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Memorandum from Knowsley Borough Council (BOP 19)
Introduction 1. Knowsley Council is a key deliverer of services for its 150 000 residents and has a leading role in the Liverpool City Region. The ability to deliver effective and efficient services that meet the needs of its residents relies in part on the relationship it has with national government and it is with in this context that this submission is made.
2. The council's submission is in two parts; the first raises a number of general observations on the balance between central and local government including form should follow function and the need for a constitution to clarify the roles and responsibilities of both national and local government. The second part of the submission deals with the financing of local government and the need to properly fund what ever functions it is called to provide.
General Observations:
Form follows function; 3. We need to understand what Local Government is for before we can develop an understanding of the balance we between local and national government - is it to provide services or represent local views. In this paper it is assumed it is to provide services.
4. The publication and enacting of the Local Government White paper last year dealt largely with the form of local government, rather than its function. It seems to me that the debate is the wrong way round and we all need to be clear what the function of local government is for - the white paper promised a constitution that never materialised the government has never set out clearly what it wants local government to do. This debate might be a start - then the form should follow.
5. Local government provides a range of personal services including: • Waste collection • Social services • Strategic education • Regeneration • Culture, sport, leisure, libraries
6. However it could provide a range of additional services including:
• Social housing - Govt could decide to abolish English Partnership (government regeneration body) Knowsley's Housing Strategy • Health (fully integrate the PCTs into Local Govt to promote the health is wealth debate Health is Wealth) • Economic development and worklessness - Govt could abolish the RDAs and passport the money direct to Councils Knowsley's Economic Regeneration Strategy and Employment and Skills Strategy
7. It is worth noting that local government did have control of many more services in the past including water and power but they were removed from local authority control without a debate and in order to meet Govt objectives at the time; now may be the time to encourage Govt to reconsider this decision.
8. All that Central government would then be left to deliver is defence, strategic transport and energy policy - whilst this may be unrealistic but it may be worth investigating as part of this debate.
Constitution; 9. Much of the welfare state has always been national (National Health Service, national entitlements to benefits and education) and as long as citizens look first to national government to deliver in these areas, national government will not be ceding responsibility to others. Newspapers are always highlighting the 'inequalities' of "postcode lotteries" rather than the democratic choice; difference will always be the result of more devolution and we don't seem to want that.
10. A further suggestion would be to develop a constitution setting out the roles and responsibilities of central and local government - this needs to be agreed by all political parties so it would provide long term stability (may be 20 years but as much as 50 years) on what we are asked to do. What ever we do we need to do the basics right, focus on what residents want us to do within the constitutional framework and it be adequately funded.
Funding and service delivery; 11. Local government is often seen as a dumping ground for all the services that the government either finds too hard to do ie congestion charging or recycling or has no answer to. The adoption of Sustainable Community Strategies and LAAs, SCS/LAA should help us to focus on service delivery and resourcing however having had a below inflation settlement allied with a 3% efficiency saving, the issue of LG funding is crucial particularly in an area like Knowsley where the opportunity to generate resources via local taxation is limited.
12. Financial freedoms depend on a fair distribution of resources from central government. The ongoing formula review must tackle the inequalities that remain such as resource equalisation, and should give greater emphasis on need (deprivation factors).
13. Knowsley supports the strengthening of the role and influence of local government on Policing and Health, building on the Local Strategic Partnership. The ability to pool budgets and commission services authority wide enables the targeting of local priorities
14. Local government will not become more independent while such a high proportion of its funding (exceptional by international standards) is controlled by central government, either through grants or the distribution of the NNDR pot. Furthermore, the capping power of government over council tax is a draconian measure, which undermines local accountability and reduces the flexibility that local authorities require to respond to the needs of local residents.
15. It would be interesting to explore further the committee's suggestion of establishing an independent commission to oversee the financial settlement for local government, which could help make local-national relationships less tense. What is important is that local authorities must be involved in any discussion or debate on local government funding to ensure that local needs and priorities are addressed and fully funded through the finance settlement.
