There is a road in one English town that falls between two boroughs – the boundary between them is an imaginary line down the middle of the road. Each borough has its own waste-management contract. On two different mornings, a truck from each borough goes down its half of the road and takes the rubbish for its half only. For the taxpayer, that’s double the work, double the cost, double the trouble.

With target cost reductions for local authorities in the region of 26% over the next three years, this apocryphal tale of two trucks may soon have a different ending – with a so-called ‘shared service’ between the two boroughs. Of course, shared services have been on the local government agenda for a while, following a similar trend in the private sector, and the concept has made inroads in legal services.

In the past couple of years, there have been a number of formal shared services initiatives involving legal teams across the country, such as in Norfolk, Cambridgeshire, Lincolnshire, Essex, Kent, London and South Wales. Manchester and Salford city councils announced just this month that they are considering such a move as part of a review of their legal services departments.

Yet not everyone believes the current wave of legal services partnerships and collaborations are the ideal solutions they have been held up to be by some, and the theory can be very different from the practice.

Share alikeThe object of shared services is not only to deliver a service at a reduced cost, but also to improve quality by bringing teams and functions together. Take Norfolk, for example. On 1 October last year, a new shared legal service was launched – the so-called ‘nplaw’ (or Norfolk Public Law) partnership – made up of three core members: Great Yarmouth borough council, Norfolk county council and Norwich city council.

The three partners’ legal teams split off from their authorities to enter into a formal and independent relationship to deliver shared legal services back to those authorities, as well as to any other district and borough councils, and authorities such as schools and parish councils, in Norfolk and beyond the county boundary.

This is more than a merger of teams; nplaw is its own practice now and its 70-odd staff are responsible for their own income generation. They must deliver services that local authorities want to buy or their income dries up.

Lincolnshire Legal Services is now in its third year of operation. It was born out of conversations between the legal heads of six Lincolnshire local authorities (including Lincolnshire county council, Boston borough council, and North Kesteven district council), who came together to become one organisation. The partnership is ‘hosted’ by Lincolnshire county council and it provides services to all the other councils through collaboration and service level agreements.

In some areas, shared legal services have worked in tandem with other shared support services. In 2006 the county councils in Cambridgeshire and Northamptonshire set up the Local Government Shared Service [LGSS], which includes HR, organisational development, finance, procurement, audit and (since 1 October 2010) legal.

There are also many less formal arrangements in place. Across Devon’s three main councils (Devon county, Plymouth city and Torbay) and various district councils, training and library services have recently been integrated. These authorities have also introduced what they term ‘shared excellence centres’; specific pools of expertise that have been identified in certain locations around the county. If a public authority is looking for advice or resources in a particular specialism, they can more easily identify and access that specialism at one of the shared excellence centres.

Common to all of these shared services initiatives is the fact that cost is the main driver – and the recent spending review has made that even more relevant. In the words of the CBI’s head of public services reform, Elizabeth Fells: ‘We estimate that up to £500 million could be saved if the 150 top-tier local authorities followed best practice in corporate services such as finance and HR, procurement, facilities management and estate management. For councils not already sharing legal services, now is the time to consider doing so.’

Or, as the communities secretary Eric Pickles told the Daily Mail shortly after the cuts were announced in the comprehensive spending review: ‘There should be a merger of all local authorities’ back-office functions, such as accounts, payroll, IT, secretaries and legal services.’

Working modelBut how exactly do shared legal services deliver cost savings – and are they actually doing so?

The first way is by delivering a one-off saving to their clients at the start of the project; nplaw offered its partner authorities a guaranteed saving of 10% on their annual legal spend to move to nplaw.

Savings are also achieved through economies of scale, where there is greater bargaining power on procurement. For legal services these tend to be in training packages, legal libraries and online research facilities. Devon is said to have saved £100,000 on its library services that way. Lincolnshire Legal Services promised to deliver £246,000 per annum in efficiency savings; Eleanor Hoggart, its assistant director, says it has achieved this every year since it started in 2008.

One of the biggest cost outlays is on external advisers and many of the shared service operations are designed to cut this sharply. Quentin Baker, director of legal services at Cambridgeshire/Northamptonshire LGSS, says external spending, which is currently around the £1m-1.5m mark, is ‘exactly what we will be focusing on’. In theory, a shared service reduces the need to seek external advice by cross-selling; it has a larger team, pooling its lawyers from different councils so all specialisms are available to all local authority clients.

Hand-in-hand with reducing the use of external advisers is the fact that shared services can actually be income-generating, and this is a secure way of delivering savings in the longer term. Shared services teams are more able to sell their expertise beyond their immediate ‘client partners’ to other public sector bodies.

A public sector legal department that serves other clients can also provide services much more cheaply than external advisers. Says Baker: ‘We are not profit-making, which is a huge advantage to our clients. We are selling our services at between a third and a half of comparable private practice rates.’ This means the service generates income that previously flowed out of the local authority to external lawyers, at the same time as saving its clients money by costing less.

KCC Legal, for example, is part of Kent county council, but provides legal advice to a number of local authorities, which brings in additional income. The service claims it delivers savings of around £2m a year to its public sector clients.

