Public services reforms to "profoundly change" role of local government: White Paper

July 12, 2011

Reforms contained in the Open Public Services White Paper will “profoundly change the future roles of central and local government”, ministers have claimed.

Key proposals in the document include a switch in the default position from one where the state provides the services itself to one where the state commissions the service from a range of diverse and competing providers. The government will also explore legislating to enshrine an overarching right to choice in individual services.

The White Paper says ministers want local authorities to become the “people’s champions” for all public services in their area – irrespective of whether they are directly accountable for those services – and parish, town and community councils to have a significantly expanded remit to run local services.

The Parliamentary and Health Service Ombudsman, the Local Government Ombudsman, and the Housing Ombudsman will also have beefed-up roles under the proposals, to ensure redress for the various new rights contained in the White Paper and the Localism Bill.

The changes contained in the long-awaited White Paper will be underpinned by five core principles: choice; decentralisation; diversity of provision; fair access; and accountability.

The document says that strong local government is at the heart of the reforms, but that councils would need to adapt to make the most of the opportunities.

In a speech yesterday the Prime Minister, David Cameron, said the reforms would bring an end to the ‘get what you’re given’ culture and the ‘Whitehall knows best’ approach.

The White Paper has received a cautious welcome from the Local Government Association, which urged the government “not to hold back” but warned that there was a risk the proposals could be “tied up in red tape”.

The proposals were meanwhile attacked by unions as “a manifesto to break up our public services”.

This is a summary of the main provisions of the White Paper. For reactions to the proposals, click here.

The five core principles

The government’s five core principles for modernising public services are:

Wherever possible, the government will increase choice: ”This means giving people more direct control over the services they use, for example through personal budgets in healthcare. People will be given the power to choose where they send their children to school or which hospital they receive treatment in”. Where it is not possible to give people direct control, elected representatives should also have more choice about who provides services and how
Public services should be de-centralised to the lowest appropriate level:  wherever possible, power should be decentralised to the individuals who use a service. “For many services, this will mean the community groups and neighbourhood councils to whom power is decentralised, while for others it may be local authorities and other elected bodies such as police and crime commissioners”
Public services should be open to a range of providers competing to offer a better service:  these providers could be in the public, private or voluntary sectors. The White Paper says the government does not have an ideological presumption that only one sector should run services. It adds that the job of government is not to specify which sector should deliver which service to which people but rather to create an open framework. This means breaking down barriers, “whether regulatory or financial”, to ensure diverse providers and a level playing field. It also requires transparency about quality and value for money of public services “so that new providers can come in and challenge under-performance”. There also needs to be fair funding on the basis of quality
Fair access to advantage the disadvantaged and improve their outcomes:  The government said it recognised that “not all people start from the same point and the scars of disadvantage can determine life chances in a way none of us consider to be fair”
Public services should be accountable to users and taxpayers:  “All public services need to be accountable to the people who use them and the taxpayers who pay for them. Payment by results is one of the methods of increasing this kind of accountability”.

The White Paper says application of these principles would provide a shift in power to people, the rationale of which was “simple: to provide people with the best possible services for the money spent”.

The document goes on to classify public services into three categories:

individual services: these are personal services – for example in education, skills training, adult social care, housing support, and individual healthcare – that are used by people on an individual basis. In this case, power will be put in the hands of the people who use them
neighbourhood services: these are services provided “very locally and on a collective, rather than an individual, basis”. They include maintenance of the public realm, leisure and recreation services, and community safety. For these, power will be put in the hands of elected councils, “at the neighbourhood level if that is what communities choose”
commissioned services: these are local and national services that cannot be devolved to individuals or communities, such as tax collection, prisons, emergency healthcare, or welfare to work. For these services, the government will “open up and, where appropriate, decentralise commissioning to ensure greater quality and diversity”

The White Paper insists that the government’s approach would “bring clear benefits for everyone involved in public services”, whether that is individuals, communities, local government, public service staff or independent providers of all sizes.

