There are many different ways of saving money - from stopping doing things, to trimming and delaying. Some do immediate damage, and some store up costs of the future.

Instead policymakers should be aiming to squeeze more value from what is spent by spotting, nurturing and scaling up more effective new ways of working and delivering services. This isn't just about more shared services or better procurement (though both are important). It is about innovation.

The evidence shows that in the public sector innovation is linked to burning platforms, particularly cost pressures. When resources are plentiful it is easy to be complacent. But when times are harder financial imperatives can spur fresh thinking. Other factors may also drive innovation: our ageing society, the consequences of high youth unemployment, toughening CO2 targets.

The Young Foundation has developed a framework of nine different approaches that we think can drive money saving innovation: from economies of responsibility (what happened when volunteer effort took over the running of Highgate cemetery), to economies of commitment (passing service provision to motivated individuals through management buy-outs or the creation of mutuals), to circuit economies (prevention before crisis) or economies of scope (savings through co-location, literal or virtual).

We have also identified about 500 different methods for supporting innovation. The most relevant put a premium on speed: incentivise fast piloting rather than traditional evaluation; espouse focused ‘A teams' rather than manage lengthy research and reflective processes.

Innovation is a process that can be understood and accelerated, something the private sector understands well. By doing it systematically and in a structured way it can also help save money. Contrary to public perception our experience is that local authorities are full of people with good ideas who are keen to develop fresh ways of working. 2010 needs to be the time for local government in particulat to invest in growing its innovation capacity, whilst there is still some money in the system to support thinking and experimentation. This demands rapid action to create the conditions for new ideas and approaches to flourish.

Read the presentation here.