Memorandum from the Institute for Public
Policy Research North (ippr north)
KEY POINTS
- Centralism and the command and control approach
to governance has failed to deliver uniformity and impacts negatively
on the delivery of public services. It is time for a more localised
approach.
- The role of the centre should be the enforcer
of minimum standards, focusing on setting key national outcomes
without getting bogged down in the detail of delivery. This will
open space for local innovation without undermining equity.
- A wider range of fiscal powers for local government
will boost autonomy and the ability of local government to capitalise
on the powers and functions available to it.
- Capping constrains autonomy. A wider range of
fiscal options is likely to reduce the reliance on the council
tax as a source of revenue, making capping unnecessary.
- Greater fiscal decentralisation must come hand
in hand with an equalisation mechanism based on need and seen
to be fair. Without this poorer areas with a smaller tax bases
will suffer.
- The power of local government varies across policy
areas. It is the "priority areas" of crime, education
and health where there is the most opportunity to increase the
role and influence of local government.
- The approach of local government earning "freedoms
and flexibilities" through an incremental case-by-case approach
should be superseded by a more coherent, and radical approach
to decentralisation.
- The biggest challenge is achieving cultural change
- locally and centrally - so that there is greater ambition for
the role of local government. It should move more firmly into
the role of setting broader local priorities and outcomes, marshalling
other services. Too often national priorities trump local ones,
and local government and other parts of the local public sector
look "up" to Whitehall rather than "out" to
the local area. This requires changes more broadly than within
local government itself.
- This debate needs to move beyond a zero sum balance
of power between central control and local autonomy. We should
look instead at the relationship and interdependence between the
centre and localities.
- Many of the best ideas, knowledge and innovation
lie at the front line where policy is delivered. Given the proximity
to users, it is here that the success or failure of policy becomes
apparent. This must be fed back to decision-makers (whether locally
or centrally) and drive ongoing improvement.
- For this to work there are some additional important
issues that the committee should consider:
Lines of accountability: part
of the problem is a political culture that holds ministers
responsible for everything. Ministers and departments need to
be clear about the limits of their responsibilities, and they
need to resist pressures to respond to matters of detail. More
direct accountability locally too, through more directly elected
mayors for example, may also help, and give the centre confidence
to devolve more powers.
Reforming the centre
reform of the centre of government has been conspicuously absent
from these debates. Any shift in the balance of power from central
to local government will require corresponding reform to the way
the centre operates. Whitehall needs to end its obsession with
delivery and micro-management and instead play a more strategic
role. Twenty-first century Whitehall should focus on articulating
clear high level outcomes for public services, and less on the
process of saying how these outcomes should be achieved.
Workforce development Such
changes, both locally and nationally, raise serious questions
about skills, capacity and capability of the workforce, both in
local government and in Whitehall. Local government leading on
setting local outcomes and marshalling the local response will
raise issues of local policy capacity for most authorities. Local
government needs a high quality workforce through investment in
the current workforce and attracting the brightest and the best
to a career in local government. There should also be much greater
interaction between the central and local workforces, through
more secondments and other such opportunities for more frequent
interaction, or even through a unified public service model. This
would also fill a capacity and skills gap in central government,
by increasing Whitehall's direct experience of local government
and other parts of the public sector.
THE BALANCE
OF POWER:
CENTRAL AND
LOCAL GOVERNMENT
1. Over the last 10 years there has been a great
deal of rhetoric around "localism" and "decentralisation".
The Blair and Brown governments have at various times claimed
to be in favour of shifting the balance of power from centre to
the locality. At times, however, it hasn't been clear quite what
this means and to which institutions central government has favoured
empowering. Moreover, it is clear that there is a significant
gap between the rhetoric of decentralisation and the reality on
the ground.
2. The government's approach to local government
to date might be described as "Jekyll and Hyde". The
Dr Jekyll of localism has delivered powers of "general well
being", prudential borrowing powers, three-year budgets the
partnerships agenda, and the concordat between central and local
government. But Mr Hyde's presence is felt in the form of capping,
which remains alive and well, ring-fenced budgets and through
the "audit explosion" in central targets and the corresponding
performance management regimes, which are still notable, despite
being whittled down through the Local Area Agreement (LAA) reforms.
Consequently, and in spite of recent changes, England still remains
one of the most centralised countries in the Western world.
