to “a body
in an area”.
There is thus no need to create new legal
This power has been granted to the new
vehicles to make place-based budgeting
Employment and Skills Board in Greater
possible. The biggest barrier to effective
Manchester and Leeds and in Budget 2010
partnership working is not the absence of
the Birmingham City Region. These bodies
local forms of governance with visibility and
are accountable for setting the adult skills
legal personality. Rather, it has been the need
policy in their areas.
within local structures to reconcile different
accountabilities – invariably stemming
The Skills Funding Agency and the National
from the need to account for public
Apprenticeship Service will commission
26 New model mayors – democracy, devolution according to the strategic direction they
and direction, Nick Hope and Nirmalee
Wanduragala, New Local Government receive from these city regions.
Network, January 2010
27 The Local Carbon Framework pilots include
3 sub-regions – Leeds City Region, Greater
Manchester and Bournemouth, Poole and
Dorset.

37
Services will become more responsive, and
hard choices about resource allocation
will have more legitimacy, if there is
greater direct accountability to local
communities. This means firstly that
decision makers should be democratically
accountable –officials and managers
should execute decisions, not take them -
and secondly that there should be a clear
boundary between local and national
accountability.
The remaining question is who can bring
together partnership and accountability and
exercise devolved governance?
Our model of governance is that an area-
based budget should be overseen by a small
number of locally elected and accountable
councillors, directly accountable to their local
voters and taxpayers for outcomes, and for
the expenditure of money raised locally; and
directly accountable to Parliament for the
proper use of nationally-raised taxpayers’
money voted by Parliament. They should
be the board of a legally-constituted
organisation with the power to hold and
spend money – which might be one of the
options mentioned above, including a council
or a legally-constituted partnership between
councils.
This area budget-holding board should be
small, simply to enable it to take decisions
quickly and effectively. The board would
have a chairman and an accountable officer
– which might be the same individual
- and could decide whether to allocate
38
responsibilities in cabinet-style portfolios.
Indeed, in areas where the place-based
budget was held by a single council, the
board should probably be the council’s
cabinet.
There are of course other possible models
– but the key principle is that the decisions
are made by locally elected officeholders,
to whom public officials, such as a Chief
Executive of a Primary Care Trust or a Chief
Constable, could answer, and who in turn
would be able to account to local voters
for how their money is being used, and to
Parliament for how nationally-voted money is
being used.
This would bring:
• democratic accountability to many
decisions that are currently taken by non-
elected bodies
• democratic validation through explicit
mandates on some issues at election time,
especially where there were concerns
about particular local services
• the potential for further devolution to
districts and neighbourhoods, where that is
the right spatial level to exercise decision-
making, through mechanisms such as
participatory budgeting that are common
in local government but still unheard-of
for the NHS, government departments and
non-departmental public bodies.
Police and place-based budgeting
The implications for the governance of
policing merit further exploration, especially
in the light of the government’s policy on
directly-elected governance of the police.
We do not think what we have suggested
for place-based budgets is inconsistent with
improving police accountability – indeed,
we argue that it would enhance both the
accountability and the effectiveness of the
police.
The most straightforward option would be
for the Chair of the police authority (current
model) or a directly-elected individual
responsible for the police (the government’s
model) to be a member of the local area-
based budget board. Where police force
boundaries are coterminous with local
authorities, the board could, under the
existing model, take over the responsibilities
of the police authority.
But devolved governance of area-based
budgets is consistent with either:
• a directly elected commissioner of police
who could have a seat on the board or
• an elected mayor, acting as police
commissioner and as chair of the board or
• directly elected police authorities who could
have a seat on the board.
There would also be implications for the
regions.
There are three possible options for the
regional tier, and local government in
the regions might not decide to adopt a
single approach:
• first, to abolish the regional tier entirely
and devolve the budgets of the non-
departmental public bodies concerned;
• second, to retain Regional Leaders’ Boards
and government offices to exercise
specific functions in relation to regional
infrastructure, the co-ordination of central-
local relations, for example on budgeting
and for some conversations with central
government;
• third, to locate decision-making on
economic issues (set one) regionally, where
the region has some of the characteristics
of a functional economic area; the councils
of at least one region would support this
approach.
39
To summarise, devolved governance
responsible for a much wider set of
public services could be:
• a council, a partnership of councils, or a
combination of regional, sub-regional and
borough-level decision-making bodies
depending on the bundle of services
included
• composed of democratically accountable
decision-makers
• served by local public officials that
execute decisions but do not make them
and account to democratically elected
councillors.

What about the parliamentary and central

government interest in places, not least the
parliamentary authority needed to spend
money raised through national taxation?
The last section explores how this can be
reconciled with devolved governance.

