Memorandum by the New Local Government
Network (BOP 24)
The New Local Government Network (NLGN) welcome
the inquiry into the "Balance of Power" being carried
out by the Communities and Local Government Select Committee and
are grateful for the opportunity to be able to set out NLGN's
thoughts below.
NLGN is a not-for-profit making, independent
think tank, which seeks to transform public services, revitalise
local political leadership and empower local communities. NLGN
is also the primary advocate of New Localism.
1. SUMMARY
1.1 NLGN welcome the existing devolutionary
principles that have underpinned government policy in recent years.
We believe that central government must follow this commitment
through to ensure that the balance of power between central and
local fosters trust, harnesses the potential for public service
improvement at the local level and ensures a coherent democratic
structure. Therefore, NLGN suggest that the government's devolutionary
initiatives should be pursued to include:
— giving local authorities more influence
over local health and police partners;
— allowing greater local fiscal autonomy
through tax policy and business rates;
— ensuring regional diversity in bodies
that scrutinise central and regional government;
— ending ring-fenced grants and empowering
local communities to respond to cross-cutting service needs;
— continuing the move away from central
government targets and investing more in shared priorities through
Local Area Agreements and Multi Area Agreements;
— encouraging local authorities to play
a more significant role in shaping the local housing mortgage
market;
— introducing legislative and scrutiny
functions in parliament to ensure that services and powers are
devolved where appropriate.
2. FURTHER DEVOLUTION
Does local government need greater autonomy from
central government? If so, in what ways?
2.1 Over the past decade there has been
a considerable devolution of services and decision-making responsibility
from Whitehall to the local level.
2.2 The Local Government White Paper and
the Lyons Inquiry were vital investigations into the authority
and influence of local authorities. Both recommended a radical
re-balancing of power away from the centre to local democratic
institutions. A number of policy proposals have been taken forward
subsequently through, among others, the Local Government and Public
Involvement in Health Act 2007 and the Empowerment White
Paper (July 2008).
2.3 These reviews set out a new ambition
for local government as a sector—of "place-shaping"
and of leading in their local "place". Councils must
now lead their communities, operate across the totality of the
local public service and manage the complex web of private, public
and third sector partners. Local Area Agreements and the new Comprehensive
Area Assessment promise to improve outcomes across the local area
irrespective of the institution responsible and to put a new onus
on local authorities to influence services.
2.4 This devolutionary impetus has gone
hand in hand with a marked improvement in the services delivered
at a local level, as demonstrated by notably improved CPA marks,
with 83% of councils achieving three or four star status. Local
authorities have been at the vanguard of the Gershon efficiency
agenda setting an example for the rest of the public sector to
follow. Together with the generally positive and proactive response
from the local government community to the new range of challenges,
this suggests that the sector has earned the right to a greater
level of autonomy and influence at the local level.
2.5 Yet, despite these notable transformations,
Britain remains one of the most centralised nations in Europe,
whilst a number of factors continue to prevent local government
from exploiting its full potential. This can be witnessed through
the continued lack of understanding among the population about
the differing roles and responsibilities of central and local
government and other public agencies. Departmental rigidity within
Whitehall constricts the approach of central government to front-line
service delivery.
2.6 New methods of public service delivery
are needed to respond adequately to the demands for personalised
services, to meet rising citizen expectations, to provide joined-up
services and to ensure participation from the community. All these
require service delivery at a more local level.
2.7 The New Local Government Network believe
that a greater degree of financial, fiscal, constitutional, regulatory,
and political autonomy and control must underpin these transformations.
This should involve devolution to the most appropriate level,
whether it is at the sub-regional level through Multi Area Agreements,
local authority level or enhancing the role of individual councillors.
