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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting 28 November 2014

 

Report of the Leader

 

Expression of Interest to Welsh Government for Voluntary Merger

 

Purpose of the Report

1.         To obtain Cabinet’s approval for an Expression of Interest in respect of a voluntary merger with Bridgend Council.

Recommendations

1.         That Cabinet approves the Expression of Interest in respect of a voluntary merger with Bridgend Council for submission to Welsh Government.

2.         That full Council be recommended to ratify the Expression of Interest at its meeting of 17 December 2014.

3.         That Cabinet authorises the use of article 13.09 of the Council’s constitution (urgent decision procedure) to submit the Expression of Interest to Welsh Government by the end of 28 November 2014.

Reasons for the Recommendations

1.         To ensure that arrangements are put in place to safeguard the interests of the residents of the Vale of Glamorgan.

2.         To ensure that the Expression of Interest receives Council approval.

3.         Welsh Government requires Expressions of Interest to be submitted by the end of 28 November 2014. 

 

Background

2.         The Council in its meeting of 29 September 2014 considered its response to the Welsh Government (WG) White Paper 'Reforming Local Government', which was published in July 2014 and which proposed mergers of Councils, including that of the Vale of Glamorgan and Cardiff Councils.  In the same meeting the Council also considered WG’s associated document 'Invitation to Principal Local Authorities in Wales to submit proposals for voluntary merger', which invited Councils to submit by 28 November 2014 bids for voluntary mergers which would allow them to merge sooner than WG’s legislative timetable otherwise allowed.

3.         It was acknowledged in the meeting that although the Council's preferred option was to continue as a Council in its own right, WG might not allow this to happen.  The options for and against merging with either Bridgend or Cardiff were set out in the report, although no conclusions were drawn either way.  It was consequently agreed by Council that, in order to resist a forced merger, pre-emptive negotiations for a voluntary merger with Councils "that share the same values and culture" as the Vale of Glamorgan Council would be entered into.  Delegated powers were granted to the Managing Director in consultation with the Leader to this effect.

4.         In view of developments after 29 September 2014, including discussions with a variety of partners on the options available to the Council, a further report was brought to Cabinet on 17 November 2014.  In that report it was proposed that rather than pursuing a 'stand alone' course of action, the Council should aim for a voluntary early merger with Bridgend Council, and the reasons for that stance were outlined.  Cabinet approved the preparation of an Expression of Interest to that effect, to be considered by Cabinet by the WG deadline of the end of 28 November 2014, and to be subsequently ratified by full Council in its meeting on 17 December 2014.      

5.         Appendix A is WG’s prospectus for Council mergers, 'Invitation to Principal Local Authorities in Wales to submit proposals for voluntary mergers'.  It requires Expressions of Interest to be submitted by 28 November 2014.  WG intend to respond by 5 January 2015.  If Expressions of Interest meet with WG approval, formal Merger Proposals will be required by 30 June 2015.  The legislative timetable for voluntary mergers is as follows:

·               A first Bill introduced to the Assembly in January 2015 would include the power for the Welsh Ministers to merge Authorities who wish to do so voluntarily.

·               Authorities wishing to voluntarily merge must submit detailed expressions of interest by November 2014 and fully developed cases for merger (the Merger Proposal) by June 2015 to the Welsh Ministers for consideration.  The Authorities and Welsh Ministers will work together in considering the cases to enable Authorities to submit statements of confirmation of intention to proceed to voluntary mergers by November 2015.  The Welsh Ministers will, by February 2016, develop the necessary subordinate legislation for approval by the Assembly. 

·               There would be no elections in May 2017 to Authorities merging voluntarily.  Instead, the subordinate legislation providing for voluntary merger would extend the terms of existing Councillors to May 2018.

·               In October 2017, a shadow Authority and shadow Council for the merging Authorities would be established, consisting of the full body of serving Councillors on the constituent Councils.  Its functions in preparing for the creation of the new Authority would be specified by Order.    

·               Vesting day for the new voluntarily merged Authorities would be 1 April 2018.  First elections to the new Authorities would then be held in May 2018, based on new wards following an electoral review of the whole of the new Authority, with new Councillors assuming responsibility four days after the elections.  They would serve for four years, until a full round of Local Government elections take place in May 2022. 

6.         For Councils proposed to be merged and not pursuing a voluntary merger the timetable differs and is set out below:

·               In January 2015, a first Bill will be introduced into the Assembly which will provide the powers necessary to enable and facilitate important preparatory work for a programme of merges, but it would not contain specific merger proposals. 

·               The proposed new powers would, among other things, enable the Welsh Ministers to require the Local Democracy and Boundary Commission for Wales to start work on considering and making recommendations for electoral arrangements for proposed new Authorities.

·               It is anticipated that, subject to this first Bill being passed by the Assembly, it would receive Royal Assent in November 2015.

·               In Autumn 2015 a second Bill will be published in draft for consultation.  This second Bill would in due course establish the new Authorities to be created through merger.

·               Shortly after the May 2016 elections to the Assembly this second Bill will be introduced into the Assembly, and subject to Assembly consideration it is envisaged this Bill would receive Royal Assent in Summer 2017.

·               In May 2017, Local Government elections (postponed from May 2016) to the existing Local Authorities would take place.  Councillors elected to Authorities which are to be merged will serve a term of three years.  Councillors of continuing Authorities (i.e. those unaffected by the merger) will serve a term of five years.

·               In May 2019, the first elections for the new Authorities, merged under the provisions of the second Bill, would be held, with Councillors elected for three year terms.  The resulting Councils would exist as Shadow Authorities until Vesting Day on 1 April 2020, when they would assume full functions, with the old constituent Authorities abolished.

·               In May 2022, full Local Government elections for all Authorities would be held, for a proposed term of five years.

7.         The Expression of Interest is required to be submitted to WG by the end of 28 November 2014.  For that reason the Council’s urgent decision procedure is being invoked, and the normal call-in process will not apply.  However, Corporate Resources Scrutiny Committee is able to discuss the report if it so wishes, and the Expression of Interest and the associated Cabinet report will in any case go to Council on 17 December for ratification and further debate.      

 

Relevant Issues and Options

8.         The Council's proposed Expression of Interest to WG for a voluntary merger with Bridgend Council is attached at Appendix B.  It is structured along the lines of the WG guidelines attached at Appendix A and has been drawn up jointly with Bridgend Council, who will be submitting the same document to WG. 

9.         The purpose of the Expression of Interest is to declare to WG an interest in an early voluntary merger of the Vale of Glamorgan and Bridgend Councils to take advantage of a range of opportunities to shape their own futures.  The reports that went to Council on 29 September 2014 and Cabinet on 17 November 2014 both contained an analysis of the options open to the Vale Council on whether to opt for voluntary merger and who the merger partner should be.  It is worth encapsulating these arguments and setting them out afresh.

10.      Two questions need to be resolved:

·               Why should we apply for an early, voluntary merger rather than await the legislative process?

·               Who should the Council merge with - Bridgend, or, as set out in WG's White Paper, Cardiff Council?

11.      These questions are considered in turn.

Why an early voluntary merger?  

12.      It is clear that significant change needs to be made to the way Councils operate and work with partners and citizens in the future.  This is recognised in the Council’s 'Reshaping Services' change programme.  A voluntary merger offers a unique opportunity to radically transform our approach to public service delivery through creating an organisation that is able to understand and influence the needs of our communities and is able to adapt and innovate in order to deliver joined up solutions. This could be designed into the organisational framework from inception and so the new merged Council will provide a once in a generation opportunity to drive the transformation changes needed with accelerated pace and impact.

13.      WG have stated in their prospectus for voluntary mergers (Appendix A) that extensive WG support would be made available for those Councils progressing voluntary mergers.  That support (which may not be provided for those not merging early) would facilitate preparation for the massive changes ahead.  Recent discussions with WG indicate that dedicated WG teams would work jointly with Councils whose bids are accepted.  This would be to 'test bed' approaches to forming the new Councils, and also to inform the forthcoming legislation on setting them up.  Clearly, the Council could benefit from these arrangements as well as making a valuable contribution to the future of local government in Wales.

14.      In determining whether the Council can continue as presently constituted rather than merging, it is becoming increasingly apparent that the dire future predictions for public expenditure have a direct bearing.  Members will be aware that in line with the Council’s 'Reshaping Services' strategy, all services are currently being subjected to assessment to determine what approaches they could take in response to substantial budget cuts.  An early conclusion is that many services are simply not viable as currently constituted if cuts of the scale currently envisaged are imposed.  That being so, in a number of cases collaboration with another Council’s service would provide the necessary resilience and quality of service.  Setting up such collaborations in a 'post-merger' environment may be difficult as prospective partners are focused on their own organisational change. 

15.      Should the other Council mergers proceed but the Vale continue as currently constituted, it would be one of the smallest (if not the smallest) Councils in Wales.  This could reduce its influence on critically important matters such as taking forward the City region agenda.  This means the interests of residents and businesses could lack effective representation.

16.      The situation in relation to merger options is a fluid and ever-changing one as WG and Welsh Councils continue to weigh up the possibilities.  Discussions with WG have raised the possibility that 12 Councils would represent the least of WG’s merger ambitions, with even fewer Councils being a distinct option (particularly since according to the map some Councils still remain as presently constituted).  That being the case, it is unlikely that the Vale Council would survive in its present form.   

17.      If an Expression of Interest for voluntary merger is submitted to WG, their initial response should be known in January 2015.  If their response is a positive one it will introduce a welcome certainty into planning for the future; if on the other hand the Council simply awaits future developments there is a danger that a continuing 'limbo' will jeopardise our ability to function effectively.   

Who should the Council merge with?

18.      The Welsh Government currently proposes that the Vale is merged with Cardiff. A number of other options exist, subject of course to the willingness of alternative partner Councils. The options could include merger with our immediate neighbours RCT, Bridgend and Cardiff or even including multiple authorities from further afield.

19.      Merger with RCT includes some of the disadvantages that merger with Cardiff represents as the two Councils are so different in size and identity (a matter that is explored in more detail below). Merger with multiple authorities could severely reduce the responsiveness of a new Council to local needs, impacting adversely on our residents. Consequently these two options have not been considered further and focus is on a potential merger with Bridgend or Cardiff.

20.      Bridgend and the Vale Council areas are of a similar size. Bridgend has a population of over 139,000 and the Vale about 127,000. The resultant new Council would have a population of circa 266,000 which is large enough to benefit from economies of scale and provide resilience. The combined population would be greater than Monmouthshire and Newport (237,000) and Conway and Denbighshire (209,000), which are Councils proposed in the Welsh Government response to the Williams report. In addition, it would also compare favourably with Anglesey and Gwynedd (191,000) and Ceredigion and Pembrokeshire (198,000).  It would also be larger than the two of the proposed stand-alone councils of Carmarthen (184,000) and Powys (133,000).

21.      Cardiff has a population of over 345,000 and a combined Vale/Cardiff council would have a population of circa 472,000. When assessed against the definite recommendations of the Williams Commission, this would be significantly larger than the next largest council following mergers, namely, Blaenau Gwent, Caerphilly and Torfaen (population of 340,000).  Indeed, even standing alone, Cardiff with a population of over 345,000 would be the largest Council in Wales, when assessed in terms of population. 

22.      The similarity in size between Bridgend and the Vale is more likely to lead to an equitable distribution of resources across the area of the new Council than would be the case should the merging councils be significantly different in size and consequently influence.

23.      In addition, where the size of merging councils is similar, a new Council is more likely to adopt best practice from whichever of its predecessor Councils demonstrates it. Where a single large Council dominates, there is a significant risk that the practice that is adopted is the one carried out by the majority from the dominant Council and this quite frequently will not be the most effective and efficient means of delivery.

24.      When considering the possibility of mergers the issue of harmonisation of funding as well as service delivery arrangements will inevitably be to the forefront. This will include the harmonisation of council tax levels between affected councils although the method of this is yet to be determined. The council tax band D equivalents for 2014/15 for the Vale, Bridgend and Cardiff are respectively £1,029.42, £1,191.87 and £973.77. With regard to spending, the following tables show the statistical summary of population and net budget requirement for 2014/15 (adjusted for town and community council precepts) across the Vale, Bridgend and Cardiff Councils to identify budgeted spend per head of population at authority level. This is then broken down into budgeted spend per head of population across the main services for each council.

25.      This is a high level analysis and would require significant further work in order to remove any anomalies and where appropriate establish direct comparisons. It does not in itself form the basis of an argument as to the appropriateness of a merger between any of the authorities but will be an important factor to be considered when developing the Merger Proposal. It should also be noted that there will inevitably be variable expenditure both across and within services where moves towards harmonisation will be tempered by the relative needs and priorities associated with the service or area under review.

 

 

Authority

Population*

Adjusted Net Budget Requirement  2014/15 **

Spend per Head of Population

 

'000

£’000

£

Vale of Glamorgan

127.2

214,331

1,686

Bridgend

140.5

255,131

1,816

Cardiff

351.7

571,106

1,624

 

 

 

 

*Stats Wales Mid-year 2013 Estimate  ** Stats Wales Net Budget Requirement (less town and community council precepts) by Authority

 

Service Area

Vale

Bridgend

Cardiff

 

£

£

£

Education

756

761

674

Social Services

411

455

423

Housing

17

14

20

Environmental services

88

72

87

Roads and Transport

61

65

43

Libraries/Culture etc

69

69

76

Planning and Economic Development

19

24

11

Local Tax Compliance

19

4

13

Debt Financing Costs

56

41

73

Central Administration

34

72

31

Other Revenue Expenditure

109

192

126

Fire Authority

47

47

47

Total Net Budgeted Spend Per Head of Population

1,686

1,816

1,624

 

26.      The previous table excludes expenditure and income on Vale of Glamorgan Council and Cardiff Council housing stock. This is because the Housing Revenue Account is ring-fenced and self-funding. Bridgend has transferred its housing stock.

 

27.      If the Vale merges with Cardiff there is a real risk that the Council could be seen as over-large and remote from the people it serves. In order to overcome this it could be necessary to set in place decision and service delivery mechanisms that enable the Council to be more responsive to local areas’ needs. This would be at a financial cost eroding any savings made from scale of delivery.

28.      A merged Bridgend/Vale Council whilst sufficiently large to be sustainable will not be so large it becomes too distant from the citizens it serves. It will not be necessary to institute elaborate sub-structures for service delivery to try and preserve some sense of place and make service delivery sensitive to the needs of the local population. The size will also mean the Council will be able to innovate and yet be agile enough to implement that change quickly.

