Magazine article Public Finance

Trouble Ahead?

Magazine article Public Finance

Trouble Ahead?

Article excerpt

It is no secret that following a deep and difficult recession, the worst is far from over for the public sector. one of its next and biggest will be to operate more efficiently on smaller budgFor local authorities, this will mean undergoing and implementing significant changes over a short period to deliver "more for less'.

The more-for-less challenge was top of the agenda at a recent conference organised by the New Local Government Network and sponsored by Zurich Municipal. At the conference, shadow local government secretary Caroline Spelman was keen to emphasise the need for local authorities to be able to innovate in the face of budget cuts.

And indeed, many of the local authorities who attended were already heeding her call and championing various new and innovative ways of working - whether through shared services. chief executives or new forms of outsourcing.

But those innovations - while necessary and potentially very positive - are not without their consequences. The rise in outsourcing and partnership working has certainly improved efficiencies, but it has also prompted a dramatic increase in the level and type of risk in the public sector supply chain.

Data loss, security breaches. contractor insolvency, reputational damage - the risks local authorities face as they migrate from service providers to strategic commissioners are far-reaching. Neglecting to confront those risks could not only have serious ramifications for service delivery, but ultimately undermine the very cost and time savings being sought in the first place.

There is no doubt that outsourcing is only set to grow and diversify further as local authorities seek to reap the rewards of specialist delivery and shared functionality. This is no longer a question of whether to outsource, but rather how. and to whom?

Engaging third-parry contractors - across both the public and private sectors - means that local authorities are a step removed from day-to-day service delivery. But they need to be mindful that while a service or function can be outsourced, the responsibility for delivering it cannot. With data loss for instance, the risk isn't just reputational damage; authorities could potentially face tough penalties of up to £500,000.

The recent extreme weather conditions have been a particularly timely reminder of the complexity of modem-day supply chains in local government. …

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