Mark Whitehead 03 August 2018

Should councils embrace 'disruptive innovation'?

'Public entrepreneurs' should be appointed to stimulate innovation and enterprise, according to a recent report.

The Royal Society of Arts quotes a key figure in the Silicon Valley revolution: Mark Zuckerberg of Facebook saying that entrepreneurs should 'move fast and break things'.

The new public entrepreneurs to be appointed by local authorities and other public bodies should 'foster a culture that supports appropriate risk and innovation', the RSA says in the latest contribution to the debate about how the public sector can break from its traditional reputation as hierarchical, bureaucratic and hidebound.

The authors of the report - titled 'Move Fast and Fix Things' in a twist on the original - describe a battleground between outdated 'old power values’ - expertise, confidentiality, formal governance and managerialism - and ‘new power values’, described as 'digitally networked, open, participatory, peer-driven and transparent.'

But the problem is, the RSA warns, that the new is 'not toppling the old.'

The question for local government policymakers and others in the public sector is: how seriously should we take the RSA's fanfare for 'disruptive innovation' in a 'culture of entrepreneurialism and ‘safe/fail’ experimentation'?

There is no doubt that cultural change is needed in some parts of local government. The mayor of an East Anglian council probably spoke for many when she admitted recently that local people saw the authority as 'Dickensian' - bureaucratic, expensive and inefficient.

But calls for radical change in the public sector should come supplied with ready-made alarm bells.

Indeed, the authors of the RSA report acknowledge this: 'The statutory responsibilities of managing public money and safeguarding human lives set the public sector conceptually apart from a private sector that can "fail fast",' they write. 'It is an oversimplification to suggest that resistance to change in the public sector is mere risk aversion.'

One of the earliest examples of 'entrepreneurial' thinking being welcomed into the public sector is the now infamous PFI - the public/private finance initiatives which ushered in joint partnerships with commercial companies to fund large-scale construction projects such as schools and hospitals.

In January the National Audit Office reported there were then more than 700 PFI deals with a capital value of around £60bn and annual charges amounting to £10.3bn in 2016-17. Even if no new deals were entered into, it warned, future charges continuing until the 2040s amount to £199bn.

The NAO concluded that public bodies can borrow more cheaply because they offer greater security, which is why PFI deals are more costly than publicly-financed alternatives and have saddled councils and other public authorities with huge debts stretching into the future.

In another example of entrepreneurialism gone wrong, several local authorities took advantage of attractive interest rates in Icelandic banks in the early 2000s. Come the financial crash of 2008, however, the banks went bust and several councils almost lost their corporate shirt. They had to fight hard to get their money - or most of it - back.

The case of Carillion offers the most graphic example of over-involvement with private sector entrepreneurialism. What at first must have seemed like a good deal with a dynamic commercial operation ended when the company, which had seriously over-stretched its resources, went bust with £1.5bn of debt and leaving several councils to find alternative providers.

These may be examples of 'creative destruction', but they serve as a reminder that traditional public service values should be cherished alongside the challenges of the new more commercialised world.

They should be a warning not to take Silicon Valley revolutionaries like Mark Zuckerberg too seriously.

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