Public sector innovation

Participatory budgeting is being used by public bodies around the world to address some of the critical challenges they face. These include lack of trust in the public sector, corruption, the democratic deficit and demands for citizen empowerment. Participatory budgeting – PB – offers the opportunity for community involvement in decision-making, while providing financial transparency. It is an example of how public bodies are embracing innovation, a theme of ACCA’s Public Sector conference in London last November.

It is correct to regard PB as innovatory, Jez Hall of social enterprise PB Partners told the conference. “It is something that has been happening for quite a long time. But what has been changing is the context, the scale and the ways it has been used. So it is innovation in the sense that most people in the UK are not using it.”

Hall continued: “Participatory budgeting directly involves local people allocating part of the public budget. The message I want you to take back from this is that budgeting is fun, if you do it the right way. And if you want the public to be involved in budgeting, you do need to make it fun – otherwise why would they waste their time?”

The origins of PB are in Brazil, about 30 years ago, but there have now been 11,000 different applications internationally of the principles. Public bodies adopting it are located from Paris to remote rural Kenya – where it has been welcomed as bringing transparency and accountability to decision-making, in the face of widespread corruption and financial waste in the public sector. In New York, $35m a year of the municipal budget is directly decided via PB in forums and online. More than €100m has been allocated through PB in Portugal in local and national schemes.

All 32 councils in Scotland are involved in either implementing or considering PB. Cosla – the Convention of Scottish Local Authorities – has endorsed PB, explaining: “The best people to decide the future of their communities are the people who live in those communities.” The aspiration in Scotland is for PB to determine 1% of public spending.

“It’s local people deciding how to allocate part of the public budget,” said Hall. He quoted one PB participant, who remarked: “If it feels like we decided, it’s PB. If it feels like someone else decided, it isn’t.”

Participatory grant-making is one PB model. This is a competitive process within neighbourhoods, where the best ideas from a local community group are given funding. “It’s like the Dragon’s Den, but where the community is the dragon.” It sounds intimidating, but it isn’t, said Hall, who describes the process as adding to community capital.

The Scottish government has allocated £2m a year for PB. One programme, led by Police Scotland, was aimed at reducing Islamophobic bullying in Edinburgh. More than a hundred projects bid, 2,500 people voted and 34 groups won funding of £5,000 each for innovative projects. The process not only allocated funds, but also increased volunteer engagement in projects.

PB can also be the basis for citizens’ engagement in public budget setting. “We need to move towards influencing mainstream budgets,” says Hall. “That is citizens deciding what work public sector organisations are going to be doing. That is about community-led commissioning at scale. That is where they are going towards in Scotland.”

The seven defining principles of PB are that the objective is about the use of public budgets; that participation has a direct impact on the budget; that citizens influence the rules governing the process; the process has a deliberative element; redistribution is part of the process; it is designed for citizens to monitor public spending; and the process is not a one-off but is repeated, for example year-after-year.

“It is about how we make ourselves accountable to those who pay for us,” says Hall. “There has to be scrutiny over the PB process as well. When it’s done well, PB should support representative democracy. It has been found that where it has been done well over a period of time, tax evasion has gone down. People are more willing to pay their taxes.”

Hall adds: “Any commissioning process could become more participative.” But, he warns, it needs a rigorous evaluation process. Hall points to a World Bank study that shows PB improves trust in government and community engagement. “There is definitive proof that PB does improve lives. But you need to do it for the long term.”


Geoff Mulgan is the outgoing chief executive of Nesta (which calls itself ‘the innovation foundation’) and was head of policy for Tony Blair when he was prime minister. Mulgan predicts public service providers will increasingly move to experimentation as they recognise they need to innovate in response to the pressures of austerity and demography. Typically, that experimentation will be undertaken initially on a small scale pilot basis, to determine what works best, in advance of full scale adoption.

Mulgan says that it is essential for the public sector to understand better what works and what is cost effective. A skills shortage is the big gap facing public bodies in becoming more innovative, along with the willingness to learn and take risks.

ACCA research has found that public sector innovation tends to be top down and incremental, rather than bottom up and radical. Mulgan told the conference that given the scale of the challenges faced by the public sector, innovation now needs to be radical and transformative, as well as being led from the top of organisations.

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