Memorandum by Emeritus Professor George
Jones and Emeritus Professor John Stewart (BOP 03)
INTRODUCTION
Why local government?
Why is local government important? Four values
provide the justification for local government—for its potential,
because some local authorities may fail in practice to realise
their potential.
1. First, Pluralism: local government
avoids concentrating governmental power in one place, which makes
it a significant part of our constitutional arrangements of checks
and balances. Local government has its own legitimacy, rooted
in election, and its own taxation, the council tax.
2. Second, Effectiveness: local government
promotes effective service delivery, since is has a better knowledge
of local conditions, has a better sense of local priorities and
can better join up a variety of services into a coherent package
than can central government or a series of separate local boards
and commissions. Governing at the local level can be more manageable
than at the national level, because there are fewer elements to
be taken account of—there is less complexity. Local government
is able to recognise and react quicker to problems that arise
in society, because it experiences them first, responding more
speedily to changing conditions and tastes. It is able to innovate,
trying a variety of solutions in different authorities to policy
problems, while the centre propounds only one, from which little
can be learned.
3. The third value is Efficiency:
local government can encourage efficiency, if most of its revenues
are raised from local people, because they will be better able
to assess the balance between their spending aspirations and the
taxation needed to finance them. Citizens can see a closer connection
between the taxes they pay to their local authority and what they
receive from their local authority than they can from central-government
expenditure and taxation.
4. Fourth, Democracy: local government
provides more opportunities, than can central government, for
people, as citizens, to participate in governing themselves, or
in controlling their representatives who govern, and in exercising
control over the organizations that provide and produce public
services.
5. The role of local government should depend
upon the value of pluralism and the expression it gives to effectiveness,
efficiency and democracy. While local government gives expression
to pluralism, central government gives expression to effectiveness,
efficiency and democracy through uniformity based on centralized
decision-making. A choice has to be made. Sir Michael Lyons in
his recent report on local government and its financing posed
the question that we both faced as members of the Layfield Committee
over 30 years ago:
"whether all important governmental
decisions affecting people's lives and livelihood should be taken
in one place on the basis of national policies; or whether many
of the decisions could not as well, or better, be taken in different
places, by people of diverse experience, associations, background
and political persuasion." (Lyons, 2007, p.40) and (Layfield,
1976, p. 299).
The role of local government
6. Local government is the government of
difference, representing, responding to and creating diversity,
as local authorities respond to the needs and aspirations of their
areas and the communities they represent. They show in their responses
differences in ideas and approaches that are the source of innovation.
Against the government of difference, central government determines
national policy, brings forward national legislation and sets
national standards. It imposes uniformities in the name of the
unity of the national state.
7. An effective system of government in
a complex and changing society should recognize the importance
of diversity within, while recognising the necessity of certain
uniformities. The problem is to achieve a balance between them
through a balance of power between central and local government.
We consider that the present balance is out of kilter because
of the undue dominance of national prescription that allows too
little place for the diversity that reflects a dynamic society.
Limits have increasingly been set to the boundaries of local choice,
yet it is local choice that enables diversity and justifies elected
local government.
8. Diversity has a value in a system of
government creating the capacity to respond not only to differences
in needs but also to differences in aspiration, helping to build
a basis for democracy at local level where it is easier for citizens
to be involved. A capacity for diversity adds to the capacity
for learning both in government and in society, as different approaches
are developed to the problems facing communities and are tested
in practice. The tendency to uniformity of approach, inherent
in government at national level, means learning is limited to
a single approach. It is often assumed, in alarm over the so-called
post-code lottery, that uniformity ensures equality, but equality
may require differences of response and of local choice on that
response.
9. The difference between local difference
and national uniformity and between national and local choice
defines the central-local relationship and constitutes a necessary
tension within that relationship. The policies of recent governments
have sought to resolve that tension by asserting the supremacy
of national policy over an ever-increasing range of issues and
in ever-greater depth of detail. These actions have limited local
choice and weakened the accountability of local authorities to
their electorate on which the effectiveness of local democracy
rests.
Central government and central-local relations
10. Central-local relations have become
dominated by a central-government approach based on command and
control whose effect has been to reduce local choice and therefore
the scope for local initiative, substituting accountability to
central government for local accountability. This approach rests
upon assumptions of the superiority of the central mandate and
of the knowledge and experience of those who operate at the centre.
While certain important steps have been taken by this Government
that could have widened the scope for local choice, by the powers
of well-being and the development of the local authority's role
in community leadership, these changes have been less effective
because of the dominant practice within central government of
command and control over the working of local authorities. Central
government has tended to see local authorities not as political
institutions in their own right, but as agencies for the delivery
of services in accordance with national requirements.
11. Command and control have been given
expression in:-
— The tendency to legislate as the first
response without considering the impact on local choice and whether
a statutory requirement is necessary. This attitude is illustrated
by the government's proposal to legislate on how petitions should
be handled by local authorities without any detailed investigation
of how local authorities handle petitions.
— The detailed prescription associated
with legislation. This approach is illustrated by the detailed
prescription through at least 15 regulations, three directives
and 150 pages of guidance on political structures, constraining
local choice and therefore innovation on the form taken by the
executive models introduced under the Local Government Act, 2000.
— The proliferation of targets and performance
measures. The number of targets has been recently cut back,
but still retaining 35 national targets as well as at least
16 statutory targets in education and early years. The Committee
should investigate the extent to which, apart from targets, local
authorities have still to report performance on other activities.
