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Taken before the Communities and Local Government Committee
on Monday 29 November 2010
Mr Clive Betts (Chair)
Examination of Witnesses
Witnesses: Ben Kernighan, Deputy Chief Executive, National Council for Voluntary Organisations (NCVO), and Ralph Michell, Head of Policy, Association of Chief Executives of Voluntary Organisations (ACEVO), gave evidence.
Q132 Chair: Welcome to this session of evidence on localism. For the sake of our records, perhaps you would introduce yourselves and tell us the organisations you represent.
Ben Kernighan: I am Ben Kernighan and I am from the National Council for Voluntary Organisations.
Ralph Michell: I am Ralph Michell from ACEVO , which is the national representative body for third-sector chief executives.
Q133 Chair: You are very welcome . To begin with, is your view of your role in the localist agenda as the voluntary sector the same as the Government’s view of what you should be doing and what you should be involved in, assuming of course that you kno w what the Government’s view is and , indeed, the Government know s what its view is?
Ben Kernighan: Shall I kick off? I think there are lots of similarities between our view and that of the Government in relation to this agenda. If you look at the voluntary and community sector as a whole, about a third of it works at a local level and more than a third works at a neighbourhood level. If you marry what the Government is saying in terms of localism with what it is saying in terms of that element of the Big Society agenda, which is about giving the voluntary and community sector a bigger role to play, there is a lot of similarity. Voluntary organisations have a really important role to play in delivering and designing services, helping to shape communities and promoting social action. There is a good deal of consistency there with what the Government is saying.
Having said that, in the context of the cuts that are happening at the moment, a lot of money is being taken away from local voluntary organisations. What I would like to see in terms of what happens here is more local decision making and for community groups to have a bigger role in their local communities to help shape services as well as, where it is appropriate, to help them to deliver services . But national Government must also keep a role in terms of ensuring that that happens. It would be a disaster if power is passed down from national Government to local Government and gets stuck there. Unless national Government keeps some degree of influence, for example by promoting things like the Compact, we will find that the agenda works very well in some areas and some areas where it works really badly.
Ralph Michell: I would agree with all of that. Probably the biggest difference in point of view is not so much between central Government and the charity sector but potentially between the charity sector and local Government. Our fear is that local Government’s view of devolution and the Big Society agenda is that it is devolution to local Government and no further. As Ben said, we would be keen for devolution to go further in order that third-sector organisations at a local level are able to play the big role that we see them having in designing and delivering services and also scrutinising local Government and playing a part in local participative democracy.
Q134 David Heyes: Those anxieties about local Government could be broadened out. For example, I guess that the removal of the PCTs is another issue that causes voluntary organisations concern. To sum that up, how will the way in which voluntary sector bodies go about their business locally be altered by decentralisation of power to councils and to these other local agencies?
Ralph Michell: A big danger we see is that different parts of the statutory sector go in their different ways and become less joined up at a local level and that makes life harder for third-sector organisations. For instance, the abolition of PCTs and the potential arrival of several GB consortia will recast all over again the relationship between the local NHS and local councils, and third-sector organisations will therefore have to operate in an increasingly fragmented environment. On the other hand, probably the biggest advantage we would see in the devolution of power is that there is at least the potential for it to enable local agencies to join up more and be less hamstrung by diktats from Whitehall. It is the lack of that kind of joined-up thinking and commissioning that our members complain about at the moment. If it were there, it would make it much easier for them to go about their business in delivering services and looking after people, which tends not to be structured around public sector silos. That is one of their big complaints.
To go back to what Ben said at the start, probably the key concern is cuts. Our estimate is that if local Government passed on the cuts it is facing proportionately to the third sector, it would mean a loss of income to the third sector of £1.8 billion a year by the end of the Parliament. We are already starting to see cuts being passed on disproportionately. For instance, Croydon has recently announced that it will cut its voluntary sector grants programme by 66%. There is the danger that Whitehall has a particular view of the third sector and clearly values its role, but in some areas local Government will not share that view and will see the third sector simply as an easy option to cut. It is a soft target and nice to have in good times but not necessary in bad times. That is our main fear.
Ben Kernighan: I have to say that I am quite frightened by what is happening in relation to health for the reason that the lessons of history are that when there is big structural change within the statutory sector, the voluntary sector loses out. In my view the reason for that is not that the thinking or intention behind the structural change is to exclude the voluntary sector or not value it, but simply all of those individuals who had successfully built relationships with people in the statutory sector cannot even find the right person to talk to. I hope that the Department of Health is thinking now about how it will put in place a framework to ensure that voluntary organisations do not lose out. Nobody wants them to but I have a real fear that that will happen. Even the relatively small change when PCTs were merging had a negative effect. This is a much bigger change on a much bigger scale.
I too would like to see the Government going further at the local and neighbourhood level in relation to the pooling of budgets. One of the big ways in which this country does not get the maximum potential from its voluntary and community sector is that very often it provides services to some of the most vulnerable people in society and it will help those individuals with their housing and family relationships, get them back into work and help them to be less likely to offend, but it is terribly complicated for that one individual to go to a variety of different funding pots at local level. Therefore, the experience of Total Place by the voluntary and community sector was not always a good one because sometimes it was just a statutory sector stitch up, but the principle behind that, particularly in a time of less funding, must be right. National Government must do more so that local authorities make sure that the voluntary and community sector is sitting round the table.
Another of my fears is to do with Local Enterprise Partnerships which were set up between businesses and local authorities. We made the argument that social enterprises and voluntary organisations were also good at creating jobs, but that message came too late. In terms of the arguments around localism, the CLG is now saying, "We’re sorry, this is a new era; we can’t instruct local authorities what to do about that." If there is too much of "we can’t instruct" or "we can’t set out advice", then in many areas both the voluntary and community sectors will do much worse. It is not a party political point. We looked at where cuts have taken place, and discovered that there are good local authority areas and poor ones-it does not cover party boundaries. Following the useful comment by the Prime Minister urging local authorities not to cut, some have not done so but others have made massive cuts, before the Comprehensive Spending Review.
Q135 David Heyes: So far we have looked at the impact very much at local level. What about the large-scale voluntary sector level, which might include what are sometimes called umbrella organisations-maybe like your own. What impact do you think there will be on their ability to influence policy at national level?
Ben Kernighan: The really important thing is that decisions are made at the most appropriate geographical level. If you look at something like services for deaf blind people or those with rare medical conditions, there is a strong argument that national or geographical areas larger than local are the most appropriate ones to provide support and to understand a strategy for supporting those people. There is, however, a big risk. While local Government is the biggest form of statutory funding into the voluntary sector, national Government funding is almost equally as big-the ratio is about 52%:48%. We may think that the pendulum had swung too far and that too much power was in Whitehall and that the best of what voluntary organisations are about is helping local people, not just having a say over the services but an involvement in delivering them. The great risk, however, is that if we swing too far that way, a lot of services for some of the most vulnerable people within society will be lost. On your point about umbrella bodies, I am more worried at a local level in relation to what is happening in terms of support. If the Government’s desired intention to see more voluntary action, more people volunteering and the encouragement of more philanthropy is to be fulfilled, you need a strong network of local support agencies.
