The British government has historically been able to either achieve a reduction in public spending, or has been able to deliver on ambitions to achieve certain outcomes for the public. However, it has rarely been able to achieve both at the same time.
In other words, the assumption has typically been if you want better public services, you need to spend more.
According to a new government review, published by Sir Michael Barber, who was instructed to carry out an assessment of public sector productivity after the Spring Budget, it is now vital that Whitehall both reduces costs and delivers better outcomes for citizens.
Due to the rising demands of the British public on government services, an ageing population, and a challenging fiscal position, it is no longer viable to achieve just one or the other.
The Public Value Review outlines a new framework for government follow, which it hopes will allow the Treasury and other departments to better measure and track their inputs and outputs, without having to rely on the assumption that more money equals better results.
The framework – dubbed The Public Value Framework – places a strong emphasis on the use of data to monitor and track the effectiveness of work, and also calls for ‘disruptive innovation’ to be embedded in all lines of work.
Sir Michael Barber said:
There have been many efforts to make government more efficient in recent decades. Some of them have been very valuable but, once they are over, business as usual returns. The aim this time is to embed a new approach to productivity in the day-to-day working of government.
That means changing how Treasury and departments work together to maximise public value. I have been very encouraged by the enthusiasm of ministers and officials for this new approach.
We all know the political cycle in Whitehall has an impact on project delivery and effective outcomes for citizens. It’s difficult to embed any consistent change across the government machine, when every two to five years new ministers come in announcing a new set of demands. The aim of the Public Value Review is to embed a way of working that is consistent and long-lasting.
The key challenge highlighted in the report is one of measurement. It notes that while in the private sector measuring productivity is relatively straightforward (both inputs and outputs have a cost), this is often not the case in the public sector. For example, a hospital might deliver a large number of medical appointments with the funding allocated to it, but if those appointments do not translate into improved health outcomes for patients, then the service is not delivering.
Therefore, without the consistent output data, the temptation has been to equate inputs (money) with outputs. The report argues that this can stifle innovation, encourage greater focus on quantity over quality and give less consideration to how additional funding can be used.
It adds that any attempts to measure productivity in Whitehall “have taken place in the absence of an embedded strategy for continuously improving efficiency and productivity” and have “often had a significant short term impact, but have generally lacked follow-through”.
The issue being that any new methodology introduced needs to change cultures and behaviours within government over the long term – something that is notoriously difficult to do.
To tackle this, Sir Michael Barber recommends introducing the following Public Value Framework to be used across Whitehall (see diagram below).
The overall task of the framework is to turn funding (at the bottom) into outcomes for citizens (at the top).
Pillar 1 focuses attention on the outcomes expected from a given budget over a 3- to 5-year time horizon, including the potential impact on human capital.
Pillar 2 explores how well inputs are being managed. As noted above, the UK has a considerable track record of success with each of Pillars 1 and 2 but has rarely managed to focus on both simultaneously.
Pillar 3 highlights the need to convince taxpayers of the value being delivered by spending, and of the importance of engaging service users. There are many areas of public expenditure where the active engagement of the user of a service can make an enormous difference to improving outcomes, such as altering their lifestyle to improve their health. The report notes that if this is neglected, then it can do much to frustrate the successful delivery of outcomes.
Pillar 4 emphasises the long-term sustainability of the system and the importance of responsible stewardship. Those responsible for a service or institution need make sure that, as they make progress on Pillars 1, 2 and 3, they are also strengthening its capacity to deliver in the long term. The report adds that leaving an institution in better shape than one found it may not seem as immediate as the other Pillars, but is vital to delivering long-term public value.
The review notes:
For the Framework to be effective at changing cultures it needs to be integrated into the ongoing conversations and processes around public expenditure, both between the Treasury and departments and within departments themselves. Regular assessments to the Framework – or Public Value Reviews – will be key to achieving this. These could be undertaken on large budgets, either within individual departments or across departmental boundaries.
They should be collaborative, involving joint teams drawn from the relevant departments, the Treasury and other experts, and establish a shared evidence base from which judgements can be made (on a 4-point scale) about progress within each Pillar and actions to improve performance. The reviews also need to be appropriately incentivised with sufficient accountability to ensure the agreed actions are delivered. The experience should be sharp, focused and rapid, initiating a fresh rhythm of practical, constructive conversations about maximising public value.
Sir Michael Barber believes that the benefits of this approach are numerous. The review describes the framework as a practical tool for assessing the chances that public value is being maximised. It aims to give the Treasury a new structure and dialogue for engaging with departments, shifting attention from solely focusing on inputs, towards optimising the chances of maximising public value.
It hopes that it will strengthen ongoing conversations by creating a shared evidence base from which to jointly identify challenges and agree solutions. In other words, it embeds an ongoing culture shift between the Treasury and other departments.
The need for data and innovation
The review notes, however, that for this framework to be successful, better use of data is needed and innovation needs to be introduced as the norm.
It argues that for every major area of public expenditure, it should be customary that good data is gathered and analysed in a timely manner to allow informed decisions to be made. The government has a very hit and miss track record with this – often because of the poor quality of public data – but moves have been made in recent months to improve data sharing and ownership.
The report notes:
In the second decade of the 21st century there is no excuse for not having this data available, both to departments and the centre of government. Where possible, this data should also be open, accessible, and comprehensible to the public, consistent with the government’s commitment at the last election.
The report therefore recommends that government raises the profile of existing data initiatives across government, and that the Treasury acts as a catalyst for this by demanding transparent, better quality, more consistent, and more timely data from departments.
Alongside the better use of data, the review adds that increased productivity also requires “disruptive innovation” – which it describes as “radically new ways of doing things that deliver much better outcomes for reduced costs”.
In recent years, the report notes, the government has encouraged this through numerous innovation funds. However, the drawback of this is that such funds risk characterising innovation as an ‘optional extra’, separate from the business-as-usual operation of the department.
The next step is to encourage departments and agencies to develop radical innovations that both improve outcomes and reduce costs across their whole organisation, and the Treasury has a role in encouraging this.
Sensible take on encouraging accountability and collaboration between the Treasury and departments’ work. It’s certainly not true that more money equals better outcomes. A change in culture and approach is essential. However, will the Treasury take note and make this a priority? We will have to wait and see.
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