Public sector must modernise or die

As the full implications of the Government's austerity and cost-cutting drive begin to sink in, it is dawning on public sector organisations that they have no choice but to modernise or die.

From charities to councils, a wave of consolidation is about to break across the whole sector, as the Government scales back the public sector's reach.

Sharing services is nothing new, but the sheer scale of the changes are unprecedented, said Mark Burke, partner and regional head of Grant Thornton's government infrastructure advisory team in Yorkshire.

"We're going to see a considerable amount of mergers and consolidation," said Mr Burke. "It's already started. There's restructuring happening in the public sector in a major way, and there's going to be more of it – from service sharing to significant consolidation."

In Leeds, last year's creation of a "super college", Leeds City College, saw the dissolution and merger of Leeds Thomas Danby College, Leeds College of Technology, Leeds Park Lane and Keighley College. Leeds College of Music will also join the merged entity from next August in a "strategic alliance".

Leeds City College is now the third-largest in the country, with more than 55,000 students, turnover of almost 80m and close to 2,000 staff. It has centralised functions, but provides services from a number of its original sites.

Accountancy firm Grant Thornton has published a new paper on the scale of the challenge: Implementing Mergers and Consolidation Across the Public Sector. It surveyed more than 600 directors and managers about the forthcoming wave of consolidation.

Peter Roberts, principal and chief executive of Leeds City College, told the survey: "I know there are a large number of colleges that are wondering about how sustainable their future is.

"There may not be as many mergers as people think, but some colleges are saying that they don't think they can continue as they are: only the bigger colleges can ride the higher waves we may see."

Mr Burke said organisations across Yorkshire are looking at how they can share services, or possibly merge, to create leaner structures. He hinted at possible changes around the Leeds city region, where leaders of local authorities are talking about possible savings.

"It reflects a fundamental shift in the way that people are thinking about how they should be delivering services," he said.

In London, three London councils have revealed radical proposals to create a "super council". Westminster, Hammersmith and Fulham, and Kensington and Chelsea believe combining services could create savings of between 50m and 100m a year.

The leaders of the three councils said: "Ensuring we can provide a high standard of local services in today's tough economic climate means thinking differently about how we operate, concentrating on what's important to the people we serve and ensuring we continue to care for the most vulnerable in our communities.

"To achieve this in the age of austerity we need to seriously examine new ways of working including sharing service provision with other local authorities."

Calderdale and Bradford Councils are already working together on a project to provide a long-term alternative to sending waste to landfill sites.

The councils are proposing a 25-year partnership to jointly treat about 250,000 tonnes of waste a year.

"If you can work with staff and colleagues about establishing what the end game is, while it can be disruptive and challenging, you tend to get to where you intended because you involved people at the start," said Owen Williams, chief executive of Calderdale Council.

In the NHS, primary care trusts and strategic health authorities are due to be abolished, with their powers transferred to GP commissioning consortia.

Central government departments and quangos have been told to reduce bureaucracy as budgets are slashed.

The charity sector, largely comprised of small entities, face dwindling resources but heavy administrative teams.

Mr Burke said: "There are going to be big cultural and behavioural changes.

"But it's being able to say 'This does not necessarily need to make you feel nervous'.

"The consolidation or merger does not necessarily need to mean the loss of jobs."

Cost savings raise merger prospects

The public sector is beginning to grasp the scale of change about to hit it, according to new research.

Accountancy firm Grant Thornton's study, Implementing Mergers

and Consolidation Across the Public Sector, discovered

that some 58 per cent of

senior staff expect their organisation to seek costs savings through a restructuring, merger or consolidation.

The survey of 600 directors and managers found almost three quarters, or 74 per cent, see it as a method of cutting costs.

About half see it as a chance for more strategic, smarter systems, and 47 per cent see it as a chance for innovation.