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Legislation needed for local government to reduce costs by sharing back office functions

Local authorities will miss the opportunity to reduce costs and make significant savings by sharing back office functions without further government legislation, according to a new report from business advisory firm Deloitte. The report looks at the potential for local government to share standardised processes such as payroll, financial administration and other transaction-driven back office processes.

Deloitte argues that legislation, that would lead to the obligatory introduction of regional or multi-local authority shared services, would remove the need to build political consensus and address cultural resistance to the concept.

Mark Lawrie, local government partner in Deloitte’s consulting practice, said: “The potential for significant savings is hampered by the strong desire to protect the sovereignty of individual authorities. Sharing back office services would not create a deficiency in local government democracy as councillors are rightly held accountable for the outputs of their authorities and not to manage support processes.

“In light of the current budgetary constraints facing the public sector Deloitte believes there is a compelling case for legislation that would require local government to share back office functions. It would move the debate from a question of whether shared services are right, to how and when could they be taken forward.”

Collaborative working fundamental to addressing the challenge of budgetary constraints

Deloitte points out that although there were a few early exceptions, tactical collaboration between local authorities has rarely succeeded at scale. Local government has been incapable of delivering the level of savings achieved in the private sector, in spite of the government’s focus on cost savings through technology. Shared services have remained an aspiration. Deloitte believes collaborative working will be fundamental to addressing the challenge of budgetary constraints and rising customer expectations.

“While local political structures are effective and accountable mechanisms to allocate resources in accordance with local need, they can also act against resource optimisation. Given the threat to existing levels of public funding this position may become unsustainable, and there is now a strong case for making the adoption of shared services for certain back office functions mandatory.”

Deloitte report: Stop, start, save. Shared service delivery in local government.

The report identifies a number of behavioural and political obstacles beyond the cost of initial investment and capacity that prevent the development of shared services in local government:

  • Risk of reducing headcount.
  • The urge to protect local authority and desire by elected members to maintain self determination over frontline services.
  • The concept of sharing infrastructure and or management functions with another council is believed to undermine the sovereignty of participant authorities by some elected members.
  • How to relocate staff outside a political boundary and share control or buy services is difficult to agree.
  • Issues linked to an individual’s career path.

The report argues that many of the issues listed above arise after initial feasibility studies and the resulting procrastination has a corrosive impact on the level of benefit that could be achieved by sharing services.

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About Deloitte

In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms. Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTT and its member firms.

The information contained in this press release is correct at the time of going to press.

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