Services for young people - Education Contents

4  Service provision: funding, commissioning and payment by results

Public funding of youth services

52.  Although there is a statutory duty on local authorities under the Education and Inspections Act 2006 to secure young people's access to sufficient educational and recreational leisure-time activities,[98] funding of youth services is not mandatory and the localised nature of provision has meant wide variation in spending on youth services across the country. Youth services have for years been funded from a number of different central government and local authority budgets, as well as a range of charitable and private sector sources and individual fundraising. Until April 2011, a key funding source for local authority youth services was the Revenue Support Grant (RSG), the overall grant to local authorities administered by the Department for Communities and Local Government. Central government provided a number of additional grants to local authorities, including the Youth Opportunity Fund (£40.75m in 2010-11), the Youth Crime Action Plan (£11.98m in 2010-11), Challenge and Support (£3.9m in 2010-11), Intensive Intervention Grant (£2.8m in 2010-11), the Children's Fund (£131.80m in 2010-11), the Positive Activities for Young People Programme (£94.5m in 2010-11), Youth Taskforce (£4.34m in 2010-11), Young People Substance Misuse (£7.0m in 2010-11) and Teenage Pregnancy (£27.5m in 2010-11).[99] These additional targeted funds represent a significant proportion of overall funding of youth services in recent years.

53.  Spending by local authorities on youth services in England was £350 million in 2009-10, the last year for which data are available. Comparable spending since 2003-04 is given in the following table:
Financial Year Outturn spending (£)

Local authority outturn spending on youth services in England 2003-04 to 2009-10[100]

Based on these figures, mean spending by local authority youth services per head of 13-19 population in 2009-10 was £77.28.[101] By comparison, local authority mean spending per school pupil in 2009-10 was £4,290.[102] This means that per school pupil spending in that year was approximately 55 times more than per head spending on youth services.

54.  As a result of the 2010 Spending Review, all ring-fenced grants from the Department for Education were abolished, with the exception of the schools budget. This meant that, from April 2011, all central funding for youth services (including both core funding and specific grants from central government) was merged into a new Early Intervention Grant, worth £2212m in 2011-12 and £2297m in 2012-13. In addition, the overall funding settlement for local authorities through the Revenue Support Grant has been reduced, causing authorities to cut discretionary spending across the board. The Government has acknowledged that "in 2011-12 the amount to be allocated through the Early Intervention Grant is 10.9% lower than the aggregated 2010-11 funding through the predecessor grants". The Early Intervention Grant is not ring-fenced and, in addition to youth services, is intended to fund Sure Start Children's Centres, build capacity for local authorities to extend free early education to disadvantaged two-year olds, provide short breaks for disabled children, support vulnerable young people to engage in education and training, prevent young people from taking part in risky behaviour like crime, substance misuse or teenage pregnancy, support young people at risk of mental health problems, and help young people who have a learning difficulty or disability.[103] On top of the Early Intervention Grant, an additional £13m for 2011 and £37m for 2012 has been pledged to fund the National Citizen Service pilots.

Non-public sources of funding

55.  We found that the range of youth services we took evidence from received funding from a patchwork of different sources, of which public funds formed only part. By way of illustration, the Salmon Youth Centre received around 60% of its funding from central and local government,[104] YMCA England 40%,[105] The Prince's Trust 36%,[106] London Youth 15%,[107] and Fairbridge about 50%.[108] The Scout Association told us that 100% of its funding came from non-governmental sources.[109]

56.  The Minister for Children and Families, Tim Loughton MP, expressed a clear view that youth services were overly dependent on public money:

Too many are still under the monopoly of local authority youth services departments ... generally, youth services are heavily reliant on large slugs of public money, be it at a national level, through nationally financed schemes through the now Department for Education, or through local authority grants. In this age, that is unsustainable. That is why, in economically straitened times, the area of youth services is feeling the squeeze more than many other areas are.[110]

He added that "the days of relying on large, public funding cheques are no longer there" and that he wanted youth services to "rely on a greater diversity of funding".[111]

57.  Susanne Rauprich told us that "if you take a large chunk of public sector funding out of the system, you will have to replace that somehow if you are committed to services to young people". She explained that there were:

Two sources from which that funding might come. One is from the young person or the user themselves. That might be difficult, particularly if you are looking at disadvantaged young people, because they are also hit by cuts in income and so on ... You then have the private sector. Such funding is in its infancy ... At this moment in time I find it difficult to get a sense of the appetite of private sector companies. There have been some real success stories, one of which is O2. The Co-operative has spent a lot of money on young people and has launched a huge programme. But we haven't seen a universal understanding among corporates that they should be considering investment in any kind of programme. Corporate social responsibility programmes need to be developed. There are too many companies that think that they can send their work force out to paint a wall in a youth club and that it is done with.[112]

58.  One alternative funding source is the new Big Society Bank, an independent institution, established by Government, which will use funds from dormant bank accounts to fund social investment projects. The Minister for Civil Society, Nick Hurd MP, told us that the Bank would "have a high level remit from us to give some priority to investing in opportunities for young people". However, he acknowledged that it was "an independent organisation so it must be free to respond to what the market brings to it and must be free to make decisions based on the quality of investment proposals that are put to it".[113] It is not entirely clear, therefore, what degree of funding youth services might expect from the Bank.

