"Make shared services compulsory", says Deloitte

Local authorities will miss the opportunity to reduce costs and secure significant savings unless there is legislation making it obligatory to introduce regional or multi-local authority shared services, business advisory firm Deloitte has claimed.

Such a move “would remove the need to build political consensus and address cultural resistance to the concept”, the firm said, adding that shared services remained for the most part “an aspiration”.

In its report Stop, start, save. Shared service delivery in local government, Deloitte claimed that, apart from a few early exceptions, tactical collaboration between local authorities has rarely succeeded at scale. Local government has been “incapable of delivering the level of savings achieved in the private sector, in spite of the government’s focus on cost savings through technology”.

Local political structures may be effective and accountable mechanisms for allocating resources in accordance with local need, it added, but they can also act against resource optimisation.

The report – which covers standardised processes such as payroll, financial administration and other transaction-driven back office processes – identified a number of obstacles that prevent the development of shared services. These include:

• Risk of reducing headcount
• The urge to protect the local authority and a desire by elected members to maintain self determination over frontline services
• Some council members believe the concept of sharing infrastructure and/or management functions with another council undermines the sovereignty of participant authorities
• Relocation of staff outside a political boundary and the sharing of control and buying of services is difficult to agree.

Mark Lawrie, local government partner in Deloitte’s consultancy practice, said: “The potential for significant savings is hampered by the strong desire to protect the sovereignty of individual local authorities. Sharing back office services would not create a deficiency in local government democracy as councillors are rightly held accountable for the outputs of their authorities and not to manage support processes.”

Describing the business case for legislation as “compelling”, Lawrie added: “It would move the debate from a question of whether shared services are right, to how and when they could be taken forward.”