Barnet Council will cut 70% of staff from the back-office functions it is outsourcing to Capita in a controversial deal to automate council services.
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The London borough's Cabinet is expected to approve the deal in a vote this evening, that will cut costs of transferred services by 18%.
Kari Manovitch, project director for the outsource at Barnet Council, said a major component of £70m savings the council expects to make from the 10-year, £320m deal will come from staff cuts.
The Cabinet is tonight expected to endorse a council report that claimed the contract would cut the costs of services by at least 45%. Yet the deal will save Barnet only 18%, a figure derived by comparing existing service costs to the fee Capita will charge to provide them back to the council after they are outsourced.
The 45% claim, presented in a Cabinet report by deputy council leader Daniel Thomas, will not go to Barnet but to Capita. The outsourcer will make the saving by cutting staff on the acquired services and automating them with a system it also uses to serve other public authorities.
Manovitch confirmed that Capita's profit margin will come roughly from the difference between the 45% saving it makes in the operating costs of its acquired services and the 18% saving it passes on in contract fees to the council - making the 27% as profit.
A council spokesman said Barnet's saving was ultimately a share of money Capita made on the contract after consolidating Barnet's back-office with those of other customers in shared service centres it operates elsewhere in the country.
"They run the payroll functions of the BBC from Belfast as well," he said. "Now they will be running two payroll functions rather than one, so they will be making economies of scale."
Capita's Belfast centre received an injection of public funds last year after it ran into trouble. Staff there will now replace jobs that Capita plans to move from Barnet.
Invest Northern Ireland gave Capita £1m to secure 336 jobs at the Belfast centre, after Capita was forced to make hundreds of redundancies to cut its own costs.
Capita had acquired at least 910 jobs in outsourcing deals with the BBC, Prudential and the Northern Ireland government since 2006. They were consolidated into 450 posts at the Belfast centre. By 2010 it had just 75 staff there.
Barnet has earmarked 515 jobs for transfer to Capita. But Capita has arranged to move 203 posts outside Barnet within eight months and axe another 45.
By the end of the contract in 2023, 147 of the 515 posts will be held by people working under contract to Capita in the London borough. Another 192 Capita staff will run Barnet's back-office from shared service centres in Banstead, Belfast, Blackburn, Bromley, Carlisle, Chertsey, Chippenham, Darwen, Sheffield and Swindon.
Barnet council said Capita would underpin its back-office automation with an £8m investment in computer hardware and software. This would include a customer system to give people "Amazon-style" accounts with the council, while Capita's fees have been tied to the volume of citizens it handles online.
Read more on local government outsourcing
John Newton, commercial lead for the outsourcing, insisted the £8m was not simply Capita's cost of starting up the contract, transitioning staff and systems.
"It is a combination of transfer and transition, and the other component is a Barnet-specific investment to provide a data warehouse," he told Computer Weekly.
"But there is investment going in. In cash terms, I wouldn't make a huge distinction between boxes and wires in one location or another, or the change management type of investment that goes into changing process. The thing for me is a very substantial up-front cost by Capita, to give us the financial benefit."
Barnet's system, called its "Insight engine", would use data about citizens and council activities to provide personalised services and "insight" into how those services were performing, said Newton.
He said specific details of what systems the council was renting from Capita were confidential.
Capita has a business intelligence system called Insight it sells to local authorities, which is based on Microsoft's Business Intelligence Technology Stack and SQL Server Reporting Services.
The council executive claimed Capita's methods would save Barnet £70m over 10 years. The contract will cost £320m. The authority said it would cost £380m to continue running its own services, and ruled out the possibility that it might modernise its own services.