Reorganisation in counties must be based on evidence

By James Maker | 20 February 2018
  • James Maker

In the wake of recent events in Northamptonshire it has emerged that Deloitte has been commissioned by district and boroughs, with the input of MPs, to undertake a study on reorganisation. This development isn’t a surprise. The issuing of the Section 114 notice by the county may have hastened the commission, but proposals have long been mooted.

Reports suggest a two-unitary model is regarded as the default option if Max Caller, or Government itself, recommends structural reform. But does reorganisation in itself offer a ‘solution’ to the financial challenges in Northants, and what does it mean for the wider position of county councils?

Reorganisation offers scope for savings that could help ease the financial pressures. An independent study undertaken by EY for the County Councils Network (CCN) showed that over a five-year period savings of between £86-£106m could be amassed for a county the size of Northamptonshire if all councils were merged into a new single unitary. If two unitaries were created, the savings profile would fall to £42-63m.

It’s also crucial to consider the timescales for when any savings are likely to be realised. Under prudent estimates, EY outlined it would take over two years to achieve any financial ‘pay back’ from a county unitary, while a split two unitary proposal would take over three years.

The average county faces a funding gap of £69m by 2020/21. Consolidated treasury management and reserves provide some additional financial headway. But the evidence suggests a two-unitary solution is unlikely to meet the projected funding gap and place a county on a more sustainable funding platform within a sufficient timescale.

Beyond the finances, we also have to consider whether splitting strategic services such as adult and children’s social care presents undue service risks and whether, over the long-term, successor authorities are best placed to promote integration with health, and drive housing and economic growth.

In social care, for example, minimising payback timescales, disruption, instability, and transitional disaggregation costs will be crucial to ensuring any potential savings are secured.

Moreover, economic and housing growth is far from homogenous in county areas, often defined by the extent of rurality and urbanisation. The interdependence between a mix of both rural and urban geography, high and low economic activity, housing growth, and diverse service needs is therefore crucial.

Proposals that under-bound urban centres will not create thriving economies and desperately needed housing, nor promote an equitable distribution of business rates. If reform was to take place, evidence points towards larger authorities built around existing county boundaries that can provide sufficient scale and capacity to collaborate and become self-sustaining.

Some will point to Dorset and suggest these proposals support the conclusion of a two unitary solution in Northamptonshire and other counties. But this proposal is unique in several ways and the outcome highlights several lessons to consider for any future reforms.

For instance, the financial benefits are skewed towards the conurbation, partly because of Christchurch leaving the county council boundary. This demonstrates that even disaggregating a small area of a county (in this case 2% of landmass and 11% of the population) leads to additional costs. There’s no doubt that the involvement of neighbouring unitaries, seeking to significantly increase their scale, has been the critical factor that has supported this small disaggregation to make it more financially feasible while reducing service continuation risks.

Dorset’s proposals show a considered process can arrive at an arrangement that suits local partners. Northamptonshire, however, looks likely to be a hastily drawn together deal driven by politics and recrimination. This is not to dismiss concerns over Northamptonshire CC. The leader has readily admitted past failings and we rightly await the findings of Max Caller’s report.

A final decision where politics is placed above evidence and long-term sustainability should not be the answer, whether dealing with the position of Northants or considering reform elsewhere to meet severe financial pressures.

For those wishing to pursue change, reorganisation may be part of the future of local government in two–tier counties, and it will only deliver long-term sustainability if it is built around evidence, not short-term fixes. It’s in this vein that Dorset, Oxfordshire and Buckinghamshire CC’s have approached their bids.

We can only hope the Deloitte study presents the full range of evidence available and ministerial judgement on any proposal, or intervention, is taken in the wider context of the long-term challenges facing local government.

In the immediate term, support for councils facing severe and in many cases unique financial challenges should be the focus, alongside creating the conditions for sustainable local government through business rates retention, the fair funding review and adult social care green paper.

James Maker is head of policy and communications at the County Councils’ Network

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