By Mark Smulian
1 March 2011
Sharing back-office services will not yield enough savings on its own to overcome councils’ financial woes, a think-tank is warning.
The New Local Government Network’s Shared Necessities, published today, said that sharing back-office services was now a common approach as councils looked for savings.
But it said councils would have to look more widely for opportunities for efficiency savings from sharing as they faced the need to save up to 8.8% of total expenditure next year, and substantial amounts beyond that.
The report said that sharing back-office services would at best save 3.6% of expenditure, and a ‘more realistic expectation’ would be just 1.8%.
Co-author Tom Symons said: ‘These are tough times for local authorities but a narrow focus on how best to make efficiency savings will be insufficient if they are to handle the lasting impact of spending cuts.
‘Those councils that boldly go beyond the back office when considering shared service agreements will emerge in time as leaner and sharper organisations better able to deliver the services people need.’
The NLGN admitted that these more radical models, such as sharing chief executives, entire senior management teams or remote service centres could call into question whether current local authority boundaries remained appropriate.
‘We are keen to
preserve existing democratic structures but there is a vital debate to be had
about the potential for the majority of council services to be merged together
across economic geographies,’ Symonds said.
But James Grierson, head of public sector at the real estate services firm DTZ, said: 'The findings of the NLGN report look wrong to us. We would expect shared back office services to deliver much larger savings, provided the shared services model is supported by a willingness to do things differently.
'Across a range of services, outsourcing typically delivers cost savings in the range of 15-20 per cent, and we expect that, across the public sector, a significant proportion of in-house delivery will be externalised over the next few years.'
