Memorandum by Professor Gerry Stoker (LGB
We welcome the draft bill because it opens the
door to many of the provisions that NLGN has suggested should
be made available to councils in two publications Money Talks
and Forerunner Councils (copies of these publications could be
made available to the Committee if requested). The idea of draft
legislation is to be applauded given the additional opportunity
it provides to iron out any glitches in the provisions of the
Bill. Second the content of the Bill begins to deliver on the
agenda of giving local authorities more powers and freedoms. There
are some issues to be raised about some detailed aspects of the
Bill. However the key question is: does the Bill do enough to
provide the capacity for councils to make a difference in their
The scope and limitations of the Bill
The Bill contains a number of new provisions on local
government finance that as a package represent a worthwhile step
forward. Authorities will be free to borrow for capital investment
without consent providing they can afford to service the debt.
Councils will be given the freedom to establish Business Improvement
Districts (BIDs) and as a result will, with the agreement of local
businesses, fund projects and service improvements through an
addition to the business rate. Councils will be given greater
powers to charge for discretionary services.
A number of other measures are outlined that appear
to create more constraints around the collection of business rates
but a greater freedom of manoeuvre over council tax. The Bill
would also seem to put the final nail in the coffin the campaign
for the return of the business rate to local control by suggesting
that revenue support grant and the National Non-Domestic Rates
(NNDR) be merged into one single grant, confirming the position
of NNDR as a centrally distributed tax.
Along with new freedoms come new responsibilities,
a formula that the Government has used before in many settings.
There will be new duties on councillors to take a role in budget
monitoring and new responsibilities on councils to ensure that
they budget for adequate reserves. Council tax revaluation will
be established a fixed 10-year cycle to ensure that the tax burden
is distributed on the basis of up-to-date property values.
The Bill contains many detailed provisions some of
which have a non-finance flavour. They include provisions to clarify
the right of councils to hold advisory polls. In addition there
are proposals for more targeted freedoms and responsibilities
and provisions to enable best value councils to trade. There is
also proposal to provide statutory guidance to enforce good practice
provisions of the transfer of staff.
There may be a number of detailed points to take
up in respect of the Bill. Generally there is a concern that the
Bill may become overly prescriptive and despite its intent undermine
some of the new freedoms and capacity to experiment that should
be at its heart. We should be careful to ensure that the regulations
in respect of prudential borrowing do not present unnecessary
bureaucratic hurdles. Similar concerns might be raised about the
potential working of the power to determine minimum reserves and
the requirements about financial monitoring. Again charging provisions
and provisions around BIDs arrangements should be flexible enough
to allow new and imaginative ways forward providing that there
is support for the local council's action from relevant stakeholders.
Does the Bill go far enough?
The short answer is no but it is a good start. A
local government finance system needs to balance out several concerns.
It may want to allow scope for the equalisation of resources or
the effective joining together of governmental action through
shared or joint budgets. If it is to promote local democracy it
needs to allow sufficient scope for local autonomy and local accountability.
In my opinion the crucial issue is not the balance
of funding as such but the freedom that a council has to make
a difference in its own community. Real autonomy comes from being
able to make a difference on key outcomes in social cohesion,
economic development, well-being, mobility and with respect to
the delivery of a whole range of services. The debate about local
government finance needs to less cast in constitutional terms
and more cast in terms of whether communities will benefit from
changes or not.
Moreover the autonomy or otherwise of local government
is not something that can be simply read off from knowledge about
the level of revenues that it raises itself. During the 1980s
under the Thatcher Government as central grant was cut back the
proportion of monies raised in English local government from local
ratepayers (domestic and business) increased by over a third,
so much so that by 1989-90 57 per cent of funding came from local
taxation. Few take the view that the years were one long march
forward for autonomous local government.
Finally we should be honest and recognise that the
concerns of the public and key stakeholders about the distribution
of funding rules out any large scale shift in the balance of central
and local funding. The Bill proposes a new grant system but the
fundamental logic of equalisation will remain. The gearing problem
faced by councils should be understood and placed in this wider
context. Gearing is to a large part a product of the commitment
to equalisation that in turn is reflective of a commitment to
equality of opportunity. If we do care that people in Devon and
Durham get the same basic access to education, social services
and health care then equalisation and substantial central funding
are here to stay. We can chip away at the margins but it is difficult
to imagine dismantling a system that has become a core part
of our sense of shared citizenship.
So autonomy and accountability if it is to be delivered
requires something other than a simple than a shift in the balance
of funding. It means giving councils freedom and flexibility to
operate at the margins over current and capital spending and the
option of trading. It means them being held to account at the
local level for the revenue raising and spending they are responsible
for at the margin. It means holding them to account for trading
Working at the margins makes a lot of sense because
it is at the margins that most real budget decisions are made.
The Bill makes a start by enabling some progress on these issues.
But it may be necessary to go further. An expanded
raft of tax and charging options-commonplace in Europe and North
America- could provide local councils increasing own source revenues,
depending of course on their ability to persuade the public and
particular groups of service users. The Bill is a step the in
the best available policy direction given the complex mix of objectives
around the local finance agenda. It is however a modest step that
needs to built on and extended.
Professor Gerry Stoker
Professor of Political Science, University of Manchester
and Chair of the New Local Government Network.