Two east London boroughs have signed a shared service agreement that has the potential to deliver £40m savings over the next five years.

The news follows the approval late last week by the cabinets of Conservative-led Havering LBC and Labour-controlled Newham LBC to establish a ‘joint committee' model under which 1,300 staff and total budgets worth £64m would be combined.

The system is set to be in place by next month with a launch date of April 2014 for full operation.

It is estimated potential £40m savings are achievable by slashing senior management costs by a third and reducing duplication across a range of services - including HR, IT, finance, audit council tax and business rates collection. 

Procurement, property and project management services will also be shared under the ground-breaking deal to share support services, which builds on an existing arrangement to share the head of ICT.

Havering leader, Cllr Michael White, said: ‘Havering and Newham are showing that political differences are no barrier to sensible councils making sensible decisions'.

He said sharing services on this scale would make ‘a very significant contribution to the further savings we face in the years ahead'.

Sir Robin Wales, Mayor of Newham said: ‘Both Newham and Havering have faced considerable financial pressures in recent years and we expect funding cuts across the public sector will continue for some years.'

‘By reducing costs and making savings we can protect those frontline services residents say are important,' Sir Robin added.