LGSS – shared services with Northamptonshire

On Friday I attended what was effectively the AGM of LGSS. The substantive business was to elect the chair for the next 12 months. As it is Cambridgeshires turn, to take the chair, that pleasure falls to me. This is an increasingly important committee as it controls the majority of back office functions for both counties. Sovereignty remains with each of the respective councils.

This was the first time that the LGSS committee met with the newly formed joint overview and scrutiny committee. This initial meeting was all about bringing scrutiny up to speed before they start acting as our critical friends. Robust overview and scrutiny is a fundamental check and balance that ensures good governance. I was able to state publicly my desire for effective scrutiny.

One comment

  1. You talk about scrutiny but there is evidence that shared services, whilst decreasing costs in one budget, actually increases costs in others.

    All of the arguments made for sharing come from within the shared services industry (IT companies, consultants, or think tanks funded by companies selling shared services). All of the so-called evidence is based upon estimates, projections and surveys. No real data.

    Professor John Seddon, an expert in service organizations with extensive experience in public sector systems says that there are two arguments for sharing services. The ‘less of a common resource’ argument and the ‘efficiency through industrialisation’ argument.

    The former argument is ‘obvious’: if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.

    The second argument is ‘efficiency through industrialisation’. This argument assumes that efficiencies follow from specialisation and standardisation – resulting in the creation of ‘front’ and ‘back’ offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution’ as the means.

    The problem with the industrial design is simple – it doesn’t absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can’t get what they want.

    The evidence of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of £176 million over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at £772,000 and a struggle to manage £12.9m in outstanding debts.

    This year Western Australia followed Queensland in ending its shared services. It was claimed that it would save $58 million a year and instead cost $444 million dollars (no savings). It is estimated that it will cost taxpayers between $1 – $2 billion dollars to rectify.

    So is possible that the accounts look good on the budget sheet, but the true performance is poor and costs passing to other budgets.

    How will scrutiny understand what the true impact of sharing has had on the service? For example what impact it has had upon the quality of the service from the service users perspective?


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