Faced with mounting debt levels and the pressures of a rapidly evolving society, Britain has reached a crisis point in the delivery of its public services. It's time to take the debate into the public arena, says Ben Lucas

We are in the middle of the worst economic and fiscal crisis to hit Britain in a generation and public services look set for big spending cuts. Observing the political reaction to this has been like watching a car crash in slow motion. Politicians are fixated on the problem, but there is little sense that they have a clear strategy to avoid the crash.

What we know already is that the April 2009 Budget assumed cuts of £100bn over the next two parliaments – the equivalent of approximately 8 percent of GDP. As economic commentator Martin Wolf pointed out in the Financial Times: "This is equal to a sixth of total spending, two thirds of the public sector pay bill and all spending on the NHS in England.”

The Institute for Fiscal Studies analysis of the Budget shows that government departments will experience annual cuts of 2.3 percent in real terms between 2011 and 2014, assuming that cuts are shared equally across all departments. The Conservatives have said that they would protect funding for health and overseas aid while also seeking to cut spending earlier and reduce debt faster – which would mean even more departmental cuts.

One area that has elicited very little response from the parties is capital spending. This is projected to be cut by 17.3 percent a year over the next spending round, taking it back to the historically low levels of the early to mid-1990s, when the private finance initiative was first developed to try to inject money into Britain’s moribund infrastructure programme. If silence can be taken to mean assent, then we can assume that, whichever party is in power, capital programmes will be badly hit, because unbuilt infrastructure cannot feel pain in the way that voters can.

This is a pretty bleak picture - and it isn’t even the whole story. Britain faces growing challenges that may be even more difficult to address than its enormous public debt. These include the pressures of an ageing society, climate change, behavioural change, social polarisation, global competitiveness and high unemployment.

In 2008, for the first time ever, there were more people over the age of 65 than under the age of 16. By 2020, the number of people over the age of 85 is expected to grow by 50 percent. With social protection accounting for roughly a third of all public expenditure and the lion's share of this going on pensions and benefits for the retired, innovation agency NESTA has put the cost of an ageing society at £300bn by 2025.

There is also the challenge presented by government targets to reduce carbon emissions by 29 percent by 2020 and 80 percent by 2050. These will require both massive behavioural change and a new phase of green innovation and infrastructure, just when projections show that capital programmes will be slashed. Meanwhile, chronic health conditions and obesity are set to put increased pressure on the health budget. The cost of eliminating child poverty by 2020 represents an additional £30bn. And our global competitiveness will be undermined by the projection that, by 2020, the UK’s global ranking for low and intermediate skill levels will be 23rd and 21st, respectively.

The Commission on 2020 Public Services, which is chaired by Sir Andrew Foster and hosted by the RSA, was set up because it is time for the debate to go beyond decisions about what should be cut. The default option for Whitehall will be to make salami-slice cuts across all areas of public expenditure, regardless of which party wins the election. But as President Obama’s chief of staff Rahm Emanuel said: "Never allow a serious crisis to go to waste." The scale of the economic challenge presents an opportunity to pose some much bigger questions about the appropriate balance of risk and responsibility among state, society and citizens, in what President Obama has called a new era of social responsibility. Does it still make sense for our public service settlement to be based on the 1942 Beveridge Report, which was designed for a society that was more homogeneous and less socially polarised than Britain is today?

William Beveridge, an economist, was a Liberal but his report was commissioned by a Conservative prime minister and implemented by the Attlee Labour government. Beveridge famously said that "a revolutionary moment in the world’s history is a time for revolutions, not for patching". Now that many of the old economic and social certainties have been called into question, it is time to develop a set of priorities that transcends party politics and establishes the basis for a new, long-term settlement. That’s why the 2020 Public Services Trust is cross-party.

For the past 15 years, new public management theory has been the driving force behind a strategy that has focused on improving the delivery of public services. But this has tended to overlook one important question: what should be the purpose of Britain’s public services? Any strategy should be targeted at addressing Britain’s economic, social and fiscal challenges – all of which are intertwined – rather than just being about citizen entitlements.

Public services and the welfare state have often been seen to embody the concept of negative welfare: protecting people from the consequences of risk, providing people with a safety net and responding to market failure. But this is to miss the point completely. Beveridge, who termed his vision the ‘social insurance state’, and Archbishop Templeton, who coined the phrase ‘the welfare state’, both had a dream of social wellbeing that has gradually faded through excessive bureaucratisation. The question for our age is what the overarching purpose of a welfare settlement should be.