Specific examples of where action is needed include:
— giving local authorities more influence
over their local partners;
— permitting greater freedom over funding
streams across all service areas to allow local targeting and
pooling of relevant funds;
— transferring to local authorities greater
freedom to set the priorities in their next round of LAAs;
— enabling local government to take a more
central role in the delivery and funding of a localised welfare
system, including capability to capture local benefit savings;
— encouraging local authorities to play
a more strategic part, with the potential to derive financial
long-term benefits for the community, by playing a more significant
role in the local housing market;
— making partners who are found not to
be contributing appropriately to the delivery of LAA appropriate
candidates for the transfer of functions and funding;
— investing power in citizens rather than
central agencies to evaluate local government performance;
— building on the government's commitment
to community empowerment and transferring genuine control to citizens
and communities through individualised and neighbourhood services.
Do local government's role and influence need
to be strengthened in relation to other public services, such
as policing and health?
2.8 We strongly believe that local authorities
must be given new methods for improving the performance of other
local public sector partners such as the police and health partners.
2.9 There is, currently, variable local
democratic accountability. Despite significant attempts to align
the service delivery and governance arrangements between some
local Primary Care Trusts (PCTs) and councils, NLGN recommend
that more radical reforms are needed. PCTs hold the stewardship
of comparable sums of taxpayer money as democratically-elected
local authorities. A decade of greater exposure, stronger audit
practice and accountability has transformed councils into discernably
better managers than many other corners of the public sector.
Councils also have the democratic mandate to take difficult decisions.
Where a PCT struggles to meet its financial targets and performance
objectives, and there is organisational and popular consent, the
PCT and unitary local authority, or county council, should be
allowed to appoint joint posts on the senior management team.
Pilot projects would offer a route to explore the potential benefits
of integration of local health and council services.
2.10 Currently, there is also insufficient
democratic accountability for local police services. We feel there
would be merit in making Chief Constables directly accountable
to local Council Leaders and that upper-tier local authorities,
through the auspices of a reformed Community Safety Partnership,
should subsume responsibility from Police Authorities for performance,
budget and priority setting. To make this new democratic accountability
viable and understandable to the citizen, PCTs and police authorities
should be coterminous with local authorities.
3. 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:
3.1 The funding of local government continues
to have a significant retardant effect on the sector. In many
instances across the country, locally-elected members have reduced
potential to impact on the strategic direction of their local
area. There is very limited economic incentive to improve the
local economy and, therefore, limited scope for long-term strategic
investment. The ring-fencing of grant sets false boundaries for
how local policy-makers tackle cross-agency and cross-service
outcomes.
3.2 We believe that the government should
look to reform the revenue raising powers of councils and devolve
powers.
Does local government need greater financial freedom?
If so, in what ways?
3.3 Councils currently raise too little
of their own money and rely too much on central government grant.
Welcome though the reduction in ring-fenced grant is (Comprehensive
Spending Review 2007), more needs to be done to encourage local
agencies to tackle local problems in the most effective and strategic
way. We believe that, with the successful introduction of Local
Area Agreements, the Government should seek to remove any remaining
ring-fenced grants that operate either through government departments
or through NDPBs, and give councils freedom to tackle the local
priorities they have identified in their LAAs.
3.4 Central government could start by unlocking
local potential and aspirations by converting a myriad of regeneration
grants into a single, un-ring-fenced and needs-based grant. Such
freedoms could be initiated as a reward incentive for those authorities
that have performed well in their LAAs.
3.5 NLGN would suggest that, until a government
is ready to adopt a more radical revision of local taxation, revaluation
of property and greater autonomy at the local level in deciding
on council tax banding and rates would allow a more appropriate
taxation regime.
Should local government be able to raise a greater
proportion of its expenditure locally?
3.6 NLGN believes that a fundamental shift
from central to local revenue raising powers is necessary.
3.7 The 2006 Lyons Inquiry argued for
a significant role for local authorities in driving their local
economies. To this end, Lyons recommended that business rates
be devolved from central to local government to act as an incentive.
