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A bid for freedom, by Karen Day

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15 July 2005

Local Area Agreements are designed to give councils unprecedented financial autonomy. But will Whitehall be able to let go? Karen Day reports

New eras and new dawns are common in government spin-speak – we're informed of at least one a week. Local Area Agreements, launched 12 months ago, were no exception. But the buzz around them has lingered and both ministers and local authorities for once share the hope that they will deliver the expected revolution in service delivery and partnerships.

In principle, LAAs give authorities hitherto unheard-of freedom to spend billions of pounds of government money, the legacy of Deputy Prime Minister John Prescott. But not all is yet rosy. The government's own commissioned analysis of the first 20 pilots suggests that the agreements are still very much Prescott's pet project.

For the ODPM, much is resting on their success. Ministers have been preoccupied with local government and what to do with it for the past eight years as they have searched for the holy grail of joined-up service delivery.

LAAs, an idea that came from within the local government community, presented the ideal opportunity. It's a policy that fits snugly into the 'new localism' trend of devolution while getting local partners, police and fire authorities, and primary care trusts to work tightly together to deliver national priorities at a local level in a local way.

Crucially, it opens the once tightly bolted door between central and local government, allowing councils, with local partners, to draw up three-year service delivery agreements with individual Whitehall departments. Government Offices for the English Regions act as negotiators between local authorities and Whitehall, and civil servants sign off the agreements and devolve the cash.

However, the spending departments are far from convinced that LAAs will help them deliver their own Treasury targets and, with conflicting policy tensions, they are unlikely to let go of the reins just yet. There is a long road ahead if there is going to be anything like a new era in local government.

In the same week that jubilant local government minister Phil Woolas launched the second round of agreements, with 66 authorities set to enter into negotiations, a warts-and-all assessment of the pilots was quietly published.

Compiled by the Office for Public Management, the report acknowledges the enthusiasm surrounding the scheme from the regional Government Offices, ODPM ministers and, of course, the participants. Eighty councils scrambled for just nine pilots, then eventually the first batch was increased to 20.

But the researchers also revealed concerns. If these remained unresolved, they argued, they would stifle the policy and render it an expensive exercise in paperwork.

Surprisingly, given the huge publicity and fanfare surrounding LAAs, the OPM found that pilot authorities were confused about their purpose. Some, in fact, still hadn't resolved this even when they signed the agreements in March. There is no obvious way of measuring the impact of LAAs and there are questions as to whether some of the work included in the agreements would have gone ahead anyway.

Inevitably, the agreements were also more resource-intensive and bureaucratic than expected. Departments complained of being harangued by an over-eager ODPM and many failed to see how the LAAs would fit in with their departmental targets, leading to scepticism and a reluctance to grant new freedoms and flexibilities.

Some councils used the process to demand freedoms that Whitehall had previously repeatedly denied them, much to the chagrin of civil servants; others were hampered by long-standing tensions with local partners. One observer described LAAs as 'trying to eat a cloud with a knife and fork' and the OPM acknowledges the overall standard as a very mixed picture – rather like local government in general.

Some £800m of funding was allocated to the first wave of pilots in three blocks. These covered children and young people, safer and stronger communities, and healthier communities and older people. The pilots brought together more than 100 funding streams and reduced the usual bureaucratic strings and monitoring attached to government money to about 60 basic targets.

On paper it's a win/win for the ODPM and councils, hence the jubilant launch by Prescott. He described the LAAs as a 'radical new approach to the relationship between central government and local authorities' – one that would lead to an 'intelligent and mature conversation' between the two.

Privately, ministers are also looking for efficiency gains. They expect to reduce the number of civil servants needed to monitor councils as they all move to LAA status by 2007.

For the Local Government Association, the agreements are an opportunity for greater autonomy. Sir Sandy Bruce-Lockhart, chair of the LGA, is uncharacteristically prickly when questioned about the OPM findings. He describes them as 'old news' and says concerns about additional bureaucratic burdens and the lack of freedoms and flexibilities were all raised with ministers in the spring and at the last central/local partnership meeting. 'You want to bear in mind that Local Area Agreements are really significant,' he snaps.

For some, they are undoubtedly significant. The Borough of Telford and Wrekin in the West Midlands was the only pilot granted a single pot of funding. It has been able to put in place a three-part, ten-year plan to regenerate the city centre, devolving the management of local services into five cluster areas.

It is also negotiating with English Partnerships to try to persuade it to grant the cash from local land sales directly to Telford rather than to the Treasury for redistribution. 'The key advantage of the LAA is that it has enabled us to have a dialogue at national and regional level on our local needs,' says Richard Partington, Telford's head of policy and performance.

But Telford, along with several of the more successful and innovative pilots, already had an 11-year-old Local Strategic Partnership in place. As the OPM notes, in these instances it is hard to gauge if the pilots wouldn't have eventually done the same anyway.

The absence of a system for measuring the impact of the scheme is unusual, especially for a Labour government programme. It is unlikely that one will be put in place, so it will be impossible to say how successful they are. An ODPM official said the department would be commissioning research on their impact, but 'as they are three-year agreements this will take time'.

