Localism

3.3 Notions of universality, minimum national standards, and ‘fairness for all’ are deeply embedded in the UK psyche. Other countries, with a history of more devolved or federal administrations, do not appear to experience to the same degree our apparent tensions over devolved decision-making versus universality and equity.

3.4 The picture in the UK seems unlikely to remain static, as the public confront stark choices and trade-offs to a degree not faced for several decades. As the detailed impact of public expenditure cuts becomes evident, the current weight placed on principles of equity, universality, uniformity and choice, look likely to shift. Government is already opening up this debate in relation to certain hitherto universal benefits.

3.5 Hence the ‘limits to localism’ should not be seen as fixed. Few if any public services or forms of welfare support should be deemed off-limits to democratically accountable adjustment and fine-tuning at the local level.

3.6 In times when every public pound has to be well-directed, the public will look for decisions to be made closer to them. They will also want to see visible outcomes, services tailored with more precision, and waste avoided. English local government has a relatively good track record in these respects, as compared with many other parts of the UK state.

3.7 Concerns over ‘postcode lotteries’ may well give way to growing public regard for thoughtful, well planned, and democratically legitimated ‘postcode variance’. This assumes that a way can be found to achieve integrated and coherent decision-making across the totality of public services delivered at local level, with visible and consistent accountability.

The lessons for decentralisation from Total Place, and the potential to build on the work done under that initiative, particularly through place-based budgeting;

3.8 The lessons from the Total Place initiative are set out in the HMT report [2] and work by the Office of Public Management [3] . The Select Committee will no doubt be looking back further, to the experience of councils and local strategic partnerships in rethinking delivery of services through local area agreements and joint strategic commissioning.

3.9 The original thrust of LAA thinking, developed jointly between local and central government, was devolutionary and localist. The initial ODPM prospectus [4] built on the Treasury’s 2004 proposals for more devolved decision-making [5] . The LGA simultaneously published proposals for local public service boards, promoting the idea of multi-agency governance bodies with a remit to oversee and steer the totality of local public expenditure [6] .

3.10 Seen from a localist perspective, early commitments by the previous administrations to ‘let go’ from the centre were never carried through. The ‘deal’ struck between CLG and local government in 2003/4 proved insufficient to shift the underlying culture of Whitehall. Those parts of government most wedded to top-down performance management prevailed. LAAs became bureaucratised through target negotiations. Removal of ring-fencing from central funding streams was piecemeal and slow. Freedoms and flexibilities granted to local councils were limited.

3.11 Despite these setbacks, LAAS (and their sub-regional equivalent of MAAs) have had significant impact. Across all 152 first-tier local authority areas in England (and with alternative models in Wales and Scotland) multi-agency partnership working across the public sector became more deeply embedded. Local political leaders took on a wider and more active role, encompassing issues of crime prevention, community safety, health, wellbeing and sustainability.

3.12 To date, policy developments on localism and devolution in England have moved forward largely through a series of White Papers, pilots and pathfinders. The 2007 LGPIH Act consolidated some of the progress made, but not with any permanence. In particular, issues of governance and accountability were largely sidestepped, with reliance placed instead on informal and voluntary partnership working.

3.13 The institutional capacity-building and constitutional underpinning that might be expected as part of a coherent decentralisation programme (as pursued in Denmark, and previously in France) [7] has yet to be put in place by any UK national government (beyond the 1998 legislation on devolution to Scotland and Wales, and the Greater London Authority Acts).

3.14 The current difficulties in devising suitable accountability arrangements for place-based budgets, and unresolved issues over the status of future LEPs, can be seen as symptoms of this ad hoc and incremental approach.

3.15 Despite being a signatory to the European Charter of Local Self Government, successive UK administrations have never accepted the principles of the Charter’s Article 9 on finance. The negotiations between the LGA and CLG on the December 2007 Concordat exposed this basic difference of view [8]

3.16 With the benefit of hindsight, it could be argued that had Government put real weight behind localism from 2003/4 onwards, the necessary expertise, institutional capacity, and governance frameworks could have been built at a time when public sector resources were plentiful.

