Local government faces a funding black hole. It must look to demand management for part of the solution

This blog is by Henry Kippin, Associate at RSA 2020 Public Services.

June's Comprehensive Spending Review contained little to be optimistic about for those responsible for delivering local public services. Apocalyptic projections of rising demand and shrinking budgets mean that many of the services we take for granted - from libraries and parks to care of vulnerable adults and children - are now under real threat. The economic context is hardly more encouraging. A sustained period of low-to-no-growth, high unemployment and stagnating living standards will likely create more pressure on public services

Local authorities and service providers could be forgiven for thinking we are now in an era of managed decline.  Many feel they have long since reached the limit of reasonable cuts and operational efficiencies.  Indeed, economic modelling by the LGA indicates a £14.4 billion mismatch in funding for local authorities between 2019/20, with expenditure projected to rise by £7.4bn and budgets likely to be cut by £7bn in that period.  The limits of supply-side cuts are becoming clear. But what is the alternative?

A new programme of work led by the RSA, Local Government Association, the Economic and Social Research Council and Impower argues that we should be looking far more closely at managing demand as part of the solution. ‘Demand management’ consists of a spectrum of responses designed to address service failure or misalignment in order to minimise future costs, and more importantly to improve people’s capacity to be independent and to play an active part in their community and the economy in the longer term. Responses range from light touch ‘nudge’ strategies and behaviour change, to a much more fundamental shift in the relationship between public services, citizens and communities, in order to build community capacity and resilience for the future.

Some demand management strategies are already being used by local authorities. For instance, Buckinghamshire County Council has tripled the number or enquiries for foster carers through better use of customer insight techniques, with anticipated savings of £1 million to Looked After Children placement budgets. This is an example of using customer insight to create behaviour change.

Another key strategy is building on existing community relationships and collaborative social networks. Shared Lives develops small-scale family and community-based care services for people who would otherwise require formal social services. Cost-benefit modelling carried out for Shared Lives and Efficiency South East demonstrates that their approach creates an average per person, per annum saving of £23,400 for older people, and £517,400 for people with learning disabilities.

Yet these examples tend to be narrow responses at the frontline of particular service areas, rather than being part of a wider and more fundamental system change across public services. The current response is insufficient in the light of challenges facing public services. Demand management must be seen as a key part of the response to declining public service funding.

The long game is a different relationship between citizens, communities and public services - based on greater reciprocity, and a reduction in dependence on and demand for traditional services. There is no silver bullet to create this shift, but some authorities are explicitly moving their corporate strategy in this direction. For example, Oldham and Lambeth Councils are aiming to build a more collaborative relationship between residents and the town hall through innovative commissioning based on a co-operative framework and a social value ethos. Sunderland Council is driving local service reform through community leadership, changing the role of local councillors in their community. Westminster Council’s Civic Contract sets out a future in which ‘everyone does their bit’, providing a framework for residents, businesses and communities to take greater responsibility for their area.

Managing demand is something councils and public service providers have always done. Yet profound constraints in supply are pushing the conversation to the next level, and creating a sense that micro and macro-level initiatives need to be better aligned.  In public health and other areas the need is already acute.  So if managed decline is not an option, we need to quickly get beyond nudge and start thinking much more strategically about how re-shaping demand can re-shape our public services.

‘Beyond Nudge to Demand Management’ is the outcome of the first stage of a two part project on demand management, led by the RSA in partnership with the Local Government Association, the Economic and Social Research Council and iMPOWER. It is available here. An in-depth report on how to move towards demand management will be published in the autumn.

This blog is by Henry Kippin, Associate at RSA 2020 Public Services. He tweets on h_kippin