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Local authority legal services: made for sharing?
Cilex Journal – February 2015

Increasing financial pressure on councils means that it is becoming common to share legal services and staff. In this article, Mark Smulian considers the impact of this trend

Local government law used to work in a straightforward way: every council had a legal department and employed enough lawyers to cover the specialist fields it required, buying in private sector expertise as needed. Those lawyers worked for one council, and other lawyers worked for other councils and other parts of the public sector, and usually everyone remained in their separate places of employment.

That 'one-of-everything' approach has been breaking down fast over the past five years - and not just in legal services - as government cuts have hit council budgets hard, by around a 28 per cent reduction. Cuts on that scale have forced councils to seek savings in places where they would not previously have had to look, including sharing services and staff with other councils. They have also pushed the more adventurous councils into trading, using the power of general competence and relaxations in the rules on how they may act commercially to sell their services both to other parts of the public sector and to private businesses.

The latter though has met a stumbling block where legal services are concerned. While the manager of, say, a council highways or grounds maintenance department could freely sell services to whoever wanted to buy them, a council legal department cannot.

As 'A new blueprint for local authority legal services?', a paper from law firm Geldards, explains: 'Solicitors' professional rules prohibit in-house local authority solicitors from servicing external clients except for other public and quasi-public bodies or local charities. This means authorities must create new corporate entities to provide the services.'

That hurdle still might not have mattered - there is after all ample work in the public sector - were it not that another way in which councils have sought to save money is to outsource services to private providers, with councils' staff and assets transferring to them.

Outsourcing services via an ABS

Were a council to outsource, say, its road repairs - even to a management buyout - the entity that took them over could no longer under solicitors' professional rules use the council's lawyers even if it wished to.

Hugh Peart, director of legal and governance services at the north-west London Borough of Harrow, has created an alternative business structure (ABS) to get round this restriction. His department is named Harrow and Barnet Public Law (HBPL), although it simply acts for the north London Borough of Barnet without the latter being an owner, and now has HPBL Ltd as its ABS.

He explains: 'ABS was done with very clear intentions, essentially because of what is happening in local government with councils that are under financial pressure outsourcing their services. 'For example, Harrow's libraries are now run by Carillion, and under the rules we would no longer have been able to provide legal advice for the library service because Carillion is a public limited company, even though we have the expertise and they want to use us.

'That trend is continuing and all I could see was my clients disappearing, not because they did not want us to work for them but because we could not.'

He says that having the ABS in place 'means we can we use it to work for people who want us'. 'The problem is not one of local authority trading regulations but of solicitors' rule - if I was head of HR I could set up something called Harrow HR and trade - but under the rules governing law I could not have.'

Kent County Council's Kent Legal Services is taking a different approach, says director of law and governance Geoff Wild. 'ABS is an interesting departure and has followed on from many councils putting out a lot of services to the private sector,' he says. 'We are doing something different with a joint venture ABS with a private partner. With Harrow and also Buckinghamshire their lawyers are still employed by councils, but ours will be transferred to the ABS, which will be in effect a new law firm, though one partly owned by the county council.

'We're doing this because there will be a trend towards closer working between the public and private sectors, and we expect to name a partner in June.'

Partnership of boroughs pools expertise

Some shared legal services prefer to stick to their parent organisations though, an example being South London Legal Partnership, which was formed initially by the south west London boroughs of Merton and Richmond in 2011 and later joined by London boroughs Kingston and Sutton in 2013.

Practice manager Paul Phelan says: 'It's designed to provide a more efficient and resilient service and deliver savings. We do not work for other bodies; we were set up to serve our parent councils and I'm not saying we would never look for other work but it would be a change to our business model. For that reason we are not looking at ABS as yet.'

Paul Phelan says that while in the past each member council would have had to employ the expertise it needed: 'now it can draw on a larger number, it might even have just been a half-time person in some roles before but we have 95 staff'.

Shared services, better career progression?

CILEx members are employed in many roles, says Paul Phelan, with children's services cases and adult social care being the two largest areas of work. Hugh Peart says that he has found lawyers of all kinds attracted to Harrow's operation because 'we find people are interested in what we are doing here, because it is different'. 'No disrespect to Brent, but if you go to work there you are in traditional in-house legal department - and that's neither good nor bad - but here there is a different buzz about the place as we are self-consciously different, so people like that'.

There are some 80 legal staff in all, and Chartered Legal Executives work across the practice, 'we don't say: "you just do X"', he says, and are supported in their qualification routes.