1,200 plus such measures had to be reported to central government
by local authorities. An investigation for the Government concludes
that 80% of the time spent by local authorities on performance
reporting was upward to central government rather than to their
local electorate (DCLG, 2006).
— The role of the inspectorates backed
by the threat of intervention by central government. There
are dangers that the process of inspection limits local choice
by making assumptions as to how local authorities should operate,
criticizing practices that are outside those assumptions and may
be important innovations. There is an equal danger that the Government
assumes too readily that the inspectors are correct in their judgments—the
assumption of inspectoral infallibility. There is a further danger
that inspections take up too much of the time and attention of
senior managers and councillors that could be better devoted to
their ongoing responsibilities and local concerns. The process
of inspection can make it more important for authorities to satisfy
the inspectors rather than their local electors. Yet despite all
these problems, there has been no detailed investigation of the
impact of inspections on the working of local authorities.
— The centralized financial arrangements.
The impact of capping, the undue dependence on government grant
and the growth of specific grants all combine to limit local choice
and weaken local accountability, as discussed later in this paper.
— The movement of functions away from
local authorities to local appointed boards or quangos accountable
to central government. This shift has transformed the pattern
of local governance, reducing the range of activities under local
elected control, and limiting local choice and local accountability.
— The proliferation of requirements
on local authorities to submit plans to central government.
Research by the Government established that 66 such plans
had been imposed on authorities (DTLR, 2002), and even that was
later found to have left out a number of plans.
12. These changes have had a combined effect
in limiting local choice, weakening local accountability and absorbing
the time and attention of councillors and senior staff, turning
their attention away from local people to meet the requirements
of central government and the inspectorates.
13. Many of these developments happened
over time in a series of separate steps without consideration
or possibly even knowledge of their impact on the role and working
of local authorities, on central-local relations and on the pattern
of local governance. Each step was justified on its own merits
as seen by the department initiating the change, and too little
regard was had the cumulative effect of such changes—the
machinery to consider the effect of such change did not appear
to exist. The Government has taken certain steps to meet these
issues: the Committee should consider whether they are working
effectively. Although there have been attempts to reduce the number
of targets, the plans required, specific grants and inspections,
it is not clear how far this trend has gone. The combined impact
of the pressures discussed above remains significant, and the
attitudes that led to these developments remain embedded in the
working of central government. As in the past a reduction of controls
can be eroded over time as new controls are created, as happened
following the "bonfire of controls" in 1979-1980.
14. The dominance of past attitudes is seen
in the continuing process of legislation and the detailed prescription
associated with it. Change is likely to be effective only if a
new style of working is introduced in central government's approach
to local government. As discussed later in the paper, an enabling
approach should replace command and control. The approach required
was summed up by Professor Helen Sullivan in calling for "explicit
acknowledgement by Whitehall that central policy judgments do
not necessarily trump local judgment where the two conflict"
(Sullivan, 2008, p 35). There is no point in local choice if the
only choice is to do what central government wants.
LOCAL GOVERNMENT
AND CENTRAL-LOCAL
RELATIONS
15. In a relationship problems are unlikely
to arise on only one side. The problem in local government has
been the growth of deference as too many authorities have come
to accept the requirements of command and control as normal. In
doing so they have accepted the limits on local choice and therefore
on innovation and initiative. Some authorities have almost invited
the limitation on local choice by asking for guidance, giving
central government a justification for the detailed guidance described
by Sir Michael Lyons as "soft controls" (Lyons, 2007,
p 79).
16. We accept Sir Michael's analysis that
"the centralisation of governmental and public service functions
has confused the accountability for local service delivery. This
has generated a relationship that 'crowds out' local government's
role in responding to local needs and priorities, and limits local
government's contribution to the kind of society we want. I believe
also that this downgrading of the local has contributed to a sense
of powerlessness among some local politicians and officers, which
needs to be reversed if local government is to deliver its full
potential in helping to meet the challenges we face in the 21st
century". (Lyons, 2007, p 173).
17. There is a need to strengthen local
democracy as a basis for a more confident local government. The
low turnout in local elections is a symptom of a wider weakness,
found also in national elections. Like national government local
democracy is, and has to be, based on representative democracy,
and will remain so as the practical approach to government. The
primary issue for all those concerned with the state of democracy
is how to strengthen representative democracy. Participative democracy
can strengthen representative democracy, but cannot replace it.
It strengthens representative democracy by enabling interactions
between representative and citizen.
FURTHER DEVOLUTION
Does local government need greater autonomy from
central government? If so, in what ways?
18. It follows from the arguments that we
have put forward that local authorities need greater autonomy
from central government, or as we prefer to put it, the capacity
for local choice should be enhanced and local accountability strengthened.
19. We emphasize the need to reduce the
extent of detailed prescription and to challenge the assumed need
for excessive legislation to secure the government's aims. Government
should consider whether detailed prescription limits local choice
unnecessarily and whether the changes sought through legislation
require it or whether there are other ways to encourage change
in local government.
20. There is a need to review the existing
body of legislation, regulation and guidance to see how far it
can and should be reduced. In part the Task Force on Lifting the
Burdens is undertaking this review, but the Government's response
to its reports is not yet clear and is in some cases disappointing.
