Select Committee on Public Administration Minutes of Evidence

Memorandum by the LGA (PSR 35)

  1.  The Local Government Association (LGA) is the national voice for local communities, speaking for nearly 500 local authorities in England and Wales representing over 50 million people and spending £65 billion a year on local services. It represents all individual authorities in England and Wales and the diverse communities they serve.

  2.  We welcome the Committee's enquiry into public service reform. Local government is at the heart of that agenda—accounting for nearly £60 billion, or 25 per cent of total public expenditure and 2.2 million, or 36 per cent of the public sector workforce, local authorities provide most of the key local services including education, social services and housing.

  3.  The agenda of public service reform has now become the most pressing challenge facing central and local government. The Prime Minister's speech on 16 October 2001 outlined this challenge:

    "The key to reform is re-designing the system round the user—the patient, the passenger, the victim of crime . . .

    The biggest problem in our public services was and is under-investment . . .

    We are backing investment with reform around four key principles:

    —  first, high national standards and full accountability;

    —  second, devolution to the front-line to encourage diversity and local creativity;

    —  third, flexibility of employment to that staff are better able to deliver modern public services; and

    —  fourth, the promotion of alternative providers and greater choice.

    All four principles have one goal—to put the consumer first. We are making the public services user-led; not producer or bureaucracy-led, allowing far greater freedom and incentives for services to develop as users want."

  4.  The LGA's supports the view that the purpose of public service reform is to put the consumer first—"citizen-centred" services must be the key objective and achievement of public service reform in the first decade of the twenty first century. This principle applies to local government as much as any other part of the public service.

  5.  Our evidence to the Committee will consider how these four principles apply in the particular case of local government. It is important to remember that local authorities are not agencies of central government accountable through Ministers to Parliament, but are a separate sphere of governance accountable to local electors and with the independent tax raising powers. This has the following implications for the Prime Minister's four principles:

    (a)  national standards cannot simply be promulgated and handed down from the centre—there has to be balancing with local circumstances and choices;

    (b)  devolution of power from the centre cannot simply be a managerial delegation of responsibility from Whitehall "head-office" to departmental "branch offices"—political devolution is needed where local authorities are concerned;

    (c)  the reform process needs to exploit local government's unique potential to bring together local public bodies, private and voluntary sector partners to develop and implement a shared strategy for the local areas and its communities, including joining-up delivery to provide integrated services to citizens.

Addressing under-investment

  6.  We welcome the Prime Minister's view that public services in general have suffered from a long period of under-investment. We agree that stable financing and new investment in public services is the key precondition for reform—this principle applies as much to local government as to the health service.

  7.  Certainly, a reformed and fairer system of local government finance is a necessity to support improved local services. The LGA has lobbied for a package of reforms including:

    —  new freedoms over capital expenditure (the new "prudential" system of capital finance);

    —  a shift in the balance of funding in favour of local raised revenue against central funding of local authorities;

    —  a reduction in ring-fenced and specific grants with greater reliance on mainstream funding; and

    —  greater discretion over fees and charges and opportunities to exploit new sources of local revenue.

  8.  However, we accept that financial reform, although necessary, is not a sufficient condition for improvement. Taxpayers and service users will need to see tangible results from service improvement if their trust is to be maintained in the benefits of higher expenditure (which may need to be funded by higher taxes). Therefore, local authorities must engage with the wider reform agenda as a quid pro quo for access to a stable and reformed system of local government finance.

National standards and accountability

  9.  The Local Government Act 1999 imposed a duty of "best value" on local authorities whereby they are required to secure continuous improvement in the economy, effectiveness and efficiency of their services. Their performance is assessed against a suite of Best Value Performance Indicator and a variety of inspectorates undertake external reviews of individual services—the Audit Commission's Best Value Inspectorate, OFSTED and the SSI. Hence local authority services are now subject to a system of rigorous checks against nationally determined standards.

  10.  However, the achievement of national standards has to be balanced against the preservation of accountability for the service to local taxpayers and citizens. We endorse the view of the Nolan Committee about the "bottom line" on accountability:

    "When a citizen receives a service which is paid for wholly or in part by the taxpayer, then the government or the local authority must retain appropriate responsibility for safeguarding the interests of both user and taxpayer regardless of the status of the service provider."[1]

  11.  Hence, achieving national standards while preserving accountability is a delicate task which needs to balance:

    —  the national determination of standards with accountability for local services;

    —  accountability to national government with accountability to local government; and

    —  accountability to service users with accountability to tax payers (by no means necessarily the same set of individuals in any one case).

