Memorandum from the Local Government Association
1. INTRODUCTION
1.1 The Local Government Association (LGA)
welcomes this opportunity to respond to the Public Administration
Select Committee's Inquiry into commissioning public services
from the third sector. Local authorities are the tier of government
which has the most interaction with the third sector.[157]
As such local authorities, and the LGA as the national representative
body, are well placed to respond to this consultation.
1.2 Local authorities are a major provider
of public services at the local level with the services they have
responsibility for touching on citizens every day lives. Ensuring
high quality, efficient public services are provided locally is
one of the main aims of local government. As local authorities
strive for continual improvement in public services they have
been at the forefront in service transformation. People's expectations
of services and the level of choice they should have are increasing;
services need to be transformed to meet the needs of citizens
and be provided by the organisation which is best placed to meet
these needs be that public, private or third sector, or a combination
of these.
1.3 In recent years there has been a growing
consensus that to secure further improvements in the efficiency
and effectiveness of public services the focus needs to become
more local than national. In May 2006 the LGA published a key
policy document Closer to People and Places which calls
for a new system in the way local services are shaped, delivered
and monitored. Central to this is to secure more fundamental improvements
in public services by re-designing services around the user, not
around service silos. With the local authority leading local partners
as well as managing and shaping local markets to get the best
outcomes for their communities. To achieve this, partners from
across the public, private and third sectors need to work closely
together.
1.4 The LGA believes that the role for the
third sector in service transformation should not just be at the
service delivery end. The best local authorities involve the third
sector in identifying service need and in service specification.
Many Third Sector Organisations (TSOs) do not want to deliver
public services but they do have invaluable expertise and knowledge
of particular groups and their needs which is vital to ensuring
services are genuinely shaped for users.
1.5 The forthcoming Comprehensive Spending
Review will have a significant impact on the resources available
to local authorities to deliver services either directly or through
others via contracts. The LGA produced an autumn statement in
2006 Meeting the Challenges Ahead which sets out the pressures
those public service providers will be under in the CSR07 period.
The Committee needs to recognise that the tight settlement across
the public sector will have implications for the Government's
aspirations on this agenda.
1.6 In December 2006 the LGA carried out
a comprehensive survey of local authorities on how they are working
with the third sector on a range of areas. This included a representative
quantitative survey of 163 local authorities across England and
Wales and nine case studies from local authorities.[158]
The LGA submission is informed by this research.
1.7 The LGA works closely with third sector
umbrella organisations on this agenda. This includes: working
with ACEVO through the Future Services Network to identify solutions
to implement this agenda; supporting NCVO's publication How
voluntary and community organisations can help transform public
services in 2006; working closely with the Office of the Third
Sector to implement the Third Sector Action Plan; and current
work with Communities and Local Government and HM Treasury to
develop guidance for local funders and purchasers.
1.8 The LGA is also carrying out a project
looking at The Role of public services in 2020 this is
developing a vision, with partners across all sectors, of what
public services should look like in 2020 and how they can be transformed
to achieve this vision. The LGA has also worked closely with Sir
David Varney during his 2006 review Service transformation:
A better service for citizens and businesses, a better deal for
the taxpayer which looks at opportunities for transforming
the delivery of local public services to make them more efficient
and responsive to the needs of users and businesses. Local government
in its place-shaping role is well placed to help deliver his vision
and the third sector should also play an important role in this.
The recommendations set out by the Varney Review provide an excellent
opportunity for a cross-departmental approach to service transformation.
It is vital that the critical roles that the third sector and
local government can play in achieving this vision are included
in the Varney Implementation Plan.
2. What are the benefits of contestability
to the users of public services?
2.1 Introducing contestability into the
public services market can help providers to improve their performance
and ultimately the quality of the service experienced by users.
However this will only succeed if there are a number of potential
suppliers in the market who can be genuine competitors. For this
to take place there needs to be fewer barriers to entry into the
market for new suppliers and greater movement within the market
to challenge poor performing providers and enable others to tender
to deliver services. Local authorities working with other local
partners need to have the power to shape markets and remove poor
performing providers. The Local Government White Paper supports
this and the LGA is keen to work with government to develop the
market shaping role of local authorities.