29.      The structure of Town and Community Councils in the Vale and Bridgend is very similar, with the Town and Community Councils sector playing a significant role in both Unitary Council areas.  The Vale has 4 Town Councils and 22 Community Councils; Bridgend has 4 Town Councils and 16 Community Councils.  Cardiff by contrast has only 6 Community Councils, and the sector does not have the same prominence.

30.      The nature of the areas of Bridgend and the Vale is similar in that both have significant rural areas, small distinct towns and villages, coastal towns and administrative centres and share a heritage coast. This contrasts starkly to Cardiff, which is a densely populated urban conurbation with approx. 2,500 people per sq.km.  In contrast the Vale of Glamorgan and Bridgend have about 500 people per sq.km.

31.      Also of importance is the fact that the Vale of Glamorgan has a unique identity when assessed in a regional context.  It is without doubt the green lung of S.E. Wales, performing a valuable function in terms of leisure, recreation and food production.  It is predominantly rural and of its 33,097 hectares, 85% (28,132 hectares) is agricultural land. The preservation of agricultural land is essential in terms of protecting food supply for future generations.

32.      The Vale has 53 km of coastline, of which 19 km is Heritage Coast that connects with the Heritage Coast within Bridgend.  It has a very similar housing need to Bridgend and the town centres of both the Vale and Bridgend face competition from new forms of retailing and the draw of the capital city of Cardiff. 

33.      Both Bridgend and the Vale Councils also generate significant commuter traffic by road and rail into the capital city and day trip traffic to areas such as Barry Island, Porthcawl and the coastal strip. 

34.      In view of the similarities with Bridgend in the above paragraphs, for the Vale of Glamorgan, there is likely to be more commonality in the nature of the challenges, opportunities and problems experienced and nature of service delivery and key policies with Bridgend than with Cardiff. This is more likely to drive efficiencies in service delivery.

35.      It is also more likely to assist in preserving the identity of the area as well as promoting regeneration activity; formulating and implementing planning policy; and delivering transport services. For the reasons outlined, and the geographical context, merger with Bridgend is seen as a more sustainable option, and a means of ensuring that the rural characteristics of both Bridgend and the Vale are protected and enhanced for the benefit of the wider region.

36.      There are particularly strong links between the population in the western Vale with Bridgend, in terms of access to services including health, retailing and recreation. It is however recognised that to the east of the Vale there are also very strong links with Cardiff, e.g. Penarth for similar purposes.

37.      Many of the residents in the Vale travel to Cardiff for work and social activity. Consequently, merging with Cardiff could bestow an advantage in terms of transportation and highway planning.  There are several strong public transport links, both rail and bus, between the Vale of Glamorgan and Cardiff, as there are with other council areas surrounding Cardiff.

38.      A merged Bridgend/Vale Council would also be within the Cardiff 'travel to work' area and the merger could assist in transport/highway planning for the existing Bridgend and Vale areas. The Vale of Glamorgan railway line links Bridgend through the Vale to Cardiff.  Bus Services similarly also link Bridgend and the Vale to Cardiff (e.g. the X2 service via the A48 and the 302/303 that links Bridgend with the rural Vale, Barry and Cardiff).

39.      With the advent of the Cardiff Capital city region, the importance of transport, economic development and infrastructure is already being driven forward at a regional level, and the Vale merging with Bridgend is not as a consequence seen as disadvantageous. Indeed, the commonality of issues between Bridgend and the Vale could be viewed as a strength and key opportunity.  A new merged Bridgend/Vale Council would also need to work with Cardiff and this resultant collaboration could be more beneficial than just a merger of Cardiff with the Vale.

40.      With regard to education the Vale of Glamorgan, Cardiff and Bridgend are in the Central South Consortium, together with RCT and Merthyr. Consequently, there are strong links between the Councils in education. Bridgend and the Vale both have 65 schools with about 22k pupils. This compares to Cardiff which has 136 schools and about 52k pupils. Schools are structured in a like way in all three Councils.

41.      Performance and prospects for improvement following the last full Estyn inspections of the Vale and Bridgend were judged by Estyn to be of the same level ('adequate') whereas Cardiff has further progress to make in this area ('is in need of significant improvement').

42.      Bridgend and the Vale are in the same Police Basic Command Unit (BCU) and consequently a merger of the Vale and Bridgend councils would facilitate joint working with the police on community safety and related issues. A merger with Cardiff would mean a new Cardiff/Vale would need to work with 2 BCUs (one of which would be partial) unless the Police re-organised the command structure.

43.      A merger with Cardiff would mean the new merged Council would exactly match the footprint of the Cardiff/Vale UHB. This would make integration of social care and health less complex. A significant amount of progress has already been made in this area including setting up of joint posts.

44.      With regard to integration programmes for Social Services and Health, merger with Bridgend would mean that the local authority area would straddle two Health Boards. Under the current NHS arrangements a new Bridgend/Vale Council would need to work with Cardiff and Vale UHB and with Abertawe Bro Morgannwg UHB as well as other Councils within the footprint. It should be noted, however that:

·               Major hospital services are already planned on a regional scale through the South Wales Programme, which will be the key driver for future patient flows and will influence how primary and intermediate care and community service should be organised

·               Significant numbers of Western Vale residents depend on the provision of hospital and some other health services in Bridgend, which is covered by a neighbouring Health Board, Abertawe Bro Morgannwg University Health Board.

