Spending Cuts Reshape Market

Spending cuts will reshape the UK local authority shared services market
By Peter Clarke

A survey sponsored by public sector BPO specialist Liberata has found that spending cuts will drive the shared services market more powerfully but they will also reshape it. Ninety-seven percent of local authority chief officers are planning for cuts in government funding. Over half are preparing for cuts of between 10% and 20%. Thirty percent say that joint working will be a dominant outcome over the next five years, but most are planning to work more closely with other public bodies in their area.

Cuts put sharing services in the spotlight

Thirty percent of local government chief officers see the sharing of services between local public bodies as a possible way of making savings. Nine of the 70 authorities questioned (13%) think that sharing services will be the dominant theme next year, but when the timeframe is spread over the next five years the number rises to 21 authorities (30%). Only 1% of authorities expressed an interest in offshoring services next year. The findings are encouraging to public sector BPO specialist Liberata, sponsors of the survey, which advocates the creation of regional service centres within the UK.

Jason Fahy, Regional Director of Liberata, told Ovum that the survey demonstrates interest in the creation of regional service centres. “The issue is local jobs; some are willing to outsource but want to keep the jobs in their area, but most want to keep the jobs in the UK. The challenge for local authorities is how to balance achieving efficiencies with the impact their decisions have on the wider community. Losing local jobs has a big impact on local shops and the local economy. Councils also have to pay local unemployed people benefits, which increases public costs.”

Total Place refocuses attention on sharing within a geography

The Total Place initiative will map flows of public spending in local areas, and make links between services to identify where public money could be spent more effectively. Nearly a third of chief officers believe that Total Place will see the councils taking more control of locally delivered services in their areas.

The emphasis for sharing services, processes, senior officers and back-office costs is therefore shifting from sharing between local authorities to sharing between public bodies in the same geography. There are still many opportunities for local authorities to share across boundaries, but the Total Place concept has proved to be popular with local authorities. While sharing between local authorities leaves the issue of control to be determined by the governance arrangements put in place, Total Place automatically gives the lead to the local authority. However, some authorities are worried that sharing back-office staff will rob the authorities of their ability to think strategically.

Over half of the councils questioned are prepared to take direct control over other locally delivered services. The sort of services local authorities would like to take over range from the delivery of some aspects of local health services to benefits and jobs advice currently delivered by Jobcentre Plus. About half of councils would like to take control of house building and regeneration from the regional development agencies and the Homes and Communities Agency.
However, 74% of authorities are worried that financial pressures will thwart joint working. Structural change is costly to delivery and delays the search for positive outcomes until the change is in place. Not surprisingly therefore, 43% of authorities think that significant savings can be realised by restructuring services.

Different delivery models

Some local authorities, such as Barnet and Essex, are planning to transform themselves into commissioning councils. Others, such as the London Borough of Waltham Forest, are planning to merge with their local Primary Health Care Trust. Newham, meanwhile, says it has identified potential savings of £70 million of over a three-year period by improving processes.

Source: Ovum Newsletter