2.2 However unless services are transformed
to meet the needs of users with outcome criteria to support this
then transfer of a poor performing service to another supplier
will not benefit users. There needs to be a greater focus on collaboration
to truly shape and create markets around longer term needs.
Have services which have been transferred to third
sector organisations shown improvements in quality?
2.3 There are two separate issues within
this question. Firstly, if services are transferred to the third
sector where the scope of the service is already ill defined and
the service is failing it is unlikely that the third sector will
be able to bring about improvements in quality as they, as any
provider would be, are constrained by the service specification
or performance measures. Instead the focus should be on transforming
services and making use of the skills of service providers and
those working closely with users to develop a service specification
which will meet the needs and demands of users. The third sector
has an important role to play in shaping the service and their
input at this early stage can have a positive impact on the quality
of the final service.
2.4 Secondly, is the issue of whether the
third sector when it delivers services shows improvements in quality
over and above other providers. It is not possible to say categorically
that the third sector can always improve service quality
and it will often depend on the type of service, the skills and
experience of the provider in this area and the demands being
placed on the service. A case by case approach is required but
recognising that all sectors come with skills and experience which
they can bring to the table.
Is loss of accountability a threat of commissioning
services? If so, how can this best be managed?
2.5 Commissioning services does not necessarily
equal a loss of accountability. In fact, it arguably makes service
providers more accountable as commissioning a service defines
the strategic direction for the local authority for that service
area. Therefore it makes accountability in terms of achieving
objectives towards that direction far clearer for both the local
authority and providers.
2.6 The Local Government White Paper recognises
local authorities' important role in taking effective action on
behalf of their constituents and holding local service providers
to account. It sets out proposals to strengthen the strategic
leadership role of councils as coordinators of all local agencies
and groups involved in shaping the community through their work
in different sectors. In addition the Paper also envisages a wider
and stronger role for local authority scrutiny including the power
to require evidence from all local service providers and placing
a duty on them to have regard to an authority's scrutiny recommendations.
The LGA supports these proposals and with this in place is confident
that a clear line of accountability can be maintained.
3. Is the third sector more likely to provide
better public services than the state or the private sector?
3.1 It will depend on the type of service
that it being provided, the needs of users and the outcomes that
are required. There is nothing intrinsic in the organisational
structure of TSOs which means that they automatically deliver
better public services than any other sector. A case by case approach
needs to be taken to each service and the value that each potential
provider can bring to delivering the best service for users.
Is there evidence that where services are provided
by the third sector that they are popular with those that use
them?
3.2 Research carried out for the LGA by
MORI in Spring 2006 showed that many people often do not know
who provides their services and do not care as long as it is of
a high quality, meets their needs and is value for money. Therefore
from a user perspective this issue can become irrelevant and the
question should be making sure that all public services are popular
with citizens however they are branded. The LGA recently carried
out some research with the National Consumer Council[159]
which showed that popularity and satisfaction are very difficult
to measure and can be influenced by a range of other factors from
culture to demographics to attitudes towards government in general.
The most appropriate service provider must be identified by local
partners based on specific local needs, history and experiences.
Is there evidence of demand for more services
to be provided by the third sector? If so, who from?
3.3 Currently the greatest demand appears
to be coming from central government narrative on the value of
the third sector. However evidence locally, voiced during regional
consultation events for the CSR07 Third Sector Review, showed
that many smaller TSOs do not feel that they have been asked if
they want to deliver public services and many have said that they
have no interest in this. This has left many small groups concerned
that they must now compete to deliver services or face losing
funding which they currently received under other funding arrangements
such as service level agreements and grants. Much of the demand
for greater involvement of the third sector in service delivery
is coming from large national TSOs that have a strong voice within
government.
3.4 Whilst the LGA supports the role of
the third sector in further service delivery it is vital that
this does not come at the expense of many smaller TSOs who have
no interest in delivering services. Local authorities are left
to face the reality of how to involve the third sector more in
service delivery whilst also ensuring that small groups continue
to receive the funding they need to carry out their objectives.
The term third sector encompasses an extremely wide range of organisations
and the same approach to all of them is not practicable.