40
Section five: cutting
out the middlemen
There is one issue left to resolve – the
accountability to Parliament for public
spending financed through national taxation
– known as the Vote or Voted expenditure.
National tax payers’ money cannot be spent
without parliamentary authority – annex A
explains the system in more detail.
Place-based budgets for economic issues
alone (set one) could account for £21.7
billion or more than the local government
finance settlement (the distributable amount)
in 2010-11 and more than the resources
available to all government departments
except defence, education, communities and
local government and health28.
By comparison, Area Based Grant is around
£5 billion. For that reason, although it is
possible that Parliament might wish to vote
the place based budgets for economic issues
as a single block grant to councils, we believe
it is more likely that Parliament would want
to see clear accountability for the outcomes
these budgets are intended to buy.
The public spending system therefore needs
to be reformed to maintain Parliamentary
authority for place-based budgets whilst
at the same time allowing local decision
makers the freedom to manage resources to
optimise the effective local delivery of public
services.29
28  Using resource DEL for 2010-11 plans, Public
Expenditure Statistical Analyses 2009
29  This discussion assumes that the allocation
of the tax base remains unchanged. An
alternative model would be to devolve a tax
We are proposing the creation of a
devolved vote to ensure Parliamentary
accountability, comprising of:
• thematic three year place-based budgets
created by pooling departmental budgets
or new formula based allocations
• an Area-Based Estimate that brings
together placed-based budgets
• approval and scrutiny by Parliament of the
Place Estimate
• a Select Committee for the non-
departmental, Area-Based Vote exercising
Parliamentary scrutiny (this might be the
Public Accounts Committee)
• accountability through either the elected
chair/leader or the Chief Executive of
the devolved body who would act as
the Accounting Officer responsible to
Parliament for high standards of probity in
the management of public funds. This role
is usually performed by the most senior
official in an organisation30.
base equal to any devolved expenditure.
This would remove any need for further
Parliamentary accountability. In any event
local autonomy would be strengthened by
the repatriation of the Non-Domestic Rate
with an element of equalisation.
30  An alternative option would be for Ministers
to nominate an official to be the channel
of accountability to Parliament. This role
would in effect become a single channel
for negotiating between central and local
government about outcomes.
41
Ministers would assure their interest in
places through:
• an outcome-based performance
management system based on no more
than five key outcomes which would be
specified in the Area-Based Vote
• place-based assessment of the outcomes
delivered by the totality of public service
• inspection focussed on issues where the
risks resulting from public service failure are
greatest.
budgets to make their own choices about
where to access services, local councils
and their partners would ensure that the
local market functions effectively, assure
quality and manage the risks associated
with provider failure. Councils are already
taking this route allowing local people choice
over how they personalise services through
individual budgets for social care.

Although Ministers would also recognise

through these new arrangements that
they would no longer have to account to The Kent Card
Parliament for outcomes within the scope
of the Area-Based Vote. Many of the most
Kent County Council’s Kent Card is an
uncomfortable issues around Ministerial
innovative way of giving individual service
accountability would be resolved through this
users the freedom to choose the way they
reform.
access important services. Following a social
services assessment, service users are offered
Place-based governance would decide
cash through the visa enabled Kent Card,
what services an area needs, how they are
as an alternative to having services provided
delivered and who provides them, for those
for them. This allows users to decide for
services where citizens do not make the
themselves how and when services are
choices themselves. They would take a whole
delivered to them and who the provider is,
public service approach to commissioning
whether it is the private, public or voluntary
from the private, voluntary and public sectors
sector.
– abolishing the silo-based commissioning
that the private and voluntary sectors find so
frustrating, and which leads to a complicated
patchwork of provision that citizens find
confusing.

For those services which are funded directly

by providing citizens with the funding, for
example through vouchers or personal

42
What does this mean for the main non-
departmental public bodies? Although
Ministers might decide that there was no
need to keep in existence a body whose
budget had been devolved, many NDPBs
would continue to have a role as a provider
of commissioned services. Place-based
budget decision-makers could decide, for
example, to commission the Environment
Agency to deliver a flood risk and
environmental protection in an area, with the
decisions taken locally. But in other cases,
it might decide to commission the services
from either the private or voluntary sector. It
is likely that over time, some existing public
bodies would shrink as their capability to
deliver public services was tested and found
wanting against private and voluntary sector
competitors, and local voluntary and private
sector organisations would take up the baton
in a diverse economy of provision.

43
Conclusion

We are proposing replacing accountability

through multiple departmental funding
streams, top-down targets and regulation
through multiple public bodies, with
outward-facing accountability to local people
through devolved governance made up of
democratically elected local councillors.