Bruce-Lockhart says LAAs are dependent on the strength of local relationships and such innovation is 'not an easy thing to measure'. He dismisses suggestions that they should be included in councils' Comprehensive Performance Assessments. 'Most people believe that the CPA will only last until 2008,' he says.

However, council sources claim that there is likely to be more government intervention in councils that fail to hit promised outcomes. That will be the price of earned autonomy.

The real sticking point for LAAs will undoubtedly be on freedoms and flexibilities – why else would councils bother to go through this exercise? Bruce-Lockhart is coy about the types of freedoms negotiated by the pilots, stating that it 'wouldn't be fair' to reveal those that have been successful until the LGA's analysis is complete. But some pilots have managed to extract more from Whitehall than expected.

Derbyshire County Council, for example, was the only pilot to negotiate an extra funding block – sustainable communities (now available to all in the second round) – and persuade employment agency Connexions to plough all its funding into the agreement. It also levered in Supporting People funding. Dave Wilcox, the council's Cabinet member for external affairs, says the agreement was based more on outcomes than a scramble for funding. He describes

the LAAs as the 'biggest revolution' in local government he has ever seen. 'We are not talking about pilots any more – this is a transformation,' he tells Public Finance.

But the agreements do depend on the co-operation of Whitehall, and the OPM report indicates that departments remain sceptical and want evidence that LAAs will help them deliver their own Treasury targets before they are prepared to grant new freedoms.

Sources singled out the Home Office for flatly turning down requests for freedoms rather than negotiating. The department has publicly acknowledged that LAAs need to balance councils' desire for greater local autonomy with its own need to meet mandatory targets such as reducing crime.

These conflicting policy pressures are a significant concern for the future of the agreements and, as the OPM acknowledges, have led some civil servants to deliberately block the progress of agreements.

'For these civil servants,' the OPM report states, 'the central thrust of the LAA towards greater relaxation of central control was felt to be in tension with requirements to secure objectives and maintain a robust source of performance data.' Departments also complained about additional pressure from an over-eager ODPM and were unimpressed when a second round was announced before the first pilots had even been signed.

Some of the pilot authorities didn't help matters, asking for freedoms that had already been rejected, including the return of the business rate to local control. The ODPM official claims departments had been supportive of LAAs and were 'committed to taking forward well-evidenced requests.'

Others, such as Telford, will have to wait patiently for their freedoms to be granted. The council is still in negotiations that are expected to continue until the end of this year; three months before the first anniversary of its agreement.

Dick Sorabji, policy officer at the Local Government Information Unit, says some pilots did 'feel rather battered' by the constant rejection of their proposals by central government; others were simply unambitious, considering that a reduction in performance monitoring was a sufficient goal. He says part of the problem was that some pilots approached the negotiations with a 'low result mindset'. He adds: 'Local Area Agreements depend on a whole new range of skills that haven't been addressed. We need an education process to go with it.'

This slow start on freedoms might be rectified in the second round of LAAs, as they will include Local Public Service Agreements for the first time. The ODPM describes these as the new 'reward element of LAAs', which will grant authorities small sums of cash if they meet their targets. Sorabji says he suspects the LPSAs have been integrated for more pragmatic reasons, with negotiations on the second round starting to slow down. 'Whitehall is bad at doing two things at once, and integrating the two is neat.'

But their addition leads to another problem – whether Whitehall and the Government Offices have allocated sufficient resources to the project. Bruce-Lockhart has been vocal about this issue and claims that spending departments have not devoted enough capacity at senior level.

Indeed, the OPM found that GOs were often not granted the powers they needed to negotiate and had to keep going back to senior civil servants for decisions on freedoms and flexibilities. 'The real disaster would be if people were not giving it enough capacity and turned it into a tick box activity,' Bruce-Lockhart warns. The ODPM did confirm that some extra funding had been made available for Government Offices, but not how much. A spokeswoman added that they would continue to work closely with colleagues in other departments to 'maximise the impact of LAAs'.

Sorabji believes it's up to the councils to raise the stakes. He says they should begin to compile information on the departments, including those that are willing to negotiate on freedoms, and in which areas, and swap information to highlight inconsistencies. 'Councils need to be in command of performance data and use it in negotiations,' he adds.

The ODPM maintains that much has been learnt from the first round of pilots. Woolas concedes that mistakes have been made and it has been a learning process 'for everyone'. But in the second round there is little margin for error. In the next 66 agreements, 21 will operate in two-tier areas, with up to 14 district and county councils. They will also have a fourth funding block and 13 will follow in Telford's footsteps with a single pot of funding. These will be followed a year later by the rest of local government, putting a lot of faith in the partnerships between local services and in Whitehall letting go.

As Woolas points out, LAAs do make common sense and there is a real political impetus to 'get on with it'. But there are hurdles to jump and, in this current climate of localism, if the ODPM and local government can't make the leap into a new era now, they never will.

PFjul2005

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