Is there evidence that contracting to the third
sector leads to greater scope for innovation in public service
delivery?
3.5 There is a wealth of anecdotal evidence
to support this but a limited number of studies that provide accurate
data on third sector innovation. In 1994 a study was carried out
by Stephen Osborne at Edinburgh University which studies this.
It was followed up with a replication study in 2006.[160]
It found that innovation is not an inherent characteristic of
voluntary organisations but arises from the policy context created
by central and local government. The 2006 study shows that the
number of TSOs who state they are involved in innovative activity
has fallen considerably. One of the main reasons attributed to
this is that many TSOs who relied on government funding had to
portray their work as innovative to secure funding in 1994 whereas
in 2006 the government agenda had moved on to valuing the specific
expertise of their services rather than discontinuity and innovation.
The contractual regime on TSOs is therefore preventing many from
being innovative.
3.6 At the local level local authorities
have been pressured with over 2000 performance indicators from
central government and a focus up to meet the needs of the centre
rather than those of local people in order to secure future funding.
Pressures of performance indicators leave little incentive for
TSOs to innovate in order to receive local government funding.
The LGA welcomes the move to reduce the number of performance
indicators. By achieving this local authorities will have the
freedom to work with partners to shape services to meet local
needs, calling on the third sector and other providers to explore
innovative solutions.
3.7 Involving the third sector and other
local partners in shaping services, coordinated through the Local
Strategic Partnership and Community Strategy, will increase the
knowledge base and intelligence of a particular service and user
needs. Therefore a collaborative approach to service delivery
is more likely to result in innovative services which join up
providers making best use of different skills. Local Area Agreements
have demonstrated that where agencies join up and involve providers
from the private and third sectors to transform a service more
innovative solutions will result.
4. Does commissioning benefit the third sector?
Will contractual relationships with the state
improve stability within the third sector?
4.1 Commissioning should benefit the third
sector, in that it will contribute towards an open and level playing
field and clear strategic direction. However the LGA is aware
from our recent survey that to get to this stage more still needs
to be done to work with commissioners to develop skills in working
with the third sector. The best local authorities have already
developed commissioning frameworks in consultation with their
local third sector which help TSOs understand how to get involved
in any part of the commissioning cycle. The LGA welcomes the Office
of the Third Sector Acton Plan which announced the training of
2000 commissioners across the public sector as a step towards
achieving this.
4.2 However looking at the sector as a whole,
the contractual relationship could result in greater instability
for many TSOs. There are two main reasons for this. Firstly, gaining
a contract to deliver a service will often take place through
a competitive procurement process. If the TSO in question is not
chosen to deliver the service they risk losing a large proportion
of their income and becoming less stable. This poses a greater
risk for smaller groups who are locally based—for capacity
reasons or due to the purposes of the organisation—and therefore
unable to easily find other contracts elsewhere.
4.3 Secondly, many TSOs are not interested
in service delivery or taking on contracts. Moving away from a
regular grant situation to an uncertain contract environment could
put many organisations at risk. As the LGA sets out in our autumn
statement, government needs to recognise the funding pressures
local authorities will be under in the CSR07 period and the impact
this will have on the third sector as a whole. Ed Miliband has
stated that we need to ensure public services are adequately funded
so that costs are not passed on to the third sector.[161]
The LGA strongly supports this view. To achieve this aim local
government must be adequately funded to meet the needs of the
sector.
Will close involvement with service provision
prevent third sector organisations retaining the ability to be
critical of government?
4.4 A mature relationship between purchaser
and provider should mean that both parties feel able to constructively
criticise and support one another. The LGA in our submission to
the Cave Review of Social Housing Regulation in February 2007
set out the future role which we see for registered social landlords
and other service providers. Under this, service providers and
others knowledge and expertise in a policy area would help to
formulate the vision for the service which would then make up
the Sustainable Community Strategy. Through this model service
providers could help shape the service and provide constructive
criticism where services are not currently meeting needs.
4.5 Many local authorities directly fund
the third sector precisely so they can lobby local government
and give a voice to specific groups in the community. This role
of the sector must be protected and maintained if we are to build
vibrant local communities. It is also essential for local and
national democracy that the voice role of the sector is not impinged.
