The reorganisation of the Welsh Government funded Welsh public sector

Over the last 25 years there have been service reorganisations that have created larger organisations throughout the Welsh Government controlled public sector. There is generally a political consensus at the National Assembly that larger organisations are betters than smaller ones and that mergers are generally a good thing.

Currently in Wales we have:

• The Welsh Ambulance Service (WAST) that was established in 1998 by the amalgamation of four existing ambulance Trusts, and the ambulance service provided by Pembrokeshire and Derwen NHS Trust.
• Public Health Wales was created at the same time as the local health boards by the merger of National Public Health Service, Wales Centre for Health, Welsh Cancer Intelligence & Surveillance Unit, Congenital Anomaly Register & Information Service for Wales, and Screening Services Wales.
• 7 local Health boards that now plan, secure and deliver healthcare services in their areas, replacing the 22 LHBs and the 7 NHS Trusts which together performed these functions previously. The population sizes vary between Powys at just over 130,000 to Betsi Cadwaladr at just under 700,000.
• The National Procurement Service was more recently created by the Welsh Government on 12 March 2013. Its remit is to secure in the region of £1bn worth of goods and services in common and repetitive spend.
• Natural Resources Wales was formed by the merger of the Countryside Council for Wales, Environment Agency Wales, and the Forestry Commission Wales. Since its creation there has been a number of loans from Invest to Save to fund redundancies and a highly critical auditor general report regarding the sale of trees.
• 2 Trunk Road agencies have replaced the former 8 County Council run agencies.   The Welsh Government reviewed the way in which trunk roads and motorways were being managed, and they decided to reduce the number of trunk road agencies from eight down to three and then down to two.
• 3 National Parks. Following the Environment Act 1995, each national park has been managed by its own national park authority since April 1997. Previously they were governed by the local county councils. There have been calls for the three to merge into one National Park for Wales but that has recently been rejected by the Minister.
• 3 Fire and Rescue services which were formed as a consequence of local government reorganisation in 1995, replacing the 8 former County Council Fire and rescue services.
• 4 regional Education Consortium created from the 22 unitary authorities in Wales responsible for education.
• 22 County or County Borough councils were created in 1995 by the merger of county and district councils. For several years there have been calls from politicians for local government mergers.
• Over 700 Community and Town Councils

Are mergers always right?

From the above it can be see that the direction of travel is to larger and fewer organisations. Those who look at it simply, calculate the savings from reducing the number of senior staff and thus provide more money for front line services.

Mergers are expensive with redundancy costs and the cost of re badging the organisation. More expensive is creating a single ICT system from the systems of the predecessor organisations. Some will still be under contract and others will need to be updated or closed down and merged into the new system.

All these are up-front costs, and whilst the cost of local government reorganisation in 1996 was approximately 5% of annual expenditure for each council, that was without the variations in terms and conditions between authorities that exist today.

The simplistic conclusions of some is that following a merger, all the senior post duplication is removed and thus substantial ongoing savings are made. This ignores two major issues, namely that  senior managers carry out tasks and if the number is reduced the tasks have to be reassigned and the same number of decisions need to be made.

Economic theory predicts that an organization may become less efficient if it becomes too large.

Larger organisations often suffer poor communication because they find it difficult to maintain an effective flow of information between departments, divisions or between head office and outlying parts.

Coordination problems also affect large organisations with many departments and divisions as they find it much harder to coordinate operations.

‘X’ inefficiency is the loss of management efficiency that occurs when organisations become large and operate in uncompetitive markets. Such loses of efficiency include over paying for resources, such as paying managers salaries higher than needed to secure their services, and excessive waste of resources.

This leads to three questions on public services as they are currently configured.

Do the larger organisations such as Betsi Cadwalladr perform better than smaller ones?

Has the creation of all Wales organisations such as the Welsh ambulance service produced an improved service?

Has the reduction in the number of organisations carrying out a function such as the trunk road agency, Natural Resources Wales and the National Procurement Service improved the services being provided?

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