WHAT IS LOCALISM AND DOES IT MATTER? Steve Martin 1 Paper presented to the Commonwealth Local Government Forum Research Colloquium: Sustainable local governance for prosperous communities Cardiff University, - March 2011 Introduction Over the last thirty years successive governments in the UK have exerted ever tighter control over local authority services and spending. Leading local government figures and commentators have railed against the erosion of local autonomy but found themselves powerless to resist the rising tide of centralisation. Opposition parties have commonly pledged to hand powers back to local government only to renege on their promises once they have been safely installed in office. All this changed however in the summer of 2010 when ministers in the newly elected government moved swiftly to start work on sweeping away the top down targets and performance frameworks inherited from their immediate predecessors. This paper explores the implications of this new ‘localist agenda’. The first section charts the loss of local autonomy under Conservative and New Labour administrations in the UK since 1979. The second section briefly examines the impacts this had on local services and accountability. The paper then turns to the current government’s proposals. It argues that its plans mark a potentially decisive break with the policies of the last thirty years and examines their prospects and potential pitfalls and some implications for future research. 1 Centre for Local & Regional Government Research, Cardiff Business School, Colum Drive, Cardiff, UK Email: MartinSJ@cardiff.ac.uk A brief history of centralisation The hollowing out of the local state under the Thatcher and Major governments has been well documented. Local authorities in the UK were forced to hand control over a range of functions to local appointed bodies whose activities were overseen by boards comprising local politicians, business people and unelected representatives of the community and voluntary sectors. Council house tenants were given a right to buy their homes at reduced rates and remaining stocks were transferred to arm’s length companies. Schools were given new freedoms from local authority control. And compulsory competitive tendering (CCT) led to the externalisation of swathes of services to the private sector (Rao and Young 1995; Walsh et al. 1997; Boyne 1998; Choi 1999; Vincent-Jones 1999). Local government spending was also tightly controlled and its performance increasingly subject to monitoring from the centre. Ministers dictated how much funding councils received by capping ‘excessive’ council tax increases and ring fencing grants for use by specific services. The Audit Commission was created in 1983 and initially given the job of checking that local authorities were achieving economy, efficiency and effectiveness (McSweeney 1988). A decade later it was charged with defining statutory performance indicators that all councils were required to publish and using these data to compare councils’ performance (Humphrey 2002). There was fierce local opposition to these moves. Public sector trades unions organised protested against what they saw as an assault on their members’ pay and conditions, and many Labour controlled authorities worked out ingenious routes around CCT legislation. But the lack of local fiscal autonomy (around 80 percent of local authority expenditure is met by grant from central government) and the absence of formal constitutional guarantees of the role - or even the continued existence - of local government meant that Westminster and Whitehall always held the whip hand. And in a show of strength Parliament voted to abolish the largest authorities – the six metropolitan county councils and the Greater London Council – that offered some of the stiffest opposition to Thatcher’s reforms. In some respects New Labour picked up where the New Right had left off. But there were important differences. Thatcher’s strategy was to divest the state of responsibility for service delivery through a process of privatisation. By contrast Blair promised to invest in local government provided it signed up to a programme of modernisation. But like Thatcher he and his advisers were reluctant ‘to trust their party colleagues in local government with money or functions, or even with the unchaperoned exercise of common party purposes’ (Walker 1998, p.4). They feared that the actions of unfettered ‘Loony Left’ councils might be a political liability, threatening Labour’s prospects of an all important second term. The 1998 Local Government White Paper therefore made it clear that ‘The old culture of paternalism and inwardness’ must to ‘be swept away’ and local authorities were expected to embrace ‘a demanding agenda for change’ (Cmnd 4014). In a speech to local council leaders in February 1998 the Prime Minister outlined the deal telling them ‘If you are unwilling or unable to work to the modern agenda then the government will have to look to other partners to take on your role’ (Blair 1998). Meanwhile his senior warned that local government was ‘drinking in the last chance saloon’. The Government pledged to abolish CCT and ‘crude and universal capping’ of local authority budgets (Cmnd 4014, para 5.7). And over the following decade there were large real terms increases in the level of central government grants to local authorities. But ministers were not about to cast off all restraint. They retained powers to limit council tax rises in order to ward off what they regarded as excessive increases and tightened existing controls on how councils’ spent the funding they were allocated, introducing a range of new ‘ring fenced’ grants, most noticeably in education which accounts for almost 