Spending Review settlement for the Department for Education - Education Committee Contents


Examination of Witnesses (Questions 1-36)

  Q1 Chair: Good morning. Thank you all for joining us this morning to discuss the spending review settlement for the Department for Education. You bring different local authority experience and insight to the situation. Given the need to tackle the largest deficit in the G20, do you think that the way the spending reductions are being allocated makes sense, from your point of view, given the Government's stated priorities? It's an easy question to start with.

  Matt Dunkley: I'll have a go at a starting response to that. I think we all understand the imperative of the deficit reduction. I think our fears are, managerially, how it is being handled by the Department and how the settlement is being broken down, in terms of the different funding streams that affect us. We are fearful that a combination of front-loading of the reductions into year 1, and the way in which the different funding streams on which we are reliant are being cut at different rates over the four years, with different amounts of front-loading and the way in which that funding is being distributed, and is being changed in some circumstances, could lead to some local authorities having to make very large reductions in the first year of the four years of the settlement. That could have a knock-on effect in terms of the amount of redundancies they'd have to fund, which might produce some unintended consequences that we don't think flow from political decisions but from about how it is being handled, managerially.

  Q2 Chair: Anyone else like to pick up on that?

  Debbie Jones: What I want to emphasise, as Matt said, is the front-loading issue. I think all of us have recognised the need to make significant reductions, but the important thing is that we essentially transform the way in which services are commissioned and delivered so you have a reasonable lead-in time. The impact of the front-loading, not just on our overall settlement but also on the grants that we have yet to know the detail of, means that we will have a very short time in which to make major decisions. That kind of immediate knee-jerk—obviously we'll do our best to avoid it—could result in those unintended consequences, which could undermine the work that we're doing in the future.

  Q3 Nic Dakin: On the impact of these changes, both of you have talked about unintended consequences. What sort of unintended consequences might we see?

  Matt Dunkley: It is partly to do with the gearing effects and the way in which the different funding streams work together. Broadly speaking, we're funded for three main sources. There is the Direct Schools Grant, which funds individual school budget shares. A centrally held portion of that is held by the local authority. It looks as though a significant amount of that centrally held funding may change through the way the DSG is allocated. We then have the children's services budget, which is funded by council tax and the formula grant for the DCLG. The DCLG bit is subject to an 11% reduction in year one, and different authorities have a different balance between their revenue base being council tax funded and formula grant funded. For a London borough like Newham, it is about 80% formula grant and 20% council tax. In my county, it is 30% formula grant and 70% council tax. The impact of the cuts on the DCLG happens differentially across the piece.

  About half of our children's services grant comes from specific grants that are paid mainly by the DfE, but also by the DoH and the MoJ. With the large numbers of those, we have no idea what the rate of reduction is. There are grants that we term "missing in action"—we have no idea whether they are going to turn up at all. Those that are going to be put into the Early Intervention Grant will be subject to a front-loaded cut in year one and a kind of moral ring fence about how that is spent, which could be interpreted as an attempt to reduce our flexibility.

  The interaction of those three streams of funding and the fact that how the funding between authorities is distributed through the Early Intervention Grant and the Rate Support Grant could change—the formulas could change—will mean big winners and losers between local authorities. That may mean some areas of very high need have to have a very big hit in year one. Therefore, instead of having the time to transform a service to a different mode of delivery over a year or two years, authorities would just be straight into cutting it, with big redundancy costs in year one. It is that lack of flexibility about the time to transform the service into something different or to commission it differently from the third sector that is the unintended consequence that may hit us very hard.

  Q4 Nic Dakin: So are you saying that you are not clear on how many separate education grants there will be next year?

  Matt Dunkley: Not clear at all, no.

  Debbie Jones: Nor are we clear at this stage precisely what will be in the Early Intervention Grant—in other words, what the balance will be in terms of grants. We know what grants are stopping, but what we don't know is either the proportion of reduction or the balance in terms of priorities. For example, the Sure Start Grant, which we anticipate will be part of the Early Intervention Grant takes up a significant proportion of what would be that grant. Early intervention in its broadest sense needs to cross the entire age range, so there are a complex series of interdependencies that we don't know at the moment. That is greatly impacting on the way in which we are modelling the likely impact over the next four months for next year.

