Principle 5 – Secures financial efficiency, resilience and the ability to withstand financial shocks

Summary: This section outlines how our proposal for three new unitary authorities in Surrey will secure financial efficiency and resilience by reducing duplication, achieving economies of scale, and addressing budget pressures. The proposal is financially-viable, promising significant savings compared to the current system, despite challenges such as existing budget pressures, demand growth, and inflation. By year four, the three-unitary model is estimated to deliver savings of £22.5m annually, with a further £39.8m of savings forecast from future transformation. Over the same period, the two-unitary model could deliver savings of £39.9m annually, with a further £46.2m forecast from future transformation. Although the two-unitary model shows slightly better financial results, the three-unitary model offers parallel significant non-financial benefits, such as improved local representation and governance.

Our proposed three-unitary authority model for the future of local government in Surrey will result in significant financial benefits by reducing duplication, achieving greater economies of scale and capitalising on opportunities for service transformation and improvement.

We understand the importance of establishing new unitary authorities that are financially-sustainable and provide value for money. To ensure that reorganisation and devolution leads to lasting economic growth and high-quality and sustainable public service delivery, it is crucial that the new structure we establish is built to last.

Our work has found that our proposal for three new unitary authorities is financially viable, resulting in significant savings compared to the current two-tier system of local government. In common with the wider sector, however, each council will face financial challenges. These include:

• Existing budget pressures, set out in Medium-Term Financial Plans (MTFPs)
• Growth in demand for services, particularly adult and children’s social care
• Inflationary pressures
• Fair Funding reform

Establishing new unitary authorities in Surrey requires careful consideration of financial sustainability amidst these significant challenges. The new authorities must utilise savings from local government reorganisation to address these pressures and deliver transformational savings to maintain service quality and scope.

In this section we set out our approach for considering the financial sustainability of the proposed new unitary authorities.

To evaluate the financial viability of both options, we have considered the savings from transitioning to new unitary authorities. These savings arise from fewer elections, councillors, and senior managers, as well as eliminating duplication to achieve efficiencies in service delivery. We have then offset these savings against the costs of disaggregating upper-tier services and the costs of implementing the change, such as redundancies, new digital infrastructure, running a shadow authority, and project management. This provides us with a net cost/benefit for implementing the proposals.

Our modelling is based on assessing and analysing the 11 examples of local government reorganisation that have taken place across England since 2009, along with the analysis conducted by PwC in their 2020 report on the options for reorganisation in Surrey.

District and borough Section 151 officers have collaborated closely in the development of this financial model.

Ultimately, our work has found that our proposal for three new unitary authorities is financially viable, resulting in significant savings compared to the current two-tier system of local government. Despite the potential for significant annual savings through reorganisation and transformation, we note that much of this will be needed to deal with budget pressures forecast to come down the line. Stranded debt remains an unresolved issue, on which we would welcome a discussion with government.