The imposition of centrally driven financial efficiency savings targets, combined with the drive towards greater competition and contestability, is eroding the effectiveness of local public services.

This is because commissioners of public services focus on short term costs rather than longer term outcomes for service users.

This undermines the Government’s stated policy of building strong local communities and economies, and impacts particularly severely on smaller and medium sized providers whose work supports some of the most vulnerable people in our society. For example, a recent survey of providers of children’s services revealed that 68 per cent had made cuts in the last 12 months. 40 per cent cited efficiency savings as the single greatest cause of those cuts.

NEF proposes a new ‘Public Benefit’ model of efficiency, using Social Return on Investment (SROI) principles. This would rebalance the role of efficiency in public service provision, moving to measure success in terms of outcomes for people rather than the ‘false economy’ of short-term cost savings to the Exchequer.

The ‘Public Benefit’ model assesses effectiveness of outcomes in terms of their benefit to users and the wider community; and service providers are encouraged to cooperate and innovate to maximise these benefits, rather than simply minimise costs. nef’s work with local areas across the UK has shown that procurement can deliver additional value and public benefit when a longer view of efficiency and effectiveness is taken.