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By Political Correspondent Mithran Samuel ...
By Political Correspondent Mithran Samuel

The efficiency review is the latest in a venerable line of government drives to slash bureaucracy, a tradition seemingly as old as democracy itself.

Few in local government doubt the efficiency review is a worthwhile exercise, and that there are administrative barriers to improving public services.

But the fact that cutting red tape makes for such great politics is a warning over what the review may throw up.

In particular, will the government be as willing to put its own house in order as to force savings from local government and other devolved delivery agents?

The review's notional target is understood to be savings of up to 7% in devolved spending by 2007-08, local government included.

The review's sponsor departments - the Cabinet Office and the Treasury - have just completed a consultation on the areas where savings can be found, and will report their findings next month before looking at how these cuts can be made.

Though the government insists that all options are open, it has already been clear where it thinks councils can slim down - procurement, back office functions such as human resources, IT and finance, and frontline transactions.

It has also suggested how savings can be made - notably shared services and collective procurement, the swifter transfer of best practice, and ICT.

But how sound are the government's assumptions?

Its key claim is that councils and other local public bodies too often try to provide all services in-house or through individually negotiated contracts, which is bad for efficiency.

However, in its response to the consultation, CIPFA claimed 'a significant degree of effort' was being put into finding efficiencies through the combination of resources and skills, citing evidence from a 2001 survey of shared service delivery.

Targeting procurement has clear political attractions given that, as the government consultation notes, it accounts for nearly half of council spending.

Add in the large differences in costs between areas, and the case for standardisation - along the model of the best-performing councils - looks compelling.

However, as a Local Government Association spokesman pointed out last week, 'the strategy needed to secure efficiencies in buying paperclips is different to that for purchasing care for the elderly'.

The New Local Government Network, while conceding the merits of standardisation where councils act as agents of the centre, argued in its response to the consultation that it is potentially detrimental to local democracy in discretionary services.

According to the NLGN: 'The important areas for local authorities are those in which their unique democratic accountability makes a difference and gives them a mandate no one else has.'

However, there is another side to the efficiency review which the NLGN, CIPFA and the LGA are trying to pursue.

According to CIPFA, there are significant limits to targeting councils for efficiencies.

Government policy and regulatory frameworks, it has argued, are often the major determinants of the balance between bureaucracy and delivery in local bodies.

It claims only a radical shift to a regulatory regime based on the principle of 'control proportionate to risk' will achieve the sort of savings the government is calling for.

The NLGN, with characteristic optimism, envisages a win-win solution to the efficiencies conundrum, if only central government looks to its own ranks for savings.

It could 'strip out great rafts of officials in higher bureaucratic levels who are only there to issue directions to and monitor what goes on in the lower level'.

Whether the review follows a localising or a centralising direction will depend as much on politics as on empirical arguments.

An initial test will be whether or not the government accepts the LGA's call for it to play a greater role in the review's second stage.

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