A major new report into local authorities sharing services has quantified the benefits and feasibility of joining forces to save money.

The 'Services shared: Costs spared?' report commissioned by the LGA and produced by Drummond MacFarlane, provides detailed analysis of five high-profile shared service arrangements. It is the first to provide a detailed insight into the scale of savings that have been achieved through sharing back office functions like IT and legal, and teaming up to deliver frontline services like waste disposal and road maintenance.

In all the five shared services saved £30 million between them across the lifetime of the sharing arrangements.

The majority of local authorities are already sharing services and, while the savings have been significant across the lifetime of the projects, they are nothing like large enough to make up for the sizable cuts to local government funding which are being made. The amount of money councils receive from Government has fallen by £3.5 billion in real terms since 2010/11*, a figure which eclipses many times over the savings that can be made annually from sharing services. The 28 per cent cut in local government funding over the current spending review period also exceeds the cuts to Whitehall department budgets, which averages around 8 per cent.

This research follows the recent publication of the Commons Public Accounts Committee report into shared services, which demonstrated that local authorities are significantly outperforming central government in this area. The LGA plans to share this report with central government departments to encourage the sharing of management teams and services across the public sector to achieve savings.

Alongside the report, a new tool which helps local authorities to understand and track the benefits of sharing front and back office services has also been launched.

Cllr Peter Fleming, Chairman of the LGA's Improvement Board, said:

"Councils are the most innovative and efficient part of the public sector and this report demonstrates the kind of steps they are taking to save money and improve services.

"Efficiency savings aren't enough to make up the 28 per cent cut in the money councils receive from central government, but measures like the shared service arrangements currently in operation at more than 200 local authorities do help to dampen the impact.

"We hope the examples identified in this report encourage even more councils to use the LGA's new evaluation tool to examine whether or not a greater range of service sharing is appropriate in their local area."

Chris Pattison, Chairman of report authors Drummond MacFarlane, said:

"Our research has shown that where public bodies plan well and sympathetically for the sharing of services and implement them early the rewards can be quite considerable."

The five shared service projects examined in the report are: Hoople Ltd in Herefordshire, Local Government Shared Services (LGSS) in Cambridgeshire and Northamptonshire, Devon and Somerset Fire and Rescue Authority, Vale of White Horse and South Oxfordshire, and Procurement Lincolnshire.

The key findings of the 'Services shared: Costs spared?' report include:

• Clear financial benefits have been achieved with the five shared services saving £30 million between them across the lifetime of the sharing arrangements through reducing staff (removing duplication and management posts), integrating IT, reducing accommodation, and improving procurement.
• The set-up and integration costs for merging services are modest with less than a two-year payback period for all the shared services analysed
• The shared services have succeeded in providing the same or better levels of performance at less cost.
• These initial benefits are typically delivered rapidly with strong top-down leadership.
• As shared services mature and evolve they are able to benefit from wider business transformation such as better use of IT and assets, improved processes and cultural change programmes.
• Baseline financial and performance information is essential to make the case for change and track the benefits of shared services in terms of efficiencies and service improvements.
• Good performance against organisations' key performance indicators are complemented by good staff indicators such as high staff morale, low staff sickness and low turnover rates.
• Rapid implementation helps build momentum for change.
• Expanding established shared services to provide services for other public sector partners in a locality is a useful way to generate income and ensure efficiencies through greater economies of scale.