3.17 As it is, it may prove that a critical window of opportunity has been missed. The years in which a localist governance framework could most easily be built have now passed.

3.18 While it is not too late for localism, it feels too late for further gradualism. If decentralisation and localism are to happen, a more radical shift is needed, comparable to the devolutionary programmes carried through elsewhere in Europe. Further years of pilots and pathfinders, chipping away at an over-centralised state, do not look to be a sufficient solution.

The role of local government in a decentralised model of local public service delivery, and the extent to which localism can and should extend to other local agents;

3.19 The ‘community leadership’ and ‘place-shaping’ roles of local councils, and of their political leadership, were consistent themes of the previous government. Local authorities were expected to take on this wider remit without explicit constitutional changes and with very limited influence over the totality of public resources. Many felt this was an exercise in being handed responsibilities without powers. Now facing massive financial constraints, a retreat by local councils from this ambitious remit could well gather pace.

3.20 Yet there has been a significant shift in relationships between councils and other public sector agencies in the area, which could be consolidated if the Coalition government moves purposefully and quickly.

3.21 The enhanced role of local partnerships and the introduction of national frameworks to provide underpinning to these bodies (such as LAAs and MAAs) have made a difference. The previous government’s aims of strengthening horizontal accountability in a ‘place’ while diluting vertical accountability to Whitehall were advanced over the period 2004-10, if not far and fast enough.

3.22 On the extent to which localism should be extended to other local agents, the answer depends on the form of localism. ‘Silo localism’, in which individual Whitehall departments simply shed responsibilities from the centre, may reduce central budgets but create an even more fragmented and expensive local state.

3.23 ‘Integrated localism’ will continue to have some upfront costs, in putting appropriate support architecture in place. But the local government community is not alone in arguing that such devolved autonomy offers the only long-term route to more intelligent (and cost-effective) forms of intervention and prevention by public agencies, along with better outcomes for citizens.

3.24 The potential role of local government in such a devolved (as opposed to decentralised) model would seem clear. It is to govern, in the classic sense, and not merely to undertake an agency role in attempting to co-ordinate local service delivery. It is to engage with, and to reflect through representative democratic decision-making, the needs and aspirations of local people. It is to make the judgements, choices and trade-offs necessary to reconfigure the boundaries of our public realm, within broad parameters and budgetary allocations set by Parliament.

Place based budgets

3.25 The concept of a single local governance body with a remit to bring together and steer the totality of public expenditure in an area has long been a localist ambition.

3.26 LGA and Innovation Forum 2004 proposals for local public service boards envisaged (as their endgame) a streamlined partnership of all key players, overseeing a locality based block grant covering the totality of locally relevant public expenditure [9] .

3.27 In its 2005 proposals for ‘second generation LAAs’, the LGA again argued for such arrangements, at the Central Local Partnership Ministerial Sub Group on LAAs and Performance Management [10] .

3.28 Interest by the previous government in such ideas quickened only towards the end of its term of office, as a result of the work of Cumbria County Council, the Leadership Centre [11] , and the Institute for Government. This led on to the Total Place Programme and the more recent lobbying proposals from the LGA [12] .

3.29 Proponents of place-based budgets now have to fight their corner in the context of public service cuts, and not at a time of growth or steady-state. This is raising questions on viability and costs of implementation.

How effective and appropriate accountability can be achieved for expenditure on the delivery of local services, especially for that voted by Parliament rather than raised locally.

3.30 The extent to which Parliament can be said to be genuinely accountable for spending decisions on current levels of centrally voted local funding is debatable.

3.31 The House of Commons determines annually, by affirmative resolution, the total amount and distribution of all elements of Formula Grant. But there are no restrictions on how local government spends the major part, Revenue Support Grant. Specific formula grants, and other ring-fenced funding streams have been shrinking as a proportion of the total of local authority spend. The Coalition Government has committed to further removal of ring-fencing.

3.32 In this context, and with layers of democratically elected decision-makers in place within first, second and third tier local government, what further level of accountability does Parliament need for place-based budgets?