3. This submission will briefly outline the case
for a more radical shift in the balance of power between central
and local government, before looking more specifically and what
additional powers local government should be handed, and how local
government will need to change if it is to exercise these new
powers effectively. We will conclude by outlining some additional
issues that we think the committee should consider as part of
its inquiry, which we believe are essential to this agenda.
THE CASE
FOR GREATER
DEVOLUTION
4. Many of the limitations of the centralised
command-and-control model of central government are now well understood.
To some extent there is a consensus across political parties,
policy experts and interest groups in favour of various forms
of de-centralisation, one of which is the re-empowerment of local
government.
5. At the same time, there are real and understandable
concerns at the centre about "letting go". These include
fears that the pace of public service improvement will slow, and
that local inequalities will emerge as a result of divergent local
practices. This has been the "social justice" concern
in relation to decentralisation, and centralisers can certainly
point to historical examples of dysfunctional local councils in
the UK that trapped their citizens in poorly performing services
without effective redress.
6. There is also concern at the centre that if
power was given away the centre would nonetheless retain all its
responsibilities, and be blamed when things go wrong. Understandably
central government does not want to be subject to blame for events
over which it has no control.
7. While these concerns are real and must be
addressed, they do not amount to a robust defence of the status
quo. Most notably this is because centralism can be seen to have
palpably failed on a number of fronts:
- (a) The centralised state has not delivered
uniformity: despite years of centralisation, the state has
not delivered uniform standards of public service provision. "Postcode
lotteries" are often the result of a centrally co-ordinated
system that is unable to cope. Centralism has failed to put an
end to varying standards.
- (b) The centralised state cannot respond
adequately to diverse needs: England is a hugely diverse country,
which means that a range of different responses tailored to the
local context are often required. It is simply not possible for
central government to master all the detail required to deliver
this from the centre. This results in differences in local demand
and local need not being properly accounted for.
- (c) The centralised state stifles innovation:
A hierarchical and rigid delivery model stifles experimentation,
militates against innovation and produces unresponsive services.
It can also lead to the "crowding out" of local action
and local choices if most decisions implemented by local government
are made at the national level. This reduces the incentive and
opportunity for local innovation and can lead to inefficient resource
allocation as local priorities are overlooked.
- (d) The centralised state results in looking
up rather than out: with local government and service delivery
organisations continuously looking upwards to ministers for instruction
and performance monitoring, and not looking outwards to the public
they serve.
- (e) The centralised state undermines local
accountability: Excessive centralism undermines clarity over
whether the centre or locality is responsible, and can encourage
further centralisation if ministers are held publicly responsible
for local decisions. If local government is perceived as impotent
it can result in a vicious circle of low turnouts in local elections
and diminished legitimacy.
8. Not only has excessive centralisation failed,
but we would argue that greater localism could help address many
of the problems outlined above.
- (a) Finding local solutions to local problems:
preferences and needs differ between areas, as does the cost of
delivering services. Greater local power and flexibility is better
suited to tailoring services around local needs and ensuring resources
are efficiently allocated.
- (b) Unleashing innovation: greater
local powers and flexibility can foster innovation and experimentation
creating "laboratories of democracy" which can help
to push up overall standards as other areas emulate successful
policy approaches where appropriate.
- (c) Being locally responsive: Locally
designed and delivered services that are also accountable locally
are more likely to be responsive. This can also contribute to
democratic renewal through empowerment, greater public involvement
in decision making and co-production of public services. This
can also serve to increase trust.
- (d) Better joining up: effectively
addressing complex problems frequently requires working across
functional boundaries. This can often be achieved more successfully
at a more local level as responses can be tailored to a common
local context and the sheer geographical size is more manageable.
LOCALISM AND
SOCIAL JUSTICE
9. Localism is not anathema to equity and social
justice. This is not to say the issue of striking a balance between
equity and diversity is irrelevant, or that furthering social
justice and localism automatically go hand in hand. Equity is
undoubtedly a crucial aspect of social justice. But in the context
of public service delivery this is too often taken to mean there
must be uniform provision of public services, which would imply
a centralised approach. A more sophisticated interpretation would
be to argue that it is not centralism per se that guarantees
equity in terms of common standards and the elimination of postcode
lotteries. Instead, what may be more important is the effective
enforcement of national minimum standards - however these are
achieved. This casts the role of central government in a rather
different light: as enforcer of a shared minimum rather than a
designer and deliverer of services. It also opens space for local
innovation in how these standards are met without undermining
equity.
