House of Commons - Communities and Local Government Committee

The Balance of Power: Central and Local Government - Communities and Local Government Committee Contents

Memorandum by Birmingham City Council (BOP 02)

SUMMARY

This submission argues strongly that local government, in particular the core cities and their city regions, must have greater autonomy and more freedoms to raise funding locally.

This argument is based firmly on the need to achieve better outcomes locally—specifically the need to improve the economic performance of the core cities so that they make their full contribution to the UK's prosperity. We set out what Birmingham will seek to achieve given these freedoms.

We argue for a power of general competence, further new local taxation and investment tools, a further reduction in central targets and inspection and further reforms to the Local Area Agreement system.

We argue that council cabinet members for community safety should sit on police authorities and that there is a strong case for primary care trusts to come within the ambit of local authorities

1. OUR FOCUS: ACHIEVING OUTCOMES

1.1 For Birmingham City Council, the question of the balance of power between local and central government starts from the issue of what we are trying to achieve—we are not interested in constitutional or structural changes for their own sake. Our case for more autonomy and devolution is simple: the UK will be benefit economically and socially from returning to local government some of the powers and independence it has lost over the last century. We believe that Birmingham's history and its enormous modern potential should stand as a testament to the truth of that statement and we will continue to put forward this argument until a government is bold enough to let go and restore to our great cities the independence they deserve.

2. BIRMINGHAM: A PROUD PAST AND A STUNNING FUTURE

2.1 Today's over regulated, centrally driven and nationally financed local government system would be unrecognisable to our predecessors. Birmingham became known as "the best governed city in the world" because it had the autonomy to act in innovative ways to address the problems it faced. Municipal borrowing was enormous by modern standards, but fully supported by the income streams the city was able to create through municipal gas and water supplies and imaginative use of local assets. Because of this local self-determination the business leaders of the city were able to commit to the city's future through enlightened self interest, realising that collective investment would lower costs for all and therefore create a more prosperous city.

2.2 Central control of local government has grown through the decades and under governments of all parties with the best of intentions. As central government became more active, created the welfare state and sought to standardise the schools and social care systems it inevitably came to legislate to define the precise role and duties of local councils. As expenditure grew it became necessary to support local budgets from national taxation and to develop re-distribution mechanisms to ensure that the poorer areas could deliver the expected services. Governments of different parties have come to assume that their mandate requires them to impose targets, initiatives and programmes on local government, rather than allowing councils the freedom to set their own priorities. There have been gains from the creation of this system, but much has also been lost. It has reached the point where this system is a barrier to innovation and the solving of local problems. It is now imperative that the balance between local and central government is corrected.

2.3 This cannot be achieved without some reform of the system of taxation which will enable a greater proportion of revenue to be raised locally (and more local choice about how it is spent). However in this submission we want to concentrate on another aspect of this re-balancing: the re-creation of the freedoms and flexibilities needed to enable us to deliver our plans for the further regeneration of Birmingham.

2.4 We have truly audacious plans to regenerate and transform the city. The Big City Plan and the growth of the city will lead to a 10% increase in population, the creation of over 100,000 jobs and the building of 75,000 new homes over the next 20 years. We aspire to take Birmingham into the top 25 cities in the world (as measured by the Mercer quality of life index).

2.5 Our plan has five key pillars:

Creating a High Speed Rail Link—High Speed 2 (HS2).

Implementing the Big City Plan in full.

Growing the Communities of East Birmingham.

Holding a Birmingham World Expo.

Building Stronger Communities.

3. DELIVERING THE FUTURE: WHY DEVOLUTION MATTERS

3.1 There are four main reasons why shifting the balance to local government (particularly in our great cities) will deliver better outcomes:

— Greater autonomy in raising finance will mean that investment is sensitive to the needs of the locality, supported by the local business community and proportionate to local assets (as it was in the era of Chamberlain).

— Local management of fund raising and projects will accelerate investment, bringing an end to years of delays for transport and other infrastructure projects.

— Local political leadership can galvanise public support and focus on delivery—programmes delivered from Whitehall risk remoteness and lack of conviction or over-the-top bureaucracy in an attempt to ensure compliance. It is not the absence of directly elected mayors that holds us back but the absence of the powers that mayors routinely have across Europe and North America.

— Devolution fosters innovation—allowing us to find fresh new ways to work with the private sector to create new economic opportunities. Centralisation leads to standardisation and drives out the risk takers and the innovators.

