6.3 Financial modelling
While the regression analysis demonstrates that a general trend of disaggregation into smaller authorities will lead to an increase in the unit cost of care, the extent of the cost increase will be dependent on the size of the local authorities created. variation analysis, this programme’s national analysis below examines the impact of LGR resulting in county areas being made up of unitary authorities of 300,000 population or below, between 300,000 and 500,000 population, or 500,000+ population. This is shown in Figure 23 below. In order to demonstrate this and allow consistent comparison with the demand As can be observed, if all new unitary councils were below 300,000 in population, this would result in additional unit costs solely as a result of reductions in purchasing power of over £270m per annum.
This programme’s modelling suggests an additional £180m of annual costs if all authorities had a population of between 300,000 and 500,000. In contrast, if all new unitary councils had a population of above 500,000, a net reduction in unit costs of £65m could be expected. This analysis presents net figures, which account for the impact of existing neighbouring unitaries being aggregated into larger councils, which may see their scale and purchasing power increase, and unit cost decrease. This therefore accounts for the additional positive financial benefit where all unitary councils are of a population of 500,000 or more. The issues related to the aggregation of smaller unitary authorities are explored more in Box 4 below.
Figure 23: Forecast increase in unit cost
The forecast increase in unit cost if all new unitaries are of average population in each segment
£300,000k
£200,000k
£100,000k
£0k
£-100,000k
300k or below
300-500k
500k+
Unitary size
56
Made with FlippingBook - Online catalogs