A plan to save up to £100bn by streamlining locally-run public services is emerging as one of the "big ideas" in the government-wide spending review to find the deep cuts announced in the Budget.
Treasury ministers have seized on growing evidence that there is huge duplication among agencies such as councils, the health service, the police, the probation service, Jobcentre Plus and quangos. They believe services can be made more effective for consumers and more efficient for taxpayers by "joined-up" working at local level – and would mean the cuts had less impact on frontline services.
The downside is that thousands of administrative jobs would be axed and that inspections of local services by watchdogs could be reduced.
Yesterday the Treasury announced a further £1.54bn of immediate cuts to projects planned by the outgoing Labour administration under rules allowing flexibility at the end of each financial year. The biggest slice will be a £1bn reduction at the Department for Education. Vince Cable's Department for Business will have to find £265m, which will include cutting aid to the car industry and cutting schemes to provide working capital and trade credit insurance for companies. The Department of Communities and Local Government will have to find £220m and the Home Office £55m.
Danny Alexander, the Treasury Chief Secretary, said: "The previous government committed to spending money it simply did not have, but this coalition Government has taken action to address this serious situation. The reality is that these unfunded spending promises should never have been made, because the money was never there to pay for them. We did not make this mess, but we are cleaning it up."
Ministers believe local agencies often deal piecemeal with the same customers – who are often bewildered by the lack of a single point of contact – at huge extra cost. It is estimated that one extra layer of administration can soak up as much as 20 per cent of the funding.
The problem stems from the way the agencies are funded and monitored by Whitehall departments, with services designed to fit the people who run them rather than the people who use them. Consumers – including the jobless and vulnerable people such as drug addicts and alcoholics – can be passed from one agency to another.
At a local level, officials work in "silos" and are often more interested in meeting their performance targets in order to preserve their existing budgets than providing the best possible service.
A Treasury source said: "We believe there is huge waste, bureaucracy and overlapping provision among different agencies. We are very keen to get a grip on this as part of the spending review."
Ministers will argue that the reform would devolve power from central to local level in line with David Cameron's "big society" theme.
Today Eric Pickles, the Communities Secretary, will tell the Local Government Association (LGA) that councils must do more for less and urge different authorities to "share" departments – for example, by merging their planning, legal and communications teams. He will tell councillors: "Previously it worked to make town halls deliver for Whitehall. Now we want to free you to deliver for the public. We're not going to be micromanaging, second guessing, and interfering in your affairs any more. We're going to get on and let you get on with it," he will say.
Councils admit there is huge scope for savings. In a report published today the LGA agrees that £100bn could be shaved off public spending in five years by introducing "single place budgets", in line with Treasury thinking.
Dame Margaret Eaton, the LGA's chairman, will tell its annual conference: "There are huge opportunities to save money and give people a bigger say in the public sector by starting with a clean sheet and giving power to the people who know their areas best. That is the way to reform the system and save money rather than to cut services we know people really need."
Getting more for less
Pilot projects set up by the previous Labour government suggest that local public agencies could provide "more for less" by breaking down barriers between them. "Total Place" is seen as an idea whose time has come and it may be the relatively painless part of the spending review to be announced in October.
A study in Leicestershire found local services were funded by 14 different national organisations, including six government departments. It costs £135m to spend £176m to boost the county's economy because it is channelled through different agencies.
The same drug-addiction and alcohol-abuse cases are often handled by the police, A&E units, GPs, community workers and voluntary groups. They addressed the symptoms, even though it would be cheaper to tackle the underlying cause through treatment.
The public are often left confused by the array of agencies. It costs £3.7m a year to send information about the performance of the county's public bodies to central government. More than 3,000 sets of data, reports or evaluations are processed each year, requiring 92 full-time staff. A further £7.2m is spent each year on inspection requirements laid down by Whitehall.