  12.  We need a way of agreeing shared priorities between central government and local councils. The current focus on balancing national and local priorities needs to change. Implementing priorities will vary from area to area, respecting different local contexts. There needs to be discretion around an issue's relative priority at a local level—for example, drug abuse is more widespread in some areas than in others—and how the local dimension affects a particular priority—for example, transforming secondary education will involve different challenges in different areas. Different priorities will also be affected by the nature and extent of other local priorities, and, crucially, the performance and capacity of local organisations and institutions, including the council itself.

  13.  The key challenge for local authorities is how to work within a framework of national standards and priorities while maintaining the scope for local choice and discretion that allows local accountability to function. Local authorities are not simply outstations of Whitehall that can operate according to standards laid down by "headquarters". They need the room for manoeuvre afforded by local discretion in order to be able to lead local communities (ie so they can act as local "government" and not simply as local "administration").

  14.  A resolution of this apparent tension requires a reform of the central/local relationship so that a balance can be struck between the priorities of ministers (reflected in national standards) and local priorities that are within the discretion of authorities acting on local circumstances.

  15.  The LGA's has published key submission to the Government for the new Local Government White Paper, Partnership for Ambition, has proposed a way forward to resolve this issue. The key ideas of Partnership for Ambition include:

    (a)  a formal agreement between central and local government of a small set of shared, national, priorities against which the delivery of local authorities can be judged. Local government will commit to perform on these national priorities.

    (b)  the negotiation of Local Public Service Agreements between Government and individual authorities which offers new local freedoms and flexibilities in support of enhanced performance and innovation against a set of agreed targets. Some of these targets can be linked back to the agreed national priorities and others can be assigned to locally determined priorities;

    (c)  a commitment from Government to "let go" or "deregulate" local government by removing Whitehall's "command and control" mechanisms over local authorities (for example, in the area of finance). In particular, Government will accept the competence of local authorities to determine, and act on, local priorities with a minimum of central interference;

    (d)  these commitments by central and local government will be set out in a national/local concordat on public service delivery. The concordat will support a reformed central/local relationship and there will be monitoring arrangements, such as an annual report to Parliament and discussion at the Central/Local partnership.

  16.  We hope the White Paper will endorse the key ideas of Partnership for Ambition. The key point is to promote a much better partnership between central and local government, particularly on the determination of shared priorities.

  17.  This new central/local relationship should also allow for a reform of Best Value. Although we support the aims of the regime—ie a duty of continuous improvement—the operation of the system has become unduly bureaucratic and burdensome to authorities. In particular, a much more "light touch" and less prescriptive approach is needed; for example, far fewer BVPIs and the adoption of "light touch" approaches to inspection (particularly for those authorities that are performing well and already possess rigorous systems of performance management).

  18.  The approach of Partnership for Ambition—an agreed set of national priorities supported by negotiated local PSAs—provides the context of or our preferred reform of best value. It will enable a better alignment between best value and local PSAs'; enable authorities to focus on a manageable number of priorities for improvement, and achieve an appropriate balance between national and local priorities; ensure that these priorities correspond with those of local communities; encourage a more strategic approach to improvement, focusing effort on priorities and areas of weakness; be less prescriptive and leave room for innovation and learning, and achieve a better balance between inspection and support for improvement.

Devolution to the front-lint

  19.  We support the Government's emphasis on devolving power towards the point at which services are actually received by the public. Bureaucratic systems of "command and control" whereby practitioners have to refer back to higher levels before being able to act must reduce the responsiveness of the service to local needs and circumstances. This form of "managerial devolution" was identified in the Modernising Government White Paper in 1999 as a key factor in the process of modernising public services and is now being widely introduced, for example in the health service.

  20.  However, we would emphasise that the issue for local government is "political" rather than managerial devolution. As suggested above, local authorities are not merely "branch offices" of Whitehall headquarters, but are a politically responsible sphere of governance in their own right.

  21.  We support devolution that will "free-up" local authorities and confer new "freedoms and flexibilities" on them. However, we fear that the Government's preferred approach to devolving power is that of "earned autonomy" where by freedoms are offered as a "reward" for enhanced performance. The clearest exposition of this broad principle to government policy to date has been the introduction of earned autonomy to the health sector. In summary it involves three star NHS trusts having access to a list of 10 freedoms and flexibilities (such as fewer inspections, less monitoring from the centre and additional financial freedoms).

