Political and Constitutional Reform CommitteeWritten Evidence submitted by Sir Howard Bernstein, Chief Executive, Manchester City Council and Chair of the Wider Leadership Group of the Association of Greater Manchester Authorities (AGMA)

Introductory Remarks

Thank you for the opportunity to contribute to this important inquiry by the Committee. I would like to make some introductory remarks about central and local government relations that might be helpful in providing context and perspective before I move on to answer the Committee questions.

Part of the problem about localism and achievement of outcomes on the ground is that there is still a tension between local government, its relationship with central government and delivery. Though the Lyons Inquiry—which reported in 2007—had its remit extended to look at the form and function of local government, we still lack a powerful national analysis about the role of local government as agents of change, as shapers of places where people want to live, work and invest and as transformers of public services. That’s why at a time when we see localism given real stimulus at a national level, I think we are still witnessing national government models of delivery—for business support, the Work Programme, skills and so on—being perpetuated. These centralised models have not been very spatially focussed and therefore in my view may not be able to deliver as effective outcomes as locally designed solutions.

Further, though the idea of “place-shaping” has become more mainstream since the Lyons Inquiry, there is still no clear definition of the thresholds for devolution to places. For example, that functional economic areas are the appropriate level for spatial planning, housing, transport and labour market productivity; that local authority and neighbourhoods are the appropriate level for creating places where people want to live and spend their leisure time; and that the individual level is for exercising influence over service provision and immediate priorities. We need such an analysis if we are to address not just constitutional reform but the future shape of local government finance—which the Government is committed to address in the Local Government Resource Review early next year. It is needed for creating the conditions for growth too.

The issue is therefore not just about powers but an acceptance of the fundamental role which good local government can and should play in providing the key integration and leadership role between all public sector agencies in an area to deliver efficient, quality public services which will deliver better outcomes. It is also the key to reducing the demand for high dependency services which is a national priority given the need for fiscal re-balancing.

1. Should the relationship between central and local government be codified?
Should codification of the relationship between central and local government be considered in the context of a wider constitutional codification?

Manchester City Council and the AGMA group of local authorities in Greater Manchester (GM) are enthusiasts and practical exponents of devolution. We want devolution because we feel that we are closer to our areas and communities than central government. If given more control over the levers and resources we can drive more rapid economic growth in our areas and improve quality of life in our communities.

The Manchester approach for many years has been to create wealth through private sector growth, but public sector reform—and reducing welfare dependency in particular—is the other key strand of our strategy. It is this latter aspect where constitutional reform in its broadest sense and devolution above all, is important.

We know that we need to increase economic productivity in Greater Manchester and to do this we need to be able to bring services and functions together at the level at which they can be most effective. Frequently, this means at the community or neighbourhood level where they are closest to the recipient. Using a model of integrated service delivery and integrated commissioning which we are developing, we are combining a range of central and local government services to reduce dependency. This work is taking place in GM in some of the most deprived communities in the country. We know from our early work in these city-region pilot areas that by working with our partners in the Department of Work and Pensions, Jobcentre Plus, NHS and other agencies, we can develop new pathways into work for residents that until now have existed on benefits. This is good for the residents concerned, good for our economy and good for the public purse.

Our Manchester agenda is therefore very much about reform as it is also about growth. Manchester wants ever improved relations between central and local government. In recent years through the type of work I have described we have made good headway, but there is undoubtedly more work to do.

It is in this context that I approach the question of constitutional reform: Will it help us to deliver the reform that we need to deliver improved economic and social outcomes on the ground?

By way of background the work on public service reform and growth in Greater Manchester is building upon 20 years of joint working across ten local authorities. Greater Manchester—of which the City of Manchester is the heart—forms our functional economic geography and it is to this wider sub-regional area that we are seeking greater autonomy and devolution of powers and resources. Much of what GM has achieved in recent years has been without formal legislation and without a codified constitution.

