Disaggregation in LGR: the decision that decides your first year
- ICS AI
- 1 hour ago
- 7 min read
Some service disaggregation follows simple, tried-and-tested rules. But the ones that decide whether a council is financially viable are the big county and people services.
In our last blog, we set out the financial challenge that runs through the whole of Local Government Reorganisation. Of the first nine councils to go through LGR, all nine reached day one safe and legal. Only three were financially sustainable in the years afterwards. The line between those two outcomes is drawn in the months before vesting day, and the most influential factor is how you split the big services between the new councils.
Disaggregation is probably the greatest financial and service risk you face in LGR. The big people services - adults and children’s social care - account for somewhere between 40 and 60 per cent of a county’s budget. Once you start dividing them, two things decide whether each new council is financially sustainable or rapidly finds itself in difficulty: the principles you choose, and the accuracy of your information. You can be safe and legal on day one and still not be viable the morning after. It’s a lesson that is often not shared so loudly, but is sadly the reality too often.
The splits that are easy, and the ones that are not
Plenty of the disaggregation work is straightforward, and it’s worth saying so. There is often a simple logic to the services, contracts, budgets and assets that need to be transferred, usually linked to funding sources or what drives the spend. The LGR finance essentials LGA Guide sets out potential approaches based on a service-by-service basis, drawing on past LGR lessons. Waste disposal goes by tonnage. Winter maintenance and street lighting go by geography. Highways by length of road maintained. Home to school transport follows populations. Libraries go with the building they sit in. For these the rule is clear, the sum is simple, and nobody spends long arguing about it.
The people services, particularly Adult Social Care and Children’s Services, are not like that, and the same guidance shows you why. Care provided in-house is transferred based on geography. Care purchased from the market is different: it has to be considered on where the clients “ordinary residence” is. This may not be where they are receiving their care today, but where they are “ordinarily” resident in your area, and lived, before being placed in care. Careful decisions are also needed about splitting staff, many of whom will work across the whole county or focus on specific client cohorts. It will be critical to the continuity of care and to financial resilience that the new unitary has the right staff to manage caseloads and their complexity.
Children’s social care is equally complex. In Northamptonshire, the children’s disaggregation used 17 measures to allocate budgets between the councils. Because of the scale of spend involved, a small percentage change in splits can have millions of pounds in consequences. It has to be done in a way that protects the continuity of service for the most vulnerable residents.
Why a split can leave a council short before it has decided anything
Demand, need, cost and provision are not spread evenly across a county. Demographics, deprivation and health inequalities influence what care is needed. What is available, and at what cost, is shaped by economic viability, wealth, geography, population density and the way care is contracted. This is why splitting budgets based on populations is not an effective approach. Far more nuanced and technical views need to be considered.
Past LGR Council have seen one new council inherit less budget but more demand and high-cost care, which hits its finances adversely in its very first year. This is not uncommon, and there is no process to challenge budget allocations after vesting day.
Getting the disaggregation wrong across these large statutory people services is not a failing of the team that inherits it. It is a consequence of where the lines were drawn, which principles were used to draw them, and the accuracy of information used to calculate the splits and their impacts.
As Anna Earnshaw of F3 Consultancy puts it, these are the decisions that can make or break a new Council, and can be the single biggest reason that Exceptional Financial Support is needed. Of the first nine unitaries, six already rely on it.
It is not only the money that has to come apart
The budget split sits on top of a harder job underneath it. MHCLG’s own Local Digital guidance is blunt that pulling shared services and data apart is a significant piece of work in its own right. It needs legal, technical, operational and cultural alignment all at once, and it needs the professional expertise to interpret what is found and make sense of the outcomes and impacts.
The very nature of local government, its economies of scale and long-term planning, means a county may have built joint management teams, shared IT systems, large platforms and long-term, high value supplier contracts. None of them was designed to be separated, and in some cases separating them can be very costly. Most will need to be allocated so each new council can stand up on day one. But there may also be services that cannot be split, or are not financially viable to split, and may need to be hosted or left to run until they eventually end.
