By Daniel Hunter

A report published this week shows how a radical transformation of the public sector can save billions of pounds while helping the elderly stay in their own homes for longer, improving employment prospects for school leavers, reducing re-offending and better supporting victims of domestic violence.

The Community Budgets guide, published jointly by the Local Government Association (LGA) and the Government and endorsed by the Prime Minister, describes how an overhaul of the way the public sector provides and pays for services can make things better for the people they serve, while delivering significant savings.

The guide describes how partnerships between public sector organisations in four areas — Essex, Greater Manchester, West Cheshire and the London Tri-borough (Hammersmith and Fulham, Kensington and Chelsea and Westminster) — piloted a new approach to local public service transformation during 2012.

In each of the four areas, NHS trusts, the police, Jobcentre Plus, councils, the voluntary and private sectors and educational establishments worked together, with support from civil servants, to identify and tackle issues ranging from unemployment and asset management to domestic abuse and re-offending. By breaking down organisational and cultural barriers and rethinking the way services are paid for and provided, they have found a way to make those services better, while saving money by stripping out unnecessary duplication.

Business cases drawn up in the four areas will start to be implemented from April 1.

The guide is intended to help other areas which aim to take a similar Community Budget approach to reforming services.

Independent analysis from Ernst & Young shows that more than £4 billion could be saved every year if all areas adopted a Community Budget approach and were able to cut the unnecessary waste, duplication and red tape which come as a result of too much centralised interference. It estimated that 80 per cent of the saving would come from the budgets of central government departments and agencies.

Prime Minister David Cameron, writing the foreword to the report, said: "When I became Prime Minister, I made clear I was going to lead a different sort of Government. Rather than hoarding power in Whitehall, I wanted us to be the Government that gave it back to the people.

"Decentralising power isn't just right, it works. People on the ground know what's needed to improve their area, and how to get value for money in achieving it. The Whitehall blueprint just can't match local knowledge."

LGA Chairman Sir Merrick Cockell said: "The prospect of further cuts to already squeezed council budgets means that local services will suffer significantly unless we radically transform the way they are provided and paid for. There is no other option.

"The pioneering pilot areas have successfully shown that by designing services around people's needs, by joining up the work of different parts of the public sector and focusing on prevention to reduce demand, we can not only save hundreds of millions of pounds, but actually make these services better too. We can help the elderly stay independent longer, reduce crime and improve job opportunities while saving money.

"The progress made by these four pilots is just the start. There is a real appetite among local government to seize the mantle and lead the way in radically transforming the way the public sector works. For this potential to be unlocked government will need drive this plan forward throughout Whitehall and ensure that all parts of the country can adopt a Community Budget approach. The rewards are too great to be ignored."

Local Government Minister Brandon Lewis said: "Efficiency within public services can be improved so that they work more effectively for people and cost the taxpayer less. Community Budgets are an ideal way for councils to achieve this which is why we are completely behind them. Today's guide and our new network will not only help local authorities understand how to action these changes but support them in doing so."

Examples of issues being tackled in the four pilot areas include:

- The Tri-borough worked together to come up with a plan which will see reoffending of short sentence prisoners drop by 10 per cent, saving up to £6 million for the taxpayer. It is also bringing together health and social care budgets to help vulnerable people receive more treatment in their own homes, reducing hospital and care home admissions. It estimates making savings of £38 million per year, while improving care and support for the vulnerable.

- Greater Manchester identified a problem with the number of young children who were not ready for school at age four and five. Through closer working between public sector partners the pilot aims to identify risks to children's development early, with the launch of preventative services targeted at every child born in Greater Manchester. A new parental contract will enable parents eligible for targeted day care for two-year olds to be on track towards sustainable employment and ‘good enough' parenting. Through investing £38 million the pilot aims to save £215 million over 25 years.

- West Cheshire has drawn up proposals to address the causes and impact of domestic abuse more effectively. It found that more than 9,000 women in the area are likely to be affected by domestic abuse, but just 1,180 report incidents to the police. Domestic violence currently costs public services there £20 million per year, the majority of which is spent on reactive services. It estimates that, by working together to introduce an access team to provide earlier support and working towards common goals and measurable objectives, it can save £7.6 million over five years.

- Essex identified that only 60 young people were training for more than 8,000 marketing jobs in the local economy while 3,250 were training for 226 hair and beauty vacancies. To address this it has set up a new Employment and Skills Board which will bring together vocational skills funding streams for 16 to 24-year-olds to ensure that skills training and job opportunities match by giving local employers more of a say in how funding is allocated. It aims to create an additional 8,000 apprenticeships by 2020.

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