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Devolution can redress 40 years of local government misery, but Sir Humphrey will have other ideas

Devolution can redress 40 years of local government misery, but Sir Humphrey will have other ideas

🕔19.Feb 2015

With the General Election less than three months away another heavyweight report sets out a template for the next Government to transfer power to English cities and regions. Everyone’s talking about devolution, but is it ever really likely to happen asks chief blogger Paul Dale.

There will be no shortage of helpful advice if the next Government is intent on pursuing any meaningful measure of devolving powers and budgets to local councils.

Over the past few months most public sector think tanks have chipped in with their own version of how economies of the English regions can be transformed by a dose of devolution along the lines of the Scottish post-independence referendum settlement.

The latest offering, by the Independent Commission on Local Government Finance, is the boldest of the lot and sets out a 10-year timetable to transfer more than £200 billion of spending from Whitehall to control at “sub-national level”, which rather sets Ed Miliband’s vow to free up £30 billion over the lifetime of the next parliament in context.

Set up by the Local Government Association and the Chartered Institute of Public Finance and Accountancy, the commission treads a well-worn path by putting the case for single place budgets, where all public bodies across a region or metro area pool their budgets and work together to prioritise and run services.

The commission, whose members include former Birmingham council chief executive Stephen Hughes, recommends a twin track approach where ‘pioneer’ authorities and regions that have proved themselves capable of dealing with devolved powers get the right to levy a range of local taxes and, crucially, would be able to vary council tax bands.

Other councils not in the pioneer premier league (Birmingham, presumably) would still enjoy substantial devolution with the freedom to set council tax at whatever level they saw fit and to keep one hundred per cent of money collected from business rates.

The commission’s recommendations are similar to proposals in Centre for Cities’ 2015 General Election Urban Nation Manifesto which calls on the next Government to pass a Cities and Prosperity Act in the first year of the new parliament which would introduce a presumption in favour of devolution for city regions and councils like Greater Manchester which have joined together in combined authority status.

Under Centre for Cities proposals metro authorities would be handed London-style powers under directly elected mayors and would be responsible for developing a strategic and integrated economic plan.

The new powers could include increased flexibility and control over fiscal revenue, including business rates and council tax, with the ability to raise additional funding for economic growth projects  as well as freedom to introduce charges, including recycling and tourist taxes, and the ability to introduce levies on existing taxes including a one per cent levy on VAT.

This is all well and good, but will any of the devolution proposals ever see the light of day?

The ICLGF begins its report with a nod to the 1976 Layfield Committee which was the first post-war attempt to restore some of the powers to local government that had been swallowed up by Whitehall since 1945.

Layfield’s central recommendation, replacing the property-based rates with a local income tax, went nowhere. Indeed, the whole report quickly disappeared into the machinery of central government never to be heard of again.

The Layfield Committee was established under Harold Wilson’s Labour government to address problems caused by regular revaluation of rates at a time of soaring property inflation where bills to householders and businesses were rising at an average of 30 per cent a year.

It was the era of the ratepayers’ movement – supposedly non-political activists who came together on a ‘cut town hall spending’ ticket and began to threaten the political establishment by being elected to councils. Some even survived into the 1980s in rural county councils.

Wilson’s successor Jim Callaghan clearly didn’t like the idea of giving more tax-raising powers to town halls at a time of acute national economic crisis where UK debt and borrowing levels were running out of control and the Government was intent on cutting spending.

His Tory successor, Margaret Thatcher, certainly didn’t fancy giving additional powers to town halls, especially not in the large English cities where councils were dominated by the Labour party. Thatcher ramped up Labour’s centralist approach by introducing measures to drastically reduce the amount of money councils could raise and spend.

Does this sound familiar? It should do for the 40 years since the Layfield Committee reported have been marked by the relentless iron grip of central Government control over supposedly profligate and incompetent local councils, regardless of political make up, to such an extent that less than 20 per cent of the cash a council has available to spend is raised locally.

Grant allocation to councils, much of it ring fenced for spending on schools, social services and housing, gives the Government the whip hand in controlling town hall spending rather than locally elected representatives. George Osborne didn’t have to try very hard to impose austerity politics on local government -he simply switched off the grant tap and let nature take its course.

The 40 years of misery have also been marked by the rise of a complex system of central government-imposed checks and inspections on local government designed to produce proof that town halls were bastions of wastefulness and inefficiency. Who now recalls the hated Comprehensive Performance Assessment introduced by the Audit Commission in 2002 at the behest of the Labour Government?

CPA was a time consuming glorified box-ticking exercise, a very blunt instrument to assess the capabilities of local government, but it certainly presented local newspapers across the country with an open goal to highlight and criticise councils that failed to gain anything other than top marks. More worryingly, CPA’s end of term report approach, invariably finding something to criticise in most cases, helped to reinforce public prejudice against the country’s “useless” councils.

The reason I make these points is to give some context to today’s devolution movement and to underline how difficult it may still prove to change the Whitehall mindset despite pre-election promises about “setting cities free” by Cameron, Miliband and Clegg.

The ICLGF report, if implemented in full, would produce a seismic shift away from Whitehall and Westminster to the great cities and regions of England. The likes of Birmingham, Manchester, Leeds, Sheffield, Newcastle, Liverpool and Bristol would eventually move towards more of a continental Europe style of local government where city-regions enjoy substantial tax raising and spending powers – and are trusted by central government to do so.

Consider the radical language in the ICLGF report.

The next Government is offered “a way to break the impasse over reform of local taxation while freeing ministers from the detail of funding decisions for individual councils”.

Local government, we are told, has a “determination to shape its own future, confident and independent”. The commission has a vision that councils as a whole can achieve self-sufficiency.

The commission says its proposals would allow central government to reduce in size with a rationalisation of the number of departments and the need for offices, ministers and senior officials. The costs of central government could be reduced further.

An independent review of the functions and sustainability of local government is proposed in advance of the next Government’s first spending review, to “assess whether local authorities are appropriately funded to meet their statutory duties and to certify that all places are sufficiently funded”.

The commission recommends establishing an independent body to advise Government on the funding needs of local government and on the allocation of funding to local authorities and sub-national areas, and the report concludes: “National Government’s role in this context is primarily to establish equalisation of resources between the sub-national areas. It is in that context that local areas are to become self-sufficient and lead the destiny of the areas they represent.”

Self-sufficient local authorities? Smaller central government and larger local government? Freeing Ministers from spending decisions? An independent review to determine whether councils are sufficiently funded?

This is enough to have the Sir Humphreys of Whitehall reaching for the smelling salts and it will take a most determined, iron-willed, Government to pursue change on such a scale against inevitable opposition from the centralist establishment.

Will the Lab-Lib Dem-SNP coalition, or the Tory-Lib Dem-Ukip coalition, or any other partnership you care to name that emerges from the chaos of the 2015 General Election have the time or the stomach to embark on wholesale reform of local government and summon up the courage to trust councils to run their own affairs?

Sir Humphrey would doubtless describe devolution as a “brave decision, Minister”. He will already have placed a confident wager on the status quo plodding on for a few more years yet, I fancy.

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