Lack of benefits prompts shared services rethink

A major local authority shared services venture involving Northamptonshire County Council is to be restructured after it was revealed that a number of service areas were only included to boost turnover.

LGSS was created in 2010 by Northamptonshire and Cambridgeshire county councils, with Milton Keynes joining as the third co-owner and partner in 2016.

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March 25th, 2020, Manchester
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According to a report to a meeting of Cambridgeshire councillors this week, the partners are in discussions over a new operating model because a number of service areas do not benefit from shared arrangements.

The report said: “It would appear that service areas were included within the scope of LGSS simply to increase the financial turnover of the organisation.

“Many service areas such as democratic services, finance and HR business partners, and operational IT simply support the organisations that they work in.

“There is no sharing of skills or resources and therefore the only benefit that is derived is through areas of significant procurement – the same outcome of which can be delivered without a shared service offer.”

In March 2018, LGSS came under criticism in a report by government commissioner Max Caller into the financial failings at Northamptonshire.

Caller said LGSS was “just a collection mechanism with a top layer of management working across all three authorities and winning a number of smaller contracts”.

He added: “LGSS claims to have delivered significant savings over its period of operation, but it is very hard to see what additional saving has been produced by the structural grouping and what could have been generated by normal management action.”

A report to Cambridgeshire councillors last month said of Caller’s report, “Whilst some of these comments may have had an element of substance others were at best unsubstantiated and at worst factually incorrect.”

However, at that meeting, a decision was taken to repatriate professional finance and democratic services functions from LGSS – in line with an earlier decision by Northamptonshire.

The three partner councils are also considering a secret report by the Chartered Institute for Public Finance and Accountancy over the future operating model.

The report said this will result in further shared service areas repatriated to individual councils.

It also revealed that, following the issues at Northamptonshire, and Caller’s subsequent report, “the opportunity to ‘sell’ services to more public sector organisations has become almost impossible”.

In addition, a major client, Norwich City Council, has given notice that it will terminate its contract in March 2020.

LGSS is also set to lose profits from the provision of services to Northamptonshire when it is abolished by April 2021.

“These two clients alone contribute around £1m to the management overheads of the LGSS operations,” the report said.

The partners hope to complete work on the new operating model within three months, although the report  admitted that “this is a very challenging ask and it is possible that it will not be delivered within this timescale”.

It added that the principles in the proposed new model “are a compromise as all three organisations are not getting exactly what they had hoped for at the start of the discussions over the future model of LGSS”.

It concluded: “There is still a large amount of work to be done, as for many service areas the issue is not simply a matter of adjusting reporting lines.”

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