A progress report from the Task Force for 2006-07 stated,
"Ministers may have widely accepted that the regulatory regime
has gone too far and is now inhibiting the improvement of public
services. This view seems to be shared by senior civil servants
too, but there is still a mindset that the burden is every other
department's fault, not their own, and central government still
knows best" (DCLG, 2007, p 7).
21. In any case the Task Force, according
to its terms of reference, is concerned with "reducing unnecessary
burdens and [sic: should be `on'] opportunities for improving
performance arrangements", (Lifting the Burdens Task Force,
2006) rather than extending local choice. A review is required
of whether existing provisions unduly constrain local choice.
Thus it could be found that where legislation was considered necessary
to establish a practice, it was now no longer necessary. Once
a practice is established, prescription may not be required. If
the practice proves unsatisfactory, and local authorities have
tested it, they should be free to change it. In certain cases
sunset legislation and sunset regulation could be introduced,
setting a time limit to prescription. Duties can be turned into
powers, leaving for local choice whether and how they are used.
22. One example of where change is desirable
is the extent of prescription on political structures. There could
be much greater variation and scope for innovation within executive
models The reverse has happened since the Local Government and
Public Involvement in Health Act, 2007, prescribes the tenure
of Leaders in ways that make it difficult to see how they can
be fully realized in practice and increases their powers in ways
that could previously be determined by each authority
23. We draw specific attention to three
areas in which the extent of local choice should be extended:
(i) The powers to make by-laws should be freed
from the requirement for ministerial approval. Part 6 of
the Local Government and Public Involvement in Health Act removes
the requirement in respect of DCLG, but those provisions should
be extended to encompass other departments.
(ii) The provisions under Section 107 of
the Local Government and Public Involvement in Health Act, 2007,
enabling The Secretary of State to require a local authority to
make changes in the Local Area Agreement should be removed. It
is hardly a local area agreement when changes are imposed by ministers
rather than agreed.
(iii) Changes may be required in the powers of
well-being in the light of decisions by the courts if sustained
on appeal. In the recent [2008] decision on the case of Regina
(Risk Management Partners Ltd) v Brent London Borough Council
and Others it was held that the financial well-being of the authority
was not the same as the economic, social or environmental well-being
of the area. The Act could not therefore be construed as authorizing
a local authority to do whatever it considered would be likely
to promote its own well-being. If the decision is upheld, it is
the first sign of a judicial process limiting the use of the well-being
powers. Surely the effectiveness and efficiency of an authority
contribute to the well-being of an area. Parliament should be
prepared to clarify the position if necessary after the appeal
process has run its course.
Do local government's role and influence need
to be strengthened in relation to other public services such as
policing and health?
24. Our answer to this question is "Yes".
Indeed we would go further and say not merely influence, but powers
over such public services.
25. One of the most important and welcome developments
in the Government's programme for local government has been its
recognition of the role of the local authority in community leadership.
In Its 1998 White Paper the Government stated it would "enshrine
in law the role of the council as the elected leader of the local
community with a responsibility for the well-being and sustainable
development of its area" (DETR, 1998, p 8.10), in effect
extending the authorities' capacity for local choice beyond the
services for which they were directly responsible.
26. This commitment was given expression
in the Local Government Act, 2000, which provided local authorities
with the powers of well-being and the duty to prepare what have
now come to be called sustainable community strategies in consultation
with other local bodies and local communities. Local authorities
have been encouraged to form Local Strategic Partnerships [LSP]
under their leadership, composed of their partners and representatives
of the local community. Part 5 Chapter 1 of the Local
Government and Public Involvement in Health Act, 2007, laid a
duty on local authorities to prepare and submit a local area agreement
[LAA] setting targets for improvement not merely for its services
but for its area generally including the services of its public
partners. Only the local authority has the statutory duty to prepare
and submit the LAA, although its public partners have a duty to
co-operate with the local authority in determining the targets
and to have regard to the targets in exercising their functions.
27. The local authority's role in community
leadership is clear under the legislation; it is accountable for
its performance of that role and in particular for the LAA and
its implementation; but it lacks the means to ensure the performance
of that role because it lacks any powers over its public partners.
Without those powers it can be held accountable for issues beyond
its control because they are the responsibility of other public
bodies of which the most important are those concerned with the
police and the health services.
28. Until recently the Government argued
that local authorities could exercise their community leadership
role in relation to their public partners through influence and
persuasion, and without any statutory requirement on those partners
to pay heed to local authority views. Consensus would be achieved
between a local authority and its partners. Consensus, although
normal, will not always be achieved, and influence and persuasion
may not be enough to achieve it. Disagreements can exist on priorities
in the community strategy, and targets in the LAA can be neglected;
yet the local authority is given the responsibility for the strategy
and the LAA and will be held accountable for them. In an attempt
to meet this problem the Local Government and Public Involvement
in Health Act, 2007, has laid an obligation on the public partners
to co-operate in the preparation of the LAA although not specifically
in the preparation of the sustainable community strategy. The
Act also requires the public partners to have regard to the targets
in the LAA. The Act does not, however, give the local authority
any powers over the public partners if these uncertain requirements
on the public partners prove ineffective, as they will where no
consensus emerges. The Government has stressed investigations
through the overview and scrutiny role of the local authority,
but again the local authority has been given no powers to enforce
the findings of such investigations.