3.2 Most importantly we need the capacity to respond flexibly to local investment opportunities, raising money locally rather than having to go cap in hand to the Treasury. A key opportunity for the city is to investigate innovative funding mechanisms to best enable delivery of the Big City Plan. Accelerated Development Zones, a concept based on Tax Increment Financing, would allow Birmingham to "participate in the growth dividend" by allowing the city to capture incremental value in the form of tax revenues generated from new development. These could then be re-invested, enabling further development and infrastructure investment—achieving accelerated growth. The first 18 projects are already in development across the city region.

4. SPECIFIC QUESTIONS PUT BY THE COMMITTEE

Does local government need greater autonomy from central government? If so, in what ways?

4.1 We have answered this very strongly in the affirmative and given an account of what will be achieved above. There are three main reasons for the current lack of autonomy, which seriously undermines the capacity and ambition of local government:

— The national statutory basis of many services and the absence of any constitutional framework for local government

— The culture of targets and national inspection systems which means that councils too often respond to national rather than local priorities

4.2 The UK (with the exception of the recent partial devolution to Scotland, Wales and Northern Ireland) is a unitary state. There is no constitutional basis for local or regional government, which could provide the platform for greater autonomy. Autonomy in the past has rested on the absence of central structures and the relatively weak status of cities with royal charters, rather than on the constitution. Given the Government's current interest in constitutional change and in moving towards a written constitution, there is scope for looking at the reforms that could edge us towards greater autonomy.

4.3 Local government could be given a "Power of General Competence"—ie to do anything that it wishes to do—and to raise any money that its local residents and tax payers consider appropriate and necessary—to advance local democracy and local service provision, as long as what is proposed is not explicitly illegal. This is the reverse of the current "ultra vires" approach which prohibits councils from doing things they are not specifically empowered to do through legislation. The Government has argued that the power of well being introduced in the 2000 Act amounts to the same thing, but this is legally doubtful and this reform would send a powerful signal about the future role of local government.

4.4 Parliament could also seek to define the categories of local authority more formally in legislation, in particular providing a full recognition of the status of the core cities and their city regions. This could be a mechanism to provide for governments to devolve more power and resources to these areas, for example in regeneration, transport and raising funds for investment. The devolution of powers to pass bye-laws is also very welcome and could be the start of a process which gives councils more legislative powers (giving them some constitutional independence). This could be extended to taxation (see below) and to other regulatory areas, especially in the core cities who could be given a specific legislative status.

4.5 The culture of setting targets and measuring the performance of other organisations serves only to propagate the stranglehold of central government over local government, increase bureaucracy at national and local levels, and divert much needed public funds from front line services. The Government has responded to this positively by streamlining inspectors, reducing the number of targets and shifting to a risk-based performance assessment regime. But it is a mark of how much further there is to go in this direction that 200 indicators is regarded as a light touch approach and the Audit Commission will still be measuring all 200 for each local area, regardless of whether they are included in LAAs! Local Area Agreements are great improvement on what has gone before. They are a useful approach to planning and allocating resources and we recognise that central government has the right to ask local authorities to prioritise certain issues (very often in practice these priorities are shared and the government need have no fears about them being ignored). But the agreements should be just that—they should contain no targets that have not been specifically accepted by the local authority.

Do local government's role and influence need to be strengthened in relation to other public services, such as policing and health?

4.6 We support the progressive development of partnership arrangements across the local public sector, including shared budgets and increasingly integrated planning and the duty to co-operate introduced in the 2007 Act. However there is concern that this system is developing in parallel with the accountability provided by elected councillors and that there need to be moves to integrate the two more thoroughly (for example by requiring LSPs and CEOs to report to full council meetings).

4.7 In health, the time has come to ask whether it would be appropriate for the primary health system to become formally part of the local government system (ie for PCTs to be accountable to councils with contiguous boundaries). The case for devolution of hospitals and other acute providers is less clear cut, but we believe it is time that the government came to terms with the idea of a partly localised NHS.

4.8 In police, we are opposed to the proposals to create separately elected representatives on police authorities that can only undermine the role of existing councillors and councils. We also recognise the concerns of police about politicization of their role. Therefore a better approach would be to legislate so that council cabinet members responsible for community safety make up the majority of police authorities, ensuring a democratic link to the LAAs and the plans of local councils.

4.9 A really radical idea would be for all public spend in a large Local Authority area to go via the Local Authority. Primary Care Trusts, the Police and other public agencies would then have to ask for money from the Local Authority who would hold them to account for performance. The result would be that only the Local Authority would be accountable to Government, so negating

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?

Should local government be able to raise a greater proportion of its expenditure locally?

What effect does the capping of council tax rises have on local accountability?

