Political and Constitutional Reform CommitteeWritten evidence submitted by Stephen Hughes, Chief Executive, Birmingham City Council, Sir Howard Bernstein, Chief Executive, Manchester City Council and Andrea Hill, Chief Executive, Suffolk County Council

Introduction

Following evidence given to your committee last year, you asked us to forward our suggestions for the coverage of a “code” setting out the relationship between central and local government. This note summarises those ideas and also addresses the issue of how the code should be implemented.

We have not repeated here the arguments about why some form of codification is necessary. We note that the Localism Bill committee has already taken further evidence on this and that it has been raised by Barbara Keeley MP in the 5th sitting of the committee and we have reflected that in our suggestions. However, it is not clear whether the idea of codification will be included as an amendment to the Bill.

We are also conscious that many of the barriers to a localism which empowers local government are political and cultural. There needs to be a sea-change in the attitude of central government towards the role and importance of local government and this can only be achieved over a period of time. Initiatives such as codification and amendments to the Cabinet Manual however can assist and speed the process of change.

Our Objectives

Our intention in making these proposals is to help fill some of the gaps in the approach to localism reflected in the Localism Bill and other government policies to date. We believe there is a danger that aspects of the Bill weaken local political leadership and accountability rather than strengthen it with powers handed directly to people rather than lower levels of government, or retained with the Secretary of State. We believe that localism can only operate effectively if there is strong local government and strong communities working together with central government. Codification of the central/local relationship is now necessary so that there is a clear understanding of:

Role of Local Government—The role of councils in shaping places where people want to live, work and invest where local government is empowered to carry out this community leadership role and is held to account locally for its decisions and success.

Finance—Increased autonomy for local government in how it is financed through various sources of tax and income and also for increased influence on central government spending within an area (through Community Budgets or otherwise) consistent with the “place-shaping” role. This is an issue that we are addressing through the City Finance Commission with Westminster City Council and which will of course be taken forward in the Resource Review.

Central—Local Relations—where central and local government are clear about their respective roles and where central and local government work together in an integrated way to deliver effective outcomes for local communities.

Ultimately our concern is to see a profound cultural change across central and local government and the civil service. This cannot be directly legislated for and will require strong political leadership at all levels. We believe that a codification of the relationship between central and local government could have a dramatic affect on setting the “terms of debate” in which this culture can be developed.

Cultural Change

Those working in the civil service need to be judged on their commitment to localism if the institutional barriers to change are to be removed. Recruitment and development and leadership will also be key issues to address. Local Government is not a programme or project (a structure for implementing government policies) but a focus for political leadership in its own right and this requires a fundamentally different concept of government which is not based on the notion of Whitehall finding solutions to “whole problems”.

One useful step would be an extensive re-drafting of the Cabinet Office manual for the civil service being produced by the Cabinet Secretary. At present this includes only 2 pages on the role of local government. We are submitting suggestions in the consultation on this for how this could be strengthened to better explain the role and importance of local government and potentially the “code” could be included as an Appendix to the manual when finalised. The manual could we think form the basis for civil service leadership and staff training and could provide the basis for further work with opinion makers on how to build a shift in cultural attitudes within central government.

“Place-shaping” and Public Spending

Local authorities need to be recognised as agents of change—shapers of places and first among equals with other partners in aligning programmes and commissioning local services. This is the aim of the community budgeting process. This needs to provide the foundation for the new financing mechanisms and other aspects of localism. There is a need for more local autonomy in funding but there is also a need for central and local funding to be better co-ordinated at the local level. This means government departments giving up some of their control over spending and delivery of national programmes as well as greater autonomy for the local.

Many of the barriers to collaboration are created by the relationship between local and central government and by the role of different central departments. Despite its democratic mandate, local government is a weaker partner in relation to other public services such as health, police and DWP which look to central government for direction rather than to local government for co-ordination. Partners are often unable to act due to differences between local and national priorities.

A pragmatic Approach to Codification

There is little attraction in any top-heavy legislation which would create an artificial framework that could end up perpetuating rigidity in the relationship. This could create difficulties in reacting to changed circumstances and unwittingly create new barriers to a sensible partnership between centre and localities. We accept that the United Kingdom does not have a written constitution and that it remains a unitary rather than federal state (notwithstanding devolution to Scotland and Wales). On the other hand any codification must go much further than the Concordat and make a tangible difference that can be related to outcomes that matter to citizens. There must also be some effective mechanism to ensure that the code is adhered to.

Therefore the code should be a statutory one, but probably not a “constitutional bill” as proposed by some. One approach would be to pass legislation along the lines of the Child Poverty Act and the Climate Change Act which place a duty on the Secretary of State to ensure that targets (or in this case the code itself) are met. This would place a strong onus on any future government to adhere to the code or be seen to be a centralising administration if it were repealed. This could be supported by a “local government commission” that would oversee the implementation of the code and provide other support and/or a joint Parliamentary committee. There should be a requirement in the code for any measures relating to a change in the powers and duties of local government or its finance system to be referred to the committee and/or the commission. The commission would also publish an annual assessment of localism and the relationship between central and local government.

In principle this could be added as a clause to the Localism Bill, with the code as a separate document.