·               For community and primary health services (the most important relationship for adult social care), both Cardiff/Vale and Abertawe Bro Morgannwg UHBs currently operate a locality structure within which the Vale and Bridgend areas currently have locality status. This is to ensure that services are properly grounded in matching local need and local service.  

45.      The Cardiff/Vale UHB would need to work with two Councils (as opposed to one under the current Welsh Government proposal). However, health and social care issues in Cardiff and the Vale are already different to some extent. With regard to Abertawe Bro Morgannwg UHB, the Welsh Government proposals would require them to work with two Councils. Depending on the future shape of Neath Port Talbot and Swansea Councils, this could remain as two or increase to three. Consequently, a merger of Bridgend with the Vale should not pose insurmountable difficulties to the two affected health boards. Indeed, it may present greater opportunities to drive and influence a more joined-up health and social care economy.

46.      The Vale Council already has established relationships and joint working with both Cardiff and Bridgend and this would assist in a merger with either Council. Bridgend and the Vale share a single internal audit service which has proved to be very successful. The Vale’s Civil Parking Enforcement role is provided by officers working for Bridgend. There are also similar examples between the Vale and Cardiff. The Vale works extensively with Cardiff and a number of other authorities in Wales on waste and recycling projects, both as part of Prosiect Gwyrdd and, most recently for Bio-degradable Waste treatment. The Vale shares senior management posts in both Mental Health and Learning Disability Services with Cardiff. The Vale of Glamorgan is paired with Cardiff in the WG’s 'footprint' for collaboration which used the NHS boundary as a default structure for collaboration. The Vale raised objections to the appropriateness of this at the time. Nevertheless, some grant funding and joint working is managed on this basis, e.g. Supporting People, the time limited Regional Collaboration Fund.

47.      Prior to 1st April 1996 some services such as Education, Social Services and Highways were delivered by South Glamorgan County Council.    Consequently, some activities within the Vale are organised in a similar way to Cardiff.  However, this has diminished over the years, and both Councils will have changed service delivery to more accurately reflect the differing needs of their populations.  At that time the Vale of Glamorgan Borough Council was responsible for services such as local planning, housing, refuse collection and disposal, parks and leisure.  

48.      There remains a legacy however, e.g. some third sector organisations are based on Cardiff/Vale boundaries.

49.      There is a perception on the part of many people in communities in the Vale that decisions made by the former South Glamorgan Council were Cardiff-centric and that the Vale suffered from under-investment.  Examples cited include a lack of school investment, particularly in the secondary sector, coupled with at that time having no Welsh medium secondary school in the Vale, and under-investment in highway infrastructure.

50.      The management structures of Bridgend and the Vale Councils are close in size and have similar cultures. This again differs significantly from Cardiff which, as a capital city, has the significantly different culture of a major city council.

Strategic Implications of a Merger

51.      There are some key implications for the Council with a merger. 

52.      The service-related implications are detailed in Section 6.4 ("Service Challenges") of the Expression of Interest (Appendix B).  It is not intended to duplicate that section in this covering report, and Members' attention is drawn to the Appendix.

53.      It is important to realise that there will be costs associated with a merger whether voluntary or enforced. These fall into five main areas:

·               Staffing – including the costs of redundancies and review of pay and grades

·               Buildings – redesign and use of existing accommodation and costs of disposal of surplus buildings

·               Systems & ICT – system integration costs and the move towards common ICT platforms

·               Council Tax Harmonisation – the potential costs and income forgone associated with a move towards harmonising council tax charges

·               Change Programme Costs – relating to the change management project team required to deliver the merger

54.      The Welsh Local Government Association (WLGA) has commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) to undertake a study to estimate the transitional costs and benefits of local government reorganisation in Wales. The final report is due for imminent release and although a "high level" desk-top exercise and not necessarily reflective of the actual position which may result, should provide some indication as to the opportunities for savings arising from merged and rationalised front-line, corporate and support services.

55.      The Change programme costs are required in order to establish a resource with the appropriate skills and capacity to develop and implement the merger.  A dedicated programme team would be needed for the duration of the project as well as external support.  The importance of this resource to the delivery of a successful merger cannot be overemphasised.

56.      In addition, the risks associated with the migration and integration of ICT systems should not be underestimated.  Delays in procuring and successfully implementing the ICT infrastructure and key systems would have a significant adverse 'knock-on’ in terms of minimising costs, achieving savings and delivering services.

57.      As well as costs, annual savings should arise from mergers. Examples of areas where these could arise include:

·               Rationalised Corporate and Support Services (e.g. democratic support, legal and financial services, human resources)

·               Rationalised front line services (e.g. waste, highways)

·               Streamlined management and a single Management Team

·               Members allowances and cost of elections

·               Accommodation and ICT

58.      The issue of costs and savings, both one-off and recurring, will be a key consideration in developing the full Merger Proposal should the expression of interest be approved.