10. Achieving this would require a framework
setting out which activities, in relation to each public service,
should be performed at each level of government. Such a framework
is conspicuously absent at present, with each central government
department seemingly acting with little reference to the actions
of others. A framework would need to set out criteria for determining
the circumstances in which a service should be provided uniformly
across the country, irrespective of place, or when a degree of
service variation should be allowed, perhaps underpinned by a
minimum national standard, but with variation in service design
and delivery.
11. Setting such minimum standards will require
a much more sophisticated understanding than we currently have
of the spatial level at which decisions are best made in different
areas of public service, and the areas where the public are willing
to see variation. There will also need to be careful negotiation
of what the national minimum standards should be. If they are
set too high it would effectively remove any real local autonomy,
as all efforts will be directed to achieving this "minimum",
to the detriment of pursuing other locally determined outcomes.
If it is set too low then - in the absence of other effective
mechanisms and incentives for improvement - some local authorities
may consistently under-perform.
Powers and finance - what needs to change?
12. Ultimately much of the debate about shifting
the central-local balance is about powers and finance. And while
there has been some extension to the powers, functions and flexibility
available to local authorities, the development of financial instruments
has not kept pace. This must be a priority area for change.
13. One way of evaluating the degree of centralism
still exercised in England is to compare the balance of funding
between central and local government across countries. In the
UK there is a clear dependency on central government grants, much
of which is earmarked for specific functions prescribed by the
centre. Meanwhile, only approximately 25% of revenue is collected
locally (Mrinska 2008). This is a very small proportion when compared
to some other Western countries. For example in Sweden over 70%
of local spending is from local taxation. Even in France, which
is often thought of as a highly centralised country, approximately
50% of revenue is from local taxation (Lyons 2007). Only the Netherlands,
Ireland and Italy are more reliant on central grants to local
government than the UK, and the first two are substantially smaller
countries in terms of population.
14. This raises serious concerns about local
government's ability to make the most of the powers and functions
available to it, as without corresponding fiscal flexibility the
autonomy of local government will always be constrained.
15. Not only does this reduce the autonomy of
local government to respond flexibly to local needs and circumstances,
but it is likely to have the effect of constraining the ambition
of local government. In the current fiscal climate, even with
the increased predictability of central level financing promised
by the government, it will be difficult to take risks in implementing
locally meaningful projects without first ensuring total support
from central government as it remains the main source of funding
for any significant investment project.
16. Capping demonstrates how centralised local
government finance is, with central government willing and able
to cap the one key tax that local authorities are meant to control.
This is an affront to local autonomy, and putting a brake on council
tax rises should be a job for voters through the ballot box. It
is important to note that the reliance on council tax as a means
of revenue would recede if local authorities had a wider range
of fiscal instruments available to them.
17. However, as with the debate about the impact
of greater decentralisation on social justice, there is a balance
to be struck with regard to fiscal powers. According to the fiscal
federalism literature greater decentralisation will lead to more
efficient spending as authorities will be responsible to the public
for raising revenue it spends. Greater fiscal decentralisation
could also bring accountability gains, clarifying what local government
is responsible for.
18. But this has to be balanced against considerations
of equity. Going too far down the route of fiscal decentralisation
will have negative consequences for poor areas, where there is
a smaller tax base to draw upon, yet a greater reliance on public
services. A potential comparison could be drawn here with the
Local Area Business Grant Incentive scheme, which sought to reward
increases in rateable values with a financial incentive from central
government, which could be spent on improving services. However
the dominant outcome was greater increases in rateable values
(and therefore the corresponding financial reward) in affluent
areas. Greater fiscal decentralisation must therefore be matched
with a robust equalisation regime that is based on need and seen
to be fair.
19. This focus on the need for more fiscal instruments
in not to say there is nothing to be done on powers. In reality
the level of autonomy available to local government varies across
policy areas, with much greater discretion seen outside the "priority
areas" of crime, education and health. It is, therefore,
in these areas where there is the most opportunity to increase
the role and influence of local government. It is also these areas
that greater local government autonomy and influence would provide
the largest challenge to central government. However it is also
important to note that what is a sensible level of decentralisation
for one public service will not necessarily be the same for another.