4.10 The over-centralisation of the tax system and the funding of local government is a fundamental cause of the lack of autonomy and the imbalance in powers in our system of government. Any system in which 80% of funding is raised by central government and re-distributed according to complex funding formulae is bound to lead to too much central government determination of priorities and service design. Rigid Treasury rules mean that, even where money is delegated there is a culture of centralised monitoring and assessment.

4.11 The council tax system cannot sustain a significantly larger proportion of local expenditure, unless there is a dramatic switch from income based to property based taxation, which is probably not desirable. Alternatives such as local income tax also present the prospect of tremendous upheaval and a significant number of losers as well as winners. Reforming this balance overall will therefore require a cross-party consensus and bold and imaginative moves to protect those who would lose out.

4.12 In the meantime our emphasis on economic regeneration points to where we believe the priority should lie for tax and funding reform. Additional freedoms to raise investment funds are urgently needed (as described above). LABGI and the Supplementary Business Rate are also welcome. The Government should also move to re-localise business rates as a further incentive to councils to promote economic development. In addition serious consideration should be given to further discretionary local taxes such as roof and bed taxes. Government must begin to trust councils to tax sensibly and to explain to local businesses and residents how the funding will benefit the local area.

4.13 Council tax capping makes a mockery of local accountability and should have been removed many years ago.

EXISTING POWERS

To what extent are local government services a product of national or local decis-making?

Does local government make adequate use of its existing powers, such as its well-being, charging and trading powers? What scope is there for greater use of those powers?

4.14 At present the balance between local and central determination is wrong. We recognise that certain local government services may require a national framework to be in place but it is essential that how we deliver such national frameworks in the local context should be a matter for local decision making by democratically elected members of the Council and not by civil servants or ministers in central government. National legislative and regulatory frameworks create a culture in which the lowest common denominator prevails—instead we want a culture of excellence where new services and extraordinary performance are promoted.

4.15 The economic, social and environmental well being powers under the Local Government Acts have been helpful in moving the agenda forward but, as indicated above, a power of general competence is still something that would be far better in the long term. Along with the freedoms on financial grounds, the additional powers could then be utilised in more effective and efficient ways.

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?

4.16 We welcome the various initiatives the Government has taken to improve the relationship between central and local government and readily admit that relations are better than in previous less positive periods for local government. However we are not persuaded that there is any "difference" from the central-local concordat to central-local relations, save that there is a recognition that the two parties have to work together to deliver local/national agendas. The position would be a lot stronger if local government were permitted as indicated above to address issues of local concern and to be allowed to raise funding at the local level. To make a real difference, the Concordat should be given a statutory status (through the Constitutional Renewal Bill) and it should be independently reviewed annually to assess how well central and local government are adhering to the agreement, though the value of such an assessment would be critically dependent on how strong government and Parliament's commitment to devolution was in practice.

THE CONSTITUTIONAL POSITION

Given the UK's constitutional settlement, what protections should be placed in law to ensure local government's ability to fulfil its responsibility as a balance on the powers of central government?

What role should Parliament have in the protection of local government's position within the UK's constitutional settlement?

4.17 There are good arguments on both sides with regard to constitutional status. On the one hand it would clearly strengthen local government against centralising tendencies but on the other it might make the position too inflexible. So we are not entirely persuaded that the protection is necessary, in law, so long as the practical issues relating to greater autonomy in powers and financial matters, as indicated above, are addressed. Some form of formal recognition that local government plays an important part in the machinery of UK governance, although helpful, would only be stating the obvious unless the autonomy and flexibility indicated above are also put into effect by central government. Framing stronger constitutional laws would present difficulties in distinguishing between what are rightly centrally defined and funded services and what is the extent of autonomy to be granted. A public debate on this would however be welcome and we are disappointed that the Governance of Britain debate has largely ignored local government.

4.18 We are not persuaded that there is a need to formally enshrine the role that Parliament would have in the protection of the local government's position within the UK's constitutional settlement. A lot will, of course, depend on how the government of the day responds to local government concerns and, as a safeguard, the court system will remain available to local government to challenge executive decisions of central government departments.

4.19 However some of the suggestions we make above may be of interest to the committee.

5. CONCLUSION

5.1 We are disappointed that the government has not included local government in its wider debate on modernising the constitution and feel that this indicates a perception in Whitehall and Westminster that local government is a second order issue for the constitution. In fact it is the very heart of our democracy—of we cannot give local councils back some of their autonomy and status then there is little hope of reviving democratic engagement.

5.2 But our argument for devolution and greater autonomy rests firmly on the outcomes we wish to achieve—in particular the need to boost the economic contribution of the core cities if they are to perform to their full potential. This cannot be achieved without empowering local political leaders and giving councils the powers to raise funding and invest in success.



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