As the Government looks to persuade more councils to privatise administrative functions, the pioneering Southwest One deal in Somerset is shrinking.

The county council is negotiating to take many services back in-house – including finance and human resources, with staff expected to transfer back next year. As the Daily Press has reported, the controversial deal was intended to save Somerset more than £200 million through sharing back-office functions, and also involved Avon & Somerset Police and IBM.

MP Ian Liddell-Grainger, who has waged a four-year campaign over the project, welcomed news that the county council is renegotiating its contract with Southwest One. But he warned the “failed enterprise” had wasted four years and cost taxpayers thousands of pounds.

A council spokesman said yesterday: “Talks between us and Southwest One have been on-going for many months. We’ve been open and transparent with staff and trade unions with a view to making changes. However, no decisions have been taken, renegotiation isn’t complete yet.”

The statement leaves key questions unanswered, including how the changes will improve current performance, and what impact they will have on the predicted savings. Bridgwater Tory MP Mr Liddell-Grainger said the talks would see many responsibilities returned to Somerset from Southwest One, including finance and HR.

“These are the essential bones of the operation,” he said. “Once they are back in the hands of the county, IBM will cease to have a stranglehold on us. It is incredibly good news. The county’s negotiators are to be congratulated. The writing is on the wall for Southwest One – and about time too. This failed enterprise has wasted four years and cost taxpayers hundreds of thousands of pounds.”

Southwest One said: “Discussions are still ongoing and no decisions have yet been made.”

An Avon & Somerset Police Authority spokesperson said: “This is a bi-lateral negotiation between Somerset County Council and Southwest One. We are not renegotiating our contract as we have a different contract to Somerset County Council, which we are happy with.”

On his blog Mr Liddell-Grainger said: “I won’t shout ‘I told you so’. But I might whisper it. This whole dreadful business has taken four years to go down the tubes and cost taxpayers a fortune.

“The Conservative leadership at County Hall is to be congratulated for talking tough to IBM. The Liberal Democrats who signed up to the deal in the first place should never be allowed to forget their crass stupidity.”

He also posted a council newsletter, which said they were now undertaking consultations with trade unions on behalf of staff who may be affected by any changes.

The Government is keen for councils and other public bodies to save money on administration, in the hope that budget cuts will have less impact on frontline services.