Memorandum by London Councils (BOP 44)
1. OVERVIEW
1.1 Government in England is too centralised
and as a result citizens receive public services that are less
effective, less accountable and less empowering. A new balance
between Whitehall and town hall is an essential first step in
reversing these problems.
1.2 Yet trying to define, once and for all,
which policies should be locally led or nationally led will not
deliver this improvement. The belief that it could is essentially
a belief that a federal constitution is the best model for 21st
century government.
1.3 In fact there is no one right answer,
because so many of the demands that people place on government
today require joint working between different public services.
Some will be nationally led, others locally. In London the demands
are more complex and so boroughs are developing new relationships
between local and regional elected government. The problem is
less about which spheres are properly national and which local.
Instead it is more about how the two spheres of government work
together to deliver what people want.
1.4 Excessive centralisation has created
an unhealthy relationship between central and local government.
It is the rules governing this relationship that are producing
less effective and less accountable public services. They are
also undermining citizens' ability to shape those services to
suit their needs.
1.5 London Councils argues that these tensions
can be reduced and public service improved if:
— Central government steps back from operational
intervention at a local level and develops its ability to set
strategic goals that guide local delivery.
— Further devolution to local government
is implemented; especially to help join up public services so
that they better serve citizens.
— Devolution also increases local financial
autonomy, not in order to make it easier to raise taxes at a local
level, but to strengthen the links between local government and
the community.
— Devolving financial responsibility will
involve the transfer of both financial and political risk from
national to local government.
— Devolution should free local government
to stop looking up to Whitehall, so that it can better look out
to the public.
— Reform must be embedded in a new constitutional
settlement.
1.6 In this submission London Councils make
specific proposals for:
— New tools and regulations through which
central government should operate
— Areas for devolution to local government
— Increased financial autonomy short of
fundamental reform of the local government finance regime.
— Constitutional reforms to help embed
the improvements that we propose.
2. THE CURRENT
POSITION
2.1 Local government does not aspire to
run the army. There are few policy areas that London Councils
both believe local government should be involved with and in which
current legislation permits no significance influence.
2.2 However, there are many policy areas
in which we believe local government should be involved, where
central government has placed delivery duties on councils, but
where local discretion is too constrained to properly meet either
the duty, or the aspiration.
2.3 The problem is that even when national
government agrees in principle to devolve, it has not dismantled
the machinery of central control. The result is that apparently
devolutionary initiatives are implemented in ways that are burdensome,
centralising and reduce the scope for local innovation.
2.4 Local Area Agreements (LAAs) are an
example of this phenomenon. The process was intended to tailor
national policies to meet differing local circumstances. However,
evidence of the new LAA process is that Whitehall has found it
difficult to negotiate in a joined up manner. Individual departments
have been in competition with each other to insert their goals
into LAAs. The result can be to increase the burden of reaching
agreement and reduce the opportunity for genuine local innovation.
2.5 National targets reflect the same problem.
Government have recognised that 80% of targets placed on local
government are primarily designed to inform the centre rather
than improve performance. The 198 National Indicator set
has improved the situation. However national regulation still
focuses too much on national pledges instead of local demands.
The forthcoming CAA regime retains the assumption that more frequent
assessment drives faster improvement.
2.6 Yet Camden had no Corporate Assessment
for six years, but continued to improve and now has the highest
CPA scores in the country. London has the highest CPA scores of
any region in England. The reality in London is that improvement
is being driven ever more by the boroughs themselves working through
Capital Ambition. National assessment distracts from this development
of more effective local solutions.
3. MODERNISING
NATIONAL GOVERNMENT
3.1 Like the golfer with one club, Whitehall
will always be drawn into micro-management until it has developed
other tools for driving national policy pledges in local circumstances.
3.2 Central government lacks the discipline,
long present in local government, of having to operate within
constraints that cannot be moved when they become challenging.
For example while CPA is a fixed and public discipline, Departmental
Capability Reviews are predominantly private and are not fixed.
3.3 Where national government commits to
deliver goals that it has not fully costed, or funded, it is able
to avoid the consequences by "cost shunting". Cost shunting
is the process of passing a duty to another organisation—often
local government—without passing on the necessary funds.
Lack of third party assessment allows central government to put
unreasonable burdens on local government. It also reduces the
pressure on central government to improvement its managerial capabilities.
3.4 Two reforms would help central government
to replace micro-management with more strategic management. These
would in turn both help Whitehall to deliver more for Ministers
and also create greater space for local innovation.
Public Service Agreements (PSAs)
3.5 The PSA regime has now been reduced
to 30 goals for national government. Delivery machinery cutting
across departments and led by a single "Senior Responsible
Officer" for each PSA has been constructed.
3.6 There is a natural alliance of interests
between the needs of these high level PSAs to achieve outcomes
and the needs of local government for the operational freedom
to tailor national policies to meet local circumstances. Between
these levels lie a range of Whitehall departmental national targets
such as APACS for policing, the YOT Performance Framework, or
the NHS Accountability & Outcomes Framework.
3.7 National government should make these
departmental target regimes subservient to locally agreed targets.
This would mean that the default assumption for all local public
services would be that targets agreed within an LAA were their
primary goals. As a consequence:
— Central government needs would be met
through 30 PSAs. Ministers would use these in deciding whether
to agree LAA targets.
— Whenever any pubic service was a signatory
of an LAA, the LAA targets would become their primary goals.
— Only those departmental targets that
did not conflict with LAA targets would be continue to apply to
local public services.
Financial Transparency
3.8 National judgements on the cost of national
policy commitments should be transparent. A suitable professional
body, possibly the Audit Commission, should be required to assess
and report publically on all national government spending pledges
that are delivered through local government.
— These reports should make a public judgement
on whether national commitments had been properly funded.
3.9 We return to the question of how to
enforce these reforms in our final section on constitutional reform.
4. FURTHER DEVOLUTION
4.1 Central government will benefit from
external challenge; just as local government has already benefitted.
However, the purpose of these central reforms is to create space
for further devolution locally.
4.2 As argued above, devolution that delivers
for citizens is only occasionally about transferring sole authority
from central to local government. More often the need is to give
local government greater discretion to tailor policy delivery
to local circumstances.
4.3 Joining up government through partnership
working is recognised at all levels as a way of delivering more
efficient services and better designing the services on offer
to suit the needs of users rather than professions or institutions.
Yet too much intervention by central government often undermines
this goal.
4.4 For example joint working between Boroughs
and PCTs in London is threatened by NHS reorganisation plans.
Equally, national goals for the Police services can cut across
the LAA agreements that borough commanders wish to sign with local
authorities.
4.5 In areas such as health and policing
both national and local government have duties to citizens. London
Councils does not argue that national influence should simply
be removed and replaced by local government control.
4.6 Instead a new way of operating must
be developed that allows national government to set strategic
goals, but does so without undermining local initiative. This
may include minimum standards or thresholds. What is essential
is that the new approach delivers much greater freedom for locally
elected leaders to marshal all public services in pursuit of goals
tailored to local needs.
Devolve & Commission
4.7 London Councils propose that an adaptation
of the principles that underpin the Direct Schools Grant (DSG),
combined with commissioning by local authorities could resolve
this tension. National government would retain control of strategic
goals for these public services, but local authorities would gain
local operational flexibility to tailor plans to suit local circumstances.
In different ways this approach could be applied to many locally
delivered public services including but not limited to:
— Benefits and job seeking
4.8 The system would work in the following
way.
— A budget would be devolved to local government
to be allocated on a yearly basis; with national three year settlements,
councils might make set budgets for longer periods. In the case
of PCTs this would be the existing PCT budget. For policing it
would be that element of policing costs that fund neighbourhood
and other local policing. Organised crime, terrorism and other
level two or three crime would remain under direct police force
control.
— As with DSG, central government would
specify the broad purpose of the budget (ideally by reference
to PSAs). It would specify what—if any—proportion
of this money might be spent by the local authority itself. We
would expect virtually all funding to be spent outside the local
authority. National government could specify minimum standards
of delivery.
— The local authority would allocate these
funds through a commissioning strategy which would be required
to demonstrate how it was furthering national policy goals, but
adapted them to local preferences and circumstances.
4.9 Policing and health care commissioning
clearly operate effectively at a borough level. In other areas
it may be that commissioning would be more effective when groups
of local authorities band together.
4.10 The government's Multiple Area Agreement
Model offers a platform on which to extend this "devolve
& commission" approach. Where an MAA has been agreed
and specific national budgets are relevant to its goals:
— Budgets should be devolved to the governing
body of the local authorities operating as an MAA.
— Examples of where this form of budget
devolution and commissioning might be applied include adult skills
funds, Job Centre Plus funding and transport funding.
Performance Regulation
4.11 London Councils believes that its performance
in recent years demonstrates that it is capable of accepting responsibility
for driving up standards across local government in London.
— In London the annual Organisational Assessment
within CAA should be suspended.
— In their place government should transfer
the duty to drive and report publically on the organisational
improvement of individual London boroughs to London's boroughs
acting collectively through Capital Ambition.
— The Area Assessment should be more locally
based making assessments purely against LAA targets. Other evidence
should used solely to validate evidence from LAAs; it should not
be used to impose new national goals on local areas.
Simplifying Partnership Delivery
4.12 The proposals to strengthen national
government's strategic influence through PSAs will also encourage
stronger local partnerships by making all departmental target
regimes subservient to locally agreed targets. As described above
in the discussion of PSAs, this would mean that the default assumption
for all local public services would be that targets agreed within
an LAA were their primary goals.
