At the annual conference of the Chartered Institute of Public Finance and Accountancy (CIPFA) last week, Amyas Morse, the head of the National Audit Office, called on the government to explain how it will respond to failing public services in the new environment of increased competition and spending restraint.
While organisations across the public sector have considerable experience of doing what they do, there are a number of factors that raise concerns about their ability to continue to do so. Firstly, many parts of the public sector, such as welfare, social services and the health service, are facing greater demand for their services, as a result of the economic downturn, changing demographic profiles and better (but more expensive) healthcare treatment options.
Secondly, changes in the way in which public services are commissioned mean that they are being delivered by a much broader range of organisations, from private sector companies to small, local charities and community groups. This diversity brings with it a range of risks, including those relating to capacity, experience, quality and motivation. And the increased competition in many areas of commissioning brings its own pressures on providers to keep costs down and to work with the thinnest of safety nets.
Finally, the ongoing requirement across the public sector to cut costs puts all services under pressure to do the same (or more) with less. While there is no doubt scope to increase efficiency in most areas, there will come a stage when the level of resources available is just not sufficient to do what needs to be done. This has led to some discretionary services being scrapped altogether, but its impact on other services is only now becoming apparent.
The inevitable consequence of these three factors is that some front line services will no longer be able to deliver. Whether this is because demand outstrips supply, because external providers default on their obligations or because budgets have been cut below the minimum required to do the job, at some point things are going to break.
This will mean big problems for the public sector bodies that commissioned these failing services. Because even though the delivery chain has broken down, they will still need to provide the service. Just because their provider has quit, gone bust or lost the plot, this does not mean that they can get away with not collecting the rubbish, providing out-of-hours medical care, processing benefits payments or whatever. You can outsource activity, but not responsibility.
It is now, therefore, more important than ever that public sector bodies plan intelligently, implement robustly and monitor proactively the delivery of the services that they and their partners or contractors provide. This includes, as a bare minimum:
- reviewing periodically the design of each service, to check that it is operating efficiently, that it meets appropriate standards of quality and that it has the capacity to respond effectively to the current and likely future level of demand for it;
- assessing critically the capacity, expertise, quality and financial standing of any external parties involved in the delivery of the service (and remembering, when putting services out to tender, that if a bidder’s price or proposal looks too good to be true, then it probably is);
- identifying key risks to the delivery of the service (e.g. demographic changes, provider issues, financial pressures) and develop a plan for how they would respond – even if just in the short term, to provide some breathing space – if the service should break down for any reason;
- developing and implementing appropriate financial and operational performance metrics to monitor delivery of the service, so that any potential issues or weaknesses can be identified early on, before they threaten the delivery of the service itself; and
- assessing the impact of budget cuts on individual services and addressing any cost pressures proactively, so that they can be managed without putting the service itself at risk. This may mean taking some tough decisions, but ignoring problems and hoping that efficiencies will just turn up is likely to be even more painful in the longer term.
With the age of austerity set to continue beyond the 2015/16 spending round, we will not always be able to stop public services from failing. But there is much that we can do to make them more resilient to the challenges and risks that they face in the current environment. And we can ensure that when problems do arise, we have the mechanisms in place to alert us to the warning signs and the means to take appropriate action to protect public services and the people who rely on them.