The Government recognised this dynamic in proposing that, under
certain circumstances, Supplementary Business Rates of 2p in the
pound could be levied by authorities. NLGN welcomed this reform
and believes that the Government needs to go further to allow
councils to harness larger revenue streams, utilise their prudential
borrowing powers and invest in transport and regeneration infrastructure
for the long-term benefit of the community.
3.8 We also feel that the Government should
explore the potential for hypothecating a part of income tax specifically
to local government. If this were to be distributed on the basis
of the number of people in employment, the local area would have
an incentive to promote local employment. The same could be done
for VAT increases across a local area.
What effect does the capping of council tax rises
have on local accountability?
3.9 Council tax capping is a significant
appropriation of local autonomy. It is, implicitly, also an acknowledgement
of more fundamental flaws in the financial status of local authorities:
— with local authorities receiving such
a small proportion of their income from council tax compared to
government grant, if a council wishes to raise investment it must
increase council tax disproportionately. This "gearing ratio"
is about 4:1;
— specific grants from central government
constituted over half of council revenue (2006) and continue to
constrain local actions;
— councils have little incentive to develop
their local economy as business rates are pooled nationally.
3.10 Together, these reduce the natural
accountability of citizen to local democracy and add to the confusion
of who remains ultimately responsible for success or failure of
public services.
4. EXISTING POWERS
To what extent are local government services a
product of national or local decision-making?
4.1 The traditional command-and-control
civil service model cannot meet the challenges posed by the rapidly
changing social and economic landscape. Growing complexity of
demand for services is increasingly matched by increasingly complexity
of provision with multi-agency working in evermore varied localities
and neighbourhoods. When local government should increasingly
become the overseer of public services in a locality, fundamental
questions are posed about the future role, construction and size
of Whitehall.
4.2 Central targets continue to be misaligned
and to distort the cross-working of public agencies at the local
level.
4.3 However, the Government has set out
a path which, if followed through, can lead to a better equilibrium
between the roles of local and national democracies.
4.4 Public Service Agreements, Local Area
Agreements and Multi Area Agreements offer new mechanisms for
identifying, agreeing and aligning local and national priorities.
4.5 The reduction of central government
targets from over 1,000 under the Comprehensive Performance
Assessment to 198 under the new Comprehensive Area Assessment
has shifted the decision-making power from central to local. However,
the prescriptive nature of many central government grants, the
large amount of public expenditure funnelled through NDBPs and
much central government guidance continues to skew decision-making
and influence in favour of national rather than local government.
In addition, many of the transactional services carried out by
NDPBs might better be devolved to local authorities.
4.6 Finally, the roll-out of Multi-Area
Agreements from 2008 onwards promises the prospect of a new
functional, viable and organic tier of government that operates
at the correct spatial awareness to solve cross-boundary challenges
such as skills, transport and employment.
Does local government make adequate use of its
existing powers, such as its well-being, charging and trading
powers? What scope is there for greater use of those powers?
4.7 While issues of equity and fairness
must always be borne in mind, NLGN feel that there is considerable
potential for local authorities to trade in a greater number of
services to their citizens and local businesses. Just a couple
of examples for where local government could present an additional
offer to its residents and at the same time bolster local council
finances include: playing a role as mortgage lender to resolve
strategic issues around housing and earn financial benefit for
the community; offering a wider range of leisure and environmental
services that fall outside of the traditional functions of a local
authority.
5. IMPROVING
THE RELATIONSHIP
BETWEEN CENTRAL
AND LOCAL
GOVERNMENT
What difference has the central-local concordat
made to central-local relations?
5.1 The local government community gave
a cautious welcome to the Concordat as signalling a new relationship
between central and local government. Particularly welcome was
the responsibility on central government to "progressively
remove obstacles which prevent councils from pursuing their role,
including reducing the burden of appraisal and approval regimes,
the ring-fencing of funds for specific purposes and the volume
of guidance it issues". This is a laudable goal. We acknowledge
that the Government has adopted some policies to put this theory
into practice and would urge it to continue on this journey.
