The scale and depth of the cuts facing local government has been widely documented, analysed, and discussed ever since the 2010 spending review was announced: councils are facing a 26% reduction in grant over the next four years, on average, with the biggest cuts taking place in year one and two.
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The fear is that these cuts would have a drastic impact on front-line services.
Cutting inefficiencies, reducing red tape, eliminating waste, and avoiding duplications have all been invoked as potential remedies, designed to mitigate the impact of the cuts without harming front-line services. Secretary of state Eric Pickles went further, suggesting that “by sharing back-office services, councils will be able to protect the front line - and even improve the choice and services that’s on offer to local residents”. Can this be correct? Can creating Back Office Shared Services (BOSS) really lead to better services?
A new report from the New Local Government Network, Shared Necessities, has found that back office functions only account for around 8.9% of total spend of local authorities. Even if local authorities were able to achieve the best possible savings from BOSS (40% according to private companies), this would only create a saving of around 3.6% of total spend. A more realistic estimate of savings (around 20%) would generate savings of 1.8%. A substantial sum within a local authorities’ budget, but insufficient to absorb the impact of the budget cuts. BOSS are therefore an important weapon in local authorities’ arsenal, but they probably aren’t sufficient.
In order to generate the kinds of savings which would absorb the budget cuts, local authorities need to start sharing front-line services, their biggest spending areas. Local government will undergo drastic changes in the next four years. A new relationship between citizens, local government, and central government is emerging, and councils will have to adapt to this new reality by transforming the way their provide services. Front Office Shared Services should be at the heart of this transformation.
Some of the most ambitious attempts at sharing services, such as the tri-borough model between Kensington & Chelsea LBC, Westminster LBC, and Hammersmith & Fulham LBC, or the Association of Greater Manchester Authorities (AGMA), have made significant savings by integrating their back and front office, and redesigning the way they provide services.
This ambitious approach brings its own challenges: deep transformation can take three to four years to come to fruition; investment is often needed to create this transformation. But in the middle of difficulty lies opportunity, and local authorities will need to think outside the BOSS to make the most of this.
Olivier Roth is a researcher for New Local Government Network