59.  We took evidence from a range of alternative funding providers including charitable and philanthropic trusts, private business and social investment experts. They considered that there was scope for greater use of such alternative sources, but that many youth services were not sufficiently aware of the options available to them, particularly in terms of social investment. For instance, Martin Brookes told us that "to get access to that money, you need the contacts and a lot of organisations simply don't have the right contacts or the right fundraising capacity ... if you want to access wealthy donors and you are a small youth charity, it's very hard to do that".[114] This was borne out in discussions at the Government's 'Positive for Youth' summit, which found that "charities can find it difficult to access private sector businesses" and suggested that the Government could act as broker between services and the private sector.[115]

60.  Despite the scope for greater use of alternative funds, witnesses concluded that none of these sources could replace public funding. Martin Brookes, Chief Executive of New Philanthropy Capital, told us that:

whoever other funders are, they can't provide enough protection because the scale of the cuts that a lot of organisations are facing is just too acute. The other funders might be foundations or trusts, or they might be private donors. Neither of those sources of funding is big enough. They could also be social investors, but that is too nascent a market to be able to step in and plug the gap.[116]

The Department for Education's summary of discussions at the 'Positive for Youth' summit similarly states that "private sector organisations are generally reluctant to provide money to 'top up' statutory funding",[117] and social investment organisation Social Finance wrote to us that "social investment in any form is not a replacement for the revenue that the youth sector is currently losing".[118] These conclusions were rather at odds with what the Minister, Tim Loughton MP, told us: that, if social investment models were developed properly, the amount of money levered in from non-Government sources would "turn out to be substantially more than the sum of the parts of public money that have been invested in the past".[119]

61.  We disagree with the Minister that spending of £350 million per year—equating to around £77 per young person aged 13 to 19—on youth services in England equates to "large slugs of public money". On the contrary, we congratulate the sector for its long-standing dexterity in making limited resources go a long way and for continuing to support young people despite reliance on a patchwork of different funds. However, in the tight financial settlement, services will need to redouble their efforts to leverage in other sources of funding, including making better use of philanthropic and charitable funds and private sector investment. Our evidence suggested that many smaller services found it hard to access such sources: we recommend that the Government and local authorities take positive action to support them by brokering partnerships with alternative funders.

Cuts to youth services

62.  It seems that the removal of ring-fencing for youth provision, coupled with the 10.9% cut to the value of funds going into the Early Intervention Grant, is leading some local authorities to prioritise statutory and higher-risk services, such as children's services, above youth services. The nature and scale of cuts to youth services funding started to emerge during the course of our inquiry. In some areas at least the picture is one of stark reductions in local authority funding for youth services. Susanne Rauprich, Chief Executive of the National Council for Voluntary Youth Services, told us that "right across the board, all we are seeing is significant reductions to services for young people",[120] and Doug Nicholls, National Secretary of the Community and Youth Workers Union, warned that "many youth services will have disappeared or be so depleted by the time of the Education Select Committee Report that only bold proposals from the Committee will help to lay a foundation for a future".[121] Written submissions from a range of sources expressed similarly grave concerns. [122] This analysis was supported by two recent surveys. A survey of local authorities by the Confederation of Heads of Young People's Services in February 2011 showed that budget cuts averaged 28%, but that some authorities were cutting 70%, 80% or even 100% of services. It found a total of more than £100 million being cut from local authority youth budgets in England by March 2012 and that the services most affected would be open-access youth clubs and centres, which 96% of the 41 heads of youth services who responded said would either be reduced or stopped altogether by April 2012.[123] A separate survey by Children and Young People Now magazine and the Unite the union found very similar results, indicating that in areas such as Warwickshire and Tameside the youth service was being scrapped altogether.[124]

63.  The existence of hefty budget reductions at local level was confirmed by local authority heads of youth services. For instance, Harry Fowler, Head of Birmingham Youth Service, said that his service was facing 50% cuts over the following two to three years: £3 million from a total budget of £5.8 million.[125] Brendan O'Keefe, Head of Kensington and Chelsea Youth Service, thought reductions would be higher than his council's average of 28% by 2015.[126] David Wright, Chief Executive of the Confederation of Heads of Young People's Services (CHYPS), spoke of a "double whammy" for youth services of cuts to central ring-fenced grants and to overall local authority budgets. Contributions from young people in Haringey through our online forum stated that "8 of the 13 youth centres have closed in our borough" and that the council was cutting the youth service budget by a further 75%.[127] The Department for Education itself recognised that youth services were being hit particularly hard. A discussion document prepared for its 'Positive for Youth' policy summit in March stated:

