Lancashire councils reorganisation costs shock

A radical revamp of Lancashire’s councils could end up creating a system that is £11m a year more expensive to run than the one it replaces – in spite of one of the aims of the change being to save money.

That is the conclusion of an analysis carried out ahead of a forthcoming shake-up that will see all 15 local authorities in Lancashire scrapped and just a handful of new ones introduced in their place.

The research found that the government-ordered overhaul will be cheaper to operate only if three or fewer replacement councils are established across the county – because they would each have more responsibilities than many of those they would replace.

However, several of the existing authorities are known to favour the creation of four or even five new councils.

There is also a huge variation in set-up costs depending on how many new authorities are brought into being – with four estimated to come with a bill of more than £41m. 

The results of what was described as a “high level” financial assessment of the various possible scenarios were featured in a report presented to Lancashire County Council’s cabinet.

The analysis – supplied by the County Councils Network (CCN) – predicted that the establishment of four new councils would have a recurring additional annual cost of £11.5m after five years.   A five-council option was not modelled, but, based on the overarching analysis, would be more expensive again.

In contrast, three new authorities were forecast to save £6.4m in running costs after five years, while two would generate savings of £21.2m and just one – for all 1.5 million Lancashire residents – would be £45.3m less costly than the current arrangements.

The reason four or five new councils could end up costing more than the 15 existing ones is because they would each be standalone – or ‘unitary’ – authorities, responsible for delivering all of the services in their patch.

Under the current ‘two-tier’ system, Lancashire County Council looks after big-ticket items like social care, schools and highways across the vast majority of the county, while the 12 district authorities – Preston, South Ribble, Chorley, West Lancashire, Fylde, Wyre, Lancaster, Ribble Valley, Burnley, Hyndburn, Rossendale and Pendle – take care of the likes of planning applications, parks and waste collection in their own patches.

Blackpool and Blackburn with Darwen councils are already unitaries and so provide the full range of local services in those areas.

Based on data produced by PricewaterhouseCoopers, the CCN has warned specifically of the additional cost of splitting up adult and children’s social care services into “multiple smaller councils”.

In an interview with the Local Democracy Reporting Service (LDRS) last month, local government minister Jim McMahon said money was being swallowed up by what he described as the “two-tier premium” of having such a complex council set-up across Lancashire.

The government has indicated that the replacement councils it wants to see created should have populations of at least 500,000 people, which, in Lancashire, would lead to the creation of a maximum of three new authorities – and so generate some level of saving, according to the CCN assessment.

However, ministers have also said they are prepared to be flexible over population size, so that the new council areas “make sense”.

Several Lancashire councils have already expressed a preference for four or five new authorities to be created as part of the reorganisation process.

Chorley has backed a tie-up with South Ribble and West Lancashire, which would necessitate four new councils in all – a suggestion likely to be supported by South Ribble at a meeting this week.

Pendle has said four or five new authorities are needed to protect “local democracy”, while Burnley wants five new councils created so it can ensure that it does end up within the same unitary area as Blackburn with Darwen.

While opposed in principle to the changes, Ribble Valley is known to favour joining Preston and Lancaster if changes are forced upon it – another scenario that would require a four-way split across the rest of Lancashire.   Preston has floated the idea of that same footprint, although has not formally proposed it.

All 15 Lancashire leaders answered a government call for an “interim plan” last week by writing to Jim McMahon to tell him that there was not yet any consensus amongst them – and simply setting out the full spread of preferences and possibilities of there being between one and five new councils in the county after reorganisation.   They also asked for a commitment to help with the “additional capacity” required to support them through the process of drawing up options.

The CCN assessment also estimated the “transition costs” for establishing different numbers of new councils, with the total for four of them being almost double that for one – £41.3m, compared to £22.2m. Two would come in at £28.6m while three would cost £35m.

The county council report stressed that the establishment and running cost figures were derived from “detailed assumptions [that] have not been made available” – and so “[do] not represent a full and final financial analysis”.

CCN chair Tim Oliver said of his organisation’s national-level analysis of the cost of redrawing the local authority map:  “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 500,000..

“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.”

The Ministry of Housing, Communities and Local Government did not respond to a request for comment on the possible cost implications of reorganisation in Lancashire.

FINANCIAL COSTS ‘NOT THE ONLY CONSIDERATION’

The Lancashire County Council cabinet report containing the cost analysis of reorganisation – which did not attract any discussion at the meeting where it was presented – also noted the risk of “service fragmentation” from splitting up those currently delivered at a near Lancashire-wide level.

The changes could potentially put the quality and delivery of [such] services at risk”, it said.

The document added:  “This is particularly relevant to both adult and children’s social care, where there is central management of service delivery across a pan-Lancashire geography.

“Lancashire County Council’s children’s social care services are rated good by Ofsted, an ambitious programme of establishing new social care provision is being established, the council is working on an improvement plan in special educational needs and disabilities (SEND) and an ambitious transformation programme in adult services is under way.

“The county council has established relationships with care providers and deep relationships with the National Health Service and the [Lancashire and South Cumbria] Integrated Care Board. Disaggregation of these services will present a challenge to this positive position and it will be important to minimise disruption.”