- July 22, 2014
When you are as old as I am, certain things start to come around again, and I am reminded how little there is that is genuinely new or untried in the realm of public sector service provision.
For example, as ATQ has blogged about before, Payment by Results was first tried in schools during Victorian times, which is before even my grandparent’s era.
My latest sense of déjà vu came this weekend when I read how Labour is likely to propose that public sector organisations should be allowed to freely compete and bid to deliver services – taking the model of the East Coast mainline train operator as an exemplar.
This reminded me of compulsory and voluntary competitive tendering (in local government) and market testing (in central government) which were used in the late 1980s/early 1990s as a way of using a competitive tender process to try and drive efficiencies and reform. The idea was for in-house teams to compete for the services that they were currently delivering. In this way, it forced an assessment of inputs vs outputs, how costs of services were made up and where changes could be made in working patterns and processes and so forth.
In local government competitive tendering was often a Thatcherite stick with which to beat left-wing Councils; while in many central government Departments, market testing was often a somewhat artificial process where the in-house team was never going to be replaced by a new provider and little benefit was derived. However, in some Departments and particularly in local government white and blue collar services, these processes led to noted improvements in in-house provision, and/or the outsourcing of services including through privatisation following management buy-outs. As a result, competitive tendering and market testing in many ways, set the public services industry ball rolling.
The world has moved on since then but similar exercises have taken place and are still underway. In 2010 and 2011, the NHS ‘right to request’ and ‘right to provide’ processes created new social enterprises for delivery of health services by previously in-house teams – which will have to compete for their ‘dowry’ contracts after five years. According to the Department of Health some 40 services and 20,000 staff are now operating in such social enterprises. The creation of these new providers was highlighted as a factor in the growing proportion of services provided by non-NHS organisations in Nuffield Trusts recent (July 2014) report. http://www.nuffieldtrust.org.uk/publications/red-state-nhs-finances
The political philosophy arguments about use of non-public sector organisations in the delivery of public services remains a constant and has, over time, clearly influenced what type of organisation will win a contract award e.g. the increasing desire to make full use of the VCSE provider base. However, the underlying idea of ‘market testing’ is the same as it ever was.
- November 6, 2013
One of the challenges for turning ideas into actions is sourcing the funding and financing of innovative programmes designed to test new ways of doing things. Edward Hickman FRSA argues that this challenge is most acute in the sphere of public services.
http://comment.rsablogs.org.uk/2013/11/05/social-investment-public-services-reform
- August 8, 2013
I know most people are on holiday but I am not and in the slow time of August, I have had a chance to reflect on the sometimes vexed question of who is best placed to deliver public services.
In our consultancy work with commissioners, providers and investors operating on the boundary of public and private sectors, we are often struck by the confluence of influences on procurement decisions which determine who is selected to deliver a public service.
In a short paper here, we explore these influences as we find them today.
- June 12, 2013
I attended an interesting breakfast seminar organised by my business school, IESE, yesterday entitled “The Challenge of Sustainable Social Investment” with panelists Prof. Heinrich Liechtenstein, Deirdre Davies of Deutsche Asset Management Group, Oliver Karius of LGT Venture Philanthropy, and Nick O’Donohue of Big Society Capital.
Interestingly, the Dormant Accounts Act defines quite carefully what social impact means for Big Society Capital by laying down what organisations its co-funded intermediary investment managers can put money to work with. These are defined as third sector organisations that are delivering a “social gain”. As a result, BSC has identified Community Development Finance Institutions (CDFIs), charities, social enterprises and organisations addressing financial inclusion as fitting this criteria.
For others, social impact is defined by the outcome sought and it matters not whether the organisation delivering the outcome is for profit, a social enterprise or a charity. A good example backed by LGT is a for profit private education business filling a gap in the market in Kenya based on a business model that charges $4 per child per month. Another example given was of a branded leather goods company that was bought out by private equity backers who then invested heavily in both ensuring that its supply chain eliminated any use of child labour and that its tanning processes were clean. It did this to create value for itself on exit by creating a sound organisation that could, therefore, be bought by others.
Clearly, an investor can decide what social impact it wants to support and also how it will measure the outcome to its satisfaction. Similarly, an organisation can decide how to include and measure social impact in its own mission statement and values no matter what its financing structure i.e. for profit or not for profit.
One other point emerged clearly for all those attending, which is that whatever the social impact arguments and story, social investors are just that – investors and they will always be looking for a return on their capital. Any organisation seeking social investment will need to understand this fully. Many social enterprises are expressly established as not-for-profit which is a decision that can be taken and is fine in and of itself. What it means though, is that only a more narrow and smaller set of potential funding is available and without “equity” risk capital, the ability to grow and deliver greater social impact will be constrained.
In my view, if social impact ends up being defined as only being delivered by not-for-profit organisations, then this will slow the growth in the social impact investment market and improved social outcomes. I, for one, believe that any investor and organisation can define for itself what social impact means and then go about delivering it.
- May 9, 2013
Today, 9th May 2013, sees the Ministry of Justice (MoJ) publish its rehabilitation revolution consultation response in “Transforming Rehabilitation – A Strategy for Reform”. See press release and links to MoJ publications here https://www.gov.uk/government/news/12-months-supervision-for-all-prisoners-on-release
ATQ submitted a response confined to the consultation’s Payment by Results (PbR) questions, as this is the main area where we are well qualified to comment.
