Some thoughts on the spending review

I thought this was a rather readable and useful piece from my colleagues over in the Sustainable Funding team. So with their permission, I have reproduced it here.

Overview

The long-awaited spending review is out and at a first glance the picture looks as opaque as ever, with front-line decisions still to be announced now the top-level budgets have been allocated. We’ve taken a look at the spending review and digested the main points and suggestions for action. We’ve tried not to duplicate analysis elsewhere and have suggested some more reading at the end if you’d like a more general summary.

Firstly, there are cuts, and they are bad – but they are not as bad as had previously been suggested (possibly an example of managing expectations, or maybe a sign that all the lobbying and negotiation had an effect). The government announced an average of 19% over four years.

Unfortunately – as feared – the departments with the biggest cuts are those that give most funding to the voluntary and community sector. If you rely on funding from the Department for Media, Culture and Sport, the Arts Council or the Department for the Environment, Food and Rural Affairs then they’ve all been disproportionately cut. The Department for Communities and Local Government are receiving the largest cut of all - 51%.

Before the spending review the Institute for Fiscal Studies estimated that we’d drop back to 2003/2004 levels of funding for the VCS. The country as a whole is dropping back to 2008/2009 levels (the shocking point about this is that we may as a result spend less of our GDP on our public services than the USA!).

However

And this is a big however.

The cuts appear to give a massive opportunity to those outside the public sector to deliver public services. The government is mooting the idea of specifying a percentage of services to be transferred outside the public sector – they want more private involvement in delivering services and are keen for the VCS to get involved.

To support the VCS getting involved, they’ve come up with some money – the ‘Transition Fund’. £100m will be made available to aid voluntary and community organisations to prepare themselves for the new situation. This money is likely to be ring fenced for development/capacity building work and is especially aimed at improving resilience over the next two years. It will also be in place incredibly quickly – some by the end of November this year.

Take action now: working with local authorities and other local statutory agencies

We’ve already seen that some local authorities are responding to the cuts in a way that could increase opportunities beyond even a quota set by government. Suffolk, for instance, have announced plans to outsource everything. Others, such as Hammersmith and Fulham, Chelsea and Westminster have announced that they will merge many of their services, creating a new geographical area for service delivery and perhaps creating opportunities for those who already run cross-borough services.

Local authorities probably won’t – on the whole – make announcements about how they’re going to allocate their budgets until early 2011 (they don’t get their budget until later this month). But work will be going on now to inform the choices they will make. If you think you may wish to attract money from local authorities and other local agencies (such as Primary Care Trusts), it is therefore a good bet to spend some time now taking their temperature and seeing if you can influence these decisions. By the time there is concrete news about what is available it will be too late.

The Compact Voice team here at NCVO has been working with local authorities to improve relationships with the VCS – which has in some cases resulted in a freeze on funding cuts and in others has at least improved the consultation process. Their case study of Thurrock Council gives a flavour of the value the Council places in the voluntary sector, talking of ‘a genuine partnership’. This is not just a one-off – over 30 other local authorities have now approached the Council to find out more about the process.

Relationship-building with local authorities also takes on more significance when you consider that:

  • The ‘localism bill’ will give local authorities much more say over their actions by means of a ‘power of competence’. See more on this with our localism driver.
     
  • Community Budgets, due in April, will fund some cross-cutting initiatives (similar to Total Place), allowing local authorities to develop cross-department services.
     
  • Ring fencing of budgets for local authorities ends in 2011/12. There will also be a reduction in targets and monitoring, giving councils a lot more freedom.
     
  • It is one of the key Government policies to shift from regional to local economic development.

There is also a move to allow local communities to buy and run assets (such as libraries) – which could offer opportunities for the voluntary and community sector at a local level.

So

  • Begin building relationships with local authorities and other local statutory agencies now – use The Compact where possible for good practice about how this might be done. You need to aim at forming a ‘partnership’ type relationship with them, meeting the needs of the local area together.
  • Begin building relationships with other partners who could co-deliver public services, especially if you are small or specialist. If local authorities can commission one consortium to deliver a range of services or a holistic service, they will save money on management – so we are expecting more to do this.
  • Make sure you are able to demonstrate your outcomes – payment for services is likely to be by results or by saving to the government. If you can’t demonstrate these, you won’t be able to draw down money, even if you are successful in winning contracts. And note - the majority of money is likely to be available as contracts, not grants.
  • Work out how you will manage this structurally in the future – for organisations that work across several local authorities this may have significant resource implications. Perhaps consider applying for funding from the Transition Fund to change your approach? There will be a quick turnaround on applications, so start developing your ideas now.
Last updated at 11:02 Wed 03/Nov/10.
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