Skip to navigation | Skip to content

Mar 17

Saving money by doing the right thing

Enterprise, Innovation, Localism, Speaking truth to power

Last week at the House of Lords we launched a much-anticipated report: Saving money by doing the right thing: why ‘local by default must replace ‘diseconomies of scale’.

Incredibly, the economy of scale argument is still dominant in the Treasury, in government departments, in local councils and health bodies, and across the political spectrum. This is the myth that cutting costs will be achieved by combining public sector procurement into larger and larger contracts, by driving down unit costs through efficiencies of scale.

This is no doubt a highly convenient myth for command-and-control politicians and for those who want to see mass privatisation of the public sector.

But not only is it false, and wholly unsupported by evidence, it is devastating in its consequences. It leads to an industrial approach to public services, riddled with standardisation and silo working. It leads to the prime contracting model, feeding the monster of corporate greed. It doesn’t even save money. By generating ‘failure demand’, rather than preventing early problems getting worse, and actually helping people, it drives up costs.

We produced this report with Professor John Seddon and his team at Vanguard Consulting. Here is a flavour of what we say: ‘Today’s public services are not designed for “people who need help”. They are designed to batch-process fixes for predefined one-off issues and then close the books. In consequence they are systems that assess rather than understand; transact rather than build relationships; refer on rather than take responsibility; prescribe packages of activity rather than take the time to understand what improves a life.’

The report, which draws on evidence from Locality members and Vanguard’s work, continues, ‘As in any system that fails to solve the underlying problems, they amplify work, appearing frantically busy while accomplishing less and less. Based on identifying needs rather than strengths, they fail to help individuals and communities build self-sustaining support systems that increase agency and independence, instead increasing resource consumption and dependency and accelerating decline’.

So what’s the alternative? We make just four recommendations, none of which will cost money, but on the contrary if implemented together will save many billions of pounds (our conservative estimate is £16bn a year) as well as vastly improving how public services are delivered:

• Local by default. Commissioning and delivering public services should take place at the neighbourhood level, as the default position, and any move to levels beyond the neighbourhood would need to be justified as exceptional.

• Help people to help themselves. People are the solutions not just the problems. This is a massive resource but all too often overlooked.

• Focus on purpose not outcomes. Predetermined output targets and even predetermined outcome targets start from the wrong place. A focus on underlying purpose is what will make the difference, especially if aligned as closely as possible to individual aspiration.

• Manage value not cost. When commissioners and managers try to drive down unit costs they end up with dysfunctional delivery that does not address the real problems, but pushes them elsewhere and ends up costing the public purse even more. The only way to drive down costs is by focusing on value. In other words, designing services that address problems early and always add value.

To my mind this is the most important report Locality has produced, but to create a shift in policy and practice of this magnitude is no small task, and we will need to promote the ideas in the report far and wide. We already have offers of help from Vanguard and other influential allies at national level. But we need to step up the local pressure too.

So I hope you will take a few minutes to read the report. Do please let others know about it. In the coming weeks we will be producing a campaign pack to help Locality’s members promote the report and its ideas locally, but in the meantime, are there people, in your local council for example, you can warm up?


  1. Mark Cargill

    Posted 17/03/14 at 1:50 pm  |  Permalink

    As Mayor of a small town and one who has spoken on the unitary authority debate, I see the necessity of power being disseminated to local governance. I also want best value. Finally I do not want to be dictated to by government on what I should buy. Therefore give us the power to buy from nominated companies that are in competition, to attract the business from Councils such as ours. This gives bulk purchase capacity with choice.

  2. Mike Riddell

    Posted 17/03/14 at 4:59 pm  |  Permalink

    When are we expecting our new ‘valuation system’?

    When can we expect to be valued for the good that we do?

    When can we expect to be supported by businesses for making the changes in community that they will benefit from and government too?

    When will we ever get recognised by the state or by business?

    When we stand up and be counted.

  3. Dominic Macdonald-Wallace

    Posted 20/03/14 at 8:24 am  |  Permalink

    Steve this is an excellent and inspiring paper.

    it aligns itself with our philosophy that collaborative working and shared services presents an opportunity to stop and completely review the way in which public support is delivered, focusing on improving the life of the recipient of the services, not the processes.

    We will make it compulsory reading for our students on the postgrad certs in Collaborative Leadership (University of Derby) and Collaboration and Shared Services (Canterbury Christ Church University) and use its case studies in our teaching programmes with CIPFA, CFOA and LGA.

    I will review it in our weekly email to our alumni of almost 2000 leaders and senior managers across the public sector next week.

    So count us in to support your work and let us know how else we can help.

  4. Dr Roger Haydon Mitchell

    Posted 07/04/14 at 5:27 pm  |  Permalink

    Thanks for an excellent paper. It would be great to connect with you via the Richardson Institute for Peace Studies here in the PPR Department at Lancaster University where we are pursuing the politics of positive peace and this sounds like an ace example!

  5. David Sawyer

    Posted 23/09/14 at 3:56 am  |  Permalink

    From way across the pond (Oregon)….direct customer delivery buy locals is heresy to the management culture. Yet most of them haven’t even meet their customers and their failure ridden systems show it!

Leave a Reply

Your email address will not be published. Required fields are marked *