There are clearly advantages and disadvantages to legislative approaches governing the relationship between central and local government. However, whilst in the past the City Council has argued1 for a new constitutional settlement to enshrine the rights of local government, I now think our recent experience would suggest that this can be done in ways that utilise existing legislation, tools and mechanisms.

For instance, AGMA is currently the only local authority group in the UK which is utilising powers under the Local Democracy, Economic Development and Construction Act 2009 to formally establish a Combined Authority to better co-ordinate transport, economic development and regeneration across the ten districts. We are also seeking greater devolution to the newly approved GM Local Enterprise Partnership (LEP) of a range of functions currently exercised by the North West Development Agency. We are very eager to ensure that our GM LEP when it begins work from 1 April next year, is given the maximum amount of devolution possible so it can drive the private sector job creation and growth to support our public sector reform on the ground.

Overall, as far as Greater Manchester is concerned we have reached a position where we are about to take responsibility for large functional areas to the GM Combined Authority. Working with other sub-regions across the North West we are also well-advanced in developing transitional arrangements for the functional responsibilities carried out by the North West Development Agency. Whilst we are still in discussion with government departments about principles and practical devolution of some of these functions, we hope it will include most if not all of what is currently delivered by the NWDA.

In the case of Greater Manchester I think it is clear that the process of devolution, which began under the previous government and continues under this one, has begun to provide the foundation for more self-reliant and autonomous local government. What is less clear now than it was in the past, is what added value a codified constitution could provide to aid a process that is already happening. Whilst existing and forthcoming legislation in the form of the Localism Bill will, hopefully, provide for the greater devolution that we seek, the question remains whether it is necessary to go through a process of codification that may not ultimately deliver better outcomes on the ground beyond those which are already achievable.

In summary, it is my view that devolution to increase the autonomy of local government needs to continue. This is already bringing an increasing recognition of and respect for local government by central government, and greater joint working to deliver better outcomes on the ground. In this context, the merits of codifying the relationship between central and local government could possibly be outweighed by the time and effort that will be involved.

2. If codification is appropriate, what degree of independence from central government and what powers should local government be given?

Whether or not codification is appropriate, there is a need to provide more powers to local government.

There are already ways that local government can provide more powers for itself through existing legislation: The Local Government and Public Involvement in Health Act 2007 allow local authorities the autonomy to establish local bye-laws without the approval of the Secretary of State. Section 239 of the Local Government Act 1972 allows local authorities to promote a Bill in Parliament. The Manchester City Council Act 2010, which received Royal Assent in April, gave the Council extra powers to control people illegally street trading in busy shopping areas. AGMA is also exploring a byelaw approach to implement a minimum unit price for alcohol across the Greater Manchester footprint. Whilst there are still many practicalities to be considered with regards to this scheme it may also help the campaign for national legislation for a minimum alcohol unit price.

On wider issues we have argued many times in the past and in our submission to the “Balance of Power” CLG Committee inquiry for greater financial autonomy including the ability to raise a higher proportion of funding locally. Many studies have shown that urban areas with greater financial autonomy have greater economic competitiveness. A 2004 study by Michael Parkinson2 found that a lack of powers at the city level helps explains the poor economic performance of UK cities relative to their European counterparts. The OECD average for locally raised finance through taxation is 55%. France is very near to this at 54%, whilst the UK is well below at around 17%. The raising of finance through local taxes also brings with it stronger local accountability.

This greater financial autonomy can come in many forms and these are matters that will be considered as part of the Local Government Resource Review. For interest, with respect to Tax Increment Financing which in Greater Manchester we plan to take this forward by linking it to other funding streams to maximise the delivery of growth within GM. Rather than focussing solely on particular projects, there will be a focus on the wider area within which a range of schemes boosting economic growth and employment will be located. Taking an area-based approach will reduce the risk of job displacement and increase the prospect of increasing GDP; boosting employers’ demand for workers; reducing levels of worklessness and welfare payments. Supporting our approach to public service reform outlined earlier, this approach would not only to boost productivity across GM and encourage maximum retention of additional business rates for investment, but it will have the wider benefit to the national economy in helping to drive growth in one of the country’s key growth points.