59.      It is anticipated that authorities that do progress a voluntary merger will benefit from the earlier identification of transitional costs and have the opportunity to enter into dialogue with Welsh Government as to how these can be supported and mitigated. Similarly, the associated savings, most of which could take at least two to three years to materialise, will be initiated earlier under a voluntary merger.

60.      Any merger will need to have regard to the differences in spending priorities that presently exist in the level of services provided. As previously indicated, the issue of differing levels of expenditure per head between similar services in different authorities is one where any process of harmonisation must first be considered in the light of political priority, relative need and other indicators relevant to the service area in question. 

61.      Harmonisation will inevitably take place in areas such as the level of Band D council tax although the basis of such harmonisation (e.g. levelling up, levelling down, weighted average) would need to be further explored together with the period of transition.

62.      Although not exhaustive, other questions which will need to be considered from the financial context are:

·               School funding formula

·               Waste disposal and recycling arrangements

·               Social services provision

·               Planning policies

·               Levels of required service improvement 

63.      Each of the issues raised above will also be need to be considered further within the Merger Proposal between Bridgend and the Vale and the potential costs and savings associated with various options modelled.

64.      As part of their existing medium term financial strategies, the two Councils have both identified the collective financial challenges in respect of their service and corporate activities up to March 2018. 

65.      All councils need to address inescapable budget pressures across the range of services they currently provide as a result of demographic changes and new legislative requirements.  In particular, the growth in the demand for and cost of adult social care and continued protection for the Education budget has significant financial consequences for both councils now and this will continue for a merged council. In addition, the resource impact of the Social Services and Wellbeing (Wales) Act and the Housing (Wales) Act has yet to be quantified.

66.      Against that background the Vale of Glamorgan Council’s existing strategy forecasts that total recurrent revenue savings of £32.4million are needed between April 2015 and March 2018. For Bridgend the figure for the same period is £38.1million.  Beyond 2017-18 as the merger prospectus states public finance prospects are bleak until 'at least the middle of the next decade.  This means local authorities will continue to face challenging settlements for several years to come'.

67.      In the event of a merger the two councils would need to ensure that their existing trajectory of service transformation is maintained and developed in an integrated way with a merger to ensure that they are able to deliver the £70.5 million identified in the two MTFS savings plans to 2017/18.  The expectation at this stage is that a merger would help the councils to realise these savings, but the Merger Proposal will explore to what extent and over what timescale.

68.      Each council has reserves set aside to meet specific and unforeseen future liabilities. The potential liabilities associated with implementing a merger between the Vale and Bridgend have not yet been calculated and there is no provision for them in the reserves of either council at this point.

69.      There are potential efficiency gains to be derived from adopting best policies and practices from each council where affordable

70.      New ways of working are a necessity, including ways of helping communities to help themselves and improving preventative work. This approach will involve further developing services with strategic partners and the voluntary and private sectors where appropriate. The economic downturn has undoubtedly placed council budgets under extensive strain but has also provided the impetus to review the efficiency of spend. A key area of focus for the councils moving forward would be to relentlessly question the effectiveness of this expenditure in order to ensure that reduced resources are delivering the anticipated outcomes of service users.

71.      There will clearly be significant staffing implications for the Council as a result of a voluntary merger with Bridgend Council and the bringing together of approximately 12,000 employees into a new local authority.  

72.      The alignment and rationalisation of service structures will take a considerable investment in time and resource. The challenge will be to manage this carefully, balancing the need for new skills, competencies and behaviours with the need to retain key expertise and experience. The alignment of workforce planning processes will be important in providing a blue-print for the change process and retaining common aspirations around youth employment, talent management, succession planning and leadership development

73.      A particular challenge will be the need to align terms and conditions of employment across the two authorities and particularly pay structures. There are different pay structures across the two authorities which will need to be aligned through an agreed job evaluation process. The challenge will be to ensure that appropriate resources are directed to this process but without repeating the all-consuming industry of job evaluation and equal pay management strategies that were typical in most authorities over the last 5 to 10 years. Support from the Welsh Government in taking an 'all-wales' approach to this would be helpful.

74.      An important element of the success of any merger arrangements will be the need for a coherent communication and engagement strategy with trade unions and staff across the two Councils. This will be essential in managing the consistency and quality of messages during the transition period and in ensuring the continuity of the already strong employee relations frameworks in each Council. It will also be important in ensuring the engagement of staff and the trade unions in the development and vision of the new local authority up to and beyond 2018.

75.      There will be a need to ensure a strong and aligned leadership team that will set the platform for the merger process and take it forward.  In such a change process it will be important to ensure that the differences as well as the commonalities between the two organisations are respected and acknowledged.

76.      It is anticipated that support in relation to many of the staffing issues and challenges as set out above will be available through the work of the Welsh Government’s Staff Commission. It will be important that officers from both the Vale and Bridgend Councils play an active role in the work of the Staff Commission and contribute to the developing national agenda.