40% of local authority spending (Travers 2004). By 2010 more than two thirds of central government funding to English local authorities was ear marked by ministers for specific purposes; just 31% was given to them as a block grant (HM Treasury 2010). Like their predecessors, New Labour ministers were keen to see the private sector play an increased role in the provision of local public services. In their view the problem with CTT was the way in which it had been implemented which had ‘led to unimaginative tendering, and often frustrated rather than enhanced real competition’ (Cmnd 4014, para 7.22). On average contracts advertised between 1989 and 1992 attracted fewer than one external bid (Walsh and Davis 1993) and even after more than a decade of CCT internal providers were still winning well over half of all tenders and almost three quarters of the estimated £2.4 billion worth of business that was covered by the legislation (LGMB 1997). The top down imposition of market testing had, the Labour Government argued, poisoned relationships between public and private sectors, and the emphasis on economy had led to a decline in service quality as in-house and external bidders were forced to pare tenders to the bone (Walsh et al. 1997; Coulson 1998; Davis and Walker 1997). For all these reasons CCT was replaced with a new duty of ‘Best Value’ which, far from doing away with externalisation, was designed to ‘create the conditions under which there is likely to be greater interest from the private and voluntary sectors in working with local government to deliver quality services at a competitive price’ (Cmnd 4014, clause 7.30). Section four of the 1999 Local Government Act required authorities to put in place arrangements to secure continuous improvement in the discharge of all of their functions. In order to comply with this new duty they must use a range of ‘tests of competitiveness’ and should not deliver services in-house if they found that ‘other more efficient and effective means are available’ (DETR, 1998 p. 20). To ensure that authorities complied with this new duty ministers introduced a new ‘Best Value’ performance management framework. Every council was required to conduct fundamental reviews of all of its functions over a five year period (Ball et al. 2002) and to publish annual plans setting out details of current performance and targets for future improvements. For the first time all local services became subject to external inspection, and the secretary of state was given powers to intervene directly where authorities failed to conduct sufficiently robust reviews or there was thought to be a risk of serious or persistent underperformance – examples included failures to agree a programme of fundamental performance reviews, consult adequately with the public, publish prescribed performance information, make robust comparisons with other service providers, set adequate performance targets, or the ‘unreasonable neglect’ of options for service provision (DETR 1999). To monitor progress the Government devised more than 200 Best Value Performance Indicators (BVPIs) which between them covered all frontline and corporate services and at their height required some 287 pages of guidance to try and ensure that data were collected in a comparable form (Boyne 2002). Within a year this highly bureaucratic regime had run into serious difficulties. Most authorities undertook a far larger number of more narrowly focused reviews than the Government or Audit Commission had anticipated. As a result it was impossible for inspectors to deliver on their promise (or threat) to scrutinise every review. More importantly, senior officials had come to the view that reviews of individual services were unlikely to get to grips with the root causes of underperformance. The experience of early interventions in failing services pointed to underlying problems in the management of the authority as a whole. The Audit Commission concluded that ‘serious and sustained service failure is also a failure of corporate leadership’ (Audit Commission, 2002: 19). Inspection of individual services was therefore of limited value because ‘Without clear corporate leadership for change it becomes a very negative task based process’ (Audit Commission, 2001: 14). As a result from 2002 onwards the Government introduced a new assessment framework known as Comprehensive Performance Assessments (CPAs). These categorised councils as ‘poor’, ‘weak’, ‘fair’, ‘good’ or ‘excellent’ on the basis of judgements about individual services and the overall leadership of the authority. Service were divided into seven main ‘blocks’ (environment, housing, culture, fire and rescue, services to children, social care and benefits administration) in the case upper tier and unitary authorities, and four areas in the case of districts (housing, environment, culture and benefits administration). Scores for each block were weighted according to their importance to national government and then aggregated to give an overall ‘performance’ score. This was then combined with an assessment of the council’s corporate capacity to provide the overall rating. Results for all 150 single tier and county councils in England were published annually. District councils and fire and rescue authorities underwent similar though less frequent assessments. Authorities placed in the bottom two categories were subject to external intervention and support which often resulted in the removal of senior managers and in some cases of council leaders. Over time the CPA methodology was refined to provide what the Audit Commission called a ‘harder test’. Assessments of the main service blocks remained largely unchanged, but the five point scale was replaced by a four