New analysis has backed up government proposals for the creation of new unitary councils in England – but new authorities must cover areas of ‘at least’ 500,000 people or more in order to save billions and free up investment into local services.
In December, the government’s English Devolution White Paper outlined plans for a radical overhaul of council structures, with government committing to end ‘two-tier’ local government, replacing 185 county and district councils with new unitary authorities in 21 areas.
Ministers have set out new unitary councils should have a population of 500,000 or more. However, they have also suggested ‘flexibility’ on this number, with district councils across the country subsequently proposing new councils with populations of 300,000 or lower.
The County Councils Network’s (CCN) new report, which draws on new data produced by PwC, reveals that replacing the two-tier system with a new wave of councils with minimum populations of 500,000 could save at least £1.8bn over five years.
However, the CCN report also shows those savings from reorganisation reduce dramatically if county and district authorities are replaced with multiple smaller councils – potentially costing local taxpayers hundreds of millions.
The analysis shows that splitting two-tier areas into 58 new unitary authorities based on a minimum population of 300,000 would cost £850m over five years and deliver no savings.
This is because the greater the number of new unitary councils and the smaller the size, the more costs are incurred from ‘disaggregation’ – the process of splitting up and duplicating county council social care services into multiple new authorities – alongside higher one-off transition costs and lower long-term efficiency savings.
CCN say the analysis backs up the government decision to include the minimum half a million benchmark, with the figures showing an ‘unsustainable’ increase in the costs of reorganisation from creating dozens more unitary authorities below this population mark.
But with the Local Government Minister Jim McMahon recently indicating proposals for unitary councils below the 500,000 population number could still be acceptable, CCN is warning that it is ‘absolutely essential’ the government now stick to the 500,000 minimum population threshold while ensuring no upper limit on the size of new councils.
The network says that failure to do so will mean the government fall short in their promise to end the ‘two-tier’ financial premium and create ‘billions’ in efficiency savings, while creating hundreds of millions of new costs for care services.
Using this data and applying different population thresholds for new unitary councils to each of the two-tier areas in England, CCN’s new report reveals:
• Replacing the two-tier system in England with 58 new unitary authorities based on a minimum population of 300,000 would cost local taxpayers £850m over five years.
• Under this scenario no long-term efficiency savings would be delivered, meaning it would be more efficient to retain the current two-tier system in England.
• This is because creating unitary authorities of this size would result hundreds of millions in additional costs each and every year from splitting up social care services into multiple smaller councils. The annual recurring cost of disaggregation could reach over half a billion pounds, while the ‘one-off’ transition costs would cost over £660m.
• In contrast, creating 29 new unitary councils based on a minimum population of 500,000 would save £1.8bn over five years, and an annual saving of £500m thereafter. This is because annual disaggregation costs reduce dramatically by almost three quarters (73%), while one-off transition costs are 28% lower.
• The level of savings increase further if a minimum population threshold of 600,000 was applied, resulting in a net-saving of £2bn over five years from creating 27 unitary councils. The savings increase further if all 21 two-tier areas were replaced with single unitary councils, with a net-saving of £2.9bn over five years.
Cllr Tim Oliver, Chairman of the County Councils Network, said: “Today’s new analysis by the County Councils Network (CCN) shows local government reorganisation could unlock billions in efficiency savings to be reinvested in frontline services. But it can only do this if new councils have populations of at least of 500,000 or more.”
“While it may be necessary for some areas to create more than one new council, this analysis shows that splitting county councils into multiple small unitary councils with populations as small as 300,000 will create hundreds of millions of new unsustainable costs, piling further strain on already under pressure care services.”
“It is absolutely essential that the government now stick to the statutory criteria they have set out, treating the 500,000 as a minimum not an optimum population scale. This will ensure we create new councils with the scale and capacity to deliver substantial savings to be reinvested in frontline services to the benefit of local taxpayers. Failure to do so could mean the government fall short in their promise to end the ‘two-tier’ financial premium.”
“CCN are not being dogmatic over whether an area chooses to reform into one or more unitary authority. It is ultimately up to local areas to choose which option to pursue, considering both the financial implications and other impact factors. However, they must do so mindful of the costs and risks involved in the reorganisation process.”
