Memorandum by the London Borough of Hackney
(BOP 45)
1. INTRODUCTION
The Mayor of Hackney, Jules Pipe CBE gave informal
evidence as part of the development of the terms of reference
for this enquiry in July 2008.
The London Borough of Hackney welcomes the Committee's
inquiry as we take on the place shaping role as described by Sir
Michael Lyons, "using powers and influence creatively
to promote the well-being of a community and its citizens."
2. FURTHER DEVOLUTION
2.1 Does local government need greater autonomy
from central government? If so, in what ways?
2.1.1 It is often the case that that local
residents believe that the Council does have the power to shape
things that are actually not within its control. The deficit between
expectation and actual powers undermines the Council's local credibility
and, by extension, public authorities more widely. An example
in Hackney is a problem with the proliferation of betting shops
that is adversely affecting the character of our streets and centres.
Licensing and planning regulations do not allow the Council to
take account of the wishes of local people to prevent these establishments
from dominating the local scene.
2.2 Does local government's role and influence
need to be strengthened in relation to other public services,
such as policing and health?
2.2.1 In Hackney there is a strong and effective
relationship between the Council and the Police. This cooperative
working relationship has helped to drive crime rates down by over
a third in the last three years—the biggest drop in London.
However, the success of this joint working has been largely due
to strong personal relationships at leadership levels rather than
a formal and accountable partnership arrangement. We support greater
local government accountability of police as opposed to directly
elected CDRP Chairs.
2.2.2 Any NHS reorganisation should only
be carried out following close and careful consultation with the
affected local authorities. We recognise the importance of strengthening
commissioning arrangements across London—particularly around
acute care, but the link between a borough and its local PCT is
vital.
3. FINANCIAL
AUTONOMY
3.1 To what extent do the current arrangements
for local government funding act as a barrier to local authorities
fulfilling their "place-shaping" role?
3.1.1 The introduction of the prudential
capital regime in 2004 has, in principle, provided local
authorities with greater flexibility in addressing capital investment
issues. However in practice the ability to enter into unsupported
borrowing is severely constrained by the need to limit the revenue
consequences in future years. Of greater concern is the fact that
for authorities such as Hackney on the "grant floor",
no additional grant is received to cover the borrowing costs arising
from so-called supported borrowing. The system should be amended
to ensure that where the Government agrees to support capital
investment by a local authority the additional resources required
are actually received by that authority.
3.1.2 The grant floor also severely affects
the level of resources available to the Council, for example in
the current year the level of formula grant available to Hackney
is limited to a 2% increase, at a time when inflation is nearly
5%, thus the real level of resources available to the Council
is declining. Other grant losses and the increase in waste costs
arising from the landfill tax have had a similar impact on the
Council's ability to provide the resources necessary to support
a truly place shaping agenda.
3.1.3 Taxation rules particularly relating
to VAT place significant burdens on local authorities and can
often result in them selecting the second best option for projects
simply to avoid adverse tax implications. HMRC do recognise these
problems and their current attempts to address the difficulties
authorities face as a result of partial exemption are welcome.
However this needs to be seen through to a successful conclusion.
As a matter of principle the government should aim to reduce the
requirements placed on authorities relating to taxation to a minimum.
3.2 Does local government need greater financial
freedom?
3.2.1 In answering this question we have
taken "local government" to mean local authorities rather
than regional bodies or, in the case of London the Mayor of London
and the GLA. This distinction is important since some funding
freedoms are not filtered down to the local authority. For example,
although the opportunity to apply a supplementary business rate
is welcome in principle, in London the decision as to whether
or not to apply this rate rests with the Mayor of London and not
the individual boroughs.
3.2.2 Business funding of local government
has declined steeply over the last 20 years or so and now
accounts for only around 20% of funds. This is one of the reasons
why in many cases local taxes have increased over the past 20 years.
3.3 What effect does the capping of council
tax rises have on local accountability?
3.3.1 Hackney has kept its element of the
council tax on hold for three years running and future plans do
not envisage any significant increases in council tax. The issue
of capping is therefore not one that is likely to affect us directly.
However, as a matter of principle we consider the use of capping
to be a very blunt instrument for achieving the Government's objective
of keeping council tax increases down that clearly takes away
authorities' freedom to determine their own budgets and tax levels.
