By Paul Carter
21 January 2010
Multiple layers of expensive bureaucracy stand between central and local government, reducing accountability and efficient provision of services. It’s time to put these quangos on the bonfire and save £15bn in the process, argues Paul Carter
Local government needs to save money while improving services, a difficult task at the best of times and particularly hard in a recession. But this can be achieved through real devolution to and empowerment of the sector.
In Bold steps to radical reform, a paper for the Localis think-tank published this week, I argue that significant cash savings can be made by streamlining local government’s relationship with Whitehall and removing the unnecessary and expensive bureaucracy associated with the majority of regional government and quangos.
This can be achieved by accelerating a major ‘control shift’, transferring their functions back to democratically elected local government.
I believe that through a combination of efficiency programmes; taking the Total Place initiative to the next level; streamlining activity; and removing unnecessary regional and quango bodies, we could save the taxpayer £15bn–£21bn in the medium term, or just short of 2% of gross domestic product.
Fundamental to achieving this would be a new and transformed relationship between central and local government. I am proposing devolution of regional and national powers to local government in 46 suggested sub-national areas, based on city and shire county boundaries. These would respect current statutory duties and coterminus operations with other public agencies.
By organising ourselves at this spatial level, we can give ministers the confidence that we have both the structural capacity to take on a range of devolved functions and the scale to drive through significant efficiencies and cost savings.
One of the arguments in favour of establishing the existing regional structure was the sheer impossibility of central government liaising/devolving to 360 local authorities. But there are about 46 city and county sub-regions in England, a manageable number for central government to empower and devolve to, with powers going to the family of local government in that area.
Under the principle of subsidiarity, districts and boroughs, towns and parishes (clustered together and working with their city/county where appropriate) would all be empowered, bringing decision-making much closer to the citizen or resident.
We must also move back to the original intention at the core of the first Local Public Service Agreement – a bilateral contract between central and local government. This would allow a serious debate with central government about the longer-term public policy outcomes facing our local communities, rather than simply being subject to the micro-management of short-term targets. Underpinning each contract should be the aspiration to continue to transform local public services and become more outcome-focused and customer-centric.
During the last Spending Review period, councils made great strides on efficiency – releasing more than £4bn worth of efficiency savings. Under the current spending round, councils expect to free a further £5.5bn by 2011. In Kent County Council alone, we have made more than £123m in savings in the past four years. Like many other local authorities, our performance has gone above and beyond the government’s required targets.
However, despite this performance, England’s system of government has become more and more centralised over the past 30 years. Early findings from the Total Place pilots suggest that councils and councillors were directly responsible for only 5% of the totality of public spending in local areas.
This amounts to just £350 of the £7,000 spent for every person in the country on these services.
Yet many regional quangos simply duplicate activity in Whitehall and invent their own bureaucracies, leading to waste and inefficiency.
Strategic health authorities currently cost the taxpayer £5.4bn per annum. Government Offices for the English Regions are responsible for managing or influencing some £9bn worth of government expenditure. Their running costs are now more than £143m – a rise of 74% since 1997.
Collectively, nine regional development agencies cost the taxpayer £2.3bn per year. Since their inception in 1999, the RDAs’ salary bill has more than trebled from £38m to over £120m, with total running costs over £238m. I believe that regional government offices, regional development agencies and strategic health authorities should all be abolished.
The Conservative-sponsored Review on Small Business and Government, undertaken by Doug Richard in 2007, highlighted examples of RDAs’ wastefulness. For example, they effectively duplicate activity through competing against one another for inward investment.
Elsewhere, 3,000 business support schemes are run by more than 2,000 public bodies and their contractors at a direct cost of £2.5bn. The report concluded that at least one-third of the money spent on regional business support is lost in administration and that a third of local business schemes aren’t even assessed to measure what they’re achieving.
Estimates of the total cost of quangos vary but even the Cabinet Office acknowledges that it has more than doubled in the past ten years. According to official government figures, quangos are responsible for £43bn of public money. In a period of economic downturn, their intrinsically limited political accountability is closely connected to a concern that they lack incentives to be efficient with costs.
