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Outsourcing looms large in coming council job cuts

Karl Flinders

Local government IT will be hit hard as councils cut thousands of jobs in a bid to slash operating costs or turn to outsourcing as an easier way of reducing headcount.

IT is already being cut back, according to the Society of IT managers (Socitm), which revealed a 10% reduction in IT staff during 2009. But even more swingeing cuts could be on the cards. According to a BBC survey, 25,000 jobs in local government could be lost in the next five years. Experts believe the figure could end up being as high as 100,000.

IT staff are already being axed as councils try to cut costs. Socitm, which represents IT managers in local government, said the number of IT workers fell by 10% last year.

Socitm also said that IT outsourcing would increase,, which will take workers off the public sector payroll. Both IT and business processes will be outsourced.

John Serle, IT trends editor at Socitm, said he expected the job cuts to be across the board in local government, with IT departments suffering similar levels of cuts as other departments.

He added that local authorities would be making a mistake in doing so because IT investments can enable savings in other areas. "People have a crazy way of dealing with [the need to make cuts] in local government and they tend to cut across the board."

When it comes to retaining service levels with fewer resources, IT can actually help, said Serle, through programmes such as automisation of services. "IT is the only show on the road," he added.

He said that outsourcing in local government, which has grown steadily but has never been "spectacular", could increase significantly as jobs disappeared. "Politicians will find it a less painful way of cutting jobs because they will pass it on to the private sector to manage and deal with."

But Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner, said many outsourcing service providers would not want to take on the costs associated with rationalising staff inherited from local government.

He said cases such as Beckmann/Martin meant that if workers were transferred from a public sector organisation after reaching a certain age they were entitled to "significantly enhanced" redundancy and pension rights, which would also be transferred to the service provider.

"Outsourcing to cut costs is all about shifting costs off the balance sheet and onto someone else's," said Lewis. "But Local government bodies will have to find suppliers that are prepared to take on high levels of liability."

The public sector IT and business process capabilities could even be spun off to raise money and cut costs.

According to reports in December, the government is considering privatising certain processing units of government departments. Former civil servant Gerry Grimstone has recommended a plan that could see the creation of massive public sector companies that would eventually be floated on the stock market.

These would compete with big public sector service providers such as Capita. The move would remove overheads from the government and eventually provide efficient services to multiple organisations.

Serle at Socitm said there was a lot of logic in doing this. "Rather than having a business process capability for your own business you can share it with others."


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