33
Examination of witnesses
Lucy Nethsingha, Eamonn O’Brien and Jonathan Stephenson.
Q96 The Chair: Welcome to this meeting of the Economic Affairs Committee. We have some distinguished guests from local government who, we hope, will illuminate the problems of fiscal devolution, which is the subject of our inquiry. Please could you briefly introduce yourselves, then I will ask the first question.
Eamonn O’Brien: I am the chair of the Local Government Association and the leader of Bury Council in Greater Manchester.
Lucy Nethsingha: I am the leader of Cambridgeshire County Council, and I am here as the representative from the County Councils Network.
Jonathan Stephenson: I am the chief exec of Brentwood Borough Council and Rochford District Council in South Essex, but also the chair of the chief executives’ group in the Local Councils Network.
Q97 The Chair: Thank you. The first question is about fiscal devolution. Do you think it will boost economic growth in your area and, if so, how?
Eamonn O’Brien: Thank you very much for inviting us. It is an important topic, and timely. This is central to the case for fiscal devolution: it can unlock not just economic growth but good economic growth, inclusive economic growth, however you want to describe it. It puts local councils and strategic authorities in a position to more adequately address local needs, deliver on local priorities and exploit local opportunities.
From my experience in Greater Manchester, I do not think it is a coincidence that the area with the most progressed and strongest devolution arrangements is also now the fastest growing, in relation to both GDP per head and productivity. So there is a growing body of evidence to support this. A piece of work by the OECD, done about 10 years ago now, provides a more theoretical argument in favour of this.
The reason why I think it will unlock more economic growth is that it is a possible solution to a range of other issues facing local government, the first of which is clearly the financial challenge and difficulties facing many, many councils. We are in a position where money is tight, which is taking capacity and focus away from potential opportunities to deliver more economic growth. It is, effectively, forcing the conversation and all the time and energy, as well as a lot of the capacity, around managing demand-led complex services, such as social care and housing.
If fiscal devolution can be an answer to those wider problems—I am sure we can develop our arguments further in this discussion—it will open up far more avenues to deliver projects that deliver economic growth. As I said, that is good economic growth, which looks at people’s skills and education, health and well-being, housing, transport and a whole host of other areas. We are confident, from both theory and practice, that we can stand behind fiscal devolution as a means to economic growth. Crucially, I think it has answers to other problems as well.
Lucy Nethsingha: I agree with most, if not all, of what Eamonn has just said. There is really strong evidence. My area is another area where we have a mayoral combined authority; we are one of relatively few rural areas that have one. Our mayoral combined authority is not in as advanced a state and has had significant problems on the way, but even in our area there is clear evidence of how devolution is driving growth in complicated but interesting ways, one of which is to do with our public transport and bus services. I am happy to talk about that at length later if anyone wants me to.
There is a really important message from the County Councils Network that I heavily endorse: devolution needs to be delivering for rural England as much as it is for city regions. At the moment, rural England is getting left behind in the devolution race, as it were. That is a real problem. Fiscal devolution needs to think about how it is going to work for widely different areas across the country.
Rural England represents about half of England’s population and almost half of England’s businesses. It is not quite half of England’s GVA, but if we are not delivering growth in rural England then the rest of England will not grow as fast as it could. Thinking about how fiscal devolution works in rural areas as well will be critical in this conversation.
Jonathan Stephenson: I agree with the points made. We definitely need a reset of fiscal devolution with regard to local councils. As an organisation, we represent 170 councils across very diverse communities. The challenge is the resources that we currently have and demand. We very much have Amazon Prime expectations on public services with a corner shop level of resource. That is a really difficult challenge for us to have in local government.
There is also the challenge of the parent-child relationship with Governments—not just this Government—around funding opportunities and devolving those powers down. Where we have had opportunities we have definitely made a difference. Local place policies with those institutions that know the local postcodes and the local people have really made a difference to outcomes, whether during Covid, with UK shared prosperity funds or business improvement districts. Those are examples of a range of things where devolved powers have really started to make an impact at a local level on the growth agenda.
The Chair: You are saying that growth is the main motivation, but it also sounds as though better local government is also your motivation—that growth is not the sole driver of this desire for devolution.