It is becoming apparent that in many areas services for young people are not being prioritised by local authorities and are experiencing disproportionate budget reductions, for example in favour of early years services and safeguarding. The Government has encouraged local authorities to focus limited funding on targeted interventions with the most vulnerable young people, and universal provision does indeed appear to be experiencing the deepest cuts. However, the scale of budget reductions and the pace at which decisions are being made is limiting the scope for full strategic needs and options assessments and for investing in innovation and fundamental reform, increasing the risk that services are simply 'salami sliced'.[128]

64.  The Government did not appear to have a detailed view of where local authorities were making disproportionate cuts, with the Minister, Tim Loughton MP, telling us that the Government "did not know the extent of it at the moment",[129] and the Minister for Civil Society, Nick Hurd MP, that "we are working with our strategic partners to gather information about what is happening on the ground".[130] Whilst acknowledging that the sector had been "disproportionately affected",[131] Mr Loughton told us that there was little he could do about levels of funding, emphasising that "the funding decisions are not made by us, they are made by local authorities".[132]

65.  The Minister pointed out that if local authorities were challenged for failing to consult young people on the provision of positive activities, "they would not be fulfilling their [statutory] duties",[133] although noted that there was "no enforceable statutory guidance on the level of provision of youth services".[134] Doug Nicholls emphasised this, warning that if local authorities did not meet their statutory duties, the Community and Youth Workers Union would be "forced to take a sequence of judicial reviews".[135] In a speech to the National Council for Voluntary Organisations in March 2011 the Communities Secretary, Rt Hon Eric Pickles MP, said that he would consider giving statutory force to the expectation that local authorities should not pass on "disproportionate" cuts to charities.[136] The Government subsequently issued draft statutory guidance to councils to this effect, defining "disproportionate" as meaning that cuts to the voluntary sector should not be greater than the level of cuts faced by the council itself.[137] Under the provisions of the 1996 and 2002 Education Acts, the Secretary of State for Education has powers of intervention to secure the proper performance by local authorities of their functions. These include the power to direct local authorities to provide specified facilities, or to direct that the youth service in a particular area be operated by a body other than the local authority.[138]

66.  Mr Loughton believed that there was a large degree of duplication and overlap in service provision, with multiple organisations running services for young people. He told us that "we have a patchwork of public service providers, with odd youth clubs, outreach workers and so on, some of which are very good and some of which are not".[139] He also expressed dismay that many services did not know what was going on nearby:

what is so frustrating for me is that I go and visit a youth project in a certain area and say it is fantastic, but then you go next door and they have never heard of it, nothing like that is happening, yet the same sort of problems are being dealt with elsewhere. For some reason, we are bad at disseminating best practice ... I want organisations to come forward with a really good project and for me to put them on a platform, to take them around the country and ask why this is not happening in your area.[140]

He thought that the Centre for Excellence [and Outcomes in Children's and Young People's Services] could disseminate more best practice, and also was in favour of 'roadshows' to publicise good practice, led by the Department for Education.[141]

67.  A number of witnesses agreed with the Minister's analysis about the level of duplication. Susanne Rauprich, Chief Executive of the National Council for Voluntary Youth Services, said that "there are still a number of services that are not necessarily what young people want. Bad practice does exist".[142] Tony Gallagher, HMI National Adviser (Youth Support) for Ofsted, believed that "there are lots of weaknesses in the delivery of youth services ... they are inconsistent across the country and within services",[143] and Nick Wilkie that "commissioning should get tough about quality", arguing that London Youth intended to become firmer about its member organisations needing to meet quality standards to retain membership.[144] Howard Williamson, Professor of European Youth Policy at the University of Glamorgan, agreed that:

far too much energy and resources are spent on competing with each other to provide the same kinds of services in the same locality. That was not the case 15 years ago: there were big gaps, but then, suddenly, under a former Prime Minister's social inclusion agenda, lots of youth organisations turned their face to 'we are going to be the ones to re-engage the young people who are NEET [Not in Education, Employment or Training]'. Suddenly you found five organisations trying to do exactly the same thing in the same locality with the same kids.[145]

68.  It appears that provision of youth services is currently "patchwork", as the Minister suggested to us, with a degree of duplication and overlap between activities and providers in some areas. We did not, however, hear evidence that decisions about current cuts to services were being made on the basis of assessment of what was needed locally and in order to weed out overlapping provision. On the contrary, the Government's assessment seems to be that cuts are being applied across the board to 'salami slice' youth services, where they are continuing at all.