Ralph Michell: I agree with that. Clearly, there are services where the beneficiaries are spread out at fairly low density. The danger is that if you devolve commissioning too far it becomes unfeasible to commission for people who are that low density. But there are many charities that run, say, specialist helplines nationally on a particular issue or produce literature-for example, the Family Planning Association produces literature to go out to all GP surgeries-where there are clear efficiencies of scale. It is not particularly sensible to commission that kind of activity over and over again at local level with huge variations in quality, so missing out on those efficiencies of scale. Clearly, there are areas where it will be more appropriate to commission sub-regionally, regionally and nationally. There is also a role for central Government, even where commissioning is devolved to a very micro-level, as with personalisation and giving individuals personal budgets, to put in place the kind of structures that will at least allow for some consistency in the way services are bought. The nightmare scenario for a lot of regional or national third-sector organisations is having to deal with hundreds of different commissioners who commission in completely different ways.
Q136 James Morris: You have expressed scepticism about the role of local authorities. The reality is that local authorities will continue to play an influential role in commissioning services. What specifically do you think needs to be done to improve understanding at local Government level about the voluntary sector? Thinking strategically, what kind of new commissioning structures would you like to see at local level?
Ben Kernighan: There are a number of things to consider in relation to that. It is important to start an answer in terms of what happens nationally. One of the immediate challenges that faces local voluntary organisations at the moment is that many of them are making staff redundant, not because they will not necessarily get money next year but because they still do not know whether or not they will do so. So, if national Government only decides how much money local Government gets in December, and local Government then decides in January, the local voluntary sector cannot wait for that if it has to know whether to pay people in april. That is a really important point. You will see a big reduction in the effectiveness of those charities and lots of people being made redundant, but, in some cases, the money will be there and they will have to recruit them back. That is a huge inefficient waste of public money that happens in almost every financial year.
Specifically in terms of local Government, educating councillors about the voluntary sector is a really important role that we will take more seriously. One of the positive things about the profile that this Government has given to the voluntary and community sector is that local Government is now thinking about how important that sector is, albeit that it sometimes makes funding decisions that do not necessarily make it feel like that to the people involved. In relation to some of the issues to do with commissioning, the voluntary sector is at its best when it is able to innovate and respond to changing need. There is a real tension here, because to have a well-run organisation you need some pretty secure pots of funding. I think that a four-year spending review period is appropriate for many services, but, within that, you also have to be able to be responsive and shift what you do and how you provide it. In my view, that means you need local authorities to commission more on the basis of outcomes and less on tightly defined contracts.
Q137 James Morris: In your comments so far you have talked a lot about the need for national frameworks. Mr Michell referred to a feeling of suspicion about having to deal with hundreds of different entities at local level, but is that not where innovation comes from? One of the dangers of national frameworks, as we have learnt over many years, is that they stifle innovation at both local Government and voluntary and community sector level, because you are constantly looking upward and having to conform to the guidelines rather than getting on with delivering the services innovatively.
Ben Kernighan: Innovation happens within national voluntary organisations and community organisations, and localism provides a significant opportunity, particularly for those community and local organisations. Within that, it is important that local Government understands how to get the best out of the sector. There are really good examples in places such as Camden, Thurrock and Merton where it is seen as a genuine partnership. Part of it is around the local authorities and voluntary and community sector coming together at the very earliest stages. In those areas where it was a good example, 18 months ago they all saw that there would not be as much money around and asked themselves how they should come together to determine their strategy and recognise that they could achieve more jointly. In the worst places, the local authority determines the strategy and then, very late in the day, it says that it is going to cut here and here because it does not have the cash.
Ralph Michell: I do not want to give the false impression that we are overly sceptical about devolution. We see real opportunities in some commissioning being done at a more local level. We also need to be aware of the counter-balancing risks. Clearly, there are risks in terms of efficiencies and so on. On your point about innovation, I strongly agree with Ben that it is both small and large. Organisations like RNIB and RNID have innovated with things like talking books and digital hearing aids in a way only they can do because they are very big. Similar to the private sector, you can get innovation from one-off individuals in their basements as well as from very large companies investing millions in R&D. You want to be able to get both.
With regard to local commissioning-I am sorry this is a fuzzy answer-probably the one term that covers what we are really looking for is "culture change". Therefore, it is a culture change from procurement to commissioning; from the kind of top-down approach Ben talked about with the local authority deciding what it wants and very late on going to someone to buy it. It is much more a partnership approach between commissioner and the people on the ground delivering it who understand the needs of service users and how a provider organisation works. The communication between providers and commissioners is really important. Ben talked about the fact that many organisations will be laying off staff simply because local authorities are not talking to them. Our members complain to us that local authorities have said, "Don’t come and discuss with us the 30% cuts we need to make or how we could do it in an innovative way. Don’t talk to us; we’ll talk to you in January when we have decided what we’re cutting, where and by how much we want you to reduce your budget," and so on. Obviously, that is not the best way to go about it. The culture change is to see local third-sector organisations as partners and not as agents to deliver the decisions that you have already taken.
Ben Kernighan: Perhaps I may add one thing in relation to innovation and commissioning because it is one of the things that the sector does best: the important ongoing role of grants. There is a misconception among many people and statutory authorities that commissioning is not very good and therefore we must all get better at it and we must understand absolutely everything about every community at every moment in time and be able to predict it three years hence. Just relax-you won’t be able to do that; it is not that simple; life is too complicated. To achieve that innovation you need especially small grants; sometimes micro-grants can make a huge difference to community organisations when they identify the needs and the innovation. This Government has said some good things about the importance of grants. Clearly, in a tough time there is a risk that those will be lost. If they are lost we will see a real dip in the ability of the sector to innovate. There is one other little point in terms of what local authorities need to be good at. If you look at what most frustrates the voluntary and community sector, it is not funding, it is that their expertise is not utilised in the strategies that local authorities take.
Q138 Heidi Alexander: Can you say something more about the role and importance of national and local Compacts in a more decentralised system? How do you see those Compacts having to evolve from where they are now?
Ralph Michell: This comes back again to culture change. There are places now where statutory organisations have a Compact but it sits on a shelf, gathers dust and no one pays it any attention; a prime example is a PCT that recently asked 18 voluntary organisations to pay back grants that it had given this year, contravening its own Compacts. There was no consultation and it gave them a month to give it back. First, there must be that culture change. Part of how we should see the Compact is probably as a tool that could lead towards that culture change, but it needs much more teeth and accountability both nationally and locally and we hope that will be hammered out in the discussions that are currently taking place in Government. I think the new Compact with more teeth needs to be agreed fairly soon because the danger is that we will have this great framework or frameworks for partnership working but it will come after the really important decisions about the cuts are made.
