Vive la devolution: devolved public-service commissioning

Government delivers north of £300 billion of human public services each year – including healthcare, welfare-to-work programmes and offender management. Currently the way these services are commissioned does not achieve value for money. Central commissioning fails to reward outcomes, leads to duplications and gaps in services, and does not tailor services to different needs across the country.

A radical new offer is needed. The devolution agenda in England should be drastically accelerated. Over £100 billion of services, including 95 per cent of the NHS's budget, can be commissioned by 38 councils across the country. This will simplify today’s complex commissioning framework, free up administrative spend and, crucially, enable policymakers and commissioners to deliver higher-quality services tailored to the needs of citizens.

Government has signed eight devolution deals, since the election of the first London mayor in 2000. These have been agreed across the country, but largely focus on the economic potential of areas such as the Northern Powerhouse and Midlands Engine.

Despite headline deals such as the devolution of healthcare spend in Greater Manchester, these deals have been more like delegation of administrative power, rather than devolution of control of contracts and funding of services. Central NHS targets, such as the four-hour waiting time and centrally agreed financial targets, are just two examples.

This misses an opportunity. The public supports the principle of devolving control to local councils. It also trusts local authorities to make decisions about the areas in which they live – by 79 per cent to 11 per cent.

In theory, there is a strong case for devolving the commissioning of public services. Local commissioners are best placed to design and monitor services which meet the needs of their areas, as they have closer ties with local providers and understand local needs. Local bodies may also integrate more easily to meet the multiple needs of service users.

In healthcare, the postcode lottery makes this acute. In 2013, Jeremy Hunt called variations in deaths "shocking". They persist, however: people are 50 per cent more likely to die in the North East than South East from preventable causes. Smoking rates are more than four times higher in Corby than Rushcliffe. English regions can follow international examples, such as Scandinavia and Spain to commission healthcare locally. Badalona in Catalonia, for example, has reduced unplanned hospital admissions by 56 per cent and improved quality of life by 23 per cent through local integrated interventions. In total, £102 billion of health spend, or 95 per cent of the NHS England's budget, can be devolved. This would make NHS England, a commissioning body, redundant.

Other services should also reflect local differences. In 2016, as a proportion of the 16+ population, London employed seven times as many finance and insurance professionals as the East Midlands, while the East Midlands employed four times as many manufacturing professionals as London. London has more than twice as many drug offences, as a proportion of total crime, than Yorkshire and the Humber. Countries like Canada and the Netherlands point to the advantages of local welfare-to-work policy design. Charlie Taylor’s work on offender management argues for the devolution of youth justice services to join up health, offender-management and other services locally.

In total, this would result in a shift of £108 billion of annual public-service spend.

A clear timeframe should be established for commissioning devolution, to benchmark progress and challenge local commissioners and government to act. Japan's 17-year timeframe for radical devolution, including fiscal powers, offers a blueprint for England.

Devolved commissioners should cover areas which have similar health, employment and skills needs. Coterminosity is the coincidence of geographical boundaries between two or more variables or organisations. Currently, the commissioning of public services such as health, social care, employment, policing and offender management often does not occur within coterminous geographical boundaries. This negatively affects commissioning by making it more difficult to integrate services and create coherent policy within single areas.

Ministers should work with local government to create coterminous regions for devolved commissioning areas, taking health indicators and economic areas into account. This would result in 38 areas across England, for which commissioners could design integrated locally tailored services.

In some areas, as shown in dark purple, economic or health areas overlap. Local areas should negotiate between themselves and government where best to draw the commissioning-area boundaries. Local identity should be taken to account when drawing up these areas, as eight in 10 people in England feel a strong connection to their local community.

Devolved commissioning areas will require strong governance to commission services most effectively.

Single commissioning bodies would allow commissioners to integrate service design to meet the multiple needs of service users. These should be combined or unitary authorities. They would replace Clinical Commissioning Groups, Police and Crime Commissioners and other local commissioners. It would simplify money flow and provide clearer accountability.

Single commissioning bodies would likely deliver administrative savings.

It would also free up over £4 billion of current administrative spend to be allocated as efficiently as possible.

These bodies should be led by single accountable leaders. Government's approach has been to insist on mayors, which bring democratic accountability and clear leadership. But 37 of 53 local referenda on directly elected mayors since 2001 have resulted in rejections. Government should therefore be open to council leaders to take on this role, as a leader does in Cornwall.

Single leaders should sit atop a cabinet of elected councillors, which have responsibility for public service outcomes in the area. This cabinet should look to design integrated policy, which can meet the whole needs of public service users, across healthcare, employment and criminal justice, for example.

These leaders should oversee competitive public-service markets. Healthcare, employment services and probation programmes are to some degree delivered by independent organisations. These markets require better oversight, however, to improve outcomes. For example, GP services are contracted but almost 100 per cent are renewed automatically, instead of being competed for. Only 10 per cent of probation contract payments are tied to outcomes, which has not incentivised change. Employment services contracts, such as the Work Programme, have delivered good outcomes for some, but the funding model has incentivised providers to 'park’ others. Improving contracts and incentivising competition can improve public-service quality.

Central government has a crucial coordinating role to play to deliver devolution.

It should deliver services which are standardised across the country – such as immunisation programmes – and those which local areas will not be able to oversee a market for – such as specialised health services because of their rarity, for example.

It can better provide a framework for devolution. The Cities and Local Growth Unit has coordinated economic devolution thus far, but should be expanded to involve more departments, such as the Department of Health and Ministry of Justice, which will be involved in the devolution of public services. This should be renamed the Devolution Unit.

Whitehall should provide leadership for devolution. It should be supported from the very top, such as by the Prime Minister, to follow the success of the Northern Powerhouse, embodied by then-Chancellor, George Osborne.

Block-grant funds (non-ring fenced) should be handed to local commissioners to spend in ways that best achieve outcomes. These grants should be distributed for several years – with four likely to be optimum to coincide with local elections. A funding formula should be set by a UK Funding Commission, a new body. The centre should complement this with a small number of entitlements to ensure that services, such as healthcare, remain universal.

This would be a radical acceleration of the devolution agenda – one that moved from economic growth to public service reform. To deliver services that work for all, this should be the aim for this government and subsequent ones.