Eamonn O’Brien: Absolutely. There is always a debate about having more resources but even just having greater flexibility over existing resources will allow us to accelerate public service reform in a really meaningful way far better than we currently can. What I mean by that is moving the areas of spend away from very costly, reactive, crisis areas, such as social care and housing, and shifting resources into more prevention and early intervention areas. At the moment, many councils are struggling to do that, and many are taking money away from that just to fund and keep the lights on in some of those other areas.
Greater fiscal devolution and greater flexibility around that money are a means to an end. I do not think it is an achievement in and of itself; it is about what it unlocks for local government.
The Chair: I hear your enthusiasm. Do you accept that, in this move to fiscal devolution, there are trade-offs? If so, what have you thought those trade-offs to be?
Eamonn O’Brien: I am happy to start, but there will inevitably be discussion around where some of this devolved money goes to or gets decided upon. There is clearly a debate here about what you might call a “vertical argument” in relation to where this all sits. Then there is the debate about where you spread those resources; that is maybe the horizontal argument for how you utilise these resources.
That is an inevitable challenge with any system. It is not something to shy away from. I think we can design systems that are mature enough to reflect different priorities, and that different areas will look and feel differently in how they distribute and make decisions about fiscal devolution.
There are clearly challenges around where we are starting from. We are starting from a point of real financial challenge for local government. This is not a silver bullet to solve all those problems. This inevitably is going to take some time to effectively rebuild and get local government back to where it ought to be. I have described it to other people in a way in which it feels like we are driving around in first gear at the moment, and we are going to have to try and get out of that as quickly as possible. But you cannot go from first gear to fifth or sixth gear straight away. There is going to have to be an expectation that this is a process rather than an event.
Lucy Nethsingha: I do not disagree with that. Can I also come back to your previous question about it being about not just growth but better local government? There is an important point about democracy and people being able to see where their taxes go. At the moment, there is quite a mismatch between what people feel council tax is being spent on and what it is actually being spent on. The majority of the public think that council tax goes on local services: roads, street lighting, libraries and things that they can see. In fact, the vast majority of council tax goes on social care, which they tend to think is national government spending. It is not.
That mismatch causes real problems for local government, in that it means that we are constantly being held to account for the fact that people are paying more and perceive that they are getting less for their money. That mismatch is a problem for local government but is actually a problem for our democracy because there is a mismatch between where people think their money is going, what they think their money is being spent on and what it is actually being spent on. Fiscal devolution and allowing local authorities more ability to spend money on the things that are the priorities for their residents can potentially increase the faith that people have in how their money is being spent. At the moment, they do not see that connection. There is also the important thing about local areas having a clear understanding of what the needs and desires are in their place. There is also a question about accountability but we can come back to that.
Lord Burns: I am hearing two arguments. One simply says that there are insufficient resources and we should have more taxes and more spending. The second argument is that if we had control over a larger part of the pot, we could allocate the money better and get more out of it. I get nervous about the first of those arguments, as that goes into other territory in terms of where it leaves national government. But I am interested in the second and the extent to which you think you can do better with the money that you have that is allocated to those services you talk about and how you could spend it in a better way.
Jonathan Stephenson: Meaningful devolution must be delivered at local as well as regional level. We are definitely looking at that. It is not just looking at local government as well but looking at strategic authorities and definitely taking a holistic approach. It is not about just passing funding down, even though we cannot just pass responsibilities down without resources; it is actually about having the opportunity to be innovative and creative around those resources, and the ways in which to think about income streams and spending. At the moment, lots of those are under the tight control of the Government.
I mentioned the parent-child relationship earlier. It is very much like a parent and a child with no pocket money, and they are telling them that actually they cannot go out to work either. That is the challenge we very much have with government restrictions on some of that. Having that local decision-making will make it a lot easier for us to think about new income streams, new ways of working and where local pressures can allow us to look to build local income and local resources.
Eamonn O'Brien: I share a nervousness in saying that the answer is just more taxes. A paper by the LGA and WPI Economics about four years ago looked at a range of possible new revenue raisers. For instance, an e-commerce levy or devolving elements of sales tax may offer some flexibility around that. Of course, that is an option. The LGA does not have a position that says, “You have to pick one of those”. But I agree with you. There is a huge amount of existing spend that could easily, in theory, be moved around the system. You would start by looking at how much the NHS spends. To be honest, even just moving 1% of the total spend is billions. We are spending nearly £3 billion a year on temporary accommodation and that is going up significantly year on year. There is a cost to not getting this right. You then run out of options and have to look at what you can do quickly.
