Shared services in local government have always looked like the idea which never quite made it. There have always been good arguments for doing it, but largely not good enough to overcome resistance, apathy, inertia and the sheer difficulty of shifting from well trodden ways of doing what we have always done.

In 2010, Deloitte was lamenting that "despite a history of tactical collaboration, shared services have really succeeded at scale". Similar comments are common throughout the research literature on local government.

Most notably, higher tiers of government, in search of the holy Grail of improved local government performance, normally reject arguments for doing so through shared services in favour of amalgamation. That's got the political attraction of looking like firm and positive action, and electoral cycles mean the fallout usually affects a different government. But it also reflects real resistance within local government. Queensland's Local Government Reform Commission was put in place to restructure local government because the state government lost patience with attempts to improve performance through a shared services strategy. One reason the Royal Commission on Auckland Governance decided not to put in place a second tier of substantial councils below a regionwide council was it believed such a tier would not be capable of agreeing on the measures needed to improve performance through a shared services approach.

But it's amazing what a bit of fiscal pressure can do. Most local governments are now facing as tough a financial outlook as ever they have seen. The New Local Government Network's just released publication Shared Necessities: The Next Generation of Shared Services makes a compelling argument that simply sharing back-office services, even if every council across the country does that to an optimal level, will come nowhere near coping with reduced revenue. The only option is to move to comprehensive shared services across the full range of what councils actually deliver.

Interest is increasing elsewhere. In New Zealand one group of councils has taken an innovative approach to how they think about shared services - for them it is very much a matter of access to and management of information, rather than the former approach of physically shifting things around, outsourcing etc. Key to this is a high-speed fibre optic cable linking all the councils together. This will enable the development of a 'centres of excellence’ approach with each council developing a different specialty, so that there is room for the large and small. Contrary to the usual fears about shared services, this approach should underpin local democracy and the continued relevance of the smaller councils.

Peter McKinlay will be presenting the findings from a case study on this initiative at the forthcoming colloquium of the Research Advisory Group of the Commonwealth Local Government Forum to be held in Cardiff 12-14 March 2011. His paper will shortly be available in the resources section of our website.

From Local Government to Local Governance.

In countries such as New Zealand, Australia and England we are used to the idea that we elect local governments which then do things to their communities, quite often for reasons which are hard to relate to any community aspiration or engagement. It's probably one of the reasons that voting turnout at local government elections has been trending downwards for a number of years, and communities are increasingly demanding direct engagement in decision-making on the matters which concern them.

We could be on the verge of very significant change. The English government's localism initiative is being marketed as devolving decision-making to the local level and indeed going further - getting government out of peoples' lives so that they can take their own decisions.

But it's not just government. Some of the most far-reaching thinking is coming out of local government itself. The Lambeth Borough Council has just released the final report of its Co-operative Council Commission, The Co-operative Council: Sharing power: A new settlement between citizens and the state. The basic theme is putting the resources of the state at the disposal of citizens so that they can take control of the services they receive and the places where they live. More than just volunteering, it is about finding new ways in which citizens can participate in the decisions that affect their lives.

There is an emphasis on moving from councils doing things to their communities to doing things with their communities, through initiatives such as shared decision-making, participatory budgeting, co-production and a long-term objective of transferring most decision-making to a mixture of employee and community owned organisations. This is not just some form of hand on heart do-gooder approach; it is a serious and constructive approach to a wealth of research demonstrating that the effective design and delivery of services which impact on the quality of life of local communities is best undertaken in partnership with those local communities.

And this is not the only sign of an increased emphasis on community participation from within local government. We are just commencing a project [we could put in a link here to the what's new bit I am just about to do] with a series of Australian partners looking at different approaches to community governance. It will compare and contrast two different and growing practices: local authority led community planning for individual communities within the local authority district; and the community planning initiative of the Bendigo and Adelaide Bank's community banking network - an exciting development in local governance.

Straws in the wind? Or the first signs that the nature of local government and local governance (and as a consequence also of the way higher tiers of government interact with the societies they govern) is going through fundamental change, and that governance itself may be shifting from essentially top-down to bottom up?

In a move with implications for governments world wide, England's Coalition Government recently delivered its promised Localism Bill with the expressed purpose of shifting power dramatically from Whitehall to England's communities, including granting a power of general competence for local authorities. It follows years of flirtation with concepts of devolution and decentralisation working through community strategies, local strategic plans, local and multi-area agreements and much more.

In its last year of office the previous Labour Government committed itself to the Total Place Initiative intended to give local providers the incentive to work together in new ways for the benefit of their clients and citizens, partly because this looked like a good way of restraining government expenditure and partly because of research evidence suggesting that the top-down design and delivery of social services is far from ideal.

Each time, the rhetoric emphasised empowerment and promised greater decision-making power at local levels. Each time the reality fell short of what had been promised.

The Conservative-Liberal Democrat Coalition Government has come up with a different vision, David Cameron's Big Society launched with the commitment that “Today is the start of a deep and serious reform agenda to take power away from politicians and give it to people. That’s because we know instinctively that the state is often too inhuman, monolithic and clumsy to tackle our deepest social problems. We know that the best ideas come from the ground up, not the top down. We know that when you give people and communities more power over their lives, more power to come together and work together to make life better – great things happen.”

The Localism Bill is the first real test of whether governments can really give up their old habits, and genuinely step aside so that communities can move into the space currently dominated by the central bureaucracy. It's an experiment which is important not just for England, but for other developed countries which rely on high spending central governments to lead the design and delivery of the public services that underpin the quality of life in modern societies.

The Coalition Government launched the Bill with a commitment to what it called six actions of decentralisation including lifting the burden of bureaucracy, empowering communities to do things their way and increasing local control of public finance. In its on-the-day briefing on the Bill the Local Government Group noted that "much of the detail and implementation of this Bill will be taken forward through regulations, order making powers, duties, statutory guidance and requirements on local authorities. We have counted at least 142 such powers."

The Bill does little to improve the financial autonomy of local government (there are some useful moves in the housing area). There is no suggestion of additional sources of funding, for example a local income tax, and existing centrally imposed controls over the level of the council tax are replaced by a provision triggering a referendum if a council tax increase is excessive as defined by the Secretary of State.

It all looks very like ‘how do you disengage without disengaging’? Part of the drive is clearly ideological, with Ministers believing that government has intruded far too much into the ordinary lives of its citizens, with the twin results that government expenditure is too high and social and other outcomes too poor to justify continuing to work in this way. Part of it is clearly pragmatic: a response to the clear need to reduce government expenditure based on the view that handing back or sharing responsibility with communities is a better way of getting the outcomes government wishes to promote.

And there is some genuine creativity in some of the initiatives being promoted - for example the community's right to buy certain local government assets, and a community right to challenge that will allow voluntary and community bodies, employees of a relevant authority and parish councils to bid to a local authority to run a service where they feel that it could be run better. This fits with the Government's Pathfinder Initiative [link for pathfinder initiative is http://blogs.defra.gov.uk/3rd-sector/2010/08/francis-maude-launches-pathfinder-mutuals/ ] announced in August for a number of pilot projects in the establishment of employee or community cooperatives to deliver services.

It's an experiment which should be watched closely by other jurisdictions. England is not the only country which recognises that it needs to pull back on the cost of major social services whilst at the same time improving outcomes. It is also not the only country where the best intentions of central governments to get out of the lives of their citizens seem always frustrated by the difficulties inherent in making major changes in bureaucratic processes and the understandable reluctance of the centre to give up power because of a concern that communities and their representatives may lack the skills and capabilities needed to replace the centre's role.

Both New Zealand and Australia, as examples, have had a long attachment to the belief that major social services are best designed centrally and delivered through centrally controlled agencies. The growing evidence that we need to move from top down to collaboration may not yet have reached the critical mass needed to overcome the reluctance inherent in even the best intentioned bureaucracies.

Much rides on this experiment. It is difficult to see how governments in the Westminster tradition will have any hope of balancing public demands for service (especially from ageing populations), and bringing public expenditure under control, unless they are able to engage effectively and work with local government and its communities. It's in all our interests that the localism experiment results in a very real shift in the balance between centre and local, including shifting the balance of power over how resources are allocated at the local level. Localism without funding autonomy could turn out to a vehicle without fuel!

New Zealand seems bent on becoming the world's laboratory for metropolitan restructuring, testing the strengths and weaknesses both of government-directed change and of voluntary approaches. I've just been re-reading PricewaterhouseCoopers's governance review for Wellington region councils. It's a must for anyone who wants to get a good idea of why it is so hard to make real change even when it looks as though almost everybody will benefit, and why it must be so tempting for a governement to intervene.

The authors have clearly been walking on eggshells, trying to draw a fine line between highlighting opportunities for change, and not wanting to upset councils which are clearly protective of their local democratic role.

It's a real wake-up call as Wellington reflects on how to respond to the changes in Auckland - the Western world's most recent example of a large scale and comprehensive city restructuring. The authors are clearly aware of the increasingly important role of metropolitan centres both nationally and internationally and make the aspirational case for Wellington to join this increasingly important international network. But that means change. Reading between the lines it's not clear they have convinced their client councils as a group that this is the direction they need to travel.

Why should this be so when the case seems so strong? The answer may lie in the way in which in New Zealand we think about local government as reflected in the following statement from the executive summary: "This … has again highlighted the key tension that exists in local government reform relating to the reconciliation of the community connectiveness of small authorities with the strategic and efficiency opportunities available in larger or special purpose authorities." Readers from other jurisdictions, especially in the English speaking world, will recognise the dilemma.

At least since the reforms of the 1980s, we've done a couple of things which differentiate us from much of the rest of the world. We have treated representation as a cost rather than a benefit, and we have believed that bigger is better. Both of these treat local government as essentially efficient deliverers of services and overlook the equally important role of local democracy (notwithstanding the lovely words of section 10 of the Local Government Act).

This has made it very hard for us to work seriously with the concept, common elsewhere, that different functions of local government require different scales. Delivering a functioning metropolitan region needs local government at a regional level scale. Local democracy needs decision-making at the neighbourhood or community level, and representation which allows most people most of the time personally to know one or more of their immediate representatives. This is not the resident to elected member ratio of 10,000:1 which categorises Auckland's local boards. It's much more the less than 1000:1 ratio typical of much of European local government.

Building a strong metropolitan region in Wellington, able to make its mark internationally, and with real efficiency and scale in service delivery through shared services or other options does not mean abandoning local democracy. It does mean standing back and thinking carefully through how to deliver the best outcomes for Wellington's citizens, and Wellington's businesses. In a nutshell, it probably means strengthening Wellington both regionally and locally so that the region's citizens feel that they are in control of what matters locally, but benefit from the strength of an effective metropolitan region.

There is clearly a debate to be had. Hopefully the councils, their advisors, and the citizens and businesses they represent will do this reflectively and realise that this is not the either/or of choosing between a strong region or strong local democracy but an opportunity to show the rest of New Zealand, and indeed local governmetn in other jurisdictions, how to have the win/win of strength at both levels.