Local government reorganisation and historic liabilities

Local government reorganisation is once again gathering pace across England and Wales, with councils under pressure to agree new structures, boundaries and governance arrangements within tight timeframes. Much of the focus has understandably been on efficiency, service delivery and political accountability. However, beneath these visible changes lies a quieter, far more enduring issue that remains largely unsettled: responsibility for historic liabilities.

When councils merge, dissolve or are replaced by new authorities, their legal obligations do not disappear. Claims linked to events that took place decades ago - whether arising from industrial exposure, safeguarding failures, social care provision or environmental oversight - continue to surface long after the original authority has ceased to exist. If responsibility for those liabilities is not clearly identified at the point of reorganisation, successor bodies may inherit significant financial and legal exposure with little warning.

The persistence of long-tail risk

Local authorities carry some of the longest-tail liabilities in the public sector. Claims may arise from activities carried out in the 1960s, 1970s or 1980s, particularly in areas such as education, housing, social services and public health. In many cases, the individuals affected only come forward years later, often prompted by changes in societal awareness, legal thresholds or evidential support.

Restructuring does not reset the clock on those risks. Instead, liability follows the legal successor to the original authority. Where that successor is clearly defined and properly prepared, claims can be managed efficiently. Where it is not, uncertainty quickly emerges – creating delays, disputes and unnecessary cost.

The challenge is compounded by the fact that many councils have already undergone multiple reorganisations over the past few decades. Documentation may reference bodies that no longer exist. Insurance arrangements may have been transferred, fragmented or lost entirely. In some cases, records remain undigitised or incomplete, leaving current officers to reconstruct liability histories with limited information.

Uncertainty breeds dispute - and cost

When a historic claim arises and responsibility is unclear, the resulting uncertainty can be expensive. Successor authorities may disagree over who should respond, insurers may question whether cover applies, and significant time can be spent establishing basic facts before the substance of the claim is even addressed.

These disputes are not merely administrative. They often require legal advice, forensic investigation and extensive document review. In some cases, the cost of resolving the jurisdictional or liability question can rival - or exceed - the value of the underlying claim. Meanwhile, claimants face delays, and public funds are diverted from frontline services to manage avoidable complexity.

The risk is particularly acute for high-value claims, such as those involving historic abuse or serious injury, where compensation awards can be substantial and reputational sensitivity is high. In such cases, ambiguity around liability can significantly increase both financial exposure and public scrutiny.

Restructuring pressures and missed priorities

The current wave of reorganisation is taking place against a backdrop of severe financial strain. Many councils are operating with minimal reserves, rising demand for services and growing exposure to claims inflation. Some are already facing the prospect of Section 114 notices or emergency funding measures.

Under these conditions, it is perhaps unsurprising that historic liability mapping is not always prioritised. Political negotiations, staffing structures and service continuity often dominate discussions. Yet failing to address legacy risk at the point of transition can undermine the very efficiencies restructuring is intended to achieve.

Every governance model carries legal consequences. Without a clear and evidenced allocation of historic liabilities, new authorities may find themselves absorbing risks they neither anticipated nor budgeted for. Once a reorganisation has taken legal effect, opportunities to clarify or reallocate responsibility retrospectively are extremely limited.

The legal consequences of change

There is also a more technical, but no less important, legal dimension to restructuring. Changes to the identity of a defendant's body can alter the legal landscape of historic claims. In some circumstances, reorganisation may affect the availability of limitation defences or complicate arguments that would otherwise have been available to the original authority.

While each case will turn on its facts, the potential for restructuring to unintentionally weaken legal positions is real. These risks are rarely apparent at the planning stage but can have long-term consequences once claims begin to emerge years later.

A narrowing window of opportunity

Despite these challenges, restructuring presents a rare opportunity to bring clarity to a complex problem. The process of redesigning local government forces authorities to examine their legal foundations, operational histories and risk profiles in a way that day-to-day governance does not.

By taking a structured approach to historic liabilities now - including reviewing insurance cover, documenting legacy responsibilities, and clearly identifying successor obligations - councils can significantly reduce future uncertainty. This work is not simple, but the benefits are substantial: quicker claim resolution, reduced inter-authority conflict, clearer insurer engagement and improved financial planning.

Importantly, this is not about eliminating risk. Long-tail liabilities will continue to arise. The objective is to ensure that when they do, responsibility is clear and defensible, rather than contested and opaque.

Governance beyond the political cycle

Good governance extends beyond immediate political priorities. Historic liabilities form part of the enduring legal identity of every authority, whether old or newly created. Treating them as peripheral or assuming they will “sort themselves out” risks storing up problems that will surface long after current decision-makers have moved on.

As restructuring proposals move towards finalisation, councils face a critical choice. They can allow historic risk to remain unresolved, increasing the likelihood of future disputes and unplanned financial shocks. Or they can use this moment to establish clarity, allocate responsibility with confidence and ensure new authorities are built on a legally robust foundation.

Local government may change shape, but its legal obligations endure. Unless historic liabilities are actively identified and addressed during restructuring, today’s reforms risk creating tomorrow’s most expensive legacy.

Laurence Besemer is CEO of the Forum of Insurance Lawyers (FOIL).