3.33 Historically, public services in England have a mix of central and local financial accountability, with no particular rationale behind the mix. As others have noted, "At no stage of English history has any government held a consistent and logical policy on the range and limits of municipal services." [13]

3.34 The LGA’s June 2010 publication on place based budgets [14] suggests a new form of ‘Place Estimate’, approved by Parliament, as the means of ensuring Parliamentary accountability for the ‘national’ element of a set of PBBs. An alternative option, of devolving a tax base equal to any expenditure streams included in a PBB, is also floated.

3.35 Either way, any solution comes back to basic issues of the central/local constitutional settlement. How should place-based budgets combine ‘Parliament’s money’ with ‘the local area’s money’?

3.36 As argued above, distinctions (and accountability arrangements) for ‘national’ as opposed to ‘local’ public funds are already blurred.

3.37 Place-based budgets could go down the route of cautious pilots, ring-fenced to specific ‘themes’ (as explored in recent weeks by Government Departments and local councils). But if they are to have significant impact, and to move beyond ‘alignment’ of funding streams (with accountabilities unchanged) national roll-out and a new set of public expenditure principles is needed.

3.38 These could be similar to those developed for the Scottish Parliament, at the time of devolution [15] , as assigned budgets over which local decision-makers have freedom to spend according to local priorities.

3.40 Where existing public funds are spent at local level, is there evidence that the public value a system of Parliamentary accountability more highly than accountability to locally elected politicians? The latter is closer to them. The concept that Parliament exerts close and direct control over the details of expenditure in a ‘place’, once Estimates are voted, is surely largely notional?

3.42 This is not the same issue as that of devolving tax-raising powers, where successive governments have made clear their reluctance to devolve significant new powers to local level.

3.43 Hence current arrangements for Parliamentary accountability should not be seen as an insuperable obstacle to place-based budgets. The case for place-based budgets is that a locally-based governance body, bringing together key decision-makers in an area and ensuring local democratic oversight, offers the best hope for more carefully targeted allocation of public funds.

4.0 Is there a viable and phased way forward for localism?

4.1 The second part of this submission looks at the prospects of achieving a transition to a form of localist governance that is radical, while minimising costs and upheaval resulting from institutional change.

4.2 The proposals are based on six guiding themes:

· Start with the money with a re-ordering of accountabilities for public expenditure

· Keep governance simple, rationalising the currently ambiguous relationships between local authorities and local partnership bodies

· Strengthen directly elected accountability as the primary means of extending citizen influence across the full range of public services

· Use existing spatial boundaries - unlike the current ‘bottom up’ approach for deciding the spatial geography of LEPs, this submission suggests using the 152 first-tier local authority areas in England as the spatial level for place based budgeting and governance (i.e. the areas currently covered by LAAs).

· Use existing legislation where possible to avoid the extended delays inherent in Parliamentary timetables

· Place faith in local politicians, and in those public servants already working at local level to improve, integrate, and reinvent public services.

Theme 1 Start with the money

4.3 Place-based budgets, under this model, would be a formula-based grant for the locality with no ring-fencing. Parliament would determine the total figure (ideally with settlements spanning 3 years or more). Decisions on spending within the total would be devolved to local level, on principles similar to those applying to the UK devolved regions. As at present, local councils would raise a proportion of the total through local taxation and precepts.

4.4. Scope of PBBs would be similar to that being developed (in their widened version) for Local Spending Reports under the Sustainable Communities Act 2007. Scope would exclude national spend on e.g. defence, and potentially include some transfer and welfare payments to individuals in cases where limited local variation has demonstrated benefits.

Theme 2 Keep governance simple and strengthen directly elected accountability

4.5 In order to extend local democratic accountability across the full range of locally delivered public services, the suggested model is that of a local board made up of directly elected mayors/leaders, working collectively with directly elected portfolio- holders for health and wellbeing, policing/community safety, employment and skills, alongside existing local government services.

