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Walsall Metropolitan Borough Council has opted to keep its struggling benefits services in-house after assessing the outsourcing ventures of other councils and coming to the conclusion that the the private sector was not up to the job.

The council has been wondering what to do with its worst performing departments since January when it ducked out of a £500m "strategic partnership" with Fujitsu at the nth hour.

The move was vindicated by a report presented to Walsall's Conservative Cabinet last week, which said that after a benchmarking study of other councils that had outsourced their benefits departments, Walsall concluded that there were "serious drawbacks" to handing the whole department over to the private sector.

Walsall's benchmarking study found "very few success stories in other local authorities" that outsourced their benefits service.

The benchmark considered 38 other authorities that had outsourced benefits. Eleven of them had ended up bringing the department back in-house.

The study also found that outsourcing would take too long, and the risk that services would degrade or fail during procurement was too high.

In December 2003, when Walsall was given a "weak" rating by the Audit Commission, the council's benefits department had been one of only two to earn three out of four stars. But by 2005, when the Audit Commission commended Walsall for "improving well" its benefits service had deteriorated so much that it was one of only two departments with two stars.

The council had claimed that benefits and other under-performing departments would see improvements once they were farmed out to the private sector, the Audit Commission reported in January.

But within the month, Fujitsu had been given the boot and Conservative Counsel leader Tom Ansell had declared the council did not need help from the private sector.

January's Audit Commission report explained why Walsall's benefits service had declined while most of its other services had improved since 2003. One of the main reasons was the introduction of a new benefits computer system last year. The council had outsourced its benefits IT systems to Northgate in 2004, but the system was delivered late.

A report by the Benefits fraud inspectorate noted yesterday that the new computer system had "created inevitable delays in claims processing", and inundated its walk-in centres with claimants wanting to query their computer-generated allocations.

The council's benefits service was "already strained", reported the BFI. "This situation was made worse when the council restructured its Revenues and Benefits service at the same time," it said.

The computer system should, however, help pull the department out of its mire, reported the BFI. If only it could train its staff to use it properly.

Walsall still felt the need for some scheme to replace its aborted strategic partnership with Fujitsu. After seeing the benchmarking study that rubbished the private sector, the council's Cabinet considered three other options: do nothing; develop shared services with other councils; or go for a "mixed economy" model in which core services were kept in-house and non-essential support services where outsourced.

It ruled out a joint services agreement with another local authority because of the difficulty in finding a good fit in good time. Doing nothing was never really an option.

The cabinet voted for the "mixed economy" method, which would require an investment of £400,000.

It did, however, note that it would not be an easy ride. "Can the council manage the potentially complex mix of internal core service activities and the externalised non-core activities?" a report to cabinet asked. In light of the problems caused by handing responsibility for its benefits IT systems over to Northgate, this was clearly a pertinent question.®

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