Wednesday, 13 July 2011

Leader gambling Cornwall leisure service and museums on profits from new business ventures

The future of Cornwall's leisure service and of Cornwall's museums are being gambled on the success of a couple of highly risky new schemes. That appears to be the message being given by Cornwall Council Leader at today's Cabinet meeting.

Flushed with being labelled a 'can do' council by his new "chum" Eric Pickles, Cllr Robertson appears to be willing to gamble services which are hugely important to many people on high risk schemes which have yet to be proven anywhere in the country. And all this from an authority with a history of missing key financial savings deadlines.

Two major items on today's agenda concern money-saving plans. One I have already written about. It is the plan to work with a private company to bid for contracts with other local authorities, health providers, police etc. The idea is that jobs will be created in Cornwall by winning contracts and that around £2.5 million will be saved from our current budget. My argument against this idea is that it is based on huge assumptions and will cost around half a million pounds just to set up with no guarantees of winning a single contract.

Another scheme involves our highways department. A new company will be set up to bid for outside work and the assumption being made is that it will make around £44 million of profit over the next seven years.

Earlier in the meeting I raised the issue of the failure of the council to meet savings budgets in the field of shared services and moving to a leisure trust. I am concerned that Council budgets are being put together with unrealistic expectations of the amount of money that can be saved and the timescale for doing so.

So I asked Council Leader Alec Robertson what would happen if the proposed savings (or income) weren't made or the timetable slipped. He pointed out that the £7 million per year figure is almost exactly the same as the council's entire budget for leisure services and culture. Just in case we didn't get the message the first time, he made the same point to my colleague Bob Austin a bit later.

It would appear from these statements that Cornwall Council is setting the future of its leisure and culture services against some highly risky ventures. If they don't come off then it will be leisure centres and museums that will be for the chop.

1 comment:

Anonymous said...

This focus upon shared service as a method to save money will massively increase costs and worsen services. All of the arguments made for sharing come from within the shared services industry (IT companies, consultants, or think tanks funded by companies selling shared services). All of the so-called evidence is based upon estimates, projections and surveys. No real data.

Professor John Seddon, an expert in service organizations with extensive experience in public sector systems says that there are two arguments for sharing services. The ‘less of a common resource' argument and the ‘efficiency through industrialisation' argument.

The former argument is ‘obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.
The second argument is ‘efficiency through industrialisation’. This argument assumes that efficiencies follow from specialisation and standardisation – resulting in the creation of ‘front' and ‘back' offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution' as the means.
The problem with the industrial design is simple - it doesn't absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can't get what they want.
The evidence of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of £176 million over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at £772,000 and a struggle to manage £12.9m in outstanding debts.

This week Western Australia followed Queensland in ending its shared services. It was claimed that it would save $58 million a year and instead cost $444 million dollars (no savings). It is estimated that it will cost taxpayers between $1 - $2 billion dollars to rectify.

With the cost of failure so high, doesn't the public deserve a proper investigation of shared services? Let us at least closely examine the supposed successes to see if they really are successes.