  To add to what Matt said, over the last decade, essentially there hasn't been a clear demarcation between the funding that goes into the different pots for children's services. We have, of course, used the grants as flexibly as we can to make the most use of the buck that we've got. Clearly, as you stop one activity and go into another, one of the unintended consequences can be that you end up stopping precisely the thing that has the greatest impact. The interdependencies of the grants and that of the likely reductions—plus the front-loading—will make the whole mix complex and turbulent.

  Q5 Nic Dakin: The Government are releasing you from ring fencing. Will that not help in this circumstance or is that a red herring?

  Matt Dunkley: I would observe that Governments of all hues tend to be very keen on ring fencing in times of budget growth and a lot less keen on ring fencing at times of reduction. But, of course, if we are set a financial challenge, it makes sense for it to be un-ring-fenced, so long as it is not a ring fence that is off but not really off, which is what we are slightly worried about, in terms of some of the restrictions the Government might try to put in place. If the ring-fencing is off Sure Start, for example, we don't really want the Department to be finger wagging and telling us how to spend that money when we are having to make very difficult local decisions across the piece. Our view is that if the ring fence is generally off, leave it off and let us get on with it.

  Q6 Nic Dakin: When the settlement talks about the five to 16 schools budget, are you clear what will and will not be in that going forward?

  Debbie Jones: We are clear about the elements, as was announced at the comprehensive spending review, of what is currently going in to it. The bits that we are not clear about are the grant picture, what is in the Early Intervention Grant and, indeed, how and from where the Pupil Premium, for example, will be funded. These are major issues for us. The other issue that it is important for us to emphasise in terms of interdependencies is that the overall reduction in benefit changes, welfare changes overall and changes in housing will also have an impact on both demand and, to pick up your earlier point, the way in which decisions are made in relation to all that non-ring-fenced money.

  Q7 Ian Mearns: We've heard the Minister tell us both here and in the Chamber that things such as the Standards Fund will be withdrawn but then added back into the general pot. Matt, you said earlier that the way the review goes could have a differentiated impact in different places. If the Standards Fund and the additional educational needs money go back into the general pot and are then redistributed by formula, would that have a similar effect?

  Matt Dunkley: It could do, but it depends on how the formula is constructed. We understand from comments that the Minister made over the weekend that the idea of a national funding formula that was floated now seems to be off the agenda in the White Paper. The issue with the Standards Fund is that if the money that was formerly given to schools and local authorities through the Standards Fund is now all to be given to schools, that increases the pressure on local authorities with regard to the services they can offer free of charge. It almost completely removes our ability to offer services free of charge to schools.

  We understand that the quantum figure for the DSG includes the Standards Grant funding, so that is important to bear in mind. As a result, schools will be faced with local authorities asking them to pay for services that they currently get for free, out of what is in effect a reduced quantum. That will cause all sorts of kinks in the system. That relates not only to school improvement; it is about some of the services relating to behaviour, reintegration, special educational needs and specialist teaching services for children with particular difficulties. We are having to look across the whole piece at charging for a whole range of things that we currently don't charge for because of the way the settlement breaks down.

  Q8 Pat Glass: Do you know how many pupils you will have in your area in January, for the census? Will that number rise, and what impact will that have on your budgets? Will a 0.1% spending increase in real terms take account of those pupil numbers?

  Hazel Cunningham: As you say, the actual figures will come through in the January census, but we have early indications of what they might be. The impact will really be across the four years. We are already seeing some increases coming through in the nought to five age range, so there is pressure in the Sure Start budget at the moment, and that will feed through into the primary sector. Having talked to colleagues in shire counties, I think that we are all finding pressures coming through at around the primary age range. We have particular hot spots within counties, and they are not necessarily in the same areas where we have surplus places, so we will need to look across the county to divest, if you like, in some areas and reinvest in others. We are not clear at the moment about any investment that will be available for basic need.

  What we understand from the Department for Education at the moment is that there will be funding for additional pupil numbers in the revenue grants and in the Dedicated Schools Grant, but we are not clear whether there is any additional capital funding. We know from the headlines that there is going to be a 60% cut in capital funding within the education budget.

