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ABSTRACT
Proponents of local government amalgamation in the UK argue that it improves the financial sustainability of organizations by reducing overall expenditure levels and improving fiscal health. However, critics suggest that structural change is beset with disruptive and unanticipated costs that can take years to overcome. This paper reviews what is already known about these issues in the English and Welsh contexts, before going on to analyze whether the amalgamations of several English counties undertaken in 2009 have led to improved financial sustainability. This analysis suggests that the costs of restructuring have not been recouped by the amalgamated governments, and that those governments perform poorly against indicators offiscal slack and balance. The implications of these findings are discussed.
1. INTRODUCTION
In the United Kingdom (UK), the centralization of power in the national state has meant that amalgamations of local governments are usually a matter of high policy rather than community determination as in countries with more dispersed fiscal authority, such as the United States or Germany. Coupled with the power to effect such structural changes, in the UK the local government system has been an on-going predilection for centrally-mandated amalgamations of local government, typically in response to the perceived inefficiency of smaller local governments (John, 2010). In fact, local governments in the UK are the largest within Europe, and have been getting bigger and bigger throughout the past fifty years.
Prior to the advent of devolution of administrative powers to Northern Ireland, Scotland and Wales, amalgamations of UK local governments had tended to take the form of compulsory consolidation of small units into larger ones, in an attempt to reap scale economies associated with bigger bureaucratic organizations. However, in more recent years, divergent approaches to the structure of local government have emerged in England and Wales, with greater emphasis being laid on voluntary amalgamation or the development of various forms of partnership arrangements. However, as fiscal austerity starts to bite in the UK, it is likely that there will be renewed pressure toward further rationalization of the numbers of local governments. It is therefore timely and pertinent to examine the recent experience of such structural change in England and Wales.
Does the relative level of expenditure rise or fall as local governments undergo...