Shared services lead to substantial savings

An LGA report has found that clear financial benefits can be made from sharing services. It considered five examples of sharing in local government and reported that initial benefits were delivered quickly and set-up costs were paid back in two years or less for all the examples considered.

The report looked at: LGSS, the venture between Cambridgeshire and Northamptonshire; Vale of White Horse and South Oxfordshire district councils; Procurement Lincolnshire; Hoople Ltd (Herefordshire Council, Herefordshire PCT and Wye Valley NHS Trust); and Devon and Somerset Fire and Rescue Authority.

Management and other staff consolidation is responsible for much of the early-stage saving. LGSS found £3.79m from this and other economies of scale. Vale of White Horse and South Oxfordshire saved £3.9m in the first two years. IT sharing, buildings rationalisation and improved procurement were responsible for other key savings with LGSS delivering £1.8m in savings from renegotiating IT contracts so far. Another £3m in savings should come from reprocuring the Cambridgeshire IT network in 2012-13.

Steve Bishop is strategic director for South Oxfordshire and the Vale of the White Horse and is responsible for finance and a number of other functions. “Six years ago Vale and South Oxfordshire were competitors as most district councils are,” he said. “You do compete for staff and things like that.”

“But there is plenty of warning that funding is going to dry up, so we all have to be looking at ways of delivering the same quality of service but more cheaply and more efficiently. Shared services is easy: you don’t have to cut services, you just make savings in bureaucracy and administration.”

Bishop sees a couple of main sticking points to sharing services. Between district and county, he says, where much duplication could potentially be avoided, co-operation is sometimes actively avoided as councils don’t want to encourage being turned into unitaries by the government. “Finance, IT, HR, all duplicated,” he explained. “The British public don’t even understand which council does what. The unitary approach better addresses that problem. Not duplicating that effort must be the biggest single source of savings in local government. Short of turning everything unitary the next biggest source of saving is shared services.”

The other sticking point is the desire to keep control. “I know from speaking to some of my colleagues in other councils that they’re saying no, we believe we’re doing the best for our residents, we don’t want to compromise with some other district down the road,” said Bishop.

“It’s so short sighted. When they’re faced with the stark financial reality are they really going to cut services rather than team up and maybe slightly compromise around the edges? Just to keep 100% control would they rather cut services to their residents? It’s ridiculous.”

Bishop also urged councils thinking of sharing services to act swiftly to avoid the business plan being picked apart too much. Paul O’Brien, chief executive of the Association for Public Service Excellence, agrees. “The more time it takes in the set up phase the more time it gives it to fall apart,” he said. “The political set up can change for example.”

O’Brien thinks that the joint committee model, the one adopted by Vale and South Oxford, is the way forward. “If you overcomplicate in the model you use to set it up you do add a burden. We prefer the joint committee approach, rather than trying to create the super company model.”

In total the LGA reported that sharing has saved:
• £10.4m over five years for Vale of White Horse and South Oxfordshire
• £10.4m over four years for Procurement Lincolnshire
• £5.4m over five years for Devon and Somerset Fire and Rescue
• £3.79m over two years for LGSS
• £0.62m over two years for Hoople Ltd