4.6 These locally elected politicians would form the executive of the local authority, and the core executive of a local public services board (or ‘local budget board’). The latter could be constituted as a public service trust, or community enterprise company, with legal capacity to hold funds and employ staff. Other key local partners (business, third sector) would have membership, as with local strategic partnerships (LSPs) at present. But a directly elected executive would sit at its core.

4.7 Current proposals for directly elected Police Commissioners would be adapted to fit with this more collective model of governance (while still meeting the commitment to introduce ‘directly elected persons’ in this role). These public service boards would oversee public health and wellbeing, as proposed in current NHS reforms. That part of the place-based budget assigned for GP commissioning would be passported onwards, other than when withholding or redirection became necessary in the public interest.

4.8 Over the longer term, such local public service boards (or ‘budget boards’) would come to be seen by the public as the key governance body for the area. They would subsume current council cabinets or executives. Non executive councillors on the local authority would continue to act as the ‘assembly’ for the area, with functions of constituency representation, overview and scrutiny (as for the GLA in London).

Theme 3 Use existing spatial boundaries

4.9 The June proposals from the LGA on place-based budgets suggested that spatial boundaries should be set through local negotiation and agreement between key partners and players. The initial stages in the establishment of Local Enterprise Partnerships (LEPs) have followed a similar bottom-up approach, leading to the submission of proposals for 56 sub-regional LEP areas.

The case for variable geography for place-based budgets, between sub-regional for economic issues to district or neighbourhood for issues such as crime prevention, is a strong one. But the complexities of making such arrangements happen, and ensuring any level of citizen understanding or coherent accountability, are formidable.

4.10 This submission suggests an alternative approach, of using the existing 152 first-tier local authority areas as the spatial architecture for place based budgets and governance. This is for several reasons.

· statutory accountability for budget-holding and resource decisions, on local government spend, already lies at this level.

· existing forms of democratic electoral accountability are in place

· Local Strategic Partnerships provide the foundations for multi-agency integrated governance in these areas, building on relationships of trust and collaboration.

· six years of LAAs has already built partner relationships at this level.

· progress could be made swiftly, avoiding extended local debate alternative spatial options

· Local Spending Reports already operate at this level.

4.11 There is no perfect solution to the question of the ideal spatial level for place-based budgets. With LAAs, district councils and neighbourhood bodies have often struggled to make their voices heard and their more local priorities included. But there has been the chance to build more mature communication and dialogue.

4.12 First-tier councils have learnt that their statutory responsibility for putting together a LAA does not give them the right to dictate priorities to lower spatial levels. And, looking upwards spatially, these same councils swiftly recognised the need to come together to tackle wider issues, at the level of natural economic areas, through MAA arrangements.

Theme 4 Use existing legislation where possible

4.13 Many councils and their local partners already work together to make use of existing legislative opportunities for pooled funding and joint governance. The history of LAAs, MAAs, LSPs, and partnership working in the Core Cities and larger counties demonstrates this.

4.14 The full scope of secondary legislation (such as the provisions in Sections 11 and 12 of the Local Government Act 2000, for the Secretary of State to approve alternative forms of local authority executive) remains relatively unexplored territory.

4.15 With a Government willing to support innovation, a means of testing out more radical options for directly-elected multi-agency partnership executives, of the kind suggested above, may prove possible without the need for primary legislation. Significant changes to central government funding regimes (such as Area Based Grant) have been introduced in the past non-legislative routes, and hence relatively quickly. More fundamental changes in accountabilities of e.g. NHS bodies or police authorities are another matter.

Theme 5 Place faith on local politicians and those who serve them

4.16 Experience of England’s devolutionary efforts over the past decade, and current Whitehall moves to ‘localise services’, suggest that some fundamental cultural blocks remain at the heart of the central/local relationship. While the rhetoric of localism has been ramped up, many Ministers and MPs appear still to see locally elected politicians as an insufficiently credible locus for devolved decision-making. There is a perceived reluctance to introduce a strengthened local state.

4.17 Advocates of local government often struggle to understand why local councils are not seen as the natural option for providing integrated and accountable localism. Following the series of reforms over the past decade, does the quality of decision-making and priority-setting at local level still have to justify itself? Is it notably worse than that at national level?

