Making Room for Innovation in the Public Sector

We all want innovation in the public services- it’s an essential recognition that the world in which most of our public provision came into being has gone, perhaps never to return.

Several commentators have drawn attention to Schumpeter’s creative destruction theory and its applicability to the current situation.  Creative destruction is the theory of the market that shows how entrepreneurs displace old-fashioned and unprofitable activity in a process that continually creates new markets and closes off obsolete ones.

We have seen this happening this week with the electrical retailer Comet formally entering administration, frozen out reportedly by internet shopping. In the media’s eyes, Apple has been labelled as the main 'creative destroyer'. 

The theory of creative destruction doesn’t apply perfectly in the public sector, because here it is usually the same organisations who have to do both and creating and the destroying.  As we know it’s a whole lot more difficult to shut down bits of your own organisation- there are psychological, emotional and cultural barriers in play as well as the inevitable costs.

What is more, users of services in the public sector have both a louder voice and a reason for expressing it.  It is unlikely there will be too many placard-waving protesters outside the local branch of Comet, but contrast that with the closure of a local library or leisure centre.    And yet curiously my local branch of Comet always seemed to be so much busier than the library.

Libraries are a good example  of how creative destruction applies – or doesn’t apply – in the public sector.  Local authorities have been reinventing their library ‘offer’ over recent years and in addition to the traditional book lending and reference libraries, many now provide CD and DVD lending, internet access, adult learning and even a café. Some are even getting into lending e-books.  You might say that innovation is not the problem so much as mission creep - which would be fine if local authority budgets were expanding to keep pace but presents a problem when they are not.  

But before I fall a victim to the militant wing of CILIP (for the uninitiated, the Chartered Institute of Library and Information Professionals), let me just say that I am using libraries only as a convenient and familiar example of a wider issue.  

Two years ago, NESTA suggested that the way to creative destruction in public services was to focus on outcomes, changing funding to incentivise delivery of results, reforming procurement and commissioning to deliver outcome-based specifications and introducing lighter touch inspection arrangements to facilitate.   

It cannot be wrong to ask ourselves what exactly we are getting with the services we provide, but none of these solutions address the fundamental issue that ultimately closing things is a matter of political leadership. This week we saw Stoke City Council leader Mohammed Pervez on BBC4 grappling with this problem as he set out to close old peoples’ homes, libraries and the city farm in order to preserve Sure Start children’s centres in his city.   He came across as a serious and concerned politician doing his best with a difficult situation, but he knew as we did that this was just the start of the attrition.  

The point is we can be as innovative as we like in the public services, and we frequently are,  but the logic of the market does not apply in the way it did to poor old Comet.  The problem is learning how to turn off those services that no longer offer value for money while persuading people that it’s the right thing to do.   It is the destructive bit of creation that’s almost the bigger challenge. 

Philosophy for Finance Folk

"Without a continual falsification of the world by means of numbers, mankind could not live"  

Friedrich Nietzsche 

And now the football results....

Word of the Week

My word of the week has been 'febrile'.  When I use it colleagues in the public sector nod.

"The Thick of It" ends .. with food for thought

In the world of risk management, reputation risk seems to be a growth area.   The notion needs to be treated with caution: the first objective in avoiding damage to reputation has to be to manage other risks adequately and try not to get into hot water in the first place.  

We need to be particularly careful in the public sector not to let the management of reputation risk take over. 

The plot of the final series of ‘The Thick of It’, which ended last night, revolved around the case of the unseen Mr Tickell,  a health worker with a history of mental illness who becomes  a media cause celebre when he appears to be bullied out of his hospital-owned tied accommodation.

The spin doctors get hold of Tickell’s medical records and release them to the press to discredit him as a nutter.  In the real world, you would hope that the Government would identify from Tickell’s medical history that he was a vulnerable person who needed to be treated with particular care and sensitivity.  In the story they do the opposite, leading to Tickell’s suicide and career-limiting consequences for officials and politicians alike.  (Did I mention this is a comedy – and a hilarious one?)

The story is about what happens when the management of reputation risk takes over from good governance. 

But reputation risk is real, and while there are people who are prepared to misreport or distort the facts about public services – normally but not exclusively in an attempt to get at the politicians who run them- public bodies will need to be in a position to refute those stories.  More controversially  perhaps, they are also entitled, by honest means, to try and stop things becoming stories in the first place.   The alternative is to accept that public bodies will be permanently hampered by people prepared to bend the facts to get in their way. That cannot be in the public interest.

It is vital that the things our public bodies and politicians do is tested and scrutinised.  The danger – a danger I think to our whole political system – is when the whole conduct of political affairs becomes a battle between media people and spin doctors.   The world depicted in The Thick of It, accurate or not, is a world in which this has happened.   

The Art of the Impossible

In last week’s ‘Observer’  appeared the following quote from Lord Skidelsky, the economic historian and biographer of Keynes;

“"It may be that there is no perfect [economic] model and that the quest for one is an error. Maybe we need different models, different theories, for different situations, and that's the best we can do".

Abso..bloomin..lutely!

There is a long-standing debate about whether economics is a science or a humanity, and an interesting academic debate it is too… (yawn).

