Squaring the Circle

How do we square the circle between less money and the need to maintain, even improve services? As a social entrepreneur I actually believe the answer is pretty straightforward. Its implementation however is not. It requires political courage, a new attitude to risk and a willingness to go forward on a number of reforms before consensus has been reached.

But before I start let me say what I bring to the discussion. I started my career in care services and swiftly realized that most of the money is wasted on services that people don’t like or want and on transaction costs. So I set up Speaking Up to empower the user. This became a seven million pound social business which I now Chair.

I am now founding a new business to help large chunks of the public sector `step out’ into mutual or social enterprise format. The idea is to liberate themselves from public sector culture and grow as socially focussed businesses. I have been in and around public services for 20 years (now also as a Lib Dem County Councillor) and have long held the view that only vast reductions in spending would force the kind of reform needed. And here we are.

So what is my answer? It has three parts. The first is that we must push-on hard with the personalization of social care and health budgets. This was started under Labour but stalled because it threatened state services. But putting resources directly into the hands of people in need not only cuts transaction costs it also means that the money is used more efficiently. People then need less of it than before.

The work to date tends to supports this. At the moment personal budgets are used for only a few thousand people . We need to make it a few million very quickly by requiring local authorities to immediately move this money out to people unless there are big reasons not to. This idea fits with the Big Society because personal budgets encourage people to become more involved in their community . That’s what I saw happening again and again with Speaking Up. It works, we should all we doing it.

The second part of my answer is that we must move rapidly to move large parts of the public sector into new mutual and social enterprise structures. Why? Because these organisations, by and large, will do the job faster, cheaper and better than if left in the state sector. Competition is essential as life without a threat to survival makes organizations lose sight of efficiency.

The evidence to support this is already there in the leisure-centre sector and is emerging in former NHS services. Set free, these businesses have been free to innovate, use business disciplines and alter the culture . They can then grow and take over other services. Again, I have seen enough evidence both through my own business, Stepping Out, to be in no doubt that this is a massive part of the solution.

The third part of the answer lies with politicians. We cannot go faster with any of this stuff unless politicians press certain buttons. What are these buttons? One is around public sector terms and conditions. The whole reform agenda will go nowhere unless pensions and current terms and conditions are quickly normalized. The incentives to remain in state employment will be too great. The Hutton Review and the ongoing work on civil servants pay and terms has to go the full-hog. This means no significant compromises with public sector unions.

Another key `button to press is to insist that all public authorities spend 80% of their budgets on external provision and view themselves only as provider of last resort. Margaret Thatcher did this with community care budgets in the 80s and we now have, on the whole, very good local markets in this sector.

The final key button to press is to make room for social enterprise and charity providers, particularly in social and healthcare services. Make no mistake - the private sector has a massive role to play and wit will deliver strong short-term savings.

But it will not create the Big Society. A strategy of divestment must go hand in hand with building community-capability. One must feed the other. This is where the really massive savings are made - from those new providers able to mix public money with the energy and resources of both the citizen themselves and the wider community.

The beauty of social enterprises, and indeed many charities, is that they can do just this– at far less cost to the taxpayer. But this will take time and some patience to develop. And we must not crowd this out by rushing straight to traditional privatization of health and social care which will, deliver short-term saving but little radical innovation or social capital. Privatization as a sole strategy will get you the same shirt - but cheaper. We need a new type of shirt.

So, to conclude, three key recommendations. Push personal budgets to the next level so the money is out there working harder and not absorbed in the state. Second, press on with divestment to the social enterprise sector. Third, create political conditions which incentivize people to move out of the state sector in large numbers. But remember that the biggest savings and changes will only arise if the Big Society is properly nurtured through divestment to social enterprises and charities – in addition to the private sector.