The bad behavioural science of more money for local government

In his speech at the Conservative party conference this week, the Chancellor signalled the good times ahead for local government spending by confirming a £13.4 billion increase in public service funding for next year. As announced in the spending review last month, several billion of this will impact local government, including ‘a large down payment on social care’.

While some see the government’s recent spending announcements as ‘duplicity and hyperbole’, the general consensus is still that the amount of new money is a welcome surprise. The IFS calculates it equates to a 4.1% increase in real terms – the largest increase for a decade.

This is good news, surely?

The sector is clearly underfunded – but providing more cash won’t instantly solve the sector’s problems. One aspect of this becomes apparent if we look at the announcement from a behavioural science perspective.

At IMPOWER, we believe that in complex public service systems like local government, the impact of unconscious behaviours from leadership on front line staff is massively underestimated. Anchoring is one example of an unconscious behaviour; this describes a cognitive bias where individuals rely too heavily on an initial piece of information when making judgements.

The money for local government announced by the Chancellor in September was more than expected. Since then, I have observed the dangers of anchoring in multiple discussions with council Chief Executives, Finance Directors, Directors of Children’s Services and Directors of Adults Services.

The discussions we were having back in July usually involved them saying something along the lines of “it looks like we have a £(X)m savings challenge next year. We are going to have to be creative, work together and widen the lens more than ever in order to deliver a balanced budget.”

The discussions we had in mid-September were rather different: “It now looks like we will only face half the anticipated savings challenge next year . . .”

The danger is now that public sector leaders start thinking in one of two ways. Both are logical conclusions to the situation, but either of these responses would be an error.

• Error 1: ‘We should take our foot off the gas. We only need to put in half the effort that we planned, be half as creative and half as collaborative.’
• Error 2: ‘We should narrow the lens down to a single year. Let’s forget any attempt to make long term plans and just work out how to survive the next 12 months.’

Excitingly, we are working with quite a number of public sector leaders who are resisting both of these conclusions. They are taking the opportunity to reframe the problem, and taking the initiative in the absence of central government leadership, and setting out their ambitions for the next 3-5 years in pursuit of sustainable systems where better outcomes cost less.

Please don’t misunderstand me. More money for local government is absolutely a good thing and the recent funding increase is nowhere near enough. However, the irony is the response to the new money has the potential to do more damage to local government than the years of austerity the sector has just been through.