69.  Youth services cannot hope to be immune to necessary public spending cuts. However, there have already been very significant and, in the Minister's own words, "disproportionate" cuts to local authority youth services, ranging from 20% to 100% in some areas, and further cuts are planned over the Spending Review period. For many wholly or partially publicly funded youth services, changes to Government spending and funding structures—including the reduction to the value of previous funds redirected into the Early Intervention Grant and the reduction in overall Revenue Support Grant to local authorities—may be both dramatic and long-lasting. The Government's lack of urgency in articulating a youth policy or strategic vision is regrettable, is compounding an already difficult situation and should not be allowed to continue. In setting out its strategic vision the Government should indicate its expectations of the range and standards of youth services which should be available across the country including, for example, access to information and advice, to varied opportunities for personal and social development and to volunteering. Such opportunities need to reflect the different requirements of those beginning adolescence and those entering adulthood, as well as other socio-economic factors.

70.  We welcome the Government's issuing of draft statutory guidance to local authorities not to pass on "disproportionate" cuts to the voluntary sector. We urge it to finalise this guidance and ensure that local authorities are made aware of its application to youth services. However, if local authorities fail to meet their statutory duty to provide sufficient services for young people, the Secretary of State for Education should consider employing his powers to direct them to commission adequate provision.

71.  We agree with the Minister's concern about a lack of awareness and information-sharing between services and geographical areas. The Department should take a lead in sharing best practice. We recommend that it establish a dedicated area on the 'Youth' section of its website for youth services and young people to post examples of innovative practice to encourage services to learn from one another. Local authorities should establish similar area-wide repositories.

Commissioning youth services


72.  The Government has called for a more contestable market for public services and greater use of commissioning and mutualisation by local authorities, including more payment by results. The Spending Review 2010 set out that "the Government believes that while it should continue to fund important services, it does not have to be the default provider. This stifles competition and innovation and crowds out civil society". It stipulated that the Government intended to set proportions of public services that should be provided by independent providers in certain policy areas, including youth services: "the Government will look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, such as the voluntary and community sectors and social and private enterprises".[146] It also announced that "the Government will pay and tender for more services by results, rather than be the default provider of services".[147]

73.  In terms of youth services, the Department's submission to our inquiry said:

we want to stimulate a fundamental shift in the role of local authorities in services for young people to enable a radical re-engineering of provision so more is delivered by voluntary and community organisations, greater private sector involvement leads to greater leverage for public funding, and local authorities themselves become strategic commissioners rather than default providers of services with a greater emphasis on value for money and the effectiveness and impact of funded services.[148]

The Minister, Tim Loughton MP, urged local authorities to be "quite radical" in delivering youth services, commenting that "the sky's the limit" and questioning "why shouldn't a whole youth services department be run by a voluntary provider, or a federation of voluntary providers ... so it's down to the political leadership of the council to set its priorities—'this is what we want to see for the young people in our area'—and then it's down to a voluntary provider to run that whole department to achieve those objectives".[149]

74.  We heard that several local authorities were indeed already embracing such changes. For instance, Fiona Blacke, Chief Executive of the National Youth Agency, told us that:

the reality is that far-sighted local authorities ... are beginning to develop strong approaches to strategic commissioning ... This is not based on a conversation with themselves about whether that is an in-house or a voluntary sector provider. It is about saying we can actually model the specifications of what we need for our young people, and then put that out to whoever is able to deliver it. In some places, local authority youth services are forming themselves into social enterprises and co-operatives to try to deliver that. In other places, there are quite sophisticated models of third sector supply chain management emerging, with one overarching organisation being able to manage a host of services.[150]

Garath Symonds, Head of Surrey Youth Service, told us that he was implementing a commissioning model which he believed could save money without "reduc[ing] services, outputs, or the hours of youth work that are delivered on the ground".[151] Surrey is proposing to retain ownership of its 35 youth centres but to second youth workers to voluntary organisations which will become the centres' 'managing agents'. The authority will give each centre resources to deliver 15 hours of youth work per week and ask its voluntary sector partners to match that. Mr Symonds explained that this was possible because "the voluntary sector can do things at less cost ... the amount we are spending on management is going to be massively reduced, because the voluntary sector can manage services at less cost. It can attract funding from outside, and it can attract community assets in a way that we cannot".[152]

Difficulties with commissioning

75.  There was some concern over who local authorities would choose to commission and whether they would favour bigger providers. For instance Nick Wilkie, Chief Executive of London Youth, thought that "there is a real risk that five or ten years down the line we will have very big £100 million organisations churning out services on a one-size-fits-all basis, because that is what contractors demand, and we will lose the local youth club".[153] Mark Blundell, Executive Director of the Salmon Youth Centre, also worried that "there is a real danger that we could get national organisations who come in and pick up a contract ... it should really be about local provision, rooted in communities".[154]