Ben Kernighan: I agree with that. What we will see in a world of more localism is that the world will be very different in different places. I am not tied to the idea of a postcode lottery as if we live in a world in which at the moment everybody gets equally good services. They do not. I do not fear that. I think that more individuals and communities being involved in local decision making and helping to shape services is a good thing. But the Compact has become more important in the context of that variability so that when things go wrong for voluntary and community organisations-when they are not treated fairly and public funds are wasted because of the way in which different parts of the state work with them-they need some redress. The evidence shows that, where the Compact works well, it helps those relationships. I agree with Ralph that it needs more teeth. For example, we would like to see the Local Government Ombudsman take a bigger role in terms of being a place where organisations can go when the Compact is not kept to.
Q139 Heidi Alexander: Do you think there are other things that could give those Compacts more teeth? You have already mentioned the role of the Local Government Ombudsman.
Ben Kernighan: I think the Parliamentary Ombudsman could play an equivalent role at national level. The whole way in which things will now be audited will be important. We are all dealing with the mindset change of things like not having an Audit Commission but, at the same time, looking at how we measure well-being in relation to that. To include in the work on well-being just how much of that is to do with people’s engagement in voluntary action will be significant. It is a very different way of assessing things. The transparency agenda will be good at spotting inefficiency and waste, but it will perhaps be less good at spotting high and low quality of services. We still need to think about how that is determined.
Q140 Simon Danczuk: You have touched upon this throughout your contributions, but, to summarise, what is the impact so far on the voluntary sector of the attempts by local authorities to make savings?
Ralph Michell: It is very mixed. Most of our members are at the stage where they know that a budget from which they currently get money is to be cut; in some cases they know that it will be cut by a certain percentage. I think that is where most of them are, but they do not yet know how that will impact on individual organisations. As Ben said, the danger is that they will have to make decisions before they know that. Either side of that there are examples of very bad practice, like the PCT I just mentioned. A trickle of our members have reported cuts for more than the past year. On the other side of the spectrum there are organisations working with their local authorities and other local statutory agencies in a really intelligent way because they acknowledge that next year there will be less money going in but there will be the same problems, and collectively they are working out how they should deal with that. There is a very mixed range of practice, but the cuts will really start to hit further down the line.
Ben Kernighan: I entirely agree with that. Last week I was talking at a conference in Oxford where there was a real fear that the council would in-source services. The approach that they described to me was that the council was keen to lose as few jobs as possible-an understandable motive-but that meant bringing services currently within the voluntary sector back into the statutory sector. There are some excellent examples of good practice in terms of people looking across the private, voluntary and public sector at how they can share resources and who has empty rooms in which community groups can meet. They are looking at those kinds of exchanges of gifts in kind and taking a more fundamental look not just at the services they provide and the ones they are cutting but at how to achieve the same outcomes with fewer resources, and what their overall objectives are in relation to that. There is also recognition that the voluntary sector has its own role to play in adapting to these changes, for example where organisations choose to merge or share back-offices. There is recognition that there are humped costs if two organisations are going to merge, so a local authority can make a wise investment by supporting that process.
Q141 Simon Danczuk: Clearly, the Government is promoting a localist agenda but at the same time funds are very restricted. What are the advantages and disadvantages or the risks associated with doing that at a very difficult financial time?
Ralph Michell: Combining cuts with greater flexibility?
Simon Danczuk: Yes-more localism.
Ralph Michell: This is one of the big concerns of our members. In particular, there are areas where ring-fencing will have protected funding going towards vulnerable groups, with whom a lot of our members work. Their fear is that, with those ring fences being removed and funding going down, they will see raids on budgets intended for vulnerable people, as we saw recently in the case of the Isle of Wight and its Supporting People budget, a large part of which was used essentially to plug a black hole elsewhere. That is a real concern.
I think that links to the point about scrutiny of all of these decisions. Difficult decisions will need to be made and that they get made is fair enough, but a lot of our members worry that they will be made under the radar at local level. Particularly with the removal of some of the scrutiny mechanisms, the worry is that vulnerable people will be hit hard, charities will go under and that simply will not appear on the radar of a lot of people, given that at local level local democracy involves fewer people, there is less media scrutiny and so on. That links to a fear related not so much to cuts as to nimbyism, which concerns a lot of our members; for instance the provisions that I understand are in the Localism Bill to provide increased chances for local people to veto particular Government activities.
We tend to assume that with all the additional involvement of local people that communities will be progressive and nice, but sometimes they will not be, and charities come up against that. For example, there is a case going on now in Harrow, I think, where an organisation is trying to build supported housing for 16 and 17-year-olds who have left home and are now homeless. That is being opposed by local residents who fear increased drug use, crime and so on. Again, there is a balance between on the one hand wanting to empower local people and, on the other, not doing so in a way that enables a local majority to disadvantage local minorities. In the absence of scrutiny of that kind of thing, a lot of our members would be very concerned.
Ben Kernighan: By far the biggest impact on statutorily funded voluntary organisations in the short term will be cuts. The numbers make that clear. If you look at voluntary organisations that work at different geographical levels, the highest proportion that get some statutory funding is the local ones. If you look at the numbers, you have £6.6 billion going from local authorities to voluntary organisations. While we welcome the transition fund that the Government has come up with to help support organisations through a difficult times, that is £100 million. You can see how a great deal of money is almost certainly just about to come out of the sector.
In relation to that, we are also concerned that voluntary organisations generally have very low levels of reserves. The median level of reserves is two months and for certain types of voluntary organisations it is less than that. There is a real risk that we will have late decision making, big cuts and a low level of reserves. That is potentially a fatal combination.
We have to hope that in the medium term at least, as there is a political consensus on the importance of civil society and voluntary organisations playing an important role in people’s lives-helping to deal with those big challenges that face society around an ageing population, climate change and so on-there are opportunities for voluntary organisations. The demand for services will go up, as we anticipate a rise in things like unemployment, which everybody predicts. It will be very difficult.
To go back to pooling budgets, where I would like to see the Government do more, it seems like a very good time to introduce that because that is a way to achieve more, provide better holistic services and to do it in a way that also saves money. It seems like the real time for that to happen.
Q142 James Morris : Earlier you expressed scepticism about Local Enterprise Partnerships. I was a little surprised by that given your desire to make sure that the voluntary sector view, as it were, is placed in strategies at sub-regional level. Quite a few of the LEPs I have seen, specifically the one in the Black Country, part of which I represent, have very specific provisions within the LEP proposals for getting the third sector and voluntary sector to input into the strategy. Can you explain a little further your concerns about LEPs, which seem to me to offer a valuable platform?
Ben Kernighan: Some of them are and some are not, and it is very difficult to get information about how many of them have strategies and how many have not, but I know there are those where it has been excluded. I know that the Government came late to recognising that the sector had a potential role. My specific frustration is that, having realised this, CLG will not now write to the existing and forming LEPs to say that these sectors have an important role and they should involve them. I absolutely agree with you that they have an important role. I know from experience that if there is one group it is hard to get into if you are not there at the beginning, it is one that in part has the purpose of distributing money.
