How procurement choices impact local governments’ budgeting capability: The case of children's social care

Abstract

Local governments in many countries are navigating a turbulent financial environment, challenging their ability to maintain budgetary control. A key indication of this declining control is the occurrence of budget deviations, defined as over- or underspending relative to the original budget. While budget deviations can have significant negative societal consequences, there is limited understanding of what drives deviations. In this paper, we examine budget deviations in local government in England, specifically focusing on the budgets allocated for children's social care provision. In recent years, children's social care in England has experienced rising demand and changes in service delivery, with many English local authorities shifting from traditional in-house provision to care provided by private sector companies. Using a panel dataset covering the period 2015–2022, we find that local authorities that have outsourced a larger portion of their children's social care to for-profit providers are more likely to exhibit budget deviations compared with those that have retained more in-house provision. In contrast, reliance on external providers with a non-profit orientation is associated with fewer budget deviations. Additionally, our analysis reveals that local authorities with greater administrative capacity and higher debt levels show lower levels of budget deviation. This suggests that increased administrative resources and heightened local financial pressures may contribute to the development of more accurate budgets, thereby reducing the likelihood of deviations during implementation. We conclude by discussing policy implications, including strategies for local authorities to enhance budgetary control in challenging service delivery areas such as social care.