All these nuances matter, because you cannot split the budgets with any confidence until you fully understand the things underneath them. Social care records and packages, for example, will have to be allocated, initially using postcode data. Experience suggest that many clients will not receive care where they are ordinarily resident, so work will be needed to establish the council area they originally resided in, and make sure the right council pays for the right care under the legislation.
Conversations will also be needed with providers of large, long-term contracts that involve significant assets, such as waste, highways and outsourced services, about whether the contract can be split at all. Experience has shown that terminations and splits can be financially prohibitive. You may instead agree to continue a shared or hosted contract, but even then you need to understand how the cost is distributed and driven, and therefore what each council will pay towards it. The new unitary’s budget relies on these baselines and the information behind them, and past approaches can mean the split is built on sand.
Two jobs the Workbench keeps separate
This is where the SMART: LGR Command Workbench earns its place, and it does two distinct jobs that are easy to blur but need to be kept apart. The first is building the day one budget for each new council from the predecessor positions. The second is modelling the disaggregation scenarios against that budget. They rely on different logic, and treating them as one is part of why disaggregation can go wrong on spreadsheets.
Building the day one budget
The Workbench works from real time, regularly updated predecessor council budget positions, and builds the picture for the new unitary council or councils. The ringfenced social care budgets, the Dedicated Schools Grant and the Public Health grant are modelled on their own, using grant formulas, with their own pressures, overspends and recovery actions. So each new council sees a realistic position by function, rather than one blended number that hides the problem. Where the predecessor councils have forecast differently, or carry different assumptions, those differences are surfaced within the Workbench as “tension points”. The Section 151 officer and the finance group can then talk them through and agree how the unitary budget will be built when the predecessor council budgets and the disaggregated county budgets are combined.
Once the approach is agreed, it is built into the system and carried into every future refresh, rather than being re-visited every time someone reopens the spreadsheet. The budget itself can also be scenario tested, not just viewed. If the finance group decides on a particular way to divide debt, reserves, or the burdens of over and underspend from the programme, those choices can be modelled against the day one position to see the effect before anyone commits to them.
Modelling the disaggregation
With that budget in place, the Workbench lets the LGR teams use rule-based features to model disaggregation scenarios against it. A finance team can set the basis of a split, population here, geography there, a different principle again somewhere else. The Workbench runs it through the adults and children’s budgets and hands back a day one picture: whether the budget remains viable, and what that particular choice does to each council.
The LGA’s finance principles and the lessons from earlier reorganisations are built in, and a team can add its own to reflect local negotiations and choices. This mitigates a significant risk in past programmes, where disaggregation modelling was based on budget snapshots taken at intervals and quickly out of date. Those estimates were often inaccurate, both because of the sheer manual effort of modelling scenarios for negotiation, and because demand and budgets were constantly changing in the background.
The disaggregation principles across budgets, balance sheets and debts matter because of how they are used. They are agreed with members, and once they are agreed they have to be applied as they stand. Being able to test the options as evidenced scenarios before that agreement is what turns the meeting into a real negotiation, with everyone looking at the same picture, rather than a decision taken on numbers that went out of date weeks ago and only show their consequences long after vesting day.
It’s important to note that the hard decisions still belong to people. None of this takes the judgement away from the Section 151 Officer group, or the Members task and finish group who have to sign it off. What changes is the ground they are standing on: a live, defensible baseline they can interrogate, rather than a snapshot that has already moved by the time anyone acts on it. For a Finance Lead or a Programme Director lying awake over the day one budget position, that is the difference between a number you are hoping holds and one you can stand behind in front of an auditor.
Turn this into a plan for your own council
Disaggregation is not settled on vesting day. It is settled by the principles you agree in the months before it. This is exactly why it’s the cheapest thing to get right early and the most expensive to unpick or argue later through negotiation and hindsight. A SMART: LGR workshop is a short, focused session: we can map where your contested splits sit, how much of the rule-based work the platform can take off your team, and what a defensible position looks like for your programme. You leave with a business case built on your own numbers.