Individual services

The government’s preference is that power over the public services that people use as individuals should go to the those individuals wherever possible. “This new presumption in favour of individual choice and control is a big step forward in putting real power and money behind people’s choices but unless people have a genuine range of options to choose from, its transformative effect will not be fully realised”
Funding will follow people’s choices. “This will shift control of billions of pounds of funding to individuals, putting people in control by using mechanisms such as direct cash payments to individuals, personal budgets, vouchers, tariff payments, loans and entitlements”
A framework for choice will be established in individual areas such as adult care, education, skills training, early years, other children’s services, family services, health and housing
Key data about public services, user satisfaction and the performance of all providers from all sectors will be put in the public domain in an accessible form
Funding will continue to be targeted to help the poorest, promote social mobility and provide fair access, including through selection criteria
The government will ensure that individual service providers are licensed or registered by the relevant regulator for each sector “so that those choosing services can know that providers are reliable, but without stifling innovation or adding unnecessary cost”
There will be forms of redress if choice is not available or where standards are not good enough. The government will provide, for each service area, “the most appropriate means of redress, making the most effective use of the Ombudsmen”
Key policies being implemented on individual choices include: personal budgets in adult social care; personal health budgets for sufferers of chronic health conditions; personal budgets for all families of children with special educational needs or disabilities (where integrated funding will also be explored); housing through the Universal Credit’s housing component; personalised budgets in the Supporting People programme for vulnerable people; greater flexibility in the early education entitlement; and school funding reforms
Key policies being implemented to ensure fair access to public services include: the pupil premium; reforming the School Admissions Code; the English Baccalaureate; public health and the new Health Premium (to incentivise local authorities to improve the health of their local population); and empowering GPs to tackle health inequalities
The public will be given the information they need to make informed decisions and drive up standards. The datasets the government collects will be made open and accessible
There will be a consultation on how best data can be made available in each of the individual services, “including looking at how to collect performance and customer satisfaction data from service providers, and whether this should be collected in a standardised form to enable comparison and transparency”
The state “will play an important part in setting the bar for existing and new providers who want to compete to provide public services”. A clear message will be sent that ‘unless you can match or better our minimum standards, you have no place delivering public services’
Over time the power of individuals to exercise choice “should drive out complacency” among providers. However, there will continue to be a need for the government to intervene in cases were providers are failing to meet minimum standards or failing to make adequate improvements (“coasting”)
There will need to be a means for individuals to enforce their new rights. The government will look at whether failure on the part of a public authority or service to provide the choice to which an individual has a right will, by definition, constitute a form of maladministration. “It therefore seems natural for the power of redress to sit with the Ombudsmen”
The government will establish how the Parliamentary and Health Service Ombudsman, the Local Government Ombudsman and the Housing Ombudsman can “play a greater role in supporting the ability of individuals to exercise choice in specific services”
This will involve looking at: whether all services are appropriately covered by the Ombudsmen; the requirements, process and/or thresholds under which an individual can seek redress from an Ombudsman; the Ombudsmen’s resources and powers of enforcement, including in areas where they could play a role in supporting choice; and giving more profile and transparency to the work of the Ombudsmen
The government will examine the role of elected and unelected office-holders in championing individuals’ rights, ensuring availability of services and providing overview and scrutiny
Independent organisations such as Which? and HealthWatch will be encouraged to act as “agitators of choice” on consumers’ behalf
Policies to increase democratic oversight and individual participation, and strengthen the role of consumer champions include: active promotion of diverse stakeholders in the leadership of local institutions (e.g. through tenant management in social housing); opening up the governance, processes and information in relation to independent service providers such as academies and foundation trusts; creating HealthWatch; and strengthened powers for local councils in relation to the NHS.

