Service Restructuring - Legal Challenges and Opportunities for Smarter Government and Operational Efficiency

Public authorities are continually reviewing the way in which they deliver services and the scale and scope of such services.  Seeking continually to improve the quality and effectiveness of services is an ongoing and expected function of all bodies delivering services and support to the public.  But the current intense financial pressures are driving authorities to look much more fundamentally at the way in which they configure and deliver their services.

In addition to the  social political and financial considerations, there are a number of important legal issues and considerations that need to be borne in mind when such reviews are undertaken and this Alert seeks to highlight these and offer some signposts for assistance. Key questions  for public authorities will be  :-

• Are we just trying to redesign the way the service is delivered or change  the service?
• If we are changing the service what service or level of service is mandatory?
• If the service is discretionary, what are the relevant considerations for the exercise of the discretion?
• How generally can we take such decisions?

Changing delivery

One of the key ways in which public bodies, particularly PCTs and local authorities, are looking at service redesign is in the context of maintaining the overall service but changing the way in which the service is provided to be more effective. This requires both effective understanding of the service itself and the interplay between different providers, and the ways in which members of the public experience the service so as to eliminate waste and inefficiency, with their consequent costs from the system, and which can also have the benefit of improving the public experience of the service as well.  In addition to the emphasis this places on smart commissioning decisions, it will also require effective translation of those decisions into implementation, either through changes to in house systems or the procurement of effective and efficient contractors.

However, given the size and scale of the financial problems which appear to face the public sector, it is unlikely that the efficiency route will prove sufficient to deliver the budget reductions necessary. Accordingly public authorities will have to consider what they are not going to do.

Can we stop doing …?

One of the sensible places to start in any serious review of service provision, is whether the services in question are mandatory/statutory which have to be provided to all citizens, or are additional/discretionary services which may be provided and may be linked to payment by the user for the additional cost of that discretionary service.

A naïve view would be that this would be a fairly simple exercise and there would be easy reference to a comprehensive list of statutory functions and services which local authorities, PCTs, and other public bodies have to deliver.  Unfortunately, this is not the case.  The statutory services which public authorities are required to deliver have grown incrementally through the years on the back of numerous individual statutory provisions, regulations, directives and interpretations of all of these by judges on a case by case basis.  It can sometimes be a very difficult matter of interpretation and judgement as to whether a particular service is a statutory or discretionary one.  Even where a particular service is clearly required to be carried out (ie the public body cannot choose simply to cease providing it) there can be much debate as to the exact level of statutory provision which is needed.

A recent example of this is the pubic inquiry into Wirral Metropolitan Borough Council’s proposals to restructure its library service which found that the council (if it had gone ahead with proposals – it withdrew them before implementation) would have been in breach of the apparently open-ended statutory duties under the Public Libraries and Museums Act 1964 to provide “comprehensive and efficient public library services for all persons desirous to make use thereof”.

The number of cases going through the courts every year on whether particular public authorities are in breach of their statutory duties or not is also testament to the difficulty of coming to a robust view in some of these areas. The courts have also created an additional level of uncertainty with the concept of target duties, particularly in the context of the wide general duty in section 3 of the National Health Service Act 2006 to provide a range of services to the extent necessary to meet reasonable requirements.

The situation is not assisted by the piecemeal nature of legislative provision over the years in a number of services which requires, for example local authorities in some cases to look back at public health legislation at the end of the 19th century.

Where certain service areas are clearly identifiable as discretionary, authorities still have to come to robust and legally defensible positions on what is appropriate to provide.  Recent headlines have highlighted innovative ideas for a “budget airline” approach with authorities delivering a core level of service and citizens/service users then making a choice from a menu of enhanced service options as to the level they want (and are willing to pay for). 

Such approaches raise tricky legal issues about which services can be charged for and on what basis which are particularly relevant for local authorities where there is not the same assumption as to delivery to be free at the point of delivery. In health there is increasing pressure around issues over co-payment and the extent and circumstances where this is permitted.

