Daniel Goodwin

Finance fundamentals

Listen uncritically to the debates currently under way on public finance and you would be forgiven for thinking that all will become miraculously clear on 20th October with the announcement of the Comprehensive Spending Review. Of course it will not. The first indications of the departmental settlements will be only the beginning and are unlikely to add very much more certainty to anyone’s position. Even knowing that the percentage figure might be right between the 25% and 40% predicted will be no guide to anyone that their particular grant settlement might still not be figure at either end of that spectrum.

The publication of individual areas’ figures in mid-December will be the first indication that anyone has of how the cuts will really be distributed and of their likely impact. That’s why we have been planning since before the election on the basis of a large reduction now, of around 20%, on the anticipation that we would then correct in later years. However it is of course a moving target, with confirmation this week of a change in the future benefits structure to add to the potential impact of the NHS changes, continuing discussions on the personalisation of services, and overlaying all these on the development of ‘Big Society’ and localism.

The common wisdom is that, intuitively, such complexity must carry a cost; but must it? According to work done in Birmingham, for example, rather than being an expensive frill, personalisation can help to control costs where it is based around early intervention and services that simultaneously create social capital. Its cost effectiveness depends on how it is approached, the processes that are employed, and the commissioning framework of agencies and sources of service. Clear segmentation, priorities and outcomes for each are needed, together with a clear understanding of interrelationships and economics, linked to process algorithms and jointly managed budgets. Simple it isn’t, but no different from any other service and with some personal service market costs expanding by 7% per annum, in any case, we need to think hard about what we can afford to pay and the long term impact of failing to deal with such issues now.

To help address this challenge, what is needed is some form of economic model to develop a clear understanding of how the ebbs, flows and currents of local finance are shaping the new environment. This would be some form of locally driven place based accounting developed through the shared resources of public sector partners. It would be at least as important, and probably a prerequisite for place-based budgeting. Such a framework would allow an understanding of the linkages between personal, universal and environmental services and be able to make assessments of social capital and public value.

Such a model would provide a useful linkage between my previous articles, providing the base material for a new authorising environment, allowing an understanding of the geo-social impact of finance and providing the core material for public leadership and debate. Hopefully some of the work currently under way at the LGA will help to fill in some of the blanks, and there is clearly a role for CIPFA. This would be a far more useful tool than the not much mourned Comprehensive Area Assessment, and by tying it in more clearly to the economics of place and the realities of the financial settlement, could help local partnerships to properly understand their shared responsibilities for delivering public value.

If anyone knows of any tool that might fulfil all or part of this, please let me know!

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This entry was posted on October 3, 2010 by in Local Government Futures, Public Value.
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