'The whole position is changing with Chartered Legal Executives, solicitors, barristers and now apprentices, you also get people who have not been to legal college and the distinctions are less clear than when I started,' Hugh Peart says.'The landscape is changing very fast and we have to adapt to how we work in that.'

One area of recruitment that had proved a problem is that of property specialists. 'We cannot recruit enough property and regeneration lawyers,' he says. 'There is a generation missing since the recession, when many went, and now local authorities everywhere have decided regeneration is the way ahead and there are not the specialist lawyers to do it, even though demand is very strong.'

Kent Legal Services has been going for 15 years and employs 125 lawyers, who service some 600 clients, Geoff Wild says. 'Things have changed very significantly in the past two or three years with less outsourcing of work not only to the private sector but to people like us,' he notes.

'We are not picking up work we would have picked up quite easily five or so years ago because budgets have reduced in the sector there is less happening and so fewer legal projects.'

Despite this, Kent Legal Services turned over about 9.5m last year and saw a profit of 2.5m on 140,000 pieces of work. 'Having that scale we can afford to keep all the legal specialisms whereas a single district council perhaps would not,' Geoff Wild says. Recruitment has been strong in Kent, in part because of its proximity to the leading City of London firms.

'We have been extremely fortunate in being able to recruit really good lawyers who perhaps would not otherwise have joined the public sector.' Geoff Wild says. 'They come from City and other backgrounds and find the way of working here better suited for them. 'This is both because of the quality of life in Kent but also the quality of work. City firms require absolute commitment with people working 72-hour shifts and at weekends, and you can do that for a while but doing it long term does not perhaps suit everyone. We can offer a high quality of work because we do such a wide range of things but without the relentless pressure, though we cannot compete on salary with City firms. In Kent Legal Services, many CILEx members work across the full range of work, he adds.

Disincentives to pooling resources

Financial problems mean that there are some areas of work where councils can neither afford to use the private sector nor employ all the expertise required in-house, which is making them increasingly look to shared services. 'There is an incentive to collaborate, but that can have its own difficulties,' Geoff Wild says. 'If you have your own law service, or buy it outsourced, then you have control but if it is shared there can be friction over who is in control and how resources are allocated between partners so there are some risks to that.'

One such example came to light in Barnet, which buys its legal services from HBPL (see above), this year when a report came up with the wrong proportions for allocating committee seats between the Conservative, Labour and Liberal Democrat groups, resulting in the embarrassment of this exercise having to be redone. An independent review found that Barnet had had an accountant, rather than a lawyer, as its monitoring officer.

Barnet is now likely to recruit capacity for high-level corporate legal support for itself after the review noted: 'There is no one who understands local government law in depth at Barnet', and that the council neither employed lawyers nor had them regularly located in its buildings, since they were based in Harrow. The report said that Barnet 'must make some changes ... to ensure that it has access to proactive professional and expert advice at all relevant times in future'.

Hugh Peart says: 'The report into Barnet has led to some changes and they will appoint a new monitoring officer to increase their capacity. We were not offering governance advice. This situation was not something we wanted to happen, but it hasn't changed the services we provide at all.'

One large shared service is Legal Services Lincolnshire, which covers almost all of the county's vast rural area, being owned by Lincolnshire County Council and the districts of North Kesteven, South Kesteven, West Lindsey, East Lindsey, South Holland and Boston.

Practice manager Chris Jones says that its external clients have included Lincolnshire Probation Service, Cumbria County Council, Breckland District Council, various local clinical commissioning groups, NHS bodies and academy schools. She says: 'It has become slightly more difficult to pick up external work because of the squeeze on council budgets. We used to bid for framework agreements let by other local authorities but those advertisements are rare now.'

Legal Services Lincolnshire has some 60-70 full-time equivalent lawyers, of whom seven are Chartered Legal Executives and five part qualified. The service was formed in 2008 when the staff who did not already work for Lincolnshire County Council were transferred to it. 'Recruitment is variable, we were able to get really good people during the recession, but as the private sector recovers you have got that competition from them,' Chris Jones says.

'Lawyers who work here have a wider range of work than they would have at a single district so people have great opportunities.' Small teams are based at local offices in Spalding and Sleaford Adult social care is the largest area of legal work, but in second place comes planning, in particular, due to a large number of appeals over proposals to build wind farms.

Whichever government is elected next May is likely to continue to make the deep financial cuts that have spurred such radical thinking in councils about service delivery, with the trend towards shared services surely set to accelerate.