Sharing services

Local government / 21 March 2011

Merging back office functions and services could save the public sector huge amounts of money. But will it affect service levels? Scott Beagrie investigates

Advocates of shared services say that it’s potentially one of the most effective ways for councils to meet the level of cost reduction necessary following central government’s deep cuts to funding. So the landmark proposal by three flagship London councils aiming to achieve reported cost savings of £35m by combining back-office functions and cutting management will be keenly watched by anyone connected to the public sector.

Hammersmith & Fulham Council (H&F), the Royal Borough of Kensington & Chelsea (RBKC) and Westminster City Council (WCC) claim the so-called ‘tri-borough’ model is the best way to protect frontline services and jobs in the future while improving service delivery in many areas. The councils have signed a Sovereignty Guarantee to safeguard ‘local autonomy, responsiveness and identity’ and are in the process of discussing the proposals at their respective cabinets. Recommendations in the report include reducing chief executive posts from three to two, combining children’s and education services with a single director and combining adult social care with a single director in charge of commissioning services. The move could result in the loss of up to 500 jobs.

But Melvyn Caplan, cabinet member for finance and resources (HR, property, procurement and IT) at Westminster City Council, stressed that the plans were still at an early stage and any figures reported on job losses or potential savings were too prescriptive.

“What the three cabinets have signed off is yes, in principle we absolutely want to look at this, we’d be foolish not to because the potential savings are pretty big – tens of millions [of pounds],” he says. “But what Westminster has also said is that we will look at each business case on its merit and some things we will go ahead with and some we won’t, depending on the business case and sovereignty issues in terms of the service.”

Job losses?

Unsurprisingly, with 500 jobs reportedly at risk there is a certain amount of cynicism that the move will deliver on its aim of protecting frontline services. Some experts also believe the barriers to merging services are simply too great and too complex.

Jeremy Cooper, director of public services consultancy iMPOWER, says that these changes are “the best example of someone really going for it and it has to be the way you do it,” but cites self-interest and “too many” governance issues as major stumbling blocks for any sharing of services.

It could be very negative reducing your change capacity at a time that you need to drive through real changes. You make a short-term saving but it’s not sustainable and you won’t get the bigger benefits.

Jeremy Cooper, director, iMPOWER

Cooper added that another snag is that the true benefits of merging take some time to materialise. “If you have a year one savings target, that leads to some negative ways of releasing savings and it means you are not really transforming or merging but literally just replacing three with one,” he says. “There is a real danger that is not even in the medium-term interest let alone the long-term.”

In the case of WCC, “no major savings” from shared services have been anticipated in its budget for the next two years, but according to Caplan the ultimate prize is a savings forecast of £60m down the line in years three and four. “The very nature of merging three sets of services together from three different councils is a process that we do not see big benefits kicking in for another 18 months to two years,” he explained.

It is also feared that by stripping out management layers the councils will not be structured in the most effective way to meet the transformation challenges of reconfiguring their services and achieving more prolonged savings. “It could be very negative reducing your change capacity at a time that you need to drive through real changes,” says Cooper. “You make a short-term saving but it’s not sustainable and you won’t get the bigger benefits.” Consequently, he fears it will also mean the councils end up spending more on consultancy or outsourcing to replace the loss of capacity.

However, Caplan contends that the most important aspect “to maintain in any sort of service is the people that are closest to the client: whether that’s in social services, adults, children, whatever, and a lot of the client parts will not change,” he says. “You’ll still have the same social workers dealing with the same client and the same structure in a local youth club.

“At senior management level, when dealing with professional management skills, that is less of a worry than if you lose critical front-facing people,” he says. He points out that losing senior people is something which any large organisation has to face as well as have the capacity to deal with and on the flipside often looking at things in different ways, hearing different views and having different skills coming in can both be refreshing and actually help an organisation. “So yes, there are some risks, but also huge benefits as well.”