With austerity biting hard into local government budgets and with service supply side costs already heavily reduced in the previous rounds of cutbacks, new thinking and doing is required to keep up public services helping those in real need – with the next round of cuts already around the corner. According to a recent research from business advisory iMPOWER, council executives should increasingly consider demand management as a means to influencing the quality of operations.
With a heavy focus on austerity and belt tightening from the UK’s central government across almost all departments, local authorities have been under considerable and sustained budget pressure. The pressures have resulted in the reduction of local government size by roughly 40%. The coming years are expected to see further decreases, with a further £30 billion in cuts expected across non-ring-fenced departments, and at the same time local authority reserves used to buffer drastic changes will continue to fall. Given the pressures faced by local governments, changes are needed in the wider services ecosystem for authorities to continue to be able to provide key services to those with the most need.
In a recent report from iMPOWER, titled ‘The Inflection Point’, on the state of local government, the need for change on the back of decreasing funding is highlighted as both a challenge and an opportunity. In recent years local governments have focused on lower supply side costs as far as possible without cutting too deeply into services. Reductions have seen 500,000 council jobs axed and other methods such as re-organisations, threshold changes and service rationing. Future cuts would however, start to affect largely frontline services. Local governments are now therefore at a point where change is inevitable, with the question how and to what end open.
While a focus on supply side has reduced costs, the research from iMPOWER shows that councils are more and more considering the demand side to see whether a reduction in inappropriate or unnecessary needs might be able to reduce budgetary burdens. ‘Demand management’ is a term that described a phenomenon that may potentially provide a ‘win-win’ for local communities and councils, with the aim of reducing peoples’ unnecessary need for statutory services in the first place.
That there are considerable social and financial gains to be made through demand management is something already understood by a vast majority of council heads. iMPOWER’s research finds that as of January 2015, 76% of 125 local government chief executives and senior directors either agree or strongly agree that demand and behavioural focused transformation represents the single greatest opportunity to reduce costs.
The authors looked in more detail at the types of transformations that could achieve savings through demand management, with child care and fostering coming top of the list, yet also recycling – an activity for which the business case is often debated – could realise savings of between 5% -10%.
Holding things back
While the benefits of demand management are agreed on by the heads of a considerable number of local councils, the path to get there is less clear. The advisors highlight a number of key barriers holding back implementation of demand management, as cited by the council executives, with the biggest issue, indicated by 67.3%, a lack of data from which to understand demand; the second biggest issue, indicated by 46.9%, as a lack of analytical skills to interpret data; while nearly 40% suggested that the initial funding for the right tools and capabilities is too onerous. Around 20% cited a lack of will as a factor influencing their decision to implement demand management in their organisation.
The consultancy notes that there are a number of key steps toward moving an organisation forward in the delivery of demand management. These include:
1. Insight function - linked to and supporting services, providing the latest detailed intelligence and trends on clients and demand drivers. The level and form of analysis we deem necessary is currently, based on the responses of chief executives and senior directors, not readily available in local authorities.
2. Skills and experience function - providing a central hub, and training, for staff leading demand management transformation projects. Training staff, both at the corporate core and within services, will be critical to ensuring the sustainability of a programme.
3. Behavioural insight function – the development of staff with specific experience in behavioural science. Ensuring you have adequate skills in designing behavioural interventions will be a critical part of maintaining your approach and continually innovating.
The consultants conclude: “People are changing, local government is its people; local government should therefore be confident about changing too. Demand focused transformation is unambiguously the core point of emphasis in this report but it is in truth a gateway to unlocking a wider set of strategic objectives for local authorities.”