  I think the issue relates to two areas. We know that on a per pupil basis, the amount of money that schools will get will be a flat cash figure, so there is no growth. The only growth will be in the actual increases in pupil numbers, and the DFE says that there is funding for that in revenue terms.

  Farrukh Akbar: In Lambeth I would say that we have similar problems, localised in the south of the borough. We are having to make provision for bulge classes and permanent provision for classes. We are struggling to ensure that we have enough funding for our schools to accommodate the increased volume.

  Q9 Pat Glass: Will a 0.1% real-term increase result in increased funding or cuts in your authority? Per pupil.

  Debbie Jones: I'll speak in general terms, because I think that would probably be helpful at this point. The 0.1% real term increase is, as Hazel has said, a flat cash position. Basically, it will include the £2.5 billion Pupil Premium. What we are not clear about is what the expectation will be in terms of schools being expected to have the cash to purchase services currently provided for within children's services. That needs to be taken into account.

  We know that year on year, overall, there is an increase in under-fives. As Farrukh has said, we are not clear, in terms of the 60% reduction in capital funding, how that would impact on the basic needs formula, which will give us the money for primary school places. Obviously we hope that any increase at that level will be reflected in funding. In places such as London, our borough has seen something like a 24% increase in primary admissions over the last four years. Clearly we are experiencing significant pressure, and we have no guarantee, for the reasons that we have outlined, that the money will be there to fund the services. The important thing to compute is what that 0.1% increase will be expected to provide.

  Damian Hinds: Just to be clear, and to make sure that we are on the same page, it is a flat cash amount on average per pupil, albeit that the average breaks down into a different amount of money that follows Pupil Premium children and money that follows others, and that translates into a 0.1% per annum compound growth rate after allowing for inflation, which is presumably defined as price inflation. Is that correct?

  Hazel Cunningham: I think the Government are using the CPI figure rather than RPI figure.

  Q10 Damian Hinds: They both relate to price inflation of one sort or another. When we talk about capital funding, although you refer to it being cut by 60%, it is still at historically quite high levels if you take the average over the last 10 years. As you rightly identified, there are potentially significant new requirements for primary places, but they must also be considered in the context of different policies on net migration.

  How do your costs break down? I know that you can never have a total, perfect split, but how do costs break down in your authorities between fixed, semi-fixed and purely variable costs?

  Farrukh Akbar: In terms of variable costs, they are mostly relating to staff, as you can imagine. They are approximately 70 to 80% of the overall budget. Having said that, our department has a budget of about £77 million, which is the cash limit, and a large proportion of it—about £50 million—is for the provision of children's social care. You have something like £20 million of that £50 million to provide placements for children. The rest of the budget relates predominantly to staffing.

  Q11 Damian Hinds: Although I understand why you described those as variable costs, within certain limits within each school, if the pupil roll went up or down by three, that would not change your staff bill at all, presumably. So, I would describe that as a semi-fixed cost, if that makes sense.

  Matt Dunkley: Things like the class size guarantee at Key Stage 1 do affect that, particularly in primary schools. If you have a class of more than 30, you must open a new class. For primary schools in particular, that can be very challenging when you have lots of net migration, lots of fluidity in the pupil population and strange patterns of growth in different parts of authorities. So, that part of the fixed cost could be tricky. Hazel, do you want to expand on that?

  Hazel Cunningham: Our proportions are very similar to those that Farrukh set out. It would depend, actually, on whether you were looking at schools or at certain services within the children's services department. For example, with SEN provision, the proportion is very much the other way—it is a small proportion. So, for us, it would be about 15 to 18% on staffing, and the remainder would be on the cost of places, for example, or on special needs education. But looking generally, staff costs range from about 75 to about 90%, so on average they are probably similar ranges. Again, for schools each situation is going to be very different, depending on the staffing structure that they have established and the leadership team that they have put in place. Some might have a very heavy staffing structure and others a much lighter one.

  Q12 Damian Hinds: What sort of wage inflation are you expecting per head on the staff bill over the next two years?

  Hazel Cunningham: Again, that varies. Within the local authority there is a pay freeze, across the piece, and in schools it will depend very much on whether the Government hold fast on the public sector pay freeze. But schools are obviously very nervous about that because, given that staffing is a very high proportion of their budgets, if there isn't a freeze on teachers' pay that will have a big implication for them in terms of the flat cash figure that they will be seeing in their budgets.

