The functions of the shared service partnership between the London Boroughs of Newham and Havering, One Source, are to be trimmed down as changes in local government have impacted its ability to generate some “cost savings through economies of scale”.
One Source was established in 2014 to provide shared back-office support services for the London Boroughs of Newham and Havering. In 2016, the London Borough of Bexley joined the arrangement but exited in 2020.
According to a council report by the London Borough of Havering, One Source “delivered considerable savings on inception and was considered a relatively ground-breaking innovation at the time”.
However, the report outlined that as a result of changes within local government since 2014, some of the services that One Source manages will return in-house.
These services include human resources (HR) and organisational development, procurement, information and communications technology, asset management and finance functions such as pensions accountancy and treasury.
The report said: “It is recognised that in the eight years since the shared partnership was established, there have been significant changes to local government and there are now different requirements and demands on the ‘back-office’ support services.
“The rationale behind the changes is that many policies and procedures do not align between the two boroughs and therefore do not generate cost savings through economies of scale.”
According to the report, the services which will remain within One Source, include legal and governance, exchequer and transactional as well as the corporate business systems team.
It continued: “One Source retains areas of strength and expertise, but each council now needs bespoke and unique support from some services, hence the decision to return some services to each council, and retaining other services as they benefit sharing.”
The rationale behind the changes is that many policies and procedures do not align between the two boroughs and therefore do not generate cost savings through economies of scale.
One Source is not ‘collapsing’
Conrad Hall, director of resources and section 151 officer at Newham Borough Council, told Room151 that this “partial split” doesn’t mean that One Source is “collapsing”.
He said: “Newham and Havering have looked at One Source in the light of a very different financial climate to the one it was created in back in 2014.
“We have agreed that some advisory functions, such as HR and procurement, are better suited to single borough delivery as we have rather different approaches to the sort of organisational structuring required for today.
“However, a really important core One Source function for transactional services will remain, as will legal services.”
Hall stated that the decision to return some of the council’s services in-house is part of a “strategy focused on our [Newham’s] core business”, which the authority plans to expand on.
One Source’s most recent finance report from November [2022] shows its overall budget of £25m had overspent by about £5m. The only surprise is how long it took the parties to reach this point.
Shared service not a ‘panacea’
However, Geoff Wild, consultant and interim manager at Law and Governance, told Room151 that the decision by Newham and Havering to return some of their services in-house could be due to the costs of maintaining One Source.
He said: “Shared services are very often not the panacea they are made out to be. The costs of establishing and maintaining a shared service is often underestimated or overlooked.
“One Source’s most recent finance report from November [2022] shows its overall budget of £25m had overspent by about £5m. The only surprise is how long it took the parties to reach this point.”
Wild highlighted that for a shared service arrangement to work its needs to have a “shared philosophy, a mutual vision and a parity of benefits”.
He added: “If any of these are missing, or there is an imbalance of power, it is doomed to failure.”
Shared services are very often not the panacea they are made out to be. The costs of establishing and maintaining a shared service is often underestimated or overlooked.
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Tri-borough arrangement collapse
Wild also detailed that the difficulty of making a shared service arrangement work increases exponentially in relation to the number of services shared, but also crucially concerning the number of partners involved.
He highlighted that an example of this is the collapse of the tri-borough arrangement between Westminster City Council, the London Borough of Hammersmith and Fulham Council and the Royal Borough of Kensington and Chelsea.
This arrangement was launched in 2011, however came to an end in 2018 after the London Borough of Hammersmith and Fulham was ejected from the tri-borough partnership in 2017.
“There are examples of where it has worked, for example, Adur and Worthing Councils, but even here the changes of political administration have resulted in a demand for greater sovereignty,” Wild added.
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