In order to make these plans as effective as possible we need the ability to exercise control over the various investment streams to secure the maximum net impact on sustainable private sector growth. This needs to include joint powers of prudential borrowing without imposed limits; the devolution of a “capital pot” for funding of transport, housing, economic development and environment and greater ability to pool funding between different agencies to invest locally.

One issue that arises in relation to this question is that capacity and capability for greater devolution has developed at different speeds in different places. As a consequence there may be a need for differential approaches to devolution across different places and perhaps different types of authorities. In GM devolution to our Combined Authority will be enshrined in law before anywhere else in the UK. It is likely that other groups of local authorities will wish to follow this approach.

There is a strong case for advanced and differential devolution to cities which has been well set out in the Core Cities group recent report “Core Cities: Driving Recovery”3 which demonstrates how England’s eight core cities—including Manchester—can deliver more private sector growth, jobs and prosperity with greater devolution from central government. This case is further elaborated in the evidence they have submitted to the Committee.

3. How, if at all, should the status of local government be entrenched, or protected from change by central government?

This question of entrenchment or protection is difficult because the British constitution has been based on the sovereignty of Parliament. Parliament is the supreme and final source of law and it can change the constitution by passing Acts of Parliament. A change of government often means changes to previous legislation. It has been suggested by some constitutional commentators that some Acts should have the status of “constitutional statutes”—such as the Human Rights Act 1998 or the European Communities Act 1972—making them more difficult, though not impossible, to change. Arguably, legislation affecting the role and functions of local government could be treated in the same way. A further development of this notion might be that constitutional statutes could only be agreed via a referendum and could only be amended or repealed via a referendum.

As discussed in Q7 below the CLG Committee recommended that the European Charter for Local Self-Government should be put on a statutory footing which could provide some protection of the status of local government. The Charter considers that public responsibilities should be exercised by the authorities closest to the citizens, a higher level being considered only when the co-ordination or discharge of duties is impossible or less efficient at the level immediately below. This begins to address the issue of appropriate spatial level that I raised in my opening remarks. The sentiments of the Charter are very much in line with the process of devolution that is currently taking place, but it lacks the definition of thresholds for appropriate functions being exercised at appropriate levels that I think would be helpful.

Though constitutional solutions are attractive there are also cultural issues that underlie the tensions between central and local government. These are often the reason why central government wishes to change the role of local government by either adding additional responsibilities or taking them away. In order to deliver the transformational change in central—local government relations that will enable local government to fully deliver the localism agenda, there needs to be a significant cultural shift in attitudes at a national level. These may happen over a period of time and may or may not be assisted by legislation.

A very simple initiative that could help address some of the cultural issues and aid understanding, would be to have some form of guidance for both the civil service and local government to work to. The type of manual that I believe Sir Gus O’Donnell has produced (but not yet published) covering relations of central government with Europe, devolved governments, peers, civil servants and Councils could be very helpful to aid understanding of the role that different tiers of government play. It could also help ensure that all government departments work to the same set of principles for devolution and that the role and value of local government is recognised. It may be particularly helpful to have such guidance once devolution from the regional tier is completed.

4. What consequences should codification or other change in the relationship between central and local government have on the accountability of local authorities to elected local politicians, local people and central government?

From the perspective of Greater Manchester there are strong governance arrangements already in place for AGMA which are being both widened and strengthened as we develop the Combined Authority and the GM LEP Board.

A codification or otherwise of the relationship between central and local government is unlikely to change these local arrangements which provide robust and accountable governance across GM but at the same time maintain the autonomy of local Councils and local Councillors and their accountability to their local electorates.

Leaders of the ten GM Councils sit on the AGMA Executive Board and each Council will nominate a member to sit on the GM Combined Authority. AGMA has joint Committees for Waste, Minerals, Planning, Health Scrutiny and statutory functions. It also has a series of Commissions for the Economy; Planning and Housing; Environment; Health; Public Protection; and Improvement and Efficiency. Elected members are appointed to these bodies from each of the ten Districts at the AGMA AGM.

