On Thursday 15 January 2026, the Local Government Association hosted a webinar focused on helping councils prepare financially for local government reorganisation (LGR). As councils await their LGR decisions, the session explored how to prioritise financial management to ensure a successful transition.
The session was chaired by Louise Smith, Senior Devolution and LGR Coordinator at the LGA. Delegates heard first from Barry Scarr, Finance Improvement and Sustainability Associate at the LGA and former Chief Financial Officer in several councils including Northamptonshire County Council as it went through reorganisation. The second presentation was delivered by Councillor Gareth Dadd, Deputy Leader and Executive Member for Finance and Resources at North Yorkshire Council, who offered political leadership insights from North Yorkshire’s journey through reorganisation.
Financial governance and practical preparations for LGR
Speaker: Barry Scarr, Finance Improvement & Sustainability Associate, LGA
Barry began by stressing the importance of clear, transparent financial governance throughout the LGR process:
- Member engagement is essential. Councils need a coherent plan for scrutiny and decision‑making, drawing on learning from areas that have already been through LGR.
- During LGR in Northamptonshire, councils used member task‑and‑finish groups for major issues such as splitting budgets and setting new council tax levels, ensuring member buy‑in and robust challenge.
- Communications and engagement plans must demonstrate transparency to members, staff and the wider community.
- All key decisions should be recorded within the programme management office (PMO) to support scrutiny and ensure alignment across workstreams.
Section 24 directions
Barry explained that a Section 24 Direction is a statutory measure issued by government during LGR that requires predecessor authorities to obtain approval from the new shadow authority or transition body before entering certain contracts or disposing of assets.
He advised:
- Agreeing a joint scheme of delegation between the shadow authority and the predecessor councils early to avoid bottlenecks or delays.
- Being aware that councils already under intervention or receiving Exceptional Financial Support (EFS) may be exempted from Section 24 Directions, as seen in Surrey.
Managing financial risk
Barry covered several areas requiring early attention:
- Contract registers across councils are often incomplete or inconsistent. Strengthening them early helps reduce risk and may reveal opportunities for consolidation and savings.
- Whereas setting of council tax is mathematically prescribed by MHCLG, council tax discounts and local council tax support schemes (LCTS) can vary widely between councils and require early analysis.
- Borrowing and loan portfolios, including existing and planned debt, loan types and maturity programmes, must be fully understood. This is especially important when a county will be split. Splitting market loans fairly can be complex and contentious.
- Dedicated Schools Grant (DSG) deficits are a significant issue for many upper-tier councils; Barry noted that the Department for Education can provide helpful support and advice on this topic.
Delivering savings and maintaining focus
Once an LGR business case is approved, government will continue to monitor delivery. Barry emphasised:
- The need to prevent scope and budget creep within the implementation programme.
- The importance of a clear understanding of what can be delivered on day one, with more transformative changes or ambitious savings phased in later.
- The necessity of a robust medium‑term financial plan for the new council.
- The value of internal challenge and gateway checks, ideally through scrutiny or internal audit teams.
- The value of engaging external auditors early and prioritising clearing outstanding accounts before vesting day to avoid creating a backlog for the new audit committee.
Workforce and data quality
Barry pointed out that staffing and data issues often present some of the biggest challenges:
- Councils should ensure they have clean establishment lists that match approved budgets.
- Differences in vacancy factors and reliance on agency staff across predecessor councils require careful explanation and alignment, so that the new authority can start with a clear list of staff.
- Data quality issues – especially around contract registers, staffing data, and information governance for split systems – often are difficult to resolve later, so put time into getting this right early on. Engagement with the Information Commissioner can help.
In addition to the above issues highlighted, Barry noted that IT readiness for day one is critical, including payroll, supplier payments, financial monitoring and income collection. Workload varies significantly depending on whether the model involves decommissioning existing systems or creating entirely new ones.