The Coverage of the Code

The role of local government. We do not want to see a lengthy definition in detail of the functions and responsibilities of local government. This would be extremely inflexible (and make further localisation difficult) as well as being against the spirit of localism—as the Redcliffe-Maud Report pointed out in 1969 “Local government is more than the sum of the particular services it provides. It is an essential part of English democratic government”. Instead the code should seek to define the overall role of local government and recognise its local mandate. However the provisions in the code need to be clear enough to ensure that government departments co-operate, for example with local co-ordination of spending.

As we pointed out in written evidence to the committee, the important thing is a code that supports practical action on the ground. Much of this can be about using (and protecting) existing or planned legislation. This includes the Localism Bill but also examples like the power to make local bye-laws granted by the 2007 Act.

We feel that the purpose of local government should be stated in the Code in terms of:

1. Promoting the well-being of communities and citizens

Local government represents and promotes the economic, social and environmental well-being of its communities and citizens. It will utilise the General Power of Competence and other mechanisms to ensure that community needs are met. Central government should respect and support local government in the exercise of the Power.

2. Shaping places so that they are attractive places to live, work and visit

Local government have a key role in “place-shaping” where local authorities and partners use their influence, powers, creativity and abilities to create attractive, prosperous and safe places where the economy grows and people want to live, work and do business.

3. Promoting economic growth and prosperity

Every place should have an identity and an economic purpose. Increasingly local authorities and private-sector led Local Enterprise Partnerships have a key role in promoting economic development and productivity in their areas.

4. Promoting local democracy including the role of councillors

Local government is the local democratic representative body for the local community. It provides community leadership and champions a vision for the local area and works with others to ensure it is delivered.

5. Co-ordinating spending and the delivery of services at the local level

Local government provides local services to meet local needs. Increasingly it will work with others delivering services across its area to ensure that community needs are met effectively. It will also lead the co-ordination of local spending across its area to ensure that community well-being is promoted.

6. Citizen engagement

Local government will work with communities to increase the levels of participation and engagement in local decisions to promote community well-being.

The code needs to place a requirement on government to enhance the ability of councils to lead the co-ordination of local spending through community budgeting or similar exercises, whether it is supported by local taxation or comes from a government department. However, to define these budgets and the mechanisms too closely would limit flexibility and future options.

Related to this is the power to co-ordinate the various capital funding streams that government still operates as a single pot and a joint power of prudential borrowing (enabling flexibility between agencies and councils).

The other key element of this section is the General Power of Competence (already being legislated for). However the version of this in the Localism Bill, as many commentators have said, could do with being far less restrictive and subject to ministerial interference.

Finance. If the code is to have any significance then it must give greater autonomy to local government in terms of its control of finance. Unless local government has more responsibility for how it raises its own income—through taxes, charges and economic activity, then it will forever remain the poor relation of central government and local democracy will continue to matter less to people. We would argue that Parliament should consider including the following in the code:

A requirement to take measures to increase the proportion of local government funding raised locally (clearly not by just cutting grants!) over time.

A requirement not to reduce the range of taxes available to councils (we would argue for new options such as bed taxes, sales tax, tourist tax etc as part of the LGRR but clearly there cannot be legislation that requires an ongoing extension of these) to protect their right to levy these in the future.

Genuine abolition of council tax capping.

Protection of the right to raise business rates locally to prevent re-imposition of any centralised system following changes developed in the LGRR. Any proposals to change redistribution systems would of course also be covered by legislation and require a referral to the joint committee and/or commission.

Relationships and processes. The code would need to set out some key aspects of the relationship between Government, Parliament and councils, for example the role of MPs in representing their constituents and how this relates to the role of councillors and councils. As Roger Gough suggests in his evidence to the select committee the emphasis has moved on to local government wanting a “seat at the table” and this is reflected in the suggested Joint Committee of Parliament, with local government attendance, to oversee central-local relations and possibly vet any proposed legislation to assess its implications for the relationship and report to Parliament. There are also suggestions that guidance should prevent ministers having to answer questions that are the responsibility of a local council.

Other Issues

There are many other initiatives necessary to support the implementation of the code: This could include greater recruitment of staff from local government into central government and increased transfer of staff between the civil service and local government to encourage greater understanding and “permeability”. Associated training through the civil service national leadership programme and staff training courses would also be helpful.

There is an important question of whether the whole of local government should be treated equally under this code or whether there is a case for recognising diversity and the different scale and importance of tiers and councils. Core cities has certainly argued that the cities should be in the vanguard of developing new powers and this is echoed in other submissions to the select committee. This suggests that there might be scope for linking powers to the 12 cities having elected mayor referenda, though there are arguments against this approach.

We suggest that the answer to this may lie in the heritage of British local government with the pre-1974 distinctions such as county boroughs and cities providing for a diversity of powers and roles as appropriate to the locality. Such an approach might also allow for new hybrid forms of local government to develop, for example in the response to the need to share services whilst maintaining local democratic representation. Further consideration should be given to how this diversity could be allowed for within the code.

Taking this idea further, we believe that government should also consider other modern and historical models for the governance of cities and principalities, such as the status of the Isle of Man, the Channel Islands, Monaco, San Morino etc. We can also find inspiration in the great renaissance city states of Italy, as cities become more and more critical nodes in the global economic system. Whatever ideas we focus on, the key aim must be to support innovation and greater autonomy in our great cities.

March 2011

Prepared 28th January 2013