Academics and activists have poured scorn on NSW Local Government Minister Paul Toole’s claims that newly merged councils have already saved millions since merging on May 12.
Nineteen new councils were created from 43 councils two months ago and Mr Toole said the savings were already rolling in. State Premier Mike Baird has promised that NSW council mergers will yield $2 billion in savings over the next twenty years.
Mr Toole told the Sydney Morning Herald: “Over a two-week period in June seven of the new councils collectively saved $6.7 million through a reduction in senior executive positions and lower administration costs, such as banking … and information and communications technology” adding, “These early wins are just the start.”
Georges River Council (formerly Hurstville and Kogarah Councils) said the savings it had made since merging would fund an extra $620,000 in pensioner rate rebates.
Meanwhile, Northern Beaches Council (previously Manly, Warringah and Pittwater Councils) told residents it has already found $3 million in annual savings, mostly through insurance, worker’s compensation insurance and senior executive redundancies.
However, the minister refused to name the other five NSW councils that had made savings or how they had been made.
Caution and suspicion
But some academics and activists are viewing Mr Toole’s claims with suspicion and warning of the consequences if councils believe the hype.
Dr Joseph Drew, Research Fellow at the Institute of Public Policy and Governance at the University of Technology Sydney, said a crucial piece of information was missing: whether the announced savings were gross or net.
Dr Drew said it was unlikely savings had yet materialised from making senior executives redundant, particularly because most executives would have been entitled to a redundancy payment.
In addition, some councils have kept on both former general managers (one as deputy general manager), at least for a while.
Government News suspects that those general managers that have kept their jobs would be reasonably expecting bigger pay packets in return for heading up larger councils and more complex operations too, pushing council costs up. It is also uncertain whether the announced savings have factored in the pay of government appointed council administrators.
Apart from the most senior roles, other staff are protected from forced redundancies for three years so these savings will not be registered for a while either.
Dr Drew said: “There would be gross savings, there’s no two ways about it, whether there are net savings is a completely different matter. It would be extremely unlikely that we could have a net saving at this point in time.”
He said that most councils had also incurred significant costs in community consultations and preparing business cases prior to the amalgamations.
Whatever the details of the savings – details of which Government News was unable to elicit from Mr Toole’s office – it seems a very early call to make.
Dr Drew said: “We won’t really know until we have four full financial years of data.”
He said councils should not go on a spending spree in anticipation of raking in millions of savings promised by the government, something he said happened in Queensland after council mergers.
“This represents danger to the financial sustainability of these councils if they start believing that that they are saving money now before they can possibly know and basing their future spending decisions on this.”
Local government expert Professor Brian Dollery from the University of New England – a council merger sceptic – agreed that Mr Toole was going off “half-cocked.”
“It’s highly imprudent of the Minister to make these claims so early in the 2016/17 financial year,” Prof Dollery said. “We’ve got to wait for the financial statements at the end of the year and that will only give us a preliminary feeling for the financial costs and benefits.
“The big costs are only going to come once staff reductions kick in and you have to factor in redundancy costs. There are also obviously IT systems, service harmonization and the like: all come with massive costs.”
Professor Dollery said merger costs occurred for up to six years after the 2008 Queensland council mergers and that staff costs rose year-on-year for newly amalgamated councils, compared with those who did not merge.
“Of course, you can pick out the savings but there are also going to be costs. You may have initial savings because you have sacked senior staff but it gets frittered away quickly.”
Save Our Councils Coalition member and Mosman councillor Tom Sherlock said he did not doubt councils had made savings and that these were welcome but he questioned the detail and whether service quality and delivery had been considered.
“They might have saved in one areas but spent in another area,” Mr Sherlock said. “I would suggest that the overall program is still significantly in deficit, considering all the costs of merging.”
Mr Sherlock said he doubted the savings reported from senior staff leaving were solid either.
“At the Northern Beaches Council for a time they had all three of the general managers plus the administrator on top. I would be very surprised if there were net savings at this point in time.”
He argued that savings made by combining IT contracts could have been made through joint organisations, rather than mergers, and that the cost of integrating IT systems across councils would end up being significant.
Mr Sherlock said that the minister was clearly keen to be seen to start delivering merger savings. He had been told that merged councils were reporting to the Department of Premier and Cabinet weekly.
“I fear that the Premier and the minister are keeping very close contact with these councils with a complete absence of any elected representatives. The state government is using local government as a tool for their own agenda.”
What Paul Toole’s Office said
Government News put a series of questions to Mr Toole’s office, including asking whether savings were gross or net, which councils had reported savings so far and in what areas of expenditure.
Questions were also asked about how savings could have been made so soon by dumping senior executives and how new councils could have achieved savings in IT, particularly when merging IT systems has been acknowledge as being one of the most expensive parts of council mergers.
Mr Toole’s office confirmed that the savings reported so far did not include state government money for merger costs or from the Stronger Communities Fund.
A spokesperson for Mr Toole offered a succinct reply to Government News’ list of questions: “Questions about the detail of savings made by new councils can be directed to the councils.”
So we did. All 19 of them. More to follow.
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