18 February 2000
According to the early findings of a survey by CIPFA's Best Value advisory service, private sector markets exist across the whole range of financial services.
Under Best Value, councils will be virtually obliged to go to the market, if only to prove the competitiveness of their in-house financial service provision.
The government's Best Value legislation does not require authorities to put services out to competition. But guidance issued at the end of last year states: 'Retaining work in-house will only be justified where the authority can show it is competitive with the best alternative… where there is a developed supply market this will most often be through fair and open competition.'
The advisory service's survey so far includes 160 authorities and examines how those councils provide 12 basic financial services, including accountancy, audit, payroll and council tax.
Some 469 services out of a total possible 1,240, nearly 40%, had contracted out at least some element. Importantly, contracting arrangements existed across the whole range of services.
Rupert Dewhirst, lead finance adviser for the advisory service, said that although the survey showed a market existed for at least parts of all service activities, some markets could be regional.
He added: 'But this not insignificant use of contracting to secure service delivery indicates a breadth of experience that the guidance forces service managers to consider as part of their Best Value reviews.' Despite this wide-ranging market place, there are some financial services that were core to an authority, such as tender evaluation and advice to politicians, Dewhirst said. 'It would be exceedingly unwise of an authority to contract these out,' he said.
The survey shows that some areas of council finance are already dominated by the private sector. For instance, 66% of councils use the private sector to provide insurance services.
Surprisingly, the survey showed that only three in ten councils involved in the administration of benefits currently contract for the whole or part of the service, despite the existence of a well-developed outsourcing market.
Dewhirst said that detailed analysis of the survey findings would also examine how successful existing contracts had proved.
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