Size, Structure and Administrative Overheads: An Empirical Analysis of English Local Authorities

The relationship is analysed between size, local government structure and administrative overheads in English local authorities. Size and structure effects are tested while controlling for a range of other variables, including the relative prosperity of the local population and the diversity of their service needs. The empirical results show that population size consistently has a linear negative effect: central administrative costs are lower in larger local authorities. The results also show that, controlling for size, administrative overheads are higher for councils in the lower tier of the existing two-tier system. The analysis provides support for arguments that economies of scale might be achieved by amalgamating smaller councils into larger units and by combining counties and districts into unitary authorities.