Penny wise pound foolish

16 May 2011 3 minute read

And so it came to pass. NPC predicted that last autumn’s comprehensive spending review would result in reductions in valuable prevention services generally paid for by local authorities. Our cuts paper tried to quantify the risk and guide funders on how to help. But what the local authority budget pressures mean in practice was brought home to me forcefully as I chatted to a charity last week. I’m not going to name the charity as it has valuable relationships with its local authority funders and I don’t want to spoil these relationships by my interpretation of what is going on.

Refuse collection contracts with local authorities are worth billions of pounds. The contracts generally run over many years—Brighton has published its contract (full marks for transparency) and its worth a billion quid for 25 years. You can be sure such contracts are negotiated very carefully by the private company’s legal team – heaven help the local authority which tries to break one of these contracts.

I’m not knocking refuse collection, recycling etc. It’s a necessary local service. But if a local council wanted to reduce specifications in order to trim 5% off a billion-pound contract costing £40m a year, thereby saving £2m a year, it wouldn’t have a legal case to do so. With time it might be able to embark on some protracted negotiations with the contractor, but the pace of the cuts don’t allow for this. So the local authority is forced to terminate a few contracts with charities offering, say, youth services, instead. These would have been provided by charities on annual contracts, without input from sophisticated legal teams, so can be terminated without legal difficulty.

So the charity I chatted to explained it was shutting some youth services. What will the young people do now, I asked? Where will they go to for counselling for family problems, homework clubs, after schools sports and music clubs, job-seeking support, drugs and alcohol advice, and so forth? Will they feel abandoned? Very probably. Will the drug dealers be pleased? Almost certainly.

‘Penny wise and pound foolish’ is how the charity described the shut-down to me. The charity predicted a rise in the usual criminal justice, mental health, and worklessness problems which plagued the area before it developed services to address these issues. This future expense will of course be shouldered by tax-payers. Some activities will be transferred to a service in a neighbouring ward—but my contact noted wrily that several members would have difficulty attending as this involved a sprint through rival gang territory.

The charity also talked movingly of the vulnerability of now-redundant employees. The youth workers employed by the service aren’t middle-class graduates with plenty of self-confidence and employment options. These are vulnerable young people born into great disadvantage, nurtured through the services’ programmes, and then given an opportunity to shine in their communities. They are employed role models helping others. And now they are let down. One young man is so ashamed he doesn’t leave his house. His employment options are limited to casual labour on local building sites—an option, but hardly playing to his considerable people skills. Its as if his light has been snuffed out—even though his redundancy is no reflection on his abilities.  The whole community is feeling the loss—the overall sense that the community doesn’t matter to anyone is palpable. So much for Big Society.

I honestly don’t think this is what the Coalition Government had in mind when it began its mission to reduce the budget deficit whilst promoting a mixed economy. It probably imagined that refuse collection could be sensibly trimmed back a bit, and that cost-effective services offered by charities and other small organisations would be retained because of the social problems solved. But in reality its got something different. The negotiating muscle of big private companies eclipses the social benefit of charities’ activities when it comes to disinvestment decisions. So the mixed economy envisaged by the Coalition Government will end up skewed towards the private sector…… while Big Society shrinks.