29. We consider local authorities require
powers to enforce their community leadership role, since they
have been given that role by Parliament. It has been suggested
that the local authority be given responsibility for commissioning
the services of its key partners, by, for example, assuming the
commissioning role of primary care trusts. They could be given
the responsibility for approving the payment of all or part of
government grants to the partners as the basis for such commissioning.
Sir Simon Milton, when Chairman of the Local Government Association,
suggested the local authority should have responsibility for "hiring
and firing police and health chiefs". (Milton, 2008, p 6)
30. We recommend that the local authority
should be in the driving seat of LSPs and in the final resort
that the public partners should be obliged to follow the lead
of the local authority. We recommend that the Committee should
consider more generally how the powers of the local authority
should be enhanced to support the role of community leadership.
EXISTING POWERS
To what extent are local government services a
product of national or local decision-making?
31. There are no simple answers to this
question, because in practice there is continuing interaction
between national and local decision-making, the nature of which
varies between services and local authorities, and over time.
As one example of the difficulties in answering the question because
of the interactions, innovation by a number of authorities can
lead to national prescription. Looking over the post-war period,
concessionary fares and even free travel for the elderly, comprehensive
education, smoke control and competitive tendering for basic services
were all pioneered by local authorities before being adopted as
national policy. National policy may then limit the possibility
of further innovation by local choice if enforced by detailed
prescription.
32. The scope for local choice and therefore
the importance of local decision-making has been reduced by a
change in the nature of legislation described by Professor Loughlin
in Legality and Locality, the Role of Law in Central-Local
government. "Though local government has since the nineteenth
century been placed on a statutory foundation, positive law has
not been a primary determinant of the relationship. Statute law
has established a facilitative framework through which conventional
arrangements for regulating central-local relations could evolve
and which, in effect, constituted a non-juridified structure of
administrative law. One consequence of the Government's recent
actions in subverting the administrative network has been to transform
law into a primary instrument of regulation" (Loughlin, 1996,
p 418). Although Loughlin was writing about the position reached
by 1996, his conclusions are equally applicable to 2008. A facilitative
framework of law in central-local relations has been replaced
by a regulatory framework that has reduced the scope for local
choice.
33. This regulatory framework is reflected
in the detailed prescription highlighted earlier. There remains
a degree of local choice for local authorities with the confidence
to exercise it, recognising that much guidance does not have statutory
force. There has always been a tendency in some local authorities
to exaggerate the extent of statutory constraint or, put another
way, to accept "the myth of statutory constraint" (Stewart,
1983, p 148), even in the period of the facilitative framework
of law.
34. The Layfield Committee on Local Government
Finance sought to establish the extent to which local government
expenditure was mandatory or discretionary which, if discovered,
would go a long way to answer the Committee's question. "We
asked many witnesses how a systematic classification might be
achieved, but even those who had advocated separation of discretionary
and mandatory expenditure as a first step in changing the financial
system were unable to suggest how it could be done…The difficulty
we encountered throughout was that the categories of local government
expenditure which are manifestly either totally discretionary
or totally mandatory are very limited: the bulk of local government
expenditure falls somewhere between the two extremes, being determined
not by formal requirements alone nor by free local choice alone
but by a complex mixture of pressures and influences. Informal
advice and exhortation from government departments, inspection,
nationally accepted standards, accumulated past practice, professional
attitudes, political influences and actions by pressure groups,
national and local, all play a part in determining local government
expenditure, along with the statutory provisions" (Layfield,
1976, pp 403-4). To this complex of influences should now be added
public attitudes, local and national.
35. The finding that most local government
expenditure is subject to national requirements, normally based
on statute, but within which local authorities have discretion,
has been confirmed in the few authorities that have tried to classify
their expenditure into mandatory and discretionary. They have
had to place most of their expenditure into a third category,
mandatory as to the activity but discretionary about how the activity
is carried out and the level of expenditure. There has been no
equivalent study of decision-making generally; such a study would
almost certainly have reached a similar conclusion to that about
expenditure. Our own impression is that the scope of discretion
for local decision-making has been greatly reduced, but significant
discretion remains for those local authorities with the confidence
to use it. The readiness to use that discretion, however, has
been undermined by the prevalence of greater prescription, detailed
guidance and the time and attention required to meet the demands
made by central government.
Does local government make adequate use of its
existing powers, such as well-being, charging and trading powers?
What scope is there for greater use of these powers?
36. The three sets of powers are examples
of the scope for local choice being extended. The Government has
indicated its disappointment on the limited use made of these
powers, and there is certainly scope for their greater use by
local authorities, but the reasons for the limited use must be
explored.
37. These powers and, in particular, the
well-being powers represent a major change in the role of local
government. Local authorities traditionally have been organized
around their established functions and have focused on the problems
at which those functions have been directed. Use of the powers
of well-being requires thinking beyond the problems which the
authority is organized to deal with and for which it already has
the powers required. Some authorities have used the powers of
well-being imaginatively, but the failure of others to do so reflects
their lack of confidence and the growth of deference. Despite
the Government's complaint about the limited use made of the powers,
the main demands made by central government departments relate
to their existing functions. These demands have required the attention
of senior management and councillors rather than the use of the
new powers.
38. The extent of use of the powers can
reflect local political choice. One political view may oppose
the use of greater charging for public services. A different political
view may oppose any extension of trading functions in competition
with the private sector. Local choices are not necessarily the
choices that would be made by the Government, but local choice
is what local government is about.
