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The need for public sector bodies in local areas to work in a more integrated manner is clear, but there are challenges in making it happen. Stephen Hughes, Bethan Evans, Peter Keith-Lucas and Matthew Waters propose a social enterprise model that could deliver what authorities are looking for.

The outcome of the CSR made clear, if it was needed, that public services needed radical transformation not just in the nature of the services that are delivered but in integrating delivery between public sector bodies.

The work already completed on Total Place provided real evidence of how much waste exists and painted some very vivid pictures of how much benefit a radical approach to change could bring. The announcement of the 16 pilots for Community Budgeting and the emerging work on “very local” budgets in 13 further areas have reinforced that community based budgets are manifestly an important feature of government policy going forward.

Implementing the findings of Total Place has not been so easy. Powers of general competence may help, but there are inadequate incentives for investing in real change: either because the benefits will accrue disproportionately to organisations that are not making the investment or because the change requires investment that will need time to delivery pay- back. In-year investment for out-of-year payback is not easy to deliver in times of extreme austerity.

What is a Local Integrated Service Trust (LIST)?

The purpose of this paper is to look at one model that can provide an opportunity to bridge the gap by creating a local social enterprise, one owned by the local public sector stakeholders that can broker the change, backed by social investment funds where necessary, including bonds.

In this model the social enterprise – the body we have called LIST – would be owned by as many local public bodies as possible to ease the position of procuring services from it, designated as a public body in its own right and with the benefit of a Deregulation and Contracting Out Order so that it can act on behalf of various local public authorities. The role of this LIST would be to:

Identify projects where investment in service change would provide an overall benefit in reducing waste or cost or making quality improvements for users. The outcomes of Total Place pilots would provide the starting point for many localities.

Broker the change, transferring the risk of delivery away from individual organisations, pooling the opportunities and benefits, supported by social investment funds where necessary. We have illustrated on the following pages how this could work in a hypothetical example by bringing it alive in the fictitious County of “Downshire”.

In its brokerage role, the LIST will be principally a facilitator, extending to supply chain manager, but it could also assume a role as part commissioner and that commissioning role could expand over time, building on past successes with the encouragement and support of its member organisations.

Keeping it simple means that this list should pick up easy targets to start with but over time and where there is local ambition to do so, it could develop into a procurement hub for services more generically.

Profits over time can be re-invested in projects that meet local priorities, some of which may have higher risks or longer term payback.

Taking forward the LIST

The model is set out below. The current government has shown itself much less prescriptive about the form that delivery takes – the lack of structure around Local Enterprise Partnerships is a good example – and we think that there is very little, if anything, that prevents such a model being implemented now. Public organisations are in real need of an effective forum to identify partnership working and real service transformation and a LIST could provide a forum for achieving not just strategic direction but practical implementation. There is a particular need to engage with GP commissioning consortia in integrating health and social care at a delivery level which is outside of the ambit of any Health and Well Being board.

LIST_CSR_Small
Click on image for large version

We have already given more thought to some of the legal and commercial issues that would need to be addressed. Issues such as:

  • Whether the LIST acts as principal or agents for its members?
  • The need to satisfy EU procurement rules and the potential to exploit the “in house” exemption
  • The contractual basis for sharing risk and reward between the LIST and its members on a project by project basis – in effect, how to create the incentives to implement the findings of Total Place
  • Access to and use of social investment funds, including bonds.
  • Bringing on board appropriate private sector expertise in managing projects and risk
  • The choice of organisational form for a LIST
  • Constitutional and government arrangements, including key terms for the shareholders/members agreement.

Please do take a moment to read the Downshire story attached – this really brings alive how this idea may happen in practice.

Stephen Hughes, Bethan Evans and Peter Keith-Lucas are partners and Matthew Waters is a solicitor at Bevan Brittan (www.bevanbrittan.com).

 

 

A hypothetical example of how LIST could work in practice – Downshire Integrated Service Trust: A five-year review

Downshire Integrated Services Trust (DIST) was formed five years ago by the principal public authorities which deliver services in Downshire to improve and integrate public services within the County.

The problem was that each of the public authorities were commissioning or cutting public services which impacted on the volume and nature of the services which other public authorities were commissioning, and no-one was holding the ring between them. The critical point came when Downshire County Council cut 50% off its road safety budget and turned off the safety cameras to save £250,000, resulting in an estimated increased cost of £100,000 to the Ambulance Trust and £100,000 to the Fire Authority in responding to road accidents, and £200,000 to the Upton Hospital Trust’s A&E Department. As a consequence, the Hospital Trust cancelled 200 hip replacement operations to save £500,000 and stay within budget, leaving Downshire County Council with an additional cost of £700,000 in additional domiciliary care for residents who were unable to care for themselves as a result of incapacity. This also cost employers in Downshire (including the County Council, the Hospital Trust, the Fire Authority and the Ambulance Trust) an estimated £500,000 in statutory sick pay, temporary employment cover and loss of production. This example was replicated across the public authorities as the cuts began to bite.

The Downshire authorities had known this was a problem, but a total of five Overview and Scrutiny Committee meetings and six Joint Chief Executives’ and Leaders/Chairman’s meetings had failed to come up with a practical solution. In frustration, the Chief Executive of Upton Borough Council made the authorities a proposal, as follows: “Upton Borough Council and its neighbour Middleton District Council propose to share a Chief Executive, and I am prepared to volunteer for redundancy. But rather than my take half a million in redundancy and bringing my pension forward by five years, Upton is prepared to use that money to establish an Integrated Service Trust as a company limited by guarantee, owned by all the public authorities, to act as a common commissioner of services for those authorities, and I will act as the Director of DIST at 75% of my present salary.”

“My job on DIST will be to identify areas where the public authorities are commissioning services where there are such clear overlaps, and come to each authority with a proposal under which each authority can commission its services through DIST.

“For example, I know that, by paying a bit more than the County Council would ordinarily spend on family support for problem children, and commissioning enhanced services, DIST can produce a bigger saving for the Police Authority in not having to deal with criminality by those children. So I can say to the County Council that, if they use DIST to commission family support services and promise DIST the current budget minus 5%, DIST will buy a 25% increase in family support service. Then DIST can go to the Police Authority and say that, if DIST can produce a reduction in the Police Force’s costs on dealing with youth criminality from these families over the next five years, they will pay DIST half of the saving every year. I can replicate that for such areas as:

  • highway maintenance and dealing with traffic accidents and insurance claims
  • extra domiciliary care enabling earlier discharge from hospitals
  • extra health education saving expenditure on hospital
  • admissions and outpatients, on family breakdown and extra housing costs arising from teenage pregnancies.

I can even take it into the private sector to give cash incentives to retailers to cut packaging, saving the District and County Councils costs on waste collection and disposal. It is my job to identify those opportunities, to set up the deals, and to act as contract manager to ensure that those savings and service improvements are delivered.”

DIST started off at a relatively small scale, cherry-picking targets where the authorities had failed to reach agreement and acting as an independent broker. Its great advantage was that it could act as honest broker between public authorities and offer a mix of service enhancement and cash savings.

The principal public authorities gave it a loan guarantee which it used to borrow working capital which it invested in service enhancements which had longer pay-back periods.

It really took off when it persuaded DCLG to make an order under the Deregulation and Contracting-Out Act 1994, which enabled the public authorities to delegate functions to DIST, so that it could have statutory powers directly delegated to it. That has enabled it to commission road and housing improvements directly, and to enter contracts with both the authorities and with private and voluntary sector organisations for the delivery of the enhanced services. So we are moving to a position where, increasingly, each public authority determines the service levels which it needs to meet its statutory obligations and makes that budget available to DIST, and then DIST, working with the authorities’ professional staff, identifies the opportunities, puts a proposal to each authority, and then undertakes the commissioning or procurement of the enhanced or integrated services on behalf of those authorities.

Not every case has paid off. Sometimes the extra investment has not produced the saving for the other authorities, But overall, DIST’s ability to pick winners has paid off. But as profits arrived, it has put 75% of the profit into paying off that initial debt, researching new opportunities and investing in deals which have a longer pay-back period. The other 25% is covenanted into a separate charity fund at arms length from the public authorities which has a Board of community representatives and is committed to their priorities for improving Downshire as a place to live and work.

The legal structure as a company limited by guarantee enables each of the public authorities to play a positive role in DIST. The trust model secures the financial benefits of charitable status and ensures that savings are ploughed back into service enhancement and community benefits. But above all, it enabled the authorities to develop a strong financial incentive in DIST’s success and positioned it as a trusted, honest broker between the public authorities. The end result for each of the public authorities has been:

  • Cash-back savings for the public authorities
  • Enhanced and more effective services for the same cost
  • Integrated services procured on behalf of a number of public authorities
  • More focus on the achievement of measurable outcomes
  • Win-win, low risk solutions for the public authorities
  • A simple and proven mechanism which can accommodate changes in the responsible authorities, for example from PCTs to GP Commissioning bodies
  • A brokerage service between the public authorities even where no cash savings are available, encouraging a climate of openness and joint working
  • Retaining democratic control and accountability in each public authority, but increasing public respect for the capacity of those authorities to deliver co-ordinated services
  • A strong community-managed fund with real spending power for improving Downshire.

In all this, the key factor is the steadfast refusal of DIST to go beyond the boundaries of Downshire and its commitment to incremental development. It is those factors which have retained local confidence and loyalty, and enabled DIST and its participating authorities to flourish.