In the following blog, the Wales Audit Office's Local Government Manager Jeremy Evans talks about how savings planning plays a vital role in supporting council financial resilience, following the release of the Auditor General for Wales’ report Savings Planning in Councils in Wales.

Effective savings planning is critical for the effective stewardship of public money and the delivery of efficient public services – in other words balancing the books whilst continuing to deliver quality services to the public.

Councils need to have a medium term financial plan, setting out how, at a high level, they will operate within the income that they receive, be that from Welsh Government or other sources such as council tax. This plan needs to look three to five years into the future. We found that all councils have these plans in place.

Making up the shortfalls

Having identified the shortfall in income – the gap between what they have and what they need - councils then need to identify how to bridge that gap over the life of the plan. As you would expect, current year plans will need to be very detailed, whilst those for two or three years away less so.

The better councils are at achieving their savings, the less pressure there is to find one-off funding streams to balance budgets. There is also less pressure on services to continue to drive out unachieved previous year savings at the same time as grappling with making those set for the current year. Not having to use underspends, reserves or other windfalls to balance the budget also means that they can be used in a more thought through way - potentially helping councils to fund initiatives that will bring financial benefits in the future.

What does success look like?

To be successful, savings plans need to be specific, measurable, achievable, realistic and time bound. We found that about half of councils have such plans in place.

Being clear how savings will be made is key to transparency. This way everyone understands what needs to happen and any concerns about the impact of the savings can be raised at an early stage.

Accurate savings value and realistic timescales are important. This ensures there is a clear benchmark against which services can be held to account and against which they can assess their progress, spotting any problems early.

As the financial pressures continue to bite, the ability of councils to just make across the board percentage cuts reduces.  Savings need to come from more fundamental changes to the way services are delivered or the way councils operate.  We found that these types of savings take longer to achieve as they are more complex and potentially higher risk.  With these transformational savings, there is a greater need to get the plan right.

Join us for an event

On 8 August, our Good Practice Exchange Team is holding a webinar on Building Financial Resilience in Public Services. The aim of the webinar is to share approaches to building financial resilience (including examples of good practice) and identifying the key barriers and how to overcome them.

The webinar is aimed at members and officers of public services in the following roles:

• Heads of Service
• Service/operational Managers for major operational delivery
• Budget holders
• Section 151 Officers and Finance Managers
• Cabinet Members with budget and planning as part of their portfolio.

The webinar will be recorded and will be available on YouTube around 1-2 weeks after the live webinar on 8 August. This allows us to add English and Welsh subtitles.

You can register for the webinar on our website or by contacting a member of the Good Practice Team by email: good.practice@audit.wales.

About the author

Jeremy Evans is a Local Government Manager at the Wales Audit Office, with responsibility for north and west Wales council’s performance audit delivery.  He has worked for WAO for over 10 years in a variety of roles having worked in both local and central government.