5. FINANCIAL
AUTONOMY
5.1 The current financial regime damages
local government in two ways. Too low a proportion of funds is
raised locally. This has been widely discussed. Secondly the complexity
of the central grant funding diverts management and political
attention away from citizens and onto Whitehall.
5.2 Today the most effective way to increase
borough income is by statistical argument with central government.
There is little opportunity to increase income by successfully
delivering on demands made by the electorate. Financial self-interest
encourages councils to look upwards to Whitehall not outwards
to their community.
5.3 London Councils believes that greater
rewards for successful policy could increase financial autonomy
without increasing the burden of taxation. At they same time they
would encourage faster innovation and could support national policy.
5.4 There are many opportunities to create
rewards for success without being forced into a fundamental reform
of the existing financial regime.
Council tax and Housing
5.5 London Councils has produced a rough
estimate of the growth in total council tax income that is the
result of recent house building London. If London boroughs had
been allowed to retain this income then the cumulative total over
the last five years for which data is available would have been
£113 million.
— Government should agree that in setting
central grants it will not reduce grant to cancel out increases
in council tax income—resulting from home building—for
the 10 years following the year in which any one house is built.
— This would help councils by providing
a way of increasing income. If combined with greater freedoms
on capital investment through tax increment financing, it could
provide a foundation for much more ambitious long term investment
in communities.
— At the same time it would provide central
government with a strategic tool to encourage support for its
national promises on house building
Closer to Business
5.6 Government has made clear its opposition
to localisation of the business rates. However, London Councils
believe that there are opportunities to better connect the fortunes
of the local economy and the local state through expansion and
simplification of LABGI style schemes.
— Government should investigate the opportunity
to allow the revenue from slices of nationally set taxes, reflecting
business activity, to be retained at a local level.
— These slices of tax might be allocated
to groups of local authorities working together; possibly through
MAAs.
5.7 In London these reforms are doubly urgent
because the net result of recent reform flowing from the Sub-national
Review of Economic Development has been to reduce London boroughs
links to economic activity. This is the opposite of the intention
in the review and the different to results in the rest of England.
6. CONSTITUTIONAL
REFORM
6.1 Many of the reforms proposed in this
submission depend on judgement. In our current centralised system
those judgements have historically been made in Whitehall. Without
further reform the centre's power to micro-manage will continue;
second guessing local decisions will simply occur at a later stage
in the process, so undermining innovation in local government
and perpetuating the unclear accountability that disempowers the
electorate.
6.2 Constitutional reform is needed for
two reasons; firstly to create a neutral referee for disputes
between central and local government; and secondly to provide
confidence that reform will endure.
6.3 London Councils believe that significant
constitutional gains can be made without opening the Pandora's
Box of fundamental constitutional reform.
6.4 Tensions between tiers of government
cannot be resolved by resort to the technical neutrality of professionals.
Democratic accountability is a vital foundation for resolving
disputes between elected tiers of government. That is why an enhanced
role for Parliament is vital. We propose:
Role of Select Committees
6.5 The House of Commons should consider
changing its procedures to permit Select Committees to take on
the role of neutral arbiter in disputes arising in the implementation
of reforms listed in this report. In particular where a disagreement
arose over:
— Whether an LAA target was consistent
with a PSA
— Whether national target regimes (such
as APACS for policing, or the Job Centre Plus Performance Framework)
conflict with local targets in an LAA.
— Whether on the basis of the independent
assessment (as proposed above) on cost shunting the achievement
of local targets had been undermined
6.6 Then the relevant Select Committee of
the House of Commons should be empowered to hear evidence and
required to make a ruling as to whether to uphold or reject the
complaint.
6.7 Where such complaints are upheld against
national government then policy changes should be made accordingly
unless:
— The government bring a motion for debate
to the floor of the House of Commons to over-turn the decision
of the Select Committee.
The Parliament Act 1911
6.8 The Parliament Act should be amended
extending the power of the Lords to reject government legislation
where they are reflecting the explicit will of the clear majority
of council leaders and directly elected mayors in England. The
Act should be amended so that:
— When the elected leaders of England's
single tier and county authorities petition the House of Lords
asking that House to reject government legislation on matters
of:
— Primary or secondary legislation changing
the boundaries, or powers of public bodies that work in partnership
with local government—(possibly as defined by the duty to
co-operate in the 2007 Local Government and Public Involvement
in Health Act).
— Primary or secondary legislation affecting
scope of powers and duties exercised by local government.
— And such a petition had been signed by
more than two thirds of the elected leaders of single tier and
county councils.
— Amendments to Section 2 of the Act
would permit the House of Lords to reject that government legislation
indefinitely, if it chose to do so.
September 2008
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