Potential Outsourcing of Revenues, Benefits, Debt Recovery and Customer Services Functions (Revision of Delegations to the East Kent Services Committee)

 

Cabinet                                    27th July 2017

 

Report Authors                        Director of Corporate Resources;

Director of Corporate Governance and Monitoring Officer

 

Portfolio Holders                     Cllr John Townend

Cllr Derek Crow-Brown

 

Status                                      For Decision

 

Classification:                          Unrestricted

 

Key Decision                           No

 

Ward:                                      Not Applicable

 

Executive Summary:

This report proposes the development of a business case for the potential outsourcing of Revenues, Benefits, Debt Recovery and Customer Services Functions’ and consequent amendments to the delegations made to the East Kent Services Committee by the three authorities in establishing revised governance arrangements for East Kent Services (EKS) and EK Human Resources (EKHR) in 2014-2016.

 

Recommendation(s):

To the extent that they are not already authorised to do so, the East Kent Services Committee be authorised and requested to discharge the powers and functions of the Council to develop a business case to enable the considerations of the merits of outsourcing the Council’s functions in relation to the following:-

•           Council Tax Administration and Enforcement

•           National Non-Domestic Rates Administration and Enforcement

•           Housing Benefit and associated services

•           Council Tax Reduction Scheme and associated services

•           Debt Recovery

•           Customer Services

(together called ‘the Revenues, Benefits, Debt Recovery and Customer Services Functions’) and to determine the actions to be taken in connection therewith.

 

 

CORPORATE IMPLICATIONS

Financial and Value for Money

Agreeing the recommendation would allow for the potential of significant savings to be delivered in the future, subject to consideration and approval by Cabinet.

Legal

The actions proposed are lawful. Further legal advice will be required and obtained subject to the agreement to implement any actions arising from the business case. These will be considered at a future Cabinet meeting.

Corporate

These matters are within the authority of the executive of each of the authorities of, Dover District and Thanet District and are within the authority of the Policy and Resources Committee of Canterbury City Council.

Once agreed by the above authorities the development of the business case will fall within the authority of the East Kent Services Committee.

Equality Act 2010 & Public Sector Equality Duty

Members are reminded of the requirement, under the Public Sector Equality Duty (section 149 of the Equality Act 2010) to have due regard to the aims of the Duty at the time the decision is taken. The aims of the Duty are: (i) eliminate unlawful discrimination, harassment, victimisation and other conduct prohibited by the Act, (ii) advance equality of opportunity between people who share a protected characteristic and people who do not share it, and (iii) foster good relations between people who share a protected characteristic and people who do not share it.

 

Protected characteristics: age, gender, disability, race, sexual orientation, gender reassignment, religion or belief and pregnancy & maternity. Only aim (i) of the Duty applies to Marriage & civil partnership.

 

Please indicate which aim is relevant to the report.

Eliminate unlawful discrimination, harassment, victimisation and other conduct prohibited by the Act,

ü   

Advance equality of opportunity between people who share a protected characteristic and people who do not share it

ü   

Foster good relations between people who share a protected characteristic and people who do not share it.

ü   

The issues of equality and the PSED will be addressed during the assessment of the business case.

 

 

CORPORATE PRIORITIES (tick those relevant)ü

 

 

CORPORATE VALUES (tick those relevant)ü

 

A clean and welcoming Environment 

 

 

Delivering value for money

ü   

Promoting inward investment and job creation

ü   

 

Supporting the Workforce

ü   

Supporting neighbourhoods

ü   

 

Promoting open communications

ü   

 

1.0         Introduction and Background

 

1.1.        The revised governance structures for the delivery of the shared services by CCC DDC and TDC were approved on the report of Head of Legal Services (Canterbury), the Director of Governance (Dover), the Solicitor to the Council (Dover) and the Interim Legal Services Manager (Thanet) (“the original report”) by the respective Cabinets Council at the end of 2014 and the early 2015 and finally, by the East Kent Services Committee on 11 February 2015. They were subject to minor amendments in July 2016.

 

1.2.        As part of EK Services’ ongoing operation, the Director of Shared Services and his Management Team have been examining ways to ensure the service remains relevant and viable. This has included work to assess options to maintain cost effective service delivery with high levels of performance as well as considering opportunities to grow revenue. As a result of this options appraisal, work has been underway to examine the possibilities offered by potentially contracting with commercial suppliers that may offer proposals for significant revenue savings whilst safeguarding the quality of the delivery and local employment and commercial partnership arrangements.

 

1.3.        At present, the governance arrangements outlined above do not specifically provide for the East Kent Services Committee to consider the business case for entering into contracts with a commercial operator for the discharge of the Revenues, Benefits, Debt Recovery and Customer Services Functions.

 

2.0         The Current Situation

 

2.1       EK Services (EKS) was formed 5 years ago to provide a range of services including IT, HR, Revenues & Benefits and Customer Services. It has been a success, delivering £6m savings back to its partner organisations whilst improving performance and increasing resilience – without significant investment.

 

2.2       EKS is funded by its partner Councils as well as income from other, non-partner organisations. Currently the participating Councils require EKS to operate within its own fixed budget and therefore inflationary pressure (including pay and contract inflation) means that year-on-year savings between £300K and £500K are needed to maintain the status quo.

 

2.3       In 2017/18, EKS will continue to deliver the required level of savings to keep within existing budgets but as employee costs form the bulk of EKS’ cost base, this is not sustainable in the longer term without a significant impact on staffing.

 

2.4       Further savings will require a significant staff reduction (an estimated 30 redundancies are required to deliver the anticipated budget savings for 2018/19) which introduces a high degree of service risk as well as high exit costs and the economic impact of job losses in the local area.

