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The future of shared services

Source: PSE - April/ May 16

The chairman of the LGA’s Improvement and Innovation Board, Cllr David Simmonds, discusses the future possibilities of shared services arrangements for councils.

Since 2010, local government has managed to cope with the largest budget cuts in the public sector – over 40% of its central government grant – without experiencing dips in public satisfaction. 

Councils establishing themselves as the most efficient part of the public sector has been an impressive feat, and largely down to the hard work and determination of councillors and officers to find new ways of working that make savings behind the scenes without affecting the quality of service. 

Shared services have been a large part of this, allowing councils to pool resources and expertise to deliver a huge range of high-quality, efficient services. At least 96% of councils are now sharing services with other councils, with some joining other public sector agencies to achieve both savings and service improvements. 

The LGA maintains a shared services map, plotting information from councils on the services they’re sharing with other organisations – from the nature of the service, to the savings from the partnership. This has helped to build up a picture of the innovation and new ways of working going on across the country. 

Shared services lessons 

Last year’s map – which is now being updated – taught us some important lessons about shared services. In particular, we’ve found that not all partnerships are created equal, and size matters! 

The clearest finding from the 2015 map is that while huge savings can be made by sharing services – with the biggest partnership savings topping £2.5m per year – more than half of partnerships are saving less than £100,000. 

Second generation of shared services 

Back-office functions are the most popular services to share, but tend to offer the smallest savings. Sharing with other public bodies has better results, however there are fewer examples of these partnerships so far, making it an obvious area of development for the “second generation” of shared services. 

The map also found the biggest savings were made in procurement and capital assets, so for those councils with less developed shared arrangements, these could be areas worth looking at first. Procurement Lincolnshire, for example, shares procurement across seven local authorities, and has saved more than £31m since it was set up in 2008. 

East Sussex Procurement Hub, bringing together Hastings and Eastbourne Boroughs, and Lewes, Rother, and Wealden district councils, has generated revenue and savings of over £8m in the last five years.

Of course, there are other motivations than money to enter into shared arrangements, from increasing resilience to enabling wider transformation across the organisations involved. Bromsgrove District and Redditch Borough Councils started out with a shared chief executive and management team, before bringing together most other services to deliver savings of £2m every year. 

Classic economy of scale effect 

Results from councils have also shown a classic economy of scale effect when more partners are added; while two partners is the most common size for a partnership, those with four partners achieve the most savings per partner. Councils need to be talking to all of their local partners – not just neighbouring local authorities – to see if there are better and more efficient ways to deliver services by working together. 

As more devolution deals are agreed, and further funding cuts take effect, it’s essential that local authorities are joining up with those around them to find ways to deliver the next generation of public services – providing the services local residents need, in the most efficient and effective ways possible.

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