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In a submission to the Welsh Government, CIPFA, the Chartered Institute of Public Finance, highlights that in proposals for voluntary council mergers there is no consideration of the cost of reorganisation and whether local authorities, with dwindling finances, have enough resources to be able to fund such reform.
CIPFA has previously estimated that the cost of the merger process could be between £159m and £268m, but despite this there is still no clear indication of how this will be funded and whether the benefits of voluntary merger will outweigh the costs.
CIPFA examined the capacity of local authorities to fund the process from available reserves, which are meant to safeguard authorities against unknown and known risks. According to figures from CIPFA, these reserves stood at £196.3m in 2015, which could fall £71.7m short of the costs of the merger process.
Commenting on the submission made to the Welsh Government, Head of Devolved Nations at CIPFA, Don Peebles said:
“Local authorities in Wales are facing unprecedented financial challenges and so it is right that the Welsh Government is examining how reform could help the sector become more efficient while improving outcomes.
“Council mergers could help Welsh local authorities streamline resources and boost performance. However, it is important that the financial and social benefits of mergers must be compared against upfront costs of reorganisation, which if funded from reserves alone, could reduce the ability of local authorities to protect themselves from future risks.
“By taking stock of the costs in the context of the budgetary pressures, the Welsh Government will be able to fully assess whether plans will ensure the long-term sustainability of services.”
CIPFA’s submission to the Welsh Government on The Welsh Government White Paper - Reforming Local Government: Resilient and Renewed can be viewed here.
In the submission, CIPFA also highlighted that to ensure local government reform is effective and that authorities can be put on a financially sustainable footing, the following should be considered by the Welsh Assembly and Government: