Insights into local government reorganisation financial planning and transformation webinar: 7 March 2025

There were two presentations – one on the theme of financial planning, and a second on broader transformation challenges and opportunities. 

There were two presentations – one on the theme of financial planning, and a second on broader transformation challenges and opportunities. 

Download the presentation slides:

• Mark Read (Cornwall Council), Insights into local government reorganisation (PPt)
• Pam Duke and Chris West (LGA FISAs), Financial planning and transformation (PPt).

There was an opportunity for questions and discussion at the end.

Pam Duke (Director of Finance at Westmorland & Furness Council) shared her insights on the importance of being realistic about capacity, the need for strong programme management and the complexities of disaggregation and integration.

LGR will comprise of different programmes of work overtime:

• Establishing the LGR programme office, including governance and leadership arrangements.
• ‘Ending well’ - closing down the legacy councils.
• Establishing the new shadow council/s – elections, interim officers, budget setting, constitution.
• Day One – transfer of functions and staff, being ‘safe and legal’, ensuring service continuity.
• Year One – getting the basics right, doing the ‘boring’ well.
• Year Two… - efficiencies, change programmes, ambitious transformation programmes.

How to approach disaggregation:

• Cumbria County Council was disaggregated into two new unitary councils and a new police and fire commissioner.
• To disaggregate the budget, it helps to approach spend and funding separately – these two sets of figures might look quite different.
• Try to understand the reason for any differences between actual spend and funding and identify potential efficiencies.
• Funding is always complex to model – e.g. harmonising council tax, business rates, grant allocation, fees and charges. Councils will now have to take the national local government funding review into account.
• Integration is equally complex – pulling together different policies, approaches and services is challenging.

Chris West (LGA Finance Associate) set out other key issues to consider throughout the financial planning and transformation process. 

How to approach financial planning and transformation:

• A strong and agreed approach to governance – who is managing and overseeing the programme? Separate groups of leaders and chief execs, or a joint working group?
• Organise the programme so that statutory officers can make the most of their differing strengths, skills and experience.
• Good working relationships between Section 151s will be critical to working through difficult financial decisions.
• Set out agreed principles early on so there is consensus around what is acceptable in the closing down of the legacy councils, e.g. use of reserve, disposal of assets, procurement of new contracts, New capital investment.
• Have a robust approach to delivery of potential savings and wider benefits realisation.
• Where benefits relating to unitarisation  have been realised, this is often about streamlining service provision and maximising the benefits of having all the previous two-tier services in one place – e.g. customer experience improvement, streamlining systems, lower people and wage bills.
• Many authorities plan to apply for Exceptional Financial Support (EFS) in Year 1 to pay for up-front transformation costs: authorities need a plan for how this would be paid off over time.

What to watch out for:

• LGR is not a panacea – it won’t automatically solve any existing issues.
• Outstanding audit and account issues will make financial planning very difficult.
• Organisational culture will overhang from legacy councils and there needs to be active support to bring together one team, including officers, members and stakeholders.
• People will be very concerned about their job stability – managing staff and wellbeing is key.
• Fill the communication gap – have consistent and regular messaging about what you’re doing, why you’re doing it and when.
• Don’t let LGR distract from service delivery now – be realistic about capacity.

Mark Read (Service Director and Deputy Chief Operating Officer at Cornwall and previously Head of Performance, Exchequer & Revenues in Restormel Borough Council) provided a detailed account of Cornwall Council's journey to becoming a unitary authority. He shared lessons learned and practical insights from their experience.

Timeline and key milestones:

• November 2006: The government issued a white paper calling for expressions of interest and bids for becoming unitary authorities.
• January 2007: Cornwall submitted two bids, one led by the county council and the other by the districts/boroughs.
• March 2007: The county council's bid was approved for public consultation.
• July 2007: The bid was approved by the government, with the new council set to come into effect from April 2009. This provided a 20-month lead time for planning and implementation.

Unitary promises and objectives:

The bid included several promises aimed at improving service delivery and community engagement:

• One-stop shops: Establishing 23 one-stop shops across Cornwall to provide easy access to services.
• Electronic access to services
• Stronger community leadership and networks: creating a network of community networks to ensure the new, larger council remained close to its residents.
• Improved partnership working: building collaborative relationships with over 200 town and parish councils.
• Consistent policies and approach: standardising policies and service delivery across the county to ensure fairness and efficiency.
• Value for money and savings: The bid estimated one-off costs of just over £19 million, with annual savings of over £17 million, promising a return on investment within two years.

Programme governance and implementation:

Cornwall established a robust governance structure to oversee the implementation:

• Joint county and district team: a collaborative programme management team team made up of officers from the county and districts.
• Implementation Executive: a mix of officers and members to track progress, ensure alignment with the new council's objectives and uphold commitment to the agreed principles around existing assets.
• Joint scrutiny arrangements: political scrutiny of the implementation programme to ensure transparency and accountability.
• Stakeholder engagement: a comprehensive engagement programme to keep stakeholders and the public informed.
• External challenge and support: involvement of the Audit Commission to provide external oversight and support.

Objectives before Day One:

Several critical deliverables were achieved before the new council went live on April 1, 2009:

• Appointment of Chief Executive and Corporate Directors
• Setting the budget
• Appointing heads of service to ensure operational readiness.
• Establishing the promised one-stop shops to provide easy access to services.
• Ensuring a smooth transfer of staff to the new organisation.

