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Mar 13

Diseconomies of Scale – how we can save £16bn

Locality, working with Professor John Seddon of Vanguard, today publishes its report following research into ‘diseconomies of scale’ in public service delivery.

The findings of the report “Saving money by doing the right thing: why ‘local by default’ must replace ‘diseconomies of scale’” reveal the potential to save in the region of £16 billion by improving services in communities. It represents a staggering opportunity for the UK to re-organise public sector resources.

The report provides evidence to challenge the widely accepted notion of ‘the economy of scale’ and points to alternative models of effective public service commissioning and delivery.

It demonstrates how public services are failing to meet people’s needs and often very vulnerable people. This is caused by scale-thinking, service-led rather than demand-led approaches, and exacerbated by new outcomes-based payment models. This report argues that current approaches to systems and scale make the sort of high profile failures that we have seen recently with SERCO, A4E and G4S inevitable.

Presenting a counter view, the report proposes that public services should be ‘local by default’; that they should help people help themselves; that they should focus on underlying purpose rather than outcome, and that they should manage value not cost. Individual case studies are used to demonstrate why scale-thinking fails to meet the variety of demand, and results in spiralling costs. The human cost can be felt by reading the true stories of Melvyn, Ruth and Jake.

“The drive towards standardisation and larger and larger contracts has generated billions of pounds worth of unnecessary demand on public services, and has fed the monster of corporate greed. We must stop feeding this monster. And the way to do that is to abandon the false economy of scale ideology in favour of what we know delivers best, for people and for the pound in the public pocket: going local, putting the community in the driving seat, focusing on added value and tackling problems early on.” Steve Wyler, CEO Locality

This new approach understands what improves a life and enables public sector, community sector and local businesses in an area to work together to design a bespoke, multi-disciplinary, evidence-based system that meets local demand. It shows the profound impact of helping people previously labelled ‘troubled’ and ‘lost’ to find ways of solving problems themselves. Not only does this way of doing things strengthen communities, it dramatically reduces future demands placed on the system. It prevents problems arising in the first place, rather than accumulating costs which could be avoided.

Visit the Local by Default page.

Sign up to our free diseconomies of scale webinar, delivered by the report’s co-author Neil Berry of Locality at 1pm on Wednesday 19 March.


  1. Joan Tipping

    Posted 13/03/14 at 2:02 pm  |  Permalink

    This is brave stuff that community activists know is on the right lines and I want to hear more!

  2. Mike Britton

    Posted 06/05/14 at 8:21 am  |  Permalink

    I think it is time that we realised the true value of social enterprise and stop just looking at it as a good cause that does a little bit of business.
    Designing commercially strong businesses that have social desire at their core, but that are robust enough to deliver without extreme support through regular funding or grant is the only way to make this dream reality.
    Competing on an even playing field means working within the market expectations of charges and delivering an exceptional service with unstinting reliability – that is the key to success for any business.
    Long live social businesses.

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