point star rating system ranging from ‘no star’ to ‘three stars’ and the criteria for assessing corporate capacity were broadened to include the quality of an authority’s partnerships with other local agencies, its effectiveness as a community leader and the way in which it managed its budgets (Downe 2008). In April 2009 CPAs were superseded by Comprehensive Area Assessments (CAAs) which assessed the key public service outcomes in a locality, rather than focusing exclusively on the services for which councils had direct responsibility. CAAs were intended to provide an independent and ‘joined up’ assessment of the public service outcomes and the quality of life in each locality. There were two main elements. An Area Assessment focused on priorities set out in local area agreements which were negotiated by central government departments and local public service providers. In addition the police, health service, local authority and fire and rescue services were the subject of separate Organisational Assessments which focused on the management and performance of these individual agencies. Unlike CPAs, area and organisational assessments did not involve primary data collection. They relied on existing inspection reports, external audits and a (slightly) reduced set of around 190 statutory performance indicators. The rationale for the introduction of CAAs was twofold. They were supposed to enable the seven different local inspectorates (the Audit Commission, for Social Care Inspection; Commission; Inspectorate of Constabulary; Inspectorate of Prisons; Inspectorate of Probation; and the Office for Standards in Education, Children's Services and Skills) to coordinate their activities and therefore significantly reduce the burden of inspection on local agencies. And they were designed to encourage local service providers to work together to tackle deep seated economic and social issues (such as economic regeneration; care for older people; reducing the number of young people not in education, employment or training; shortages of affordable housing; environmental sustainability; reducing crime; preventing violent extremism; and tackling the causes of poor health) which were not the sole preserve of any of them but which required concerted action by a number of different sectors. The impacts of top down performance frameworks For the last decade then English local government has then been subjected to unprecedented levels of external surveillance and financial control (Lowndes 2002). It has not been entirely one-way traffic. Local authorities were granted a new (though little used) power to promote the well being of their areas; controls on borrowing were relaxed; and central-local relations became less fraught. The combative rhetoric of the early Blair years gave way to a more conciliatory tone. Ministers no longer talked of last chances. Local government was now a ‘trusted partner’. However it is clear that at a time when most countries have been devolving power away from the centre, the UK moved decisively in the opposite direction. Many UK scholars were fiercely critical of New Labour’s approach. Stewart (2003: 253) complains of ‘over-prescription; over-inspection and over-regulation’ (Stewart, 2003: 253). Wilson (2003) accuses ministers and their officials of ‘control freakery gone mad’. Davies (2008) condemns them for what he regards as ‘double dealing’ – talking up devolution whilst doing the opposite. And Goldsmith (2002: 109) classifies the UK as an outlier within Europe, noting that ‘No other European country has anything like the plethora of initiatives, special grants, powers over taxing and spending and regional oversight as does Britain’. According to its detractors, the New Labour approach to public services reform was wrong both in principle and practice. There have been four main types of critique. First, some commentators see external inspection as an infringement of local democracy. Local politicians have their own democratic mandate which ministers should respect. Local authorities are closest to the citizen and best placed to understand and respond to the needs of their local communities. External regulation was therefore an insult which indicated a lack of trust in and regard for councils and councillors. Second, the imposition of national standards and external performance regimes was said to foster a compliance mentality in a way which stifles innovation. Accountability is channelled upwards to ministers, robbing councils of the flexibility they need to be responsive to local priorities. Third, external regulation was costly. According to government figures, by 2005 the direct costs of the local government inspectorates in England amounted to £97 million per annum (ODPM/HM Treasury 2005). In addition local authorities incurred significant compliance costs – the staff time and other resources that local authorities need to expend to make themselves ‘auditable’ by preparing plans, collecting performance data, hosting inspection visits and responding to audit and inspection reports. A survey of English local authority chief executives found that councils devoted an average of 597 staff days per annum to preparing for and managing inspections (Downe and Martin 2007). The time taken up on ‘paperwork’ might, it is argued, have been better spent on core tasks such as managing ‘frontline services’ (Hood and Peters 2004: 278), and regulation produces other ‘dysfunctional effects such as ossification, a lack of innovation, tunnel vision and suboptimization’ (van Thiel and Leeuw 2002: 270). Fourth, a number of scholars have questioned the rigour of the CPA methodology (Martin et al. 2010). Andrews (2004) criticises it for failing to take account of the impact