Northamptonshire council takes outsourcing to different level

A Conservative-run Midlands county council is blazing a trail for providing public services in an age of austerity.

Northamptonshire is reducing its core staff to 150 people by transferring 4,000 employees to four new service providers, which will be part-owned by the council, paying dividends, but managed like private sector companies.

The move is driven by budget pressures, with the county, which has one of the fastest growing populations in England, needing to find £148m in savings during the next four years.

A report by the Local Government Association last year suggested that of the 27 county councils in England, Northamptonshire was the "least able to fund itself", in part because it charges the lowest council tax of any shire authority.

Paul Blantern, the council chief executive, says: "We're always having to be at the leading edge, to be innovative and creative."

Outsourcing has been used in local government since the 1980s, largely by Tory-run councils who are less wary of engaging private sector expertise to help deliver key services.

According to the LGA, there are multiple models for outsourced service delivery using mutuals, charities, not-for-profit organisations and private sector providers.

Barnet was dubbed "easy-council" by critics that complained services resembled those of low-cost, no frills airlines such as easyJet. Others who took up the outsourcing model were Essex, Southampton City, Suffolk and Staffordshire.

But experts say Northamptonshire is going much further. In effect, the council is reduced to a role of commissioning body, buying all its services from outside on a profit-sharing basis.

Balfour Beatty already handles the street lights, Kier the roads service. But under the plan, statutory services such as social care for the elderly will be delivered by third parties.

Mr Blantern says the arrangement will give him much more flexibility. "If I build a care home with surplus capacity because I think in 10 years' time I will need another 100 beds, as Olympus Care Services I can sell those beds.

"If the care home was still in the ownership of NCC [Northamptonshire County Council], by law I am not allowed to sell that bed. That's just ridiculous."

The changes have so far met with little opposition from trade unions, in part because the council has in all instances remained the majority shareholder in these new entities.

Moreover, Steven Bennett, branch officer for Unison, says the terms and conditions for those moving to these new enterprises are better than for those remaining on the council payroll.

Consumers also seem happy. Mr Bennett says the day centres for residents with learning difficulties that are now run by Olympus "have never seen so many users".

But some local government experts point out that councils still have ultimate responsibility when things go wrong and therefore need to retain some in-house expertise.

According to Tony Travers of London School of Economics: "When you contract services out, the expertise you had in-house may disappear altogether. This is what happened with the probation service. The smaller your core gets, the less will be your expertise."

Another local government expert worried that the council might lock itself into unsuitable long-term contracts: "If you look back 10 years, the services you were tendering for then look very different to those you want in your community today."

He also warned there were big differences in providing public services where the council management has direct day-to-day input compared with when it is run at arm's length by a private sector provider.

"The chief executive is not going to be able to pick up the phone on a Monday and ring the manager if he's heard about something going wrong over the weekend," he says.

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