In a number of cases, including a recent case on a disability package the courts have been prepared to accept that the availability of resources can be relevant in making an assessment of what service is provided and so can offer flexibility for restructuring (see R (McDonald) v Kensington and Chelsea RLBC [2009] EWHC 1582 (Admin)).  However the scope for this varies between different statutory regimes and often, although the courts may say they recognise the difficult position of authorities having to make financial allocation decisions between competing priorities, the decisions of the courts do not always demonstrate such concern in practice.

Attempts by the PCTs to limit the scope of NHS services through decisions not to fund certain procedures are likely to be difficult unless they are supported on clinical grounds as effectively weeding out  ineffective or inefficient practice.

Relevant criteria

Having a strong policy foundation for making changes to service configuration is vital.  But there can be pitfalls along the way of moving to a new basis for service provision and how a public authority changes its approach, rather than legitimacy of the end result, is often the aspect of service reconfiguration that trips the authority up or leads to successful court challenges.

Service users and objectors to changes in service delivery are also increasingly using the Human Rights Act to seek to challenge proposals for service change.  For example, challenges to the closure of care homes were brought recently against a decision of Coventry City Council on the basis both of the duties under the National Assistance Act 1948 and also under Article 2 of the European Convention of Human Rights arguing that the authority had not properly taken into account published literature and statistics which established a demonstrable rise in mortality for care home residents who were transferred to alternative accommodation (R (Wilson) v Coventry City Council; R (Thomas) v Havering LBC [2008] EWHC 2300 (Admin)).

Increasingly public bodies have to have regard to a whole range of relevant issues when considering changing the ways in which they deliver services.  For example, there are now wide ranging obligations under the Equalities Legislation (Race Relations (Amendment) Act 2000, Disability Discrimination Act 2005 and the Equality Act 2006) which place general duties on public authorities and which also place a specific duty to carry out an equality impact assessment as soon as a relevant new policy, function or service is considered.  Public authorities are also required to monitor for adverse impact and publish the results of assessment consultation and monitoring. For the NHS there are increasing  rights and expectations in part  driven by  the new NHS Constitution, which, even where merely setting out aspirations, will have an impact on decision making for service change.

These specific requirements are in addition to the general legal expectations (which have to be met to make any decision legally robust) that public bodies will take informed decisions having regard to all relevant considerations and disregarding any irrelevant considerations.

Process and consultation

One of the key things to get right if at all possible in making decisions which are likely to be controversial – as any decision to reduce services will be – is the process and in particular the need for consultation.

For local authorities, there are specific statutory requirements which involve consultation with service users and people affected by decisions, particularly where a proposal involves the closure of a facility, for example a care home or school. The position for the NHS is more complex with requirement not merely to consult but to involve patients or their representatives, even at the stage of formulating proposals and throughout the activities of the NHS body, where there is a potential impact on the way services are received.  There is also  the obligation to consult the local authority overview and scrutiny committee where the potential change to services is material. But public expectation that they can make their views heard even where there are no such specific consultation requirements are now reflected in a new general duty on authorities to involve local people in decisions about services and policies and to offer appropriate opportunities for people to have their say about decisions and services that affect them through consultation, and to do so at a stage where the eventual outcome is still open to change.

This Alert has focused on the legal issues arising from a significant change in service provision involving reduction of provision, closure of facilities or provision through more economic means.

Service restructuring can also involve finding imaginative ways to provide quality services at less cost including:

• integrating services provided by variety of public authorities and voluntary sector agencies so that they are provided by the same team of staff or the same contractors from a single point of contract for service users;
• reviewing the quality of service which public bodies can now afford to provide and examining existing contracts in detail to ensure value for money, sometimes resulting in renegotiation/re-financing/termination and re-procurement;
• realigning the local spending priorities and programmes of various public agencies to remove duplication and focus on agreed targets whether through the Local Area Agreement, Multi-Area Agreements or Total Place Programmes; and
• consolidating assets across public bodies to ensure better use of facilities/office accommodation and enable the release of surplus and expensive assets.

The challenge for public bodies as outlined in the Operational Efficiency Programme, the Government paper on “Putting the Frontline First” and in the Pre-Budget Review is for all organisations involved in the commissioning or delivery of public services to be prepared to look radically at service reconfiguration and restructuring, but to do so on a sound legal footing.