Public sector legal teams feel the squeeze

If there were any doubts that the clouds of doom have settled over the UK, last week they were eliminated when the chancellor George Osborne announced his Comprehensive Spending Review (CSR).

The impact of 19 per cent cuts in public spending, including 500,000 public sector job losses and the attendant implications for the private sector of these people being temporarily taken out of the consumer economy, is huge.

But what will it mean for public sector legal departments and the firms that serve them?

Prioritising

“The tendency is to protect frontline services such as education, adult social care, children and housing,” says Gifty Edila, corporate director, legal and democratic services, at the London Borough of Hackney. “Clearly we’re in business to provide these services, and while they’ll face some cuts, back-office functions will take greater reductions.”

From an HR point of view, the focus on shrinking ­budgets will be reflected in a recruitment freeze, as well as increased workloads for those who stay on board, Edila explains.

“There’s no scope for recruiting more staff,” she says. “We have to manage with the resources we’ve got. It means you limit ­opportunities for [bringing on] trainee solicitors.”

One approach that has already been undertaken by scores of local authorities is creating consortia for the centralised purchase of legal services. Hackney, for ­example, participates in the 10-strong London Boroughs Legal Alliance.

“A number of us are ­working together to get competitive fees,” says Edila.

Other examples include the Birmingham City Council panel, which is open to other local ­authorities, and the North West Legal Consortium.

There is a suggestion that this is a model that could be taken up by central government too, according to Field Fisher Waterhouse partner Paul Barton, who advises the state on procurement, IT and outsourcing matters.

“Cabinet Office minister Francis Maude kicked off a renegotiation of large Government suppliers,” says Barton. “The Government’s trying to act as one client. We’ll see more centralised procurement and more shared services.”

Can-go quangos

Maude’s bonfire of the ­quangos has already decided the fate of certain public ­sector legal departments. Regional development agency (RDA) One North East is just one of the 46 per cent of such organisations that will be abolished.

Group secretary and head of legal services and ­procurement at One North East Peter Judge, who was named The Lawyer’s In-House Lawyer of the Year for 2010, now seems a bit like the captain of the Titanic, staying on board while his staff escape to relative safety in jobs elsewhere. All found jobs before their roles were made redundant. Judge does not know how much longer he will be needed.

The RDA’s chief executive Alan Clarke says that One North East is “under no illusions” about what lies ahead.
“We face an extremely challenging year ahead as we wind down agency business and finalise transition plans,” says Clarke. “But in the meantime we’ll do everything possible to ­support economic growth in the region.”
More work for some
Other quangos have been spared such a fate. Health and social care regulator the Care Quality Commission (CQC), for example, has had its role expanded. Legal
has also been elevated to ­directorate status within the body, without any increase to its budget. As well as being responsible for regulating the NHS, adult social care and independent healthcare, it will also begin overseeing dental and GP practices in the next couple of years. ­Furthermore, the regulatory functions of bodies such as the Human Fertility and Embryology Authority and the Human Tissue Authority will fall within its remit.

“We’re taking on a huge amount of work,” says CQC director of governance and legal Louise Guss. “And it’s unlikely we’ll be getting any additional funding. We still have the same team that we did a year ago and we’ve cut our external costs by a third.”

But rescue from the ­bonfire is probably more of a reprieve than an indefinite acquittal, and the firestarters will be watching the CQC’s spending closely to ensure it is doing its bit for the ­putative ’national interest’.

“We’ve been told we’ve got to rationalise land and estates and move into empty government buildings,” explains Guss. “We’ve already pulled the guts out of estate costs. Ten years ago we had 100 offices, now we have nine. A lot of our staff work from home.”

Hackney’s Edila talks about the move to slim down certain areas of low-risk areas of legal activity.

“We may look at reducing certain areas of enforcement activity. We don’t need to be chasing people selling apples and pears in bowls on the street – you prioritise antisocial behaviour and serious fraud,” she says. “You have a statutory duty to protect the elderly and children and to house the homeless.”

In contrast, enforcement is the CQC’s lifeblood and will increase rather than reduce. “It’s the aim of the organisation,” says Guss.

And dealing with complex cases with an already highly rationalised team means there will continue to be a reliance on private practice for specialised advice.

Nicola Hart, head of the universities practice at ­Pinsent Masons, thinks her team will need to traverse the boundary between legal and strategic advice more.

With the CSR detailing 25 per cent cuts for the Department of Business, Innovation and Skills, which funds higher education, Hart’s clients will experience almost unprecedented challenges. But Hart believes there are also opportunities.

“We’ve been doing workshops around the theme of self-sufficiency and autonomy in a tough environment,” she relates. “Traditionally most work for us has been on construction, property and estates, but big commercial projects and outsourcing are going to increase.”

Pinsents has already been involved in assisting universities on partnerships with the private sector, including helping the University of Essex create commercial opportunities from its ­student accommodation provision (The Lawyer, 25 January).

As well as the employment advice that will be needed in relation to the anticipated redundancies, Hart expects assistance on competition, charity law and pay and pensions.

“Competition law will be a huge issue,” she states. “Four or five years ago we acted for a group of public schools that were investigated by the OFT for cartel activity for talking to each other about the fees they charged.

“With the lifting of the cap on tuition fees, ­universities will be looking at what fees they charge. They don’t realise they shouldn’t be talking to each other about setting fees.”

Off with their heads

As The Lawyer went to press, one senior public ­sector legal head, Birmingham City Council’s Mirza Ahmad, had already found out his job had gone, with another high-level legal head expecting his to be scrapped too.

The Treasury is betting that big funding cuts will help the Government meet one of its declared raisons d’être – fiscal health. But what about one of the other key planks of its policy agenda – fairness? On ­universities at least, the jury is still out.

“I’m concerned that it’s going to be difficult to keep up the access agenda,” says Hart. “You risk universities becoming more middle class. The ones that are going to suffer are local ­universities. They may not be world-class, but they’re doing an excellent job training nurses and so on and will struggle to charge fees high enough to keep going.

“How are they going to be sustained? I don’t think anyone’s answered that question.”

Extent of the cuts

Per cent change in departmental programme and administration budgets, 2010-15

Education -3.4
Health +1.3
Transport -21.0
Communities -51.0
Local government -27.0
Business, Innovation and Skills -25.0
Home Office -23.0
Justice -23.0
Law officers’ departments -24.0
Defence -7.5
Foreign and Commonwealth Office -24.0
International development +37.0
Energy and climate change -18.0
Environment, Food and Rural Affairs -29.0
Culture, Media and Sport -24.0
Work and Pensions +2.3
Scotland -6.8
Wales -7.5
Northern Ireland -6.9
HM Revenue & Customs -15.0
HM Treasury -33.0
Cabinet Office +28.0
Single Intelligence Account -7.3
Small and independent bodies -27.0
Total -8.3