20 April 2007
Local government faces an uncertain future. The Lyons' report has been largely rejected by ministers, there is the prospect of a messy reorganisation, and local partnerships are failing to get off the ground. So what can be done? Public Finance begins a series of articles on an 'After Lyons' theme with Peter Hetherington's analysis of localism in the real world
When Tony Blair and Ruth Kelly set out their vision of revitalised local authorities working with partners to 'reshape public services around citizens and communities', Herefordshire Council decided to act. Taking a cue from the warm words of the prime minister and the communities secretary in the local government white paper six months ago, it set the pace for others by agreeing to combine health and social care functions in a ground-breaking public service trust.
Along with its primary care trust partner, Herefordshire talked confidently of 'making history' in a new 'total wellbeing' organisation, with a combined annual budget of £500m and 5,900 staff. Savings could be achieved with a single management structure then reinvested in local services, the two bodies proclaimed.
'The argument for bringing essential functions and budgets together to generate significant economies of scale is compelling,' enthused Neil Pringle, the chief executive of the unitary council. 'The chance is there… to revolutionise people's experience of local public services.'
But this was only the start of a wider initiative to embed local government as a 'leader and a place-shaper… putting in place a new framework for strategic leadership', as the white paper put it. Roger Phillips, Herefordshire's innovative leader, took this to mean that authorities should take the lead by bringing most public services – not just ones delivered by the council – under one roof by partnering other providers. Public safety, regeneration, the environment, transport, and maybe even higher education and training, could all fall within this joined-up model of service provision, under the trust umbrella.
Plans are moving quickly. Already a steering group has been established, with special teams examining finance, planning, commissioning and corporate governance and other issues.
Herefordshire is looking to central government to shortly put its money where its mouth is. But the assumption is that the government speaks with one voice; that a high-profile initiative backed by the prime minister – and embedded not only in a white paper but also in the Local Government and Public Involvement in Health Bill – has buy-in throughout Whitehall.
Clearly it hasn't. Buzz words such as 'place shaping' and 'strategic leadership' might have become a mantra in one section of Whitehall, namely the Department for Communities and Local Government, or CLG as it now calls itself. But other departments are somewhat less enthusiastic.
As Sir Michael Lyons discovered during his series of inquiries into the form, function and financing of local government, there is a large gap between government rhetoric and reality. While not generally disheartened by the reaction to his final report – although clearly irritated by the response of CLG – he insists that there is everything to play for in the run-up to this autumn's three-year Comprehensive Spending Review.
But he cautions that a significant shift in Whitehall thinking – and practice – will be needed to counter an inbuilt command and control culture. While the local government white paper six months ago offered a promise of devolution from Whitehall to town hall, he asks: 'Is CLG able to deliver across government departments?'
To achieve truly joined-up local public services, departmental financial 'silos' have to be smashed. In Herefordshire's case, Department of Health money has to flow into a single local pot to combine with social care. And for Herefordshire, read England.
Councils, we are told – by CLG and, maybe more significantly, by voices in the Treasury – are facing an historic opportunity with a Bill that explicitly seeks to widen the boundaries of local government. Gordon Brown talks of devolution from Whitehall to town and county hall, and then to communities themselves. He accepts that public services are best administered locally. He has even hinted at a wider constitutional rethink between the central and the local if – or when – he enters Downing Street. Chris Leslie, a former local government minister who now heads the New Local Government Network, enthuses: 'He is talking very much about a new politics and governing differently… of letting go from the centre and, hopefully, allowing councils to flourish.'
Yet with the Bill crawling through Parliament, other events seem to conspire against the vision set out in the white paper: the prospect of a messy, extremely partial reorganisation of local government to create more unitary councils in, maybe 12 areas, with relationships between competing districts and counties already badly fractured in some cases; an unenthusiastic response to Lyons' review from CLG particularly (but not, necessarily, from the Treasury); and general indifference, even hostility, in wider Whitehall to pooling budgets on the ground.
What are we to make of it? Lyons, for one, if a little tetchy and frustrated, is not entirely downhearted at local government minister Phil Woolas's initial response to his report. Predictably, Woolas ruled out any immediate hope of revaluing properties as well as a new council tax band for expensive houses. But Lyons told Public Finance: 'The key [response] is not the press statement from Phil Woolas which was, frankly, a rather partial view… the key document is included in the Budget booklet which, with the exception of capping and the tourism tax – which I didn't propose, I just said it was worth exploring – did give a very clear statement that the remainder of the report would be taken forward.
'Where is my disappointment? Because in reacting to the press hysteria about revaluation – a relative side-show – too many people have demonstrated the local government death wish that the debate is all over. It's only just begun.'
Lyons' own view is long-term and pragmatic. He thinks that local government still has everything to play for with regime change in the air, partly because he believes the Treasury is still broadly on-side. He thinks the white paper offers the prospect of greater freedom for councils to deliver 'place-shaping', namely, working with a wide range of public bodies and service providers to help create a better quality of life for residents.
'I have consistently said that flexibility is more important than tax-raising powers, that freedom to respond to local initiatives, differences in preferences, needs, in different communities is more important than the ability to raise more tax money,' he insists.
So, on the one hand, he thinks the local government white paper offers the prospect of flexibility so that councils can embrace the wider public sector and help join up all services on the ground. On the other, he sees potential difficulties ahead and cautions: 'That (flexibility) is going to take some achieving, given the history of these initiatives and, particularly, the danger that things get tied up in guidance which is so detailed it leaves no room for discretion, even if there is a reduction in headline controls and performance management.'