76.  Responding to the Government's call for greater provision by the voluntary sector, several witnesses emphasised that the voluntary sector was already heavily involved in the delivery of youth services and urged commissioners to build on those partnerships. Harry Fowler, Head of Birmingham Youth Service, said that "to dispel perhaps not a myth but the misunderstanding sometimes, the partnership between statutory and voluntary youth services is already extremely close. It is very hard to draw a line between some of them. We have statutory youth workers based in voluntary organisations".[155] Susanne Rauprich warned that her particular fear was that "partnership mechanisms, which really ought to be strengthened at a time like this, are also at risk in certain areas".[156] Nick Wilkie thought that the best partnerships would be "between large charities that have national brand and can invest in quality assurance, impact assessments and good financial controls alongside the inevitably slightly chaotic, rough around the edges local provision".[157] The Confederation of Heads of Young People's Services (CHYPS) wrote in evidence that "a mixed economy of voluntary and local authority direct delivered services secures best outcomes for young people".[158] Although there is no national figure available, small-scale comparisons suggest that services provided by the voluntary sector significantly outnumber those provided directly by local authorities.[159]

77.  We also heard that commissioning against specific outcomes could be to the detriment of young people's overall development. Nick Wilkie outlined that:

Commissioners will typically commission in their line of sight to reduce reoffending or teen pregnancy, or promote retention in education ... the risk is that somebody might work with you on Monday night, Neil, because you are about to be kicked out of school; somebody might work with you on Tuesday lunch time because you are about to have an unwanted teen pregnancy; and somebody might work with you on Wednesday because of something else. No one is saying, "Neil, you're a great bloke, but you're screwing up. Why?" ... The point is that we need to commission for developing character, which is not a nebulous or romantic thing to say. If we develop characters, we will increase resilience and abilities, which will lead to a range of outcomes.[160]

Witnesses from targeted services also warned that "simply providing an intervention that addresses a single behaviour often doesn't address the entire set of issues for a young person".[161] Some emphasised that the outcomes on which services are commissioned should include positive contributions by young people, as well as deficit indicators. Nick Wilkie noted that "we now have a database where we can all understand what crime was committed in our neighbourhood. Surely it is not beyond the wit of us all to have the positive mirror image of that; to say how many young people contributed positively in my neighbourhood?"[162]

Young people's role in designing services

78.  One model being championed by the Government is mutualisation, whereby young people themselves lead services, with the local authority and professional youth workers providing support. The Confederation of Heads of Young People's Services has been piloting the model with a number of local authorities, and David Wright, its Chief Executive, told us that 17 other authorities were already interested in mutualisation.[163] Brendan O'Keefe, Head of Kensington and Chelsea Youth Service, one of the pilot local authorities, explained his intention to "opt out of the local authority in order to run our own business, contracted back with the local authority at less cost. The improvement for us is that we will be able to attract funding from a variety of different sources, which we currently cannot access".[164]

79.  We were told that involving young people in designing and commissioning services was important, and several ways of doing so were proposed. Liam Preston, Young Chair of the British Youth Council, noted that an Ofsted report in 2007 had concluded that involving young people in reviewing services was a key to achieving success. He thought that "if you tailor a service to what young people need and let them review it, rather than getting other people to come in, it will end up saving money".[165] The British Youth Council told us that "just over half (57%) of youth councils manage a budget and seven out of ten either participate in or run the Youth Opportunity Fund".[166] A 2008 review of the Youth Opportunity Fund (YOF) and Youth Capital Fund (YCF) by the National Foundation for Educational Research for the then Department for Children, Schools and Families, concluded that the "approach whereby a panel of young people decide whether applications for the YOF/YCF from other young people should be funded has been a success. Nearly all local authorities considered that the young people had done a good job in administering the Funds".[167]

80.  The Minister, Tim Loughton MP, agreed, saying "if we are producing youth services that are effective, needed and producing results, the best test is that they are being appreciated by the young people who are there to use them".[168] A couple of written submissions questioned how it would be possible to assess the effectiveness of youth work without asking the young people who engaged with the youth worker, with one drawing an analogy with measuring the impact of a vicar, and another of an MP.[169]

81.   Susanne Rauprich told us that a whole range of methods could be employed to engage young people in the commissioning cycle, such as the appointment of a young commissioner in Devon, which the Department for Communities and Local Government had "considered to be an effective model".[170] Fiona Blacke suggested recommending that Government include, as part of its commissioning support advice to local authorities, guidance on how to engage young people effectively in the process.[171] Similar arguments were made by The Scout Association—one of whose key tenets was an emphasis on young people leading and designing services—the Prince's Trust and Salmon Youth Centre.[172]

