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What went wrong with the NSW mergers?

November 2020

Four years on, the NSW mergers are still making headlines for all the wrong reasons. Back in 2016 the Fit for the Future process, brought in by the Baird government, was one of the biggest changes NSW local government had experienced over the preceding decade. The process required councils to identify how they could become ‘fit’ to meet the government’s sustainability benchmarks, under threat of merger if they didn’t. The process made all councils take a long hard look at themselves and, in our view, benefited most, if not all, councils through a better understanding of their finances and assets and how better to manage them. Unfortunately, the process was never concluded, resulting in a lack of accountability for councils to change.


The state government proposed a number of mergers. Some councils merged voluntarily, some were forced, and some fought not to merge and won. Through that process Morrison Low supported a large number of councils with evidential based analysis on whether or not those mergers would create any benefits. Based on previous merger outcomes and assessments, it highlighted the potential benefits but also the immense difficulties councils faced in realising them. Benefits were naturally larger in metropolitan Sydney and smaller or non-existent in the regions, where they were even more difficult to achieve.


The main benefits occurred through rationalising staff; however, staff were protected for the first three years and by the end of the protection period most had settled into valued roles in the larger organisation. Staff reductions are generally politically unpopular and in smaller communities council staff are an integral part of keeping that community alive.

There was an opportunity to close duplicate facilities or at least rationalise them, but that process is fraught with challenges and you would be hard pressed to find a council that had closed a pool, library or any other facility for that matter. In reality, many councils did the opposite and upgraded facilities and services.


Communities pressed councils to harmonise services and service levels across the council area. No community wants to receive a lower level of service than it is currently receiving, so services tended to be harmonised to the highest level, adding additional cost and staff. Add to that the vast expense of new or integrating IT systems and it is not surprising that costs have grown over the past four years. In addition, harmonisation of pay and conditions often imposed additional cost on merged councils. Even the carrot to merge, the government grant for new facilities, came with a flip side of increased maintenance, renewal costs and depreciation.


Merged councils and unmerged councils face the same challenges in being sustainable - how to do more with less. Communities expect more and want to pay less. Politically it’s hard to say no to your community, it’s hard to reduce services or service levels and associated staff, so it’s not surprising to see councils under extreme financial pressure.


The way forward is clear, albeit unpopular and, to some, unpalatable. Integrated financial, asset and service planning will provide the answers, and if not at least the questions, communities need to discuss about what they are prepared to pay for.


Ultimately it comes down to understanding the true costs of delivering local government services and then either strong decision-making by councils to live within their means, or accountabilities being placed on elected councils by state government to make sustainable decisions, both options would be unpopular. In the end, that should not stop councils having serious conversations with their community on what they can do to become sustainable through the next integrated planning and reporting cycle.