IfG.CC -
Institute for eGovernment

Richard Kerley, professor of management at Edinburgh’s Queen-Margaret University, told Public Finance that he expected councils to continue to drive down costs by tightening terms and conditions for staff and pooling -purchasing power. ‘However, the other side of doing that is that the procurement will go to -English, German or French businesses once you get into the bulk purchasing territory, because the big suppliers are by and large in the larger centres of population,’ he said.

Unison, Scotland’s largest public service union, also warned of the high cost of setting up “public service factories” in a bid to save councils cash, adding that shared facilities were not providing the answer to modernising services.

The union said frontline services will suffer as a result of the top-down approach to change and that shared services was an agenda being pushed by private sector consultants.

West Dunbartonshire councillors have voted against plans to share services with other councils in the west of Scotland.

They unanimously rejected the proposal to take part in Clyde Valley Shared Support Services at Wednesday evening's council meeting in Dumbarton. West Dunbartonshire is the second of the eight councils to withdraw from the project, following a similar move by South Lanarkshire.

Delivered by Atos Origin, the Skills Development Scotland Information Systems shared services deal will now provide service desk, application management, desktop and IT infrastructure services to Highlands and Islands Enterprise (HIE).

Bodies including Scottish Enterprise, Scottish Development International, and the Scottish Criminal Case Review Commission have already signed up to the deal in order to lower ICT costs and improve efficiency.

Seven Scottish councils have published a business plan for sharing back office services, including IT, in a bid to make £30 million in annual savings.

The Clyde Valley councils looking into the £155 million-plan include East Renfrewshire, West Dunbartonshire, East Dunbartonshire, Inverclyde, Renfrewshire, Glasgow and North Lanarkshire councils.

The councils involved include East Renfrewshire, Inverclyde, Glasgow, Renfrewshire, East Dunbartonshire, West Dunbartonshire and North Lanarkshire.

The business case proposes a two-phase implementation process. The first services to be shared will include ICT, revenue and benefits services, transactional finance and transactional HR.

When South Oxfordshire and Vale of White Horse district councils started sharing services, their shared staff amounted to one man. But the fact that he was the chief executive of both authorities may help explain why, just three years down the line, they have gone on to integrate most of their work.

The only areas that still function separately are those that operate on different IT systems, such as development, and even here plans are afoot to bring them together. "There isn't any in-principle objection to bringing them together," says David Buckley, the joint chief executive whose appointment three years ago kick-started the process. "You can imagine sharing pretty much anything if there is a will – and the IT supports it."

The head of the civil service, who is also permanent secretary at the Department for Communities and Local Government, said that his civil service reform plan will restructure departments in ways that break down rigid organisational barriers in order to more closely reflect modern society.

Eric Pickles lauds Westminster, Hammersmith & Fulham, and Kensington & Chelsea for making savings through sharing services, and he is, to say the least, encouraging other councils to follow suit. As the shared services bandwagon grows, will we see, as Pickles hopes, billions of pounds wiped off public service expenditure, or will we be wishing with hindsight that the communities secretary had been more circumspect?

According to the 'Services Shared: Cost Spared?' report, local councils, fire brigades and the NHS could benefit from shared service arrangements to help reduce their overall procurement costs.

In once case Cambridgeshire and Northamptonshire councils delivered savings of £1.8m by renegotiating a contract with their IT supplier, expecting to save a further £3m between 2012-2013.

Governments had for decades failed in their frustrated attempts to share back office services. But now a new initiative, which forms part of the Civil Service Reform Plan, is to use private sector expertise to save up to £600m a year for the taxpayer.

On the face of it, cost sharing groups (CSGs) that provide shared services exempt of VAT look a good thing.

Dig beneath the surface a little, however, and the question of whether real value is being offered arises. In order to qualify for VAT exemption, a CSG has to be non-profit making by providing services at cost to the organisations within the group – all of which jointly own the CSG.

The committee had looked at evidence from the Cabinet Office, the Department for Education and the Department for Work and Pensions at previous attempts to save money and welcomed the coalition government's renewed focus on improving shared services – driven by the Cabinet Office's "ambitious new strategy". However, there were risks involved and there was "a particularly challenging timetable for implementation".

Produced by Drummond MacFarlane for the Local Government Association (LGA), the Shared Services: Costs Spared? report looks into five high-profile shared service arrangements between councils across the country.

The plan admits that "there have been many public pronouncements of failure and some, less public, successes in this arena". It says the initiative "needs to go further in terms of service and deliver greater savings faster" as shared back offices play their part in the government's efforts to cut the deficit.

The report, entitled Services shared: costs spared? was carried out by strategic advisers Drummond MacFarlane and looked at shared service agreements between Cambridgeshire and Northamptonshire county councils, Devon and Somerset Fire and Rescue Authority, Herefordshire Council, Herefordshire Primary Care Trust and Wye Valley NHS Trust, Procurement Lincolnshire, and Vale of White House and South Oxfordshire District Council.

In light of the news that the UK still faces a structural deficit of £90bn, this week’s Spending Review outlined a number of further cuts which will come into force over the coming years, setting the context for the 2015 election. Against a backdrop of continued uncertainty and economic gloom, the CSR did explicitly recognise the potential for technology-driven innovation in the public and private sector, as well as the requirement for the UK’s cyber capabilities to progress at a faster pace. With job losses anticipated as part of the continued efficiency measures, skillsets within the public sector will need to diversify, and private sector skills will have to be tapped into, to meet this need.

Local authorities are becoming increasingly active in setting up shared services with other councils and public sector bodies from health to police. The trend has taken tim to develop since it was declared a virtue in Sir Peter Gershon's Efficiency Review of 2004, as while many supported the idea legal complexities often got in the way.

Not any more, it seems. That is partly to do with a new spirit of pragmatism, and as a result of the emergence of a body of case law which now allows councils to work together without fear of falling foul of procurement law.

Writing in the Science and Technology Facilities Council's annual report for 2011-12, John Womersley, chief executive of the STFC, says that service levels at the centre remain "significantly below expected standards".

The centre was set up to bring services such as human resources, finance, IT and grant allocation for all the research councils under one roof.

In a report examining the sharing of functions such as finance, human resources and procurement across five shared service centres, MPs also found setting up the hubs had cost more than anticipated.

The committee has reiterated conclusions made by the National Audit Office earlier this year that the centres had cost £1.4bn to build and operate – around £500m more than expected.