Big local authorities are responding to draconian spending cuts by cutting back on external legal spending while maintaining in-house budgets, while smaller authorities are doing the reverse, according to research by the Gazette.

Findings based on 60 responses to freedom of information requests show a startling divide in strategies for coping with the tight financial regime introduced by successive spending rounds since 2010.

At the 12 largest local authorities which responded, spend with external legal providers fell by 17% in 2012/13, while in-house spend remained flat on the previous year. Birmingham City Council cut external costs to £2.2m from £2.7m, while increasing in-house spend to £9.6m from £9.3m.

Lancashire County Council grew in-house spend 2% to £1.9m, while cutting external spend 1% to £630,000.

By contrast, many smaller local authorities doubled or tripled external legal spend, while keeping in-house costs down. For example, Lichfield District Council in Staffordshire doubled external spend to £100,147 in 2012/13, while shrinking its in-house budget by 24% to £96,876.

Hambleton District Council in North Yorkshire increased external spend by 141% to £42,549, while reducing its internal budget by 15% to £101,261.

Helen Randall, partner in the public sector commercial department at international firm Trowers & Hamlins, said district councils are being hit particularly hard by the cuts and are likely to continue to ‘have a tough time’.

Randall said many larger authorities are seeking legal advice for a number of services. The firm acted for the London borough of Barnet in its shared legal service merger with Harrow last year.

‘We are seeing more requests for advice on alternative service delivery methods for all sorts of services including ABS for legal services, mutuals and joint ventures,’ she said. ‘We are also advising on revenue increasing opportunities and knotty governance issues, and regeneration [work] is coming back.’

Mark Hynes (pictured), head of legal and director of corporate affairs at the London borough of Lambeth, said reducing capacity is a ‘false economy’ as most local authority work is not expendable.

‘A reduction in capacity of 50% would have to be picked up by our external legal partners who are profit-driven, and invariably this would result in the overall legal charges increasing beyond the savings delivered in payroll terms,’ he said.

Lambeth cut back its external legal spend by 40% to just under £2m in 2012/13, reducing its in-house spend by 16% to £2.8m.