Shared Services and Big Yellow Taxis

April 20, 2011

As austerity bites ever deeper, the local government headlines are often alight with the savings expected or promised from shared services. For service collaboration is currently a key prescription item for authorities needing to lose a lot of budgetary weight.

So, for instance, on 21 March 2011 the Local Government Association issued a press release entitled Councils to save millions through shared services. But whilst Local Government Group Improvement Board Chairman, Cllr David Parsons, accepted that shared service delivery was no 'silver bullet solution to the biggest cuts to local authority budgets in a generation' and that introducing shared services 'takes time and money to implement', he nevertheless said that the savings can be long-lasting and significant. The LGA referred to ‘more than 200 projects either already up-and-running or under consideration, with some delivering savings to residents in excess of £3 million a year.’

Local authority legal services are no exception with, for instance, Richmond and Merton agreeing arrangements, and shared services already in place in (amongst others) Lincolnshire, Norfolk and Cambridgeshire (amongst others) yielding undoubted savings and efficiency gains. Certainly working life in a high-tech world demands constant and creative reinvention to meet ever-evolving requirements.

And with Local Government Lawyer reporting on 18 March 2011 that one in five local authority legal departments face budget reductions of 20/30% against a significant demand increase for legal advice, shared legal services are clearly a pressing financial imperative.

But are they a Good Thing? The answer of course is definitive. It all depends!

For if local government is infinitely variable on the ground, so are its legal needs and in-house legal practices and there is no one-size-fits-all solution. Clearly it makes absolute sense to seek economies and efficiency of scale and resource by putting in place effective and properly wired-up arrangements to improve things. And current shared service models do seem to have taken off smoothly and to be cruising nicely.

But the future is a challenging place and with the substantial flexibility of ownership and structures to be introduced by ABS on 6 October 2011 the legal landscape is going to be very different for all its inhabitants in terms of both opportunities and challenges. These were well-canvassed in Philip Hoult’s 17 February 2010 article: Time to prepare for alternative business structures and Polly Botsford’s article in the Law Gazette on 7 April 2011: Forecasting the creative impact of alternative business structures on law.

But with Government pressure on services often unfairly dismissed as ‘back office’ is likely that large commercial organisations will be active with proposals to run a suite of legal and other support services to local authorities and other public and private bodies and will seek ABS licences accordingly.

Whilst the business model will inevitably involve TUPE-ing across those currently providing the service, it will equally unavoidably involve shaving costs significantly to get a lot more from much less through investment in technology and other infrastructure; and also, no doubt, before very long a thorough staff resource ‘rationalisation’. So for those who’ve not already done so, it will now be more important than ever to determine what your in-house legal practice is for and its business plan going forward, tuned to present and impending realities and making sure your people are genuinely on board with the strategy. For if they’re not, you’ll be sailing against the wind.

However, whilst a bulk commercial services type model may work well for commodity-type legal services (i.e. those essentially comprising ‘mechanical’ process) it will work much less well for high discretion legal advice which senior local government lawyers (monitoring officers and others) have traditionally provided.

As local government changes radically and (in the opinion of many) forever, new career opportunities clearly need to emerge other than or in addition to the established one-authority head of legal model. Indeed authorities are already sharing (or planning to share) their heads of legal (e.g. Kensington and Hammersmith in addition to the Merton and Richmond arrangement mentioned above).

For if there are going to be fewer legal departments with their own legal heads it will also be important to ensure that the senior local government lawyers of the future are suitably incentivised and equipped with the knowledge and instinct to give their authority clients high quality, top level advice. Whilst current shared service arrangements no doubt have this on board, as the legal stage scenery rapidly shifts and with more senior (and therefore more expensive) lawyers being encouraged or forced to exit across the country, this is likely to be an ever more resonant issue for authorities.

Currently, per Bob Dylan, ‘money doesn’t talk it swears’. But when local government eventually settles down to a new and more austere reality, senior members and officers are likely to miss the ready availability of trusted corporate legal advisors if suitable arrangements for this aren’t put in place. For as another songster once warned: ‘Don't it always seem to go/That you don't know what you've got/Till it's gone’.

Dr. Nicholas Dobson is a Senior Consultant with Pannone LLP specialising in local and public law is also Communications Officer for the Association of Council Secretaries and Solicitors.