“we have assumed that the existing services delivered by councils will remain unchanged”

The Northern Ireland Environment Minister, with responsibility for local government, the DUP’s Edwin Poots has told the NI Assembly that he is “absolutely committed to successfully delivering local government reform in May 2011.” BBC report here. [Additional report here] According to the Economic Appraisal by PriceWaterhouseCoopers the preferred option, which would incur one-off costs of £126.6million, has “a projected saving of £438million over a 25-year period.” Which may seem slightly dubious given the lengthy time-scale involved.. The detail of the financial analysis [pdf file] reveals that the annual Local Government Costs are expected to rise from £623.2million to £763.4million while the annual Central Government Costs would fall from £138.5million to £5.1million. They’ve still to work out what to call all of them though.. and then there’s the issue of Council debts. Adds Mark Devenport has some related thoughts. Update Hansard record of ministerial statement and debate.From the financial analysis [pdf file]

5.53 The following comments are made in respect of these costs:

?? Local Government Costs – we have assumed that the existing services delivered by councils will remain unchanged, however the functions transferred from Central Government plus the new functions that councils will take on add approximately £140.2 million to local government expenditure;
?? Central Government Costs – these costs, within central government, currently cost approximately £138 million, however this reduces significantly as functions are transferred to local government. The cost of £5.1 million remaining is in respect of the component of Planning Service which will remain in Central Government;
?? Increase in Local and Central Government costs – the overall costs of Central and Local Government increase from £761 million (i.e. £623.2m + £138.5m) to £768.5 million (i.e. £763.4m + £5.1m) due to the cost of enhanced civil contingencies, community planning and the additional costs of the delivery of local planning;
?? Regional organisations – the cost of the regional organisations increases by over £2.25 million reflecting the additional cost of audit and enhanced role proposed for the Local Government Association;
?? Transition Costs (Annual) – these are applied equally across all ‘Do Something’ options and refer to additional costs which will be incurred on an annual basis, such as: salary harmonisation; senior staff salary increases; councillor remuneration increase; councillor development costs; costs of a standards committee and NI Ombudsman (Commissioner for Complaints) costs;
?? Transition Benefits (Annual) – these are applied equally across all ‘Do Something’ options and refer to benefits which will be incurred on an annual basis, such as: savings from reduced numbers of senior staff and councillors; reduced audit fees and savings from insurance premiums;
?? Transformation Benefits (Annual) – these benefits apply to option 3, 4 and 5 only at a rate of 2.5%, 5% and 7.5% of revenue expenditure respectively. This reflects the more progressive nature of transformation being proposed and therefore the financial benefits which can be derived from this;
?? Transition Costs (One-off) – these costs are applied equally across all ‘Do Something’ options and include items such as: winding up of legacy councils; creation of new councils; recruitment of top tier staff; severance scheme for councillors; redundancy costs for senior officers; relocation; excess fares; capacity building; and inducting staff into the new organisations;
?? Transformation Costs (One-off) – these costs apply to option 3 (at a rate of 3% of revenue expenditure), option 4 (at a rate of 7%) and option 5 (at a rate of 8.5% including an additional £8 million for the establishment of the BSO). The cost of option 5 shows the incremental nature of this option vis-à-vis option 4;
?? Total Cost of RPA functions – this shows that the cost of delivering option 2 is more expensive than option 1 on an annual basis and also includes a significant transition cost of £38 million. Options 3, 4 and 5 can all be delivered at a lower annual cost than option 1, however they incur significant one-off transition, ICT and transformation costs ranging from £53 million to £127 million. Taking option 5, it costs approximately £126.6 million to implement but could deliver annual revenue cost savings of approximately £41 million. The impact of these one-off costs compared to the annual net revenue costs on overall project viability across all options is assessed in the Net Present Costs calculation section below.