Oh my cost!

In this blog, I explain why planning public services is difficult, and argue that spending information is more accurate than many think.

It is unlikely that ‘OMC!’ will catch on as a new abbreviation in text messages. However, making sense of present, and planning future spending cause headaches to local commissioners, finance directors, and operational managers across public services.

We all should do things by the book.

Step 1. Need profiles: What types of needs will the service meet?

Step 2. Demand: How many people will have each need profile?

Step 3. Spending per head: How much spending will be required by each need profile?

Step 4. Total spending: Multiply the answers to steps 2 and 3.

The trouble is that the book has not been updated for a while, and is in competition with many other books. Take the example of youth offending teams.

Step 1. Need profiles. Following a judge decision, the needs of a suspect can go overnight from some light touch support to prevent future shoplifting, to intense supervision as a result of proven assault against a shopkeeper.

Step 2. Demand. Luckily many local authorities see tens rather than hundreds of new entrants to the youth justice system each year. Working out exactly how many is difficult. In fact, the number can duplicate or triplicate totally unexpectedly in a matter of weeks.

Step 3. Spending per head. A youth offending team needs a number of staff in place, regardless of who comes through the door. Operational managers, practitioners, psychologists, and social workers cannot be hired and fired at the same pace as need profiles and demand change. That is why more often than not teams are stretched, or overstretched, and occasionally have some time to spare.

Step 4. Total spending. Demand-led, and zero-based budgeting are options to develop spending plans from scratch each year based on the steps above. However, in reality, services like youth offending teams use priority-based budgeting whereby last year’s spending is updated depending on the pressures affecting the local context.

As a result, when we look at the spending information available on the internet we get and ‘OMC! moment’. This is how quickly spending per head changes year on year at one of the 152 youth offending teams in England, compared to school spending in the same local authority:

Spending per pupil, and per young offender in an anonymous local authority (index, 2014-15= 100 per cent)

Planning school spending is easier than in the case of youth offending. A few will come and go, but the children born this year will start primary school in about five years, and secondary school in about 12 years.

My conclusion is not that certain public services should give up planning ahead. Far from it, I believe that we should learn lessons from analysing spending information, as opposed to just disregarding it when it throws shifting patterns difficult to make sense of.

We elaborated on some of these thoughts as part of our recent report on Children’s services: spending and delivery. The sources for the graph are statistical information published by the Department for Education, and the Youth Justice Board.

It would be great if you left a comment with your opinion on how those responsible for planning spending could deal with the difficulties set out in this blog.

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