Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions First Report


5  FUNDING

84. The resources available to elected regional assemblies would mostly be provided by central government grant which would be made up of existing funding streams for programmes transferred into the responsibility of assemblies, including relevant staffing budgets. The White Paper suggested that assemblies would have 'freedom' to spend this as 'a single block grant' 'as they judge best'[94] subject to meeting a small number of targets agreed with central government (and, as with similar arrangements for local government, additional funds might be awarded if targets were exceeded). These terms were qualified in the draft Bill. The assembly general grant would have come 'primarily' as a block grant, and assemblies would have had 'considerable freedom' under their general purposes to spend their funding as they judged best. [95] 'Such conditions' as the Secretary of State 'sees fit'[96] might have been attached though no fuller information is given as to the potential reach of those conditions. These changes of emphasis suggest a rather tighter central government prescription of what elected regional assemblies might have spent their money on than was originally envisaged. This was not welcomed in evidence, where in general maximum discretion in expenditures was preferred. For example Dan Corry from the New Local Government Network argued:

    You have got to take the ring-fencing off and all the rest that sort of thing. With local government it is the same thing, the more it comes out of a single pot and you leave it to the assembly the better.[97]

85. The reduced budgetary flexibility in the Draft Bill as compared to the White Paper has to be considered alongside two other points. It would have been difficult at least in the short term for elected regional assemblies to shift patterns of expenditure across inherited programmes. Mark Sandford from University College London pointed out:

    The nature of the funding settlement and the elected regional assemblies is such that a lot of the money which will come from the central government grants will be pre-committed to general areas such as regional development, housing and capital allocations, the regional fire and rescue service.[98]

It would have been even more difficult to do so where programmes are run through arms length functional bodies such as the Regional Development Agencies, Regional Cultural Consortia and Regional Fire and Rescue Services. Paul Bevan from the South East Regional Assembly said:

    I think the functional body approach is a real limitation. It is bad enough within a government or local government organisation to take money from one department and put it into another to reflect your priorities; but if you have got functional bodies with relatively autonomous boards that makes it even more difficult'[99]

86. Evidence to the committee suggested that elected regional assemblies would not have sufficient discretion over funds which have not already been allocated to expenditure programmes to adapt spending to meet their new priorities. As the Committee said in its report on regional economic disparities, regional government should mean more than the regional administration of national government priorities.[100]

87. Should the Government revisit the idea of elected regional assemblies in the future it should adhere to the idea of 'single pot' block funding and avoid the temptation to be overly prescriptive on how elected regional assemblies draw up their budgets. As far as possible the assemblies should be empowered to set their own targets, and to deploy resources to meet them. They would be accountable to regional electorates, and need not be subject to the heavy hand of central Government.

The Precept

88. The precepting power proposed for elected regional assemblies has raised some concerns. The White Paper envisaged that assemblies could include a precept on council taxes to raise funds for their running costs, notionally at a level of 5p per week for a Band D council taxpayer; and to deliver on their priorities, such as economic development projects.[101] There appears to be no overt provision for the latter in the draft Bill, though additional precepts are not ruled out. There remains a provision for capping the level of the precept, should its rate of increase be seen by central Government as excessive.

89. In the absence of greater budgetary flexibility, elected assemblies may inevitably be drawn to raising precepts in order to generate some discretionary financial capacity. The precepts could rise quickly beyond the levels anticipated in the draft Bill, and point to the developments in the Greater London Authority, where a similar power has been used to push increases well beyond the rate of inflation.[102] Councillor Arthur Thomas from the English Regions Network said: "I do not think the 5p is something which will cover the cost of what you are envisaging there".[103] Mark Sandford from University College, London said: 'I think there is a risk that the fabled 5p a week on a Band D council taxpayer is likely to rise'[104] Professor Travers from the London School of Economics said: "It would be surprising if the precept that is to be given to regions outside London stayed at the tiny, tiny level that was originally envisaged'."[105]

90. Local authorities are understandably concerned about this prospect, not least because the experience in London suggests that few council tax-payers seem to distinguish between the different bodies raising additional charges on council tax bills, tending instead to blame the local authority. Professor Travers said:

    There is no question that perhaps the single issue that caused the greatest rift between the boroughs and the Mayor of London in its first couple of years was the disagreement between the boroughs and the Association of London Government and the Mayor over a particular precept which was seen as too high, because the boroughs do feel that it is their single unified bill that the public sees as being what people pay and that a sharp rise in the GLA precept is blamed on the boroughs.[106]

91. He suggested that it should be possible at limited expense to produce separate council tax bills.[107] Professor Travers argued that the level of precept envisaged would leave elected regional assemblies too much dependent on central government grant. He proposed that half or more of the funding for assemblies should be raised locally.[108] There is a strong rationale in ensuring a sense of fiscal accountability in the work of elected regional assemblies. The Government is currently reviewing the balance of funding which local authorities raise locally and provided by central Government. When the Committee considered local government revenue funding in 2004 we emphasised the importance of local accountability. In our report we said: "Enhancing the accountability of local authorities to the people they serve is at the heart of the balance of funding debate."[109] To be effective elected regional assemblies should have precepting powers and they should also be fiscally accountable so that the electorate can see how public funds are spent. At the very least separate council tax bills would be required to highlight the contribution towards the Assemblies.