  22.  In a speech to local government leaders at the LGA on 16 October, the Minister for Local Government, Nick Raynsford MP said:

    "Where councils have clearly shown their ability to deliver top-quality services and to lead their communities, why should they not have more freedom to exploit more opportunities? Why not allow them to negotiate their own framework of plans? Why not allow a much lighter touch inspection regime? Why not allow more discretion on spending?"

  23.  We know the Secretary of State for Health is minded to introduce earned autonomy for social services departments and we suspect (pace the Minister's statement above) that a "star system" may be proposed for authorities in the forthcoming White Paper. The LGA strongly opposes the simplistic application of this model to local government because:

    (a)  we do not believe that a simple star scoring system is capable of reflecting the range and scope of local councils and their responsibilities;

    (b)  most of the freedoms in the NHS list are similar to those which the LGA would want to see made available to all councils;

    (c)  we want councils to have access to a set of freedoms and flexibilities that reflect their local needs, circumstances and priorities rather than being drawn from a predetermined, more narrowly defined menu; and

    (d)  earned autonomy pays no regard to the separate political mandate local councils have—whereas NHS Trusts can be treated as a "branch office" of the Department of Health, this is certainly not the case for the relationship between central and local government.

  24.  We believe there are three different elements to devolving power to localities:

    —  deregulation: this strand relates to the removal of unnecessary and inappropriate constraints and regulatory and administrative burdens on local councils, or order to free councils up to perform more effectively;

    —  freedoms and flexibilities: the focus of this strand is to enable councils and their partners to work in new and different ways to enable them to deliver tangible improvements in public services; and

    —  rewards: this is a different concept to the previous two and is a reward for performance (and an incentive for others) rather than a step to support performance.

  25.  We also need to be clear about the ways in which these elements are made available to councils. Our view is that:

    (a)  there is a significant "bedrock" of deregulation which should be made available to all councils as of right (such as the prudential capital regime; the prudential ability to trade; plan reduction and a reduction in specific grants);

    (b)  there is a smaller set of more radical initiatives which cannot be made available to all councils immediately because:

    —  the proposal ought to be tested through piloting before it is rolled out more widely; and/or

    —  before having access to the proposal or piloting it a council needs to demonstrate that it has the right capacity or has appropriate arrangements in place to achieve best use of the new freedom.

  Examples of this category could include: light touch inspection; requirement for a minimal number of statutory plans; no ring fencing of finance; no direction by DfES on school funding.

    (c)  other freedoms and flexibilities should emerge from discussions between councils, their partners and government about local priorities and strategies to tackle them. More ambitious local PSAs, of the type proposed in the LGA paperPartnership for Ambition, would provide a framework in which this discussion could take plce; and

    (d)  rewards should be relevant to the aspect of performance that is being measured and should incentivise better performance.

  26.  Our preferred approach would mean that all councils would benefit from the removal of some controls and would have the right to seek access to more radical deregulatory initiatives and other freedoms and flexibilities through a more ambitious local PSA process. The PSA negotiations would provide an opportunity for the government to satisfy itself that the council had the capacity and ambition to take advantage of the deregulation or freedom it was seeking, "High performing" councils would have access to the more radical deregulatory initiatives as of right and would have strong evidence to use in PSA negotiations to seek more ambitious freedoms and flexibilities All councils could potentially be rewarded for relevant good performance.

Flexibility of employment

  27.  We accept the need to adopt new, and more flexible, ways for working for the local government workforce. But just as important from the point of view of service improvement is the fact that high quality public services need a high quality workforce. The key workforce issues include:

    —  the need to recruit and retain a high quality workforce;

    —  the need to maintain standards of pay and conditions and address the emergence of a "two-tier" workforce;

    —  the need to provide for high quality training and investment in skills; and

    —  the need to motivate and manage staff to secure their full potential in their jobs.

  This is all essential if devolution to the front-line is to work in practice. Equally, these issues apply regardless of whether the workforce is employed by the council or by a private or voluntary service provider.

  28.  The LGA is currently, with its social partners in the CBI and TUC, developing its input into the Government's review of Best Value (due to report in January 2002). Workforce issues are at the heart of this review.

  29.  In summary, the LGA's view is that councils need adequate powers in relation to contractors' employment practices to ensure the delivery of high quality services. We supported recent amendments to Part II of the Local Government Act 1988 which had prevented councils from taking account in any tendering process of the terms and conditions of employment of workers by any contractor. In March this year the Government made an order under section 19 of the Local Government Act 1999 and issued associated guidance. The order allows councils to take account of terms and conditions, and arrangements for promotion, transfer and training, to the extent that they are relevant for the achievement of best value or for the purposes of a TUPE transfer.

