Regional and local tensions: The role of shared services

Regional development and local government often exist in a state of tension, especially where efforts to foster regional development are channelled through proposals to consolidate existing local councils into larger 'regional councils', and where this follows from the view that larger government authorities are more efficient than smaller ones. With respect to amalgamation, critics point to the controversy generated by local government consolidation, the absence of authoritative empirical evidence of scale economies, the equivocal outcomes reported in case studies, and the reduction of local democracy. Moreover, structural change through consolidation is often met with an auxiliary argument for the implementation of shared services arrangements between local government entities. Proponents of shared services commonly argue that since only some local government services exhibit economies of scale, structural change should focus on the joint provision of these services. Thus, shared services arrangements can play an important role in easing the tension between regional development and local development by fostering and supporting collaboration in an effort to improve local government service delivery, while at the same time maintaining 'local voice' and 'local choice'. Given the potential policy interest in shared services arrangements, this paper (i) reviews the current body of empirical evidence on the economic outcomes of shared services arrangements and (ii) considers the associated policy implications. We conclude that cooperation between councils in the form of shared services arrangements should be pursued because it may not only result in cost-savings but could also lead to 'bottom-up' revival of regional development. In our view, this collaborative approach is a far better policy option than the 'top-down' policy approach that has been historically imposed on local communities in the form of forced council consolidation.