Councils will be unable to cover the costs of voluntary mergers in Wales using their reserves, the Chartered Institute of Public Finance (CIPFA) has warned.

In its submission to the Welsh Government, CIPFA said there had been no consideration about how potential council mergers will be funded or whether the benefits will outweigh the costs.

CIPFA found that Welsh councils held £196.3m in reserves in 2015, which is more than £70m short of the estimated cost of the merger process.

Head of devolved nations at CIPFA, Don Peebles, said: ‘Local authorities in Wales are facing unprecedented financial challenges and so it is right that the Welsh Government is examining how reform could help the sector become more efficient while improving outcomes.

'Council mergers could help Welsh local authorities streamline resources and boost performance.

‘However, it is important that the financial and social benefits of mergers must be compared against upfront costs of reorganisation, which, if funded from reserves alone, could reduce the ability of local authorities to protect themselves from future risks.

‘By taking stock of the costs in the context of the budgetary pressures, the Welsh Government will be able to fully assess whether plans will ensure the long-term sustainability of services.'