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


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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