  Q13 Chair: Is there an effective pay freeze, or are there some elements of entitlement to rises, increments or anything else? Are there some hidden rises going on that will affect budgets?

  Hazel Cunningham: Within the local authority?

  Chair: Or within schools.

  Hazel Cunningham: Within schools, I think that it clearly depends on whether there is local discretion on pay policies. If there is, I think that most local authorities will be looking to freeze any kind of growth in salaries, but that would be in consultation with unions and trade union associations.

  Q14 Chair: So it is effectively a true freeze. There aren't any increments kicking in.

  Hazel Cunningham: No.

  Matt Dunkley: In answer to your question about schools, where you have incremental drift, that will still occur. That cost will be absorbed in the flat cash figure, and so it is a net pressure for schools.

  Q15 Damian Hinds: What I was trying to get to was if the CPI figure is being used as the overall inflator to calculate a 0.1% real-terms increase, in the scenario of a freeze—just to make it mathematically simple, let's assume it's a perfect freeze—the 0.1% is actually higher. Presumably.

  Farrukh Akbar: I have also read that there are estimates of pupil number rises of 0.7%. That is unconfirmed, but I have read it.

  Matt Dunkley: If the DSG figure has been calculated to include a CPI-related inflator on staff salaries—if that is in the DSG figure, which at the moment I don't think we have the detail to know—then if that pay increase doesn't occur, that is a real-terms increase over and above 0.1%. You're correct.

  Q16 Chair: So, there could be some headroom in this. If there is a true and effective freeze for two years on the pay, and that's 70 or 80% of a school's bill, and you're getting an inflation increase but that's not passed on to staff, it would actually give both local authorities and schools some headroom. Is that fair?

  Hazel Cunningham: I think that that's difficult to confirm at this stage without knowing the assumptions that have been worked into, or will be worked into, the DSG settlement, but there are implications as well in terms of the announcements that have been made about the £1 billion that will be saved, or will need to be saved, nationally by schools in procurement and back-office savings. So again, that assumption has, I presume, been built into the DSG figures overall. That is 3.3% on national DSG currently.

  Q17 Damian Hinds: I just wanted to finish by speaking about this capacity issue. I do not know if it is possible to give a percentage of capacity average figure per school, and obviously there will be some that are above average and some that are below. So, to make it simpler—again, I am not recommending this, but I just want to illustrate a point—what would be the impact of increasing the maximum class size by one pupil in every class in your authority, in terms of the overall cash impact?

  Farrukh Akbar: The average in London authorities is £5,200 approximately. So that is the cost of funding per pupil. That does not necessarily mean that that figure covers all the costs around a pupil.

  Matt Dunkley: The point to make there is that, outside of the Key Stage 1 class size limit of 30, schools are always entirely free to organise their classes to be as large or as small as they wish, and they can rotate their staffing structure to service that. So the schools formula itself is not predicated on any particular assumption about class size, other than at Key Stage 1.

  Q18 Damian Hinds: But the use of the metric of funding per pupil is, because it implicitly assumes that everything else stays the same. Is that correct?

  Matt Dunkley: That's correct.

  Debbie Jones: Just to give you a flavour, for each additional form of entry that we are currently calculating in Lambeth, we estimate that we will need an additional £130,000 per year, in terms of revenue funding. That is the estimated pressure.

  Q19 Ian Mearns: What's coming out from this is that if local authorities themselves aren't clear exactly how this is going to pan out in terms of the services that they provide, the schools themselves will not be clear about what will be available to buy back, or what they will have to buy back and pay for out of this new arrangement. Am I right in thinking that?

  Matt Dunkley: Absolutely.

  Q20 Pat Glass: Can I just clarify something? Looking at an authority like Lambeth, you will get—setting aside the schools funding for the moment—a flat amount per pupil. In an authority like yours, there has been an increase in the last few years of 24% of pupils and that is likely to increase. They are all in the wrong part of the borough, so you have to create classes and you don't have the capital funding for that. If these children were all coming from stable backgrounds, with English as a first language and with no special needs, you could cover the cost of it, but what happens if they don't? What happens if those children come in with additional needs?