20. Overall, a key problem is with the current
approach to extending the powers and functions of local government,
by which local authorities must "earn" greater freedoms
and flexibilities by "proving" themselves through high
performance, in most cases to central government, although in
some cases it is to other tiers of government. For example, following
the Sub-National Review, local authorities must "prove"
their economic development capacity to the regional development
agencies. In practice this has too often amounted to earning greater
discretion to do only what central government wants and approves
of.
21. Ultimately, earning "freedoms and flexibilities"
on a case-by-case basis only results in the incremental extension
of local government power, rather than anything more radical.
Such an approach also fails to address the question of reforming
central government.
22. It also fails to initiate the cultural shift
that is required both centrally and locally in order to achieve
more ambitious and empowered local government that sets the agenda
locally based on local needs and demands. This is an issue we
turn to in the next section.
SHIFTING THE
CULTURE CENTRALLY
AND LOCALLY
23. There is a need for all levels of government
to be more ambitious about the role that local government can
play, both as a local leader and as a contributor to the national
debate.
24. To the credit of local government, its performance
has improved significantly and rapidly as judged by the comprehensive
performance assessment (CPA), indicating local government is doing
a good job of performing within the remit set for it. We note
in passing that a comparison of the CPA with the Departmental
Capability Reviews shows that local government has performed significantly
better than its counterparts in Whitehall.
25. A more ambitious approach in part means local
authorities making full use of the powers available to them. In
particular, the prudential borrowing powers, power of well being
and charging and trading powers all remain underutilised by many
local authorities.
26. But as well as making full use of its powers
and performing well within the framework set out by central government,
local government must demonstrate capacity for self-generated
improvement and initiative. This will give central government
departments increased confidence to devolve further powers, functions
and flexibilities.
27. Too often local services remain the product
of national priorities and decisions, which are taken without
adequate consideration for local context. This is further compounded
by the tendency of many local authorities to look "up"
in order to try and interpret what is wanted by the centre, which
tends to trump what is needed locally.
28. As the centre is the source of most funding
and the performance management regime, this is quite rational.
But these target setting and performance management regimes can
lead to perverse outcomes including target hunting, gaming, segmenting
policy streams and limiting innovation. Instead local government
should primarily be accountable to the electorate whom they serve,
with their needs at the forefront of their actions.
29. Local government should move more firmly
into the role of setting broader local priorities and outcomes,
marshalling other services and steering local activity. As the
directly elected part of the sub-national web of governance, it
is right that it should play this role, bringing local legitimacy
to the activities of other parts of the public sector. Local government
should be the fulcrum of democracy at the sub-national level.
In this respect the establishment of Local Strategic Partnerships
(LSPs) and LAAs have been moves in the right direction.
30. But for local government to be fully in the
driving seat requires changes more broadly than within local government
itself. For example, there remains a question about the adequacy
of the duty to cooperate given most parts of the local public
sector outside of local government look "up" to their
masters in Whitehall rather than "across" to local government
for direction. Shifting this tendency is clearly a big job that
would require change across the public sector. In particularly
there would need to be changes in central government as well as
locally to be effective.
31. Too often the debate is about central control
or local autonomy, cast as a zero sum balance of power. It is
time to move the debate beyond this approach, and to look instead
at the relationship and interdependence between the centre and
localities.
32. Many of the best ideas, knowledge and innovation
lie at the front line, with the so-called "street level bureaucrats"
delivering policy, who given their proximity to users are often
the first to know whether a policy is working or not. A core function
should therefore be to feed that back to decision-makers (whether
locally or centrally) and for them to play the part of "talent
spotter", developing and disseminating ideas.
33. For such feedback loops to work public service
managers need to be appropriately incentivised to provide such
feedback, rather than focusing solely on the more immediate task
of meeting output targets. A more open process where all share
a desired outcome and are pursuing a common minimum, but the design
and delivery of services is open to debate may better deliver
this goal.
34. These are the sorts of changes that aren't
easily captured by mechanisms like the concordat. That is not
to say the concordat hasn't been useful - although it is difficult
to judge its success given it has not been in place for long and
remains largely untested.
35. A constitutional settlement for local government
may be more important here. A constitutional settlement would
set out the relationship more clearly, helping to overcome key
problem for local government, which is the sheer level of public
confusion over the respective roles and responsibilities of central
and local government. A constitutional settlement would also be
much more difficult to erode or ignore than a concordat. The relative
weakness of the constitutional position of local government in
England ultimately explains why central government has been able
to adjust the powers, functions and boundaries of it with such
frequency and relative ease.
