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.
Wales
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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