The problem is made worse by Whitehall’s bizarre tendency to replicate past mistakes. Time and again quangos are shown to fail with regard to the provision of local services. Yet, time and again Whitehall’s answer to such failure is to set up another quango – which often replicates the failures of the first. A good example is the current plan to abolish the Learning and Skills Council, which has failed to improve performance and standards in the further education sector.
Given the transformation in pre-16 education and training, such as Kent’s innovative 14–16 vocational curriculum – full devolution of the LSC function to local government should be considered. This would allow for a transfer of our successful approach into FE and for a more seamless transition between pre- and post-16 provision.
The government intends to devolve the LSC commissioning function for further education to local government. But not for the first time the promise of devolution and the abolition of one quango signifies a false dawn. In place of the LSC, the government has created two new quangos, the Young People’s Learning Agency and the Skills Funding Agency to oversee the FE commissioning process and the provision of apprenticeships – a vital part of future FE provision.
The two quangos will operate through the regional bureaucracy, with local government plans expected to align and conform with regional strategies – limiting the councils’ ability to commission FE provision according to local need.
We believe many other regional and quango health, arts, sport, business support and educational bodies should be reviewed with an assumption against their continued existence.
It is also necessary to define an essential strategic, but more minimalistic, role for governance at a regional level. But this must be led by all local authorities within the region and might include wider elements of strategic planning, infrastructure, economic development and the management of inter-regional relationships.
Bold steps to radical reform’s blueprint of a post-regional landscape would have most regional and quango functions devolved back to a much more streamlined but locally inspired framework of local authority co-operation. Efficiencies would be automatic through a reduction in overheads – fewer public servants running ex-quango services. We call for the elimination of a whole array of regional and quango bodies with their functions and budgets, where necessary, transferred back to local government.
The current centralisation has also led to an unacceptable level of regulation, process and bureaucracy. According to the National Audit Office, the cost of regulation across the whole of the public sector is £8bn per year. The annual cost of micro-monitoring local government activity is more than £2bn. Such top-down prescription and inspection is wastefully inefficient and time-consuming. It also greatly inhibits the scope for local motivation and public service innovation.
A transformed relationship with government would reduce the need for the range of external bodies undertaking audit and inspection of local public services, as this should rightly be the core function of Whitehall departments. As such, our proposal would radically reduce or abolish the wider inspectorates of local public services, including the Care Quality Commission, Ofsted and the police inspectorate.
The Audit Commission’s role in particular has ballooned over recent years as it has become the primary agency responsible for inspection of local public services. We want its responsibilities rolled back to its initial foundation, principally focusing on assuring the government and, specifically, the Treasury of the financial probity of local public service providers; assessing (alongside the Treasury) progress made against sub-national contracts; and providing national best practice reports to facilitate sector-led learning.
Such a rollback in the range of functions undertaken by the Audit Commission and the wider inspectorates could save £1bn of the £8bn spent annually on the oversight, assessment and performance management of the public sector.
Notwithstanding the above, the Audit Commission should also play a major new role in providing independent assessment and needs-led analysis to guide national funding allocations.
Of course, local government must continue its drive for performance improvement and can point to a strong record in recent years. However, it is important to recognise that while the overall picture has been impressive, the ability of local authorities across the sector should not be exaggerated. But it should be the sector itself that is responsible for bringing its poorest performers up to standard.
The main role in sector-led support should lie with the Local Government Association, which would work with the best authorities in the sub-region to actively support any authority that consistently performs well below the average. The LGA’s role would be as a broker and facilitator of sector-led support, promoting exchange of information and expertise across authorities.
A profound and significant reshaping of the future form and role of government is now inevitable as public expenditure is slashed in the years ahead. Bold steps to radical reform shows how public services can rise to this challenge, simultaneously releasing significant cashable savings and real service improvements. What local government needs now is the long-awaited opportunity to see the rhetoric on decentralisation of powers and responsibilities turned into practice.
Paul Carter is the leader of Kent County Council. The report, Bold steps to radical reform, can be downloaded from the Kent County Council website
