Memorandum by Knowsley Borough Council
(BOP 19)
INTRODUCTION
1. Knowsley Council is a key deliverer of
services for its 150,000 residents and has a leading role
in the Liverpool City Region. The ability to deliver effective
and efficient services that meet the needs of its residents relies
in part on the relationship it has with national government and
it is with in this context that this submission is made.
2. The council's submission is in two parts;
the first raises a number of general observations on the balance
between central and local government including form should follow
function and the need for a constitution to clarify the roles
and responsibilities of both national and local government. The
second part of the submission deals with the financing of local
government and the need to properly fund what ever functions it
is called to provide.
GENERAL OBSERVATIONS
Form follows function
3. We need to understand what Local Government
is for before we can develop an understanding of the balance we
between local and national government—is it to provide services
or represent local views. In this paper it is assumed it is to
provide services.
4. The publication and enacting of the Local
Government White paper last year dealt largely with the form of
local government, rather than its function. It seems to me that
the debate is the wrong way round and we all need to be clear
what the function of local government is for—the white paper
promised a constitution that never materialised the government
has never set out clearly what it wants local government to do.
This debate might be a start—then the form should follow.
5. Local government provides a range of
personal services including:
— Culture, sport, leisure, libraries.
6. However it could provide a range of additional
services including:
— Social housing—Government could
decide to abolish English Partnership (government regeneration
body) Knowsley's Housing Strategy.
— Health (fully integrate the PCTs into
Local Government to promote the health is wealth debate Health
is Wealth).
— Economic development and worklessness—Govt
could abolish the RDAs and passport the money direct to Councils
Knowsley's Economic Regeneration Strategy and Employment
and Skills Strategy.
7. It is worth noting that local government
did have control of many more services in the past including water
and power but they were removed from local authority control without
a debate and in order to meet Govt objectives at the time; now
may be the time to encourage Govt to reconsider this decision.
8. All that Central government would then
be left to deliver is defence, strategic transport and energy
policy—whilst this may be unrealistic but it may be worth
investigating as part of this debate.
Constitution
9. Much of the welfare state has always
been national (National Health Service, national entitlements
to benefits and education) and as long as citizens look first
to national government to deliver in these areas, national government
will not be ceding responsibility to others. Newspapers are always
highlighting the "inequalities" of "postcode lotteries"
rather than the democratic choice; difference will always be the
result of more devolution and we don't seem to want that.
10. A further suggestion would be to develop
a constitution setting out the roles and responsibilities of central
and local government—this needs to be agreed by all political
parties so it would provide long term stability (may be 20 years
but as much as 50 years) on what we are asked to do. What
ever we do we need to do the basics right, focus on what residents
want us to do within the constitutional framework and it be adequately
funded.
Funding and service delivery
11. Local government is often seen as a
dumping ground for all the services that the government either
finds too hard to do ie congestion charging or recycling or has
no answer to. The adoption of Sustainable Community Strategies
and LAAs, SCS/LAA should help us to focus on service delivery
and resourcing however having had a below inflation settlement
allied with a 3% efficiency saving, the issue of LG funding is
crucial particularly in an area like Knowsley where the opportunity
to generate resources via local taxation is limited.
12. Financial freedoms depend on a fair
distribution of resources from central government. The ongoing
formula review must tackle the inequalities that remain such as
resource equalisation, and should give greater emphasis on need
(deprivation factors).
13. Knowsley supports the strengthening
of the role and influence of local government on Policing and
Health, building on the Local Strategic Partnership. The ability
to pool budgets and commission services authority wide enables
the targeting of local priorities
14. Local government will not become more
independent while such a high proportion of its funding (exceptional
by international standards) is controlled by central government,
either through grants or the distribution of the NNDR pot. Furthermore,
the capping power of government over council tax is a draconian
measure, which undermines local accountability and reduces the
flexibility that local authorities require to respond to the needs
of local residents.
15. It would be interesting to explore further
the committee's suggestion of establishing an independent commission
to oversee the financial settlement for local government, which
could help make local-national relationships less tense. What
is important is that local authorities must be involved in any
discussion or debate on local government funding to ensure that
local needs and priorities are addressed and fully funded through
the finance settlement.
16. The lengthy and thorough analysis of
Lyons is all that is needed to inform the select committee on
finance.
