CIPFA analysis of Welsh council merger

25-11-2014

CIPFA, the Chartered Institute of Public Finance and Accountancy, has today published the first rigorous and detailed study on the potential costs of local government mergers in Wales.

Commissioned by the Welsh Local Government Association, SOLACE Wales and the Society of Welsh Treasurers, the study examined in detail the impact of the proposals set out in the Welsh Government White Paper “Reforming Local Government”.

The study was undertaken by working directly with authorities and provides an overarching cost benefit analysis of local government mergers and examines both the risks and potential for savings.

As the deadline looms for those councils looking to submit an Expression of Interest (EOI) for Voluntary Merger, CIPFA have calculated that the upfront costs of reorganisation across the whole of Wales could range between £160m and £268m.

This is offset against potential savings of £65m a year across all councils after a three year period.

The study found significant differences in the costs of mergers for different local authorities with a variety of local factors needing to be taken into account to properly understand potential costs. It also considered that councils would need to carefully balance the benefits and risks of mergers given that in period of pro-longed fiscal constraint future forecasts suggest further large reductions to local government settlements. This may mean that authorities’ ability to make savings will be eroded as they respond to budget pressures and deeper cuts.

Rob Whiteman, CIPFA's Chief Executive, speaking on the report said:
 
“With over half of the UK Government’s consolidation plan still to be realised, all political leaders need to be honest with the public about what the future holds and what action is needed. Indeed in our recent Manifesto for the 2015 election, one of our calls was for all decisions on spending and services to be taken in the context of medium to long-term financial sustainability.
 
“Council mergers are one of those key decisions.  Our assessment of the financial implications of restructuring in Wales is based on a thorough evaluation of the current cost and staffing profiles of the councils that would deliver the White Paper recommendations.

“The evidence suggests that the finance profession in particular will need to be keenly aware of the risk management issues of undertaking large structural change whilst simultaneously continuing to deliver on prolonged reductions to council budgets.

“If council mergers are to deliver for the public, politicians must undertake thorough due diligence and provide a rigorous evidence-base for decision-makers to determine the robustness of the Welsh Government’s ambitions.”

In the study CIPFA Wales evaluated a number of areas where the costs of transition and recurrent savings are likely to be significant. These included people change costs, including redundancy, of up to £158m; property, systems and other change management costs of around £54m and income forgone due to council tax harmonisation of at least £57m. Meaning the upfront costs of reorganisation across the whole of Wales could range between £160m and £268m.

This was offset against annual savings in the order of £65m that will be achieved after a three year period.

CIPFA in its recent “Manifesto 2015” argued that the structure of local government and the public sector needs to change to allow services to be provided more effectively and decisions on funding to be taken at the right level.

ENDS

Contact: Matt Patterson
Press office
Office: 020 7543 5787
Mobile: 07920 104 025
Email: matthew.patterson@cipfa.org

Notes to editors

For a copy of report or for more information please contact the CIPFA press office.

CIPFA’s report will be published by the Welsh Local Government Association on Tuesday 25 November 2014:  The Transitional Costs, Benefits and Risks of Local Government Reorganisation

In October 2014 CIPFA published its manifesto for 2015 Things can only get worse: a call for sustainable public finance. The manifesto addressed some of the profound choices that future governments will need to make if they are to balance the books ensure public finances are sustainable over the coming decades.

About CIPFA
 
CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. Our 14,000 members work throughout the public services, in national audit agencies, in major accountancy firms, and in other bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, we champion high performance in public services, translating our experience and insight into clear advice and practical services. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance. We work with donors, partner governments, accountancy bodies and the public sector around the world to advance public finance and support better public services.