Memorandum from 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:

· Health care

· Policing

· Transport funding

· Benefits and job seeking

· Skills & training

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.

o 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 £113m.

· 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 ten 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:

o 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).

o 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