4.18 Many would also argue that the calibre of staff supporting and servicing local partnership work, from councils, NHS bodies, police and other arms of government is as good as that of civil servants in regional Government Offices and in many parts of Whitehall.

4.19 Given the track record of improvement in local government, particularly in use of resources, project management, and delivery (as compared with many NDPBs, quangos, and central departments) what’s not to be trusted?

4.20 Yet cultural attitudes towards local government remain slow to change. Ministers and Whitehall have gained more respect for local government in recent years, but historic perceptions of councillors as ‘a bit dim and often self-important’ still run deep. As does the prejudice that civil servants possess ‘Rolls Royce minds and local government officers… motorcyclist’s minds’. [16]

4.22 Efforts were made by CLG and others, as part of the previous government’s ‘new performance framework’, to shift these cultural attitudes in Whitehall. The Institute for Government has continued to press on this theme [17] . But there are signs of Whitehall reverting to its silo traditions, while simultaneously pursuing forms of localism that bypass local government.

Potential risks of localism

4.23 For any government, there are risks inherent in devolving and decentralising. Yet at a time of major budget public expenditure cuts, there are also big risks in doing nothing, or in a fragmented approach to localism.

4.24 Some risks that the Select Committee may wish to consider, and to look for ways to ameliorate, include:

· the lack of an integrated governance layer to which to ‘let go’. The previous government moved cautiously in strengthening the role of local strategic partnerships. Following the 2005/6 review undertaken by ODPM [18] , these partnerships were left as non-statutory bodies with no powers or capacity of their own. Total Place took integrated local governance machinery no further.

The current search for suitably robust decision-making arrangements for LEPs, place-based budgets, or for health and social care, demonstrates this gap in our governance landscape. There is still no adequate statutory means through which local decision-makers can come together to create strong and effective vehicles for multi-agency, democratically accountable, leadership of place.

Without such a layer of governance to let go to, the devolutionary ambitions of the current government will remain hindered. The suspicion remains that Whitehall will always find reasons why such a governance layer is not needed, or is undesirable.

· fragile support arrangements for local partnership working. Much of what has been achieved at local level in recent years has relied on commitment and energy of small numbers of staff, working to make a success of LSPs, LAAs and MAAs, and ‘joined-up’ working. Funding arrangements for such staff have often been ad hoc and short-term, relying on sources such as Neighbourhood Renewal Funding and LAA Performance Reward Grant, which are no longer there.

Hence there is little solid institutional capacity in place to take joint working and place-based budgets to the next level. More worryingly, a number of councils are already dismantling or reducing their local partnership arrangements, in their efforts to cut costs.

In doing so, their hope is that collaborative working is sufficiently ingrained as the ‘day job’ for many service providers, for working relationships to survive intact. This may well prove a false hope. Several Coalition Government initiatives potentially run counter to an integrated approach to local public service delivery (separate directly elected police commissioners, GP consortia of unpredictable size and spatial level).

· the temptations for any Government to ‘axe and devolve’, cutting budgets while passing down accountability for the consequences. In the minds of the public, this could forever associate greater local autonomy and place-based budgets with much increased austerity. As discussed above, this is not the best moment to be embarking a shift from central to local decision-making.

5.0 Conclusions

5.1 That a decade of public service expansion passed by under a government cautious and ambivalent in its moves towards localism is already one missed opportunity.

5.2 It will be doubly ironic if a new government committed to the ‘radical devolution of power and greater financial autonomy to local government’ finds that it presides over the dismantling of the modest advances towards integrated local governance as have been put in place (despite the obstacles) in English counties and cities.

5.3 Empowerment of neighbourhood groups, and a more active civic society, may help us through these difficult years. Silo-based decentralisation, through which Whitehall departments offload responsibilities (and shrunken budgets) to more localised delivery agents, may prove better than nothing. But neither is a substitute for integrated and democratically accountable local governance, bringing together resources and decisions in a way that citizens can understand.

5.4 Localised and devolved governance in England should not prove an impossible nut to crack, if the political will is there.

September 2010