Are Scottish Councils Quietly Reversing Outsourcing? A Look at Insourcing, Cuts and the Highland IT Shift

7th December 2025

A notable article in the Guardian on 6 December 2025 noted the high sums being paid by London councils outsourcing services to private firms.

The article starts with the reduction in council funding by UK government since 2010. [url=https://www.theguardian.com/society/2025/dec/06/london-councils-warning-structurally-dependent-on-private-firms-as-report-shows-500m-spend]London councils have a sustained reliance on private firms as report shows £500m spend[/url]

That research in London shows that authorities rely on companies to carry out basic functions so are Scottish Councils who have had significant budget reductions relying on out sources in in a similar way even though they have tried to adapt with shared procurement services.

Many Scottish local councils are under heavy financial pressure, and there's increasing evidence that many are turning to outsourcing, shared-services and "external resource" (or joint procurement) arrangements to try to plug the gaps caused by funding cuts. But the situation is more mixed than a simple "yes they outsource like London does"

What we know so far: pressure on Scottish councils + shift to shared services / outsourcing/b]
• Scottish councils face serious funding gaps

According to a recent survey, 70% of councils in Scotland warned they may be unable to balance their budgets within five years under current funding pressures.

Many councils are planning deep spending cuts: in 2023/24 there was a combined target of ~£300 million in savings across councils, reflecting structural constraints on funding vs rising demand.

As a result, councils are raising council tax, increasing fees, reducing expenditures, and turning to alternative approaches — including shared services and commercial activity — to try to plug the gap.

So the financial backdrop for Scottish councils looks very similar to that which forced many London boroughs to rely more on external providers.

• Growing use of shared services, procurement consortia and flexible outsourced services

A recent report shows that Scottish local authorities now run 340+ collaborative projects (or are in development) across the country — including shared procurement, joint service delivery, staff development and regional partnerships.
improvementservice.org.uk

One of the best recalled examples is Scotland Excel, offering a "Flexible Procurement Service" that councils and housing associations use for procurement, legal work, IT, estates management, construction — basically pooling demand across multiple councils so as to reduce cost and complexity.

According to Scotland Excel themselves: over five years the service has handled 135 contracts worth £39 million showing real uptake.
Scottish Housing News

More recently, shared digital procurement has had success: for instance, aggregated procurement of Microsoft licences across many councils has been used to secure savings and reduce overhead.

This shows many councils are indeed leaning on joint/shared external services where possible — not always full outsourcing, but collaborative procurement and resource-sharing.

[b]But there are significant caveats — and it's not the same as wholesale outsourcing
• Mixed results and some councils are rejecting shared-service proposals

Not all shared-service or outsourcing proposals fly: a recent example: three councils (Renfrewshire Council, West Dunbartonshire Council and Inverclyde Council) rejected a proposal to share a combined internal audit and fraud service — because they concluded it wouldn't provide "value for money".
themj.co.uk

More broadly older research (and council-sector critics) warns that "shared services" — especially for complex, specialised services — can be very costly, take many years to "break even", and sometimes fail to deliver on promised efficiencies.

Some councils in Scotland have reverted to bringing services back in-house after outsourced providers failed to deliver. For example, one council in the Highlands cancelled an outsourced cleaning contract (public lavatories) when the provider said the contract was no longer commercially viable.

So: while shared services and outsourced procurement are tools in the toolbox, they're not a guaranteed fix — and for some services or councils, they've proved unreliable or uneconomic.

Comparison with London — are the dynamics similar?

What recent reporting on London shows (for example, a 2025 study on councils' reliance on private firms) is that many core functions — IT, staffing, financial advice, even "basic" council administration — are being outsourced in a structural, long-term fashion.
The Guardian

In Scotland:

There is a growing shift toward external procurement services and shared services across councils (via Scotland Excel and collaborative councils) — so in that sense there is a parallel to London's outsourcing trend.

But the shift seems more cautious: shared-service models tend to focus on discrete areas (procurement, IT licences/software, transactional services) rather than wholesale outsourcing of "core, essential services."

Some councils are explicitly rejecting shared services where value seems unclear. So the dependency is more selective and less systemic compared with what seems to have happened in many London boroughs.

Scottish councils are relying more on external/shared services — but less as a default "everything outsourcing" model, and more as a pragmatic "supplement / support" where budgets and capacity demand it.

What this means in practice (for residents, policy, future risk)

As funding continues to be squeezed — especially with rising costs, demand pressures (social care, homelessness, maintenance) — councils may increasingly expand use of shared procurement and outsourced services. But this will likely stay targeted rather than universal.

Shared services / joint procurement make sense for "commodity-type" functions (licences, standardised procurement, IT, some admin). For specialist or frontline services (social care, complex infrastructure, local maintenance), outsourcing remains risky — and many councils seem wary.

The patchiness of uptake & value-for-money outcomes means there's a risk of inconsistent service levels across Scotland: some councils may benefit from efficient shared services, others may struggle with cutbacks or abandoned contracts.

It suggests a "hybrid model" is emerging not full privatisation of services, but a mix: in-house core services + external/shared services for some support functions.

Scottish councils appear to be adapting to austerity by leaning more on shared or outsourced services, but the reliance is not yet as deep or widespread as seen in London. The pressures are there, but so far there's evidence that many councils are trying to be selective, cautious, and retain in-house capacity where possible.

What the data shows: outsourcing vs insourcing in Scottish local government (and recent trend)

There isn't a single centralised database that tracks "how many Scottish councils outsource X service vs manage in-house" — at least publicly — in a way comparable to recent studies in London. Instead evidence comes piecemeal via public-reports, council-statements, press accounts.

