SEMINAR ON ALTERNATIVE FUNDING MODELS SOME ... - Bitly

SEMINAR ON ALTERNATIVE FUNDING MODELS SOME THOUGHTS Colin Mair, Chief Executive, Improvement Service The seminar illuminated the range of potential models that could be adopted to get more resources behind improving outcomes and reducing inequalities through early intervention and preventative intervention. A commonality across all presentations was a passionate commitment to improving lives and opportunities, particularly for people and communities who are likely to experience substantial inequality in their lives (due to age, gender, socio-economic circumstances, etc.). This is worth emphasising as, since the Christie Commission in Scotland, there is a slightly instrumental view that what we are trying to do is prevent future demand on public services and public spending. It is probably worth re-emphasising that that would be a very useful by product, but the core purpose is preventing people having poor and restricted quality of life/opportunities in life. Usefully, from that perspective, the recent “Community Empowerment, Scotland” legislation (2015) places an unambiguous duty on Government and the major statutory authorities in Scotland to work together to “improve outcomes” and “reduce inequalities”. (It does not suggest we need only bother doing that if it would reduce future demand and spending!) This point is emphasised because the seminar suggested to me that “alternative funding models for what?” is a question worth pursuing. As the models were discussed, it became clear that a range of purposes were implicit or explicit in them and that, though some were potentially related or aligned, they are not strictly alternatives for a single purpose. To summarise that range of purposes, they included: 

R & D into what works to improve outcomes and reduce inequalities.

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Building confidence around proven innovative interventions.

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“Bridging the gap” in moving to prevention while still having to maintain the full suite of reactive and universal services.

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Bringing new resources into play through innovative social/ethical investment opportunities.

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Ensuring that initial investment by charitable funders creates sustainable services and impacts.

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Creating a platform for social enterprises to develop products, services and markets.

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Creating innovation leadership capacity and skills.

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Providing an infrastructure of evidence, analytics and metrics for assessing the merits of social investments and their impact.

All of these were clearly underpinned by a shared commitment to improving outcomes/reducing inequalities and there were other clear cross-cutting elements as well. A “3 P’s” model just about works: all models are focused on prevention as investment; all models require partnership; and all models require a rigorous approach in linking investment/funding to performance. (Unfortunately, these are not always characteristics of how the public budget is managed!) The range of purposes raises the question of what issue(s) we are actually trying to address with new models. These seemed to include:

1. The acute demand pressures on a declining current public budget making it difficult to develop and invest in new, more sustainable preventative models of provision, and the vicious circle that follows. 2. Lack of R & D and innovation capacity. 3. “Inertial bias” meaning that anything new has to be “proved” to the nth degree, and restrictive procurement approaches that reinforce that bias. The first issue seems linked to restrictive Treasury and public accounting rules that make it hard to treat prevention as investment which is precisely the basis of all the alternative models: benefits over time should be funded over time. Public borrowing is at an all time low cost and it seems perverse that our own rules would prevent us availing ourselves of this opportunity. Getting to a new framework for public borrowing for preventative investment would liberate that. It may also be worth looking at often substantial public reserve funds and surplus asset pools as potential investment resources. The second and third points are cultural. “R & D” is a culture, a state of mind that is future oriented and accepting of both risk and failure in driving towards future returns. Public planning and political cycles are relatively short term which can restrict future orientation. Public accountability often qualifies appetite for risk or failure. It may well be that charitable funders will be the major R & D resource around but that should allow them to make reciprocal demands on the public sector. A number of the models require such a connection to be viable. The “inertial bias” is in part a reflection of the need for quite a high degree of stability and security in planning and running major services and assets (schools, hospitals, roads, etc.). People whose major or only focus is innovation often undervalue stability, but also vice versa. Big service organisations often struggle with innovation, even when the status quo models are not working well for a significant section of their users. The answer is probably “inter-seeding” cultures so we get beyond both “inertia bias” and “innovation bias”. So……What Next? The Cabinet Secretary recommended action so four thoughts as to taking the agenda forward: 1. A more detailed bit of work to pull together a framework for comparing different social investment financial models, their commonalities and differences including relevance to particular issues or problems, preconditions and known track record. The analysis to be published and used as a basis for engagement with CEO’s and Finance Directors across the public service in Scotland. This comparative work may already have been done in which case the trick will be to show its relevance in the Scottish policy and financial context. 2. A key issue remains the ability to demonstrate the social value added that such models would deliver. Outcome commissioning and investment in prevention assumes that value added can be measured. This requires predictive analytics and reliable metrics. I would regard these as the necessary infrastructure for a social investment approach and it was clear from the presentations that substantial work has been done here. A sensible strategy may be to put a relatively standard framework of analytics and metrics in place for Scotland to build confidence in rates of return, and to prevent every initiative having to start from scratch. It would also create a more level playing field for investment appraisal by allowing equivalent questions to be raised about the status quo ante. 3. As Treasury rules and public accounting practice seem to be a key inhibitor of both direct public investment in prevention, and to public underwriting of social investment programmes, it would be helpful to tease out exactly the changes necessary to free this up. The minimum requirement will continue to be rigorously demonstrated investment propositions and the

work on analytics and metrics will help here. The Cabinet Secretary indicated he would be happy to meet on this but we would need to be clear about what needs to change, why it needs to change and how it needs to change before such a meeting. 4. Finally, we need a concrete proposal to take forward. The Scottish Government announced a stimulus fund recently (around £100 million) to offset the potential effects of Brexit. The broad criteria are that it advances the Government’s priority outcomes, creates employment and consumption, and can be spent by the end of this financial year. If the agility of a social investment approach is to be demonstrated, it would be good to get a rapid outline proposal(s) for a social investment partnership to that fund. On the basis of the seminar, I can think of a number of propositions that meet the Government’s requirements and which could be built on the public sector, charitable sector and third sector leadership that was present. I suggest that those interested convene a meeting very quickly. The IS will be happy to coordinate and contribute to this. The above is an impressionistic, and probably idiosyncratic, take on the day and is utterly open to challenge. However, if there are colleagues who want to explore this further, The Robertson Trust and the IS would welcome hearing from them asap.

Help us take the discussion further At the seminar, Derek Mackay, the Cabinet Secretary for Finance and Constitution, outlined the Scottish Government’s openness to new ideas and appetite to “make things happen”. With this in mind, we are keen to keep this discussion going and work towards concrete proposals. The Robertson Trust would encourage all with an interest in the area to join our Alternative Funding Models for Public Services Linkedin group for updates and discussion. We will also be sharing all seminar resources within this group.