39. Certain uncertainties about these powers
need clarifying if they are to be more widely used. The recent
judicial decision described above has raised doubts about the
scope of the powers of well-being and have confirmed the fears
of those who have argued the powers fell short of the powers of
general competence found in many countries. There has been some
uncertainty about the extent to which charging powers can be varied
according to need and to the income of those charged, and about
the extent to which trading powers can be used to make a profit
for the local authority.
40. There is a need to recognize uncertainty
about the powers, and that local political choice can vary in
the use of the powers. But above these factors it is important
to recognize that the demands made by central government on local
authorities turn attention away from the use of the powers.
FINANCIAL AUTONOMY
To what extent do the current arrangements for
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?
41. The problems with the local-government
finance system, and how to correct them, were clearly identified
in the report in 1976 of the Layfield Committee. The Lyons
report of 2007 praised the approach of Layfield, recognising
that the same problems still bedevilled local-government finance.
But Lyons strangely failed to consider the central recommendation
of the Layfield report. The problems remain today and Layfield's
main recommendation is still relevant for enhancing both democracy
and efficiency in local government.
42. In 1976, as now, a major concern of
people was with increases in local tax bills, then domestic rates
and now council tax. The first question to address is who is responsible
for council tax increases. Central government says local government,
and local government says central government. Each blames the
other in an annual ritual when no one is prepared to accept responsibility.
Here is confusion of responsibility. Layfield's approach was that
this confusion must be eradicated. The main responsibility for
local government spending and taxing should be laid somewhere,
either on central government or on local government. That was
a political decision for the Government to take, and then having
made the choice, the next task is to devise a local-government-finance
system to sustain the chosen allocation of responsibility.
43. If the centralising model is adopted,
then it is appropriate for central government to control local
expenditure and local taxation, doling out the lion's share of
local government funding in the form of grants, leaving local
authorities with responsibility for spending those resources,
and being held accountable for the way they spend the resources.
44. If, however, the decentralising model
is adopted, then it is appropriate for local authorities to control
local expenditure and local taxation, and to be accountable for
those spending and taxing decisions. This latter model was Layfield's
preferred choice, which we have championed since 1976.
45. The Lyons report, like Layfield, recognised
that the Government had first to decide whether it wanted a centralised
or decentralised system, and came down on the side of decentralisation.
The Committee, also, must make the choice between the two models,
which we advocate should be, as Layfield and Lyons urged, the
local government model. We advise the Committee not to seek some
"middle way": that path has been followed for years
and has led to the present confusion and disarray. A hard choice
has to be made.
46. Having made the initial decision, the
Government must devise appropriate financial arrangements. Layfield
argued that taxation matters. A decentralised model of governance
could not be sustained if central government grant was the predominant
source of local government's revenue. Local responsibility and
accountability should be sustained by local taxes bearing on local
voters. Central grant had to be reduced, and replaced by local
taxation.
47. At this point it is necessary to note
two erroneous objections to our position. First, we are not saying
that shifting from a predominantly grant-financed system to a
predominantly locally-financed system will automatically lead
to a decentralised model. There has first to be a decision in
favour of decentralisation, and then, to support that decision,
a change from the predominance of grant to the predominance of
local taxation. Second, we are not saying that grants will disappear.
They will still be needed to help authorities with scarce resources
and high needs-to-spend, to put them on a level playing field
with better-off areas. This equalisation can be achieved with
much lower levels of grant than now, and distributed by mechanisms
independent of central government.
48. The next question to address is what
sort of local taxation. Both Layfield and Lyons liked a property
tax for local government: indeed it is an ideal tax for local
government. Lyons favoured making it fairer, by adding new bands
at both the top and bottom ends, with regular revaluations, and
turning council tax benefit into an automatic entitlement and
not something that had to be applied for. Layfield argued that
property tax alone could not finance local expenditure. After
reviewing other possible taxes it advocated a Local Income Tax,
not to replace the property tax but to supplement it. We have
a virtual local income tax now: it is that part of national income
tax that goes from localities to the national Exchequer and is
returned to local government in grant. Layfield advocated that
this hidden local income tax should be made explicit, and determined
by local authorities accountable to their local voters.
49. Lyons did not take this step. For some
reason, still unexplained, the Lyons report contained nothing
about Layfield's proposal for council tax to be supplemented with
a local income tax that would reduce central grant and hence national
income tax. The Committee should put this option back on the agenda.
HM Treasury should welcome this reform as a way to make local
authorities its allies in seeking the wise use of resources. No
longer would local authorities be like drug addicts calling on
central government each year for their fixes of grant. Instead
they would be incentivised to be responsible local decision-makers,
balancing their spending against their taxing decisions.
50. The Government seems to think that local
accountability can be effective if it covers only the way local
authorities spend the money allocated to them in grant: accountability
for expenditure not for taxation. That approach is too narrow.
If councils are not accountable for their taxing decisions to
local voters, and only account for they way they spend money,
then councillors and voters are encouraged to behave irresponsibly.
They do not have to balance their desires for extra spending,
higher and improved service standards, with the inevitable consequences
of those decisions on local tax demands. Responsible decision-making
by councillors and by local voters can occur only if spending
and taxing decisions are fused.
51. The rebalancing of funding away from
national grant to local taxation would remove the problems that
flow from the gearing effect whereby small changes in grant are
magnified in local tax changes, giving distorted signals to local
voters about the expenditure decisions of their local authorities.
