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In the foreword to the 2004 three-year spending review, Tony Blair declares that the government is "extending devolution, increasing choice, supporting flexibility and ensuring greater personalisation in public services".

This translates as a push for two things:first, more flexibility so that professionals and communities can decide how best to deliver services, and second, for services built around individual users' needs and circumstances "rather than relying on the expectation that people will fit in with the system".

How that will be achieved is less clear given the review's other main thrust: efficiency savings, delivered largely as a result of bulk-buying services at a regional level.

The scale of these savings is based on the recommendations of the former chief executive of the Office of Government Commerce (OGC), Sir Peter Gershon, who was asked to lead a cross-cutting review of efficiency in the public sector. Chancellor Gordon Brown has concluded that annual savings of £20bn can be made across all government departments by 2007-8, of which at least £6.45bn a year can be found within local government spending.

For local government, this means that, although its grant will rise by an average 2.6 per cent a year between 2005-6 and 2007-8, it will simultaneously be expected to achieve annual efficiency savings of 2.5 per cent.

Gershon's efficiency review, published last week alongside the spending review, recommends that all departments agree with the OGC by December 2004 how to improve value when buying, providing and arranging services.

The spending review claims there is scope for "significant additional savings" through joint commissioning by local authorities through new regional centres of excellence, led and managed by local authorities.

Thirty-five per cent of the £6.45bn annual savings in local government is expected to be made through negotiating better contracts for services, including adult social care, social housing and children's services.

Of the Department for Education and Skills' £4.3bn annual efficiency gains by 2007-8, 35 per cent is supposed to come from strengthening the way services are bought in the education and children's services sectors, with the help of a new procurement centre of excellence to be established by April 2005.

The DoH, meanwhile, has agreed a target of £6.5bn annual efficiency gains by 2007-8, of which 10 per cent will be generated through improved commissioning of social care, including new ways of working with service providers.

Community care minister Stephen Ladyman has confirmed that work is under way to assess commissioning of social care services and to set out best practice for a more strategic approach.

However, no doubt with his personal drive to increase the uptake of direct payments and levels of independent living among older people in mind, he insists that "local demands and the need to provide people with a spectrum of choice is an important principle that will be built into any future changes".

But Association of Directors of Social Services president Andrew Cozens says an approach that is based on economies of scale on the one hand and the minister's pursuit of personalised services on the other hand is a dilemma for social care.

"There is a dichotomy between the idea of collections of local authorities commissioning jointly and the notion the minister is pursuing around personalised or tailored services," Cozens says.

He accepts there is scope for further joint working in social care commissioning, however, particularly in children's services and where authorities individually commission expensive packages of care for people with very specific needs. "We want to be able to commission services that suit the needs of the local population," he says. "We don't want huge, one-size-fits-all contracts. But once we have worked out the needs, it will make sense to work together.

"I'm worried if there are attempts to set regional contracts for domiciliary care and so on. But, say we needed lifts installed in homes for older people, it might make sense for the contract to be sorted out at a regional level."

Nigel Druce, strategic adviser for the Improvement and Development Agency and former director of social services at Cornwall Council, insists there are "no easy savings in social services through regional procurement". He says there is a clear conflict between personalised services and regional procurement, with social services having a greater duty to provide choice.


"We have been here before," Druce says. "In the 1970s and early 1980s, there were regional procurement systems, particularly around child care. And they all failed. The councils found it difficult to agree to the contracts with the providers and the whole thing imploded."

This point seems to have been taken on board by the emerging regional centres of excellence.

Caroline Highwood, assistant director (resources) at Kent Council, which is leading the centre for the South East, says those involved have already identified that social care is "not something that we would do in quite the same way as furniture or pencils or ordinary items of stock".

"The idea was more about sharing good practice among authorities in the region rather than all getting together and doing a contract. We are not planning a cross-authority contract for residential care, for example. But we will be sharing in more detail what works.

"I don't think we would support big contracts. We are clear about the importance of service user choice."

Druce believes areas where social services could make gains are around joint services with health, such as services for adults at the high end of the autistic spectrum. Currently, although commissioning tends to be organised regionally, there are still separate contracts for health and social services. "Providers have to negotiate contracts twice in these areas and sometimes trade us off against each other," Druce says.

He encourages local authorities to look for these types of efficiencies now rather than waiting to be told what to do by government.

Social services directors should also think about clubbing together at a regional level to fund an adviser on procurement in social care for the region, Druce says. He emphasises the importance of taking the initiative, such as setting up standard framework contracts for standard services which can be tailored to individuals' needs.

Druce argues that social services departments also have a responsibility to encourage independent providers to invest in their staff - thereby offering a higher quality service and better value - by offering them longer-term contracts.

Keith Beaumont, programme manager responsible for national procurement strategy at the Local Government Association, works on the premise that the bigger the contract, the better the deal you should be able to get. However, he admits that the social care area is "slightly more complicated".

Social services departments and their new regional centres of excellence are now faced with a delicate balancing act: deliver the efficiency savings required in order to free up the money promised for investment, while at the same time delivering the prime minister's promise of more personalised services. It is to be hoped they are more successful than their counterparts 25 years ago.

Other key implications for councils

• Three-year revenue and capital settlements for local authorities, expected to be agreed in 2005 after a full consultation.
• Real-term average annual increase of 2.6 per cent a year in formula grant to local authorities between 2005-6 and 2007-8.
• Efficiency gains of 2.5 per cent a year, equivalent to £6.45bn by 2007-8, releasing resources for front-line services.
• Increased freedoms and flexibilities for fair, good and excellent local authorities from September 2004, allowing authorities to trade in their efficient services.
• Greater freedom to set local priorities alongside national targets through a reformed local public service agreement process.
• Development of local area agreements to strengthen conversation between central and local government, and bring together additional funding streams and merge them where appropriate. This will be tested in one authority in each region in 2005-6.