There is also a huge amount about the utilisation of things like business rates. In Greater Manchester, for instance, we retain 100% of our business rates. That allows us to take long-term decisions about growth because you can see it, whether that is borrowing against those business rates receipts or spending up front on infrastructure and bringing in private sector investment off the back of it. This idea of devolving income tax or a portion of it could potentially incentivise pushing more projects towards greater employment. So there are ways in which you can do this that are not simply going back to the tax and spend lever, although that is an option. There are a range of options that our work has set out could be done, and a degree of preference around which of those would be better. But that is not the only solution.
Q98 Lord Young of Cookham: You all agreed that the progress we have made on devolution so far has been beneficial. We heard it is driving growth and we heard about Manchester. Can we just focus on the proposition that the Government have now put before us, which is that for the mayoral strategic authorities, instead of the current grant system, they are going to, on a fiscally neutral basis, switch it to another grant system—namely, a percentage of the local income tax that is generated. Looking at that and putting aside some of the other things about growth, what is it that local authorities will be able to do if you change the system that they cannot do at the moment?
Lucy Nethsingha: I will give you a practical example of some money that was given that has been devolved to Cambridgeshire and Peterborough Combined Authority, which is to do with the skills budget. I am the chair of the skills committee there. That money previously would have been going through the Department for Education directly to colleges. It is now coming through our mayoral combined authority and the level of the detail and the work that we are doing in collaboration with local employers is at a much more granular level and is far more carefully calibrated to what our local economy needs than it could have been otherwise.
Lord Young of Cookham: Is that not a function of the decision to devolve the responsibility for skills, rather than the mechanism through which the Government pass the money?
Lucy Nethsingha: Yes, that example is. On the issue about the mechanism through which the Government pass the money, I imagine that one of the reasons that they would want to do that is to incentivise growth in places. I am not sure that income tax is necessarily going to do that. The problem with income tax is that some areas will benefit and others will not. That is something that the Government are going to have to address. In the case of the business growth currently devolved to Manchester, there is an incentive for areas to grow faster, whereby they get to retain some of that growth, and that would be beneficial and helpful for local places to see how that connection works for them.
Lord Young of Cookham: That would not solve the problem that Councillor O’Brien referred to about the pressure on local government. As Lord Burns implied, that is a separate issue with how much the resources go through. It is not quite clear to me if there is anything practical that authorities will be able to do that they cannot do at the moment under the current regime.
Lucy Nethsingha: Under the grants regime?
Lord Young of Cookham: Yes. The same amount of money is coming through; it is just coming through a different channel. What difference of itself does that make?
Jonathan Stephenson: There is an element of looking at devolution and looking at conditions around the devolution of funding, resource and responsibility. As an example, recently the Government changed the business rate multiplier to look at pubs and live music venues, reduce the business rates on those venues and increase the level of business rates on vaping shops, which, at a local level, is a really good idea. We never had the powers locally to do those. That would be a good idea and on a local, more place-based, level, you could trial those things, rather than always on a national level. Having that fiscal devolution of responsibility can be tested on a local area and really make a difference. It is about not just the funds but the responsibility and the conditions that come with the funds. Because if we say, “Here’s the funds, here’s the responsibility, but these are the conditions and you cannot move outside those parameters”, we will not be able to test things.
Lord Young of Cookham: As I understand it, the responsibilities are not in and of themselves going to change—just the channel through which the money comes. That is the proposition. Is just channelling the money in a different way really fiscal devolution? Is that what you regard as devolving real power to local authorities: the power to raise their own revenue, apart from overreliance on council tax and business rates?
Eamonn O’Brien: There is sometimes confusion around what you might call fiscal decentralisation and devolution. Explicit in devolution has to be far greater flexibility around how you spend the amount of money, but there is also the question of your ability potentially to raise more yourself. The overnight visitor levy is a good example of that: some places will embrace the opportunity to raise that income while others will not. The ability to do that is devolution.
If the Government simply said, “We’re going to raise it nationally and we’re going to give you a chunk of that money, but here are the 10 conditions and the areas you have to spend it on”, that would be more decentralisation than devolution. Until now, the journey has been, by and large, one of decentralisation rather than genuine devolution.
Lord Young of Cookham: May I ask a final yes/no question? Is the continuation of council tax capping consistent with fiscal devolution?
Eamonn O’Brien: The LGA’s position is no.
Lucy Nethsingha: No.
Jonathan Stephenson: No.
Q99 Lord Burns: Can we look at which taxes should be devolved or assigned? What guiding principles should be applied when deciding which of those should be devolved? You mentioned business rates earlier, but do you have a set of principles or any idea of which issues would make one approach more successful than another in terms of either particular taxes or some of the charges that you mentioned?
Eamonn O’Brien: As I mentioned earlier, we did a piece of work back in 2022; if colleagues have not had a chance to have a look at it, we would be happy to make sure that it gets shared. It set out a series of principles by which you could analyse a variety of potential revenue streams.
The principles begin with sufficiency: does this address the point I started with? Does this help us get to a point? However, as Lord Young alluded to earlier, just moving money and paying for it in a different way does not deal with the issue of sufficiency.
The second principle is buoyancy: in going up and down, there is a risk associated with having greater fiscal devolution. If money can go up, it can also go down, potentially. So there is a question mark around protecting against that dynamic, especially when our demand certainly is not going down. The other principles included fairness, efficiency, predictability, transparency and incentives.
What the paper outlined, against all those principles, is what we would argue theoretically meets them. The thing that was highest up there was the devolution of income tax, as well as an e-commerce levy. The paper set out what that could theoretically raise and how it could potentially be distributed. It balanced that against areas that we did not think were as appropriate for fiscal devolution.
So there is a body of work there. We stopped short of saying, “The LGA’s position, therefore, is that the Government must do X, Y or Z”, but the report set out a pretty detailed argument across a range of options. As I say, the devolution of income tax and an e-commerce levy were the two top ones that came out of that process.
Lucy Nethsingha: The CCN’s position is that it is important to recognise that areas are different. What works in one area may not be appropriate in another area. It may be helpful, therefore, to look at a range of options for fiscal devolution so that areas get some choice over the bits that they have. Clearly, if you are in an area of high business growth, as I am, the retention of business rates is really helpful because we have high growth anyway. In other areas, the tourism levy might be really helpful, but there will potentially be parts of the country for which neither of those options is particularly useful; indeed, they may even be detrimental. Having a range of options will be really important in how you look at this.
To go back to the previous question slightly, there is also the business about people wanting to see how their taxes make a difference to their local area, regardless of which tax it is. Even if all you are doing is passporting income tax, if people can see how some of that income tax is being spent in their local area, and that is visible and accountable locally, you may at least get some slightly different outcomes from what you would have had otherwise.
Jonathan Stephenson: Financial stability requires diversified revenue streams. In local government, we have very few revenue streams. We have four of them: council tax, business rates, fees and charges, and limited grant funding. We had commercial income, which has changed in terms of the approach we can take.
The LCN’s position is that, where costs are local, revenue should be local. I have a good example of that. We talked about tourism. Oxford has massive amounts of tourism, which is fantastic, but that has a cost as well. For a population of 160,000 people, 7 million visitors to the city is fantastic, but that obviously has an impact on the public realm and on open spaces, as well as on street cleansing and environmental impacts. As a test, Oxford was looking at whether putting £2 per visitor in would help it achieve £2.5 million of income. However, at present, it cannot do that without the local powers to do that. Again, it is a bit handcuffed in terms of the income streams it could achieve, but visitors who visit Oxford would probably be very happy to pay £2 as a visitor levy to come into Oxford.
Lord Burns: I go back to my first category around whether this was higher taxes or reallocating spending. Of the things you mentioned, the e-commerce levy, the visitor levy and keeping all business rates are all cases of more taxes. The only one that I would describe as the devolution of existing taxes is income tax, of course, but you are happy to sell this on the basis that, because they are called charges or levies, they somehow or other do not go under the heading of taxes.
Eamonn O’Brien: I am not a cynic; I would not be as cynical as that. I will leave that to you to decide.
To be clear about this, the alternative is that people are going to pay more in taxes anyway if we do not get this right, and they are going to pay significantly more in taxes because council tax is going up every year. As Lucy was saying, people are paying more and getting less. That is breaking an element of the social contract in places where people are feeling hard done by because of this situation. There is a massive debate around what to do about council tax but, in the meantime, it is continually going up. Nowadays, it is a deeply regressive and unfair tax.