Q143 George Hollingbery: Very briefly, we’ve touched on statutory duties coming in under the second tier council. It occurs to me that ring fence removal is all well and fine, but if there still exists a huge plethora of statutory duties you are in no better place at all, and the only place a lot of councils can go is to the voluntary sector and to cut grants to third parties. Is that a reasonable analysis?
Ralph Michell: I do not think it is the only place. We are seeing a lot of unintelligent cuts. There are ways in which you can cut costs-we would like to see more of this-by transforming the way you deliver services. One of the ways you can do that is in partnership with the third sector. For instance, we have talked a lot about joining up. One of our members, Addaction, works with problem families, which, as we all know, are a huge cost burden on the state. Their service called Breaking the Cycle has a marked impact on families, in terms of drug abuse, engagement with the labour market and the way the whole family works. Independent evaluation of that work suggested that, for every pound invested, within two years you would be likely to save £87. There are similar stories in the NHS, in reducing reoffending and so on, which we could provide to you separately if you are interested. There are ways you can save money by working more with the third sector. What we are most worried about is the opposite: that you see the third sector as a frill and nice to have, and you get rid of some of the activity that probably saves you significant sums of money further down the line.
Q144 Heidi Alexander: You mentioned the role of the community and voluntary sector in local Government in terms of scrutiny. Are there any tensions around more contractual relationships existing between local authorities and the community and voluntary sector in public service delivery, and their role as a critical friend and scrutineer? Do you see any concerns in your membership about those sorts of issues?
Ben Kernighan: I think there is a tension. Lots of voluntary organisations take the king’s shilling while criticising the hand that feeds it, to mix a metaphor very badly. My response in terms of my advice to the statutory sector would be: remember the importance of grants and that they are really good; that you cannot know everything that is needed; that when you choose contracts, look for those that are not too tightly specified. People want to transform public services at the moment. You will not transform public services by moving them from one sector to another. If you keep a contract incredibly tightly drawn you will end up with the same service and a voluntary sector organisation that begins to take on the characteristics of a statutory organisation, which is not where we can add best value. Then my advice to voluntary organisations in relation to that is: they should always remember what their purpose and mission is; take on those contracts only if they believe that overall they will better fulfil the value of their mission; and try to diversify their funding, which is where philanthropy, and central and local Government’s role in supporting and encouraging philanthropy, is so important.
Ralph Michell: There is a potential tension. If a local authority wants to bully one of the voices in the area, then this is an extra tool for it to do that. If a charity is afraid of consequences, then there is potential for it to be silent because it is receiving money when otherwise it would not. I am not sure that is what happens most of the time. I think that in a lot of cases it is the daily delivery of services to those who use it and dealing with the local authority that puts a lot of voluntary organisations in a good place to know what they are talking about. In a way, I think the roles can be complementary and certainly there should not be a tension between them, even if there can be. I agree with Ben that both grants and contracting are an important part of commissioning; both are good ways to secure different types of services. A third-sector organisation in receipt of a grant could feel equally under threat if it is critical of local Government. I do not see the shift we have seen to some extent from grant-funding to contracting as having a particularly negative impact on that ability to speak truth to power.
Q145 Bob Blackman: You have painted the picture of disparate activity across the country in terms of the funding position. You have mentioned the potential issue of a postcode lottery applying to services. Casting your eyes forward five years after this agenda has been rolled out, what do you expect to be the impact on the mix of local service providers across the country?
Ralph Michell: I think it will be very mixed. In some places we see local authorities making a big shift towards out-sourcing their services, so they will want a very diverse and healthy provider market; in other places, as Ben has said, local authorities are in-sourcing and looking after their own, and there we will probably see organisations in trouble and the provider market shrinking. Even within those two groups, commissioning will be done in different ways; there will be different levels of involvement in the joint commissioning processes and different responses from within the provider market. Therefore, in some places we start to see consortia being built to enable providers to be commissioned from reduced procurement teams. In some cases that probably will not happen to the same extent. You then have the variation in the number of third-sector organisations in any single local area. I am afraid it is not a very helpful answer, but I think it will be extremely mixed.
Q146 Bob Blackman: What do you envisage will be the impact on the people who use the services? Ben, do you have a view?
Ben Kernighan: Yes. I have the view that to predict five years into the future is potentially a foolish thing to do. I am talking about my doing it, not you asking the question. At its best I think we will see some exciting examples at neighbourhood level-so quite localised-of where services have been transformed and the voluntary and community sector has played a significant role in that. In particular in terms of your question about the users of services, they are therefore engaged in shaping and designing those services. It is not a deficit model; it is not "What do you need?" but "What can you and the people you connect with at the moment do? What are your skills and abilities? How can we add to that and help you within your neighbourhood to make a bigger contribution as well as receive a better service?"
We will also see lots of examples at a neighbourhood level as well of different statutory sources coming together and really exciting multi-purpose community solutions. We will also see other areas that have not got to grips with what is a complex agenda, where we will see a lot of fragmentation, disorganisation and big fears in relation to the whole period in relation to health, even if when we come out of the reorganisation it is good. The period of change could be really tricky, and probably it will be harder to keep tabs on what is going on in different places. There will be more of a culture within the public and voluntary sector of needing to spot good ideas all over the country and using technology to help think of the best ways to do that.
Q147 Bob Blackman: A lot of local authorities are now looking at sharing services and bringing together a whole range of services to make themselves more efficient and effective. Do you see that as a conflict with the delivery of services at a very local level, even below local council level?
Ralph Michell: Not necessarily. For instance, there are national charities that are essentially federations of smaller units. There are national charities, for instance RNIB with its talking book service, that are able to provide an extremely personalised service to individual households. Similarly, we see models emerging of consortia of providers. There are ways to marry the two.
Q148 Bob Blackman: Do you think that because councils are coming together this could be an advantage to the voluntary sector?
Ralph Michell: Going back to Ben’s point, it really depends on what service you are commissioning, what the need is and how that is geographically provided.
Q149 Bob Blackman: Are there any particular examples where you think there could be an advantage?
Ralph Michell: Where you have a number of quite small providers, not several providers in every local area-for instance, the British Liver Trust, which is a very small charity that works with a disease that is one of the biggest killers in the UK-there is no way that those small charities can be commissioned and seek to be commissioned by hundreds of local authorities. Frankly, if they have to try, their service will probably be hit negatively. There is an example where the shape of the third sector as it is must be taken into account; otherwise, you risk commissioning at a level that does not work for providers.
Q150 George Hollingbery: You expressed some dissatisfaction with the Total Place model as it was piloted. The third sector had little or no input into it. Can you tell us a little more about what you think the third sector can add? How can it improve the results? At some stage I would also like you to address the idea of accountability.
