Plans for multi-unitaries in county areas risk funding misallocation, analysis warns

Multi-unitary arrangements will be implemented in Suffolk, Norfolk, Essex and Hampshire in 2028-29. With the exception of Essex, all the proposed unitary arrangements will broadly use a combination of existing district boundaries and parish boundaries.

Research commissioned by the County Councils Network (CCN) and produced by Pixel Financial Management said there is a “significant risk” that the disaggregation of funding for the new multi‑unitary areas is inaccurate and leads to “material levels of under‑ or over‑funding for new unitaries”.

The financial consultancy firm said there is “no recent experience of disaggregating funding to more than two unitaries in a county area”, noting that a county has not been split into more than two unitaries since Berkshire in 1998.

The report said that disaggregating funding in these multi-unitary counties “will be particularly challenging” because: county funding will have to be split between more than two new unitaries; district funding will also have to be split into at least two unitaries (in some cases, districts will be split into three unitaries); and funding for both county and district services will have to be split based on parish boundaries where districts are being split.

“If the funding disaggregation is ‘wrong’ then there will be a mismatch between funding and spending, and potentially a significant step-change in funding when allocations are next reviewed”, the report warned.

It added: “By deciding to implement multi-unitary arrangements, the government is creating a much more challenging and complex task for these counties, with the heightened risk that funding is misallocated.

“Some new unitaries are more likely to be under-funded as a result, with significant risks to services and financial viability, at least in the short term.”

Elsewhere, the report said that the Relative Needs Formulas (RNFs), which calculate how much funding an individual local authority needs to provide local services, relative to other authorities, are "hard to replicate".

This is due to unpublished datasets and calculations for the new RNFs and “unclear” explanatory notes from the Ministry of Housing, Communities & Local Government (MHCLG), the consultancy said.

It added: “Unless MHCLG can supply more data or calculations, there is material risk that funding is inaccurately disaggregated.”

The report said the most significant risks relate to children’s services funding, which “cannot be disaggregated without disaggregated data from government departments”, and to adult social care.

It added that disaggregating funding on non‑district boundaries makes the challenges “even greater”, because datasets are not available at parish level and some are not available at ward level.

The consultancy said it is “not clear” whether MHCLG has assessed the data availability for the proposed new unitaries, particularly where non‑district boundaries have been proposed. It called on local authorities should press the department for an assessment of data availability and a commitment to provide either source data or disaggregated data where necessary.

Their report concluded: “Our view is that creating new unitaries on non‑district boundaries will be many times more difficult than using existing district boundaries. If ministers are going to go ahead with it, then it needs a properly thought‑through plan, and timescales need to be realistic.”

In an accompanying report on systems and financial issues, the consultancy said the scale and complexity of the new unitaries is “unprecedented” and that “systems and functions in district councils have never been split before”.

It warned that system challenges and the ability to move cash around the new organisations “will be particularly acute, and will potentially threaten the operational ability of the new unitaries on day one”.

It added that creating new unitaries on non‑district boundaries is “a quantum level more difficult than using existing district boundaries”, and repeated that “it needs a properly thought‑through plan, and timescales need to be realistic”.

Responding to the briefings, CCN chair Cllr Matthew Hicks said the analysis “clearly demonstrates” the level of complexity involved is “untried and untested, with severe risks that funding could be misaligned with actual need and financial systems may not be ready for vesting day”.

He added: “Serious questions remain over whether this has been fully and robustly assessed during the process, with the government not providing further information to justify and evidence that these reorganisations can be delivered on sustainable financial basis.

“If these reorganisations are to be at all successful, government departments will need to provide extensive support to local areas, including sharing the data underpinning new formulae to accurately disaggregate their income and funding to prevent some councils being unsustainable from day one.

The Ministry of Housing, Communities & Local Government has been contacted for comment.

Adam Carey