Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 440-459)



  440. And when we come to look at this review we have been promised about the balance of funding between central and local government and the detail about where the money comes from, is it actually going to achieve anything real or is it just like some of the comments, that when we get down to the detail it is not likely to amount to much?
  (Ms Sillett) It is hard to say. We cannot second-guess what your colleagues are going to come out with, but I suspect within the Deputy Prime Minister's Office, and he and Ministers would want to see a change in the balance of funding. I am not sure about other departments, whether they actually are indifferent to it, but it is how that is going to be achieved. Clearly the easiest and simplest way to do it would be to bring it back to a localised business rate, which it does not look as if this Government is prepared to do, so given that, I do not think we are particularly optimistic about the outcome of a review which is reviewing evidence which we have seen over the last 50 or 60 years.

  441. And that will make that less likely, in your view? Linking the NMDR to the support grant in one stream is likely to make it less likely for the business rate to be localised?
  (Ms Sillett) If one was cynical, one would say that is part of the reason for that to happen, but maybe it is an accident, but it is clearly something that has happened which can be unpicked, but it does not look as if there is any intention on behalf of the Government for doing that or they would not have gone for that merger which is not totally necessary, but it seems to me that is a marginal point, it is not substantive. What is substantive is, is there a will to do it and is the Government looking at means to do so, and there may be other ways of doing so which are not about localising the business rate, and how much is the Government prepared actually to risk changing the system because there is a reason.

  442. On the issue of ring-fencing, which is another matter of concern in local/central relationships, could there be things included in the Bill which would reduce the ring-fencing and have you got particular issues you would like to see included there?
  (Ms Sillett) I am not sure the Bill is necessarily the right place. Again I think it is about political will and it is probably about some tensions between different government departments more than it is about the workings of a Bill. It does not necessarily need legislation. It may be within the prudential framework but until we know how the subsidy mechanisms are going to work for that, I do not think we can be clear whether there is going to be more ring-fencing or less ring-fencing for capital investment in terms of revenue funding. I think it is an outstanding issue. It is an issue that is clearly outstanding from the White Paper. I do not think it is necessarily something that is directly about this Bill. I am not sure it could be in the legislation. I think it is about government departments being committed to, firstly, taking seriously what they were saying in the White Paper about testing, more ring-fencing or new ring-fencing against certain criteria and it is about particularly, I think, Health and Education really wanting to do that. I think at the moment there is no sign that that is the case, so I think it is about politics, I do not think it is necessarily about legislation.

Mr O'Brien

  443. When you talk about the balance for raising revenues between local government and central government, where should the balance be?
  (Mr Reed) The balance between central and local funding?

  444. Yes.
  (Mr Reed) We would certainly like to see it be above 50 per cent. At the moment it is 25 per cent—

  445. And how would local government raise that money?
  (Mr Reed) Well, there are a number of means to do it. They would either return the business rate to local level or they would have a combination of other methods, such as taxes which are used in other countries, tourist taxes, hotel taxes and so on. In the Commission we also asked that there be some consideration in the future of the possibility of local income tax, but however it is done, we believe that local democracy will never be strong in this country unless—

  446. Why is that not included in your evidence? In your evidence you have five lines on local government finance. Now, you are giving us examples as to how you believe—
  (Ms Newman) It is the LGIU evidence you have got.

  447. Yes, but I am looking at the Commission on Local Governance submission. Mr Reed is now saying that there are examples of raising taxes. Now, obviously if we are to consider that, we want examples and I think it should be included in your evidence unless you would like to send us a paper on that.
  (Mr Reed) We would be quite happy to give you a paper on that. We had 66 recommendations in our report, so obviously we had to select a few for the evidence. We could not provide the full report, but we will leave the full report with you and we will be very happy to follow up with any written evidence that you want.


  448. Fine. In your introduction, you were not happy with the Comprehensive Performance Assessment. Should there be a right of appeal?
  (Mr Reed) There certainly should. We understood that there was going to be a right of appeal. At the moment the only appeal mechanism, at least that is my understanding of it, is internal moderation through the Audit Commission. We think that is unsatisfactory and there must be a more transparent way of challenging the final categorisation because a lot rides on the final categorisation, not just the freedoms and flexibilities, but also the status of the authority in the eyes of the electorate, so yes, indeed.