One of the problems with the 1940s model was that it paid insufficient regard to the importance of individual agency and social networks, an omission recognised by Beveridge himself in his report on the voluntary sector and the welfare state in 1948. It is not enough merely to provide a service or entitlement when the quality of the outcome will depend on how the citizen engages with it. That is why Harvard economist Amartya Sen’s idea of freedom as ‘capability building’ is so attractive and why it makes sense to think of the purpose of public services as being to create a resilient society in which citizens are given the capabilities to lead the lives they choose. The function of redistribution should be to help overcome inequalities in capabilities. This implies a more targeted, family and citizen approach than that which is embedded in traditional universalism.

RSA chief executive Matthew Taylor recently argued that the purpose of public services should be to promote social productivity, using the example of education. Rather than focusing on the 20 percent of a child’s life that is spent in school, surely it would make sense to see how the education service can support learning in the 80 percent of time spent outside the classroom? The same approach could be applied to healthcare and to individual carbon reduction; in both cases, the critical challenge is to encourage people to change their own behaviour.

Making public services mobilisers of social capacity rather than just delivery silos helps make the economy more competitive and society more resilient. At a time when the limitations and constraints of public funding will be all too obvious, it will be crucial to engage citizens and communities in the production of their own social outcomes. Indeed, much continental European policy reform has focused on maximising economic participation in order to reduce the dependency ratio and maintain a decent funding pool for services.

There is growing cross-party policy interest in how to measure the social value that public services ought to create. In France, President Sarkozy, unhappy with the limitations of GDP as a measure, established a Commission on the Measurement of Economic Performance and Social Progress, whose members included Joseph Stiglitz, Amartya Sen, Robert Putnam and Cass Sunstein. The Commission recommended the establishment of sustainable wellbeing indicators and the measurement of the quality of ‘social connections’, which are linked directly to health and education outcomes. Any reform-minded government should realise that what gets measured is what gets done.

The Commission is still developing its vision but it is clear that the scale of change it envisages can only be carried out through public participation. It will not be enough simply to pass legislation, especially where it involves quasi-constitutional change – for example, in the relationship between central and local government in England. It will be necessary to build a consensus about the outlines of a new settlement, as Kevin Rudd’s new Labour government in Australia set out to do in 2008. It established an Australia 2020 consultation exercise that culminated in a summit of 1,000 participants, chosen by an independent committee to reflect diversity and expertise on the key economic and social issues facing the country. The point was to create a national conversation about a social and economic agenda for reform. Whichever party wins the election in Britain should consider a similar move.

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Ben Lucas is director of the 2020 Public Services Trust. The Commission on 2020 Public Services Trust is chaired by Sir Andrew Foster and is based at the RSA. Fellows can take part in the debate and contribute their ideas by visiting the Your2020 website.

A new direction for public services 2020 public services shift the culture from social security to social productivity Unlike our existing settlement, which is predicated on managing risk, we should be looking to enhance the productive capacity of citizens and build resilience to the social and economic challenges we all face. This is a shift from negative to positive welfare: focusing resources where they can increase social capacity; understanding and capturing the potential of social networks; and allocating public spending in accordance with the most efficient ways to create productive and sustainable outcomes.   2020 public services should be citizen-driven, shaped by the needs of individuals, families and communities and directly accountable to them for their performance Currently, public services are shaped by and accountable to government. This relationship should be inverted so that citizen entitlements and responsibilities are the driving force for public services. Public service outcomes will be determined by the quality of citizen engagement, which will range from contribution and consultation to creation. At the heart of this will be much greater transparency about the funding and performance of public services, so that citizens can use data to drive improvement. 2020 public services redirect power away from the centre and towards the localities 2020 public services should liberate those responsible for delivering and managing services from over-centralisation and a culture of stifling managerial accountability. Transparent, permeable governance, stronger local political accountability and effective means of redress will redirect the energies of public service professionals – creating better, more efficient and more responsive outcomes for citizens in the long term. 2020 public services reconnect the financing and purposes of public services The way in which we finance public services should reflect the societal goals we want to achieve. We must broaden the range of resources available, recognising the informal, social and private contributions citizens can make. We should be open and explicit about the distributional trade-offs that shape the allocation of public resources, and prioritise the most efficient ways to address deep-seated and damaging inequalities.  2020 public services redefine the role of the state 2020 public services require a role for the state that goes beyond existing debates over big versus small, or nanny versus nudge. Rather than seeking a perfect institutional form, the 2020 state must adapt to the changing needs and demands of citizens; it should be flexible enough to allocate resources efficiently and strategic enough to strike the right balance between regulation, provision, infrastructure development and social mobilisation. The result would be a state that is less centralised and more discursively engaged with citizens – no longer the inevitable provider of welfare but an effective regulator of the production and distribution of social value