This report looks at the idea, first put forward by Joseph Schumpeter over 70 years ago, that cuts in public services can lead to increased innovation.

Key findings:

• There is a need for radical innovation in Britain’s public services, and this means three types of response from policy makers: 
• Resources should be moved from ‘outmoded’ approaches to radically better ones. Arbitrarily protecting frontline services could block radical reform.
• Commissioning needs reforming to encourage new community and local provision. 
• The culture of audit should be replaced with a more light-touch process of assurance. The current central monitoring of public services is costly and works against innovation.
• Reducing spending on public services is the Government’s most pressing and difficult challenge.

As social and economic issues result in rising demand for services, how we respond to these decisions will define how public services operate in the future.

However, we have come across many great examples of radical innovation in public services that are delivering better results for less money. The question now is how to make these examples the norm, rather than the exception.

'Schumpeter Comes to Whitehall' draws on the economist Joseph Schumpeter’s analysis of innovation – and on Nesta’s own experience of supporting innovation in public services – to consider how Government should approach the cuts in ways that prompt innovation.

Authors:
Laura Bunt, Michael Harris and Stian Westlake