 

2.5       EKS is now at the point where cutting services in line with its partner Councils’ affordability constraints will start to have a direct impact on service quality, raising the risk of service failure and performance degradation on Benefits (error bonus and payment time) and Council Tax and Business Rates collection levels as well as Customer Services.

 

2.6       This reduction in staffing would be required in addition to any other losses that would be required as a consequence of external impacts, for example the reduction in DWP and DCLG grants for the administration of Housing Benefit and Council Tax Support as well as the likelihood of the introduction of Universal Credit creating further job losses.

 

2.7       A number of options have been explored, ranging from continuing the current direction of travel, through to more fundamental reshaping of EK Services. These can be broadly categorised as:

 

“Maintain” – refine and implement the new operating model for EK Services, exploit the existing digital ambitions as far as possible and seek further funding from councils or, alternatively, reduce costs through staff reduction.

 

Strengths

Weaknesses

Currently very competitive costs

Risk to service, collection levels, error bonus

Mature service offering that is relatively stable

Realistic limitation on savings

 

Costs of exit, impact on local employment

 

Universal Credit looming so greater redundancies ahead

 

Large increase in charges to Councils if they desire to maintain the current levels of staffing and service quality. This would probably be to the detriment of other council services

 

“Exploit” – as per the maintain option plus manage the need to contain inflation growth and deliver savings via income from new business

 

Strengths

Weaknesses

Currently very competitive costs

Not structured so will require investment, starting from zero baseline

Mature service offering that is relatively stable

Need realism over quantity and speed of pipeline / delivery (4 & 5 figure sums more likely, not 6 figure)

Existing corporate layer and governance structures provide a sound foundation for expansion

Competing against other players offering solutions at scale and competitive pricing

Good reputation amongst peers

Will not prevent job losses from areas such as Benefits

 

To be effective would need to seek business beyond public bodies and therefore establishment of a Teckal compliant company (increasing set up costs and risk)

 

“Enhance” – look to bring other (transactional) council services into EKS

Strengths

Weaknesses

Leverages the corporate layer and governance

Streamline and improves value via process improvement through scale and resilience rather than deliver significant savings

Greater resilience and helps with specialist areas where recruitment / retaining is challenging

Job losses remain in areas such as Benefits through UC and Customer Services via Digital

Proven expertise in running shared services and sound governance reduces risk

Helps councils deliver savings but existing EKS staff (300+) still require growth to be maintained

 

“Expand” – Build out current services to other local authorities

Strengths

Weaknesses

Leverages the corporate layer and governance

Level of savings not likely to be as large as one may expect, other LAs already on a journey of staff reduction so economies limited

Greater resilience and helps with specialist areas where recruitment / retaining is challenging

Universal Credit looming so greater redundancies ahead

Complements any other work within East Kent that may seek to assess opportunities for closer working

Shared Service partnerships greater than four become very challenging; usually only achievable via a contractual style relationship rather than partner approach

Should generate further savings through sharing fixed costs, subject to specific individual service business cases

Extended time frame for delivery of savings

 

An additional option is to “enhance and expand” – a combination of the previous two – which has broadly the same strengths and weaknesses.

“Strategic Partnership” – use the existing service as a basis for the development of a locally-based processing hub run by a commercial organisation but sharing growth opportunities.

Strengths

Weaknesses

Financial savings from contract go-live date

Contract management capacity either with a residual EK Services of the client councils would need to be strengthened

Guaranteed performance levels and quality

Potential complexity of aligning client-side functions in a 4-way contract unless this function remains with a residual EK Services

Avoidance of redundancy for transferring staff

Long term budget commitment (albeit at a reduced level) required from contracting Councils

Staff job security for the contract duration subject to satisfactory performance

Impact of bringing staff back into the Councils at contract end is not quantifiable at present

Staff terms and conditions (including LGPS) protected

 

Ongoing investment in the service

 

Creation of a partnership style of operation where added value from service growth is shared;

 

 

Local new job creation

 

Provides flexibility for the Councils to consider parallel “maintain” or “enhance” options

 

 

2.8       Rather than a traditional outsource of service, it is felt that a strategic Commercial Venture with a private partner has the potential to protect and grow jobs and develop services whilst delivering savings, and considering the pros and cons of the options detailed above, appears to be the most attractive delivery model for this service moving forward.

2.9       Any decision to proceed would of course be made subject to the production of a comprehensive business case detailing all options considered, that would be considered by the Councils.

2.10     In order to allow the East Kent Services Committee to develop such a business case the changes to existing delegations detailed above are required.

3.0         Options

 

3.1       (i)    To approve the recommendation contained in the report.

            (ii)   Not to approve the recommendation contained in the report.

 

3.2       Option (i) is recommended, as it allows the East Kent Services Committee to develop the business case for outsourcing of Revenues, Benefits, Debt Recovery and Customer Services Functions. The risk to Councils, for selecting this option, is considered low; it enables the EKSC to develop a detailed business cases for potential work associated with a specific set of functions, currently delegated to them. The detailed business case will be developed in consultation with council lead officers and subject to appropriate council legal and finance approval. The business case will be considered by each of the councils and will contain risk assessments and all relevant information to ensure informed decision making.

 

4.0       Next Steps

 

4.1       The East Kent Services Committee to make appropriate delegations to each of the Director of Collaborative Services and the Director of EK Services to enable him to develop the business case and report back directly to each of the three councils prior to further consideration by the East Kent Services Committee.

 

Contact Officer:

Tim Willis, Director of Corporate Resources;

Tim Howes, Director of Corporate Governance

Reporting to:

Madeline Homer, Chief Executive

 

Corporate Consultation

 

Finance

Tim Willis, Director of Corporate Resources

Legal

Tim Howes, Director of Corporate Governance