Neighbourhood services

There will be new “bottom-up” rights – such as the Community Right to Buy, the Community Right to Build and the Community Right to Challenge – to give local people the chance to taken on powers previously only exercised by local authorities
The government will consult on the scope for enabling neighbourhood councils – i.e. parish, town and community councils – to take control over local services. “This will focus on the local public realm, leisure opportunities and community activity and could include: street improvements; parking and traffic restrictions; local libraries; local museums and arts; sports, local parks and leisure facilities; licensing of certain premises other than for the provision of alcohol; minor bye-laws and lower-level anti-social controls; and community grants”
Empowerment of neighbourhood councils in this way will need to fit into a local scheme of delegation, developed in consultation between the local authority and proposed new neighbourhood councils. However, the government will consult on how a national framework for these local schemes could assist councils at all levels to promote decentralisation of power
The government’s vision was “long-term” and would be driven by the motivation and capability of councils in different neighbourhoods. The White Paper acknowledges that many neighbourhood councils are not used to this kind of power and some areas do not even have such organisations yet.
There will be exploration of how the financial framework for neighbourhood councils could be improved
A number of government policies are intended to boost neighbourhood control. These include: the provisions on neighbourhood planning in the Localism Bill; the requirement for police forces to hold regular neighbourhood beat meetings; moves to make it easier to establish new neighbourhood councils and groups; and the provision of additional support for disabled people wishing to seek elected office
As part of the second phase of the Local Government Resource Review, the DCLG and the Cabinet Office are to work with two areas to enable local residents to “play a part in commissioning the neighbourhood-level budgets and service solutions for their priorities, alongside other public bodies”
There will also be further support for the development of community commissioning models such as Local Integrated Services, where local people are at the heart of the commissioning process

Commissioned services

In the services amenable to commissioning, the principles of open public services “will switch the default from one where the state provides the services itself to one where the state commissions the service from a range of diverse providers”
The government will look at where the separation of purchasers from providers makes most sense as a means for encouraging innovation and diversity of provision
A new “open commissioning” policy will be introduced in a number of specific services (to be consulted on). “In those areas, commissioners should: consult on and be challenged by potential providers from all sectors on the future shape of service; seek and fully consider a minimum of three providers, from whichever sector, when they contract for services; and transparently link payment to results”
There will be a consultation on how to establish “credible” accreditation bodies for public services which can mirror the work on the National Institute for Health and Clinical Excellence in the health service. The government will also explore the creation of independent expert bodies in other areas of public services
The government will not take a commissioning approach in national security or the judiciary, “which are natural monopolies of state provision”. This will include the military, core policing, intelligence services and the judges. “However, there will still be support, specialist and back-office functions in these services where diversity of provision is appropriate”
There will be a consultation with local authorities and the wider public sector about how to go further in opening up locally commissioned services in: customer contact; planning; property and facilities management; back-office transactional services; family support; support for looked-after children; trading standards and environmental services and housing management
Policies designed to boost democratic decentralisation include: police and crime commissioners; elected mayors; greater financial control with the end of ring-fencing; new revenue-raising powers such as the Community Infrastructure Levy and tax increment financing; health and well-being boards; scrapping local area agreements; retention of business rates; and community budgets
There will be a further drive to introduce an element of payment by results “to provide a constant and tough financial incentive for providers to deliver good services throughout the term of the contract”
Key policies being implemented in relation to payment by results include: the Work Programme (providing personalised back-to-work support for those at risk of long-term unemployment); the Ministry of Justice’s rehabilitation projects; councils being paid in part for improvements in public health; and tests run by ten local authorities of a range of payment by results models with their providers in relation to Supporting People services
The government will seek views on the potential to extend commissioning approaches to other national services including: court and tribunal administration; payment processing; prevention, detection and investigation of fraud; debt management and enforcement services; identity-related services; land and property information services; customer contact services; back-office functions for prosecutors; and immigration and visa administration
The government is “enthusiastic” to identify central government commissioning functions that could be decentralised to locally elected individuals and authorities, such as local councils and police and crime commissioners. There will be a consultation on the potential to decentralise commissioning power in a range of services “where there is a clear case for improving value for money”. They include: natural environment support; public transport support; skills and services for families with multiple problems
Where local areas come forward with credible proposals to do things differently in areas whether they are currently limited or prescribed by national policy frameworks, the government will give them serious consideration
There will be a consultation on how best to ensure that accountability is built into the commissioner/provider relationship across public services as services are opened up to a diverse range of provision
This consultation will include: whether or not the role of local councillors as citizens’ champions needs to be enhanced to ensure proper accountability of providers from all sectors; how providers can enable greater user participation or management in all sectors; whether or not providers in all sectors should be subject to the same requirements for transparency and in which service areas this would make most sense (e.g. how performance data and information transparency can be extended to private companies and voluntary sector organisations providing public services).

