Financial viability of Welsh council mergers ‘being ignored’

13 Apr 17

Warnings over the financial viability of plans to merge Welsh councils are being ignored as costs of implementation remains unclear, CIPFA has claimed.

In a submission to the Welsh Government, CIPFA highlights that the proposals for voluntary council mergers give no mention to the cost of reorganisation.

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.

Concerns have been raised regarding 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. 

Don Peebles, head of devolved nations at CIPFA, 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 whilst improving outcomes.

“Council mergers could help Welsh local authorities streamline resources and boost performance.”

But Peebles warned: “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.”

He urged the Welsh government to stake stock of the costs in the context of the budgetary pressures it faces.

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