CITY REGIONS
17. It's promising that the importance of
local decision-making to the economic fortunes of cities and city-regions,
informed by academic work comparing the UK to continental and
north American cities, has been taken on board by government and
reflected in innovations such as the Sub National Review and MAAs.
On Merseyside the development of the City Employment Strategy
is an example of this devolution. The next steps, which it would
be good if the select committee could be encouraged to back, would
be Core Cities' proposals in the Unlocking City Growth
report for Accelarated Development Zones (requested amongst the
"Asks" in our draft MAA) and Regional Infrastructure
Funds. However, poorer localities should also welcome the fact
that the balance will still be struck between such devolution
and national government's stake in regional development and equalising
outcomes (Eg in National Indicators focussing on improvements
to wellbeing locally and PSA7 on regional economic performance).
Addressing the political deficit
18. Central government via the empowerment,
active citizenship and volunteering, ownership of assets agenda
are attempting to address the political deficit at a local level
which will be difficult due to years of central government systematically
stripping LG of power funding and credibility. Planning powers
have consistently been removed from local government with the
introduction of the Planning Infrastructure Commission being the
latest example of this process. There is a need to introduce more
credibility into the political process and address the political
deficit at a local level, for example, local councils should have
the power to determine even potentially large planning applications
and be held to account accordingly, an example of this is the
Kirkby Regeneration project.
Relationship with Europe
19. The real issue in many people's minds
is not the relationship between national and local government
but the one between national and European government. The recent
survey by Ipsos Mori encapsulates this as people do not
wish to be involved in local politics. Power has been ceded to
the EU with a majority of legislation being taken through parliament
being EU directives. Often central government agrees limits and
targets with the EU and then expects LG to meet them without fully
costing the implications—the collection and recycling of
refuse is a case in point
FINANCIAL ISSUES
Does local government need greater autonomy from
central government? If so, in what ways?
20. If further devolution leads to greater
freedoms and flexibilities to prioritise where resources can be
directed based on local need then this would be welcomed. Central
Government's role should be to provide leadership by setting a
clear vision, a stable framework, adequate resources, effective
incentives as well as accessible and consistent information on
performance. Local government need to be given the resources to
achieve this vision as they and local people see fit.
21. Tackling the problems at the roots of
communities need to be directed by locally elected Members who
have the knowledge about what is required and works in their community.
Local government need to ensure that resources are available to
communities to support these initiatives. If local government
is able to demonstrate that it has the mechanisms to facilitate
this then this would strengthen the argument for greater autonomy.
FINANCIAL AUTONOMY
To what extent do the current arrangements for
local government funding act as a barrier to local authorities
fulfilling their "place shaping" role? In particular:
Does local government need greater financial freedom? If so, in
what ways?
22. Financial freedoms depend on a fair
distribution of resources from central government through the
formula grant. The ongoing formula review should tackle the inequalities
that remain such as the area cost adjustment, and should give
greater emphasis on need ie deprivation factors.
23. The continued use of ring fenced grants
by the Government leads to the inefficient allocation of resources
and undermines the ability to place shape and manage the achievement
of targets. However, the move to non ring-fenced grants, such
as the area based grant is a favourable method of funding for
new government initiatives. It is important that the Government
fully funds any new initiatives. For a floor authority, such as
Knowsley, any increases in formula grant can result in no additional
funding to implement initiatives as floor grant is merely replaced
with formula grant.
24. It is also possible that specific ring
fenced grant, which are restrictive in the way local authorities
retain management and administration resources would enable further
resources to be passported to communities to place shape. The
infrastructural costs that accompany initiatives may be reducing
the impact of new resources on improving standards.
Should local government be able to raise a greater
proportion of its expenditure locally?
25. For an authority such as Knowsley with
a low tax base, the opportunity to raise a greater proportion
of its expenditure locally is very restricted. The ability to
raise income from fees and charges is minimal and is incomparable
with the income generation potential of some boroughs, such as
London Boroughs. The ability to generate income needs to be taken
into account as part of methodology for distributing formula grant
as part of resource equalisation, which will not disadvantage
those local councils with low tax bases.