82.  One of the discussion threads on our online forum with young people asked young people "if you were in charge of spending for young people in your area, what would you spend the money on?" Respondents suggested a range of priorities, of which the most commonly occurring were libraries, sports facilities and youth centres. Others mentioned training for jobs, careers advice, music, cadets, Scouts, subsidised travel, and (particularly sexual) health clinics.[173] Our panel of witnesses from national youth organisations all thought that allocating funding to services led by young people "would be a great recommendation",[174] and Fiona Blacke commented that "under the previous administration one of the great successes was the youth opportunity fund and the youth capital fund, which were distinct, ring-fenced elements of the budget that local authorities gave young people to control. There was huge scepticism among elected members about whether young people would make sensible decisions, but the evidence is that they did it extremely well".[175] Bill Eyres, Head of Sustainability at O2, also thought that "social action is about getting money and support into the hands of young people".[176]

83.  We support the broad principle that local authorities should primarily become strategic commissioners rather than simply the default providers of youth services. However, given that a significant proportion of youth services are already provided by the voluntary sector, to make significant savings local authorities will need to consider radical options—for instance, converting entire youth services departments into social enterprises, as in Kensington and Chelsea, or handing management of youth centres to the voluntary sector, as in Surrey.

84.  We believe there are a number of practical recommendations which will make commissioning of youth services more effective. The Government should draw these to the attention of local authorities, either through its forthcoming Public Service Reform White Paper, or by issuing guidance on commissioning practice. First, rather than simply continuing to commission those services currently being provided, local authorities should undertake a thorough review of what their young people want and need, avoiding duplication and waste and taking into account what is already being provided by other agencies. Second, the outcomes against which services are commissioned must include positive as well as deficit indicators. Third, local authorities should encourage partnerships bids, particularly those which mix large bodies which are well-known and have the capacity to invest in collecting management information, with smaller, community-based providers. Finally, Government should require local authorities to set out how they will involve young people in commissioning decisions, whether in representative roles, such as young mayors, or through processes such as participatory budgeting. The evidence we received suggested that such involvement can not only empower young people, but also enhance the effectiveness of spending decisions.


85.  Payment by results is a model whereby a proportion of funding from central or local government to providers is dependent on achieving specified results—for example, a reduction in reconvictions among young offenders. Payment by results has already been employed in other areas of public policy, most notably by the Department of Health to pay Primary Care Trusts for improving patient outcomes against a range of measures. The Department for Education's written submission stated that:

The Department is committed to introducing an element of Payment by Results to the Early Intervention Grant. The Department is considering approaches for a consistent PBR mechanism which can be applied across the whole to encourage Local Authorities to focus on what works best in their area ... [and] is considering carefully what kind of financial incentive model might be appropriate to increase the focus on desired outcomes.[177]

The Minister for Civil Society told us that "the payment-by-results principle is attractive in the sense that it focuses the commissioner's mind more keenly on what he or she is trying to achieve". However, he recognised that "the underlying reality is that such a principle is not applicable everywhere, and it tends really to work only when the outcomes can be clearly measured and the metrics are clear". [178]

86.  The Government is advocating the development of social impact bonds in funding public services. Social impact bonds are a form of outcomes-based contract in which public sector commissioners commit to pay for significant improvement in social outcomes (such as a reduction in offending rates, or in the number of people being admitted to hospital) for a defined population. Through a bond, private investment is used to pay for interventions, which are delivered by service providers with a proven track record. Financial returns to investors are made by the public sector on the basis of improved social outcomes. The best known example of Social Impact Bonds to date is a pilot by the Ministry of Justice with young offenders at HMP Peterborough, designed to tackle the high rates of reoffending associated with offenders released from short-term prison sentences. Under the scheme, voluntary and community services are being financed through social investment to deliver intensive support to 3,000 short-term prisoners over a six year period, both inside prison and after release. If the initiative reduces re-offending by 7.5% or more, investors will receive a dividend payment of up to 13% of their original investment, funded by the savings generated in the criminal justice system.[179] Louise Savell, Associate Director at Social Finance, the organisation developing the bonds, told us that:

In many ways youth services offer good potential for social impact bonds. There are a range of experienced, high quality service providers in the sector. It is fairly well documented that, when youth services do not work or youth services are not provided and youth unemployment, teen pregnancy and antisocial behaviour are high, there is a significant social consequence and public cost. All that stands in favour of outcome-based financing. The matter is potentially tricky in terms of who pays for success. When we look at where the outcomes and benefits to the public sector accrue from improved youth outcomes, there are potential benefits to the Department for Work and Pensions of reduced benefit usage, increased tax take and to the health sector of reducing teen pregnancy and mental health issues, as well as the Department for Education. The benefits are spread around the Government. The is a real question around who would pay for outcomes.[180]

