Now is when we ought to be turning our sights to the medium-term challenges and opportunities facing public services. A year from the general election, the coalition’s policy programme has pretty much run its course, and the longest and deepest recession for generations has ended.
Of course, these are hardly times of plenty. Living standards have been squeezed as never before while public spending austerity will continue for the rest of the decade – with 60% of the cuts still to come, according to the Institute for Fiscal Studies. The Local Government Association estimates that at least 56 councils could cease to be financially viable after 2015, and that the funding shortfall for local government will be £14.4bn by 2020.
But fiscal factors are only part of the picture. Our economy and society are going through profound change. An ageing society, combined with a birth spike, is changing family structures and work patterns. Our work, social and economic experiences are being transformed by open technology, with a surge in the number of micro and small businesses. New social networks challenge vertically structured bureaucracies, whether in government, public services or banks.
This is also an era of rapid urbanisation. The population of Britain’s core cities has grown by nearly 10% in the last decade. Globally, cities are driving growth and 70% of the world’s population will live in urban areas by 2050. And climate change remains the world’s greatest challenge.
Public services need to understand and respond to these trends. The Royal Society of Arts’ recent report, Managing demand: building future public services, sets out some much needed new thinking about this.
The term ‘demand management’ is a deliberate inversion of the emphasis on supply-side change that has characterised much of public service reform for 20 or so years. The big story now has to be about how to generate better social value, not what we can do to promote greater efficiency.
Public services need to be turned on their head, so that they start from people and their assets and needs, rather than from silos and universal service entitlements. There is an emerging use of demand management approaches across local government – from ‘nudge’ techniques through values modes analysis to applied behavioural insights in areas such as recycling and littering.
A number of innovative councils now need to attempt something much bigger – whole-system change. That’s why the Leeds Local Government Commission proposed a new strategic purpose for the authority as a civic enterprise council. Similarly, Sunderland has been grappling with what it would mean to be animated by a community leadership purpose, while Lambeth merged its service departments into four thematic priorities to focus on co-operative commissioning.
Greater Manchester has one of the most ambitious approaches to reform, with demand management and public service reform at the heart of its economic development and City Deal plans.
Whole-system, whole-place reform requires integrating organisations and services across places and within communities. It has five key components: tackling issues through the context of place; starting with individual families and places; working together to build community insight; linking networks and community identity with behaviour change; and emphasising the role that councillors can play in community leadership.
Carolyn Wilkins, chief executive of Oldham Borough Council, highlighted the challenge at the launch of Managing demand: ‘We talk about troubled and chaotic families, but what about troubled and chaotic public services?’ Better information and insight are crucial, so open data is central to radical reform. Greater Manchester has been seeking to map complex dependency by drawing on data sources across health, employment and welfare services, social care, education and the criminal justice system.
At the same time, we need to much better understand family, social and community networks. That’s why the innovation charity Nesta has called for proposals to digitally map community networks and why the RSA has developed Social Mirror, an application that enables people to match their interests with community groups and activities. And the Leeds Data Mill is publishing vast swaths of open data that can enable a richer understanding of the pattern of social and economic life and provide the basis for community and business ventures.
Hard fiscal reality sits behind much of this. It is unsustainable to carry on as we are. The financial case for a systemic shift towards prevention is based partly on savings already made by demand management, but much more on predictive modelling about the potential scale of these in future. EY modelling for the LGA, based on the four community budget pilots, predicts a potential five-year net benefit of up to £20.6bn.
A leap of faith is required. This new approach will have to be developed with data from the bottom up, rather than the state down. It will draw on resources, such as social capital, that the state doesn’t count.
Locating power and resources with people and local communities presents an existential challenge to our centralised state. It will have to learn to let go, both financially and politically.
A preventive, socially productive approach requires a new fiscal and financial settlement. There are three dimensions to this. Horizontally integrated public services will need long-term, single-pot whole-place funding. There should be much greater fiscal freedom and autonomy both for borrowing and to align the promotion of business and revenue growth. And the finance community in local government will need to help develop new mechanisms for encouraging social and preventive investment.
The new social contract will be even more far reaching. You can’t create social productivity and open public services through a closed, vertically integrated administrative bureaucracy. This is a challenge to local government as much as to Whitehall. It requires a more open politics. Local politicians will need to lead a conversation with their citizens about what they need and want from public services and also what they should do for themselves.
Greater power and resources should be located within local communities, with the promotion of neighbourhood commissioning of services and the extension of personal budgets. Councils will need to become properly open institutions, using open-source policymaking, opening up budgeting and spending decisions, and publishing open data for their places.
The new times call for a new approach. There are some promising developments across local government, but what’s now needed is a more open debate about what 2020 public services should look like.
