Summary
This analysis also demonstrates the impact of median income and deprivation on unit costs of care. Whilst the effect of this will be net neutral through disaggregation, this will add an additional factor of variation to unit costs in newly formed local authorities, similar in nature to the variation in demand. With many business cases containing analysis of unit cost delivery to inform future savings projections, it is critical the government fully assess the assumptions to test the robustness of any underpinning analysis which suggests large recurring savings could be achieved.
This analysis demonstrates that as local authorities become smaller and lose purchasing power, this change has a significant material impact upon the unit costs of care. This presents a financial case for avoiding disaggregation where possible. Where this is not possible, it highlights the importance of minimising the levels of fragmentation and increasing the size of the newly formed unitary authorities, and maximising purchasing power. Where this is compromised, the costs need to be modelled and understood as part of the business case for local government reorganisation. A 1% increase in unit cost per 200,000 reduction in population is an appropriate working assumption.
As local authorities become smaller and lose purchasing power, this has a significant material impact upon the unit costs of care.
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