Service Shared: Costs Spared?

Published on Friday, 24 August 2012 09:40
Posted by Cllr Peter Fleming

The LGA has long recognised the importance of shared services as one of a number of ways for councils to reduce costs and improve services

Our Shared Services Map shows that the majority of councils are already sharing services and, while the savings have been significant across the lifetime of the projects, they are nothing like large enough to make up for the sizable cuts to local government funding which are being made. The amount of money councils receive from Government has fallen by £3.5 billion in real terms since 2010/11, a figure which eclipses many times over the savings that can be made annually from sharing services.

Our recent 'Services Shared: Costs Spared?' report, provides a detailed analysis of five shared service arrangements. Rather than producing more guidance for councils the LGA is keen, four or five years on from the advent of shared services, to focus on the evidence of what members have achieved. This research aimed to provide evidence to answer the questions – do shared services work? Can they save money? Do they perform better?

The report provides a detailed insight into the scale of savings that have been achieved through sharing back office functions like IT and legal, and teaming up to deliver frontline services like waste disposal and road maintenance. This research contrasts with the recent publication of the Commons Public Accounts Committee report into Whitehall shared services which showed that such arrangements had cost £1.4bn to set up - £500m more than expected – and in some cases had actually cost more than they had saved. The LGA plans to share this report with central government departments to encourage the sharing of management teams and services across the public sector to achieve savings.

The report revealed that clear financial benefits have been achieved, with the five shared services saving £30 million between them across the lifetime of the sharing arrangements through reducing staff (removing duplication and management posts), integrating IT, reducing accommodation, and improving procurement.

It was discovered that the set up and integration costs for merging services were modest, with less than a two year payback period for all the shared services analysed. The shared services also succeeded in providing the same or better levels of performance at less cost.

The initial benefits are typically delivered rapidly, but as the arrangement matures and evolves it starts to deliver savings in new areas, such as better use of IT and assets, improved processes and cultural change programmes.

We were impressed but unsurprised by the findings. Local authorities have long been the most efficient and innovative part of the public sector and we knew anecdotally that the more than 200 shared service arrangements operating in local government were saving council taxpayers lots of money. We hope this report acts as a prompt for greater exploration among our members and for central government and other parts of the public sector to follow our lead.

Alongside the report, a new evaluation tool which helps councils to understand and track the benefits of sharing front and back office services has also been launched. It can be used to help make decisions on whether to set up a shared service or to manage progress on one that has already been established. The model does not replace detailed financial planning but is focused on supporting overview and scrutiny committees and member and senior management decision making and benefits realisation tracking.

With cuts to local government funding set to continue well into the next Comprehensive Spending Review, and authorities likely to be pressured to freeze council tax until the end of this Parliament, innovation and efficiency are more important than ever. They will not make up for the funding shortfall but they can dampen the impact of cuts on frontline council services.

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