Value for money

92. There are two issues associated with value for money. The first is with the transition costs of setting up elected regional assemblies and the second relates to the capacity of Assemblies to add value once up and running. No concrete estimates of transitional costs were given in the draft Bill and its accompanying policy statement. The costs would be the establishment of assemblies, in particular the transfer of staffing from other public bodies to assemblies (approximately 200 people) and the provision of accommodation for assemblies and the reorganisation of local government into a single tier system in regions which voted to introduce an assembly.

93. The Government assumes that the transitional costs would be offset by longer term savings. In the White Paper it was suggested that more effective targeting of resources and efficiency improvements arising from scrutiny by members could result in sufficient improvements in value for money on programme expenditures to cover running costs. And there is a more traditional assumption that the reorganisation of local government into a single tier, despite short term costs, brings longer term efficiency gains. The Government provided little hard evidence on these points. Richard Allan, Director of Regional Policy at the Office of the Deputy Prime Minister did venture an 'average figure for the set-up cost' of "about £33 million",[110] but no detail on how this was calculated was provided.

94. The Government has not estimated cost savings from a move to a unitary system of local government. Nor, indeed, has the Local Government Association, though the Association did caution that estimates of cost savings in past reorganisations have been overly optimistic. The LGA's chairman Sir Sandy Bruce-Lockhart said: "I think experience has shown from the setting up of unitary authorities eight years ago that those savings did not materialise to the extent that the people expected."[111]

95. Richard Allan also ventured an estimate on annual running costs, at "about £24 million in the North East and more for assemblies in a larger region".[112] The lack of detail in how this figure has been calculated provoked some concern, not least for its implication for the level of council tax precept. Councillor Gibson said: "It is a difficult one to work through. I would like to see a paper on this. I do not know where the 5p comes from. I do not know where the £25 million comes from."[113]

96. With the lack of information about their financial implications for the electorate and overall resources, it was very hard to work out the cost benefit analysis of elected regional assemblies and lay them open to accusations of little more than costly 'talking shops'. This is particularly the case with the limited powers and responsibilities proposed for the elected regional assemblies. Mr Boles from the Policy Exchange said:

    It would be hard to design a piece of legislation that was more guaranteed to increase that cynicism and that apathy [about governance in this country] than this particular Bill. There is almost nothing in it that will inspire any confidence in anyone of the honesty, transparency or real willingness to do something to improve people's lives than this Bill. These things [elected assemblies] are a charade, they are a mockery, they will add no value at all, they will cost a huge amount of money and they will generate enormous amounts of blether, with absolutely no purpose.[114]

97. In making the case for any future assemblies, the Government needs to estimate the likely costs. Otherwise it will be too easy for stakeholders to express a lack of confidence in the Government's financial planning. We find it odd that the Government had done so little detailed planning of the costs and benefits of setting up, and urge it to produce fuller estimates in the name of transparency should it at some point revive the elected regional assemblies proposals.

98. The electorate in the North East were not convinced about the 'cost-benefit' calculation in regard to elected assemblies, unable to see in the modest powers of assemblies and their limited autonomy from central government sufficient prospect of concrete improvements in their daily lives to vote for their introduction. When the policy on elected regional assemblies is revived, the Government - and departments across Government - will need to invest real powers and resources in elected regional assemblies.


94   White Paper p. 44. Back

95   Draft Bill Policy Statement p. 25. Back

96   Draft Bill para 56/7. Back

97   Q90 (Mr Corry) Back

98   Q12 (Mr Sandford). Back

99   Q350 (Mr Bevan) Back

100   Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Committee - Ninth Report of Session 2002-03, Reducing Regional Disparities in Prosperity Back

101   White Paper pp. 45-46. Back

102   Q58 (Prof Travers) Back

103   Q349 (Mr Thomas) Back

104   Q12 (Mr Sandford) Back

105   Q58 (Prof Travers) Back

106   Q69 (Prof Travers) Back

107   Q69 (Prof Travers) Back

108   Prof Travers  Back

109   Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions - Ninth Report of Session 2003-2004, Local Government Revenue, para 9 Back

110   Q261 (Mr Allan) Back

111   Q137 (Sir Sandy Bruce-Lockhart) Back

112   Q261 (Mr Allan) Back

113   Q346 (Councillor Gibson) Back

114   Q73 (Mr Boles) Back


 
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Prepared 5 January 2005