16. The lengthy and thorough analysis of
City Regions 17. It's promising that the importance of local decision-making to the economic fortunes of cities and city-regions, informed by academic work comparing the UK to continental and north American cities, has been taken on board by government and reflected in innovations such as the Sub National Review and MAAs. On Merseyside the development of the City Employment Strategy is an example of this devolution. The next steps, which it would be good if the select committee could be encouraged to back, would be Core Cities' proposals in the Unlocking City Growth report for Accelarated Development Zones (requested amongst the "Asks" in our draft MAA) and Regional Infrastructure Funds. However, poorer localities should also welcome the fact that the balance will still be struck between such devolution and national government's stake in regional development and equalising outcomes (Eg in National Indicators focussing on improvements to wellbeing locally and PSA7 on regional economic performance).
Addressing the political deficit; 18. Central government via the empowerment, active citizenship and volunteering, ownership of assets agenda are attempting to address the political deficit at a local level which will be difficult due to years of central government systematically stripping LG of power funding and credibility. Planning powers have consistently been removed from local government with the introduction of the Planning Infrastructure Commission being the latest example of this process. There is a need to introduce more credibility into the political process and address the political deficit at a local level, for example, local councils should have the power to determine even potentially large planning applications and be held to account accordingly, an example of this is the Kirkby Regeneration project.
Relationship with 19. The real issue in many people's minds is not the relationship between national and local government but the one between national and European government. The recent survey by Ipsos Mori encapsulates this as people do not wish to be involved in local politics. Power has been ceded to the EU with a majority of legislation being taken through parliament being EU directives. Often central government agrees limits and targets with the EU and then expects LG to meet them without fully costing the implications - the collection and recycling of refuse is a case in point
Financial Issues: Does local government need greater autonomy from central government? If so, in what ways?
20. If further devolution leads to greater freedoms and flexibilities to prioritise where resources can be directed based on local need then this would be welcomed. Central Government's role should be to provide leadership by setting a clear vision, a stable framework, adequate resources, effective incentives as well as accessible and consistent information on performance. Local government need to be given the resources to achieve this vision as they and local people see fit.
21. Tackling the problems at the roots of communities need to be directed by locally elected Members who have the knowledge about what is required and works in their community. Local government need to ensure that resources are available to communities to support these initiatives. If local government is able to demonstrate that it has the mechanisms to facilitate this then this would strengthen the argument for greater autonomy.
Financial Autonomy To what extent do the current arrangements for local government funding act as a barrier to local authorities fulfilling their 'place shaping' role? In particular: Does local government need greater financial freedom? If so, in what ways?
22. Financial freedoms depend on a fair distribution of resources from central government through the formula grant. The ongoing formula review should tackle the inequalities that remain such as the area cost adjustment, and should give greater emphasis on need i.e. deprivation factors.
23. The continued use of ring fenced grants by the Government leads to the inefficient allocation of resources and undermines the ability to place shape and manage the achievement of targets. However, the move to non ring-fenced grants, such as the area based grant is a favourable method of funding for new government initiatives. It is important that the Government fully funds any new initiatives. For a floor authority, such as Knowsley, any increases in formula grant can result in no additional funding to implement initiatives as floor grant is merely replaced with formula grant.
24. It is also possible that specific ring fenced grant, which are restrictive in the way local authorities retain management and administration resources would enable further resources to be passported to communities to place shape. The infrastructural costs that accompany initiatives may be reducing the impact of new resources on improving standards.
Should local government be able to raise a greater proportion of its expenditure locally?
25. For an authority such as Knowsley with a low tax base, the opportunity to raise a greater proportion of its expenditure locally is very restricted. The ability to raise income from fees and charges is minimal and is incomparable with the income generation potential of some boroughs, such as London Boroughs. The ability to generate income needs to be taken into account as part of methodology for distributing formula grant as part of resource equalisation, which will not disadvantage those local councils with low tax bases.