Challenges and reflections:

Mark highlighted several challenges and reflections from Cornwall's experience:

• Balancing service standards: harmonising service standards across the county – everyone wants to take the best from each consistent council, but it is unaffordable to have the highest ‘gold’ standard across every service.
• Cultural integration: managing the cultural integration of staff from different councils, each with its own way of doing things, takes substantial time and energy.
• Communication and engagement: effective communication and engagement with staff and stakeholders is important to manage expectations and address concerns.
• Sustainability for Day One: make sure the essentials work for paying and collecting money, being contactable and delivering essential services.

Ten key learnings related to LGR financial planning and transformation:

The speakers and chair (Graham Farrant, Chief Executive at BCP) agreed on several key themes:

How close were the business case projections to the actual realised benefits? 

• Councils are likely to be ambitious in making their business case to government – but it is important to not oversell potential efficiencies and savings.
• Measuring actual realised benefits is difficult in an environment where you’re making savings – are they cuts, or savings because of reorganisation and transformation?
• External factors and service demand will likely change between the submission of the business case to the new authority being in place, which makes measuring the benefits more difficult.

Was there formal agreement on the use of resources, disposal of assets etc? Or were these voluntary, informal agreements?

• Initially agreements on how to work together will be voluntary. Get leaders and senior officers in a room to lay the ground rules about how to work together.
• A memorandum of understanding/statement of intent is useful for committing to agreed principles but is not ultimately legally binding.

Any advice on how to model the financial framework for the new council?

• The approach is usually based on combining existing data from the constituent authorities and then benchmarking across the sector to sense check that the combined expenditure and income estimates look reasonable.
• External consultants are useful for advising around this, alongside the knowledge and expertise from service managers and your finance teams.
• It’s about coming up with the best estimates you can and refining as you progress.

To what extent did LGR create the opportunity to rethink service planning and delivery, not just bring them together?

• Everyone wants the new unitary to take on the best service quality from across the different councils – but it is unaffordable to have a ‘gold’ standard for every service.
• Focus on supporting members to understand different realistic options for service delivery – this is ultimately a political decision.
• Be realistic about capacity for transformation within the council’s reorganisation programme, but also across the sector – consultants also have finite capacity, and will have to make decisions about who, what and when they can provide support.

How did you approach disaggregating the balance sheet, and how has it worked out?

• To an extent, disaggregation of assets is simply determined by geography.
• In some cases, strategic assets may sit in ‘the wrong place’, and an alternative solution is developed (e.g. a separation of ownership and use).
• The more tricky parts of disaggregation relate to capital financing, looking at all of the loan portfolio to ensure equity on maturity and interest rates.
• It can take a long time to go back through debtors and creditors to make sure they are all apportioned to the right authority.
• Different bases for apportionment can be applied to different parts of the balance sheet e.g. population, road length. There isn’t usually a right and wrong answer – it’s a question of agreeing amongst the stakeholders ‘what’s the least worst option’ of apportioning items and moving forward.
• Ensure decision making is documented (again good programme management is key). Set principles early on - get agreement between Section 151s about the methodology, and document this in the legal report. External audit will want to see that you’ve stuck to the agreed principles around disaggregation.

If contracts (e.g. waste disposal) are up for renewal and need to be retendered, with a new contract extending beyond the date of a new authority being created, what is the right approach?

• Authorities will need to consider contracts on a case-by-case basis, looking at the potential impact on the new authority and its residents – there’s not a one-size-fits-all approach.
• For example, in Westmorland and Furness the waste contact continued to sit with one authority, as legally it was not possible to split it in the short/medium term. Contracts will vary in how restrictive their terms are. 

Did you have to make voluntary or essential redundancies?

• In Cornwall both were required, although voluntary redundancies were taken first.
• Note that redundancy costs may be significant in the short term (e.g. redundancy costs relating to combining senior management teams).

Was there any modelling involved in the additional costs of changing centres of operations? (For example, the additional strain on waste disposal units from travelling further.)

• In BCP - a lot of additional costs have become apparent subsequently, which were not fully modelled. This includes additional travel claims for colleagues who have been moved to new base locations and through closing down remote buildings.
• In Cornwall, there weren’t any significant changes in the centres of operations at the outset. However, any subsequent changes were fully modelled regarding cost/impact/efficiencies to inform the relevant business case.

Any insights on housing? (ie. tenants will have a new landlord - does that require a tenant ballot as we had to do transferring back from an ALMO)

• The new BCP unitary merged an internal housing service (Bournemouth) and an ALMO (Poole) into a single service, which required significant consultation and subsequent restructure, with associated redundancies, single system etc.

What period did you use for council tax harmonisation?

• Cumbria harmonised council tax in the first year to maximise income – the difference was not hugely different, which made it more politically tolerable to do on a relatively short time scale. Practically, this was effective as it was difficult to explain the variation to residents.
• BCP originally planned to harmonise council tax over five to six years, but subsequently accelerated that and completed harmonisation in two years.

Did BCP or Cornwall get any capitalisation directions to cover the transition - debt or flexible use of capital receipts?

• Neither BCP or Cornwall received extra resources, or capitalisation to cover the transition costs.
• BCP did discuss this with DLUHC at the time, but they made it clear that the only route to access capitalisation was through the Exceptional Financial Support system, which required government governance and CIPFA financial review etc. The downsides of this process far exceeded the potential benefits.