Outsourcing role as councils plan cuts

16 June 2011

Local authorities are getting to grips with the scale of the efficiency savings they need to make - but 40 per cent do not yet have strategies in place to achieve the spending cuts required.

On average councils are expecting to make cuts of 20 per cent by 2014, with one-third anticipating 25 per cent or more and one in ten targeting over 30 per cent.
Although they acknowledge that this is likely to mean radical change in the way services are delivered, in many cases the plans for effecting the savings are either still being created or have not been approved.

Recent research among chief executives and directors in local authorities has revealed:
 Councils expect to increase outsourcing levels by 70%, moving from 20% average outsourcing levels in 2011 to 34% by 2014.
 84% of councils believe outsourcing has been successful in achieving savings, however only 58% believe it is critical for them to achieve their targets.
 44% of councils stated political concerns as a barrier to outsourcing; 28% identified a lack of capacity and 27% a lack of skills for delivering change.
 75% of councils believe the citizen’s voice will be fundamental to future delivery models and 76% believe more local control will enhance local authorities’ ability to meet their targets.
 63% of councils believe that partnership is the most important factor in a public private relationship; lowest cost doesn’t make the top five.
 25% of councils don’t expect to meet their savings targets fully by 2014 and 40% have no approved strategy in place to achieve them.
 Only 8% of councils look to a consultant to start their procurement process, whilst 20% look internally to local government best practice rather than wider service-specific expertise.

Interserve, the international support services and construction group, commissioned YouGovStone to survey chief executives and directors in 101 local authorities to find out how well positioned they are to cope with the 2014 budget challenge.

Adrian Ringrose, Interserve’s Chief Executive, commented: “This research identifies the severity of the 2014 financial challenge and highlights a reticence among local authorities to tackle some of the larger and more publicly-focused areas of spend. Delivering savings to the extent necessary will require more radical change than simply increasing outsourcing levels.

“Councils clearly indicate that they are interested in procuring best-value solutions rather than adopting a purely cost-based approach, yet they don’t appear willing to undertake a full review of their service delivery. The opportunity exists for them to make fundamental reforms for the benefit of their communities; ultimately, the future is going to be defined by partnerships between the public, private and third sectors working together to help redefine delivery and instigate a positive change.”

Mark Fox, Chief Executive at the Business Services Association, said: Interserve’s important research has allowed us to understand better the attitudes towards outsourcing of councils up and down the country. Although we have long suspected that local officials – those who are charged with finding spending efficiencies – recognise the value of outsourcing, this research has confirmed it. It is clear now that the greatest barrier to reform that we face is political preconceptions.

“Attitudes do seem to be changing, however, perhaps based on the strong record of success the private sector has had. We want real partnerships with local communities, and we are adamant that a public service ethos is not just the preserve of the public sector. Our industry is working hard for people around the country, collecting their rubbish, sweeping their streets and tending to their parks. At a time when councils are facing deep financial challenges we can do it for less money and, very often, to a far higher standard.”