Ralph Michell: If you take as an example Blue Sky, which is a social enterprise that employs offenders to do grounds maintenance, its service reduces reoffending but also it is one that local authorities want to commission. I suspect that the impetus for that kind of joining-up of the public sector will come from outside the public sector; social enterprise having the imagination and initiative to join up, reduce reoffending and clean parks or recycle. I suspect you are unlikely to see that kind of thing emerge from within the silos of the public sector. It is that kind of initiative and outside imagination that you want to bring into the transformation of services. It strikes me that if that can be brought into the design and commissioning of services and thinking about transformation, you are much more likely to get better outcomes for people and better value for money than if you have what we saw some of with the Total Place pilots, which was essentially total public sector; different statutory agencies talking to each other and working out where they could eliminate duplication.
Q151 George Hollingbery: Do you see the third sector in this case as innovator champions advising big boards, elected boards or whatever they are-the accountable layer-for the Total Place? Do you see those people offering services that are innovative and joining things together? How does the third sector fit in? Is it a combination of those things?
Ralph Michell: It is a combination of both. The more open both processes are, within the bounds of what is practical, the better from our point of view. Things like the right to bid, while not perfect in our view, are a step in the right direction. The culture change would see the local authority and probation trust in that instance seeing Blue Sky not just as a delivery agent but a partner in the local area that they might want to talk to when redesigning services or going through a radical rethink of how to achieve what they want to achieve with the budgets they have. The more of that we get the better.
Ben Kernighan: I agree. The sector has a role in understanding what is going on in its locality and the clever local authorities realise that they cannot know everything that is going on in their local area, and working together they will come up with better plans and strategies.
Therefore, they have a real role in understanding need. They have another role in helping to shape the design of services because they often have expertise in delivering services, and subsequently there is also a potential role, which some want to take on and some do not, around the delivery of those services.
Q152 George Hollingbery: Can you tell me very quickly how this structure works? Do you see potentially an advisory board underneath whatever it is that looks after the Total Place budget and is required to consult with you every single time, or is there a champion on the board itself? Is it done by pitching?
Ben Kernighan: For example, you could have the chief executive of the council for voluntary service; you might have somebody from the community foundation who brings in an element of philanthropic giving. You would expect the chief executive of a good council for voluntary service to consult within their own membership so that they have got a real sense of what the sector in their area needs and they know who has expertise in different areas that can be brought into that process. That would probably be a common model to work well. Guidance from national authorities in relation to commissioning has long realised that, if you try to separate entirely the process of who decides what needs are and who delivers services, you do not end up with the right services, because it is the people who understand communities and have some experience of providing services that can best inform what the overall strategy needs to be.
Q153 George Hollingbery: It sounds very exciting. You are talking about social entrepreneurs driving in at the Total Place level to make sure that innovation happens and occasionally providing too, but that is not essential?
Ben Kernighan: Yes.
George Hollingbery: That is exactly where we are?
Ben Kernighan: Yes.
Q154 Mike Freer: You said that the sector had an understanding of its locality and needs but we hear two voices: there are those who say they have an understanding of their locality and their needs and that should be harnessed for service delivery and design; and yet others say it could be one voice, one community, one niche of a locality, which then influences service delivery and then excludes others. What is your view on how local authorities should harness that knowledge, and what shape should that harnessing take?
Ben Kernighan: A local authority needs to triangulate its knowledge about the voluntary and community sector. Clearly, if it has something like a council for voluntary service it needs to work out how effective it is; how big a membership it has; what processes that organisation has for consulting its membership. It should also encourage wider direct dialogue, so it should ensure that its council workers and leaders also come into direct contact with a range of different voluntary organisations. It may be impractical to have all the voluntary organisations on the Total Place board and that is where an umbrella organisation can play a useful role. One of the other potentially valuable roles the sector can play in a world in which we want to see more voluntary action is in promoting the use of volunteers by the public sector, and obviously there is a lot of expertise in the voluntary sector to help do that. The more opportunities there are for the two sectors to work together, for councillors to shadow the trustees of voluntary organisations, for opportunities to do job shadowing and all those things to help understand better where each is coming from the better, because the responsibilities are different. Ultimately, politicians have to make difficult decisions about resources that will annoy some people because they will not choose those organisations. There is that ultimate difference in role that needs to be understood. But there is a whole raft of exciting ways in which the level of understanding between the two sectors can be promoted at local level.
Q155 Mike Freer: How do you stop the excluded being excluded?
Ralph Michell: To start with, it is important to bear in mind that a lot of the time, not always, third-sector organisations advocate the cause of a particular community that is more excluded rather than less. As a citizen I would want the local or regional state or whatever to retain and be very clear on its role in ensuring that its services are for everyone and that it is not captured by a particular interest group, but I would also want it to seek to understand as best it can all of the communities it serves. If there is a Somali association in the local area that it could speak to in order to understand better the needs of that community, then it should.
Q156 Chair: You talk about local authorities needing to change the way they interact with the voluntary sector. Does not the voluntary sector have to change as well, because clearly at present many local authorities do not see the voluntary sector as assisting with their difficulties; they see them as a way of making cuts and reducing expenditure?
Ralph Michell: The third sector does have to change in terms of the way it communicates with local Government, because a lot of the time that is still immature. Recently, we did some work with Lambeth Council, bringing together some of its commissioners and local third-sector providers. The chair of the commission that that work was under described the relationship as "adolescent". I think there is some truth in that. There are still some parts of the third sector that see themselves as having a right to public money and approach local authorities as whingers rather than as partners. I think that needs to change if this relationship is to work. There are clearly ways in which third-sector organisations as providers of services need to change the way they work in demonstrating their impact and in understanding some of the pressures commissioners are under. Yes, absolutely; the third sector needs to change as does the statutory sector.
Ben Kernighan: So often it comes down to the nature of the relationships. Where those are good and there is willingness for each side to understand, you will often see very successful partnerships in terms of what can be achieved. Demonstrating impact is an important but difficult area when you are trying to achieve social outcomes, especially if you are helping people on the first step of the way. Perhaps you are increasing their confidence so they can get out of the house or socialise, but perhaps not to the extent that they become employable. That becomes very difficult territory in terms of demonstrating impact. It is not simple but it is something on which voluntary organisations need help and support. A big challenge that will face community groups in the years ahead is simply to understand the landscape. This is a radical Government that is proposing big changes across a whole range of different parts of Government, so having the information to understand what is going on and who to contact-those very basic things-will be crucial. That is where organisations that provide support to voluntary organisations will also be important.
Chair: Thank you very much indeed for your evidence.
Examination of Witnesses
Witnesses: Matthew Pinner, Policy Adviser, Federation of Small Businesses, Tom Ironside, Director of Business and Regulation, British Retail Consortium, and Edward Cooke, Executive Director, British Council of Shopping Centres, gave evidence.
Q157 Chair: Good afternoon and welcome to the third evidence session of our inquiry into localism. For the sake of our records, could you say who you are and the organisation you represent.
Edward Cooke: My name is Edward Cooke and I am Executive Director at BCSC. We represent retail property developers and occupiers.
Matthew Pinner: I am Matthew Pinner, Policy Adviser at the Federation of Small Businesses.
Tom Ironside: I am Tom Ironside, Director of Business and Regulation at the British Retail Consortium, which represents small and large retailers.