Without the gearing effect voters would see clearly in the changes
of local tax rates the consequences of the spending decisions
of their local authorities.
52. At present the confusion of local-government
finance system is a barrier inhibiting local authorities from
being community leaders, and place-shaping their localities. As
Lyons recommended, capping should be abolished, and local authorities
given more financial freedom: and, we go further, not just over
spending but over taxing too. Capping is not appropriate for the
decentralising model, since it undermines local accountability
and makes central government responsible for decisions on local
budgeting.
53. DCLG seems to have forgotten about Layfield
and Lyons. Within a few hours of publication of the Lyons report
the then Minister of State at DCLG rejected recommendations from
Lyons about the abolition of capping, regular revaluations, extra
council tax bands and transforming council tax benefit into an
entitlement. The Local Government and Public Involvement in Health
Act, 2007, and the white paper of 2008 [Cm 7427], Communities
in control: real people, real power, failed to address the
central issue of local government finance. The Committee should
ensure that DCLG tackles the problem that has eroded local government
for so many years: the confusion over responsibility and accountability
for local government finance.
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?
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?
54. To reinforce the choice to rebalance
the system of governance in favour of local government, and to
protect that choice against centralising encroachments, there
is need for a Constitutional Settlement, embedded in statute,
about the relationship between central and local government.
55. A first step in doing so was taken on
December 12th 2007 when the Government and the LGA signed
the Central-Local Concordat on central-local government
relationships. It seems to have disappeared without trace. Local
authorities rarely refer to it, while central government has paid
it scant attention. Despite the Concordat, inconsistent central
government messages continue to flow. The reason lies in the weakness
of the Concordat. It needs reassessment, rewriting and then a
statutory basis to ensure it makes an impact on both central and
local government.
56. We are concerned that the Government
does not regard local government as part of the Constitution.
A Constitution lays down the rules of the game, the main institutions
and processes of government, the relationships between the various
institutions, and the relationships between these institutions
and the people. The Concordat does none of those things. Its main
feature is a list of service outcomes agreed by central and local
government, revealing that central government regards local government
as an instrument for service-delivery not for local community
self-government.
57. Local government is part of the Constitution:
rooted in elections, an example of representative democracy; with
its own local tax, council tax; an array of services to run and
functions to carry out; a responsibility for the well-being of
its people and areas; and shaping the development our cities,
towns, counties and villages. It is often written into the Constitutions
of other countries. Sir Michael Lyons called for a constitutional
settlement and has already told the Committee in oral evidence
[Q 2, 23 June 2007] that the Concordat is a "diluted
version" of what he had recommended. We urge the Committee
to recommend a statutory constitutional settlement with the following
elements. It should:
(i) Recognise the constitutional position
of local government, indeed that local government is part of our
constitution, requiring care and respect befitting a basic institution
of our system of government. This point was not explicitly
stated in the Concordat. It did, however, reaffirm that "The
Government is committed to constitutional reform and will work
with the LGA to ensure the roles and responsibilities of local
government are reflected in proposals as they are developed."
[para 1] To that extent the Concordat is an interim statement,
and the Committee should press for a full recognition of the position
of local government in the constitution.
(ii) Contain a clear statement that the primary
role of local authorities is the government of local communities,
enabling their well-being. The Concordat contains statements
of such a role for local government, but it is not set out as
the primary role that should determine its rights and responsibilities.
Rather the Concordat emphasizes some specific services delivered
by local authorities and hoped-for outcomes, not the shaping of
the development of the locality.
(iii) Contain a clear statement that local
government needs the powers and resources to carry out this primary
role. The Concordat does not go far enough in asserting the
rights and responsibilities necessary to sustain the primary role.
There is no indication that central requirements should normally
be set out in primary legislation, limiting detailed interventions
that arise from over-prescription and over-regulation. There is
no recognition of the importance of the quasi-legislative powers
of a local authority to set by-laws in the interest of the local
community, free from central control. The suggestion in the Concordat
of the need for flexibility of funding is ambiguous, avoiding
such fundamental issues as the balance of funding and the freedom
of local authorities to determine their own expenditure and level
of local taxation.
(iv) Clarify that the primary accountability
of local authorities is to their electorate. The Concordat
says too little about accountability, and yet this issue needs
clarification to avoid the danger that local authorities are seen
as accountable to central government rather than to their electorates.
The constitutional settlement should emphasize clarity of accountability
to avoid the confusion in accountability exposed by the Layfield
committee in 1976 that has increased since its report. Local
authorities have to act within the law, the scope of which has
been greatly extended by the powers of well-being, but they should
be explicitly accountable to their electors for their actions.
(v) Express a commitment to give local authorities
powers to ensure quangos and appointed boards at local level should
be accountable to local people through local authorities for their
contribution to the government of the area. Paragraph 16 of
the Concordat does recognise the need to increase local accountability
for key public services, and Sir Simon Milton suggested how this
need could be met, proposing that local authorities have powers
to remove key officials in the health and police services. We
hope the Committee will lead a discussion of this and other approaches,
including giving local authorities the role of commissioning such
services.
(vi) Recognise that the primary role will
entail local authorities responding to diversity between different
areas and creating diversity between them. This diversity
should be welcomed, indeed celebrated, as an expression of local
initiative and innovation.
