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Externalisation of services could leave local authorities vulnerable to ...
Externalisation of services could leave local authorities vulnerable to

changing circumstances, the author of a major new study has warned.

Tom Entwistle of the Local and Regional Government Research Unit at

Cardiff University Business School, told members of the Public Services

Network that 'hollowed out' councils run the risk of not being able to

deliver services in future years.

'Hollowing themselves out in terms of capacity and competence can put

councils in a dangerous position when circumstances change,' he told a

PSnet national seminar in Birmingham.

The nine month Cardiff study -- due to be published in mid-February --

included a survey of 210 direct service organisations across the UK,

followed by six detailed case studies.

Dr Entwistle said that although the majority of councils seemed acutely

nervous that best value would lead to greater externalisation, this did

not appear to be happening in practice.

The study found that in-house services have a number of advantages:

* Responsiveness -in-house services are flexible and can be re-directed

to meet needs while contracted out services lose flexibility.

* The mixed economy -in-house services work well with private

contractors. More than a third of authorities in the study spent more

than 20% of their turnover on subcontractors. Private contractors in

contrast are more interested in minimising competition.

* Delivering strategic focus - In-house services are able to respond to

the council--s local agenda more so than private contractors.

'There is a clear case for in-house services in certain circumstances.

The theory says so and our study confirms it.'

The survey found that 94% of DSOs believed compulsory competitive

tendering made services competitive and Dr Entwistle said authorities

needed to build on the competitiveness and autonomy which came out of CCT.

If the management is right, in-house services can use their advantages to

provide better and more efficient services, he said.

New models of management which don't allow service managers to contribute

to the authority--s strategic focus may pose a threat to internal

services, but Dr Entwistle said his work suggested that all local

authorities need some internal service provision - 'We would sign up to


In some cases, he believes councils will form public/public partnerships

with other authorities to offer economies of scale and develop the

expertise of the internal providers.

Prof Steve Martin, director of the Local and Regional Government Research

Unit which is carrying out a five year evaluation of best value for the

DTLR, said they hoped to extend the PSnet study further.

'We have been fascinated by the issues this research has raised and we

feel they deserve more of an outing, looking at more authorities and

tracking them over a longer period.'

The Cardiff University Business School report into In-house service

provision will be published in mid-February. Copies can be ordered from

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