09 May 2008
In the year since Sir Michael Lyons set out his vision for the future of local government, ministers have launched initiatives to boost the 'place-shaping' role of councils. But the funding conundrum remains, argues Sue Stirling
Gordon Brown came to power pledging a new relationship between central and local government, and greater public involvement in local decision-making. These aspirations drew on the 2006 white paper, Strong and prosperous communities, and last year's report of the Lyons inquiry into local government, which put 'place shaping' at the heart of English local authorities' role. This envisaged councils using their powers and influence creatively to promote the general wellbeing of their communities and citizens.
There has been a steady stream of policy announcements and initiatives touching on local government, including the Governance of Britain green paper; the Review of Sub-National Economic Development and Regeneration and the white paper on supplementary business rates.
A year on from Lyons, it is time to assess how the government's devolution and empowerment plans are shaping up. Lyons' recommendations for the future of local authorities covered three core areas: giving them greater flexibility; creating incentives for them to boost local economic performance; and their funding and revenue-raising powers. In the past year, there has been some movement in each of these areas.
Under the new generation of Local Area Agreements, now under discussion, local authorities' work will be judged on fewer indicators. Councils and their partners have had more freedom to decide which indicators best reflect local priorities. This is likely to increase the flexibility available to local authorities – although holding back the centralising hand of Whitehall has proved a challenge, with some government departments still stressing the importance of their priorities.
It is not just about targets. Prospects for success have been helped by the 'duty to co-operate' conferred on named public sector partners by the Local Government and Public Involvement in Health Act, which requires them to take account of LAA priorities. This should reinforce councils as the fulcrum of local democracy, steering the priorities of other public sector organisations.
Greater flexibility is also vital in the government's empowerment agenda. Local authorities now have a duty to 'inform, consult and involve' local people in decisions. We are also seeing initiatives such as participatory budgeting, which allows residents to take part in decisions on allocating funds.
But the challenge is two-fold. First, work on engagement and empowerment must be moved from the margins to the mainstream, as a core part of local authorities' activity. Second, if councils are to enable the public to shape places and services, they must have the tools and capacity to respond to its wishes. These will be important issues for the forthcoming community empowerment white paper.
Local government has also gained a greater role in economic development, previously mainly the responsibility of the regional development agencies and central government. Initiatives such as Multi-Area Agreements and city development companies strengthen councils' role in economic growth. The government's Review of Sub-National Economic Development and Regeneration, which fed into the 2007 Comprehensive Spending Review, gives local authorities a pivotal role in the development, implementation and scrutiny of the new 'regional integrated strategies'. These will be formed from the merger of the existing regional economic strategies and regional spatial strategies. Approving the RIS will require a more joined-up approach from local authorities through regional forums of council leaders.
The sub-national review also confers a duty of local economic assessment on councils. The assessments will feed in to regional and sub-regional strategic economic development plans, ensuring that they are deeply rooted in the needs, opportunities and challenges of local economies. More controversially, the government envisages that this will improve councils' capacity to manage economic development – but it is difficult to see how.
Overall, these changes point to the empowerment of local authorities as place shapers, with a central role in the economic, social and environmental wellbeing of their areas. Councils have also confirmed their role as community leaders, involving local people and reflecting their views.
Yet the changes have not addressed a conundrum of impotent local governance – the lack of delegation of funds to go with the delegation of responsibilities. Once again, Whitehall is encouraging councils to take on more responsibilities without any meaningful opportunity to raise and control resources locally.
Although there has been progress on supplementary business rates – with the publication of a white paper in October 2007 – the update, reform or replacement of council tax that Lyons recommended has not happened. This is the crucial challenge that needs to be addressed if local councils in England are really going to be empowered to take fiscally responsible decisions.
That is not to argue for wholesale decentralisation, as the weaker tax base of poorer areas will always require some central needs-based resource allocation in the interests of equity. But while three-quarters of local budgets depend on receipts from central coffers, councils will lack real power to implement their own priorities and will continue simply to be the managers of central government resources and advocates of its will.
One way of bringing the diverse strands of local government reform together might be through elected mayors. A recent IPPR essay, Mayors rule, calls for more directly elected mayors in urban local authorities, as a way of reviving public interest in the local political process. Certainly the London mayoral election suggests that greater personalisation of politics can have this effect, and not just because of the characters involved in the capital. Experience of elected mayors – from Middlesbrough to Stoke-on-Trent – suggests initiative, achievement and greater voter recognition.
So this is a time of opportunity, but we need to consider how best to translate it into action. This month, the IPPR will host a conference on the future of local government, with participants including local government minister John Healey and Sir Michael Lyons. Healey has said: 'We are at a decisive point in a decisive period of the development and recasting of the relationship between the centre and local government.'
But getting this right will be crucial for Brown's government, which has declared its desire to further devolution and empowerment. Success is likely to be determined by the attitudes of all sides to the new relationship between different tiers of government. One year on from the Lyons report, the direction of travel is broadly positive, with a steady stream of activity and reform. What might now be needed is for this to be brought together in a coherent package.
Sue Stirling is the director of the Institute for Public Policy Research North. The IPPR's Local Government Futures conference will be held in London on May 15.