Q158 Chair: You are most welcome. If points are made on which clearly you are all agreed, there is no need to repeat them. Obviously, we can get through more of our agenda in that way in good time. The evidence you have submitted so far shows that among a number of organisations, including your own, there is anxiety about lack of clarity about precisely what the Government’s agenda is and what it might mean for your organisations and members. Do you want to highlight any particular cause of concern that you may have?
Edward Cooke: Critically, there is lack of clarity over where decision-making powers are being devolved to, which means that what our members do, which is to regenerate local communities, will be much harder to achieve. Despite broadly supporting the principle of devolving decision making to a local level, whereby local people are best able to establish solutions for their local community, having multiple different rules and procedures in a number of jurisdictions around the country adds complexity to the way our members develop retail schemes. That is our major concern.
Matthew Pinner: Given the nature and speed of change we have seen so far, inevitably there will be lack of clarity on some of the final details. From our point of view, we are keen to see what this will mean in terms of exactly what is to be done where and at what spatial level. I do not think we are entirely clear about everything at the moment in terms of planning how that will relate, for instance, to Local Enterprise Partnerships, of which we are very supportive and where we see lots of potential. We would perhaps like to see as soon as possible how, for instance, Local Enterprise Partnerships will interact with a new spatial view on planning given that the regional perspective will not be there any more. We would also like to see some further detail on exactly what Local Enterprise Partnerships will be able to do and how they will feed into some of the new elements that are being pushed up to central level, such as inward investment and exporting. How will LEPs deal with those? How will they deal with the things that we are to see being pushed slightly more locally?
Tom Ironside: BRC members are broadly supportive of the move to greater localism. From our business experience we see significant benefits to tailoring local services to local needs. This is reinforced by our experience of working through partnerships such as business improvement districts, town and city centre management companies and business crime reduction partnerships as well, where we can see that locally developed solutions can have significant benefits in local areas. That said, as my colleagues have said, these need to be balanced against requirements of cost and certainty. You need to have relative cost and certainty in order to plan and invest in growth. Our chief concerns in that context-I highlight a couple of areas-would be the way in which neighbourhood plans will operate and the potential for increased local revenue raising and variation between local areas in terms of revenue raising. Members have concerns in relation to potential growth variation in regulatory regimes and also the capacity of local authorities to take on the broad new remits which are being proposed for them.
Q159 Chair: So, it is more the detail rather than the general direction about which you have concerns?
Tom Ironside: That would be a fair reflection of where we are.
Matthew Pinner: That would certainly be my view, yes.
Q160 James Morris: As you say, localism implies that there may well be variations of approach and service delivery across the country and that necessarily will create some complexity. Do you think that might skew the advantage of the business relationship towards small business to the detriment of large national companies?
Matthew Pinner: I am happy to speak about the small business element. You are quite right that having different areas pursuing different priorities and at different speeds could assist small businesses in those areas but, at the same time, as a national organisation we would rather see as much consistency as possible in certain things. Take the example of regulation: while it is good to have one area that does something particularly well, if that variation means other areas are not doing something particularly well, I would argue that is an argument for having a clear national strategy and national policy to back up some of those things, otherwise those variations could become differences in quality. Business likes certainty and consistency, and that is the same for small businesses. Even though we do not necessarily deal with multiple local authorities, we still want to see a level playing field.
Tom Ironside: We represent both small and large businesses. We see challenges on both sides. For smaller retailers the challenge is very much where to find the time and resource to interact with the necessary parts of the machine to input into that increased local sensitivity and make sure your voice is heard. For larger businesses that over the past 20 or 30 years may have centralised much of their interaction with public and Government bodies there is a new challenge: how do they go about interacting across the whole of the UK in a way that fits with their business models and is relatively efficient and cost effective? There is a whole different set of experiences or challenges for larger companies.
Edward Cooke: I agree with the last point. It is about adaptability. Over the past 20 years or so large business has increasingly centralised its operations, and its business model is much more like that to align itself to where Government has gone. Increasingly, they are looking at their business models and establishing ways to empower staff at local level to get involved in these partnerships, whether they be LEPs or other groups, that now have genuine power and responsibility and, if they are LEPs, are private sector-led. They see the advantages of working much more closely with local stakeholder groups because of the nature of this devolution.
Q161 James Morris: Just on the point about LEPs, do you have concerns about the way you may interact with Local Enterprise Partnerships, again on the principle that they are bottom-up and are not being prescribed from the centre? Does that concern you, or do you see opportunities in that for business?
Edward Cooke: I think the opportunity is that they are business-led. If you see public/private partnerships across the piece, whether they be through local asset-backed vehicles in the case of regeneration or something similar, that alignment with the public-sector and private-sector objectives is a huge advantage. We might have some concerns where LEPs have responsibility for strategic planning in one place but not in another. At what level are you engaging with LEPs? Who has responsibility for that? Will it still be the local planning authority? There are advantages in this public/private sector-led system but disadvantages in the lack of clarity.
Tom Ironside: To add to that, many large retailers are involved in the development of LEPs in the areas where their headquarters are based, so they are building knowledge and understanding through that interaction. There is a process of positive interaction with these new structures that I hope will provide them with a model for broader interaction as we move forward.
Matthew Pinner: From a small business point of view we definitely see great potential for LEPs if they take it forward in the way that has been envisaged. They are business-led and that is absolutely fundamental. One concern that we continue to have going forward is simply that, for small businesses, engaging with LEPs is not necessarily as easy as it is for large businesses simply because they do not have the same resources and capacity to make known their views. Nevertheless, they are a hugely important part of local economies. We are keen that across the country they make sure they are involved. In many areas we have seen some good engagement with the small business community through the FSB and other locally based structures, but that is not entirely consistent across the whole country; it is not there the whole way.
There is perhaps another issue in terms of this engagement. Because they are not funded, if business puts in money alongside local authorities, there is the potential that small business will not have the same capacity to do that without even just some small independent funding. If they have been asked to contribute, those small businesses will not be able to contribute perhaps towards the secretariat of the LEP in the same way that a large business would. That is where our concern would lie. On the other hand, we are very supportive of the move and think it has great opportunities.
Q162 Simon Danczuk: The Government’s idea of localism is to devolve power down to local councils, local people, local councillors and local stakeholders so that the people at that level, who one assumes know best, can use that power to stimulate the local economy and growth for business. I get the impression that you do not share the Government’s appetite and enthusiasm for this devolvement of power. From what you have said so far, you seem to prefer a more centralist consistency across the country rather than letting things be decided more strongly and locally.
