Back in 2011 the government pushed for local authorities to share back-office functions, suggesting that it would protect their services from budget cuts. But is this still the case?
Today (25 October), four local authorities in Gloucestershire have announced that they are considering whether they should move several services back in-house from their jointly owned company, Publica.
In 2017, Cotswold, Forest of Dean, West Oxfordshire and Cheltenham councils established the company to provide a range of authority services, from customer services and planning to back-office functions like IT and finance.
Despite the authorities suggesting that Publica has “delivered a number of efficiencies and savings” they are considering trimming down the functions of the company following the publication of a report by consultants Human Engine.
The report in question recommends that a “significant number of locally focused services should move back from Publica and return to being under greater control by the councils”.
The councils suggest that their reasoning behind this is to “best meet the financial challenges” that local government currently faces. This also comes as Cotswold District Council announced yesterday (24 October) that it could face issuing a section 114 notice in the future.
The pending decision by the Gloucestershire authorities is similar to actions by the London Boroughs of Newham and Havering back in April when the councils announced that they were trimming back the functions of their shared service company, One Source.
According to Newham and Havering, the reasoning behind their move was that changes in local government have impacted its ability to generate some “cost savings through economies of scale”.
Are the days of shared services numbered?
Following on from these examples, will other shared services collapse as the funding issues facing local authorities evolve?
The answer is “yes” according to Geoff Wild, experienced monitoring officer, director of Law and Governance, consultant and interim manager. He tells Room151 that “their days are numbered now that margins are so tight”. “There are very few success stories out there,” he says.
In fact, Wild argues that the original case for outsourcing and the use of wholly-owned companies as vehicles for service delivery “was always tenuous and often ill-thought through”.
In 2011, Eric Pickles, the secretary of state for communities and local government at the time, encouraged the idea of local authorities sharing back-office functions to protect council services from budget cuts. This endorsement was thought to be a way of relieving the need for public funding.
Wild states that where some went wrong was in trying to treat a local authority like a company, “but it’s not a company and it’s not designed to be a business”. He argues that local government is a statutory body, democratically accountable and restricted by laws and regulations.
“Local government is not staffed by commercially-minded business people. Instead, we have bureaucrats with a completely different skill set,” he adds.
Wild highlights that local government must work within a given budget and the ability to make savings is very different from the ability to generate profit. Hence, the business case for these wholly-owned companies from the start was “tenuous”.
Another high-profile case which shows the difficulty of making a shared service arrangement work 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, but came to an end in 2018 after the London Borough of Hammersmith and Fulham was ejected from the tri-borough partnership in 2017.
On the other hand, Nathan Elvery, founder, managing director, executive coach and mentor at Imagine Public Services, argues that opportunities for improved efficiencies go through cycles, shared services being one such cycle, which “large parts of the local government sector have successfully embraced”.
“The pace of change in local government is rapid to say the least and these shared services models once established need to up. With changes in political control, a greater focus on governance, examples of failed arrangements and future financial benefits of such models in question, it comes as no surprise that councils are reviewing these models, this is all part of that natural cycle.
“So once we have a trend for creating shared services, we’ll now have a trend of these models to be reviewed and in some cases, not all, these arrangements coming to an end,” he tells Room151.
Cotswold District Council is set to consider trimming the functions of Publica on 2 November, but only time will tell whether other authorities follow suit.
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