Memorandum by Manchester City Council
(BOP 10)
FURTHER DEVOLUTION
Does local government need greater autonomy from
central government? If so, in what ways?
1. Local government does need greater autonomy
from central government. We welcome the devolutionary principles
of the Sub-National Review, but believe that government needs
to recognise that different forms of governance are appropriate
in different places. In particular, cities—the engines of
growth for their regions—need more autonomy than they have
now. At a time of economic challenge, it is even more important
that the key drivers of the nation's economy, are given sufficient
freedom to maximise their potential contribution to national economic
growth and stability. We need to create room for cities to develop
their own governance arrangements, which build in stronger, more
direct, accountabilities.
2. To really empower the best leaders in
cities we need to allow local government in cities to come up
with their own solutions that are fit for the people and places
they represent. Government should therefore take the necessary
powers to give governance models in individual cities statutory
backing, but retain the power to grant or not grant proposals
from cities for new governance arrangements as a safeguard.
3. The basis on which Government would make
decisions about differentiated devolution would be that the degree
of power devolved from central to local government would be proportionate
to the impact it could have. We suggest that there should be two
core criteria, subject to debate and negotiation with Government.
First, the levels of autonomy granted should be based on the scale
of opportunities presented for economic growth and for reducing
poverty and deprivation. Individual local authorities would be
challenged to provide hard evidence demonstrating their potential
to drive further economic growth and to connect the benefits of
this to our most deprived communities.
4. The second criteria would be an assessment
of the capacity and capabilities of each authority to create the
required growth, and to deliver their full potential contribution
to the economic growth and well being of the nation. Part of this
judgement about capacity and capabilities is about how robust
local or sub-regional partnerships are, what steps have they taken
to ensure good decision-making and proper local accountability.
5. The Greater Manchester MAA submission
presents a very strong case for granting greater freedom to the
sub-region to drive forward our jointly agreed economic and social
priorities. Government needs to acknowledge that capacity and
capability for greater sub-regional governance has developed at
different speeds in different places and whilst challenging, should
adopt a differential approach to devolution which rewards those
areas, like Greater Manchester, which have taken the bold steps
necessary.
Do local government's role and influence need
to be strengthened in relation to other public services, such
as policing and health?
6. Local authorities are the essential lynchpin
of ensuring effective public services for our communities. Our
leadership of Local Strategic Partnerships gives us a pivotal
role in ensuring the alignment of priorities across local public
services. We believe that this role should be exercised through
partnership and negotiation, and that the duty to co-operate is
currently sufficient; although there would be a case for strengthening
the power of scrutiny. However, while exercising this role, we
regularly come up against the issue of national versus local priorities.
It is important that local targets are given equal weight with
national targets so that national priorities that are not relevant
locally do not pointlessly dominate.
7. Within the area of crime and disorder
for instance, difficulties are often created between conflicting
local and central government priorities. National announcements
within this area do not always take local agreements into account.
Even at the sub-regional level, there is also the issue of partners
within the same field using different performance measures. This
is the case in Manchester with the Police using different criteria
to the Crime and Disorder Partnership. We also believe that supervision
and inspection needs to be consistent, with the contribution all
partners make to tackling the priorities of a place being taken
into account. At present local government gets judged, in part,
on what other agencies do or don't do. We would argue for a clear
contractual commitment from all partners to the delivery of jointly
agreed priorities; contractual, so that failure to deliver their
part of the bargain has consequences for that organisation.
8. This said, local government is free to
take innovative steps in this regard without Government proscription—which
is our approach in Manchester. As an example, the Chief Executive
of the Manchester Primary Care Trust is a full member of Manchester
City Council's Senior Management Team.
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?
— Should local government be able to
raise a greater proportion of its expenditure locally?
9. We support the LGA case for a reform
of local government funding and for local government to have access
to more of its own income. This would mean nationally that there
would be less of an effect on the council tax from spending decisions;
currently a 1% increase in spending can lead to a 4% increase
in council tax.
10. Manchester, with a low tax base and
a high need to spend, has a higher than average level of "gearing"
as only 20% of our net revenue funding requirement is covered
by Council Tax. As such, our Council Tax would have to increase
by 5% for each 1% increase in our budget over that provided by
central government. This limits the ability of the Council to
raise funds to pay for local priorities.
11. The current system is neither easy to
understand nor transparent and does not provide clear accountability
for decisions on budgets and Council Tax levels. The complexities
of the system mean that it is difficult to pin down what drives
local decisions leading to service changes or increases in Council
Tax.
12. There are also concerns that the Council
Tax by its nature does not meet the requirements of a "good"
tax. It is not buoyant in that the tax base on which the tax is
charged (domestic properties) does not increase in line with the
general improvement in the economy. To increase revenue from the
tax each year to meet increased costs, it is necessary to increase
the tax rate. Because of the gearing effect this has led to high
increases in past years across the country.
13. Council Tax is also an "unfair"
tax. The regressive nature of the Council Tax means that it is
a higher relative burden to the less well off and continued high
increases in Council Tax will eventually make it unaffordable
by the more deprived members of society (even after benefits are
taken into account).
14. We would therefore support a call to
give local government greater financial freedom and would want
to see a higher proportion of our funding needs raised locally.
We believe that creating a stronger link between local spend and
local funding will strengthen accountability and help the Council
to become more engaged with local voters.