77.      The ICT systems used in the two Councils differ, including corporate systems such as HR, Finance and Payroll.  There is an opportunity to appraise the best ICT infrastructure to support the new authority, including a consideration of how ICT can support transformational change, e.g. in agile working.  The challenges to address will include the harmonisation of ICT across a range of services, the transformation of business processes, staff training, data migration and protection, different ICT policies and practices, and different hardware arrangements.

 

The Risks of a Voluntary Merger  

 

78.      There are clearly numerous risks involved in a process as complicated as the merger of two Councils: many of these are outlined in the section above on the Strategic Implications of the merger.  This section focuses rather on the specific risks of embarking on a voluntary merger as opposed to letting WG's legislative timetable run its course on the basis of the map in the White Paper.

79.      The risk that Council mergers across Wales do not proceed despite WG's current intentions.  The New Council would be larger, stronger and better able to have an influence on strategic regional issues.  It could become clearer in the run-up to the 2016 Assembly Elections if this could be the case.  The Council will not have committed itself to a merger until late 2015 and could withdraw before then.

80.      The risk that key staff and senior officers are diverted from their existing responsibilities in planning for the merger.  This issue would need to be discussed with WG as forming part of their support package for authorities embarking on voluntary merger.

81.      The risk that the costs are higher than anticipated and/or the savings are lower or not realised at all.  This will need to be tested and assessed/analysed thoroughly with expert support through developing a Merger Proposal.

82.      The risk that one of the three parties (Vale/Bridgend/Welsh Government) decides not to or is unable to proceed at any point during the process.  Some financial incentives or recompense for abortive effort should be put in place; this will be discussed with WG.

83.      The risk that a change in Welsh Government in 2016 could put the process in jeopardy.  Again, possible recompense will be discussed with WG.     

84.      The risk that the merger does not deliver the savings envisaged but at the same time distracts both Councils from effectively managing forthcoming budget cuts.  It is becoming increasingly apparent that Council mergers will be a means of enabling some budget savings.  The merger of services that are subject to substantial cuts will be a key means by which their resilience and continuing effectiveness can be made more likely.  

85.      The fact that there is a lengthy process for preparing the case for voluntary mergers means that the Council will have ample opportunity to come to a considered judgement on the advisability or not to proceed.  The timetable for voluntary mergers requires merging authorities to submit "statements of confirmation to proceed to voluntary mergers" by November 2015, having previously worked with WG in preparing the Merger Proposal.  That being so, the best part of a year would be available before the Council would need to make a final decision.

 

Conclusion

86.      The case for embarking on a voluntary merger, the risks of doing so, and the mitigating factors, are described above.  It is considered that there is a convincing argument for a voluntary merger, and the recommendation therefore is that Cabinet endorses this conclusion.     

87.      As to who the Council's merger partner should be, on balance it is considered there are strong reasons supporting a Vale/Bridgend merger.  This is not to say that it would be impossible to envisage a Vale/Cardiff merger, and the considerations in support of that are listed above.  However, it remains that there are fundamental disparities between the Vale and Cardiff which would make it difficult for a merger on equal terms to happen.  These disparities are essentially about size (Cardiff Council is roughly three times the Vale’s size) and about the nature of the communities the Councils serve:  Cardiff is a densely populated urban conurbation and capital city with all that that entails, while the Vale’s character focuses on a significant rural area, small district towns and villages and coastal towns. 

88.      There could be more complexity with regard to social care/health integration if Bridgend and the Vale were to merge. However, this could be overcome and it would not make sense to form a new council based on just a single service area (social care) to the detriment of other services such as education, regeneration and strategic planning.

89.      There would be no detriment to Cardiff resulting from a Bridgend/Vale merger:  the capital city is already of a sufficient size (population over 345,000) to benefit from scale.  Where it would be beneficial to achieve even greater scale economies or where a regional approach is desirable, this arrangement would offer an improved opportunity for collaboration between a merged Bridgend/Vale and Cardiff, as both of these Councils would be within the same city region area.  Additionally, Cardiff would not be distracted by the organisational disruption caused by a merger and could focus on its important role as the capital city of Wales and improving the prosperity of the city region

90.      It is important to stress also that collaboration between the Vale (and any other merged Councils) and Cardiff will and must continue.  For the past few years a good deal of effort has been put into joint working between the two Councils and their partners, and that effort is bearing fruit.  Joint arrangements in respect of Health and Social Care in particular will be further progressed, and wider initiatives such as Regulatory Services, the Education Consortium and Prosiect Gwyrdd, which involve Cardiff in addition to other Councils, will also continue.  A joint Cardiff/Vale Local Service Board has been set up to oversee and facilitate joint working initiatives with a number of partner agencies, and it is the intention that the board will carry on.

91.      It is becoming clear that even after Councils have merged, it will be essential for them to continue to work with each other and with other partners in order to deliver sustainable outcomes for the public.   

