Proposition one, two and three – A Financial Case for Radical Efficiency.

 

1. Politicians of all parties agree that public services face a financial crisis. Many users argue that they also face a crisis of effectiveness.

 The UK’s public finances are in a poor state. This year, we face a budget deficit of £175 billion, or 12.4% of GDP. This structural deficit is not simply going to go away: the Treasury’s latest estimate is that £140 billion of that deficit is ‘persistent’ and will not be eliminated without measures to supplement the economic upswing expected from 2010[1]. Politicians from left and right acknowledge that this means a financial crunch for public services over the next five to ten years.

At the same time, both policymakers and the staff and users of public services agree that there is still a need for further improvement – especially in delivering more effective, responsive and personalised services. This is despite important improvements in some areas, and decades of performance management,  targets, new institutional forms and new funding models.

There are three basic responses to the need to reduce spending, as summarised below; only the last – radical efficiency – meets this need and improves outcomes at the same time.

2. Current political solutions to reducing the budget deficit focus on priorities for cost cutting and achieving greater operational efficiencies. This is a recipe for giving users ‘less for less’, or at best, ‘the same for less’.

”It means a determination to cut waste, cut cost – and cut lower priority budgets”  (Alistair Darling)

”We could save billions by scrapping entire government departments and culling quangos” (Nick Clegg)

 “We are all in this together… (we will) ask the nation to make a collective sacrifice in which everyone but the poorest would have to contribute to reduce the largest deficit in our modern history” (George Osborne)

Less for Less

The first response is to make differentiated cuts that attempt to protect services for the most vulnerable. Efficiency in this context is about generating the most impact for money spent (‘impact efficiency’) – serving those first who rely on services the most.

Suggested cuts include:

• Abolish child trust funds for all but the poorest third of families and those with disabled children
• Eliminate child tax credit for families with household income over 50k

Same for Less

The second response is to undertake ‘operational efficiencies’ that make more productive use of existing resources. Efficiency here is about maximizing the value of existing ‘inputs’ to the system. This is not a new idea – it builds on the Gershon Report and the James Review amongst others – but it does represent a further round of new measures.

Suggestions include:

• Better integration and management of IT
• Better management of assets and estate
• Integrate LAs and frontline professionals in delivering savings by encouraging cross sector cooperation

3. Radically efficient public services offer something different. They call for different resources to be used (at lower cost) and lead to significantly better outcomes for users.

 

Different, better and cheaper

The third response depends on innovation – leading to different, much better and significantly cheaper public services. This is about reconsidering who service-users are and should be, how they can best be served, and often using different resources to realise this new vision. It is about taking a new perspective on an old challenge and redefining the outcomes we want to see – not just offering a new version of the current system for less money. This makes it possible to make savings on a much bigger scale.

Necessary, not just desirable

Radically efficient services that are different, better and cheaper are not just an attractive proposition – they are an increasingly necessary one. ‘Less for less’ and ‘same for less’ approaches are not sufficient to reduce the level of public debt, let alone improve services and outcomes to the extent that is desired by policymakers and the public.

Radical efficiency also resonates with the Public Accounts Committee’s[2] recent insistence that public services should respond to the financial squeeze with new ideas, not an extension or trimming of old models.

The need for radical efficiency is real. Our research shows that its existence and impact is too.  Based on the challenges mentioned above we have developed the Radical Efficiency Model, which outlines the fundamenals in how better cheaper and different public services can be designed and delivered. The need for radical efficiency is real. Our research shows that its existence and impact is too.

 

 

 

 [1] Finanical Times: Budget 2009, April 23, 2009

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