The alternative here is not a low tax nirvana. We are still going to be in a situation where we are spending more money on failure, with an inability to deal with some really tricky issues. There has to be an honest discussion, if we are serious about fixing these problems, around new levies or taxes potentially being part of the solution. As I said earlier, there is a huge amount that could be done with the existing amount of money if we were given more control over it and had more influence to spend it in different ways. I could give endless examples, from health and social care to housing and children’s services, of where we can demonstrate that. The problem we have at the moment is our inability to do both things at the same time.
Lucy Nethsingha: If you have devolution, it is not necessarily always about putting up taxes. Taxes rarely go down; they are sometimes held steady. In Cambridgeshire and Peterborough, under the previous mayor, we had a mayoral precept for bus passes for young people. We now have a Conservative mayor. He has decided not to raise that tax, so there is a very tight squeeze on how much money can be spent on buses. That is about local accountability. There is a clear choice for the local population between whether to vote for a mayor who raises taxes and get better bus services or to have one who keeps them static, meaning that the bus services must be managed so that they stay within the budget. There is at least clarity about it and there is local accountability. People can see that our bus services have got better since we had the mayoral precept, but they are now being squeezed again. But it is about accountability and being able to see if your £36 a year goes on this. If it does not go up, we do not get as much of it.
Baroness Penn: I want to follow up on the question of which taxes, on Lord Young’s point about council tax capping and Jonathan’s point about having a bit more flexibility over business rate design. It feels like the taxes that we think of as local are quite centrally controlled, but something that is not often raised is devolving control over how those taxes are calculated—whether that is more flexibility over council tax or on how business rates work. I just want to know whether that would be part of the mix, in terms of which taxes or fiscal devolution.
Jonathan Stephenson: For the last 15 years, we have been capped on council tax. Think about the commercial world: in different areas, there is a different requirement on resources and on spend, so having 2.99% without going out for a referendum is a real challenge for local authorities. If they have a democratic mandate and have been elected, they should make decisions. Central government makes decisions at central government level; the Government will make decisions on income tax or national insurance without having to go back out for another referendum. At the moment, the tools to do that are really challenging and very difficult for democratic accountability. The leaders and politicians have been voted in, but they can raise council tax only up to a certain level. If they want to go further, they have to go out to a referendum. Not many politicians are going to ask people, “Would you like to pay more taxes?” So that control is not really helpful.
Different areas have different requirements. In some areas, such as buses, as has been said, politicians will say, “We would like to put more into bus services” or “We would like to put more into open spaces”. The public, through consultation, will actually say, “We would like to see that”, for some areas. So they should have the powers to increase council tax if they want to and they have that buy-in locally. That is a real challenge.
We see across the country, in the commercial sector, that the same supermarkets charge different fees at different places, because the demand, need, cost of service and resources are different. So why can local government not have that sort of flexibility as well? There is a difference but, at the moment, we are all treated the same with regard to council tax. I am just using that as an example, because it was highlighted.
Lucy Nethsingha: Your point about which taxes local government has any control over is a good one. We have very little control over anything, in terms of what we are allowed to raise money for. This means that we increasingly have to raise money from the very small number of things over which we do have control: car parking is an obvious example. It is one of relatively few areas where local councils are able to put taxes up—in effect, they are taxes on parking—and mostly they do. Some places choose not to, because they choose to prioritise bringing people into their high streets in response. There is a massive debate going on in Cambridgeshire and Peterborough about where we do that and where not to.
That example also brings out the much greater opportunities in some areas than others. So the opportunity to charge for car parking in the centre of Cambridge is completely disproportionate from what it is in some of our market towns. When you allow flexibility, you also need to recognise that those flexibilities are likely to benefit some areas more than others. There are questions there about how you make sure that any flexibilities do not just benefit areas with potential for growth and visitor income, but think about how other areas can benefit as well.
Q100 Baroness Wolf of Dulwich: The car parking example was quite good for me and my question, which is about equalisation. One of the things that always comes up when we talk about fiscal devolution—not decentralisation, in your sense, but devolution—is the fact that some places have more opportunities to raise money than others. Equalisation is something that central government already spends a large amount of time worrying about and no doubt will again.
Before I come on to asking you whether you think this is a major problem, I am interested to know whether you think that current equalisation works anyway. There is a certain tendency to talk as though we have an equalisation system at the moment that is just fine, but now we are heading off into the badlands. Maybe that is true, but I would be interested to know whether you think that the current approach, in which you have a limited number of income streams all of which are tightly controlled, is delivering something that could be seen as fairly equalised or whether that is not the case.
