Public services and the crunch

August 19, 2010 at 9:27 am 2 comments

by John Craig

I recently went on a day-long visit to the Big Society.  Well, I was looking for the Big Society anyway, along with members of the civil service’s Top 200 on a visit to East London.  All day I was thinking back to the ‘credit crunch’ – that forgotten phenomenon that is far from over.  We are seeking to make citizens, in Nick Hurd’s phrase, ‘less dependent on the state’, just as ‘de-leveraging’ is hoovering £5 trillion  from our wider economy.  The result is that the challenges facing our businesses and our public services aren’t as different as they might seem.  So I am wracking my brains about what we may have learnt from the credit crunch, and what it might mean for public services and the Big Society.

Read my four lessons here.

Lesson #1 Leverage can drive growth, but too much is a bad thing

Just as private equity uses an initial stock of capital to leverage resources through debt, so entrepreneurial community organisations like Bromley-by-Bow Centre leverage through repeated match-funding. At its best, this allows local leaders to align services in more dynamic ways than policy ever could. However, just as with debt, too much matching creates instability, so that the loss of one funding stream – like a pull on a golden thread – can bring down a whole organisation. We should support community anchor organisations and that means not just helping them to bid for revenue but providing them with sufficient capital that they can thrive in the long-term.

Lesson #2 Capital and revenue can work powerfully together, but house appreciation is not a pay rise

Many who spent all their equity in the boom years now owe more than their house is worth. These kinds of confusions of capital and revenue can be very costly. However, public services arguably do too much to separate capital and revenue spending, often dealing with them in entirely separate departments. Nevertheless, at the margins, interesting shifts between capital and revenue spending are occurring. Some are looking to replace spending with investment.  For example, Lambeth has a popular scheme offering local people the tools to clear up derelict land rather than doing it for them. At the same time, some investment will be replaced by revenue spending. Where roads can’t be built, councils may invest in bus and car-sharing services. This kind of flexing – thinking hard about when spending or investing generate greatest value – is a great way to develop more efficient, sustainable services. We have to be rigorous about capital and revenue, but not miss a chance to flex the two.

Lesson #3 Delegation works, but ownership is more than a piece of paper

 In the run up to the credit crunch, mortgage-backed securities passed between so many hands that whose mortgages they were and who was responsible for them was forgotten. The gap between assets and their owners had grown far too wide. Similarly, the chain from citizens, through Whitehall and Westminster and back to the local school or hospital, is often far too long. We all own our public services, but it hardly feels that way – we don’t necessarily feel responsible or able to shape them. On our visit, the most memorable line came from Bromley-by-Bow – “members don’t just own the Centre, they feel like they own it”. Mutual approaches to ownership can really unlock people’s energy, responsibility and commitment and we should support disciplined experimentation across public services.

Lesson #4 Corporate governance is boring, but getting it wrong is disastrous

The supermen of global finance associated committees and oversight with drudgery, weakness and indecision. But their failure to express and reinforce long-term commitments to the right values in their governance structures cost them. Similarly, if enthusiastic volunteers are asked to take minutes and fill in forms, they will soon lose interest. But that doesn’t mean that policy-makers shouldn’t sweat to get the right governance for the Big Society. For example, we visited St Paul’s Way School in East London where strong community links are helping to drive school improvement, and the potential for this kind of work is huge. With dedicated funds in short supply, reforms to the likes of schooling and general practice are the critical opportunities to secure the Big Society.


Entry filed under: Innovation Policy, Public Services.

The Transforming Early Years team are looking for a learning partner Public tools as public services

2 Comments Add your own

  • 1. Matthew Horne  |  August 23, 2010 at 8:33 am

    This is an excellent summary John. Have you read the Storm by Vince Cable. It gives an excellent insight into the crunch but fails to push the analysis into the longer term wave of change at the base of our economy or into the social economy, as you do here.

  • 2. Public tools as public services « Disciplined Innovation  |  August 24, 2010 at 10:27 am

    […] the tools to do things for themselves.  (I mentioned the Lambeth example in my recent post about post-crunch trends in public […]


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed

The Innovation Unit website

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 29 other followers


Twitter Updates

Follow innovation_unit on Twitter

%d bloggers like this: