Kent County Council eyes independent legal function
£330m cost-saving initiative could see law director role axed and lawyers liable for negligence
Geoff Wild
Kent County Council (KCC) is floating plans to spin its legal function out into a separate company, in what would be the first example of a public sector organisation adopting an alternative business structure (ABS).
Under the plan the local authority (LA) could transfer its in-house legal department to an arm’s length company, which would hold a contract with KCC to provide it with legal services while also competing for private sector work.
If such a company is formed, ownership and profits will be split between the LA and staff shareholders.
KCC wants to save £330m in the next four years and may also make the director of law and governance role, currently occupied by Geoff Wild, redundant, creating instead the position of director of governance and assurance, which would have a wider remit but be paid around 20 per cent less.
A KCC spokesperson said: “[KCC] so far has a successful model of legal services and we’re proud of that. We’re transforming the way the organisation operates to make sure we deliver our services to residents in the best possible way.
“As part of that restructure we’re exploring the best way forward for our legal services, which includes the possibility of developing them into an arm’s length company.”
However, Bevan Brittan partner and local government specialist Peter Keith-Lucas said the project could prove problematic, as there would be no guarantee that the council would pass all its legal work to the spun-out business.
“The question this poses is whether the legal team would retain the loyalty of the LA,” he argued. “If you’re an in-house service you’re probably good at a narrow range of services, but you don’t necessarily have the breadth or resources of private practice.”
It is thought that some elements within KCC are hopeful that creating a separate company would also allow the LA to sue the company’s lawyers if it felt there was a case of professional negligence.
But Steven Holland, head of the professions and risk department at insurance broker Lockton, pointed out that the subject of liability would be hotly contested.
“When we get to [the professional indemnity insurance] renewal [date on 1 October] next year, we’re going to have to address ABSs,” he said. “If there’s [external] ownership then qualifying insurers may say they want some caveats.”
Readers' comments (6)
Anonymous | 29-Nov-2010 9:50 am
I fear this is a sad reflection of vindictive internal politics at Kent. In a sane authority, the last person to be axed or face a pay cut would be the person that has turned a cost incurring department (Kent's legal team) into a revenue generating one. Yet this is exactly what is being suggested. I suspect that what is happening is that Mr Wild is being punished for having 'stepped out of line' in some way by a cynical, power mad council exec/s punishing him for not towing the line.
The result? The public sector will lose one of its best and most innovative legal stars to private practice, meaning slightly higher taxes in the county for slightly less achievement. Expect Kent's revenue generating team to transform into one that pays hefty fees for legal work to private practice because it will have lost its best people to them.
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Anonymous | 29-Nov-2010 10:26 am
To Anonymous | 29-Nov-2010 9:50 am
Kent CC's executives may be smarter than you think.
Yes Mr wild has made money for Kent but in a sense job done.
I highly doubt any staff will move to the private sector.
In case you hadn't noticed the private sector is sacking lawyers not taking them on.
Higher taxes don't necessarily follow. Rather Kent may just decide to cut the fat and perhap some of the ridiculous perks and benefits to Council staff!
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John | 29-Nov-2010 4:58 pm
To Anonymous | 29-Nov-2010 10:26 am
Staff may not leave for the private sector, but they may leave for other public sector organisations.
Also, if the legal department stops generating money for the council, how do you suppose the short-fall will be made up if not by council tax? Particularly when money from central government is be drastically cut.
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Anonymous | 29-Nov-2010 6:32 pm
John,
Why does the shortfall need to be made up by Council tax increases?
The Council can just make savings elsewhere?
It is common knowledge that local authorities waste money.
Some Local Authorities have the fattest managers and heads of service and a lot of them don't do that much.
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Crusoe | 30-Nov-2010 1:10 pm
I think the argument for sharing legal expertise across the public sector is compelling. However there are significant risks in KCC's proposed legal services structure.
This ABS cannot be guaranteed to win KCC's legal work. KCC will need to follow the procurement rules when out-sourcing all its work. Any attempt to work around the procurement rules will be challenged by external law firms.
Likewise where KCC legal services wins work it is open to a challenge of State Aid as it is openly competing in against law firms in a recognised market.
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Michael Bond | 19-Jan-2011 5:28 pm
I was disappointed to hear the news from Kent County Council as Geoff Wild has clearly done a fantastic job for them. He wrote a paper for the International In-house Counsel Journal last year detailing how he had done it, which can be found at the IICJ library: http://www.iicj.info/iicjlibrary/iicjlibrary_search_form.asp
It is clear from that article that he had worked hard to turn the department round.
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