of deprivation on performance. Jacobs and Goddard (2007) and Cutler and Waine (2003) argue that star rating systems like CPAs are misleading because they mask the complex and multi-faceted nature of performance and the resulting aggregate scores are highly sensitive to the weightings which are used. And Maclean et al. (2007) showed CPA judgements to be a poor predictor of future performance. However, empirical research on the impacts of New Labour’s ‘modernisation’ agenda suggests that in spite of these concerns the combination of large increases in spending and unprecedented focus on improvement was associated with significant and sustained performance gains. The three main sources of longitudinal data about local government performance in England - statutory performance indicators, inspection reports and public satisfaction surveys – all indicate that there were significant improvements (Martin 2009). Statutory performance indicators show variations between services but some spectacular gains in areas such as waste management and culture services. CPA scores confirm this. There were improvement in almost all services between 2002 and 2008. Almost three quarters (72 percent) of authorities moved up one or more performance categories in terms of their overall performance. The proportion ranked in the top category rose from 15 to 42 percent, whilst the proportion in the lowest two performance categories decreased from 23 percent to 3 percent (Audit Commission, 2009). The results of national surveys of public satisfaction with local services based on large samples (in excess of 200,000 people) drawn from every local authority in England are consistent with the evidence from inspections and performance indicators. They showed that there were significant increases in public satisfaction with almost all local government services. Research which has investigated the causes of these improvements has demonstrated the importance of the external challenge and stimulus provided by inspection. Both local government managers and national policy makers see CPA as having been particularly effective (Grace and Martin 2008). A survey of senior local authority officers in 2006 found that a large majority reported it to be most important external driver of improvement in their councils and compared its effectiveness favourably with more ‘collegiate’ and less confrontational policy instruments such as the Beacon Council scheme and programmes of peer review initiated by local government bodies (Downe and Martin 2006). Systematic comparisons with Wales and Scotland which eschewed the muscular English approach in favour of less confrontational approaches to assessment suggest that local government performance has not improved as rapidly in these countries (Downe et al. 2008; Andrews and Martin 2010). Similarly, research on the CAAs found that although local authorities, police and health bodies were critical of the burdens which it placed on them, they had encouraged better partnership working between them and focused attention on important public service outcomes (Hayden et al. 2010). There is still much to learn about how and in what circumstances hard edged performance regimes like Best Value, CPA and CAA inspections work best (Hood 2007; James and Wilson 2010). However, these findings are consistent with research which points to the effectiveness of top down ‘terror and targets’ in other services (Bevan and Hood 2006). The triumph of ‘localism’? Notwithstanding the success of New Labour’s approach in encouraging performance improvements, critics who argued that the costs and dysfunctions of external assessments outweighed any gains eventually won the day. And by the time of the 2010 General Election all three major political parties pledged a change of direction and a shift of power away from Whitehall to town halls. The architects of CPA and similar performance regimes in other sectors argued that the improvements which had been achieved meant that top down management and measurement could now be eased back in favour of a greater role for self improvement and self regulation. Inspections yielded diminishing marginal returns over time and according to the former head of the Prime Minister’s Delivery Unit became less necessary as public services moved from being ‘awful’ to ‘adequate’ (Barber 2007). Moreover, local government now faced new challenges. The improvement apparatus of the previous decade had been good at supporting councils to become ‘competent organisations’ in a time of increasing resources, but they now needed to become move ‘beyond competence’ (Swann et al. 2005). The incremental improvements of the past – essentially doing the same thing, but better – would not produce the efficiency gains needed to meet the demands of deficit reduction. Service providers were going to have to do some things differently developing new services and transforming delivery processes by working across organisational boundaries (Martin and Davis 2008). For both of the main opposition parties top down performance assessments were emblematic of all that was wrong with the Blair/Brown approach to public services reform. Liberal Democrats were long standing champions of decentralisation, whilst Conservative shadow ministers pledged to wage war on ‘Big Government’, rolling back the frontiers of the ‘Nanny State’ by taking power away from the bureaucrats (including inspectors) and handing it to local people who would act as ‘armchair auditors’. The coalition government has been true to its word, going much further and much faster than most observers imagined possible. One of the first acts of the new Secretary of State for Communities and Local Government was to instruct the inspectorates to stop