After tilting at windmills, authorities share the burden

By Bill Loughrey, managing director, local government, Civica Many early attempts at local government shared services were akin to tilting at windmills, with multiauthority plans to pool resources often proving over-ambitious, impractical and often cast aside. However, sharing of resources is now a realistic proposition for many councils. A series of studies over the last 12-18 months indicate that town halls are coming round to this promising if sometimes complex strategy. The LGAs continuing research indicates that around 50% of the UKs 433 authorities are now engaged in a total of 143 different shared services arrangements. Our own survey of 100 local government service directors and IT managers earlier this year reinforced this optimism toward shared services, with 89% of respondents agreeing that shared services projects will succeed. Remarkably, when asked the same question in 2010, only 24% of participants agreed. Despite this acceptance of the principle of sharing, we are seeing a set of specific and pragmatic approaches to the question of how to maintain and enhance service levels, rather than a movement or a surge towards these arrangements. The exact shared services proposition differs from region to region but some key trends are now discernible. Firstly, the most readily identifiable response is the traditional sharing of services by two or three authorities. The parties aim to improve or drive costs out of a single core, resource-heavy local service such as revenues & benefits or environmental services. Some of these programmes may be the prelude to a wider pooling of resources. Others may see the arrangement extending beyond the original partners. Some authorities have set up independent legal bodies to manage their sharing of services. With very clear savings targets and highly motivated work teams (or employees TUPEd to a business process specialist), these models can deliver enhanced services while ensuring annualised cost savings. Establishing them may be underpinned by the up-front integration of existing technology infrastructures but the involvement of a private sector partner can ensure the streamlining of business process and deployment of technology skills to deliver performance gains and savings over the longer term. The second major trend is the sharing by outsourcing external or internal services to other councils. Better-resourced or high performing authorities, often in conjunction with a trusted private sector partner, may act as a hub for councils whose resources are stretched. This strategy may include redeployment of departmental employees within one authoritys offices to save operational resources or office space while improving resilience. Councils are realising some impressive savings by sharing or outsourcing services, but as budget reductions bite further, the question remains: is it enough? In a situation where the prudent authority is effectively selling services to its peers, not every authority can employ this method; one of them must be the buyer so what then? Can sharing arrangements promote much larger scale savings or inspire more strategic models that genuinely transform the economics of local services? Progress towards this more radical rethinking of services is also identifiable. A third emerging trend is that of more ambitious shared service agreements. We are seeing larger or more progressive councils sharing resources to co-ordinate on departmental services such as collaborations between counties such as Hampshire-Dorset that are driving economies on a greater scale than before. This type of

collaboration could see sharing extended more widely across regions in a way that some of the original sharing projects envisaged but could not deliver. For many however, the single biggest factor in the drive to shared services is the Coalitions deficit reduction plan. Whatever the sensible progress that has been achieved by local government, with tighter spending settlements to come, the public sector is looking for a step change to balance new service thinking with structural cost savings. Though its national impact is low, a fourth trend sharing that drives structural innovations is beginning to take root. Some councils are re-engineering services such as benefits administration by setting up dedicated centres of excellence in conjunction with private sector partners. This strategy embeds creative approaches and system efficiencies into daily operations. A number of contractual agreements now see the private sector provider tasked with delivering efficiencies to an agreed value each year. A number of authorities use this approach to deliver economies of scale with the private sector accepting the project risk and the two parties sharing the gains. The long term prize could even be that town halls gain access to innovations such as tools for identifying demand for local services, reducing system fraud or taking tranches of existing services online, harnessing the type of business innovation often confined to the entrepreneurial private sector. Shared services involves pragmatic approaches to budget constraints but the 150 million savings identified could provide the answer to securing local services. Tilting at windmills is a thing of the past. Ends
Notes to editors The LGAs research is at: http://tinyurl.com/7ynlokq