Lucy Nethsingha: It is not the case, I think. The vast majority of rural councils would say that they do not get a fair deal from the current system. If you look at the per-head spending in an area such as Cambridgeshire in comparison with some of our more urban areas, particularly London, it is far, far lower. That is even more the case if you look across education and health, as well as local government. It does not feel fair to lots of places.
Eamonn O'Brien: There will always be a debate about what is fair and fair funding, and what drives need. In the last 15 years, we have seen a move away from deprivation and a move towards deprivation in how health funding is largely determined. It is a complex thing, and we would be kidding ourselves if we said that there was an exact answer that was completely perfect, unless we had twice as much money to deal with, when it would not really matter. There will always be a debate about how you distribute the money.
At the moment, we have a fairly obscure and difficult-to-understand system of tariffs and redistribution that many people in local government feel they have no ability to influence. Moving away from something like that and having a more local discussion and debate about how resources are shared is a far better way of dealing with it. That has certainly been my experience from devolution: we get certain pots of money at a Greater Manchester level, and sometimes my council benefits and sometimes it does not. Sometimes we get our fair share and sometimes we do not, but I would rather have that.
Baroness Wolf of Dulwich: This goes back to Lord Young’s point: you are being given a pot of money with more freedom to do what you like with it. Can I push you a bit further on that? What if we moved to a system that was more like car parking or hotel and tourism taxes, in which local governments, presumably at many different levels, have different powers to raise taxes and can make different decisions about whether they want to have a bus precept or not? I am putting words in your mouth, but would that be any worse from what we have at the moment? If it would, what would be your preferred method to make sure that things did not get too unequal?
Eamonn O'Brien: We have to accept that, in any sort of localism agenda, local areas will make different decisions that look and feel different. I do not think it can be too stark, but it would not be unreasonable for Greater Manchester to choose to take the overnight visitor levy when the Liverpool City Region does not. I do not think that that would be a major problem; it is something the country can be quite relaxed about.
The question is who gets to determine what a sufficient level is. It comes back to the point that Lucy made earlier about accountability that, if we get it wrong in a local area and put too much resource into certain areas and not others, we should be accountable for that back to the electorate. This idea of saying, “The only way that we can ensure that there is no postcode lottery and complete equality across the country is by containing and restraining everything in the centre”, I would argue, has not worked. We should embrace the differences and say that there is probably not a perfect position in all this, but it should be guided by a series of principles and what you perhaps might call an accountability framework on outcomes. We are moving towards a sense that, if we achieve the outcomes, we can be pretty relaxed about the means by which it is done.
Lucy Nethsingha: You also need to recognise that different places will probably end up with different outcomes, and that that might be a choice, but that is okay. Actually, if some places choose to have more street lighting and more nightlife, and other places choose to have less street lighting and less nightlife, that is okay. Places should be different. There should be differences even in how our market towns feel, but the current system does not seem to allow much flexibility for that at all.
Jonathan Stephenson: There is disparity around the funding but also around regions. In the east of England, as I am sure my colleagues would agree, we get very little funding compared with other parts of the country. There is a real opportunity for accountability and local ownership, and the opportunity to decide and be accountable for those decisions locally, at the lowest point at council level. Doing so gives us a longer-term view on a place; at the moment it is piecemeal and day-to-day. We are trying to plan long term, but when political and funding cycles come together they create very short-term thinking. That creates difficult issues where we cannot plan for the future of both the people and those places.
Q101 Lord Newby: I understand and accept the argument about local decision-making leading to different outcomes. To what extent, however, do you think you still need a national minimum in terms of standards? Suppose you had a council that decided it was going to do something very radical, which meant that you were getting deep cuts in provision, and in some cases it was possibly very costly. How do you cope with that? Do you accept that if you have considerably more local decision-making, you can get not only the sunlit uplands of more growth but also the sloughs where things go wrong—I mean “sloughs” without a capital S.