all work on the next round of CAAs. On August, without warning or prior consultation, he announced the abolition of Audit Commission accusing it of having ‘lost its way’ and profligate waste of public money. The Department of Health subsequently announced an end to annual performance assessments of councils by the Care Quality Commission and Ofsted began phasing out its annual assessments of children’s services assessment. Responsibility for external auditing of local authority accounts would be transferred to the commercial sector with accounting standards overseen by the National Audit Office. Standards for England, which was created by Labour to overseen a framework designed to ensure that local politicians maintain good standards of conduct, was also abolished. The Government has recently explained that its actions are intended ‘to free up local authorities to enable them to be innovative in the delivery of services, rather than merely seeking to raise performance against centrally established criteria to achieve good inspection results. Local authorities will have the freedom to deliver services in ways that meet local needs, and will be accountable for those services to their electorates. These principles are key elements of localism’ (CLG 2011: para 22). Government departments will continue to have a role in specifying and aggregating information which is ‘of national importance’ or required to ensure accountability to Parliament. But ‘the principal aim is to reduce the burden of data collection on local government’ (para 25). The emphasis will be on providing local residents with the information they need to hold councils to account and it will be up to local authorities to decide what these data are and in what form to make them available. A draft ‘Localism Bill’, published in December 2010 and currently making its passage through Parliament, proposes a range of other changes. Some apparently increase the level of discretion for local authorities. Councils are to be given a general power of competence. They will be allowed to revert to the traditional committee system which was abolished by Labour and to decide who to place on housing waiting lists. The Government is also proposing to abandon regional housing targets. There are though some changes which the Government plans to force on local authorities. Twelve of the largest English cities will be made to replace existing council leaders with directly elected mayors and all authorities will have to publish details of senior staff pay. Many of the proposed changes are in fact designed to hand power to local communities rather than local government. It will become easier for local groups to take over the running of local services from authorities, to stake a claim to important local buildings, and to trigger referendums on local issues. Referendums will also become mandatory where councils propose to increase council tax above a ceiling set by ministers. It is too early to tell which of the provisions in the draft bill will make it into law or to discern exactly what the performance framework of the future will look like but it is perhaps worth making a number of observations of possible future directions. One interpretation is that the localism bill is a sham. Critics have been quick to point out that ministers plan to retain the powers which their predecessors took to intervene in authorities. And the secretary of state has not been slow to tell authorities what he believes they should be doing on a range of issues from the fraught issue of fortnightly bin collections to the development of shared services. The Society of Local Authority Chief Executives complained recently that the draft bill has a distinctly ‘Orwellian quality’. It asks ‘how on earth can we maintain the fiction that this is a Localism Bill when it has 142 new regulatory powers for the Secretary of State?’ and argues ‘This is centralist, not localist, and does nothing in pursuit of the government's desire to usher in a “post-bureaucratic age”’ (SOLACE 2011). A second interpretation is that we are witnessing a genuine but partial and somewhat tentative attempt to devolve power to the local level. The Communities and Local Government Department, which is responsible for the localism bill and the changes to the performance framework that have been described above, has always been more positively inclined than other key government departments to devolution. It remains to be seen whether the Departments for Education and Health, which oversee the largest spending local authority services, will follow suit. Moreover, the proposals contained in the localism bill do not promise any fundamental change in control over local authority funding. There has been a reduction in the amount of ring fencing, but ministers will continue to determine how much funding is available to each council. There has been talk of returning control over non-domestic rates to local government but as yet there are no published proposals to do so and even if this were to happen English local authorities would still enjoy less fiscal autonomy than their counterparts in many other parts of the world. A third interpretation is that ministers are deadly serious about devolving power but not to local authorities. The early signs suggest that are more interested in handing control to local communities than to local councillors. As a senior civil servant explained to me last month: ‘We looking to leap frog over local government and empower local people’. Whilst the Local Government Association (unsurprisingly) argues that it is for councils to regulate their own performance (De Groot 2006; IDeA 2009; LGA 2011), the secretary of state has repeatedly emphasised the importance of