On occasion it can appear very unfair, for example, where an authority
is capped whose actual council tax is substantially below some
of its neighbours. It blurs the accountability for setting the
level of council tax within an authority and therefore weakens
local democracy.
3.3.2 Although the Government has made real
efforts to reduce the number of ring-fenced grants and increased
flexibility for authorities with the introduction of Area Based
Grant, a major element of resources for Education authorities
remains ring-fenced in the form of Dedicated Schools Grant (DSG).
Given the amounts involved, this places a major restriction on
the ability of authorities to allocate overall resources in a
way which matches local priorities. The ring-fencing of DSG should
be removed at the earliest opportunity.
3.4 Should local government be able to raise
a greater proportion of its expenditure locally?
3.4.1 The basic principle that funding should
follow need should be preserved in any consideration about changes
to funding and revenue raising mechanisms. For more deprived areas
like Hackney where there is higher need but less ability to raise
funds locally from either individuals or businesses, some form
of equalisation or central funding will be needed.
4. EXISTING POWERS
4.1 To what extent are local government services
a product of national or local decision making?
4.1.1 Central governments will always want
to make use of local government to deliver their national agenda.
In order to place shape the local council must have a high level
of intelligence about the area to determine its local priorities.
In Hackney, detailed and robust analysis of the area and its communities
has helped us to embrace this role effectively. We used this knowledge
and data to inform a series of scenario planning exercises with
our local partners to identify a shared vision for the area. From
this, we had a robust basis on which to select the priorities
for our Local Area Agreement, and establish a set of clear and
measurable outcomes for 10 years hence in our Sustainable
Community Strategy. Only those activities that demonstrably help
to achieve the desired outcomes will be funded, through an open
and transparent strategic commissioning process.
4.1.2 A current example of the complex interaction
between national and local priority-setting and decision-making
is the Multi-Area Agreement that Hackney Council is developing
with the four other Olympic host boroughs. The boroughs are working
together to realise Government's aim that "the most enduring
legacy of the Olympics will be the regeneration of an entire community
for the direct benefit of everyone who lives there".
The five boroughs have identified three key themes underpinning
this ambition: worklessness, housing, and environment and the
public realm. To work effectively, specific powers need to be
devolved to the partnership, such as commissioning, realignment
of administrative boundaries to serve the MAA area, and new accountability
frameworks for integrated services.
4.2 Does local government make use of its
existing powers, such as its well-being, charging and trading
powers? What scope is there for greater use of these powers?
4.2.1 Like most authorities, Hackney makes
good use of its trading powers, though the scope for raising income
must be balanced against the needs and circumstances of local
people. For example, in more deprived areas, market rates for
services such as leisure facilities put them beyond the means
of many. In Hackney, we have introduced free swimming for under-18s
at our leisure centres (ahead of this becoming national policy)
and special concessions are in place for carers and other disadvantaged
groups.
4.3 What difference has the central-local
concordat made to central-local relations?
4.3.1 While the stated intentions within
the concordat are worthy, there is little by way of binding or
concrete guidelines or rules of engagement contained in the document.
The reduction of the number of targets within the LAA process
is welcome, but we would like to see more evidence that central
government is truly committed to a "bottom up" priority-setting
regime and greater acceptance of local evidence. There is a still
a tendency for central government departments to press hard for
local authorities to include those targets that they see as important.
For example, Hackney was strongly pressed to include National
Indicator 35, dealing with the prevention of violent extremism.
We were able to find a solution in that case, but we believe that
there should be only one point of contact for LAA negotiations
and that different central government departments shouldn't lobby
for the local authority to include "their" indicators.
4.3.2 The most recent, revised proposals
from the Audit Commission for the Comprehensive Area Assessment
(CAA) that will replace Comprehensive Performance Assessment (CPA)
appear to increase the burden of assessment on local authorities.
The proposed annual "organisational assessment" of how
councils manage performance and use resources appears to replicate
the Corporate Assessment component of CPA and increase its frequency
(this is in relation to point 9 in the concordat on "reducing
the burden of appraisal and approval regimes"). We would
welcome a more proportionate approach and suggest that the organisational
assessment is carried out every three years. We will be assessed
annually on our progress against targets in our Local Area Agreement,
which is meant to express our priorities in relation to central
government.