(vii) Promise to establish an independent
Commission or Joint Committee of both Houses of Parliament to
monitor central-local relationships. The Government has said
that it and the LGA will monitor the Concordat, which could lead
to revisions. But there is need to go further to create a firm
framework for central-local relations as is appropriate for a
constitutional relationship and provide protection for it. An
authoritative body is needed, not dependent on either central
or local government. This body would keep the financial relationship
under review, including the grant settlement, but should not itself
make that settlement which is and should be a political responsibility,
since it involves issues of national distribution and redistribution.
The role of the independent body would be to appraise and report
on that decision about the settlement.
58. The Concordat recognises that changes
are required in the behaviour and practices of central government
in the same way as change is required of local authorities and
other local bodies. The change required of other local bodies
is to recognise their accountability to local people. The change
required of local government is to regain confidence in showing
initiative and innovation in community leadership. The change
required from central government is that its departments should
accept that the Concordat requires they exercise restraint in
prescription and regulation. The Government must ensure that the
words and spirit of the Constitutional settlement are accepted
in the deep recesses of departments.
FURTHER ISSUES
Should central-local relations be based on national
standards?
59. Even some champions of local government
are reluctant to take the decentralising path because they fear
it will lead to unacceptable variations in standards of services,
the so-called post-code lottery. The Committee should confront
and demolish this thesis, and show the value of diversity.
60. Central Government's line is it needs
to be sufficiently confident that controls are in place to prevent
unacceptable inequality in service provision as a result of poor
provision in some areas. It wants to end postcode lotteries, whereby
in some parts of the country standards fall way below the rest—but
who is to judge, why central government and not local people?
61. Do people really want uniformity,
the same everywhere? If they do, then that is not necessarily
a justification for central government enforcing its standards,
since local authorities, responding to their local people, would,
if they had discretion to make their own choices, voluntarily
choose the same. The need to enforce a standard is a sign there
is no consensus about the standard.
62. Another problem arises because most
people don't know what's done elsewhere, and know only what takes
place in their area. Their own experiences shape their perceptions
and motivations, not what happens elsewhere. What they want is
something better than they now have—improved services, higher
standards, excellence close at hand, while paying lower taxes
than now. Inconsistent? They are the confused messages that politicians
elected by the people have to reconcile.
63. Centralisers rely much on polls of public
opinion that, they claim, show the public, when asked to choose
between, on the one hand, national standards, where the government
ensures services are exactly the same everywhere, and, on the
other hand, minimum standards, with local government having the
ability to vary standards above the minimum by levying higher
council tax, choose by a large majority, between 60% and 70%,
national standards (www.ipsos-mori.com). But the question asked
surely prompts that response. Who in their senses would ever want
to choose the "minimum" of anything, and have to pay
more for what they really want above it? A "minimum"
standard has no rhetorical appeal for most people. Would MPs be
happy to campaign for a minimum standard of anything?
64. Some think local government could flourish
if central government confined itself to minimum standards. This
issue divided the Layfield Committee (Layfield, 1976, pp 302-15).
The dissenting minority said the centre should fix minimum standards
and pay for them, leaving local government free to adopt higher
standards to be paid for out of local taxation. Such an approach,
the minority argued, would resolve the confusion of responsibility.
You still hear this approach urged as a way ahead.
65. How does one define a minimum standard
for a service and cost it? We are told not to assess performance
by inputs, or throughputs, or even outputs—we should focus
on outcomes; but again how does one define, measure and cost them,
and enforce them? Imagine the controversy over calculating for
each local authority the costs of providing the minimum standard
of each service. And if there were a failure to meet the standard,
how do you decide whether it was the consequence of inefficiency
by the authority or of conditions beyond the control of the authority?
And how do you enforce the minimum standard if there is failure?
66. Another key question is: could minimum
standards be stable? Since no one would be satisfied with just
a minimum, central government would be constantly under pressure
from all kinds of groups, lobbying to raise the minimum. These
pressures for ever-higher standards, all focussed on the centre,
would make it impossible for the centre to stick to a minimum.
It would be continually revising the minimum upwards, curbing
local discretion and causing instability.
67. The standards approach, both for minimum
and higher standards, is artificial and restrictive, concentrating
attention on particular elements in particular services, and it
fails to have regard for the local impact of the totality of services
or of the interactions between services and organisations. It
ignores the complexity of policy.
68. National minimum standards would stifle
creative thought in local government about policy. All a local
authority would have to do is to check it had met the national
standard and tick the box. It would have to think no further.
It would not have to explore changes in local circumstances and
wishes, but simply follow the national standard.
69. Some worry that without minimum standards
local authorities would allow their services to deteriorate, in
a race to the bottom. But that's unlikely: local authorities operate
in the same atmosphere of public opinion as does central government,
responding to similar pressures and views about what is acceptable,
and if services became unacceptable the local electorate could
vote them out. Common standards would tend to prevail, but they
would have been adopted freely, not imposed from the centre, and
they would fit local conditions and wishes. Some authorities would
go beyond even common standards, and compete to have better standards
than others. Sir Michael Lyons' report attacked those who deplored
"postcode lotteries" in service provision. He argued
that an approach based on local choice, leading to differences
in services in different areas, would achieve a more efficient
balance between needs, preferences and resources than would a
centralised system. It's not only a more efficient use of resources
overall, but also fairer, as long as all areas have that choice.
70. The concept of national standards is
inherently centralising. It displays the arrogance of centralists
who think they know the answers to complex social problems and
are justified in imposing their uniform solutions everywhere.