Chris Grayling

  449. We heard from Westminster earlier that they thought that the Comprehensive Performance Assessments would paralyse the local authority for a month or two.
  (Mr Reed) Yes.

  450. In your view, is this set-up hugely onerous for local authorities? Is it going to do as Westminster suggest it might?
  (Mr Reed) It is massively resource-intensive and, to give you an example because you have been pressing for particular examples, the Chief Executive of East Sussex spoke at the LGA Conference the other week and she said that she had kept a diary of how much time she, as Chief Executive, during June spent on inspection-related matters. Her diary indicated that she had spent 87½ hours during one month on inspection-related matters. She quite rightly asked the question, "Do you think that the ratepayers in East Sussex want me to be spending that amount of time on inspection-related matters?" We believe the whole thing has got out of kilter and needs to be addressed.

Mr Cummings

  451. In your evidence you argue that inspections should be able to ensure compliance with the law and constitutional principles. How closely do the inspections ensure compliance?
  (Mr Reed) Well, everybody agrees that central government have a right to ensure that there is a certain quality of standards, but we are now in a situation where the individual minutiae of each service and the targets being achieved in each service are being examined by numerous government inspectorates and it is not just the Comprehensive Performance Assessment schemes, but all the other inspectorates that are involved as well.

  452. What do you believe the Government can do to free the local authority from unnecessary inspection whilst ensuring that poor-quality services can be identified and improved?
  (Mr Reed) We certainly would not say that there should not be some element of external inspection and challenge to what local authorities do. It is just that the whole thing has now been taken up by a massive bureaucracy and this needs to be addressed, so—

  453. What would you do though? How would you free local government?
  (Mr Reed) We should rely far more on self-assessment which is part of the CPA, but only a part of it. We should ensure that it is only the extremes which are being assessed by government, so where there are situations of extreme failure is where the Government actually step in. The vast majority of local government is quite able, with the current systems that are provided, for example, by the Improvement and Development Agency, to organise and improve its own services. I think that everybody now is concerned about improving services across all political parties. This inspection regime is not helping us to do that. In fact it is distracting us from providing the home helps and so on which everybody knows are necessary.

  454. And yet you argue that the power trade should not be related to a local authority's performance.
  (Mr Reed) The power of trading?

  455. Yes.
  (Ms Newman) Basically we think it is unworkable and it is a very destructive way they have set it up at the moment because what they are suggesting, particularly within the current categorisation, you have an overall categorisation for a local authority, then in every local authority, I think you know and we know, there are some areas of excellence and in those areas of excellence there is no reason where there are benefits to the local community that the local authority should not be allowed to trade. The only way they could sort out those specific areas of excellence within the current framework is to inspect every service and give every service a ranking so that you would decide which was excellent, which was not, which would be allowed to trade and which would not. That becomes a nonsense. You can have a specific reason in a small area where you can really see how trading could benefit your community where you are doing good work. The Government has argued that that would be a distraction if they allowed that to happen in a poor-performing service and you could argue that a local authority is at the very bottom of the league in the very lowest category, that maybe for a period while it gets its act together it should not be allowed to trade. In all the other categories there are going to be areas of excellence and what we have found is rather like if you praise someone, if you give them the ability to improve, they go on to improve in other areas and if you give them the freedom and flexibility to trade in those areas where they are doing good work and they themselves know they are doing good work and they can justify it in terms of the well-being of their community, the 2000 Act, then there seems to us no reason why you should prevent the residents of that area benefiting from these services that local authorities provide.

  456. Do you believe that the Bill should have included proposals to streamline best value and, if so, how could that be achieved?
  (Ms Newman) Well, they are proposing to streamline best value. I do not know whether it requires a legislative framework to actually do that.

  457. The question was, should the Bill have included it?
  (Ms Newman) I think it could be done outside the Bill. One of the issues we have—


  458. You said it can be done in regulations, so you prefer regulations to seeing things on the face of the Bill?
  (Ms Newman) Guidance, if you like. One of the issues is that the current Bill is actually heavily dependent on the regulations. The impact it will have in these trading and charging, what the restrictions are—

  459. That is why, as far as I am concerned, I prefer to see things on the face of the Bill, but you are implying that as part of best value, instead of having it on the face of the Bill, they should be in regulations.
  (Ms Newman) I think we believe that you should be seeing the regulations at the same time as you are seeing the Bill.

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