If it is, we will lose the very essence that makes the third sector
so valuable. The power relationship between funders and the funded
requires further attention to ensure that the independence of
the third sector is maintained.
Is there a risk that the service providers will
become increasingly bureaucratic?
4.6 This is a concern for all service providers,
not just those in the third sector. Rationalising the number of
performance indicators passed on to local government from the
centre will help in reducing the bureaucracy. In addition changes
to the way local authorities are audited through the new comprehensive
area assessment process will also help this. The LGA is working
with Communities and Local Government, the Audit Commission and
CIPFA to look at the current auditing processes and how local
authorities can rationalise the monitoring and performance information
collection that is currently passed on to the third sector.
Is there a risk that third sector organisations
will lose their independence, their identity or their distinctive
ethos?
4.7 TSOs often carry out a number of roles—community
advocate, lobbyist, building social capital and service provider.
For TSOs to maintain their distinctiveness they need to maintain
the diversity in their role and ensure that any contracts they
take on do not compromise the purpose and objectives of their
organisation. No third sector suppliers should rely on government
funding alone and therefore compromise their independence.
Might the third sector become polarised between
large service providing organisations and more radical groups?
If so, would this matter?
4.8 The third sector is already an extremely
diverse sector and figures show that the sector is already polarised
to some extent in terms of income and coverage.[162]
The best local authorities are developing commissioning strategies
which will enable TSOs of all sizes to be able to compete for
services and become involved in shaping services. There are distinctive
values which smaller groups can offer and working in consortia
with other small TSOs could help to maintain the distinctive values
of these groups and work with specific parts of the community
whilst also being able to deliver a larger contract for a local
authority.
4.9 Those organisations who choose not to
deliver services should not be seen as more radical as they have
chosen instead to focus on other approaches to achieving their
mission such as lobbying government and this should also be supported.
Neither should it be inferred that those groups who decide not
to deliver public services when it does not support their purpose
should then have their mission seen as being radical and outside
of the considered norm of society.
5. Does commissioning services from the third
sector have any benefits for the state?
Does the state risk losing control of service
delivery in a way which might be damaging?
5.1 As has been noted, accountability can
be strengthened by commissioning services. The role for service
providers within scrutiny and in developing the sustainable community
strategy should also ensure that the state retains control of
services. The state has a legal responsibility to provide statutory
services. If a service was not performing sufficiently the state
could call for it to be re-commissioned or taken back in-house.
It is therefore important that statutory bodies retain some degree
of capacity and knowledge should they need to take services back
in-house. Commissioning services allows local authorities to focus
on their wider place-shaping role.
5.2 There needs to be a clear understanding
amongst providers and purchasers that purchases retain the ultimate
accountability and responsibility for a public service, as has
been shown on many occasions when a service which has been outsourced
fails, the public body with overall responsibility is held accountable.
In high risk service areas, such as social care and children's
services, providers from all sectors need to accept that there
will be closer monitoring of the service by the statutory body.
A process which minimises the monitoring burden should be agreed.
How is duplication of effort in order to monitor
and manage contracts best avoided?
5.3 When the monitoring burdens placed on
local authorities are reduced this can be appropriately passed
on to the third sector. To reduce duplication all statutory agencies
contracting to the third sector need to similarly reduce the burdens
passed on to providers. Duplication can best be avoided by providers
working through the local area agreement structure agreeing on
the services that need to be provided for a local area and commissioning
them through the LAA under one monitoring system with specific
local statutory partners taking on responsibility to monitor and
manage specific contracts.
How good is the state at managing bidding processes
and defining contractual obligations when commissioning services?
5.4 The Regional Centres of Excellence have
worked with local authorities during the SR04 period and now possess
a large number of case studies of local authorities working developing
good practice across the commissioning process (see www.rcoe.gov.uk).
Many local authorities are reviewing the way in which they commission
services and in response to this agenda and to support their place
shaping role they are improving the role of commissioners. Moving
further towards local authorities having the freedom to focus
on local needs will mean that an outcomes approach can be adopted
rather than traditional outputs pre-set by central government.
6. What are the financial implications of
providing services through the third sector compared with directly
provided state services?
Are services cheaper to provide?