But when it comes to dealing with practical problems, surely we have to see economics as a craft, which comes with a box of tools that politicians and officials need to learn how to use skillfully, selecting the right ones for the right job.

We hamper ourselves by throwing away half of the toolbox simply because it doesn’t fit with current ideology, and this is particularly dangerous now at a time when we find ourselves facing unprecedented economic hazards.

It’s as if we hired plumbers on the basis of whether or not they believe in spanners.

Politics used to be the art of the possible, so why do politicians so often seem to go out of their way to make it into the art of the impossible?

Lies, Damned Lies and By Election Analysis

The Feltham & Heston by-election has produced the predictable outcome of a Labour win against a background of greater than the usual level of voter apathy.

But when he heard a comment on the radio this morning that the Labour Party is clearly going backwards, because it had achieved a lesser swing in this by-election than in Barnsley Central, Chubby Cat pricked up his furry little ears.   For two reasons; firstly that Barnsley Central was the last by-election but two (so the interviewee in question was clearly being selective) and secondly because of the sheer bonkersness of relying on 'swing' as a measure of very much at all in a by-election like this.

It is testament to the influence of the late, great Robert McKenzie, inventor of the swingometer, that we still use this concept.  It has its uses, but it was invented in the days when 95% of the votes in Parliamentary elections were cast for two parties, Conservative or Labour, so it made more sense to think of elections as a battleground in which one party won support from the other.  Nowadays, across the UK, around a third of votes are cast for other parties, so the pendulum is now one that swings in circles rather than just to and fro.  At the very least, you have to calculate more than one swing figure for each contest to see what it is going on.

For by-elections, which invariably come with a much poorer turnout than General Elections, it makes more sense to look at who it was who decided not to vote.

In Feltham & Heston, over 25,000 people who voted in 2010 decided not to bother in the by-election, a 52% remarkable reduction in the number of votes cast, broken down as follows;

Conservative	-10080	-61.0%
Labour	-8535	-40.3%
Lib Dems	-5315	-79.6%
BNP	-1174	-68.5%
Novelty & local (*)	-632	-74.1%
Green	-104	-19.6%
Workers Revolutionary	-78	-100.0%
UKIP	284	28.6%
English Democrat	322

(*)   'Novelty & Local' is Chubby Cat's collective term for all those parties that don't really count at a national level.

The Conservatives lost the largest number of votes, over 10,000 or 61% of their votes, while the Lib Dems fared even worse, losing nearly 80% of their 2010 poll.   Labour lost 40%, which is less than the 52% overall reduction in votes cast, hence the increase in its share of the vote, but only an irrespressible optimist would call it good.  A pattern since the 2010 General Election has been that all three main parties have lost votes in each of the by-elections, apart from Oldham & Saddleworth, which arguably doesn't count because the 2010 result was declared void.  Only UKIP regularly increases not just its share of the vote, but also its ACTUAL number of votes.

Of course, all of this is great fun,  and utterly meaningless, but it confirms the general trend provided by polling that none of the three main parties is in particularly good odour with voters at the moment. The next General Election is likely to be won by the people we dislike least on the day.  

Passing on the Pain

The BBC reports that the English Community Care Association, a representative body for charity and private sector care providers, has criticised local authorities for 'appalling' behaviour in seeking to reduce what they pay for care home services.  

This can be read two ways.   Firstly, it is clearly the case that local authority funding is being reduced significantly in cash terms over the next few years, and since social care is the largest area of local authority expenditure which is not directly funded by the Government (as is the schools service), many authorities have little choice but to bear down on costs.  There are only two ways they can do this,  either by reducing entitlement to services, which is clearly difficult when we are talking about highly vulnerable people and in some cases almost certainly unlawful, or they can try and reduce prices.

Since the private and voluntary sectors are now major providers of care services, the only way this can be done in a lot of cases is to reduce fees paid to these providers, and inevitably some of those providers will be more easily able to bear the reduction than others.  For local authorities, this is no more than doing to their suppliers what the Government and, to some extent, the taxpayer does to the local authorities.  Even before the current economic crisis, more was expected for less on a year-by-year basis.

The other way of looking at it is that if you are a care provider, and you have already driven down costs as far as they will go, it is impossible to go on providing the same services for less money- just as it is impossible for local authorities to do so for services they run, for all the exhortations of Ministers.  Furthermore, some local authorities seem to have been a little high handed in the way they have sought unilaterally to reduce fees which, if I recall from ancient days my studies of commercial law, is not strictly allowed.

The Government's reaction has not yet become clear but I have a shrewd suspicion - based on track record- that they might take the part of the private and voluntary sector, if they say anything at all, although perhaps they would be wisest to stay out of it.

Let it not be forgotten in all of these high handed rows between funders, commissioners and providers that the people who suffer at the end of the day are the residents of care homes, among the nation's most vulnerable citizens.   Thus every time a decision is made to cut public expenditure rather than to put up taxes, the pain of public sector cuts finds its natural level. In many cases, as in this one, this is at a level of accountability many steps removed from the original decision-  a process which, if I was being cheeky, I might be tempted to call the 'Trickle Down Effect'.