Reorganisation can damage front-line services

Senior politicians in Wales are increasingly vocal in their desire to consider a reduction of the 22 Welsh local authorities. It is argued that fewer councils will save money by doing the same with less.

Since the Beecham Review local government has been urged to ‘join-up’ and make the connections with each other to enhance service delivery. However, policy-makers remain concerned that such voluntarism has yet to really take hold. Invariably, where voluntary compliance is perceived to be failing, central governments turn away from ‘softer’ measures and draw upon legislative powers to mandate structural change.

Reorganisation of local government has long been a default response of UK central government to the aspiration to improve coordination of public services. While the coming era of fiscal austerity will undoubtedly increase the pressure towards local government reorganisation, numerous questions about the effects of such large-scale restructuring remain. Can the costs of the process of reorganising be recouped? Are bigger units of government really more cost-effective? What are the implications for local democracy?

The optimum organisational size for the delivery of public services is one of the most enduring issues in the theory and practice of public administration. Policy-makers across the world continually debate the merits of alternative local government structures in terms of their consequences for costs and performance.

In recent times, central governments in several countries have enacted or considered reorganisations of local government on the grounds of efficiency. For example, in Denmark, the number of local government units was recently reduced from 270 to 98, and there is on-going discussion about another reduction in the future. Similarly, in Australia and Canada, debates have long raged about the amalgamation of local governments. In Eastern European countries, such as Poland and the Czech Republic, municipal consolidation has also become a common aim of central policy-makers.

All of these reforms assume that the scale economies accruing to bigger units of government translate into better, less expensive services. However, despite the proliferation of programmes for local government reorganisation, politicians’ rhetoric on cost-savings and service improvement is rarely backed up by hard evidence.

Several studies have examined the transition costs associated with reorganisation. Research by Michael Chisholm, a member of the Local Government Commission in the 1990s, showed that the financial cost of the 1994-5 reorganisation of English local authorities was greatly underestimated and that it was unclear whether this was ever recouped through any subsequent efficiency savings. A recent study by Cardiff Business School suggests that the recent voluntary process of restructuring amongst some English county councils led to a rise in expenditure of about one per cent and a corresponding decline in service standards of about 5 per cent.

It is possible therefore that the main risk of restructuring is the damage to front-line services rather than the impact on council budgets. Medium-term or long-run gains in performance simply may not be sufficient to compensate for the losses associated with the reorganisation process.

Although there is strong evidence to suggest that bigger units of government benefit from lower administrative overheads, empirical studies published around the time of the last round of local government reorganisation in the 1990s present inconsistent evidence on size and council effectiveness. A recent report by Cardiff University’s Centre for Local and Regional Government on behalf of the Department of Communities and Local Government found the relationship between population size and local authority performance in England to be a complex mosaic of insignificant, positive, negative and non-linear effects. For some local services bigger may be better, while for others small may be more beautiful – at least in terms of effectiveness.

Even if the hypothesized scale economies reaped from reorganisation were uniform, there is another influential strand of literature on local government size that suggests that as scale increases important virtues of local democracy are lost. Theorists of participatory democracy have long asserted that small scale government is best for citizen engagement with politics and policy-making.

Indeed, a commitment to making local services more citizen-centred has been at the heart of the Welsh Government’s public service reform agenda. To be truly democratically responsive, the argument goes, councils, or rather councillors, must be close enough to the communities that they serve for each to develop a healthy familiarity and respect for the other. Survey data from several West European countries points towards a strong negative relationship between council size and community-orientated outcomes. Citizen satisfaction, trust in government and participation are all higher in smaller units of government.

Thus, although it is conceivable that larger councils may be able to devote more resources to building community capacity or empowering local people, it is likely that these efforts will be focused on overcoming a democratic deficit that may simply be absent in smaller authorities.

So what does all this mean for the prospects for local government reorganisation in Wales? First, it indicates that a long-term perspective is required to assess whether the short-term financial and performance costs of reorganisation are likely to be recouped. The multiple reorganisations of Local Health Boards in Wales serve as a reminder that structural change is too often a default response to short-lived political priorities.

Secondly, if, as the available evidence implies, economies of scale vary across services then it may be the case that alternative structures are required to reap the benefits of large or small size for each of the major local public services for which the Welsh Government is responsible.

Finally, and perhaps most importantly, all of this highlights that political judgements about trade-offs between efficiency and democracy are inevitable. The extent to which those judgements reflect the will of local citizens is a matter of political leadership, both from the centre and the local community.