5.2 Local Area Agreements represent a practical
and every-day method by which to put many of the sentiments embodied
in the Concordat into being.
5.3 Ultimately, NLGN are confident that
greater flexibility and autonomy to set priorities at the local
level will result in a new enhanced relationship between central
and local.
Should an independent commission be established
to oversee the financial settlement for local government?
5.4 NLGN do not believe that an independent
commission should be established to oversee the financial settlement
for local government. An independent grant commission would not
be democratically accountable to local government and would, therefore,
not address the root problem. As such, the suggested reform would
represent no improvement on the current status quo, within which
Whitehall makes the decision.
5.5 There would be significant potential
in shifting the onus from central to local oversight of the financial
settlement. In this respect, it would be profitable for the Committee
to consider whether the local government family should take responsibility
for difficult issues like grant distribution and whether Council
leaders should be made to face up to the collective distribution
task themselves. This could consist of requiring a two thirds
majority of support from Council leaders across the country.
6. 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?
6.1 NLGN has consistently argued for local
council leaders as elected democratic heads to play a more prominent
role in scrutiny of the legislature and policy.
— Our research has demonstrated that the
House of Lords does not reflect the regional diversity of the
country. For this reason, and so as to ensure a representative
second chamber, one of the options we have advocated is that council
leaders should be given seats in a reformed House.
— The £123 billion annual spend
by NDPBs is a significant proportion of the state's expenditure.
However, control of this money through NDPB board members does
not represent the regional diversity of the country but is a symptom
of Britain's over-centralised condition. We suggest that:
— specific nominations for these appointments
should be sought from council leaders;
— that a "National Diversity Strategy"
should complement the concept of equality of opportunity;
— and that some functions of NDPBs could
function more appropriately through local authorities
— We welcomed the concept of regional select
committees to hold the Government and regional bodies to account.
Again, we would recommend that council leaders as champions of
their local communities should be represented alongside MPs on
these committees.
— We would ask the Committee to consider
establishing a statutory LGA which would have the authority to
engage in meaningful dialogue on the issues that Whitehall is
unable to solve alone.
What role should Parliament have in the protection
of local government's position within the UK's constitutional
settlement?
6.2 NLGN welcome the Sustainable Communities
Act 2007 which gives local authorities the opportunity to
initiate policy development. It provides local authorities with
a chance to take a more proactive leadership role in formulating
policy and building stronger arguments for the devolution of powers,
responsibilities and funding to the local level.
6.3 In its ongoing sub-national review,
the Government should consider whether Multi-Area Agreements (MAAs)
need to be recognised on a statutory basis. This will give Central
Government the legal protection it needs in order to grant particular
powers and allow more funding to flow to MAAs, through bi-lateral
negotiations, without setting a precedent for other areas.
6.4 Finally, NLGN ask the Committee to consider
reforms of parliamentary procedure and scrutiny to safeguard the
position of local government. We believe that there is potential
to build on the example set by the House of Lords' Delegated Powers
& Regulatory Reform Select Committee, whose remit is "to
report whether the provisions of any Bill inappropriately delegate
legislative power (to Ministers), or whether they subject the
exercise of legislative power to an inappropriate level of parliamentary
scrutiny". We suggest that there would be potential in establishing
a Commons/Lords Devolution Select Committee to check for inappropriately
centralising legislation.
6.5 We would also ask the Committee to consider
recommending a "devolutionary test" for new legislation.
This would be complementary to the Regulatory Impact Assessment,
which evaluates the potential impact of legislation on equalities
and business. Such a reform would mean that, in drawing up any
legislation, the relevant department and government minister should
always consider the principle of devolving relevant existing or
new services to local authorities before drafting the bill. The
assumption would be that services should be devolved unless demonstrated
otherwise.
September 2008
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