Jury still out on local government amalgamations

September 6, 2012

The recent publication of the reports on the amalgamation of the Two Tipperary County Councils and the City and County Councils of Limerick once again brings some focus on the challenges of delivering 21st century public services through 19th century structures. It also raises the question on whether the amalgamation of local authorities can generate the savings which, notwithstanding the considerable efforts of the current local government system since 2008, will be a necessary feature of the local public service environment in the coming 3-5 years as the overall economy is re-structured to allow it compete in the international economy.

This is not just an issue in Ireland. Across the OECD local government systems have seen considerable merging of local authorities. In some respects Ireland has come relatively late to the party, particularly when viewed in the context of reforms in countries as diverse as New Zealand, Israel, Denmark and the Netherlands.

That said, a common feature of amalgamation in most other OECD countries is that a whole of system application has been applied, more often than not within the context of a general re-structuring of the local, regional and national public administrations. In some countries the changes have been dramatic and transformational, in others, amalgamation has been more nuanced but what is generally found is that the local re-structuring has occurred within a framework where decentralisation of national public services to the local authority system has been a central pillar in the reform process. Thus the argument is made that, in the context of such decentralisation where smaller authorities may not have the professional or technical wherewithal to deliver services, a bigger unit of local government is required.

Also argued by those promoting the idea of bigger units of local government comes the view that bigger units will achieve economies of scale and thus unit costs and per capita costs will reduce allowing central government to enhance the level of cost shifting from the national exchequer to the local and the reduction of state aids to the local government system.

This particular argument was given short shrift by the Lyons Report in the United Kingdom in 2007 but generally the argument regarding the delivery of efficiencies and scale economies is only recently becoming a feature of independent review. The findings of such research increasingly point to contrasting outcomes in terms of actual savings and efficiencies. This suggests that the move towards greater scale needs to be treated with some caution. On the other hand, increasingly it is becoming evident that move towards shared service provision and spatially determined contracting out of services provides greater scope for generating significant savings whilst guaranteeing enhanced service delivery, accountability and effectiveness.

Fortunately this thinking is apparent in the recent publication, by the Minister for the Environment, Community and Local Government, of the Local Government Efficiency Review and this has be welcomed.

While the decisions to move towards a joined up Tipperary and Limerick are now well in hand, even in the implementation reports addressing the mergers there seems to be a recognition of the need to derive greater efficiencies through shared service planning. The challenge now is to come up with transformational models which can be driven forward within the local government system and, ideally, with a clear partnership between local government, their local communities, national government and the private sector.

So looking at the lessons which increasingly are being highlighted, most recently in the work of the Centre for Research on Local Government Economics in the Netherlands, it is evident that applying both political and economic effort towards reducing the numbers of local authorities will not necessarily deliver any long term savings. Indeed the evidence suggests that the opposite might be the effect.

What seems evident, in so far as empirical evidence is available, is that a focus on shared service platforms based within a local government system and applicable across the full public service can provide the basis for enhanced service delivery and greater efficiencies. The argument might better be about retaining the local authorities we have and building them up to take on the responsibilities of delivering services currently well outside their existing remit whilst reducing the number of public bodies generally at national, regional and local levels.

Interestingly this lesson seems to be a central feature of the move towards municipal demergers which is now underway in areas as diverse as Queensland and Germany. Perhaps the idea that the further you remove the citizen as a tax payer, from the point of decision-making on the delivery of public services and the raising of funds to underpin such delivery, the more difficult it is to raise taxes and other new sources of income, might have something to do with such learning?

At a time when the Irish exchequer is confronted with the reality of introducing property taxes to help fill the chasm in the national finances perhaps this lesson might receive some consideration and that others, and not just the parent Department in local government, might pay heed to the need for a general overhaul of the public service using delivery models which are increasingly being proven to work at international level. In the mean time we need to treat with complete caution the ill judged argument that having less local democratic accountability will result in greater efficiency in public service delivery.