Eamonn O'Brien: This is absolutely a dynamic of the debate, and it must be had because it is important. When you look at a range of the services that we are talking about, you would still have national standards on housing, for instance—on housing quality, social housing and the regulator. You would still have national standards on education, children’s social care and adult social care. There would still be the national audit system for local government, although that is in itself going through some difficulties at the moment. There is always the provision, too, of some form of intervention from the Government, which is a potential check on some. You gave a good example; there are other examples at the moment where there is active intervention in councils that have taken too much risk, perhaps, or that have made some reckless decisions. They are however probably the exception where councils are concerned. It goes back to an element of trust but with a framework of accountability. There is a pretty strong framework of accountability for the types of services that we offer.
There is also an element of understanding shared outcomes; I mentioned this earlier. If we can agree a sense of shared outcomes between national and local, and hold ourselves to account over those in that relationship, then we should feel confident to let go of the reins more than we currently do and say, “We will give you the opportunity to prove yourself against a shared set of outcomes”. That is effectively what we have now in Greater Manchester. It has not had time to really show its results yet, but that is a fair way of working. It is probably a stepping stone towards what it ought to be because, of course, in many other countries around the world this would be a fairly alien discussion. We should acknowledge that, too: that other countries would be surprised that this is even a debate. It is not how most countries operate. It is fair to say that we could look at using that existing framework, but also at some form of shared accountability of outcomes. I do not think we should be afraid of saying places will look and feel different, and that there will be different outcomes at the same time.
Lucy Nethsingha: The current framework in which local government operates feels pretty crazy at times. If you think about the legal requirements that we have to provide special educational needs services—which we cannot provide because there are not enough educational psychologists available to provide them, and yet we are held legally accountable for that—we are bleeding money out in a crazy way. There are no standards however about what our roads or street lighting need to look like. At the moment, we have a structure within which local government is attempting to operate, with very tight and sometimes completely undeliverable legal expectations in some areas and almost no legal expectation in others. That is the position that we are currently trying to navigate. A slightly more rational accountability framework might be welcomed by a lot of people, but it should not be overly prescriptive.
Q102 Lord Reid of Cardowan: During the discussions prior to today, and indeed after today, I have not been able to understand how equalisation would work. Put simply, the distribution of more equality is largely determined—not exclusively but largely—by the Treasury. This may be fair or unfair, but that is the present system. The more that fiscal devolution occurs, the less power and quantity the Treasury will have in determining equalisation. On the other hand, if success through local autonomy is to be rewarded, it is a natural concomitant that there will be failures. There will be a need, perhaps a greater need, for some form of equalisation. At the moment, as you said, it is very complex, and yet it is centrally decided. How will equalisation work structurally to overcome some of the disadvantages and the lack of success in areas after fiscal devolution? Do you have a formula or a structure for that, or do you just think that this is a matter for future discussion?
Jonathan Stephenson: I will not go directly into the formula, but we have gone from a place of the Treasury being the controlled decision-maker to being an assurance role, and then to the powers and funding being passed down to local government. There is a big piece around the culture change of local government and the transactional relationship between local and central government. There can be many formulas, but central and local government working differently to deliver these outcomes will be a massive cultural change in government. There needs to be a reset; there needs to be engagement; and there needs to be discussion on how we can work together and not continue with the current parent-child relationship. The formulas can come with that: we must have a framework, whether it is a local, national or regional framework, for public service and public life, while giving wider parameters for doing things locally. That is the risk of failure, but accountability locally means that if there is failure, it is local accountability with assurance at Government level as well. I do not know if I have fully answered the question.
Lord Reid of Cardowan: That is a slightly different issue. When you say assurance, it means that the Treasury will still be the treasurer of last resort for failure.
Jonathan Stephenson: Yes, as Government.
Lord Reid of Cardowan: That also has implications for fiscal rules and so on, as presently constituted. You can imagine that there will be all sorts of problems if the Treasury is landed with bills of a significant nature; recent local government suggests that it might be. What I am asking is not about the relationship between the parent and the child; it is between the siblings. Once you pass the power down, a proportionate passing down of power means a proportionate decrease in the central capacity to equalise. That means an increased responsibility to find a way for the siblings to compromise. Do you have a plan, or a formula or an idea of how that might occur, given that you accept that if success is rewarded then failure is going to be penalised?
Eamonn O'Brien: The short answer is that we do not. That is something that needs to be worked on through this process.
Lord Reid of Cardowan: That is why I did not understand it; it does not exist at the moment.