4.3.3 The Area Based Grant, and the flexibility
for localities, is very welcome and has the potential to deliver
efficiencies. However, central government need better to understand
this, both in terms of influence over use of funding, and reporting.
This issue will develop as the funding within the ABG increases—for
example with the inclusion of Supporting People in 2009. As an
example of where this is not working well, so far this year Hackney
has received a number of requests for information on activities
and spend for specific areas of the Area Based Grant, from the
Home Office, Defra and DCSF. Even the DCLG's statement of grant
this year asked for breakdowns into specific themes (eg Safer
Cleaner, Children and Young People).
4.3.4 The process management of the negotiations
could be improved, with central government sometimes failing to
understand the importance of local processes—such as political
sign-off. It often feels that the process is one sided where deadlines
for local authorities are mandatory—but only guides for
central government.
4.4 Should an independent commission be established
to oversee the financial settlement for local government?
4.4.1 There is an established set of ground
rules in central government relating to the financing of new burdens
placed on local authorities. In principle this requires the responsible
Government department either to transfer resources into Formula
Grant or (exceptionally) to provide a specific grant. The process
is policed by CLG. However decisions on the total resources required
to meet a particular new burden are normally determined by the
relevant government departments and are not subject to independent
verification. Areas where the quantification of the additional
resources required has been questioned and no conclusive justification
has been produced include concessionary fares, licensing changes
and asylum-seekers. An assessment of the adequacy of resource
transfers by an independent body would provide a greater assurance
that authorities would be properly funded for new burdens.
4.4.2 The Formula Grant model, referred
to as the four block model, which was introduced in 2006-07 lacks
transparency. The previous system at least attempted to allocate
resources to authorities on the basis of an assessment of genuine
spending need based on empirical evidence. It is accepted that
this was never perfect but it is considered to be vastly preferable
to the current system where significant elements of the model
are based on "judgment". In effect it is open to Ministers
to move resources between authorities to almost any extent that
they wish. For example, by transferring resources from the relative
needs block to the central allocation block they can transfer
resources from high needs to low needs authorities. We think it
is essential that we move back to a system based on the best possible
assessment of real spending needs.
4.4.3 There has been a very high level of
damping in the settlements for years since 2006-07. As a result
of high levels of damping, Ministers were able to take the decision
to introduce the new Social Services formulas, which we strongly
believe to be flawed, without any immediate devastating consequences.
However over the longer term London authorities will suffer the
full extent of the losses and many will remain on the grant floor
for many years. There must be a real question as to whether Ministers
would have taken a decision to introduce the new Social Services
formulas if it had resulted in an immediate loss of resources
of £25 million for social care for Hackney, one of the
most deprived authorities in the country, and a loss of over £400 million
for all London authorities. We think that the apparent breaking
of the link between decisions on grant formulas and the perceived
financial consequences of those decisions (at least in the short
term) is a serious weakness of the current system.
4.4.4 Along with many other authorities
we have serious concerns about the adequacy of the population
data used for the grant settlements. Whilst many of the problems
have been acknowledged by the Government and action is now being
taken to try and resolve them this does not provide any immediate
solutions to address the continuing use of figures which we know
are wrong in the grant formulas. The commission could have a role
in reviewing the adequacy of critical data used in the grant model.
5. THE CONSTITUTIONAL
POSITION
5.1 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?
It is uncommon across the globe for local government
to be a check or balance against the powers of central government.
Although the electorate may elect local authorities run by the
party in opposition at Westminster (an observable trend since
the 1980s) this does not in any way make it the role of local
government to place a balance on the wielding of central government
power. The jurisdictions of the two should be clearly defined
as spheres—rather than tiers. Examples for consideration
are New Zealand and South Africa. It must be borne in mind at
all times, that underfunded local government will not have the
power to fulfil its mandates, and unfunded mandates and failure
in one sphere of government will undermine the credibility of
the other.
5.2 What role should parliament have in the
protection of local government's position within the UK's constitutional
settlement?
Hackney's main concern is that the authority
of democratically elected local leaders is not eroded by legislative
or constitutional change.
September 2008
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