26. The delay in council tax revaluations
has lead to continued inequalities between council taxpayers across
the country. The Lyons Review recommended the addition of a new
upper and lower band to redistribute wealth between the very rich
and the poor, which should lighten the tax burden for many residents
within Knowsley. The Lyons Review supports the continuation of
the council tax system in principle, but highlights that it is
a tax which is progressive to income if council tax benefit is
fully utilised. Before any alternatives to council tax can be
considered, which could lead to financial autonomy, trust must
be secure between residents and local government.
27. If the introduction of a local income
tax is successful in Scotland then it could provide the backdrop
to English council tax reforms. How the potential funding pressures,
resulting from the exemption of Council Tax Benefit receipts from
the affordability calculations, are managed by central government
will have a bearing on the feasibility. The Barnett Formula will
be under close scrutiny to determine whether the proposal in Scotland
is viable.
28. Arguments about the rate of increases
in business rates in comparison to council tax increases suggest
businesses have been treated leniently. However, in tough economic
conditions the effect of significant increases in business rates
would be felt by all businesses. Since business rates have been
distributed nationally, œ1billion has been redirected from
local government funding to support other national government
priorities. As business rate receipts finance the majority of
the formula grant allocations to local authorities their impact
on financial freedom lies in the fairness of the formula and the
quantity being released. The three year settlement protects local
government from cyclical fluctuations in business rate receipts
and enables some stability to forward plan.
What effect does council tax capping have on local
accountability?
29. The cap on council tax is a draconian
measure which undermines local accountability and reduces the
flexibility that local authorities require to respond to the needs
of local residents. The cap is not the only factor restricting
council tax rises. Political and social constraints are equally
restrictive. The balance between increased revenues and affordability
of residents has to be monitored. The ability to fund local services
is getting increasingly difficult, especially for floor authorities
facing the prospect of a tapered floor. Residents are unlikely
to differentiate between local and national governmental responsibility
but when given the opportunity, in whatever elections, are likely
to vote for change, if they feel worse off.
EXISTING POWERS
To what extent are local government services a
product of national or local decision making?
30. The movement away from target setting
to outcome based monitoring, as with the Local Area Agreement
has meant a transfer of accountability to local government.
Improving the relationship between central and local
government
What difference has the central-local concordat
made to central-local relations?
Should an independent commission be established
to oversee the financial settlement for local government?
31. The benefits of an Independent Commission
to oversee the financial settlement for local government may include
financial settlements being less of a political tool ie Ministerial
decision and therefore, in theory, fairer. Disadvantages depend
on whether local government has a voice, and whether the commission
has a greater understanding of local needs. The two components
of the settlement are the distribution method and the quantum.
Central government would need to provide adequate resources for
the Independent Commission to distribute resources fairly, and
should be subject to calls to account from the Independent Commission
if resources are withheld by the Government.
CONCLUSION
32. In the context of the discussion about
the future relationship between central and local government it
is important to establish some key principles.
(1) Subsidiarity—the need to balance the
efficiency of regional service delivery against local democracy
and local responsiveness;
(2) Common Boundaries—experience suggests
that people can understand public services better when they are
delivered in common boundaries which also make it much easier
for organisations to deliver real joined-up services (this is
an approach Knowsley has been pursuing with the PCT for a number
of years) ; and
(3) Strong Local Government -people have in the
past strongly supported local government and this support needs
in the future to be the centrepiece in service delivery and local
democracy. Without it local government may as well be regarded
as a branch of national government
33. Such a statement of principles would
serve to ensure that both central and local government are working
to a common vision and ensure that the allocation of functions
takes place in an environment of trust, mutual regard and the
common cause of providing integrated public services meeting the
needs of our citizens.
34. Such principles and vision could form
the basis of a constitution between central and local government
and be part of the Prime Ministers desire for a written constitution
for all. The constitution enforceable in the courts would set
out the clear roles and responsibilities of central and local
government. The constitution possibly along the lines of the BBC's
charter would be developed after far reaching consultation and
have all party agreement. It would be reviewed after an extensive
period of time.
35. The key to ensuring a proper balance
between local and national government power and fulfilling the
vision and core principles is clear, transparent and accountable
fund raising powers. It is funding which is the key to ensuring
the balance between local and national government powers and whilst
this has been recognised by the current government in the commissioning
of the Lyons Review—little if anything of real substance
has emerged; the committee may wish to look at how the review
has been implemented.
September 2008
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