We believe we have the most robust, democratic and accountable governance arrangements of any city-region in the UK. We believe that these arrangements should be decided upon and maintained locally. If further devolution—including financial devolution—is provided then there will be an increasing interest in and accountability of local government to the local electorate on an increasing number and range of services and functions provided.

5. Does the devolution settlement provide a relevant model for a possible codification of the status of local government?

Devolution to Scotland, Wales and Northern Ireland was confirmed by referendum thereby arguably giving greater democratic legitimacy. As mentioned in answer to Q3 above, consideration could be given to allowing referenda on constitutional statutes thereby encouraging greater democratic involvement. It remains however, that the devolved bodies are not sovereign and could in theory be repealed by Parliament. Whilst I do not consider that the devolution settlement needs to be replicated in England there is a need to ensure that devolution to the local level continues swiftly supported by existing and forthcoming legislation.

In relation to finance, the Scotland Bill is intended to give the Scottish Parliament more control over raising the money that it spends. Whilst Holyrood currently raises about 15% of its revenue, this could increase to 35% and allow the Scottish Government to receive a 10% share of income tax raised in Scotland. As the devolved Parliaments and Assemblies receive greater fiscal autonomy, the lack of fiscal autonomy at local level in England may become more apparent.

As outlined under Q2 above local government in general in the UK needs to increase the share of finance that is raised locally. Again these are questions to be dealt with in the Local Government Resource Review.

6. Are there examples of constitutional settlements between central and local government in other countries that are relevant to an appropriate model for the UK?

The trend in continental Europe has been to decentralise and regionalise decision-making, placing powers at the lowest level. Continental cities have responsibility for a wider range of functions which affect their economic competitiveness than do their English counterparts. Continental cities typically have more diverse forms of local revenue and more buoyant tax bases, which make them less fiscally dependent upon the national state and more proactive in their development strategies.

In France, decision-making used to be highly centralized, but in 1982 national government passed legislation to decentralize authority by giving a wide range of administrative and fiscal powers to local elected officials. In March 2003, a constitutional revision changed the legal framework towards a more decentralized system and has increased the powers of local governments. In the German system intergovernmental relations between the Federation and the Länder reflects the fact that the Länder have always been the main administrators not just of their own laws, but also of most federal and directly applicable European legislation.

Again, the direction of travel in these continental examples is what is important and which needs to be replicated in the UK.

7. What is the value of existing attempts to codify the relationship between central and local government, through:
the Central-Local Concordat? —
the European Charter of Local Self-Government? Should this Charter be placed on — a statutory footing?

The CLG Committee recommended that the European Charter should be enshrined in UK law. In this case Bills would need to be declared in compliance with the Charter and impact assessments carried out. This could help deliver greater authority for local government but may only re-inforce a devolutionary process that is already underway. Presenting this as a National Charter for Local Self Government might help re-inforce the Government’s existing commitment and initiatives for devolution.

The CLG Committee found that Central-Local Concordat had made little difference to relations between central and local government. The most important changes that have happened in Greater Manchester are as a result of the devolution of powers, responsibilities and finance from national to local level and this process should continue.

8. How would the “general power of competence” for local authorities proposed by the current Government affect the constitutional relationship between central and local government?

This would give greater statutory basis for local government to do anything that it feels necessary not restricted by other legislation. However, it does not fundamentally alter the relationship in the way that a written constitution would. It would, however, be a key part of the devolutionary measures described in enabling the greater autonomy of local government and is therefore welcome.

6 December 2010

1 MCC stated in our evidence to the CLG Committee on the Balance of Power: Central and Local Government in 2008: Under the current settlement, local government will always be subject to the whims of central government. A new constitutional settlement is required that enshrines the rights of local government and local democracy.

2 Parkinson M et al (2004) Competitive European Cities: Where do the Core Cities stand?, London: ODPM

3 Driving Economic Recovery: A New Partnership with a New Government. Core Cities Group 2010. www.corecities.com

Prepared 28th January 2013