  Debbie Jones: I'll speak in general terms, then I'll ask Farrukh to give you some of the detail.

  As you have just said, in Lambeth we know that there will be a continued pressure for primary places. The cumulative impact of the inter-relationship between capital and revenue means that that pressure is likely to be compounded. By that, I mean that because there is likely to be less money available for capital and because, for a number of reasons, obviously what we have been planning for—particularly on the secondary phase—is increased renovation or new schools, effectively you've got schools that are badly in need of repair. There may not be enough money. That creates its own pressures. So the interface between capital and revenue is important.

  As you also said, there are differentials across the borough. We know in terms of need that a proportion of children coming in will have a high level of additional needs and that a high proportion will qualify for the pupil premium. However, how the pupil premium is calibrated—although there has been consultation on that, we don't have the detail yet—will also depend on the amount of money that is in schools.

  Equally, regarding the Early Intervention Grant that is available to Lambeth, much will depend on, first, how much it is reduced by and whether it is front-loaded, which we expect it to be, and, secondly, there is the issue of how much of the grant is predicated on assumptions around protecting or not protecting Sure Start children's centres, and so on.

  So, because all our schools now work in federations and clusters, all these variables will knock on together. We have done a very significant amount of profiling obviously, in terms of our pupil needs numbers, but we need to look at the complex inter-relationship between those variables, which we expect to increase the pressure.

  Do you want us to add to that?

  Chair: We probably need to move on.

  Q21 Pat Glass: Very quickly, can I stick with local authority funding? We know, or we expect, that there will be a 12% cut in the non-school budget. How will that affect the children's services budget? Which of the services are likely to be affected most? Can you keep the youth service in mind when you answer that because it tends to get forgotten?

  Debbie Jones: We've no intention of forgetting the youth service. As Farrukh was saying, if you take the overall budget available, we don't know precisely how much we'll actually be left with in the complex interplay between the schools budget, our budget and the grant settlement. If I am talking proportionately, there is £50 million for social care, which covers not just child protection but services to children in the looked-after system. The remainder covers a whole range of services, including youth services and those we currently have in relation to Connexions, and all the services provided by grant. We are modelling out a whole range of scenarios that take account of the front-loading and the in-year reduction in area-based grant, which has been 24%. We anticipate—we are modelling—something between 14% and 30% overall, because that is what we need to do. Obviously, we are doing that against the council priorities, taking account of the fact that all this is now non-ring-fenced. That gives councillors choices.

  We must also take account of the services that we have to provide by law and the point I wish to make is that although funding is reducing, a number of the expectations and the law are not changing at this stage. Expectations within communities, and indeed legal requirements, remain the same. All that is balancing the impact.

  

  Q22 Chair: So you are saying that because statutory services are being given a reducing budget, they will take more than their fair share and that anything that is non-statutory is likely to be cut. Can you bring that alive for us? What does that look like on the ground? What is it like in terms of youth services and in your estates and areas? What will the changes feel like to young people in your areas?

  Debbie Jones: For young people it means that we will have to look at those services that are targeted on the more vulnerable children. By their very nature, those services will have to be protected.

  Q23 Chair: So the universal will lose at the expense of the targeted?

  Debbie Jones: That will depend on the way that the priorities in the grants are sorted, and indeed what services can be built round and within schools—the way that the pupil premium works and so on.

  Matt Dunkley: I would say that in a shire county such as East Sussex, which is a mixture of deprived urban, well-off urban, deprived rural and well-off rural communities, the main change that young people will see is the effective ending of some universal access to services. It will certainly be extremely difficult for us to have a universal offer on things such as youth services. Some of the services around Connexions and careers are also going to be under threat. Some of the services offered out of children's centres that are currently universal and free at the point of delivery to everyone will either have to be more targeted or, in some cases, charged for. Those are the kinds of change that people are most likely to feel on the ground.

  Q24 Tessa Munt: I want to look at community budgets. The Government said that around £8 billion a year is spent on 120,000 families with multiple problems. Funding gets into local areas only via hundreds of separate schemes and agencies, but the problems continue for those families for whom that money is supposed to change everything. I wonder whether anything would be achieved by abolishing the local public service partnerships and bringing in the community budget.

