Sharing back office functions "won't be enough", warns think tank
Councils must “boldly go beyond the back office” if shared services are to deliver the savings needed in a period of unprecedented change, a leading think tank has claimed.
In its report, Shared Necessities: the next generation of shared services, New Local Government Network (NLGN) said a narrow focus on generating efficiencies in the back office would not be enough.
NLGN predicted that even in a best-case scenario, sharing back office services would limit savings to 3.6% of expenditure; with a more realistic expectation of 1.8%. This would fall short of the savings to total expenditure that the vast majority of local authorities will have to make.
The report said: “Up to this point progress has been focussed on the low-spend areas of the back office, such as legal services or financial, with a piecemeal and variable approach to any more ambitious sharing of higher-spend, front office services, such as adult and social care or waste collection. This has to change.”
Other recommendations in the report – which was supported by law firm Bevan Brittan, SAP and CapGemini – included:
- Councils should adopt a presumption in favour of sharing services. “The burden of proof should be on why a service can’t be shared, rather than why it could”
- A national platform designed to increase market liquidity and information should be developed. This might be a website “where local authorities and public bodies could both search for prospective partners and enter their details in order to offer services”
- Place-based budgeting should be used more extensively
- Public agencies should be given the same legal freedoms to embark upon shared services as councils have through the well-being powers and the proposed general power of competence
- Local enterprise partnerships should be “adequately funded and incentivised, so that they can become a cross-sectoral forum facilitating relationships, cooperation and where possible shared services, while ensuring that local specificities and circumstances are adequately taken into account”
- The potential for Invest-to-save Bonds to be used to finance the implementation stages of an extensive shared services programme should be investigated
- Local authorities should explore “deep and long-term” integration of services between neighbouring authorities.
The report, which contains a toolkit for local authorities and partner organisations looking to develop shared services, said: “New models of shared services, from sharing chief executives and senior management teams to virtual centres, are aimed at helping local authorities with the practicalities of sharing, as well as fitting them into much broader strategies for organisational change. There are implications for the nature of local authority workforces, and potential for reform of organisational structures to more generalist pools of employees, coupled with targeted incentives, to help combat the ‘human’ barrier to sharing.
“Sharing services also brings questions about the nature of local authority boundaries to the fore. We are keen to preserve existing democratic structures but there is a vital debate to be had about the potential for the majority of council services to be merged together across economic geographies. It is also apparent that the ‘market’ for shared services is underdeveloped.”
Bethan Evans, partner and head of the Communities and Local Government Group at Bevan Brittan, said: "Shared services has been gathering pace and scale in the last year in an obvious response to the immense financial pressures faced by authorities. We have seen from our client base that more and more authorities are considering how to share across boundaries (and sectors) often starting with support services.
“But what the report makes clear is the size of the opportunities if shared services are seen as a fundamental way of restructuring front line provision, and not just a way of making small cost efficiencies in back office services (however welcome all of these are at this difficult time).”
She added that publication of the report was timely. “It comes hot on the heels of the LAML judgment in the Supreme Court which has comforted councils seeking to use jointly owned companies for shared services projects. It also comes at a time when the new general power of competence is making its way on to the statute books so further easing worries about remaining areas of vires doubt. Local authorities should have confidence to explore openly all ideas and proposals which could support the sharing of services.”
NLGN’s Tom Symons, one of the authors, added: “These are tough times for local authorities but a narrow focus on how best to make efficiency savings will be insufficient if they are to handle the lasting impact of spending cuts. Those councils that boldly go beyond the back office when considering shared service agreements will emerge in time as leaner and sharper organisations better able to deliver the services people need.”
Philip Hoult
