30 July 2004
Whitehall is to devolve decision-making to local authorities in nine pilot areas from next year in the first tangible example of the government's commitment to localism.
As part of its ten-year vision for local government, Local Area Agreements will be negotiated between communities and Whitehall, leaving councils with more freedom to spend 'hundreds of millions of pounds'.
Under the plans outlined by Deputy Prime Minister John Prescott and local government minister Nick Raynsford on July 27, councils' revenue support grant and numerous departmental funding schemes will be merged into three 'themed' pots. These will cover: children and young people; safer and stronger communities; and healthier communities and older people.
One of the pilot areas, however, will receive just one funding pot in an expansion of the freedoms.
In conjunction with local partners, which could include primary care trusts and the voluntary and private sectors, the pilot councils will negotiate a number of targets and objectives with regional government offices. They will then be given the freedom to decide how to achieve the targets, rather than being told how to do this by up to 17 government departments.
As with Local Public Service Agreements, if they succeed, they will be granted an extra 2.5% of their annual budget as a reward.
The pilots will be chosen from the nine English regions and both ministers were keen to point out that they wouldn't all be 'excellent' performing authorities. They will begin in April 2005 and could become national by 2006.
'These agreements will allow councils to make decisions about the balance of these funds and have more of a mix instead of each department saying x,y and z,' Prescott said.
Despite the Local Government Association lobbying hard for the LAAs, its reaction was cautious and reflects the level of cultural change Prescott is expecting from his Whitehall colleagues.
'Anything that simplifies funding streams is welcome as long as we don't lose money,' Sarah Wood, LGA director of economic and environmental policy told Public Finance. 'But the depth of cultural change for government will be immense, which is why we have to make sure it is all technically sound so colleagues less enthusiastic about LAAs don't try and hide money away.'
Prescott conceded that there was some anxiety among some ministers on devolving more freedom to councils. 'We have to proceed slowly. The departments are saying: “Don't compromise our targets on what we're supposed to deliver”.'
But there was also some cynicism as to the depth of the change. 'As education will be removed and the police are separately funded, it is much easier for them to consider adopting a more liberal approach,' said Tony Travers, director of the Greater London Group at the London School of Economics.
The Local Government Information Unit said the LAAs were a step toward overcoming the government's old-fashioned centralist mindset, but feared the policy had already been mauled by spending ministers.
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