However, a broader trend is documented in the UK-wide public-service analysis literature: many local authorities are now bringing services back in-house (insourcing), especially non-core or support functions, after decades of outsourcing. A 2019 report quoted in a mainstream outlets shows that a large proportion of councils that insourced believed it gave better value, greater flexibility, better quality than long-term outsourcing.

The motivations often cited for insourcing include: more control over service quality and delivery; financial savings once inefficiencies, contract failures or overhead in procurement/management are accounted for; better local accountability; and ability to adapt services to local needs — rather than being locked into long-term fixed contracts.

But it's uneven in that not all councils switch back, some services remain outsourced or in hybrid arrangements; in some cases councils rejected proposals to share services or insource because independent audits or reviews concluded expected savings or benefits were insufficient.

The trend in Scotland appears to be partial and selective insourcing — some councils, some services, especially "commodity" / support services (IT, cleaning, standardised admin) — but nothing like a uniform nationwide reversal of outsourcing.

Because the publicly available data is fragmented and project-based, it's hard to quantify reliably “X% of councils now outsource vs insource”. But anecdotal evidence and repeated reporting suggest that insourcing has increased in recent years, especially as austerity pressures, contract failures, and calls for better value have mounted.

The case of Highland Council and Wipro — what they did and why it matters

The Highland Council provides a clear documented example of a council reversing outsourcing, and it sheds light on motivations, scale and impact.

The Council awarded a 7-year ICT services contract to Wipro in September 2016. This was meant to deliver savings (cost-reduction over contract lifetime) and modernise services including device roll-outs, network upgrades etc.

By 2020, the council concluded that the outsourced arrangement was no longer satisfactory. Under a plan dubbed Project Dochas, they proposed to bring IT services back in-house. The reasons given included: poor service quality, system failures (e.g. system crashes affecting schools, leisure centres, council-tax payments) under Wipro; and belief that an in-house team would provide better value, local accountability, flexibility, and support local employment.

The plan was ambitious as they estimated that taking IT in-house could save around £1 million per year.

The transition began in late 2021 with first key service-desk and field-engineering teams moved over from Wipro to Council employment.

By 2022, Council approved a new ICT & Digital Strategy. The majority of ICT services are now delivered in-house, with support from a newly expanded Council ICT team; some “specialist contracts” may remain for niche needs, but core services are internal.

The in-house ICT team is planned to grow from an initial 49 full-time equivalent (FTE) staff to between 120-130 FTE, thus retaining or creating skilled local jobs in the Highlands.

The Council explicitly argued that this in-house model would give them “greater flexibility, dynamic approach to modernising and transforming services,” compared with a fixed-term outsourcing supplier contract.

So Highland's shift was driven by a mix of value-for-money calculations, poor performance under outsourcing, desire for local control, and local economic/job considerations.

What we can infer - does the Highland example point to a broader Scottish shift — or is it an isolated case?

From what we've seen:

The Highland case suggests that outsourcing is no longer viewed as the default “cost-saving” route by at least some Scottish councils. When outsourcing fails to deliver (or fails to adapt), insourcing becomes attractive — especially for services that are critical, visible, or prone to disruption (IT, systems, customer / public-facing services).

Because of the mixed results (some councils reject insourcing proposals; some services remain outsourced; others re-insource only parts), the shift is uneven. That matches findings in the broader UK that insourcing tends to focus on support services rather than frontline or specialist services.

The pressures (funding cuts, demand on services, performance failures) that drive councils toward such decisions appear persistent and worsening — so we may well see more councils follow Highland's route over coming years.

But insourcing doesn’t eliminate all challenges: recruiting and retaining skilled staff (especially in remote/rural areas), covering ongoing technology upgrade costs, ensuring resilience and security, and managing resources remain tough. Highland’s new ICT Strategy acknowledges these challenges and frames the in-house approach as a long-term commitment to building local capacity, not a short-term “cost-cutting” fix.

Thus, the Highland example though personal to that council can be seen as indicative of a possible broader recalibration in Scottish local government: away from blanket outsourcing, toward more hybrid or flexible models combining in-house capacity + selective external contracting.

Implications (for policy, accountability, local communities, and comparisons with London)

For local democracy and accountability insourcing helps keep important services (IT, citizen-facing services, system support) under direct democratic/senior official control, rather than locked into long-term private contracts. That may better align service delivery with local priorities especially in rural & economically fragile areas like Highland.

For local jobs and skills: the shift helps retain and create local skilled jobs (IT engineers, field engineers, digital officers) that might otherwise be outsourced important in economically marginal regions where opportunities are scarcer.

For financial resilience insourcing may offer more predictable costs, avoid “contract surprises” (e.g. failed performance, emergency recovery plans, cost overruns), and give councils more flexibility — useful when budgets are squeezed.

For service quality and flexibility: internal teams may be more flexible in managing change, responding to local needs, adapting to new priorities compared with fixed-term outsourcing contractors.

Compared with London (or other big urban/metro areas) the dynamics differ. In London many councils outsource widely often because of scale, complexity, and historical patterns. In rural Scotland, population density, different cost structures, and community expectations may make insourcing more attractive or pragmatic.

the case for insourcing or at least for selective, strategic in-house service delivery — is strong in many Scottish councils now, especially for ICT and other “core-support” services.

The shift by Highland Council suggests that, under pressure, outsourcing is no longer seen as a one-size-fits-all solution. Rather, councils are re-evaluating what should be outsourced vs what should be managed locally — and in many cases, bringing things back in-house seems to deliver better value, local resilience and control.

For anyone unfamiliar with council procurement activities the following links may help

Improvement Service

Scotland Excel