Public sector mergers – cost reduction vs localism

The public sector has been hit by merger-mania. The London Boroughs of Camden and Islington are to share a chief executive, as are a number of district councils including Christchurch and East Dorset and West Devon and South Hams. Some are even sharing across county boundaries, such as South Somerset and East Devon and South Holland and Breckland.

The NHS is seemingly going one better by sharing entire management structures. From next month, three management teams will run eight London primary care trusts, saving an estimated £48 million. The councils, too, are planning much greater collaboration once the joint chief executives are in place, as the Guardian’s Jane Dudman reports:

Announcing their plans, Islington and Camden say that they are already working together to find out where joint working will deliver savings. The authorities need to find large amounts of money – between them, the two councils say they may face a total budget gap of up to £200m. That kind of money doesn’t come from simply running school meal contracts jointly, a move the councils made earlier this year as one of their first combined operations.

Much bigger savings will be looked for, and it is management jobs that will be under threat. In the case of South Holland and East Lindsey, the two councils expect to lose 116 jobs, out of a total of 1,200.

This all sounds great. There is clearly lots of money to be saved from economies of scale in both the NHS and local government. But when management structures merge doesn’t that effectively create a single organisation? If the same managers are running the entire operation, ever on the lookout for savings by reducing duplication, won’t the differences between the organisations start to disappear?

The councils and the PCT boards may still exist but what scope will they really have for independent policy-making when the delivery of services is dependent on them adopting similar practices to those of their neighbours. Merged management structures and combined operations will, de facto, create single organisations.

Surely this runs counter to the government’s espoused localism. While the government wants small GP-led commissioning bodies, the NHS is planning to create one mega-trust, or three mega-ish trusts, covering the entire north-western quarter of London. If the collaboration between the north London boroughs is taken to its logical conclusion, the northern part of the city will be run by the London Borough of Camlington.

These moves may save money but they do not match the government’s rhetoric about empowerment and devolution. Of course, it may be that there is a contradiction between devolution and saving money. As I said eighteen months ago, devolving power can be expensive. Perhaps big, or at least bigger, might be the way to go if public sector organisations are to reduce costs significantly over the next four years.

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2 Responses to Public sector mergers – cost reduction vs localism

  1. Pingback: Public sector mergers – cost reduction vs localism - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. cammy says:

    Do you not see that this new goverment is splitting the country. We’re are being divided wealthy/poor. Just have a look at what is going on, they may be taking from the rich… but why are they taking from the poor!? Why are we the only one’s who suffer! why use us to get what you want? I don’t understand why you would you do this as you are getting far more from this than your COUNTRY! WHY!?

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