PROPOSED OPTIONS
15. In the short term, we would argue for
reform of the current Council Tax system to address some of the
concerns about the nature of the tax. We have in the past proposed
widening the number of bands used for Council Tax purposes by
adding additional bands at the top and bottom. We have also argued
that the tax paid by those in the bottom band and those in the
top band should be widened from the current 1:3 (this means
that households in the highest band only pay three times more
tax than those in the lowest band). These two options together
would help make the tax less regressive and less of a burden to
the generally less well off. But in a Manchester context such
a change is likely to reduce the proportion of funding raised
locally and further increase our gearing ratio.
16. Therefore, we believe there is also
a case for the re-localisation of the National Non Domestic Rate
(NNDR). This would widen the tax raising powers of the Council
and move the balance of funding back towards the levels pre 1990.
It would also help the Council to engage more meaningfully with
local businesses to help ensure the Council are better meeting
their needs. It would also provide a direct incentive to the Council
of increasing the level of business activity in the city. We recognise
that this will bring with it the responsibility to ensure that
tax in Manchester remains competitive and provides good value
for money as we appreciate the impact on businesses of high tax
levels. Discussions have taken place within the Manchester business
community on this issue and they are sympathetic towards our case.
GOING FURTHER
17. As well as exploring the re-localisation
of the business rate we are considering, at city-region level,
joint powers of prudential borrowing and finding innovative ways
to deploy the assets of various public sector partners to facilitate
investment and help lever maximum value to the public purse. Cities
like Manchester need to invest substantially in their infrastructure
if they are to remain competitive. Most cities in the US and Europe
are able to deploy a variety of methods in order to do this. Alongside
the other 7 Core Cities, Manchester is making a case for
the devolution of more funding to regions and sub-regions and
for the piloting of innovative financial tools to enable us to
invest in the big ticket items such as transport infrastructure
which are so clearly needed.
— What effect does the capping of council
tax rises have on local accountability?
18. Manchester has a long history of Council
Tax Increases that have been held below inflation, this will be
the 9th consecutive year now and as such capping has not been
an issue for Manchester during this period. However, capping cuts
across local accountability and local spending decisions and as
such Manchester would support its removal. We have also previously
recommended that a number of bands be increased at the top and
bottom of the range and that the proportions at the top and bottom
EXISTING POWERS
To what extent are local government services a
product of national or local decision-making?
19. Bold devolution, differentiated by each
city's potential to release further economic growth and its capacity
to connect the wealth generated to people in deprived communities
is an issue for cities because it's in our most deprived communities
that people most need to see change geared to local needs not
national priorities.
20. New LAAs have reduced targets for local
government but other public services are still tied own by input
and process controls. Whitehall needs to let go and enable all
public services be held accountable locally. The people of a city
need a mesh of services to create genuinely sustainable communities:
better educational attainment, higher skills, better employability,
longer life expectancy, less crime and antisocial behaviour, better
transport etc. The precise choice and mix of targets will be city
specific.
21. Each individual in each deprived community
in our cities is not a collection of problems for public services
to sort out. We need to empower and individuals and communities.
We need to break through cycles of deprivation; to reverse cultures
of dependency. Public services need to help people invest in themselves,
in their own futures to raise their own individual ambitions and
self esteem. We need governance of cities that reinforces and
rewards individual and community self-improvement. Helping people
to be more resilient to the problems of deprivation and to be
better able to take the opportunities being generated by the success
of our cities can never be achieved through command and control.
It can be achieved through local leadership and within sensible
and sensitive governance arrangements that change the way public
services see their role.
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?
22. Manchester City Council makes good use
of the powers that it has.
IMPROVING THE
RELATIONSHIP BETWEEN
CENTRAL AND
LOCAL GOVERNMENT
What difference has the central-local concordat
made to central-local relations?
23. We welcome the sentiment of the concordat,
however, it is too early to judge whether it has made any real,
lasting difference to relations between the central and local
tiers of Government.
Should an independent commission be established
to oversee the financial settlement for local government?
24. We support the view expressed in the
LGA's document "A new vision for local government finance"
that there should be a new independent "public finance commission"
to oversee and maintain a sustainable local finance regime. This
would allow for a depoliticised approach to be taken, similar
to the precedents set for this in banking and finance eg independence
of the Bank of England and lighter touch to the Financial Services
Authority. The commission would not be involved in making political
choices, but could provide independent evidence evaluation and
advice to both central and local government around key issues.
25. Such a commission would provide the
opportunity to devolve from Government a number of tasks which
are probably better regulated outside the government, including:
— Stewardship of overall funding regime
including determination of the distribution and equalisation of
mechanisms and maintaining an overview of accountability arrangements.
— Keeping data and tax base valuations
up to date, in the latter case by commissioning contract work
from valuation offices.
— Regulation of a devolved regime of fees
and charges, and to investigate and advise on new or alternative
charging regimes.
— Provide the regulatory framework for
the relocalisation of business rates.
— Research and advice, to support the integrity
of the system.
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?
Under the current settlement, local government
will always be subject to the whims of central government. A new
constitutional settlement is required that enshrines the rights
of local government and local democracy.
What role should Parliament have in the protection
of local government's position within the UK's constitutional
settlement?
No comment.
September 2008
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