enabling local people to take over the running of local services and keep councils in check. Fourth, it could be argued that the concept of ‘localism’ is very convenient for ministers at a time when they are imposing the deepest cuts in local authority budgets in living memory. Over the next four years English councils need to reduce their spending by around a quarter with much of the pain having been ‘front end loaded’ in the first and second years. Councils are being forced to shed staff and reduce services. In this context localism might be seen as little more than the decentralisation of penury, a means whereby ministers can put some distance in voters’ minds between themselves and the effects on local services of the national debt crisis. Whereas the Blair/Brown governments offered local authorities additional investment in exchange for improvements in performance, the offer from Cameron and Clegg is the granting of limited freedoms and flexibilities in return for doing the government’s dirty work. Whilst the eventual scope and significance of the Government’s version of ‘localism’ is difficult to predict at this stage, the clearest and most advanced component of its agenda is the removal of top down targets and dismantling of external inspection, and in itself poses questions which merit attention from both policy makers and scholars, and might form the basis for a future research agenda. First, there is a real risk that faced with the challenges of making large budget cuts and without the external stimulus provided by inspection, local authorities will lose sight of the need to continue to improve service quality. This could have a particularly detrimental impact on vulnerable groups who are most dependent on public services. Second, there are questions about the effectiveness of self regulation – either by individual authorities or the local government sector as a whole. The literature suggests that there are a number of advantages to regulatory regimes in which there is little relational distance between regulators and regulatees. It is suggested that there is less incentive for gaming and a greater chance of learning from ‘best practice’. However, the risks of regulatory capture are also higher (Ayres and Braithwaite 1992). This begs questions about the ability of the Local Government Association, as a membership organisation whose primary purpose is to represent local government interests, to bring failing authorities to book. The top down performance frameworks of the past have been criticised by scholars for leading to an ‘intensification of managerialism at the expense of local democracy’ (Davies 2008: 4) which left ‘councillors often being little more than electedmanagers, rather than local politicians able to articulate and act upon the wishes of the citizenry’ (Copus 2006: 5). Effective self regulation by individual councils implies a need for councillors to make informed and honest assessments of the performance of their councils and challenge managers where there are problems. But the harsh realities of local party politics make this a tall order. Councillors from controlling groups will naturally want to defend their administration’s record, whilst opposition groups will be tempted to seek political advantage by exaggerating problems. Similarly, existing research on public awareness of and attitudes to the performance of local public services cautions against inflated expectations of public scrutiny of council performance. Surveys conducted by Ipsos MORI over the last ten years show that there is little public appetite for greater involvement in monitoring services. Most people are passive recipients of performance data. Only a quarter say that they would to have more of a say about the way in which their council runs things. Thus while the OnePlace website (established by the Audit Commission as a vehicle for disseminating information from CAAs) attracted large numbers of visitors, very few of these were members of the general public. Most of the hits came from local authorities, other public bodies, the media and third sector organisations. And there must also be doubts about the public will trust performance data provided by authorities themselves. Audit Commission inspections provided independent judgements about a council’s capacity and performance which could be used by elected members, businesses, voters and other local interest groups to hold their local authority to account. It is not clear whether they and other local stakeholders will regard performance information provided by authorities themselves as being similarly reliable and impartial. In the absence of the Commission there may therefore be a need to consider how to validate and safeguard the integrity of locally produced data. And there are important questions about how authorities can benchmark their performance in order to identify good practice in the absence of comparative national indicators. Finally cuts in public spending make it even more important for local services to avoid duplication and to find ways to pool their resources. But the absence of ‘joined up’ assessments to encourage them to work together could mean that budget cuts drive them back into traditional ‘silos’ in an effort to protect their own budgets, with adverse consequences for both efficiency and outcomes. All of this suggests that self regulation (whatever form it eventually takes) is unlikely to come cheap. To be effective it will require considerable investment in gathering robust performance data and equipping local politicians and voters with the knowledge and skills they will need to interpret information and use it to hold services to account. 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