  30.  The union concerns that prompted the best value review centre on the view that a two-tier workforce is emerging on council contracts, with new starters being employed on worse terms and conditions than staff transferred under TUPE. The number of contracts and staff affected is disputed, as is the severity of the problem (ie how much worse off the new starters are) and whether the problem is growing. The unions are pressing for an arrangement that guarantees new starters conditions that are no less favourable than those enjoyed by transferred staff.

  31.  The section 19 Order enables authorities to take account of the terms and conditions of new starters insofar as they are relevant to the delivery of the specified service. This provides a basic safeguard against the employment of staff on low pay and poor conditions, but may not go as far as the unions would like. Also, the section 19 Order only enables action by councils to protect terms and conditions, it does not require them to do so. There is some evidence that many authorities are not yet aware of these powers or lack the skills to use them effectively.

  32.  There are particular issues relating to pensions, where currently contractors may offer comparable pension rights, but are not required to do so. A general requirement to offer comparable pension rights is likely to emerge from the current review of TUPE and we believe this change enjoys broad support among authorities.

  33.  Hence, progress is being made on the workforce issues that could undermine (even derail) the process of public service reform. The LGA, with its partners in the improvement and Development Agency and the Local Government Employers Organisation, is also making an ambitious bid for investment through Spending Review 2002 for significantly enhanced funding to develop skills and training and a package to boost recruitment and retention of staff. For comparison, we note that over £1 billion has been earmarked for modernisation initiatives in the NHS and, bearing in mind that local government represents a comparable value of public service activity, we believe there is a strong case for significantly more funding to invest in skills and capacity building in local government.

Promotion of alternative providers

  34.  We believe that the debate about this aspect of public service reform has been unnecessarily clouded by the assumption that "alternative provision" must mean either outright privatisation of services or quasi-privatisation via public/private partnerships. This misrepresents the situation. It is largely accepted that classic privatisation has run its course—those public assets that the private sector was interested in owning have already largely been transferred. PPPs, whatever their merits or demerits, do not represent a form of privatisation—responsibility for the service, ie the chain of accountability, remains public responsibility, vested in public representatives (whether it be ministers or councillors).

  35.  This view also pays insufficient attention to other new options offered by the reform process. The provision of services by public bodies to each other and the formation of new public/public partnerships is at least as likely to be an outcome of the reform process as public/private partnerships. For example, smaller councils are anxious to develop new partnering and consortium arrangements with one another to tackle complex issues like e-government and better procurement.

  36.  Our position on this issue is straightforward and pragmatic:

    (a)  we support a diversity of options being made available to authorities;

    (b)  we believe that authorities must be able to exercise maximum discretion and operate real choices with determining;

    —  what constitutes the "best value" option for the provision of a service;

    —  the selection of the appropriate delivery vehicle in order to achieve the best value option.

  37.  In other words best value provides the key as to how improvement should be taken forward. We believe that best value should promote experimentation in new and better ways to deliver services and achieve outcomes and encourage and enable councils to learn from others and adopt what works best. This implies greater diversity in the ways local services are supplied and by whom. In turn, greater diversity implies that councils and citizens should have more choice among service providers. No service provider—public or private—should expect its position to remain incontestable.

  38.  Greater choice among service providers will be achieved by creating more opportunities for councils to contract with both private and voluntary providers and other councils and other public bodies. Greater choice will only be ensured where there is a plurality of provision. For many services, the outcome will be a mixed economy of public and private or voluntary provision. But there should be no presumption about the mix of suppliers. Some supply markets may remain dominated by public, and some by private suppliers. Encouraging a plurality of potential suppliers and widening the choice of supply options is more important than the eventual make-up of the supply market.

  39.  However, authorities must have real options and be able to make real choices between those options—the fabled "level playing field". There are three important steps the government should take to level the playing field for choice among supply options:

    —  emphasise in guidance a commitment to a level playing field and to a strategic approach to procurement, not a bias to externalisation or automatic market-testing;

    —  replace the current system of controls on councils' capital spending to allow a fairer comparison of publicly and privately-financed options involving capital spending; and

    —  improve the powers of councils to carry work with and for others, including other councils.

  40.  The current best value guidance is too easily interpreted as requiring a one-size-fits-all approach to best value reviews, including a routinised approach to testing competitiveness. Best value has been accused of allowing some councils to remove services from competitive pressure and keep them in-house. In fact, many other councils have reacted in the opposite way. They are continuing to test services through competitive tendering as if CCT had never gone away. Both are wrong. Best value should not be concerned with the current competitiveness of the service supplier but the options for future improvement of the service. How the service should be delivered in future is the primary question; answering it will often make by whom? much easier to decide. The best value guidance should be revised to emphasise the "make or buy" decision, and the factors that should influence it.

