Test 3 October, 2017

Modern life has changed – so services must too

Life expectancy has risen, employment rates are as high as they have ever been, participation in higher education has increased, crime has fallen and technological innovations have provided new opportunities. In short, how we live has changed. This change has also brought challenges such as caring for an ageing population, rising levels of childhood obesity, loss of traditional industries, new working practices and a housing shortage. Some individuals and families with multiple, complex needs have been left behind.

Meanwhile the role and structure of the public sector has also altered. Government has increased its reach in some areas of social and economic life and drawn back in others. This has been partially driven by the ideological preferences of successive governments, but it has also been a response to the challenges of addressing the ever greater complexity of modern life. Technology has also shifted the way that we interact with public services and added further to that complexity.

Some big questions remain to be answered for the government and public services. How can government encourage innovation in the delivery of public services? How can it encourage social innovation, where people come together to solve social problems? These types of solutions are particularly powerful because they are social in both their means and their ends. People developing new relations and working out their own solutions to the problems they face is preferable to government trying to solve their problems for them. But, what role should government and public services play in helping people come together and problem-solve in ways that are inclusive and sustainable? What should the relationship between the modern state and the twenty first century citizen should be?

One possible solution has been outcomes-based commissioning. On the face of it, this is a simple idea: rather than paying service providers for the amount of a service they deliver, government pays for the social outcomes the service achieves. For example, rather than paying employment services for the number of unemployed people they help to find work, why not pay them for the outcomes they deliver (i.e how many people they get into work).

The hope has been that outcomes-based commissioning will cut bureaucracy, free up service providers to innovate and deliver more cost-effective services. Since 2010, billions of pounds of public services have been subject to ‘payment by results’ (PbR) in sectors as diverse as welfare, criminal justice and international development and over 30 Social Impact Bonds, or SIBs – a form of payment by results in which social investors provide working capital to deliver services with government paying them for the outcomes that are then delivered – have been launched. However, in a large review of the evidence on outcomes-based commissioning that colleagues and I have recently completed we found that PbR programmes and SIBs are typically more complex and costly to commission than comparable services. For both PbR and SIBs the increased focus on outcomes and better performance management has the potential to offset some of the additional commissioning costs. Although in some UK PbR programmes narrowly defined outcomes and an excessive emphasis on performance management had the potential to undermine the quality of service delivery. While there is some evidence that PbR and SIBs can incentivise different behaviours at the level of organisations and individuals delivering services neither PbR nor SIB programmes in the UK have been strongly associated with innovation in the design of services. An important caveat to our findings is that despite extensive investment in PbR, there has, to date been relatively little evaluation of its impact. More and better designed evaluations are needed.

In the meantime new models for commissioning public services are being developed. Some use the logic of PbR, such as ‘social investment partnerships’. Others take old models of shared ownership such as cooperatives and employee mutuals and re-imagine them for 21st century public services. These are alternative commissioning models that have potential to foster innovation, particularly social innovation and more evaluation of their impact is needed. One of the most promising new approaches is the ‘personalisation’ of services. This model is well established in social care and many of us with elderly relatives will have come across the idea of a ‘personal budget’ where a service user is allocated funding to pay for the services they need. We are currently exploring the potential of personalisation in other sectors, including the criminal justice system where more personalised approaches to the resettlement of offenders hold much promise. However, a recurring theme in all of these areas of innovative commissioning is a lack of robust evidence about their impact. In a recent report on personalisation the National Audit Office highlighted the lack of robust evaluation evidence.

Going forward Government should continue experimenting with different and innovative models of commissioning. Some will be a success and allow innovative organisations and individuals to re-shape the design and delivery of public services. Others won’t work or the their costs will outweigh their benefits, but we can only find out which are which if we also invest more in high quality evaluation, building an evidence base to support commissioning approaches.

Chris Fox is Professor of Evaluation and Policy Analysis at Manchester Metropolitan University where he is Director of the Policy Evaluation and Research Unit and co-lead of Metropolis