87.  The potential for both payment by results and social impact bonds for youth services seems problematic in terms of the difficulties we found in measuring outcomes, as discussed in chapter 3, which are particularly acute in terms of preventative and open-access services. The following summary of difficulties with payment by results was put to charitable, private and social finance experts:

The first is the difficulty in defining the audience, especially when people may drift in and out of it. The second is isolating the impact of any particular intervention that a service might do when lots of things are happening in these people's lives. The third is identifying a control group to compare that impact against. The fourth is having measures of success, particularly in the interim—we may be able to project that over a person's lifetime, although there are all sorts of effects, but what is the measure in a definable, realistic time frame? Those first four, I suggest, apply to any payment-by-results scheme and a further two seem to me to be added when you introduce social impact bonds. The first of those is the fact that savings come from many different budgets and there is a danger with that of double counting. The sixth, or second, depending on which list we are counting on—is that savings are a cash flow over a very long time horizon, so even if savings are made, they may be made in 15 or 20 years' time, when there has been two or three changes of Government.[181]

Witnesses responded that some of those difficulties were surmountable, although others were more entrenched. Louise Savell thought that cohorts of young people and comparator areas could be used instead of a control group, and that interim measures of success could be used to counteract the long time frame over which results might materialise, but recognised that the challenge was "whether sufficient data exist between specific interventions and their impact on those outcomes to build a robust case that would give investors sufficient confidence to put their money behind it".[182]

88.  Some witnesses suggested that payment by results models might work in some targeted services, where a specific, easily measurable outcome was sought, but many foresaw difficulties with more open-access services. Garath Symonds, Head of Surrey Youth Service, noted that "we have just let a contract to move young people who are NEET into apprenticeships. We are paying the agency only when it gets the young person into an apprenticeship".[183] David Wright, Chief Executive of the Confederation of Heads of Young People's Services (CHYPS), thought that "we know that by reducing teenage conceptions or later pregnancy we can see in the levels of investment that there are savings for the state as a consequence" but that "the more general and open access it is, the less clear it becomes".[184]

89.  Even with a specific outcome in mind, being able to put a value on prevention would be extremely difficult. This was neatly illustrated in one exchange, in which it was rhetorically asked: "are we suggesting that people who are not pregnant by the time they are 18 pop in for a payment?"[185] Louise Savell agreed that applying the model to preventative services could be hard: "demonstrating a counter-factual—that if you hadn't done something then there would be a negative consequence—is the key challenge".[186]

90.  We do not believe that a system whereby local authorities withhold payment until a service demonstrates specific results is suited to the funding of youth services, particularly open-access ones. First, many services simply do not currently collect appropriate data to measure outcomes. Second, the cohort is ill-defined, with many young people dipping in and out of services over a period of time. Third, isolating the impact of a single intervention is hard when a service may be only one of several influences on a young person's life. Fourth, results are likely to be achieved over a long time frame over which services would struggle to operate without any up-front funding.

91.  However, we do believe that there is scope for a form of social impact bond to be applied at a local authority level, in addition to core spending on youth services by local authorities. Under such a model, the Government could encourage social investment in a basket of outcomes for young people in a local area. If those outcomes improved, there could be a return to the investor and also to the local authority. We recommend that the Government carry out a feasibility study on such a system, bearing in mind that it should be in addition to current spending on youth services, not an alternative.

98   Education and Inspections Act 2006, Part 1 Section 6. Available at: See paragraph 5 of this Report for relevant text Back

99   Figures provided by the Department for Education and published on its website. The Youth Opportunity Fund, Youth Crime Action Plan, Challenge and Support, and Intensive Intervention Grant were ring-fenced, meaning that local authorities were required to spend the money on that purpose alone or lose the funding. The Children's Fund, Positive Activities for Young People, Youth Taskforce, Young People Substance Misuse, and Teenage Pregnancy grants were unring-fenced, but took the form of additional area-based grants which central Government directed should be spent on these priorities Back

100   Data are taken from section 52 (now section 251) outturn statements submitted to the Department for Education by all 150 local education authorities, and are LEA Net Revenue Expenditure. Prior to 2003-04 outturn data was only reported against Net current expenditure (not LEA Net Revenue Expenditure). In 2008-09 and 2009-10 there was an additional funding stream for Positive Activities for Young People, totalling in each year £93,736,528 and £95,382,802 respectively. Financial year 2009-10 are the latest available outturn data: data for 2010-11 are expected in late autumn 2011. Back