Diversity of provision

There will be a consultation on how to extend the type of autonomous status enjoyed by the likes of local health trusts, academies, leisure trusts and arm’s length management organisations “to most of those organisations within the public sector that provide services, while ensuring transparency and accountability”
The White Paper says the government’s approach would mean much more than just tendering exercises for the same old services. “We want to open up existing provision to competition from new providers with different ways of doing things”
There will be regular assessment of the barriers to entry and exit that may prevent diversity and innovation from being achieved, and subsequent recommendations about steps to address those barriers. “This includes looking at how to enable a level playing field for all independent providers, as well as addressing barriers that are particularly problematic for smaller private, voluntary and charitable enterprises”
The government will explore legislating to enshrine an overarching right to choice in individual services. “This would clearly define in law those rights that are already set out in existing pieces of legislation (for example, the Education Reform Act 1988), as well as providing a framework for extending this to any new areas considered appropriate”
There will be a consultation on how to stimulate more openness and innovation in public services through new types of providers within the public sector, “where this will improve services and give better value to the taxpayer”
This consultation will include: whether operational functions in building-based services should be split out to encourage more diversity and innovation in the operational functions while the public sector retains ownership of the assets; incentivising public service organisations to overcome traditional fragmentation; whether there is scope for more shared services – e.g. in the back office – to create competing businesses out of public sector organisations; whether voluntary sector organisations could be supported to acquire current public sector providers that would benefit from being run as a charity; whether semi-autonomous bodies should be made fully autonomous (e.g. by moving ALMOs into the housing association sector); and trialling school responsibility for permanently excluded pupils
There will be a consultation on how best to unlock external capital such as philanthropy and enterprise capital
In addition to the work on the Red Tape Challenge, the government will invite those on the front line of public service delivery to say how the government can enable staff to work smarter and improve productivity, and to identify areas were central government can reduce burdens and bureaucracy
Steps will be taken to identify and overcome the barriers placed in the way of public sector workers who want to exercise new rights to form mutuals
The government will not dictate the precise form of mutuals – “rather, this should be driven by what is best for the users of services and by employees as co-owners of the business”. Options include wholly employee-led, multi-stakeholder and mutual joint venture models
Key policies for public sector employee ownership include: the Right to Provide; mutual pathfinders; the Mutuals Task Force; the Mutuals Support Programme; and the Enterprise Incubator Unit
Barriers constraining open public services apply as much to movement within the public sector as they do to movement between sectors. “In examining such barriers, the government is not looking to give preference to any particular sector. Our aim is simply to level the playing field and ensure that a range of providers have opportunities to compete”
Public service commissioners will be encouraged to disclose TUPE liabilities at an early stage during a commissioning process or when the Right to Provide or the Right to Challenge has been invoked
To improve the commissioning of public services, the White Paper says it is important to get the balance right between specifying outcomes and enabling innovative approaches to service delivery. The public sector will want to develop long-term partnerships where appropriate. “Equally important is ensuring that contracts do not place too great an emphasis on the specific experience and track record of providers which could crowd out new participants with new ideas from entering service provision”
Where appropriate, the government is encouraging commissioners to break up contracts into smaller lots, giving a range of providers greater opportunities to deliver elements of government contracts
The government will explore new public service areas where it could be appropriate to introduce transparent pricing “to help diversify provision and ensure that competition is based on quality rather than price”
There will be a consultation on whether providers should have a right to appeal to an independent figure or organisation when they fell that they have been unfairly precluded from a commissioning process. There will also be a consultation on a sector-by-sector basis on whether it is appropriate to have an independent body to consider complaints from alternative providers in areas other than the NHS “and if so, what framework or principles and rules should apply and who might fulfil this role, including a relevant Ombudsman”
It is inevitable that some providers – both new and existing – will be unable to meet the rising minimum standards the government expects of them. “However, the inevitability of small levels of failure is not an excuse for dismantling the system of open public services and returning to the old ways of top-down prescription”. In open public services, failure by a few would not mean failure by all
Continuity regimes will be designed by the Treasury, the Cabinet Office and government departments. These will have six overarching principles: (1) struggling organisations should be given support to turn around performance, within agreed timescales, before failure occurs; (2) accountability for providing quality services and good financial management should remain firmly with the provider; (3) where failure occurs and is the result of poor management, there should be “severe consequences” for managers and others involved in the governance of the provider; (4) continuity regimes should articulate a short, carefully selected list of existing data that will be used to identify failure; (5) there is a role for external bodies such as regulators with powers to ensure proper financial management and to intervene to ensure continuity of service; and (6) systems should be flexible to accommodate the changes of the open public services reforms and therefore government departments should set out the long-term vision for ensuring continuity of service, as well as any transitional arrangements
As part of its consultation on extending autonomous status within the public sector, the government will consider the applicability of the foundation trust model to other public services. “In addition, we will explore extending different models of increased independence and a more diverse provider base to children’s centres”
Greater transparency will be introduced for spending decisions “so that communities can see where reductions in public spending have fallen”