BARRIERS TO
LOCALISM - SOME
UNASKED QUESTIONS
36. This inquiry asks some very important questions
about the balance of power between central and local government.
However in our view there are some further important issues that
the Committee should consider, which we have hinted at in the
text but outline more fully below. They are: lines of accountability;
workforce development; and reform of central government
Lines of accountability
37. Perhaps the most important barrier to localism
in Britain is a political culture which tends to hold ministers
responsible for all actions of "the government" most
broadly conceived. Local problems often result in the desire to
"hang the minister". The most obvious example of this
is in the health service where the Secretary of State is expected
to answer for every hospital infection or dirty ward. The reasons
for this are complex. In part this is because the doctrine of
ministerial responsibility is deeply ingrained in the national
psyche; it is partly because central government fails to exercise
restraint, and wades into arguments and it is partly because it
is not obvious who is to blame if it is not the minister, and
the lines of accountability are too opaque.
38. The Lyons report rightly makes clear the
importance of cultural and behavioural change at the top of government:
ministers and departments need to be clear about the limits of
their responsibilities, and they need to resist the inevitable
pressures to respond to matters of detail which are the responsibility
of individual local authorities.
39. One way of addressing this is through more
directly elected mayors, as the name recognition and direct accountability
they bring may serve to increase the confidence of central government
to give powers away. Certainly this has been the case for the
Mayor of London. In some respects it is understandable that central
government does not want to give powers away if it is still be
blamed when things go wrong. This would be to give away responsibility
but retain accountability.
Reforming the centre
40. Reform of the centre of government has been
conspicuously absent from these debates in Whitehall. The failure
to look at this issue alongside reforms at the local level has
both limited the speed and extent of improvements to public services
and local democracy, and offers a very significant opportunity
for the future.
41. The way we govern has changed, with government
increasingly "steering not rowing" and having to operate
through reformed state institutions, through networks created
and managed by them and through markets shaped and monitored by
them. Twenty-first century Whitehall cannot command and control
and must be reformed accordingly. This means being able to work
with a constellation of public, private and voluntary actors,
negotiating across boundaries at the international, regional and
local levels and managing diverse delivery chains. It requires
the centre to take a more strategic role, rather than trying to
micro-manage delivery.
42. Such a reformed role should mean more concern
for articulating clear outcomes for public services, and less
with the process of saying how these outcomes should be achieved.
This should be led by local government in partnership with other
actors.
Workforce development
43. Such changes, both locally and nationally,
raise serious questions about skills, capacity and capability
of the workforce, both in local government and in Whitehall.
44. If local government is to raise it sights,
be more ambitious and lead in setting local outcomes and how to
achieve them, local policy capacity will be an issue for most
authorities. For services to be the product of local decision-making
and for policy initiative to be grasped, local government needs
a high quality workforce. This not only means investing in the
current workforce, but taking steps to attract the brightest and
the best to a career in local government. A perennial - and convincing
- argument of the champions of devolution is that the perception
of local government as disempowered and subservient to national
government makes it more difficult for it to attract the best
people into both political and officer roles. Steps must be taken
to make a career in local government as attractive as one in Whitehall.
45. One way to do this would be to end the formal
distinction between the civil service and the wider public service
and move towards establishing a more unified public service
workforce, which would ensure much greater mobility of staff between
central and local government and other public bodies. For instance
a public service graduate recruitment pool could be developed.
If such a move is deemed a step too far, an improvement would
be to increase the mobility between the two workforces through
secondments, and other such opportunities for more frequent interaction.
A missed opportunity in this respect has been making the National
School of Government a civil service only resource, whereas opening
it to different parts of the public sector would have increased
cross-fertilisation.
46. Such developments would help to fill a capacity
and skills gap in central government, as it would increase the
likelihood of those working in Whitehall having direct experience
of, or at least direct contact with, those in local government
and other parts of the public sector. This would help to break
down barriers and increase understanding, as currently the centre
is too distant from and lacks contract with those delivering policy.
A central challenge for civil service reform is to bridge this
divide and establish a new working relationship with public service
delivery bodies, including local government.
47. So far the debate on central-local relations
has tended to focus exclusively on devolving powers and functions
and resources and overlooked the issue of how we spread human
capital across the two sectors. A stronger focus on the workforce
is needed.
October 2010
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