Edward Cooke: From our perspective we are not at a point where we can say wholeheartedly that we absolutely support localism in the structure that is to be presented because on the whole we do not know what it will look like. Our main concern is probably in the area of transition. We have had a fairly centralised system of Government over the past number of years. Rapid devolution of decision making to local level creates a number of issues, not just about clarity of responsibility. We would like to see Government produce some constitutional settlement, or whatever it might be, that really identifies who is responsible for what. It also has a skills issue, which Tom alluded to at the beginning. You have a system, which in a planning context is something we are obviously very interested in, where planning has increasingly become a bit of a tick-box exercise. We have a number of examples where senior case officers in councils consult with our members-representing developers-on objections coming from elsewhere and asking for their advice, because they have not been empowered to evaluate that objection against the priorities of the local community, and then make a judgment on how to respond to that objection. We are not entirely sure what localism will look like for the development industry, and because of the way Government has functioned over the recent past, we are concerned that there is an issue of skills, especially in the area of planning. There are the benefits we talked about with the public sector being more closely aligned with the private sector and achieving a goal that is established in a partnership environment.
Matthew Pinner: I think that from a small business perspective we are supportive of these moves towards local communities, including local business. We feel that small businesses are at the root of communities; they are at the heart. But it is also a question of balance; it is to do with what you can do and what solutions you can find locally, but at the same time in certain areas trying to maintain consistency. If, for example, we are looking at giving more freedom to local groups, including local businesses, to pursue a project or a programme on a small scale-perhaps a community facility or something-we think there is real potential there for getting local community groups and businesses involved. But at the other end of the scale, perhaps in terms of the business rate, we think that you need a slightly more consistent approach, rather than a different one. It is very much about putting things not necessarily at their lowest level but at the right level and there is scope within that. The issue on localism is that, because we have not necessarily seen all of the actual detail, while we can say we support some of the principles, we are not quite sure exactly where we stand on some of the individual policy areas and functions within that.
Tom Ironside: We echo those comments. We are supportive of the broad thrust of where localism is headed as we currently understand it, but we are acting in the absence of key pieces of the jigsaw, namely the Bill and so forth. We believe from our interaction with local authorities that some are really well placed to move forward rapidly with the localist agenda. We are not clear whether that is a general realisable picture because our interaction with local authorities across the country leads us to believe that there is some variation in skills, knowledge and competency within those authorities in the key areas where we interface with them. I would echo Matthew’s comments about devolving power to the most appropriate level rather than the lowest possible level. If you look at the example of the West London local authorities that are currently looking at combining back-office activities as a route to securing efficiencies, clearly there are different levels to which you can move the power down in order to be effective. During a transitional phase, we would look to Government to provide, as touched on by colleagues, the right sort of support and co-ordination to assist local authorities and other local interests to engage with this new agenda.
Q163 Simon Danczuk: Matthew, you started to touch on this. Are there any policy areas that should not be devolved down to local level? You mentioned the setting of the business rate. Are there any other policy areas that should not be devolved down to local level?
Tom Ironside: I’ll go first. I am not sure we would identify any particular policy areas, but for parts of policies we can see some areas where logically you would want to put restrictions round them. We think Government is already in the process of recognising that. They are to retain a national planning framework. We do not yet know the extent of that, but clearly there is a case for doing so. Clearly, decisions around infrastructure, be that planning, waste management or energy generation infrastructure, will not be very easily dealt with at a micro-level. Inevitably, there will be areas that do not lend themselves to that sort of devolution. However, with a very broadly drawn general power of competence, there is a lot of potential to go further.
Q164 George Hollingbery: Mr Ironside, you are coming at this from the perspective of representing retailers. Therefore, I infer that what you are interested in principally is planning. Do your joint interests go any further than that in localism?
Tom Ironside: Certainly ours do go very broadly because we are now hearing about localism through a whole range of different policy areas. We shared some of the concerns which the FSB has just referred to in relation to business rates, but we can also see that there are localist dimensions to proposals coming through in relation to policing, waste management and a whole range of other areas including licensing and right across the board. As the picture becomes clearer or we get more detail about what the intention is, we find relevance to ourselves across a whole range of different policy areas.
Edward Cooke: Principally, the planning system is very important from the perspective of our developer members as are new models for development finance that have a local element, in particular discussion on tax increment financing; critically, business rates; and to an extent achieving the Government’s targets for sustainable energy and carbon reductions and how they are applied across the country using the planning system or our preference, which is building regulations.
Q165 Heidi Alexander: Do you think local authorities should be held accountable for policies to support business and promote economic growth? You talked about the appropriate geographical scale. I just wonder whether you think that local authorities themselves should be held accountable for that and whether it is at a different level. If you do think local authorities should be held accountable, how should it be done? What do you think of the army of armchair auditors in this respect?
Edward Cooke: For our members to have assurances that the standards within local authorities are set at such a level that they are able to do what they do, which is to regenerate local areas and provide employment opportunities and investment in the fabric of towns and cities, there must be some kind of monitoring of performance. At the moment it probably makes sense for that to be at central level rather than through LEPs or any regional structure.
Matthew Pinner: As to accountability, I agree with Edward that in some areas you do need a way to monitor performance. If we move to the armchair auditor model and the ballot box, which is the ultimate accountability to the electorate, it is much more difficult for business to interact with numerous councils if there is no standard expected and performance monitoring, whereas if you still have some national oversight of how councils perform, it is easier at national level. We believe the Government does not understand the importance of small businesses. It is difficult for small businesses necessarily to adhere to a standard at local level all the time, but, for instance, on regulation there are certain standards we would like to see adhered to across all local authorities. If you have a local better regulation office, you have a slightly more robust mechanism. You can therefore monitor what is going on, but you can also push down best practice. There is a balance to be struck between allowing local solutions but also ensuring there is consistent best practice, which creates a level playing field for business.
Q166 Chair: It does not happen now, does it?
Matthew Pinner: Certainly in terms of regulation, no. We would like to see a strengthening of that.
Chair: The law is the same but how it is applied can be different.
Matthew Pinner: Exactly. For instance, we would like a stronger and better local regulation office. The move we would like to see is to greater consistency in the way councils deal with small businesses on a whole series of licensing and regulation matters. We argue that would perhaps get worse if you move to a slightly more hands-off approach; we would not see the progress we would like to see-an improved and more consistent approach.
Tom Ironside: It is reasonable to expect local authorities to be held accountable for business development in their areas. In some areas central targets will not be just desirable but will be required because they will be defined in EU directives. You have waste recycling targets and so forth and they spring from European considerations. As colleagues on my right have said, there needs to be some mechanism to allow businesses to interpret different sorts of information from different local authorities on a relatively comparable basis. We are quite open-minded about how you get to that outcome. We do not have a prescriptive view on that yet.
Edward Cooke: Any mechanism that helps to establish where local authorities are exemplars in the area of our interest and shares that information among their peers would be extremely valuable.
Tom Ironside: To build on that, there may well be an opportunity for businesses to play a role in the promotion of best practice. We can see a role for ourselves, too.
Q167 Heidi Alexander: Do you see a role for LEPs in providing some form of accountability?
Tom Ironside: Probably it would not be sensible for me to comment at the moment. On the issue of LEPs and their own potential democratic deficit, especially in the context of private sector members of LEPs, I would urge some caution about the role they might play in that respect. One thing we definitely want to see over the next year or so is that, whatever the model looks like, it is not revisited immediately afterwards. The RDAs suffered a certain democratic deficit. We are not quite sure how the private sector constituents of LEPs will be elected to those boards and whether that might create similar problems, so I would urge caution.
