Payment by results trouble

12 June 2012

Eric Pickles has announced that the Department for Communities and Local Government (DCLG) is launching a ‘payment by results’ (PbR) scheme, which will reward councils  that help 'troubled families' to 'get children off the streets and back into school; reduce youth crime and anti-social behaviour; and put adults on a path back to work.'

The scheme is aimed at a real and widely recognised problem (even if many people dispute the statistics the government is basing it on). Government spends huge sums of money providing different interventions to the same families – when an individual service, more tailored to a family’s specific needs could be much more cost effective and much less intrusive. As we noted in our 2010 report The State of Commissioning, this problem has not been resolved by the increased use of ‘payment by results’ contracting, despite hopes that it might. The Work Programme still only pays for employment outcomes, the Ministry of Justice’s reducing reoffending pilots pay only based on reconviction rates, and drug and alcohol PbR pilots also cover only a limited range of outcomes.

So surely CLG’s scheme is to be welcomed?

Possibly. But there are a number of aspects of the announcement that are worrying. First, the scheme includes outcomes that are fiendishly hard to measure, such as ‘reducing antisocial behaviour’. Second, government doesn’t yet have the required data to understand and measure whether changes in many of these outcomes are the result of actions by a provider (in this case local government) or whether they might have happened anyway. Third, the scheme will overlap with existing government PbR schemes. It therefore adds to rather than reduces the risk that government will pay twice for certain results. For example, both the local authority and the Work Programme provider could take a fee for getting the same person into work.

What’s more, this scheme sounds rather similar to a pilot programme that was being developed by four local areas supported by the Cabinet Office linked to CLG’s “Community Budget” pilots. It’s not clear that this pilot has been completed or yet reported any positive results – which raises the question of whether, as we urge in our report Testing New Commissioning Models, the new contractual model announced has been tested in any way before being fully rolled out.

A much better approach would arguably be to build on existing payment by results schemes, closely involving those with experience in developing payment by results schemes (for example, in the Department for Work and Pensions and Ministry of Justice officials). And it would surely make sense only to limit payment by “outcomes” to those areas where results can be measured and attributed – rewarding other measures of performance (proxy indicators) if this is not the case.

In other words, there is no doubt that those working across government departments should be seeking to ensure that their multiple interventions make sense from the recipients’ perspective and provide value for money for the taxpayer. But it’s far from clear that this DCLG initiative – apparently unlinked to all the other poorly co-ordinated government payment by results schemes – is the right way of addressing the issue.

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One Response

  1. steve hampton on 12 June 2012 at 9:59 pm

    Why does PbR reward money go only to the providers (local government)?

    Couldn’t DCLG reward money be split between the providers and the neighbourhoods which have troubled families? This would provide a direct incentive for local residents in those neighbourhoods over the next 3years to
    + ensure the council has accurate statistics on the number of troubled families
    + collectively challenge the councillors and service providers to deliver the most effective interventions
    + collectively support and challenge those families needing help directly and alongside local services

    While intensive intervention from local services is necessary to turn around troubled families, it is not sufficient for those families to maintain that turnaround. They often require a lifetime of support and positive relationships to prevent relapses. Ideally you want communities to offer that support too rather than rely on a state service.

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