6.1 It will depend on the service area as
to which sector can provide the cheapest services. However lowest
price should not be the mark of best value. Achieving quality
services that meet user need has to be the main focus. Examples
from local authorities demonstrate that the third sector can provide
better value for money services in some instances. However there
can be other costs to consider such as upskilling the sector.
In some areas the skills base of the sector to deliver services
is so low that adding this cost on to the cost of the service
can make them an uneconomical option in the short term.
6.2 Over the longer term working with the
third sector as a service provider may result in cheaper services.
Faced with tight budgets local authorities need to consider turning
to more preventative forms of service delivery. We are arguably
paying for the consequences of bad results by spending money building
prisons and hospitals when the cost of preventative services would
have been less. Many TSOs have skills and expertise in working
on preventative services. By commissioning such services the third
sector could help to reduce overall service costs in certain areas.
6.3 More needs to be done within the sector
to develop peer-review systems to challenge each others performance,
particularly around areas of delivering efficient services and
identifying opportunities where TSOs could join up to deliver
shared services. Large TSOs could lead the way on this and support
smaller groups to identify ways to make the services they deliver
more efficient, and in turn even more attractive to purchasers.
Are the benefits of the third sector participation
in public service provision so great that it is appropriate to
have financial rules which encourage this, or should the aim be
to have "competitive neutrality" between public, private
and voluntary sectors?
6.4 There should be competitive neutrality
between all sectors. Parts of the third sector still need support
to be able to get to the stage where they can compete on a "level
playing field" and funding from central government is needed
to support those TSOs who want to get involved in service shaping
and delivery. It is necessary to distinguish between parts of
the third sector as many larger national or international TSOs
are arguably in a better position to compete for services than
a small business and therefore it would not be fair to support
the third sector as one homogenous group. Support needs to be
given on a case by case basis and the resources made available
to local authorities to support groups who have the potential
to provide particular services. Neutrality can also be achieved
though identifying the value of the third sector at the selection
stage. The work by the Childcare Implementation Project from the
Department for Education and Skills provides such evidence: http://www.everychildmatters.gov.uk/earlyyears/implementation/
7. Are the costs and benefits to the state
the same when commissioned from the third and private sectors?
7.1 The costs and benefits of commissioning
from the private and third sector differ as do the costs and benefits
of providing services in-house. The costs and benefits will be
different depending on the service, the specific needs of an area
and the outcomes required. Each provider will be able to offer
a different service package and the state, be that local or national,
needs to be clear about the outcomes they require.
SOURCES
Cave Review of Social Housing Regulation, LGA
Submission, February 2007.
Closer to People and Places, Local Government Assocation,
May 2006.
Customer Satisfaction with local services, LGA
and NCC, January 2007.
Meeting the Challenges Ahead: LGA autumn statement
2006, LGA, November 2006.
Partnership in Public Services: an action plan
for third sector involvement Cabinet Office,
December 2006.
The Innovative Capacity of Voluntary Organisations:
Survey Evidence from a Replication Study, Stephen
P Osborne (Edinburgh), Celine Chew (Aston) and Kate McLaughlin
(Birmingham), ESCR Discussion Paper Series: No 0701, January 2007.
The UK Voluntary Sector Almanac 2006, NCVO,
2006.
LOCAL GOVERNMENT
ASSOCIATION
The Local Government Association (LGA) represents
almost 500 local authorities in England and Wales. They, in turn,
represent over 50 million people, spending over £76 billion
each year on local services.
March 2007
157 The UK Voluntary Sector Almanac 2006, NCVO,
2006. Back
158
The survey and case studies are currently unpublished but will
be part of a publication to be produced in May 2007. Back
159
Customer Satisfaction with local services, LGA and NCC,
January 2007. Back
160
The Innovative Capacity of Voluntary Organisations: Survey
Evidence from a Replication Study, Stephen P Osborne (Edinburgh),
Celine Chew (Aston) and Kate McLaughlin (Birmingham), ESCR Discussion
Paper Series: No 0701, January 2007. NCVO Almanac, 2006. Back
161
Questions to the Duchy of Lancaster, 7 March 2007. Back
162
NCVO Almanac 2006. Back
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