Select Committee on Transport, Local Government and the Regions Fifteenth Report

Part 8: Miscellaneous

Clause 102: Power to trade in function related activities

48. Clause 102 gives the Secretary of State the power to make an Order enabling best value authorities to trade in any of their ordinary functions. We welcome the Minister's clarification that the power to trade will be extended to councils on the basis of high performance in particular services.[61] Tony Travers described the tradition of "ensuring as far as possible that local authorities where they do trade with the private sector do so on fair and equal terms." While we welcome the intention to give trading powers to local authorities, we would wish to see safeguards against authorities trading unfairly, particularly by using an unfair competitive advantage to undercut small local firms. We recommend that the framework for trading should make it impossible for local authorities to cross-subsidise the costs of providing the traded service from other areas of council activity.

Clauses 105-106: Performance Categories


49. The White Paper contains a commitment to establish a new model of inspection for local government based on the principles of co-ordination, proportionality (based on performance and risk), and effectiveness.[62] The memorandum from the Society of Local Authority Chief Executives (SOLACE) expressed disappointment that the draft Bill had not been used to rationalise inspection services:

"The draft Bill has missed the chance to rationalise inspection services in the wake of the Comprehensive Performance Assessment. That failure seems to reveal a 'silo' mentality within Government departments. A Government with a real desire to achieve modernisation and improvement by making local authorities more effective may well have used a draft Bill to say so in a more comprehensive manner."[63]

50. We received evidence about the "paralysis"[64] caused to local authorities by very high levels of inspection, distracting officers from providing services. We heard from SOLACE:

"I think it is the LGA who estimate that nearly two years ago now the cost of inspection was running at something like £700 million, but that was just indirect costs, as I recall, not in the actual costs to the authority, because for every pound the Government is spending on this the authority is spending £2 or £3 trying to get it right, and the sheer burden is something to behold."[65]

Total Audit Commission spending on local authorities is estimated by the Commission to have doubled since 1998 and now stands at £130 million, of which £12 million is being spent on Corporate Assessments.[66] Within individual local authorities, one Chief Executive was reported to have spent 87.5 hours in June on inspection related matters.[67] Other authorities estimated that it required one month's preparation time to gather the documents and information required by the Comprehensive Performance Assessment inspection team,

"The document requirements of the assessment team are extremely large and onerous. In terms of paralysis, the senior management across the authority has been very heavily engaged in this process for at least a month, We have had to construct appropriate office accommodation for the inspection team within the city centre. Obviously because Wolverhampton wants a fair assessment, we have had to produce an enormous amount of documentation and training, which we have had to disperse throughout the whole of the staff."[68]

51. We are disappointed that the Act has not been used as an opportunity to reduce the amount of inspection that authorities receive. This would seem to us to be a pre-condition to the introduction of any new regime of categorisation. The ongoing costs and opportunity costs of the current level of inspection mean that money continues to be taken away from service provision.


52. The White Paper proposed the introduction of a Comprehensive Performance Assessment of each authority. The assessment of a council's performance draws on existing performance indicators, existing inspections and audits and a corporate governance assessment of the whole authority. Comprehensive Performance Assessments are currently being undertaken in unitary and county councils, with the aim to complete the assessment of all upper tier authorities by December 2002.[69] Local authorities are not satisfied with the methods being used to undertake Comprehensive Performance Assessments. A key concern is the lack of transparency about the methodology that will be used to combine service and corporate performance assessments to generate the Comprehensive Performance Assessment for the authority as a whole. Councillor Bruce-Lockhart, Vice Chair of the LGA said:

"We know the blocks which make up the Comprehensive Performance Assessment and they cover the main services, such as education, social services and so on, and they cover a quarterly assessment, they cover performance indicators, satisfaction ratings and so on, but we do not know how those are added together to judge where authorities will eventually come. It is very important for this to have any credibility that the process is fully transparent. You could, of course, devise a methodology of drawing these facts together which would favour one particular type of authority above another and, therefore, absolute transparency about the methodology, which we have not yet been allowed to see, is extremely important."[70]

In his evidence to the Committee, Professor Steve Martin, Director of the Local and Regional Government Research Unit at Cardiff University Business School, commented that:

"The proposal to judge an authority's overall performance therefore requires a weighting system and the resulting categorisations will depend crucially on the weightings attached to different service areas."[71]

53. Local authorities also question the balance between local, democratic agreement of priorities and a centrally imposed methodology which applies a national weighting to the relative importance of different services in the Comprehensive Performance Assessment. Councillor Bruce-Lockhart said:

"The places that cause particular concern are where local priorities, which are the priorities of the electorate, are not necessarily judged as being right because they do not sign up to Government priorities and that causes us a major concern."[72]

54. Another concern relates to authorities who find themselves close to the boundary of a performance category. Tony Travers said:

"I think the real difficulty will be if there are significant rewards particularly for those in the top rank or penalties for those in the bottom then being on the margin and just in or just out, that will be very, very important. The question of how that is calibrated, if it is not done properly, will lead to legal challenges, there is no question."[73]

