The UK public sector will be severely cash-strapped but technologically innovative and "hyperlocal" in the next decade, leading policy analyst Geoff Mulgan has told IT managers.

Delivering a keynote at the 2009 society of IT management (Socitm) conference in Edinburgh, Mulgan told the IT heads not to fall into the trap of technocratic retrenchment in the face of cash cuts.

The impending financial crisis was also an opportunity to rethink services and the policies governing them using the models offered by social media. These could achieve policy goals at low cost.

Read Mark Chillingworth's blog on how cuts are an opportunity for public sector CIOs

Mulgan offered several examples of how public sector organisations in others parts of the world were starting to use social media applications not simply to extend services but to start to change the nature of how government and the public related to one another.

These varied from simple processes such as allowing members of the public to report a multitude of different problems in their localities online, to creating more complex interactions where the public participated in more sophisticated debates.

In the US, the Intelligence Service had started using “Intellipedia”, a means for operatives to share information with one another, breaking down traditional hierarchies that worked against the simple exchange of important information.

"I am not aware of any part of UK public sector that does this," said Mulgan. "But why doesn't every council have a ‘municipedia', on issues such as how to address the downturn. We are hopelessly inefficient about sharing knowledge and information, let alone between other local government and other public agencies such as health bodies. I would love to see it happen," he said.

Some organisations had already started experimenting tentatively with social media, which could leave the refuseniks behind.

Another movement that would be encouraged by social media was hyperlocality, the emergence of information sources and forums to discuss issues right down to street level. Up to now it has been easier to find out national information online than details of what your neighbours were doing," said Mulgan.

Dovetailing will all this at a more basic level was a breakout session on the coming overhaul of how public sector bodies buy seemingly commodity IT resources such as bandwidth and connectivity, which in England and Wales will in future be under the auspices of the Cabinet Office's Public Sector Network (PSN) VPN marketplace.

The PSN is designed to achieve cost savings by pooling the way authorities buy services that replicate one another so as to raise costs. There seemed to be no clear consensus about whether the PSN will actually be mandatory. It is still early days, with only one council having achieved ‘pathfinder' status.

A separate session titled Social Media - are IT managers blocking modern ways of working? uncovered a degree of scepticism from the very IT heads who will find themselves grappling with the conundrum of ‘more for less'.

Common complaints included a lack of tools for managing social media, ill-defined policies, and a lack of enthusiasm about having to police what was and was not acceptable when staff used external social media sites such as Facebook and Twitter.

One IT head recounted that access at his organisation had been cut after an employee inadvertently imported a Trojan into the council network from a social media site.

The problem is that the social media sites that offer all the public models were not designed for use by organisations based on notions of accountability and hierarchies of control.

It looks as if it could take the maturing of third-party tools - and more money for investment - to allow Mulgan's vision of a revolution in services to be more than a bold prediction.