Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence


Examination of witnesses (Questions 220 - 239)

TUESDAY 30 JUNE 1998

MR JOHN BALLARD, MR PHILIP WOOD and MR PAUL EVANS

  220.  Civil servants have advised Ministers that it will not result in an increase in cost?
  (Mr Wood)  We have advised Ministers that it should not.

Mrs Ellman

  221.  I should like to turn to the cost of local government reorganisation. Can you take me through the costs involved from consultation to implementation and early operation? What are those costs for both central and local government?
  (Mr Wood)  Our estimate of the costs over five years is approximately £485 million in total. That can be broken down in the following way. First, the Government have provided supplementary credit approvals of £428 million to the authorities affected by reorganisation. That is intended to enable authorities to pay for transitional costs associated with reorganisation until the savings and receipts associated with that process can be realised. The other elements, which are much smaller, are: £26.3 million for the work of the Local Government Commission; £1.5 million for the Local Government Staff Commission; £1.6 million for the Local Government Residuary Body; and a £28.2 million transitional reduction grant that has been given to some authorities to ease the financial effects that cannot be readily covered. That results in a total of approximately £485 million.

  222.  What is the cost of redundancies and early retirement?
  (Mr Wood)  The £428 million of supplementary credit approvals are intended to assist local authorities to cover costs like any redundancies that arise as a result of reorganisation. That cost is part of the £428 million.

  223.  You said "intended to assist". I want to know how much redundancies and early retirement have cost?
  (Mr Wood)  I cannot tell you that because the Government do not know. The Government do not know because the figures that I give are what the Government have done and acknowledged by way of costs that they support. Local government has made bids for assistance, but we have not met them all. We are not saying that the assistance we have given will necessarily cover all their costs. That is a matter for the local authorities. The figures that I give are what central government has itself given by way of assistance to the local authorities concerned. It is not a figure for the total costs of the reorganisation which may well differ but which are not separately collected or collated.

  224.  You have not answered my question. I asked about the cost to both central government and local government of reorganisation. You are telling me that this is the money that the Government have made available?
  (Mr Wood)  That is correct. They are the only figures that we have.

  225.  Do the Government know the costs of local government reorganisation?
  (Mr Wood)  In total, no, but we think that the figures just quoted will cover the great majority of the costs involved. But we do not know the total figure. The answer to your direction question is: we do not know.

  226.  What was the original assessment made of the costs before the exercise took place?
  (Mr Wood)  I am not aware of that. There may have been an estimate of which I am unaware. I shall check it, but I do not know.

  227.  Certainly, estimates were made at the beginning. Individual local authorities were given some figures which were found to be gross under-estimates.
  (Mr Wood)  I shall see if the department has some figures. If it does I shall let you have a memorandum.

  228.  Are the Government making any attempt to establish the actual costs?
  (Mr Wood)  No.

Chairman

  229.  Why not?
  (Mr Wood)  Because there has been no need or demand for that information.

  230.  Surely, across the country there are quite a few areas that would like to see local government reorganisation. One of the key questions is: Is it value for money? The process has been fairly cumbersome. A few people have been quite upset by it. Surely, we should know the estimated cost at the beginning and whether those figures have turned out to be accurate.
  (Mr Wood)  I shall look at any estimates or figures we may have. However, you say that in some places there is still demand for change. The Government do not regard further local government reorganisation as being on the agenda at all. That underlines my point that the question may be interesting but it is not relevant from the Government's point of view, in the sense that they do not intend to go further down the road of local government reorganisation.

  231.  But in making that decision one of the relevant bits of information is whether it has been good value for money?
  (Mr Wood)  The Government have already decided that they do not wish to go down that route.

Mrs Ellman

  232.  Irrespective of what new policies may be followed, do you agree that it is a valid exercise to discover how much the reorganisation has cost?
  (Mr Wood)  If there were sufficient time and resources it would be interesting. It is a question of how much money it would cost to collect the data and whether the use to which it could be put would be worth the cost of doing it.

  233.  Do you not think that this reflects in a curious way on the Government's perception of best value? The Government wish to know what local government is doing and how it is securing best value. This was a central government initiative, yet we are told that apparently the Government do not have any plans to establish the cost of the exercise?
  (Mr Wood)  Not the precise cost.

  234.  Or the cost at all?
  (Mr Wood)  The figures that I have given establish very precisely the cost to central government. But the Government have not gone on to attempt to look back and produce a complete balance sheet of the cost to local authorities.

  235.  Does the cost that you have given include the cost of redundancies and early retirement?
  (Mr Wood)  The supplementary credit approvals that the Government provided to the local authorities were in response to bids by local authorities which included costs such as redundancies. However, there is not a directly traceable line which attaches a label to a particular sum of money for redundancies. That is not how the system works.

  236.  I also referred to early retirement. However, you say that this money was in response to that?
  (Mr Wood)  Yes.

  237.  The Government do not know whether it covers the actual cost?
  (Mr Wood)  That is correct.

Mr Flight

  238.  If one goes right back to when Peter Walker started to fiddle around with local government reorganisation, it is astonishing that there has been no analysis over 30 years of the cost benefits. The costs go quite deep. One can draw up a huge list of on-costs. I would have thought that, if nothing else, as a measure to protect against the future it would be worth having some form of unit to monitor the process?
  (Mr Wood)  There would be a cost associated with that. This matter is no longer on the Government's agenda. I think that it would be rather difficult to justify the costs to the Exchequer of setting up a unit of the kind you describe. This discussion may be a little unbalanced without explanation of the following point. It is not only a question of costs but of benefits. The Government's approach to the financing of these costs has been based very much on the belief and intention that in the long run the reorganisation, especially into unitary authorities, will be self-financing. Hence the provision of £428 million for supplementary credit approvals is by its nature an approval to borrow, not a cash grant. Moreover, it is an approval to borrow which is not backed up by financing costs passed back to local authorities through the rate support grant. It means that the local authorities themselves will have to cover the costs of the £428 million of borrowings that they have been allowed to undertake from savings that they reap from the reorganisation in the form of getting rid of overlap and spare buildings and assets. They will also reap the financial benefits that come from upfront expenditure on redundancies. There are fewer people to pay by definition as a result of the redundancies that have been paid for.

Mrs Ellman

  239.  However, the cost of early retirement will continue. You keep evading that question. What assessment has the department made of the cost of reorganisation to the remaining counties given that certain parts have been made unitary authorities?
  (Mr Wood)  The figures that I have quoted cover all the local authorities affected by the reorganisation.


 
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