The structure of local government and the public sector needs to change to allow services to be provided more effectively and decisions on funding to be taken at the right level
The relationship between the centre and local communities is built on the idea that central government, by default, is best at devising and implementing policy and raising and spending money. Yet central government’s record in planning projects and spending efficiently and effectively is poor. In the words of the National Audit Office: ‘Historically, the majority of major projects in government have not delivered the anticipated benefits within original time and cost expectations.’
However, since 1997 the debate on devolution has been opened up by the granting of substantial taxation and borrowing powers to Scotland and Wales which are now set to be extended. Local government in England has gradually been allowed more freedom through initiatives such as Localism, City Deals, Community Budgets and the partial localisation of business rates.
The Communities and Local Government Select Committee put the case for fiscal devolution – the ability to raise and spend money locally. They recognised the disparity between different parts of the UK in their economic clout and ability to exercise devolved powers.
In a 2014 report the Committee concluded that the case for giving substantial fiscal powers at least to England’s major cities is just as compelling as devolving power to Scotland, Wales and Northern Ireland. They suggested that fiscal powers should be devolved to groups of local authorities, covering a recognisable large-scale area, that can demonstrate how they share, and work together as, a functioning economy. And that fiscal devolution was the logical next step on the path to genuine localism.
In terms of spending, there have been significant variations in the impact of the cuts on different regions and types of authority. This is because the local government finance system is based on allocating more grant to councils judged to have greater need and less ability to raise local income, so deprived urban areas have lost a greater proportion of their funding under austerity.
However there is a balance to be struck in terms of localism and efficient provision of public services. For example there has long been a debate about whether London needs 32 separate boroughs, the levels of voluntary collaboration between different boroughs now suggests that perhaps there should be fewer.
While locally based services can identify and respond to needs of local population, if units are too small then service provision becomes inefficient as those in need cannot access specialist advice and services needed effectively. While more strategic organisations covering larger areas are better placed to take allocation decisions, they may not be able to take sufficient account of local factors.
Local government reform across the devolved administrations demonstrates the role service reconfiguration and restructuring can play in responding to common financial and service pressures:
All the devolved governments are also currently considering funding mechanisms as part of these wider reforms.
In England council tax is based on property values set 23 years ago, so the tax being paid bears no relation to the true value of property today – undermining the credibility of the tax. Every year the distortion increases and the credibility reduces yet further.
It is also a regressive tax because it costs those with low value properties proportionately more, for example in Kensington and Chelsea the most wealthy in Band H will pay £178 per month compared to the lowest Band A rate in the same borough of £59 per month. Council tax discounts support the very poorest but since the localisation of council tax support and annual reductions in funding made at the same time, discounts have been eroded for poor families in work.
CIPFA calls for: