LGSS Law, the ‘social enterprise’ alternative business structure (ABS) owned by three local authorities, is set expand dramatically by merging with the shared legal team of Westminster City Council and the Royal Borough of Kensington & Chelsea (RBKC).
The third council in the Tri-borough Shared Legal Services, the London Borough of Hammersmith & Fulham, said it was not ready to progress to merger, which is planned to go live on 1 December.
A paper going to the RBKC leadership team for approval this week said: “Our Shared Legal Service office will in effect form a London Branch of LGSS Law Ltd, which will be well positioned and resourced to expand through merger and increased ad-hoc work.
“The ABS vehicle established by LGSS Law over the past two years will provide a modern business-like platform from which the combined teams will grow their business through in-sourcing work currently outsourced and attracting new external clients by trading surplus capacity released by productivity improvements. If necessary, capacity will be increased to grow the business and expertise.”
LGSS became an ABS in April 2015. It is made up of what was the joint legal services department of Northamptonshire and Cambridgeshire county councils, and merged in Central Bedfordshire council’s legal team a year later.
Since its launch, LGSS Law’s turnover has increased by 30%, or £2.2m, to almost £8m. It is owned by the councils and they receive both reduced rates and dividends.
The paper, written by RBKC’s director of corporate services, John Quinn, said that when Shared Legal Services was being created in 2015, all three councils envisaged that the second stage would be to explore alternative models such as a company and/or ABS so that it could act for clients other than the council.
Mr Quinn wrote that merging with LGSS would provide the two councils with “access to a tried-and-tested ABS vehicle and its associated processes and infrastructure. It also avoids the requirement to set-up a new ABS from scratch (involving a 12-to-18-month regulatory process) and provides access to LGSS Law’s clientele”.
He said the primary objectives of the proposal were to continue to improve the quality of the service, further increase the resilience and deliver “significant financial benefits to the owner councils through cost reduction and income generation”.
The paper projected that the two councils would make savings of £1m between them by 2019/20 – with Westminster accounting for 60% of it – and also enjoy increased income of at least £178,000 each by 2022/23.
The savings would come from reduced internal legal costs “through economies of scale and improved transparency and control” and reduced external legal spend through “significantly more work” being done in-house.
“It is assumed that 50% of external spend can be brought in-house, and delivered 30% cheaper than the external cost (based on LGSS Law’s experience and comparison with other providers/competitors).”
The paper said the intention was to continue to grow expertise in all aspects of local government work: “For example there is no intention to venture into private client work eg divorce, conveyancing etc.
“The target new clients will be local authority partner organisations eg police, health and other local authority service providers such as charities, housing associations or private organisations that provide local authority services.”
Quentin Baker, executive director of LGSS Law, said he was “delighted” to be working with Westminster and RBK&C “on this ground-breaking project”.