Matthew Pinner: I think Local Enterprise Partnerships are an excellent way to engage with business and for business to air their concerns and combat some of the problem of having to deal with multiple local authorities. You can address business concerns on a slightly larger scale. I am not sure that LEPs and accountability would necessarily fit if they are not elected bodies, but certainly they are a potential mechanism for businesses to get their concerns heard, as opposed to accountability. I am not sure that at the moment, based on the model that it appears we are moving towards, it would be suitable for that.
Q168 Bob Blackman: One of the thrusts of Government policy is clearly to make local authorities consider how they can make their areas more business friendly. I think I detected in your evidence that you are not in favour of local authorities having the power to set their own business rates. Is that a fair conclusion?
Tom Ironside: It is a fair conclusion.
Edward Cooke: Based on what has come from the Local Growth White Paper, although there is no explicit reference to a relocalised business rate rather than there is to local rates retention, as an organisation and industry I am sure we would still resist local business rate retention, in the same way occupiers did through the Lyons Inquiry process, as a fully relocalised business rate where the UBR can be set by that council.
Q169 Bob Blackman: Therefore, you favour a position whereby local authorities could retain the business rates that they raise but not levy a particular rate?
Edward Cooke: Exactly. Probably the position we are in at the moment is that some fiscal incentive and alignment with the local authority and business interest, which could be created through the business rate, could be potentially advantageous but multiple different business rates across the country would be administratively very costly and something that I am sure our occupier members would not support.
Tom Ironside: To add to that before perhaps Matthew comes in, retailers are very clear on this point. They would strongly oppose any move away from a national UBR because they need the clarity and certainty that derives from that nationally set business rates multiplier. That clarity and certainty allows them to drive investment and plan strategically.
Q170 Bob Blackman: I accept your view. Would you support a position whereby the local authorities retained more of the money that came in from business rates, for example for infrastructure improvements?
Tom Ironside: Indeed. We certainly do not have a closed mind to that particular part of the proposal, provided that could be done in a way that did not lead to the other outcome. We can see the argument for greater incentivisation through retention.
Matthew Pinner: We are certainly very concerned about the potential for localisation of rate-setting powers. Small businesses do have issues in many cases with business rates; it is a large overhead for small businesses in many cases. Normally, rent and wages is the main aggregate outgoing. Whatever the issues with the current system, the UBR allows you to project forward for five years. Basically, the rate tends to increase with inflation. That gives us certainty. Also, the idea of having different levels in different areas means we move away from a level playing field for business, but in terms of incentives, we are certainly open to that although we would like to see more detail.
Q171 Bob Blackman: In what other areas do you think the Government could make changes to create financial incentives or other incentives to make local authorities more business friendly?
Edward Cooke: The one area for which we have been arguing strongly is Tax Increment Financing. The model we prefer is something called Local Tax Reinvestment Programme, which allows the developer in this case or the private sector to retain an incremental increase in the business rate to pay for the upfront public infrastructure cost. At the moment we find that in lots of regeneration schemes there is a viability gap and often that matches what it is our developer members spend on public infrastructure works. If there is a way to address it, that would be extremely positive for the delivery of schemes like Sevenstone up in Sheffield. We think the LTRP model of TIF is one way to achieve that.
Q172 Chair: Is that like the United States model?
Edward Cooke: Yes. There are a number of models applied in the States. There is also the ADZ model, which is the public sector-led scheme. They also have a private sector-led scheme. It is a developer pay-as-you-go scheme; it means the risk is transferred from the public to the private sector, but it is the public sector that ultimately gets the benefit of that investment.
Matthew Pinner: In terms of Tax Increment Financing, we would like to see a bit more detail. Again, we do not have a closed mind to it but, as you probably appreciate, for small businesses those models are perhaps things in which they might be involved in the benefits of a development. You might want to include small business in the infrastructure project that you were pushing for under a TIF, but in terms of the detail we will hold fire on that. Most of the financial incentives probably do revolve around business rates. There is the obvious issue of potential discretion for discounts, which again we favour if it can be done cost-effectively. The issue for councils is that they would have to fund that, but there is a potential there, for instance, to try to regenerate a town centre. If you want to push a particular area to get a street back up and running and the council can find a way to discount business rates in a discretionary way, that is a potential way to stimulate growth. That is a good example of a local solution.
Q173 Bob Blackman: Presumably, you would agree with the automation of relief for small businesses rather than those businesses having to apply for it?
Matthew Pinner: Yes; we would like to see automation. Clearly, we are not there yet, but the relief in the first place was an excellent move and take-up is rising. Obviously, we would like to see more steps towards automation, and the latest announcement is a positive step in that direction.
Tom Ironside: We would echo Edward’s comments about TIFs but, just looking more broadly at the planning system, we can see a case for the right sort of financial incentives to start to free up the planning process, and that is a recurring theme we hear from members right across the sector. They have long-standing schemes in the pipeline that they would like to see move forward more quickly. If there are ways to incentivise those transparently, that is not unattractive to us. We are starting to note the first signs of that thinking coming through. We would be interested to see where that leads.
Q174 Bob Blackman: Do you not have any concerns that there might be fragmentation in that approach under a localist agenda?
Tom Ironside: We can certainly understand that fragmentation may be an issue in those cases. To go back to earlier discussions, this depends on what national parameters are put around schemes of incentivisation of that sort.
Q175 Chair: The previous witnesses came from the voluntary or third sector. Government policy is to encourage local authorities to work with and offer more work to the voluntary sector. Are you equally enthusiastic about that aspect of localism, where work that might be going to your members as private sector companies might not always go to voluntary organisations?
Tom Ironside: I am not sure we see direct competition in the sorts of work that might go to voluntary organisations compared with the sorts of services and products that retailers provide. We approached the opportunity to work with some of those voluntary organisations very positively and we are already talking to them about how we can find ways to maximise mutual benefits. I am not sure that we see that conflict yet.
Q176 Chair: But the Federation of Small Businesses might well see conflict.
Matthew Pinner: Again, until it is clear what we might see provided by social enterprises and non-voluntary organisations it is difficult to see whether there would necessarily be a competition. You might get a situation where what you do is allow them to work together on something. A community organisation might want to build a playground, for instance. A small business could help them to do that. There is not necessarily a need for competition in that sense. We would welcome it, but with the reservation that at the moment we are not quite sure what we will see them do. I do not think that has really come through.
Edward Cooke: There are opportunities for greater joint working even in the ownership of shopping centres to create value. I know that it has happened in a number of constituencies in the UK recently. I know that Lewisham and Catford shopping centres have been approached by Lewisham Council. They are working with one of our members to increase the asset performance of that centre, so there are opportunities to work there to improve the asset management of retail property. Historically, local councils have used consulting services to a large extent in the planning application process. That has been hugely beneficial for them. With more interpretive autonomy at a local level for planning, that dynamic might change slightly.
Chair: Thank you very much for coming to give evidence.
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