Westminster and Kensington & Chelsea legal teams set to merge with LGSS Law
The legal teams at the Royal Borough of Kensington & Chelsea (RBKC) and Westminster City Council (WCC) could become the London arm of LGSS Law, the alternative business structure owned by three other local authorities, as early as 1 December 2017, it has emerged.
Hammersmith & Fulham Council (LBHF), the third member of the Tri-borough Shared Legal Service with RBKC and WCC, is said to be not ready to progress the merger.
Details of the proposed combination are contained in a business case to be considered at a meeting of RBKC's Leadership Team this week (19 October). A target operating model has also been prepared.
Written by RBKC’s Director of Corporate Services, John Quinn, the report says clients of the Tri-borough Shared Legal Service had indicated they “are very satisfied with the quality of legal advice received and have seen significant improvements in the service provided”.
However, there are areas where improvements are required. These priorities are:
- Clear demonstration of value for money including transparency on legal costs and how they break down.
- The right business processes including regular and correct billing.
- More business-like (more structured and consistent) strategic relationship management.
- A Legal Service that acts in more business-like and commercial way, focused on supporting services achieve desired outcomes.
- Some services have identified responsiveness and accessibility as an issue – these are in areas of routine work eg some property work.
The business case says the expansion of the shared services and the creation of a social enterprise law firm through a merger with LGSS Law would address these issues, enable the service to act for organisations with an affiliation with the private sector such as council joint ventures and deliver “a more rigorous and business-like experience for clients”.
The company created by the deal would be wholly owned by five local authorities (LGSS Law Ltd is owned by Cambridgeshire, Northamptonshire and Central Bedfordshire Councils). Staff will transfer to LGSS Law Ltd under TUPE regulations.
The report says: “Our Shared Legal Service office will in effect form a London Branch of LGSS Law Ltd, which will be well positioned and resourced to expand through merger and increased ad-hoc work.
"The ABS vehicle established by LGSS Law over the past two years will provide a modern business-like platform from which the combined teams will grow their business through in-sourcing work currently outsourced and attracting new external clients by trading surplus capacity released by productivity improvements. If necessary, capacity will be increased to grow the business and expertise.”
This recommended option was one of four considered in developing the business case. The others were: the shared legal service (including LBHF’s legal team) merging with LGSS Law; the shared legal service creating its own ABS; and the shared legal service remaining as is but with continuous improvement.
The business case says the merger of RBKC and Westminster legal teams with LGSS Law would provide “access to a tried and tested ABS vehicle and its associated processes and infrastructure”. It would also avoid the requirement to set up a new ABS from scratch - something the report says would involve a 12 to 18 month regulatory process - and provide access to LGSS Law’s clientele.
The identified financial benefits from the merger are:
- Total General Fund Savings by 2019/20: £703,000 (WCC: £374,000; RBKC: £329,000).
- Other Efficiencies by 2019/20 (HRA, Capital & Other Funded): £336,000 (WCC: £247,000; RKBC: £89,000).
- Increased Income by 2022/23: £356,000 (WCC: £178,000; RBKC: £178,000).
The overall cost of implementation is £572,000 with a Westminster share of £291,000 and a Kensington & Chelsea share of £281,000.
The business case notes how the RBKC legal service has gone through three restructures/mergers since 2012 and the last merger (creating the Tri-borough Shared Legal Service) had delivered £1.4m savings across the three councils.
“Further savings of such a significant scale are not possible to deliver without some considerable innovation,” it says. “The ABS proposal provides such an opportunity.”
It adds that an ABS would provide an opportunity “to create a sizeable firm of over 200 staff which can reduce external spend more significantly”. (The business case includes an assumption that 50% of external spend can be brought in-house and delivered 30% cheaper than the external cost, based on LGSS Law’s experience and comparison with other providers/competitors)
Shared Legal Services “also has an ambition to be more business-like and commercial and an ABS provides the best chance of instilling those private practice disciplines whilst retaining the best of public sector ethos”, the business case suggests.
Target new clients for the merged firm would include local authority partner organisations such as the police, health and other local authority service providers such as charities, housing associations or private organisations that provide local authority services.
Agreed commercial terms for the merger will be in a five-year exclusivity agreement, which will mirror the terms agreed by the existing owners of LGSS Law.
The proposals are expected to be considered by Westminster’s Cabinet later this month.