Political leadership, challenges and lessons from North Yorkshire
Speaker: Cllr Gareth Dadd, Deputy Leader and Executive Member for Finance & Resources, North Yorkshire Council
Councillor Dadd opened with reflections on his experience as both a district and a county councillor. Although he initially opposed unitary reorganisation in 2008, his experience of reorganisation in North Yorkshire has now persuaded him of its benefits.
Councillor Dadd provided the context that initially, North Yorkshire had had two competing LGR proposals: a single unitary model and an East–West two‑unitary model backed by most districts. As the single unitary proposal was chosen for North Yorkshire, North Yorkshire County council was designated as the continuing authority to oversee the transition.
From decision to vesting day
Councillor Dadd highlighted several key considerations:
- A strong Section 24 Direction can help prevent spending or decision‑making that could prove challenging for the new authority as councils approach vesting day.
- Early planning for council tax, redundancies and spending controls is crucial.
- Strong leadership from officers and councillors is essential throughout the transition period.
Challenges in setting up the new unitary
Councillor Dadd echoed Barry’s message that councils must be realistic about what can be achieved and avoid trying to do too much too quickly.
He emphasised that it was vital to appoint a new chief executive committed to the goals of LGR early, to provide effective strategic direction to the LGR programme and the new council.
Councillor Dadd noted that establishing a new unitary council is a marathon not a sprint: not everything needs to be complete by ‘day one’. He advised councils setting robust and realistic plans for what is necessary to achieve ‘safe and legal’ on day one, before making a longer-term plan for future transformation.
Workforce, culture and working with unions
Recognising challenges early makes them manageable. Councillor Dadd advised:
- Addressing HR issues such as equal pay, TUPE, redundancy and pay structures as early as possible.
- Building strong, open relationships with trade unions – something that had helped North Yorkshire significantly.
Financial considerations and opportunities
Councillor Dadd shared North Yorkshire’s financial approach to LGR:
- The county council chose to set aside £38 million from reserves to cover LGR costs and did not request contributions from district councils in the area.
- Council tax harmonisation was politically sensitive but successful, achieved over two years with cross‑party support through a member working group to deal with some of the more difficult issues.
- Additional savings emerged unexpectedly once the councils’ finances were examined more closely, such as business rates reserves and collection rate assumptions.
Importantly, North Yorkshire did not need to undertake budget disaggregation, which simplified the process. This will not be the case in all areas going through LGR.
Financial savings through LGR
Councillor Dadd reported that North Yorkshire had achieved £68 million of recurring savings through LGR. The key areas in which saving opportunities were found included:
- procurement and commissioning
- energy and insurance
- harmonisation of charges (e.g. parking, leisure)
- service efficiencies across environmental health, trading standards, and parks.
Property savings were smaller than might be expected but still significant.
What went well — and what remains challenging
Successes included:
- a smooth vesting day where the public noticed no disruption
- clear and evidence‑based savings
- strong teamwork and limited HR issues.
Continuing challenges include:
- cultural change and lingering perceptions of a “takeover” from the county council
- explaining locality arrangements
- ongoing IT integration issues.
Councillor Dadd concluded by acknowledging the uncertainty that LGR poses, but encouraged councillors to embrace the opportunities that it brings too, describing it as “one of the most fascinating and interesting bits of work” in local government – but one that requires sustained commitment and leadership.
Questions and answer highlights
Resources
- The slides, webinar recording, and FAQs will be available on the LGR & Devo Hub.
- See the LGA’s recent LGR finance essentials guide ‘Accounts and audit requirements through the LGR process’.
- See the LGA’s recent LGR finance essentials guide ‘Ensuring strong financial governance and financial sustainability in the lead up to LGR’.
- See MHCLG’s list of preparatory activities for councils to be doing whilst they await their final decision.
- See a list of LGR related risks and how to mitigate them, produced by the LGA, MHCLG and sector partners
- Stay tuned for upcoming webinar sessions on LGR and devolution.
- Sign up for the Devolution and LGR bulletin to stay updated.