101   Total local authority spend in England in 2009-10 divided by the total number of 13-19 year olds in England based on latest ONS estimates (4,532,500 in 2009) taken from Office for National Statistics, Mid Year Population Estimates 2009, Table 4 Back

102   Department for Education, Benchmarking tables of LA planned expenditure, 2009-10. The figure excludes LEA central services spending on schools which is not delegated to individual schools or providers (e.g. special education, school transport, school improvement, asset management, Connexions) Back

103   Written Ministerial Statement on Education Spending, 13 December 2010 Back

104   Q 111-112 Back

105   Q 113 Back

106   Q 149-150 Back

107   Q 150 Back

108   Q 155 Back

109   Q 110 Back

110   Q 410 Back

111   Q 446 and Q 418 Back

112   Q 42 Back

113   Q 441 Back

114   Q 306. See also Q 303 [Louise Savell] Back


116   Q 305 Back


118   Ev 184 Back

119   Q 444 Back

120   Q 34 Back

121   Ev 199 Back

122   For instance, Unison states that Norfolk County Council is proposing a complete withdrawal of its youth services [Ev w148]. The Confederation of Heads of Young People's Services (CHYPS) stated that cuts of 50% and 100% were occurring across the country [Ev 149] and the National Youth Agency that more than a third of charities expected reductions of 10-20% and one in five were closing completely [Ev 103]. See also Brendan O'Keefe, Head of Youth Service at Kensington and Chelsea who said that 28% cuts "would result in a very, very significant reduction in our ability to run youth services. Because most of our services are discretionary, I anticipate that it will be higher, but there is not yet a council position on that; it is purely my estimate". Q 238 Back

123   Confederation of Heads of Young People's Services (CHYPS), 7 February 2011. Available online at: Back

124   True scale of council youth service cuts revealed, Children and Young People Now, 8 February 2011 Back

125   Qq 230-231 Back

126   Qq 237-238 Back

127   See posting at Back

128   Department for Education, Positive for Youth discussion document. Available online at:  Back

129   Q 483 Back

130   Q 458 Back

131   Q 451 Back

132   Q 453 Back

133   Q 454 and 455 Back

134   Q 456 Back

135   Ev 200 Back

136   Rt Hon Eric Pickles MP, Speech to National Council of Voluntary Organisations, 1 March 2011. Available at:  Back

137   Department for Communities and Local Government, Best Value Guidance Consultation, April 2011, available at: accompanying press notice, available at: See also Local Government Chronicle, Ministers unveil statutory guidance for councils dealing with third sector,14 April 2011, pp.2-3  Back

138   Set out in Department for Education (2003), Resourcing Excellent Youth Services (2003), Annex 2 Back

139   Q 428 Back

140   Q 447 Back

141   Q 470 Back

142   Q 24 Back

143   Q 209 Back

144   Q 145 Back

145   Q 213 Back

146   HM Government, Spending Review 2010, Cm 7942 (October 2010), p.34 Back

147   Ibid., p.34 Back

148   Ev 113 Back

149   Q 464 Back

150   Q 34 Back

151   Q 236 Back

152   Q 243 Back

153   Q 161 Back

154   Q 124 Back

155   Q 245 Back

156   Q 19 Back

157   Q 161 Back

158   Ev 146 Back

159   For instance Ev w20 [Tom Wylie]. Currently around 11,000 registered charities in the UK include 'young people' in their mission or activities, of which some 6,000 define themselves as 'youth clubs or Scout groups' [Charity Commission 2011]. This significantly outstrips the number of local authority statutory providers Back

160   Q 138 Back

161   Q 316 Back

162   Q 163 Back

163   Q 246 Back

164   Q 242 Back

165   Q 26 Back

166   Ev 118 Back

167   National Foundation for Educational Research (2008), Outcomes of the Youth Opportunity Fund/Youth Capital Fund, Research Report DCSF-RR046, p.iv Back

168   Q 419 Back

169   Graeme Tiffany wrote "sometimes I think of youth workers as being a bit like vicars; how could you judge if a vicar was doing a good job without asking their parishioners?" [Ev w373]; Keith Jones wrote that "what evidence do your constituents, as tax payers, have that YOU provide value for money? What would your `robust evidence look like?"[Ev w375] Back

170   Q 47 Back

171   Q 48 Back

172   Qq 88-90 and 134 Back

173   See posting at:  Back

174   Q 26 Back

175   Q 27 Back

176   Q 311 Back

177   Ev 113 Back

178   Q 470 Back

179   Cabinet Office (2010), Modernising Commissioning, p.10 Back

180   Q 314 Back

181   Q 327 Back

182   Q 315 Back

183   Q 222 Back

184   Q 251 Back

185   Q 317 Back

186   Q 317 Back

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© Parliamentary copyright 2011
Prepared 23 June 2011