A crucial year

January 16, 2007

Chris Leslie, Director, NLGN
SocietyGuardian.co.uk

This year looks set to be a game of two halves for local government, most likely a feverish six-month wait for the summer’s Comprehensive Spending Review (CSR) and change of prime minister, followed by a torrent of reforms from Gordon Brown, determined to be seen to govern in a new way.

The bittersweet expectations built up from the seemingly permanent rolling inquiry process, under Sir Michael Lyons, mean that high hopes for greater devolution battle with the realities of budgets. While many have grown cynical about the likelihood of a more mature, delegated approach to public policy, there is reason to believe that a Prime Minister Brown might be tempted to reach for constitutional reform to prove he represents ‘change’ rather than ‘more of the same’.

At the sharp end of local service delivery, however, the prospects for escalating real budgets look slim. Central government grant settlements are likely to peak this year, with an indication that the coming three years will require even greater in-house savings – no wonder the annual 3% efficiencies target has been so well trailed. Stronger inflationary forces will prompt a tough pay settlement, and when taken together with the well known social care funding pressures and other changes such as the landfill tax rise from £3 to £24 per tonne in 2007, councils will be focusing harder than ever on finding money. Yet the ability to turn to the council taxpayer is limited, with a growing realisation that the current £21 billion take represents close to the optimum level of public tolerance.

So council leaders and chief executives have little alternative but to place great hopes in Sir Michael Lyons’ inquiry, keeping their fingers crossed that he will champion their cause and fight for great things out of the CSR. Recent hints suggest that the Treasury wants to strengthen the role of councils in driving forward economic prosperity with more financial incentives, building on the ‘business rate growth incentive’, and using the new planning gain supplement to this end. Lyons may also be able to secure some smaller revenue generation where there is a sound political rationale, perhaps through novel waste charging arrangements. At the New Local Government Network we continue to urge Sir Michael to recommend a more radical culture change in the way local government is financed, assigning more revenues that currently accrue to the Treasury directly to councils as a means of incentivising attention to the local tax base.

Of course, to discover the full story of the CSR one need only glance across the Treasury-commissioned reviews, where Lyons is merely one of a dozen concluding this year, with an additional six Treasury working groups feeding into the mix, ranging from security to children to housing. This collection of thought-provoking policy inquiries is the real power-house in government thinking, and it is likely that together they reflect the Chancellor’s priorities for change.

Thinking optimistically, 2007 could be the moment when the day-to-day temptations to grab the levers of command-and-control are superseded by the wise devolution of power from Whitehall, which cannot possibly gather together management data and local knowledge needed to govern micro-policy decisions. The CSR is the key moment determining whether this will happen. Aspirations of a ‘zero-based budgeting’ approach emphasise the potentially fundamental nature of this review process. Maybe CSR 2007 will herald radical departmental reorganisation in Whitehall, with perhaps an overhaul due at the Home Office, the drawing together of the Cabinet Office, Communities and Constitutional Affairs into a single entity. Maybe the Treasury could be reformed into two departments for economic policy and public expenditure. If this occurs, local government will need to reflect and respond.

Local democracy is already responding to the ‘place-shaping’ agenda set in this year’s Local Government Bill, where councils have a greater chance to influence other regional quangos through scrutiny and setting strong strategies. It could well be that the CSR will encourage local government to take on new functions, overseeing the majority of locally delivered services, a stronger role in regional governance, perhaps even piloting the transfer of primary care trust commissioning powers.

The implications for local government are potentially great. Gordon Brown has a taste for setting national strategy but transferring daily decisions to agencies independent of ministers. Could this be an opportunity for a reformed Local Government Association to take on responsibility for some of the tougher issues ministers typically grapple with, including grant distribution formulae? We can only speculate but we know that 2007 will reveal a summer of activity that the astute local authority leader should be anticipating.


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