John Seddon is an author and consultant with a special interest in public sector reform. His latest book ‘The Whitehall Effect: How Whitehall became the enemy of great public services and what we can do about it’ is published by Triarchy Press.
Since Margaret Thatcher, all prime ministers have placed public-sector reform at the top of their domestic agenda, with the avowed intent to reduce costs. Yet expenditure has trebled in actual terms; more than doubled in real terms and public services have not improved. All governments, regardless of political colour, have done the same things: industrialised services (call centres, back offices, sharing and outsourcing services); imposed targets, inspection and regulation; promulgated IT-led change, ‘personalisation’, choice, Nudge and so on.
You have to get down into the nitty-gritty of what happens in practice to learn how these things are, in fact, driving costs up. Politicians have been chasing the chimera of cost-management. Counterintuitively, managing cost drives costs up.
Services are moved to call centres because telephone calls are cheaper than face-to-face services. But every shiny new local-authority call centre I have studied experienced volumes of demand far beyond what was in their plan – it’s what I call failure demand, caused by the failure of services to work for citizens. The mistake was to assume you can take the ‘telephone work’ out of departmental services (and millions were spent getting consultancies to bully departmental managers into doing so).
Likewise, the idea of the ‘back office’ is to reduce costs by moving service work away from places of customer contact where customers ‘interrupt’ (!) the work of the service agents, preventing managers from ‘sweating’ the labour. But back-offices, too, create failure demand. People in back offices take a ‘rules and procedures’ view of customers – quite different from seeing them face-to-face – and the standardisation and specialisation of work means the arrangement fails to deal with the variety of customer needs; so more failure demand.
Sharing services creates a short-term illusion of savings because there are genuine savings of the less-of-a-common-resource type (fewer managers, buildings, IT systems; real but often hard to achieve) but the bigger promise of longer-term reductions in transaction costs are never delivered, witness Southwest One, Birmingham City Council and many others. The principle culprit is standardisation of services. What actually happens is demand volumes rise inexorably (failure demand again) and where these ventures are out-sourced to private- sector providers with contracts based on activity volumes we end up paying more and more for worse and worse services. You couldn’t make it up.
Universal Credit, the flagship ‘digital-by-default’ service is a train crash in slow motion. I warned Iain Duncan Smith at the start that he had two hurdles to clear: getting the IT system to work, then getting the service to work. If he gets over the first (90 per cent of large-scale IT systems fail) he will fall at the second because computers are no good at dealing with high-variety services. If people are forced to use a digital service it will create enormous volumes of failure demand, to say nothing of the impact on people’s lives. Universal Credit could be delivered in months by face-to-face means rather than taking now more than seven years (as originally promised) at a cost of hundreds of millions.
If all of that isn’t bad enough, these notions of industrialisation – all based on the flawed concept of economy of scale – have been bullied into public services by a regulatory and inspection regime. It is a regime of compliance.
To foster innovation we need a regime of responsibility; we need a major shift in the locus of control from Whitehall to public-service managers. Paradoxically it would improve accountability and transparency and above all it would provide a platform for improving services and reducing costs. The scope for improvement remains; and is astonishing.