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Welsh local government mergers could cost £268m

The upfront costs of local government mergers in Wales could cost as much as £268m, a new report by the Chartered Institute of Public Finance and Accountancy (CIPFA) has revealed. 

Commissioned by the Welsh Local Government Association, SOLACE Wales and the Society of Welsh Treasurers, the study stated that the cost would be offset against potential savings of £65m a year across all councils after a three year period. 

However, the study found significant differences in the costs of mergers for different local authorities with a variety of local factors needing to be taken into account to properly understand potential costs. 

CIPFA Wales evaluated a number of areas where the costs of transition and recurrent savings are likely to be significant. These included people change costs, including redundancy, of up to £158m; property, systems and other change management costs of around £54m; and income forgone due to council tax harmonisation of at least £57m. Meaning the upfront costs of reorganisation across the whole of Wales could range between £160m and £268m. 

Rob Whiteman, CIPFA’s chief executive, said: “The evidence suggests that the finance profession in particular will need to be keenly aware of the risk management issues of undertaking large structural change whilst simultaneously continuing to deliver on prolonged reductions to council budgets. 

“If council mergers are to deliver for the public, politicians must undertake thorough due diligence and provide a rigorous evidence-base for decision-makers to determine the robustness of the Welsh Government’s ambitions.” 

The report provides the strongest evidence-base so far on the transitional costs, the recurrent costs and the expected benefits that will accrue from the most ambitious programme of local government reform since 1996. 

Cllr Aaron Shotton, WLGA deputy leader and finance spokesperson, said: “Over the next three years alone, local government will be absorbing budget shortfalls of around £900m and I hope policy-makers and politicians alike will reflect on this piece of work and begin to address the many questions that arise from it.” 

A Welsh government spokesman added: “We simply cannot afford to miss this opportunity to change the shape of our councils and to drive funding into improving frontline services. 

“There is a significant cost to doing nothing.” 

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