On November 8th 2005 the Audit Commission produced a report claiming that partnership working has the greatest potential for improving efficiency in benefits processing. This, we in Vanguard (and our clients) know is not the case.

I wrote to the Audit Commission's chairman, James Strachan (since resigned), to say the report actually says local authority's costs vary and the authors could not work out why; and to jump from there to pushing 'partnership working' is to promote the wrong answer. I was also rather fed up that the Vanguard solution was not included, especially as it had been reviewed by Audit Commission people and they had put it forward to the report's authors.

Frances Done, Managing Director - Local Government at the Audit Commission wrote back to say she did not recognise my summary of the report. This is my reply to her:

Dear Ms Done

Thank you for your letter of 20 December. As you do not recognise my summary of the report's conclusions, let me quote from your report, firstly on understanding costs:

22 There are large variations in administration costs between councils dealing with similar amounts of activity. Direct comparison between councils is complex and a number of factors need to be taken into account.

36 …Cost structures are different and make true comparison very difficult…

37 …Councils are involved in benchmarking groups, but there is no real knowledge from them as to which council is the most efficient…

39 …we found little proof that councils had assessed the cost-benefit of their efficiency initiatives …. and consequently few were able to show any efficiency gains…

I too have found it very difficult to establish the true costs of processing benefits; indeed this problem extends to many local authority services and is due in large part to the way the budgeting processes and regulatory regimes work. I think we agree that this should be an urgent priority; otherwise local authorities and their inspectors are likely to make unreliable judgements about value for money.

Over the last few years local authorities have been obliged to follow the DWP's directives on the design and management of benefits processing, as your report notes:

51 Most councils now have a front/back office approach to delivering the service…

These directives have been the start of the problem. The DWP has promulgated a high-cost, poor service design. Let me explain, in the simplest terms, what happens. It should be no surprise that most benefit claimants who turn up to make a claim do not bring with them the things that are needed to establish eligibility and entitlement. The DWP service standards mean people are seen quickly, not left waiting, and whatever is brought is processed. These actions fragment the work. To compound the problem, documents are processed through document imaging systems; the batching, queuing and sorting required introduces errors. The back office is thus a repository of electronic inventory and the bulk of the work in back offices constitutes re-work (waste).

You may be aware that the 'back-office backlog' is a recent phenomenon; instead of understanding the causes (the design of the front office and the use of electronic scanning), DWP 'help' personnel encourage local authorities to attack the consequences. We have seen a rise in private sector organisations winning 'backlog busting' contracts. It is madness. More importantly, it is a waste of public money.

This DWP-inspired design results in lost information, so claimants are asked to bring in things they have already produced; it increases the end-to-end time, causing claimants to progress-chase and typically claimants have to attend as many as four or more times to get this service. It is no surprise that claimants get annoyed - you would. Putting up posters telling claimants not to behave badly does not solve the problem. It is a problem of design and the DWP should be held accountable.

It is a commonly held belief that electronic document management improves efficiency; your report shares this (mistaken) belief:

38 Many initiatives have taken place to improve efficiency such as: electronic document management; …. outsourcing…

Similarly people believe that outsourcing improves efficiency. Again, your report shares and reinforces this false belief. Talking about the front/back office design you say:

51 …This was not the case five years ago, and provides an opportunity… of relocation of back office functions.

The DWP-promulgated design has led to the drive to share or outsource 'back office' work. It is to believe in economies of scale. Of course such economies exist for some activities, but not, interestingly, for benefits processing. Vanguard's work has shown that significant improvements to service and efficiency can be achieved by taking a completely different approach to the design and management of benefits processing. As I said in my letter to Mr Strachan, the design and results are in the public domain, have been studied by your own people and they tell me this solution was brought to the attention of your report's authors but was ignored. Instead, your report follows the current ministerial line; partnership working:

59 We found that the greatest potential for more efficient working was through increased partnership working….

This is simply not the case. Shared back office services show the kind of waste I described above and, if anything, the waste is compounded by bringing together different authorities. It may be true that shared services result in savings through less managerial posts but these designs drive the processing costs up. A one-off saving is nothing compared to the long-term costs of waste and poor quality service. The lower transaction costs reported ignore the fact that the true costs of service are end-to-end from the customers' point of view. It is of no value to have a lower transaction cost if that design creates more transactions.

Ministers and their agents have been pushing partnership working for some time, your report takes it to the extreme:

72 If the partnership opportunity is followed to its conclusion, it could be argued that there is scope for one nationally delivered revenues and benefits service.

You may be aware that forty-six authorities in the East of England are considering joining together in one large back-office. If this goes ahead it will lock in high costs for some considerable time.

Finally, I was extremely disturbed to read that the Audit Commission will:

When reviewing its value for money arrangements, expect councils to demonstrate that they have seriously addressed the potential for reducing costs through shared service delivery.

This will cause authorities across the land to act in ways that are likely to lead to high cost, poor quality services. The coercive power of the inspector should not be under-estimated. I need your assurance that where people have the knowledge and evidence to show that partnership working on benefits is the wrong thing to do, they will not be penalised by their inspector.

Yours sincerely

John Seddon

PS I am sending a copy of this letter to Sir Michael Lyons, as benefits processing is just one example of the specifications and inspection regime making service worse. I shall also publish this letter on my web site, to encourage those who know better to stand their ground and insist that their inspectors produce evidence to support their impositions. Please don't assume this is a hostile act. When ministers fail to listen it might help to increase the number of voices saying the same thing.

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