  41.  There needs to be a widening of the options available to authorities. The Government should legislate at the earliest opportunity to replace the present system of controls on local authority capital spending with the proposed system of prudential controls, so that a private sector supply option is not so often the only possibility where capital expenditure is involved. But the prudential regime will not create an entirely level playing field so long as the government continues to provide incentives, such as PFI credits, that are restricted to private supply options.

  42.  The Government should also act to improve councils' powers to work with and for each other by introducing the order proposed in Working with others to achieve best value, on which it consulted earlier this year. This order should provide wider powers for local authorities to work in partnership with the private and voluntary sectors, including a power for councils to jointly establish joint boards to discharge any of their executive functions. It should also give councils clear powers to trade with private and voluntary organisations—and private individuals—as well as other public bodies, but without the "prudential" limit on trading activity proposed in the consultation paper. Best value itself, with external scrutiny through audit and inspection, are sufficient to ensure the responsible exercise of wider trading powers.

The reform process and the challenge for the public service ethos

  43.  Our evidence has proposed a pragmatic and realistic approach to the Prime Minister's four principles for public service reform:

    (a)  national standards yes, but achieved through a streamlined system of best value and with a negotiated approach to determining shared priorities and a local Public Service Agreement for every locality;

    (b)  greater political devolution of power to local authorities, with new freedoms and flexibilities conferred as a support to improvement, not as a reward;

    (c)  flexibility of employment must be combined with powers for authorities to ensure the maintenance of a high quality workforce;

    (d)  there must be diversity and contestability in local service provision, authorities must have the discretion to choose the best value option for the way services are provided.

  44.  What implications do these conclusions have for the concept of "public service ethos"? Other evidence submitted to the Committee—by the Local Government Information Unit and the London Borough of Hammersmith and Fulham—makes the case that something called a "public service ethos" does exist in local government and is valued by its staff. Typically, "ethos" is often related to the following ideas/ideals:

    —  shared values of honesty, integrity and caring by staff;

    —  the placing of service to the public before monetary of salary-related ideals;

    —  service provision on the basis of "need" rather than "availability of pay", perhaps with the service being "free at the point of use"; and

    —  democratic values with the community having a "voice" or "stake" through the electoral system in the collective provision of the service.

  45.  We accept that "ethos" captures a valuable point about the values that underpinned service delivery at a time when all local services were universally delivered by public providers. However, today, for better or worse, we have entered a new situation with regard to provision:

    (a)  choice and accountability to service users are now much more at the heart of decisions about delivery than in the past, there is a much greater presumption in favour of a "customer-focus" for services than there used to be; and

    (c)  a greater value is placed on innovation and diversity than in the past, a "one-size-fits-all" approach to provision is no longer seen as acceptable.

  46.  The reality is that a "mixed economy of provision" now exists for most local services and the desirability of maintaining an "ethos" of public service must adapt to that reality. Ultimately our view is pragmatic—any ethos of public service is only as good as the service that is actually provided to the public. A "caring" ethos isn't worth much if it goes hand in hand with a poor service. Therefore, we believe that the best ethos public services can have in future is a commitment to provide the highest quality services with a citizen or customer focus.

  47.  We do not believe that this principle is threatened by diversity of provider. Diversity actually supports quality by allowing innovation and supporting a learning process where authorities can try different approaches to find out what works best. We reject the view that working with private providers (or, for that matter, other public bodies or voluntary providers) must mean the "death" of a public service ethos.


  48.  The Committee will be aware that local government is a devolved matter. The public service reform agenda is following a parallel, but separate path in Wales. The Welsh Local Government Association has a formal Partnership with the devolved government and the Assembly and is developing parallel opportunities for reform based on strengthening community leadership and the provision of higher quality, more citizen responsive services.

  49.  A number of reform initiatives are underway for local government in Wales:

    —  each of the 22 Welsh authorities is entering into a Policy Agreement with the National Assembly on an agreed set of national and local priorities;

    —  best value is being reformed to focus on outcomes;

    —  resources are being redirected into learning new skills and gaining new competences appropriate for working in partnership—between authorities, with other agencies and through new technologies; and

    —  increasing flexibility and freedom from excessive regulation that the growing understanding with the Assembly is bringing.

Local Government Association

December 2001

1   Committee on Standards in Public Life, Second Report, vol 1, p 12 Cm 3270 1996. Back

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