Society's problems are too complex to be captured by such an inflexible
approach. Far better to have many local authorities devising not
just their own ways of implementing national policies but their
own policies to suit their distinctive localities. Local authorities
could learn from each other, and not be just arms of central government.
71. We urge the Committee to celebrate decentralisation
and diversity and reveal that fears of post-code lotteries are
groundless.
What is the role of the Local Government Association
in central-local relations?
72. In considering the relationship between
central and local government we are concerned with much more than
the relationship between the Local Government Association and
central government. We are more concerned with improving the relationship
between central government and local authorities and the impact
they have on each other, or fail to have. But the LGA has a role
to play, particularly in mediating the impact that local authorities
seek on the policies and practices of central government.
73. The LGA faces a dilemma, since it has
to represent the diversity of views and practices in local government,
based on the principle of local choice, making a national association
of local government almost a contradiction in terms. It faces
two dangers—first it may reduce the diversity of views in
local government to a uniformity that does not and should not
exist: second, operating in close contact with central government,
it can come to accept the assumptions made in Whitehall about
local government. Effective central-local relationships at this
level require the LGA to be aware of these dangers and avoid them.
The Committee should consider how far the LGA avoids these dangers.
WHAT SHOULD
BE DONE?
74. We urge the Committee to recommend:
(i) A significant reduction in the extent and
scope of legislation on local government, based on consideration
of whether legislation is required or whether local government
could deal with the issue concerned without legislation. Let legislation
be the last resort.
(ii) Where legislation is undertaken, detailed
prescription should be avoided. The principle should be that where
a duty is imposed on local government, local authorities should
be given freedom as to how that duty is carried out.
(iii) Targets and performance reports should
be reduced to a minimum—a minimum that has not yet been
achieved.
(iv) A major review should be undertaken of the
work of the inspectorates to establish their impact on the operations
of local government, including the time taken to deal with them,
and to establish whether they encourage local initiative and innovation
or whether they discourage changes that do not conform to the
inspectors' concept of good practice.
(v) The financial arrangements should support
local choice and local accountability.
(vi) Changes sought by central government departments
in both the structure of local governance and in central-local
relations, such as the creation of new local appointed boards
or quangos, new specific grants, planning procedures, targets
and performance reports, should be considered not merely on their
individual merits, but for their impact on the overall structure
of local governance and the working of local authorities, to avoid
the danger of the unexpected cumulative impact of such changes.
The Committee should consider whether changes in the procedures
for handling such issues deal adequately with the problem.
(vii) There is a need for regular reviews of
the state of central-local relations and of the impact of changes
on the relationship. These reviews should be reported annually
to Parliament and whenever a special report is required on a proposed
change. These reviews should be conducted by an independent body,
which could be a Joint Committee of both Houses or a permanent
independent Commission. Central government and the LGA should
carry out their own reviews as a basis for giving evidence to
such a body.
75. These changes are unlikely to take place
without changes in the style of working of both central government
and local authorities. Central government's command and control
model is based on its assumptions about the superiority of central
government's mandate and about its superior knowledge and experience.
Such assumptions about the superior mandate expressed in parliamentary
sovereignty and statutory powers should not be allowed automatically
to trump local decisions; otherwise there would be little point
in elected local government and local choice, themselves created
by Parliament. Nor can it be accepted that knowledge and experience
in central government are superior to the knowledge and experience
of those in local government who face daily and directly the problems
of local communities. Central government has much to learn from
local government.
76. We argue for an enabling style in central
government's approach to relations with local government, based
on an appreciation of the value of local government and on respect
for the knowledge, experience and the ability of those who work
in and for local government. It would be expressed not merely
in consulting local government on policy but in involving its
representatives in developing that policy to a greater extent
than at present. It would mean that where central government were
concerned with an issue it would work with local government to
find out whether that concern was shared, how it should be dealt
with, rather than assume almost automatically that legislation
was required. Discussion and mutual learning are characteristic
of the enabling style, and powers are often more relevant than
duties.
77. An enabling style should also characterize
the inspectorates and the approach of the central government to
their findings. Central government's approach should not be based
on an assumption of inspectoral infallibility, recognizing that
the knowledge, experience and ability of those inspected are often
greater than that of the inspectors. Inspectors should recognize
the dangers of absorbing the time and attention of local authorities
and the danger of curbing initiative and innovation if inspectors
assume that they rather than the authority know the right approach
to its tasks. The danger is of inspectors acting as commissars
rather than as partners in shared learning recognising they have
as much or more to learn from the authority as the authority has
to learn from them.
78. From local government a new confidence
is required, abandoning unthinking deference to the centre. Its
mottos should be "Never ask for guidance; if you ask, you
may not like it" and "Work it out for yourselves".
Confidence should grow if local democracy is strengthened, and
that requires strengthening representative democracy, based on
interactions between elected and electors. Participatory democracy
should reinforce that interaction, and can in this way strengthen
representative democracy rather than be seen as an alternative
to it.
79. The Committee should recommend a rebalancing
of the relationship between central and local government in favour
of local government in the ways we have proposed. This choice
for decentralization should be reinforced by local-government
funding arrangements designed to reduce local government's dependence
on high levels of grant by establishing local taxation based on
a fairer property tax and a local income tax. A statutory Constitutional
Settlement that protects the place of local government within
the Constitution should further reinforce this choice for decentralization.
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September 2008
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