While clearly attractive in terms of political presentation, we felt strongly that the proposed binary measure where outcome related payments were triggered only for total desistance would not work well. If a provider is paid only for offenders that desist totally for 12 months, then as soon as a person has re-offended there would be no further incentive to work with them. If the most prolific offenders are the ones more likely to re-offend, then such a binary measure could be almost counter-productive.
We suggested that PbR payments be linked to reductions in a total measure of offending across a cohort. In this way, providers would be incentivised to work consistently with all offenders in their cohort and especially those most likely to re-offend. This suggestion, no doubt also put forward by others, has been accepted as a component of the payment mechanism in a blended approach that retains the politically important success payments for total desistance.
“We have refined our ‘payment by results’ approach in response. Our payment mechanism will incentivise providers to focus resources on all offenders, including the most prolific and the hardest to help, and will ensure that they are not able to ‘game’ the system. Providers will be rewarded with success payments primarily when they achieve an offender’s complete desistance from crime for a 12 month period. However, our payment mechanism will also take into account the total number of re-offences committed by the cohort of offenders providers are responsible for rehabilitating, so that providers are incentivised not to neglect the most difficult offenders and those who have already reoffended. Every victim of crime matters and we need to ensure this is reflected in providers’ payments.”
- March 23, 2013
In this week’s budget statement, the Chancellor announced no change of direction for his deficit reduction strategy.
Analysis by respected commentators such as the Institute for Fiscal Studies (IFS) has pointed out the implications of further reductions in spending, particularly by those Departments of State which have not been ring-fenced to 2015 i.e. all those except health, education and international development.
According to the FT article covering this story: “On current plans, departmental spending is set to drop by 2018 to the lowest level since 2002-03 in real terms and to the lowest as a proportion of national income since at least 1998, resulting in a radical reshaping of the state.”
How radical is this reshaping going to be?
It can be argued that, to date, reforms of public services designed to drive out savings have been in the ‘salami slice’ category. In other words, the easiest areas of non-statutory expenditures have been cut back, staff numbers have been allowed to fall through natural wastage without replacements and such like.
Widespread reshaping of service delivery models and more radical reforms have not been evident. However, the ability of public service delivery organisations to muddle along with more salami slicing, in the hope that the public funding taps will be turned on again soon, must be diminishing.
With such a long period of austerity ahead, some more imaginative responses will have to emerge. There are some pointers as to the direction of travel.
Another article following the budget, this time in the Guardian, discusses plans to de-duplicate public service activities – extending the findings of the Total Place initiatives piloted under the previous Government and Whole Place Community Budgets trialled by this Government. The service areas highlighted are: families with complex needs; health and social care for adults; economic growth, work and skills; reducing re-offending and domestic abuse; and early years.
In another part of the Guardian was a different article discussing how mutual models could be more widely applied in the delivery of local government services, providing an alternative model to either in-house or outsourced to private sector providers.
Finally, if the Government’s acceptance of almost all of Lord Heseltine’s ‘No Stone Unturned’ recommendations leads to any genuine devolution of budgets and decision making authority away from Whitehall’s control, then there will undoubtedly be scope for very different thinking to emerge.
Perhaps it is only when faced with the kind of long term austerity picture which we now have that public service reforms gain genuine traction rather than lip service.
- February 12, 2013
The Ministry of Justice consultation on the Rehabilitation Revolution – https://consult.justice.gov.uk/digital-communications/transforming-rehabilitation – closes on 22nd February.
The MoJ’s self-set conundrum is an interesting one – how to design a PbR mechanism that rewards providers who succeed in getting offenders to desist totally whilst at the same time encouraging providers to work with those most likely to re-offend and so reduce their chances of receiving successful outcomes payments.
Colleagues at ATQ have submitted a consultation response and have suggested a route through the conundrum.
It proposes a ‘before’ and ‘after’ scoring mechanism where values are linked to the offences committed and providers are targeted to achieve an overall reduction. A minimum threshold maintains a ‘binary’ reward mechanism that the MoJ is seeking and it positively encourages providers to deal with the most prolific offenders as their highest priority.
The consultation response can be found at http://www.atqconsultants.co.uk/images/uploads/VF%20ATQ%20MoJ%20Rehabilitation%20of%20Offenders%20Consultation%20response.pdf
- November 14, 2012
Listening to two of the authors of the joint Fiscal Fallout report – Ian Mulheirn and Ben Lucas – at the RSA prompted a couple of observations.
The format of the event is deliberately kept to one hour and, to my perception, around 55 of the 60 minutes available were taken up with an admirable and entirely familiar analysis of the problems facing any Government trying to implement reforms whatever the fiscal climate. Some examples being:
- too much centralisation in the UK without enough local or city region decision input let alone autonomy;
- inability to overcome long held silo mentalities and cultures in addressing complex social problems;
- poor commissioning skills and accountability structures that hinder any innovation;
- no service design skills anywhere in Whitehall and few in local government;
The list is longer and the challenge appears so overwhelming that any solutions proffered in the 5 minutes when they were discussed effectively defaulted to arguing for wholesale change with an “I wouldn’t start from here if I were you” at their heart.
Despite these observations on the presentation session, I recommend reading the report as it at least tries to set the challenges in a framework that breaks it into more accessible chunks – what the report calls “Pillars of a Social Productivity Spending Review” (how think-tanky is that?)
One of the themes within the Pillars is to “Commission for Social and Economic Value”. This theme is of great interest to me and my colleagues, particularly the use of public sector commissioning to foster greater public service innovation. We have written on this topic before
To my mind, commissioning practices designed to allow for service innovation is one area that actually can be addressed as a point solution within the overall challenge. It doesn’t need every other part of the answer to be in place first – just some imagination and vision.