Legal team at North East council faces 23% cut in staff over three years

The legal services department at a large local authority in the North East could be required to cut its headcount by almost a quarter over the next three years, it has emerged.

The department at Newcastle City Council was asked to illustrate a 54% base budget reduction as part of the local authority’s efforts to save £90m by 2016, or a third of its current budget.

The base budget reduction for legal services equates to savings of £379,000, and would come on the back of savings of £679,000 previously made in 2011/12 and 2012/13.

The latter were achieved through staffing reductions (9 FTE posts), increased income (though bringing insurance work claims in-house), and reducing non-staffing expenditure “to an absolute minimum” (at £0.3m or 14% of total expenditure).

However, the report warns that the further budget reductions now being demanded “could only be met by further staffing reductions” and that a reduction of £379,000 would equate to ten FTE posts (23% of its current staff complement of 43.1 posts).

The report warns: “LS (Legal Services) responds to client demands. Unless and until clients cease activities (which can only be in those areas where they do not have a statutory duty), LS will need to continue to provide a comprehensive legal service so as to protect the council from legal risk.

“However, on the basis of current information, the demand for legal input is likely to increase rather than decrease. There are no areas where demand is reducing but several areas of growth.”

The particular areas of growth cited by the report are:

• Children’s services: The council saw childcare proceedings rise 26% from 2010 to 2011. “This increased volume is expected to continue for the foreseeable future. At the same time, changes to the court system have greatly increased the case management role which falls on the local authority and also created a significant increase in workload in childcare cases”.
• Adult Services: “In addition to the increased risk of challenge to commissioning decisions, the number of Court of Protection cases is expected to rise due to developments in caselaw and the context of an ageing population”.
• Major projects and conveyancing: the council’s current development programme is “ambitious and major projects such as the ADZ and Super Connected Newcastle will require considerable legal input in terms of commercial, procurement and development/property work”. The report also predicts significant increases in property acquisition and disposal work.
• Corporate/commercial: Public sector finance reductions and consequent changes to council services mean an increased risk of challenge from affected service users. There is also a much greater incidence of challenges to the council’s commissioning and procurement decisions. The report also highlights the fact that client departments are exploring new structures and ways of working as well as seeking savings through contract negotiations, trading ventures and asset disposals. Another pressure point is the public health duties the council is taking on and the need to deal with transitional arrangements.
• Employment: “There will be some reduction in equal pay claims but this will be outweighed by the need for legal input into the major remodeling of the council’s workforce and the likely increase in employment claims arising as a consequence.”

“Overall, it is difficult to quantify but it is likely that the above factors will generate a significant increase in demand for legal advice," the report says.

It also outlines how the only way in which legal services could realistically meet the target reduction of £379,000 was by way of staffing reductions.

It says non-staffing expenditure had been “stripped down to the absolute minimum”, and that it was unrealistic to rely on increased income to meet the savings target. The scope to drive out major efficiency savings was also seen as limited.

In relation to the staffing cuts, the report highlights how some posts within the department are funded through fees the council charges and others are required if the department is to meet its income target of £1.45m.

It warns that the amount of support the team provides clients could be reduced to “a bare minimum”, increasing the local authority’s exposure to financial and reputational risks arising from legal challenge. It also points to the potential for slower response times and as a result delays in the delivery of frontline services.

“Alternatively, if it were accepted that legal work still needed to be done and there was insufficient legal capacity, then this would need to be bought in from external providers (at an hourly rate at least 2-3 times that of the internal charge),” the report says.

Potential shared service arrangements with one or more Tyne and Wear authorities have been considered “but are felt unlikely to generate major net efficiencies”.

The report says: “It would appear that no LA legal department carries under-utilized capacity and management structures are very lean so any potential savings from consolidation would most likely be outweighed by increased operational costs (in terms of line management, accommodation etc).”

However, it reveals that resilience/back up arrangements with other public sector bodies are being developed. A joint venture initiative is being pursued with North Tyneside Council’s Legal Department to provide traded services.

On the timing of the cuts, the report proposes that the majority of reductions should be deferred to later years. The cut for 2013/14 should be limited to £50,000 (or 7% of the base budget). Further reductions of 16% and 31% would then following in 2014/15 and 2015/16 respectively.

Among the reasons for this approach would be that it would allow a better assessment of the actual needs for future legal support.

The report also proposes the introduction of a ‘business partner’ approach within a ‘hub and spoke’ arrangement.

This would see Newcastle’s legal services staff “work much more closely with clients to provide more value-added support, advice and guidance, and ensure a more targeted and effective use of limited legal resources”.

A designated legal services representative would work closely with clients to ensure alignment to support the delivery of their business priorities, as well as to pick up potential legal issues as early as possible.

“This business partnering arrangement will be absolutely key to the process of reviewing the extent to which the illustrated budget reductions in 14/15 and 15/16 can actually proceed without giving rise to unacceptable risks,” the report says.

The legal services team at Newcastle has an expenditure budget of £2.179m. It spends £1.884m on employees, £6,000 on transport, £110,000 on supplies and services and £179,000 on internal charges.

Its income budget is £1.448m, comprising internal income of £954,000 and external income of £494,000.

The department has been asked to reduce the net budget of £731,000 (i.e. the expenditure budget less the income budget) by 54%, leading to the figure of £379,000.

A copy of the report can be viewed here.