What shall we do with the public sector? – part two

As mentioned here, these are uncertain times for the public sector. Consultants at KPMG are keen to see the delivery role of the public sector reduced by as much as possible in favour of marketized system of payment by results and there’s a number of heated policy debates currently overlapping with this narrative.

The natural companion to payment by results, potentially a key part of it, is personalisation. The Department of Health is currently funding an in depth pilot study of personal health budgets across 70 sites in England and this report features the initial reflections on the experiences of 20 sites chosen for in depth study. Personalisation is a very simple concept. You give people who use health services the money that would be spent on providing services for them and they decide which services they want to spend that money on.

That’s the simple concept. The pilot study is looking at the slightly more complicated reality. Many of the biggest practical challenges are around managing the process within PCTs – including persuading the finance department that they can and should have a go at trusting service users with direct payments.  But some of the biggest questions about personalisation – questions that are unlikely to be answered while personal budgets are ‘double-running’ alongside block commissioned services – are around the market: “6. Promoting choice and control in the absence of a clear and developed market”.

The main focus of this initial report is on NHS services provided by bits of the NHS but, from a social enterprise point of view, the question of market development is a key one. In theory, social enterprises are ideally placed to increase the scope and quality of the market. In theory, social enterprises (and other community organisations) work more closely with people who use services than NHS or private providers. In theory, this should mean that social enterprises are more likely to be able to provide services that people will want to use their personal budgets to buy. But is this the reality? And if it’s true that social enterprises know what services people want and the right ways to provide them, will we be in a position to enter these new markets?

In the absence of either ongoing grants or government agencies commissioning defined chunks of service provision social enterprises (and other small grassroots groups who don’t regard themselves as social enterprises) will have to:

(a) adapt their current models of working to be able to sell services to individuals for a fee that enables them to cover their costs

AND (b) finance the bulk of the ongoing costs of providing services on the basis that they won’t necessarily be able to sell those services.

To what extent will this work? (a) will be possible if either central government or local agencies pay for it to happen once – with one-off grants (or loans) funding the development of the market. (b) is more of a problem. How many small local organisations will ever be able to provide surplus capacity if there isn’t any funding to pay for it? How many will want to take the risk?

Unlike straight business where investors finance goods or services that may not be sold on the basis that, if these goods and services are sold, they make profits, people running local social enterprises and community groups are risking not getting paid a relatively low wage for doing a difficult full time job, with the winning scenario being that they get paid a relatively low wage for doing a difficult full time job.

It’s true that organisations can spread their risk by scaling-up and offering more services across a wider geographical area but what about those that can’t or don’t want to?

These concerns don’t amount to against an argument against personal budgets – frustration with services that are ‘just there’ and don’t offer anything useful to anyone is one of the key drivers for people to start social enterprises – but both central government and local funding agencies need to think carefully about how to deliver personalisation in a way that creates the market that people want. The big danger is that if ways aren’t found to fund (the most effective) small local organisations remaining in the market, people using services will be left with a purer method of exercising an equally limited or even more limited choice.

Coming soon: part three – co-production.

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3 Comments

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3 responses to “What shall we do with the public sector? – part two

  1. Alisdair Cameron

    You slightly gloss over some of what’s being sneaked in under the guise of implementing personalistion/SDS etc: namely rationing, in two directions. The bar is being raised reducing entitlement to any services/budget, and the size of the budgets for the lucky few in receipt of them is nothing like those recipients might have been led to believe. Factor in the complications with clinical issues and it’s not a terribly rosy picture for soc enterprises. Somehow a market is desired (as if that’ll magically sort out all of health and social care) but markets require surplus capacity.Nobody, but nobody is prepared to pay for that.Thus only large multinational commercial enterprises can flourish,being prepared to set up loss-leaders in order to build market share, and be well positioned for the likely insurance-based health’n’social care world that we’ll have within 5-10 years. Diversity in the market?Nah. Fresh start-ups, genuinely local enterprise, etc will only get marginal trade.

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  2. I agree that the situation doesn’t look that good but that is mainly because the process of market-shaping has been undertaken so slowly by the public sector agencies and the timeframe, both politically and financially, has caught up with the whole process. I also agree that all budgets are, and always were getting smaller. Bleak, it’s true but there is still the potential for viable socially enterprising solutions.

    There is a real desire in the public sector for a socially responsible engagement with this opportunity and social enterprise would seem to fit as a mixture of wishful virtue and ‘cost-effectiveness’. There is an urgent need for a reality check in these dialogues that will require all to be responding to the opportunities with thoughtful and inventive solutions. It must be understood by all that no business response is just going to be an extension of a current service.

    The gathering of information and knowledge by social enterprise support agencies such as SEC and Social Enterprise East of England (SEEE) is a valuable tool to assist emerging understanding in this area. To that end there is a paper at http://www.seee.co.uk/resourcelisting.asp?section=103&sectionTitle=Think+Tank+Library
    entitled ‘The Transformation of Adult Social Care – Exploring the opportunity for Social Enterprises’ that might stimulate this discussion.

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  3. Pingback: I should co-pro (What shall we do with the public sector – part three) « Beanbags and Bullsh!t

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