Failure demand is the biggest cause of rising demand, not demographics, according to a new report, ‘Saving money by doing the right thing: why ‘local by default’ must replace ‘diseconomies of scale’, published at a House of Lords launch on 12th March 2014. The study analysed hundreds of thousands of demands placed on the public and third sectors across multiple localities in the UK over the past three years.

Ministers, civil servants and public sector leaders learned that that more than £16bn of public money could be saved every year by tackling ‘failure demand’; unnecessary demand such as repeat assessments, multiple referrals, delayed discharge, unwanted equipment and unsuitable services, all demand caused by a failure of public services to understand people and provide them with what they need.

The study, published by Vanguard and Locality is the first of its kind to discriminate between artificial demand for public services, generated solely as a result of an organisation not taking the right action and real demand, experienced by the person who needs help.

“Everyone thinks the rise in demand for public services is caused by an ageing population and a rise in long term chronic conditions. But is there another explanation? We tend to think that the rise in demand is coming from new people, it is not, it’s the same people. Studies of hundreds of thousands of patient records, case notes and files reveal that the main cause of rising demand is the same people fighting the system to get what they need. Public services assess the same people up to a hundred times, refer them on multiple times, keep them in hospital when they shouldn’t be there and give them equipment they can’t use. All this unnecessary activity isn’t free. This finding marks a seminal moment in our understanding of demand for public services because it shows us exactly what to do. We should design services which are able to do the right thing for people in the first place”.
John Seddon, Vanguard Consulting

The report outlines the two main causes of failure demand, discovered empirically in the studies. The first is the prevailing belief held by the Treasury in ‘economies of scale’ and the second is the drive from procurement professionals and IT companies to standardise services.

This is the first major challenge to the widely held belief that economies will come from buying in bulk and reducing unit costs. The report argues that too many services prescribe standard packages of activity rather than understand what improves a life. This in turn causes huge amounts of failure demand and spiralling costs because people get what they are given, not what they need.

“We know how to reduce billions of pounds worth of unnecessary demand on public services; simply abandon scale in favour of designing localised services which are able to do the right thing for people in the first place. It is not public service which is at fault here. It is a system dominated by scale and standardisation. That is what needs to change” Steve Wyler, CEO Locality