55. SOLACE questioned the effect of a poor Comprehensive Performance Assessment on those officers within the council whose services are good:

"It is not really very fair on a rather good trading standards officer and a very good trading standards department to be damned for all time merely because something went wrong in social services. I think one has to be a little bit cautious about making overall judgements like that could demoralise very, very good people for reasons well beyond their control."[74]

56. Local authorities are also concerned that no account is taken of their ability to carry out their 'community leadership' role, which councils have been encouraged to develop following the Local Government Act 2000:

"As an example, in the last couple of weeks when this was going on, Coventry was trying to protect jobs, and still is, at Marconi; and Massey Ferguson had closed and we were trying to sort out staff there. We have a very diverse, multi-ethnic community, with Muslim, Hindu, Sikh and Kashmiri. We were talking to them to try to take the tensions out following what had happened on the Asian sub-continent. At the same time we had the young second generation Irish theatre group that was performing in Cork, doing a marvellous play. None of that would be taken into account, as far as we can seethe fact that our community leadership is leadership is strong and is expected to be strong, We have the feeling that whatever else the CPA is, comprehensive it is not; and there is this awful feeling that the situation is pre-judged even before anybody arrives on the scene; and yet we have spent literally months going through what we do, item by item."[75]

57. Councils' concerns about the methodology are compounded by the fact that it is still being developed whilst inspections are being undertaken. The Audit Commission told us it is now consulting on the methodology for weighting the results of the inspections of various services and authorities' corporate capacities which will be used to combine the judgements on individual elements into a Comprehensive Performance Assessment.[76] The Audit Commission told us that its proposal to give equal weighting to education, social services and environmental services, would not be the same as deciding the weighting nationally.[77] The Minister suggested that giving equal weighting to services would avoid controversy.[78] However, the decision to give equal weighting is still a subjective decision and the Commission told us that the Comprehensive Performance Assessment was a way of "using numbers to add up subjective judgements."[79]

58. Local authorities are clearly not yet happy with the methodology for Comprehensive Performance Assessment. A high quality, transparent, trusted mechanism is needed, particularly at the margin of each category. Concerns about the methodology are compounded by the fact that it is being developed whilst inspections are being undertaken. It is not yet clear how assessments can be made comprehensively across the council and there is a risk that good officers providing decent services will be demotivated by poor performance ratings for their authority as a whole.

59. We were frustrated by the difficulty in getting a straight answer from the Audit Commission about the necessity and value of a single Comprehensive Performance Assessment as opposed to the publication of service ratings and the corporate assessment. We recommend the Minister reads the transcript of our evidence session with the Audit Commission and hope that councils find it easier than we did to get clear, concise, straightforward advice from the Commission.

60. In its evidence to the Committee, the Audit Commission also commented that inspections showed that 60% of councils were classified as weak or failing in relation to all services in except education.[80] If 60% of councils are classified as weak or failing in relation to all services except education, this raises concerns about the calibration of inspection results and the incorporation of these into the overall performance assessments.


61. Clause 105 requires the Audit Commission to categorise English local authorities on the basis of their performance. Under Clause 105(5), the Secretary of State cannot change the Audit Commission's categorisation of an authority. The Audit Commission appears to have only internal procedures available for appeal[81] but as we heard from the Local Government Information Unit and many others:

"The Government needs to acknowledge that councillors might disagree with an Audit Commission assessment that might also be rejected by the local community. It must put in place a mechanism whereby councils can challenge or appeal against their classification. The Bill as drafted specifically excludes appeal to the Secretary of State."[82]

Mr Travers added:

"It would be surprising if there were not some form of appeal mechanism built into the arrangements and, indeed, one would hope that the Audit Commission and the Government will build such a mechanism in because if they do not there is the risk that it will go to court."[83]

The Bill must include a mechanism for external appeals against categorisation by the Audit Commission.

Clause 113: Overview and scrutiny committees: voting rights of co-opted members

62. Clause 113 gives local authorities the power to allow co-opted members of overview and scrutiny committees to vote at meetings of those committees. We heard from the County Councils Network (CCN) that this "may be regarded as a step away from the democratic principles of elected local government representation. The CCN is concerned at the potential precedent this may set."[84] We believe that Clause 113 is unnecessary and undemocratic.

61   Q599 Back

62   Paragraph 3.40, Strong Local Leadership: Quality Public Services,  Back

63   LGB10 Back

64   Q339 Back

65   Q189 Back

66   Q475 Back

67   Q450 Back

68   Q349 Back

69   Chapter 3, Strong Local Leadership: Quality Public Services Back

70   Q59 Back

71   LGB06 Back

72   Q56 Back

73   Q307


74   Q186 Back

75   Q338 Back

76   Q464 Back

77   Q486 Back

78   Q582 Back

79   Q520 Back

80   Q534 Back

81   Q494 Back

82   LGB25 Back

83   Q320 Back

84   LGB33 Back

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