Given that Lyons, sensing the political climate, steered away from radical recommendations, the coolish reaction from Woolas and other ministers was all the more surprising. In truth, Lyons' mission was always a fudge born out of a Downing Street cop-out.
Nick Raynsford, the former local government minister, wanted to grasp the nettle of financing in his Balance of Funding review, which reported in July 2004. It recognised that councils needed to raise more of their revenue, while accepting that households were shouldering an increasingly unfair burden of council financing – up from 20% in 1993/94 to 25% in 2003/04 (and now 26%). Alarmingly, in the same period, the contribution from business, through the 'nationalised' business rate, had fallen from 29% to 22% (now 21%).
'We recognised this inequity,' recalls Raynsford. But an election was then looming. No one wanted to feed tabloid and Daily Telegraph hysteria about middle classes facing a hammering although, in reality, up to 3 million poorer households are already paying too much council tax, as Tony Travers has reported in Public Finance. So Lyons was asked to examine funding at a time when a revaluation exercise – the first since 1991 – was just beginning. Raynsford's instinct was to go ahead with the revaluation and wider reform soon after the 2005 election when the political temperature was more favourable.
Sir Jeremy Beecham, a vice chair of the Local Government Association and a member of the Balance of Funding review team, felt the same. 'I think, at the very least, we could have had a commitment to take it into the life of the new Parliament and we should have gone ahead with revaluation,' he laments. 'Lyons was originally appointed to get over the election period.'
But Raynsford lost his job. The new (and short-lived) local government minister, David Miliband, abandoned revaluation later in 2005. In another fudge, Lyons was asked to expand his brief. The rest is history.
Now, in mid-term, with Labour languishing in the polls and facing a further drubbing in local elections early next month, there appears little prospect of any meaningful reform this side of a general election – and, probably, after if the Conservatives gain power.
One key player close to CLG says: 'While there have been lots of promises in the white paper, it's fair to say there is some way to go before they can be delivered. There's a growing consensus that local authorities should be the “place-shapers” – but doing it through partnerships. Sensible councils should see how far they can go through collaborative arrangements without major constitutional change, as there's little appetite for that.'
Take a city such as Sheffield. It is already pushing the boundaries of collaboration as far as possible by partnering business and other stakeholders in a new work and skills board, a local economy board, a health and wellbeing partnership (it jointly appointed a director of public health with the local PCT) and a city development company. 'I suppose what we are showing is that, where there are promising local conditions, you can make advances with the right partners,' says Sir Bob Kerslake, the council's chief executive.
Where, exactly, that leaves a council like Herefordshire is open to question. 'We are waiting to go out to public consultation with our plan and, before we do that, we are waiting for the two departments (CLG and DoH) to run their finger over it and say “this looks an interesting idea… go further with it”,' says an exasperated Phillips.
In truth, his exasperation could as easily be directed at his own party – Conservative – as Labour. Among senior Tories in town and county halls, there appears growing disquiet about the populist stand of their front-bench local government team (Caroline Spelman and Eric Pickles) who voice plenty of criticism – on council finance, particularly – but offer few, if any solutions. Although committed to devolving more powers from Whitehall to councils, they have – so far – failed to spell out firm proposals. The difference in tone and language between the thoughtful Conservative chair of the Local Government Association, Sandy Bruce-Lockhart, and Spelman is striking. Where the chair talks of the need for 'wholesale, radical, far-reaching reform of the council tax', the front bench favours no change.
'They seem to be out of touch with the reality on the ground,' says one senior Tory councillor. 'We just can't get through to them.'
The more immediate priority for councils is trying to second-guess the emerging new regime – crucially, making the right connections with the Treasury – while keeping the government to the devolutionary commitment of the white paper.
Paul Coen, chief executive of the Local Government Association, still maintains that it offers authorities the 'best opportunity in a generation', while cautioning that the commitment to devolution has to become reality. 'I would be anxious if it was just about lifting the regulatory burden on councils,' he says. 'Substantial powers need to be devolved.'
The NLGN's Leslie, who is close to the Brown camp, says that this year's three-year Comprehensive Spending Review, which has been put back to the autumn, is crucial. 'That is where the new thinking will come,' he insists, while raising the prospect of a 'quiet revolution' in the way England is governed.
Lyons agrees. 'The Treasury are absolutely critical in this equation and, in the long run, they are the key players, which is not to diminish CLG. Ruth Kelly has come forward with a strong promise and we have to see this delivered… the key test is whether a developmental path for funding is reflected in the Comprehensive Spending Review. The white paper offers a promise – the challenge is, will it be delivered?'
The question is whether CLG will be able to deliver across government departments. What does he really think? Lyons says the 'sheer complexity of wiring in Whitehall' makes it difficult to break out of departmental silos and address local government in the round. He predicts it will be an 'uphill battle' to get all departments on board to meet the white paper's aims of meaningful devolution.
'We've got a history of this proving difficult,' he cautions. Perhaps that puts the Herefordshire dilemma – the political will to devolve and join up on the ground versus the hard-wiring from town hall to Whitehall – into perspective. Some ministers clearly want to let go and break the circuit.
But in a state with so much power concentrated centrally, can they reroute the transmission lines? Over to Phillips in Herefordshire. 'They're all talking about “localism”,' he says. 'I sometimes wonder will they ever really have the guts to do it?'
Peter Hetherington writes on community affairs and regeneration
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