92.      A merger with Bridgend would be seen as an "exceptional" case by the WG as the new authority would straddle the boundaries of two health boards and would not conform with existing EU Convergence area boundaries. These issues are addressed in Section 10 of the attached Expression of Interest.

 

Resource Implications (Financial and Employment)

93.      The financial considerations of pursuing a voluntary merger are as set out in the body of the report. Subject to the agreement of both councils and Welsh Government, the second phase of the exercise will be to produce a Merger Proposal where the specific financial implications can be explored in detail.

94.      There will be significant transitional costs involved in merging. Specifically, these will revolve around staff, buildings, systems & ICT and change programme costs. In addition, the harmonisation of council tax charges and the development of a fair basis upon which to prioritise and allocate future funding between services and areas will need to be further considered.

95.      It is anticipated that authorities that do progress a voluntary merger will benefit from the earlier identification of transitional costs and have the opportunity to enter into dialogue with Welsh Government as to how these can be supported and mitigated.   

96.      Recurring savings that are also expected to accrue over time as a result of merger will be initiated earlier under a voluntary merger.

97.      There is an argument that since there is no indication that WG know the costs of reorganisation, the Council risks being committed to a process it cannot afford.  However, the WG prospectus describes an Expression of Interest as an opportunity for Councils to work with WG to identify the steps required for a merger and develop a Merger Proposal.  It is therefore entirely reasonable to set out to explore these issues.  If the Merger Proposal does not stack up or if resources cannot be identified to support a merger then clearly there should be no expectation for us to proceed.  Councils would be in a good position to articulate the cost and benefits of a merger.     

98.      There will be significant staffing implications resulting from a voluntary merger with Bridgend (or Cardiff).  These are set out in the section on strategic implications.

99.      As indicated the success of any merger arrangements will rely on the ongoing engagement of both the staff and the trade unions. 

100.   At a local level the recognised trade unions have been consulted on the progress of current merger discussions and the prospect of a voluntary merger bid with Bridgend Council. Such consultation will continue over the coming months subject to the Cabinet approving the proposals within this report and the response from Welsh Government.

 

Sustainability and Climate Change Implications

101.   There are no direct environmental sustainability and climate change implications arising from this report.

 

Legal Implications (to Include Human Rights Implications)

102.   There are no immediate legal implications arising from this report.  Any future merger will require considerable work to be undertaken in relation to employment, contract, property and other assets and liabilities matters.  While legislation will provide a framework within which these matters will be managed, there will need to be legal protocols between the merging authorities; management, negotiation and procurement of contracts and other legal transaction documentation;  and advice on various legal issues, responsibilities and entitlements.   

 

Crime and Disorder Implications

103.   There no specific crime and disorder implications arising from this report, but the structural arrangements for dealing with crime and disorder have a bearing on a potential Vale/Bridgend merger.  Both Councils are currently in the same Basic Command Unit within South Wales Police, which would make a merger in this regard comparatively straightforward.   

 

Equal Opportunities Implications (to include Welsh Language issues)

104.   Extensive work on an Equality Impact Assessment (including Welsh language issues) of a merger will be needed if the Expression of Interest leads to the submission of a formal Merger Proposal.

 

Corporate/Service Objectives

105.   The Council’s stated values are delivering good services, transparency, engagement and empowerment.  It is important that these continue to be observed in any merger proposed.

 

Policy Framework and Budget

106.   The Expression of Interest is required to be approved by Cabinet and ratified by full Council.  This is in line with the WG prospectus for voluntary mergers, which allows the approval by Cabinet of an Expression of Interest by the 28 November deadline, with full Council approval needed shortly thereafter.      

 

Consultation (including Ward Member Consultation)

107.   The prospectus for mergers requires some 'initial engagement' to have been done before the Expression of Interest is submitted.  Initial consultation has been carried out with a number of stakeholders and more information is included in the Expression of Interest at Appendix B.  Bodies engaged include the Local Service Board, South Wales Police, Cardiff and Vale University Health Board, Abertawe Bro Morgannwg University Health Board, Vale Centre for Voluntary Services, Town and Community Councils, South Wales Fire and Rescue Service and Cardiff Council.  Comments from the public on proposed Council mergers were received as part of the Council's budget consultation and are included in Appendix A

108.   If the Expression of Interest leads to the preparation of a Merger Proposal, 'full and extensive consultation and engagement' will be required at that stage.  Attached as Appendix B is the proposed Communication and Engagement Plan that will accompany the Expression of Interest.        

109.   This is a matter for the whole Council and therefore no ward member consultation has been undertaken.

 

Relevant Scrutiny Committee

Corporate Resources

 

Background Papers

Welsh Government White Paper 'Reforming Local Government', July 2014

Welsh Government document 'Invitation to Principal Local Authorities in Wales to submit proposals for voluntary merger', September 2014

 

Contact Officer

Huw Isaac, Head of Performance and Development

01446 709760

 

Officers Consulted

Corporate Management Team

 

Responsible Officer:

 

Sian Davies, Managing Director

 

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