The future role of local government

Strong local government is at the heart of the reforms, the White Paper insists. But “councils will need to adapt and develop new capabilities to make the most of the new opportunities”
The White Paper cites the opportunities for local government as: much greater freedom from central government control (through the general power of competence, fewer restrictions on funding etc); devolution of national and regional functions (including in relation to public health, economic development and early years); funding following individual choice (in adult care, education and housing); giving power and control to neighbourhoods; more local democracy (including the direct election of police and crime commissioners, referenda on spending and growing requirements for transparency); community budgets; and commissioning (“local authorities will continue their shift from self-sufficient providers to commissioners of services from a diverse range of suppliers in different sectors, including helping their own staff to set up new independent enterprises”)
Central government will engage with local authorities to develop a shared vision about the new opportunities and possibilities for stronger local government created by the open public services agenda
In addition to councils’ potential role as “people’s champions”, this would include exploring how to empower councils to shape their local area “through greater local freedoms on planning, finance, regulatory powers and infrastructure”, and to become as financially self-sufficient as possible
Other elements of this vision include how local authorities could: “benefit from the maximum possible decentralisation of central government services to the local level”; champion direct democracy and transparency of public data; act as the principal representatives of their community; “actively decentralise power to individuals and neighbourhoods; be “excellent and open” commissioners of those services that cannot be devolved further; and combine forces with neighbouring local authorities and lower-tier councils within there area to improve the success of the wider area

The future role of central government

Over and above its international and national security functions, central government over time will focus on several key roles.
There will be a consultation on these roles, which will include: establishing and enforcing core entitlements such as patient rights within the NHS and parent rights to early years and school places; setting floor standards, enforced by independent regulators or published data; ensuring fair access to services and preventing discrimination, such as setting the School Admissions Code; identifying areas of market failure which disadvantage groups and require state intervention; ensuring sufficient protection for individuals and communities “so that they have a fair and genuine choice of quality providers for decentralised services”; ensuring fair funding of public services to support wide policy objectives, such as social mobility and equality of opportunity
The government will promote support for the opportunities created by the reforms. This will include access to new forms of external finance such as social investment (e.g. social impact bonds); payment for results on capital improvements; and the financing of modernisation programmes.
Support will be made available to those who are considering setting up a mutual, including through the £10m Mutuals Support Programme
A positive action programme will be launched to “improve the awareness of public service opportunities to new providers, especially small and medium-sized enterprises”. The government will take “positive action on procurement and through regulators to ensure that other opportunities are opened up to new types of provider, be they from the public, private or voluntary sector”

Next steps

The government will hold a “listening period” between July and September 2011, after which it will set out a programme of work to implement the open public services agenda
In November 2011 the government will set out how departments will take forward ideas to implement open public services over the rest of this Parliament, including proposals for legislation.
Commitments will be reflected in departmental plans. Any new commitments will be subject to regulatory impact assessment.
From April 2012, departments will publish regular progress reports, setting out the steps taken to open public services.

Philip Hoult