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Memorandum from the London Borough of Hackney (BOP 45) 1. Introduction The Mayor of Hackney, 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 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 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 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 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
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
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 5.2
What role should parliament have in the protection of local government's
position within the 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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