Report casts doubt on shared services savings

Councils planning toshare back office services, including HR, to achieve large budget cuts have been challenged by a report that suggests savings will be as little as 3.6 per cent.

The report, Shared Necessities: the next generation of shared services, said that even if back office shared services achieved “maximum efficiency” savings would only amount to 3.6 per cent. It added that a more realistic figure for potential savings was half that, or 1.8 per cent.

This falls very short of the average 25 per cent savings by 2014 that councils have been asked to find by central government, and means frontline services and jobs remain vulnerable to cuts.

The findings also put into perspective the suggestion from communities secretary Eric Pickles that back office efficiencies would prevent frontline job losses.

To provide services and make savings, the report suggested that councils must “boldly go beyond the back office” when implementing shared services.

New models of shared services could include sharing chief executives and senior management teams, and using virtual centres to provide services for the local population.

Councils already looking at more radical shared options include three London councils, Westminster, Hammersmith and Fulham, and Kensington and Chelsea, and the Association of Greater Manchester Authorities, which is considering joint adult social care services.

However, the report admitted: “There are implications for the nature of local authority workforces and for reform of organisational structures.

“Sharing can be accompanied by challenging legal and HR issues, not least redundancy and TUPE, which can often offset potential benefits.”

Council employees could be deployed to “generalist pools” of staff serving across previous geographical boundaries. To break down any “human barriers” or resistance to change staff would be offered targeted incentives, it said.

However, sharing can also help local authorities to recruit and retain specialist staff “more easily” as well as maintaining a better in-house career ladder and training programmes. “Larger organisations can create new areas of expertise and generate greater flexibility,” the report said.

Tom Symons of think tank New Local Government Network, co-author of the report, 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.”

The NLGN research looked at 59 councils.