The challenges that the post-war public sector was built to respond to have changed: life expectancy has risen, employment rates are as high as they have ever been, , crime has fallen and technological innovations have provided new opportunities for work and leisure. The challenges the modern state faces are different ones including: rising levels of childhood obesity; family structures that are more fluid; a housing shortage; fewer ‘jobs for life’; caring for an ageing population; and loneliness. In the face of these new challenges, some individuals and families with multiple, complex needs have been left behind. These challenges are not just complicated, they are complex in the same way sending a rocket to the moon is complicated but raising a child is complex.
Getting beyond the public v. private debate
One thing this complexity signals to us is that neither the state nor the private sector have all the answers. The debate on reform of public services that leads inexorably to a discussion about the State versus the private sector seems stale and even misleading. Over a number of years the Centre for Analysis of Social Exclusion at the LSE have charted the evolution of state welfare provision, broadly defined as education, health care, income maintenance, housing, and personal care. Professor John Hills at CASE notes:
“There has always been a ‘mixed economy’ of welfare in terms of the balance between public and private provision, finance, and control.”
The complex mix of funding, provision and control of public services leads his colleagues Burchadt and Obolenskaya to argue that: “a straightforward diagnosis of ‘privatisation’ is not helpful or perhaps even meaningful”.
Looking for innovation in public service reform
For the last three years I have been directing a European project looking at welfare reform across Europe. Rather than focusing on the big, ideological debate of public v. private, we have instead looked at specific public service innovations to identify how they are financed and regulated, how they are implemented at a local or regional level and how people and communities respond to them. Underpinning our work is an interest in ‘social inovation’. Social innovation happens when people come together to solve social problems. These types of solutions are particularly powerful because the process of solving the problem is itself social. So, as the Young Foundation argue in the Open Book of Social Innovation, social inovations are social in both in their means and their ends.
We found many examples, across Europe of innovation in public service reform that involve local people and communities both in designing and delivering social solutions. The UK was no exception. Many innovations are utilizing new models of shared ownership, for example, Community Interest Companies. Others take old models of shared ownership such as cooperatives (for example, there are now several hundred cooperative schools) and re-imagine them for twenty first century public services.
How can government encourage innovation, particularly social innovation? In the UK government has tried outcomes-based commissioning as a tool for encouraging innovation in public services. Rather than paying service providers for the amount of a service they deliver, government pays for the outcomes they achieve. One of the intentions of this approach is to free up providers to innovate in service design and delivery. We recently completed the first systematic review of outcome-based commissioning, covering both Payment by Results programmes and Social Impact Bonds (a form of Payment by Results backed by social investors) launched in the UK since 2010. We reviewed 46 evaluations and found that PbR programmes and SIBs are typically more complex and costly to commission and while there is some evidence that outcome-based commissioning can incentivise different behaviours, neither PbR nor SIB programmes have been strongly associated with innovation. However, the evidence-base is limited and we argue for a new round of smaller, more focused Payment by Results programmes where evaluation of PbR as a policy instrument is central.
Another theme in both our European and UK research has been the growth of personalised services. Developed in the UK social care sector it is a model where people have choice and control over how that service is delivered to them. ‘Personalisation’ is spreading rapidly to sectors beyond social care. Personalisation can mean many things, most simply that public services respond to people’s individual needs rather than offering a standardised. In more radical versions of personalization individual responsibility and commitment form the basis for the co-creation of services between service users and those who deliver services. Technology could play an important role in co-creation whether it is analysing Big Data to better understand ‘need’ or crowd-sourcing ideas for service design.
We will be exploring co-creation working with a consortium of 24 partners across Europe during a three-year innovation project called Co-creation of Service Innovations in Europe (CoSIE).
The possibilities for public service reform are many and varied, but have yet to be fully explored. Technology will play a role, but will not diminish the human element. Social innovation will be key.. Government needs to continue to experiment with different commissioning models and different models of shared ownership, ensuring that these encourage rather than inhibit innovation. Academics need to work with government to provide a stronger evidence base so that we can better understand what works. This includes not only evaluating the effectiveness of new, innovative public services, but also evaluating properly the policy instruments, such as outcomes-based commissioning and personalisation that make them possible.
 Example from Glouberman S and Zimmerman B (2002) Complicated and Complex Systems: What Would Successful Reform of Medicare Look Like? Toronto: Commission on the Future of Health Care in Canada.
 Hills, J. (2011) ‘The changing architecture of the UK welfare state’. Oxford Review of Economic Policy, Volume 27, Number 4, 2011, pp.589–607
 Burchardt, T. and Obolenskaya, P. (2016) ‘Public and private welfare’ in Lupton, R., Burchardt, T., Hills, J., Stewart, K. and Vizard, P. (Eds.) Social Policy in a Cold Climate: Policies and their Consequences since the Crisis
 Link to cooperative schools website
 To be published Autumn 2017 in Albertson, K., Bailey, K., Fox, C., LaBarbera, J., O’Leary, C. and Painter, G. (Forthcoming) Payment by Results and Social Impact Bonds: Outcome-based payment systems in the UK and US, Bristol: Policy Press