To summarise our argument:

• there is clear evidence from the Total Place
pilots and other sources that the devolved
governance of public services, enabling
the integration of public services and
commissioning or regulating them at the
right spatial level, will result in better value
for money
• there are a number of services where there
is a strong case for devolving governance
based on the performance of the service
and the absence of a significant obstacle
to devolution in the form of economies of
scale, the aggregation of risk, and public
fears about equity, usually expressed as
postcode lotteries
• local government and their partners have
developed or are developing the devolved
governance structures to which funding
and decision making can be delegated
• the creation of a place-based vote provides
the mechanism through which public
spending can be voted and spending
accounted for.

44
Summary: devolved
governance -
implementation
These reforms require central and local
government to take a number of actions
summarised below.
Public service governance reforms that:
• Replace the Regional Development
Agencies (RDA), with local enterprise
partnerships unless the councils in
the region elect to retain regional
arrangements, and abolish the boards of
Primary Care Trusts and Strategic Health
Authorities
• devolve the RDA, Homes and Communities
Agency and Skills Funding Agency budgets
to place-based budgets
• devolve the budgets and commissioning of
employment support and Job Centre Plus
functions
• transfer responsibility for many trunk
roads (not motorways) from the Highways
Agency to local government
• create local accountability for offender
management.
Accountability reforms that create:
• a new devolved Place Estimate ensuring
Parliamentary authority for place-based
budgets
• a new joint performance framework
between central and local government
based on a small number of key outcomes
• a single inspectorate focussed on
safeguarding issues where the risks to
public service failure are greatest.
Legislation to:
• extend local government’s scrutiny powers
to the public services included in a place-
based budget, including those where the
citizen’s choices determine the funding
flows, and establish joint scrutiny
• reform the arrangements for police
accountability to enable them to be
discharged by devolved governance.
Administrative steps to:
• issue a prospectus to local government
inviting it to set out its arrangements for
devolved governance and arrangements for
outward accountability and scrutiny
• re-structure Primary Care Trust boundaries
so that they are coterminous with local
authority boundaries.
Local government will:
• set out the arrangements for devolved
governance, including the arrangements
for outward accountability and scrutiny
• implement a peer review to ensure that
the best practice in outward accountability,
including the direct involvement of
citizens in assessment, review and scrutiny,
becomes the norm
• work with local partners to enable local
people to rate and review local services
online, as they do commercial products and
services
• invest in and support leadership
development and councillor recruitment.
45
ANNEX - public spending:
reporting and accounting31
The Estimates procedure
Under long-established constitutional
practice it is for the Crown (the Government)
to demand money, the House of Commons
to grant it and the House of Lords to assent
to the Grant.
Estimates are the means of obtaining from
Parliament the legal authority to consume
the resources and spend the cash the
Government needs to finance department’s
agreed spending programmes for the
financial year (April to March).
Parliament gives statutory authority for both
the consumption of resources and for cash
to be drawn from the Consolidated Fund
(the Government’s general bank account at
the Bank of England) by Acts of Parliament
known as Consolidated Fund Acts and by
an annual Appropriation Act. This process
is known as ‘Supply procedure’. The Main
Estimates start the supply procedure and are
presented by the Treasury around the start
of the financial year to which they relate.
The Treasury presents alongside the Main
Estimates a set of Supplementary Budgetary
Information tables reconciling the Estimates
to departmental report tables.
At various points in the year the Treasury
presents, New, Revised and/or Supplementary
Estimates, as appropriate, asking Parliament
for approval for any necessary additional
31 This section reproduces material from HM-
Treasury.gov.uk
46
resources and/or cash or for authority to
incur expenditure on new services.
The Accounting Officer role
Formally the Accounting Officer is someone
who may be called to Parliament for
the stewardship of resources within the
organisation’s control. They sign the
resource accounts, annual report, the
statement of internal control, any request
for resources and the estimate. They have
personal responsibility for the regularity and
propriety of expenditure, value for money,
management of opportunity and risk and the
organisation’s financial transactions.
The Accounting Officer takes responsibility
for the organisation’s business in the event of
a Public Accounts Committee investigation.
In relation to the grants local government
receives, there is not direct accountability
to Parliament. Whilst Chief Executives are
ultimately responsible for the council’s
reporting and accounting, the relevant
Permanent Secretary provides the
accountability to Parliament. Under our
proposals, either a local government leader
or the senior official – the Chief Executive
of the body exercising devolved governance
would account to Parliament.
For further information please contact
the Local Government Association at:
Local Government House
Smith Square,
London SW1P 3HZ

or telephone LGconnect, for all your LGA

queries on 020 7664 3131
Fax: 020 7664 3030
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48
L10-386 © LGA June 2010
ISBN 978 1 84049 7335