Published by Meg Hillier MP, Chair, Public Accounts Committee on 1 November 2017
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The way public services are commissioned is fundamental to their success. Commissioning is the design, procurement (where there is a purchaser-provider split) and evaluation of public services. In many cases, in healthcare, employment services and offender-management programmes, this split exists, but the commissioning structures are not in place to achieve value for money for the over £335 billion spent each year on public services.
This was the finding of Reform’s previous research, Faulty by design. The state of public-service commissioning, which argued that the way public services are commissioned is fundamentally flawed. Commissioners do not focus on outcomes, rather rewarding provider inputs (such as activities), or outputs (such as waiting times), rather than outcomes (such as quality-of-life improvements). The funding of services is fragmented, with different bodies commissioning services to achieve the same end (including duplicate programmes being commissioned), or gaps in services in other cases (where separate commissioners assume it is each other’s responsibility). Despite aims to devolve elements of commissioning public services, to areas such as Greater Manchester, the centre still controls the design and functioning of services through national contracts and targets, for example. All together this means that commissioners have not worked with providers to tailor service design to outcomes that matter to everyone using public services.
A radical new offer is needed. The devolution agenda in England should be drastically accelerated. Commissioners need the power to design contracts for providers to meet local needs most effectively – in healthcare, employment services, skills and offender management. This requires commissioners to hold non-ring-fenced budgets, with maximum freedom to design contracts to offer to competitive public-service markets. This will only flourish if commissioning areas are designed to cover geographies requiring similar interventions, and governed by single, integrated and accountable commissioning bodies.
This is more a change of tune than a tearing up of institutional arrangements. Unitary authorities or combined authorities can be responsible for commissioning services, totalling over £100 billion in 2016-17 spend. These would replace complex local commissioning bodies, such as Clinical Commissioning Groups (CCGs) and Police and Crime Commissioners (PCCs), and allow commissioners to integrate service design. New local authority structures can cover 38 areas, which have similar healthcare and employment needs. This transfer of funding from central to local government would be followed by the abolition of NHS England, a commissioning organisation. The centre must take a light-touch approach by setting high-level outcomes, for local commissioners to tailor to their areas. International moves to a more devolved state suggest this can be completed in 15 years, with the right support.
Recommendation 1: The Government should devolve 95 per cent of NHS England’s budget, totalling £101.9 billion in 2016-17. The Government should scrap NHS England.
Recommendation 2: The Government should devolve responsibility for the commissioning of five employment-services programmes, including Jobcentre Plus, totalling £1.5 billion in 2016-17.
Recommendation 3: Government should devolve the commissioning of 12 skills and apprenticeships programmes, totalling £3.2 billion in 2016-17.
Recommendation 4: Government should devolve the commissioning of probation and youth-justice services, totalling £1 billion in 2015-16.
Recommendation 5: Government and local areas should ensure the coterminosity of services boundaries when entering devolution negotiations. They should take into consideration population health outcomes, their wider determinants, LEP boundaries, STP boundaries and council boundaries. Taking these elements into account would approximately result in 38 devolved commissioning areas.
Recommendation 6: A combined authority or a unitary authority should cover a commissioning area and take on all devolved commissioning functions for healthcare, employment services, skills and apprenticeships, and offender management.
Recommendation 7: Local commissioning boards should be headed by a single leader accountable for these decisions. Mayors should not be mandated by central government, however, and local areas should be able to shape their own leadership structure if one elected official holds a time-limited position accountable for public services across the local commissioning region.
Recommendation 8: Local commissioning bodies should form around the outcomes set by the cabinet and leader. Agile procurement teams should tender contracts, and disband after.
Recommendation 9: The Government should expand the role of the Cities and Local Growth Unit to include oversight of the devolution of public-services commissioning. The new unit should be called the Devolution Unit with wider membership from all departments from which powers are devolved.
Recommendation 10: Local commissioning bodies should receive block-grant funding. Local commissioning bodies should only be required to meet high-level outcomes agreed with the centre to receive the funds, and the grants should cover five-year periods. Block grants should be inflation linked and the inflation index and funding formula set by a UK Funding Commission.