Finding the right level

Discussion the recent Conservative green paper - 'Control shift'

Author: James Morris, Whitehall & Westminster World   |  

The Conservatives’ new green paper on localism has been touted as a radical, devolutionary document. In fact, says James Morris, it is more nuanced; regions remain to balance the empowerment of councils

The Conservatives recently published their long-awaited green paper on localism, Control Shift: Returning Power to Local Communities. The title itself speaks volumes about what the Tories are pushing for; but does the paper itself contain the reforms necessary to justify such a tagline? And what implications do these proposals have for the central government machine?

The proposals are undoubtedly a step towards a localist framework. They include the idea of city referendums on the introduction of elected mayors; the return of powers over planning and housing from Regional Development Agencies (RDAs) to local authorities; and the provision of councils with a ‘general power of competence’.

Furthermore, local authorities will be given the right to impose council tax increases above the current five per cent cap. To do so they will have to hold a referendum and win the popular vote – which is unlikely to be a regular occurrence. This is, however, an acknowledgement that councils can be trusted to make decisions with taxation implications, and for that reason should be seen as a shift of power away from Whitehall. Overall, these proposals can be seen as a progressive shift of responsibility towards the local level, and we at Localis welcome this direction of travel.

The Tories have wisely chosen to incentivise house building for local authorities, offering to match the council tax revenues raised from new house builds. This will be funded partly by freezing increases in the ‘formula grant’ received by councils for four years, and partly by scrapping the ineffective Housing and Planning Delivery Grant (HPDG).

The HPDG was introduced to resolve the anomaly that when councils built new houses and generated increased council tax revenues, they lost out under the complex ‘equalisation’ process. But it only offered councils a three-year guarantee of funding, so never gained their full confidence.

Ending the unwieldy £100m Whitehall expense known as the Local Authority Business Growth Incentives Scheme (LABGI), designed to reward councils that boost economic growth, is also a positive move. The Lyons Report was critical of this scheme, saying that the equalisation process had made its effects “blunt”. Frequently, councils which succeeded in attracting strong business growth to their areas were set high and often unachievable targets, whilst underperforming councils ended up LABGI winning funds.

Under the Conservatives’ proposed replacement, the Business Increase Bonus, councils would be allowed to retain for six years business rates income in excess of the anticipated level. This simplification of business growth incentives could potentially reduce the burden on central departments, and unlock some of the unnecessary bureaucracy in the current system at the local and national level. Such excess income might be due to economic growth, or to rises in business rates – on which the paper also has something to say.

The proposal that councils be freed to reduce business rates as they see fit – as long as they can make up the shortfall elsewhere – is also a positive move, as is the sensible idea that businesses should be involved in the consultation process on proposed increases. The current government’s policy is to allow only upward increases, capped at two per cent, and the Tories’ ideas – much like the proposal for local referenda on council tax increases – represent cautious steps in the right direction.

Councils would also be given what is known as the ‘general power of competence’. This should help them to innovate and develop ideas appropriate for their area, without having to consider whether or not specific legislation exists promoting that course of action. I think there is a broad question to be asked here over the reach of this freedom, given that the ‘power of wellbeing’ already gives councils broad scope to enact a wide range of tasks in their areas. Broadly, then, the introduction of a general power of competence should not have a significant impact on central government departments.

Another proposal is to abolish the remaining central government targets to which local government is subject. Localis produced a research note last year entitled Information, Information, Information, which looked at precisely how this could work, and suggested placing a duty on local authorities to communicate more widely with the public on these measures. The Conservatives are wisely putting their faith in standardised, accessible information flows about the performance of each individual council and levels of pay amongst local government officials. Again, this is likely to reduce bureaucracy and improve accountability, with central departments relieved of the task of monitoring targets.

The area of policy in the green paper which has perhaps attracted the most attention is the proposal for elected city mayors. We are all aware of the success in London of the mayoral system, which has helped to develop a joined-up policy framework, in addition to enhancing local democracy and clear accountability. The Conservatives now want to introduce mayors in other large cities around the country. However, the amount of power which these new mayors will have is unclear; nor do the proposals define their relationship with regional government offices and RDAs.

Control Shift returns to local authorities the powers over planning and housing currently exercised by regional bodies, and should be seen as a positive step towards enhancing local democracy and decision-making. The ability to ‘further economic development and regeneration’ will remain with RDAs under the Conservative proposals, however, as it is generally perceived that stability in business support and growth is a high priority in the current climate.

However, Localis has consistently argued for a pragmatic dismantling of RDAs to ensure democratic accountability and a meaningful economic regionalism. The recent move towards Multi Area Agreements (MAAs) and other cross-border collaborations is a step in the right direction, and we look with interest towards the more bottom-up forms of regionalism which are emerging. The impact of this on central government departments is, again – and in-keeping with much of the green paper – likely to be a slight reduction in workload.

In the foreword to the green paper, David Cameron claims that the Conservatives want “nothing less than radical decentralisation”; but while the rhetoric is admirable, the proposals are more subtle than that, and put reform back onto the right path without loading any significant bureaucratic or legislative burdens on central or local government. Local authorities need greater financial autonomy and freedom if they are to become truly innovative, finding the savings which central government demands whilst producing the services which local people desire.

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