Start-up costsOn the debit side, however, shared service initiatives can be expensive to establish at the outset. Participating local authorities employ external consultants to project manage the integration. Then there is the cost of transferring staff and integrating IT systems. Given that the cost reductions demanded by the spending review are front-loaded (the greatest percentage must be made in the first year), this potential outlay is problematic.

Dave Shepperd is head of legal services at Plymouth City Council, which currently has informal shared service arrangements within Devon. These arrangements are not being formalised. Says Shepperd: ‘At this precise moment, when we are being asked to make serious and immediate cuts, and with the huge costs of setting up these partnerships, I am not sure it is the right time. We have to focus on immediate outcomes because our authorities want savings right now. If our informal relationships naturally progress into a shared service partnership, then we’ll do it, but only if it happens naturally. We do not want to force it.’

Geoff Wild, director of law and governance at Kent County Council, observes: ‘The initial investment is so big that there is no way local authorities are going to see a good return on that investment.’

Wild, who has been thinking about and planning shared services for more than a decade, has more deep-seated concerns about formal partnerships, and disputes their ability to deliver long-term savings: ‘I simply don’t believe these partnerships can deliver the savings they talk about. Very often the projects have not made the difficult decisions that need to be made, such as stripping out layers of senior management, or centralising offices into one or two spaces instead of seven or eight.’ Certainly, on the issue of job cuts, partnerships have been shy to undergo redundancy exercises. Though the Cambridgeshire- Northamptonshire LGSS project is restructuring and, according to Baker, expects to achieve a 50% reduction in management, not many other partnerships or initiatives have done this or intend to do so.

Wild believes that without restructuring and grouping lawyers together, shared service partnerships are not really transformative: ‘They can be artificial collaborations that are not collaborations at all as each team of lawyers retains its own space.’

Victoria McNeill, head of law at nplaw, echoes Wild’s point about physical integration. Norfolk’s partnership involved moving all staff to one central location and she says this was the most important, and most beneficial, part of the integration: ‘We wanted to get away from a sense of "them and us" between lawyers in different locations. We wanted to be co-located, one team, sharing expertise and stories. And it has worked.’

Some shared-service initiatives do not get off the ground at all. Last month, the London boroughs of Camden and Islington abandoned plans to merge their senior management teams, for example. Stephen Turner, chair of Solicitors in Local Government [SLG], says that collaboration is inherently difficult because of the very individual nature of a council or authority: ‘There is no one size or shape that fits all. Clearly, all local authorities must look into shared services in the light of substantial cost reductions, but, geographically, you are different, politically you may be different – two authorities may not be able to agree.’

Nor has there been an absolute diktat from central government. It has certainly made its position clear and has done a few pieces of shared-service activity itself, such as between the Department for Education and the Department for Culture, Media and Sport, which is now integrated into the Treasury Solicitor’s department (TSol). And looking at the Government Legal Service [GLS), it is clear that shared services are not as new as they are made out to be; the Treasury Solicitor’s department represents about 180 government departments and agencies. TSoL has been around since 1661.

Informalities Given that there is nevertheless a clear trend towards greater integration, what does the future look like?

Taken a step further, some of the more formal partnerships could, in theory, operate as private firms, completely independent from their local authorities. This is unlikely at the moment because of the current restrictions on who can own a law firm. A council cannot currently have an ownership stake in a firm. But all that will change this October, when alternative business structures come in.

Isn’t it also possible that these shared services could start to compete with each other, as well as with private providers? Baker is concerned about this: ‘I believe there is a great danger in trying to mimic the private law firms by competing with each other. It would be absurd if we were spending resources on trying to win business like this. What we should be saying is that we are best placed to provide these particular services to the public sector’. Or as the Lincolnshire Legal Services website puts it: ‘We understand how the public sector operates because we are part of it.’

Others believe that the move to shared services needs to be driven more aggressively. Mirza Ahmad, president of the Association of Council Secretaries and Solicitors (ACSeS), convened a panel of lawyers to investigate how local authority legal departments might look in future.

Last September the panel met to consider possible models, including shared services. Ahmad put forward his own vision of a potentially national, local government legal services model based on ‘six centres of legal excellence’. Under this model, shared legal services would be provided at a handful of large, centralised ‘hubs’ across the country, such as in Essex to represent the east region, and Leeds for the north-west and the north-east.

But what about the lawyers? Is this their vision too? There is an argument that shared services could produce the worst of both worlds for the lawyers involved. They would be subject to some of the pressures of private practice – chargeable hours (which are not much less than in the private sector; at KCC Legal they are set at 1,350 hours) and targets – but without the benefits and higher levels of pay. Hoggart disagrees: ‘If the alternative is to lose jobs, then this is better. But it is more than that. We can offer real opportunities for people, such as specialisation (which small teams of one or two lawyers could never do) and flexibility. We have the means to move you from one specialist area to another.’

McNeill makes a similar point: ‘Culturally, our lawyers can see the benefit of being somewhere bigger and stronger. We are a more attractive employer. Our lawyers are already motivated to work in the public sector, so if they cannot have the same levels of pay, that is not necessarily a priority.’

Turner says members of SLG have raised some concerns about shared services, but not half as many as have been raised about the cuts to public spending. So from the lawyers’ perspective, at least, shared legal services are generally viewed not as part of the problem, but as a partial solution.

Polly Botsford is a freelance journalist