26. The delay in council tax revaluations has lead to continued inequalities between council taxpayers across the country. The Lyons Review recommended the addition of a new upper and lower band to redistribute wealth between the very rich and the poor, which should lighten the tax burden for many residents within Knowsley. The Lyons Review supports the continuation of the council tax system in principle, but highlights that it is a tax which is progressive to income if council tax benefit is fully utilised. Before any alternatives to council tax can be considered, which could lead to financial autonomy, trust must be secure between residents and local government.
27. If the introduction of a local income tax is
successful in
28. Arguments about the rate of increases in business rates in comparison to council tax increases suggest businesses have been treated leniently. However, in tough economic conditions the effect of significant increases in business rates would be felt by all businesses. Since business rates have been distributed nationally, £1bn has been redirected from local government funding to support other national government priorities. As business rate receipts finance the majority of the formula grant allocations to local authorities their impact on financial freedom lies in the fairness of the formula and the quantity being released. The 3 year settlement protects local government from cyclical fluctuations in business rate receipts and enables some stability to forward plan.
What effect does council tax capping have on local accountability?
29. The cap on council tax is a draconian measure which undermines local accountability and reduces the flexibility that local authorities require to respond to the needs of local residents. The cap is not the only factor restricting council tax rises. Political and social constraints are equally restrictive. The balance between increased revenues and affordability of residents has to be monitored. The ability to fund local services is getting increasingly difficult, especially for floor authorities facing the prospect of a tapered floor. Residents are unlikely to differentiate between local and national governmental responsibility but when given the opportunity, in whatever elections, are likely to vote for change, if they feel worse off.
Existing powers To what extent are local government services a product of national or local decision making?
30. The movement away from target setting to outcome based monitoring, as with the Local Area Agreement has meant a transfer of accountability to local government.
Improving the relationship between central and local government
What difference has the central-local concordat made to central-local relations?
Should an independent commission be established to oversee the financial settlement for local government?
31. The benefits of an Independent Commission to oversee the financial settlement for local government may include financial settlements being less of a political tool i.e. Ministerial decision and therefore, in theory, fairer. Disadvantages depend on whether local government has a voice, and whether the commission has a greater understanding of local needs. The two components of the settlement are the distribution method and the quantum. Central government would need to provide adequate resources for the Independent Commission to distribute resources fairly, and should be subject to calls to account from the Independent Commission if resources are withheld by the Government.
Conclusion 32. In the context of the discussion about the future relationship between central and local government it is important to establish some key principles.
(1) Subsidiarity - the need to balance the efficiency of regional service delivery against local democracy and local responsiveness;
(2) Common Boundaries - experience suggests that people can understand public services better when they are delivered in common boundaries which also make it much easier for organisations to deliver real joined-up services (this is an approach Knowsley has been pursuing with the PCT for a number of years) ; and
(3) Strong Local Government -people have in the past strongly supported local government and this support needs in the future to be the centrepiece in service delivery and local democracy. Without it local government may as well be regarded as a branch of national government
33. Such a statement of principles would serve to ensure that both central and local government are working to a common vision and ensure that the allocation of functions takes place in an environment of trust, mutual regard and the common cause of providing integrated public services meeting the needs of our citizens.
34. Such principles and vision could form the basis of a constitution between central and local government and be part of the Prime Ministers desire for a written constitution for all. The constitution enforceable in the courts would set out the clear roles and responsibilities of central and local government. The constitution possibly along the lines of the BBC's charter would be developed after far reaching consultation and have all party agreement. It would be reviewed after an extensive period of time.
32. The key to ensuring a proper balance between local and national government power and fulfilling the vision and core principles is clear, transparent and accountable fund raising powers. It is funding which is the key to ensuring the balance between local and national government powers and whilst this has been recognised by the current government in the commissioning of the Lyons Review - little if anything of real substance has emerged; the committee may wish to look at how the review has been implemented.
September 2008
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