Wednesday 15 May 2013

The great paradox: concentrating on cutting costs drives them up

Down in the forest, something stirs.  Shhh now, don't scare it away.  Something is emerging from Labour's policy review, at least according to John Harris in the Guardian.  It seems to include a combination of three approaches - or is it four, I can't quite grasp which.  And they are as follows:

1.  Balancing the budget over a decade, involving an approach to austerity that Harris quotes insiders as calling 'brutal'.

2.  Growth led by house-building.

3.  Re-thinking how the public sector fits together, with an emphasis on prevention - which is a success for my colleagues at the New Economics Foundation who are among those pedalling exactly this.

4.  Turbo-charged localism.

My first thought about this, apart from the fact that it will divide the Labour Party, is that it appears to be an attempt to borrow the coalition's rhetoric and make it work rather better.  Perhaps even along the lines the Lib Dems might attempt if they had a free hand.  Hence the controversy.

My second thought is that turbo-charged localism is not, never has been, and probably never will be, something the party of Beatrice and Sidney Webb will be able to carry out in practice.  But, hey, perhaps I will be surprised.

But what really interests me is how balancing the budget and reorganising the public sector might fit together - and could still be made to fit together by the coalition.  Because to genuinely reduce the cost of public services, you really need a big idea about how they might work differently - you need a diagnosis and a prescription.

The coalition has a diagnosis - they understood the disastrous effect of targets - but no prescription that really fits it.  New Labour had a prescription but a faulty diagnosis.

Without the diagnosis, public service reform just becomes public service cuts, and they often lock in costs elsewhere in the system.  I have written before about how historians covering these years will regard our main story as the looming crisis in public services, and the race against time by empowered service professionals to come up with the ideas they need to re-configure them.

But it is worse than that.  Without a big idea behind spending cuts, any government gets impaled on the horns of a dilemma described so powerfully by the systems thinker John Seddon:

"The truth is counterintuitive: focusing on costs drives costs up. It doesn't take a rocket scientist to work out that we'd be better off if we could design a service that meets people's needs, quickly, effectively and once."

There is the great paradox which has eluded successive governments.  If you focus on cutting costs, the costs will rise.  If you try and provide a more effective service - which might well not be digital by default - then costs will fall.

Seddon is an important figure in all this.  He is the presiding genius over a whole range of related ideas that, taken together, would completely transform the effectiveness of our services.  Before the election, I took him to see Vince Cable, hoping they would hit it off (they didn't really get the chance).  After the election, I organised a debate at the Royal Society of Arts with him under the title 'The New Efficiency'.

He remains a kind of king-over-the-water for the kind of service manager who is most frustrated by the direction of public service reform over the past decade. 

Seddon's frustration with Whitehall is expressed in a wonderful monthly e-newsletter which has become required reading in local government circles because it is so enjoyably rude.

He isn't right about absolutely everything - this isn't a hagiographical blog - but I have come to believe that he represents the wave that is about to break over public services.

Perhaps Labour will run with this approach, and the related approaches I describe.  Perhaps they won't.  Perhaps the coalition will realise, at this late stage, what needs to happen.  I don't know.  But the wave will eventually break, sweeping the whole caboodle of lesser ideas - Lean, digital by default, payment-by-results - into history.

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