  Debbie Jones: On community budgets, most of us would generally welcome the opportunity to pool resources, but it is probably true to say that we are already doing that. There are going to be 16 community areas piloting community budgets, covering about 28 councils. In any event, a lot of work in those boroughs and local authorities has already been done with the developments around place-based budgets. So I think we all see it as a clear opportunity.

  Some of the risks around community budgets will relate to the extent to which there is interplay involving the separate funding streams and the separate statutory requirements. The opportunity is there because the whole can be greater than the sum of its parts, but much will depend on how, and how much, those budgets can fund, and for whom. For example, the work that will be done to identify the high-risk families—again, there are a number of precursors around high-risk families and work that has been done with them—will need to be agreed and recognised across the piece. It's not rocket science to look at the kind of families who can benefit from those community budgets. I'm thinking of histories of domestic violence, parental drug and alcohol misuse, poor family relationships—a whole range of criteria can be used. What we need to be sure about is that those community budgets will target those families who are particularly vulnerable—those families who hit the radar, whose children are at risk of coming into the care system.

  Q25 Chair: That's the point of them, isn't it?

  Debbie Jones: Yes, that is the point, but in—

  Q26 Chair: You've pooled the budgets. The money is handed to you and you're told to target the most vulnerable. You just have to get on with it, don't you?

  Debbie Jones: But the choices that we will have to make are between working with families whose children are at the top of the graph—in the system already—and working with families who are significantly at risk.

  Q27 Tessa Munt: May I follow that up? If the Government accept already that the situations of those families don't change from what has been happening up until now, what is going to change?

  Debbie Jones: The opportunity of taking away the barriers and the silos will and should make a difference. It has in certain areas.

  Chair: Thank you. May I bring in Matt?

  Matt Dunkley: The problems come once you get outside sectors in terms of pooling budgets. All the Total Place pilots and the authorities that have looked at the same principles around place-based budgeting have found this. There are ring fences within local government. Once you get outside those and get into Benefits Agency or Home Office funding, the police or other agencies—health and so on—it can get more difficult because of governance and because of restrictions, but it has to be right that pooling resources to target families in a way that changes their behaviour so that it reduces their dependency on services represents sensible long-term planning. That has to be right.

  I think the point that Debbie is trying to make is that underneath those families where those multiple problems are known are a whole raft of families who are on their way up to that point and for whom large chunks of funding are being withdrawn, and in various forms.

  Q28 Tessa Munt: I want to ask about the advantages of introducing budgets for children with special educational needs and those with disabilities. What are the pitfalls of funding in that way?

  Matt Dunkley: Could I respond to that, because my council—

  Chair: There are a few more areas that I want to get through, so although I hate to push you, it would be great if we could keep this short and sharp.

  Matt Dunkley: Okay. I'll be very quick. We have a project involving seven councils in the south-east. We've put forward a proposal to pool all the funding that youngsters with disabilities receive in a single personal budget. That will require legislative change, but we think if you have the funding associated with statements, with respite care and with health provision in a single budget that is managed either by the family or by a service on their behalf if they can't do it themselves, that will change the way in which the market works for disability. It will aid long-term commissioning—whole-life commissioning—for families. It will increase choice and flexibility for families. We'll end up with a better result and a less adversarial result for families with children who have special educational needs in a local authority. In a nutshell, that's it, but it's very, very complex.

  Q29 Ian Mearns: When the Pupil Premium comes in, it will be targeted at schools for particular children. What's to say that the school will spend it on the particular child? Could it be spent on general management of the school?

  Matt Dunkley: In terms of a personal budget instead of a statement, if you're taking about children currently in segregated, specialist provision, there would be a fairly obvious relationship between the school's spend, the benefit that the child was getting and the budget.

  With the Pupil Premium, the proof of the pudding will be in the outcomes, won't it? In return for the Pupil Premium funding, schools will be expected to demonstrate a narrowing of gaps in achievement between pupils subject to the Pupil Premium and those who are not.

  Q30 Ian Mearns: Should it be ring-fenced?

  Matt Dunkley: I don't believe that that would help schools, no.

  Q31 Chair: Can I ask about the voluntary sector? How open do you think it is? I am interested to hear from you. Would you like to do this, Neil?

