Public sector set for massive change as cuts bite and services suffer

Spending cuts on a scale not seen since the creation of the welfare state, coupled with far-reaching reforms to open state provision up to new players, will mean a different future for the public sector

Fundamental assumptions about what the state should provide and how it should do it are being challenged. No wonder then that there was a feeling of anxiety in the air as delegates gathered for the Guardian's eighth Public Services Summit.

It was an anxiety that the deputy prime minister, Nick Clegg, acknowledged, as he emphasised that he was not just "committed but devoted" to the public sector.

"Many of the people I've spoken to in the public sector are positive about the opportunities ahead, the freedom from targets and bureaucracy, the chance to run your own departments and design your own ways of working, the chance to do what you are trained for and to make a difference," he said. "But you're also anxious, of course, about the cuts that are coming and anxious about the claims that what the government is doing is privatising for ideological reasons."

On the day Clegg defended the coalition's commitment to public services, 17 Liberal Democrat council leaders and 71 local party heads criticised the government over the speed and scale of cuts to local authorities. But Clegg said that not only was tackling the deficit crucial but so were modernisation and reform. "The solution of throwing money at a problem isn't a solution for long. We have to have public services that thrive in the bad times as well as the good," he said. "The state must back off and allow the genius of grassroots innovation, diversity and experimentation to take off."

Some of that experimentation was on display at the summit. In perhaps its most radical form so far, it is seen in the approach of Suffolk county council, which is proposing to hand over all the services it operates to providers in the private and voluntary sectors. Suffolk's chief executive Andrea Hill said her authority's future was as "a consumer champion, like a local Which? magazine for our citizens".

Brighton and Hove council chief executive John Baradell spoke at the event on the day his authority announced budget cuts of £82m over four years, and the creation of a workers' co-op out of the elements of one of the council's services. Having to save money, he said, gave the council the opportunity to work "wider and deeper" with private, public and voluntary sector organisations, to become what he called a "convenor and curator" of service providers across different sectors. "We are reinvigorating public services through collaboration and innovation. There is nothing that can't be considered," he said. "That's a moment in time that we must not waste."

Hilary Cottam, founder and principal partner of the social enterprise Participle, which designs new ways of delivering public services, said innovative projects such as hers could make huge savings for the public purse – but they need to be properly funded at the start. "With a small investment, there is a huge opportunity to make a social leap forward," she said. "We are saving money but nothing would have happened without the start-up investment to kick it off. I am very worried about the pace of change. If we don't invent now, it will be a race to the bottom."
Social enterprises and mutuals are seen by the government as another way of bringing diversity into the provision of public services: ministers are encouraging public sector staff to form mutuals or become social enterprises, as well as backing existing private and third sector organisations to take on more work.

But Peter Marks, chief executive of the Co-operative Group, warned that mutuals could not be seen as a panacea. He said he had serious questions in particular about whether the John Lewis model - a partnership approach that financially benefits employees - was the way to go. "I would question whether that business model and philosophy is right in a public services setting," he said.

Cutting services, designing new ones and accepting fresh risks may all seem scary stuff. But the Christie NHS foundation trust chief executive Caroline Shaw had some advice on surviving these anxious and challenging times. "It is murky out there," she said, "but as the writer Margaret Drabble said, when nothing is sure everything is possible."