  Q32 Neil Carmichael: I beg your pardon, I thought I was coming in later.

  I want to talk about the voluntary sector and how it can fit in to local authority work. In particular, I would like to know whether local authorities are receptive to the ideas of the voluntary sector and whether you have the capacity to procure the voluntary sector, because procurement is obviously a key issue here, including specifying what you want and then making the decisions about delivery?

  Debbie Jones: I'll be as brief as I can be.

  Q33 Chair: So, can you say how open you are to procuring from the third sector and whether you have a bias towards the large as opposed to the small and the local?

  Debbie Jones: Local authorities have been procuring with the voluntary sector for some considerable time and have been open to developing capacity and ensuring that what services can be run through the voluntary sector are run through it. I think that the position varies depending on where you are—whether you are in an urban area, because urban areas tend to have the large voluntary sector providers, or in a rural area, where you are talking about a complex mix. The issues will be different. In both cases, I think that there are possibilities, but the differential issues need to be tackled.

  The main point that I wish to make is that, certainly for services such as youth services, which we were talking about earlier, there are real opportunities in relation to seeing a lot of service being delivered through the third sector. However, one of the risks of the front-loading that we were talking about earlier is that you don't give the third sector enough time and capacity, particularly in areas where the big organisations are not represented, to do what is necessary to make the most. Also, it is not necessarily cheaper, and I think that is one of the issues that we need to think about.

  Q34 Neil Carmichael: For the third sector—the Big Society bit, which is really what we are coming on to—there is a need for some security, isn't there? I say that because, in the past, the voluntary sector has received grants or subsidies and that grant or subsidy mechanism has changed, or it has effectively allowed the service to be questioned. How do we get that security in place to give the voluntary sector confidence that it can be there for the long term, subject of course to the normal provisos?

  Debbie Jones: An effective procurement process and a stable settlement are obviously key to that. However, one of the issues that we have had to face—I will speak locally—is the fact that, because a lot of our services are already provided through the voluntary sector and because the Area-Based Grant took a 24% hit in-year, capacity has clearly been undermined. I can't speak for the third sector, but I imagine that what you may well be hearing next is that there is a level of certainty that is needed and that there is an issue about capacity-building that needs to be built in.

  Building the necessary skills within local authorities—in other words, so that we become more about commissioning—is not something that is problematic, per se. If the systems are right, and if they are efficient and effective, it can be done. There are two issues: the first is the front-loading; the second is the variation in maturity, strength and capacity across the piece.

  Q35 Tessa Munt: I want to ask you about Sure Start and early intervention programmes. Apparently, the Sure Start funding will remain at about £2 billion a year by 2014-15 and the early intervention grant will also be £2 billion a year by then. As I understand it, the early intervention grant will include Sure Start funding. What's left?

  Matt Dunkley: Not very much. In gross terms there are about 11 grant streams that we know of that are being amalgamated into the early intervention grant, including Sure Start. So, at the end of the four years you are basically seeing a flat-lining of Sure Start funding and, in effect, some of those other things are being removed altogether. That is going to mean that local authorities will look very hard at what some of the Sure Start funding is currently spent on to see whether the pattern established under the old regime of funding is sustainable in the context of the removed ring fence. I would argue that it is not.

  So, for example, lots of authorities will look to areas such as regulatory activity around early years settings to strip that back to statutory minimums. They will be looking at some of the activities that we are able to offer free at the moment, which we might have to begin to charge for, and we will look at targeting services paid for by that grant more specifically on the vulnerable families, rather than necessarily a completely universal offer.

  Q36 Chair: It's a relatively new programme, so is there quite a big opportunity to charge for services that have been developed? The thing has been set up; it needed to be put into place, but now can it be tightened up and improved at the same time as requiring less money to be spent on it?

  Matt Dunkley: There are big opportunities to charge for some parts of it, but they are not so substantial that they will make a massive difference. The much vaunted baby massage for middle-class families is one area where we might be able to charge, but it will not produce enough revenue to close the gap we are talking about in the overall funding streams.

  Chair: Thank you all very much for giving evidence to us this morning. If we can move swiftly to the next set of witnesses, that will be fantastic.


 
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