Eamonn O'Brien: We have a set of principles on which a system could be developed. That is probably our starting point. The first is that we should aim, as much as is possible, for a fiscal or fiscally neutral starting point, and a floor at which we allow for devolution to be built upon. I will give an example. If you had a large employer in your area that went bust, and that was a very significant hit to your business rates, or if there was some form of natural disaster—say, flooding—and that had a big hit on your local area, then the question would be about who steps in to equalise in that situation. This would contrast with another scenario where you borrow recklessly, your commercial investments go sour and you are left with a very significant gap. I think there are two versions of failure—or maybe underperformance—that might merit different types of responses and interventions. It starts with understanding the principles through which you would intervene, should there be underperformance. It is fair to say that I cannot point to a formula at this stage that says exactly how it will work.
Q103 Baroness Wheatcroft: I will take the siblings analogy one step further. Never mind whether somebody makes a mistake and they borrow money they should not have for a foolish project—one sibling is likely to be more attractive than the other. Car parking charges and visitor levies will bring in a huge amount more for an attractive town than for the really unattractive town that does not get many visitors—it might have the odd business traveller. It simply does not have the same advantages. Is that something that you would hope to compensate for, or is that just the luck of the draw?
Jonathan Stephenson: As local government, we do that all the time in certain places. We have lots of market towns, and lots of other towns and cities, and we—members and officers—have to do that equalisation all the time. There will be one that is more affluent and another that is more deprived and needs more resource. We work with the public on that justification. Some are very keen to see the more prominent town or city being invested in more, because of the ripple effect out into the countryside. There is a lot of work, and even though we have not got the full details of a framework, there are definitely principles that we already apply to local government life.
Baroness Wheatcroft: How do you think it might work under the fiscal devolution that is now being discussed?
Lucy Nethsingha: I will try to answer that and the previous point. These are my thoughts and not those of CCN, just to be clear. We talk about the Treasury having to pick up the tab for local government failure, but actually quite often the people who have been picking up the tab are the local council tax payers. That is painful for them and for the councils that take over from the ones that have caused problems—and there have been a number of those.
In a number of cases, if you had asked neighbouring councils whether they knew things were likely to be going wrong, they probably would have done. There are quite a lot of situations where the councils in a surrounding area can see and understand—and hear rumours about—what is happening, but they have no capacity or mechanism for saying, “This council in my patch is heading in a bad route”. So, if you are looking at fiscal devolution and looking at where that accountability sits, some of it can sit nationally but some of it could also sit at a regional level, potentially at a slightly higher level than the mayoral combined authority level.
Coming back to the point that was made before about siblings and local government also supporting the less attractive towns, that sharing across regions and the stronger areas supporting the weaker areas are things that happen. It could certainly be incentivised within the way in which fiscal devolution happens. The more you look across broader regions, the more you are able to think, “If we are judging the growth of a whole, larger region and incentivising that, you then have to bring everywhere up to some extent”. So there are ways in which you could look at regions and look at responsibility and accountability being not just at a very local level or at the Treasury level but at some levels in between, so that people have more control over what their neighbours are doing, which we do not have at the moment.
There is also work that the LGA does with its peer improvement programme and scrutiny. Some of that could be helpful in mitigating the potential for disasters. It does not necessarily answer the equality point, but it does answer the question of who might be responsible for failure.
Jonathan Stephenson: On that point, there is an opportunity to grow on some of the things we have had in local government, such as the duty to co-operate, the duty to support and the duty to collaborate. You could look at that in regional areas and strengthen it; you could build it with local and central government to create that insurance piece. The sibling probably knows more about the other child than the parents, so those siblings need to work together to make it work.
Eamonn O'Brien: It all exists in a context where we have a mechanism for equalisation at the moment, but would we all say it is working? We have the Barnett formula for the devolved nations, is that working? There are international equivalents, such as reunification in Germany; equalisation between east and west was constitutionally required. There is an argument that we should ask: is that working? There are formulas and mechanisms—
Baroness Wheatcroft: The answers on the whole are not positive.
Eamonn O'Brien: On the whole, I think the argument is that they are better than not having them. But the question is: can we get to a point where we start from a pure position of equality? I do not think we can do so. How we make sure people do not fall too far behind is an important part of that, but I also believe that that should not mean that we hold people back at the same time.
Q104 Lord Butler of Brockwell: We now come to a series of questions about who makes the decisions in a greater devolution system. First, I will ask you about a specific point. The Prime Minister, as you know, has announced that mayors will be given new powers to override local councils’ planning decisions. Is this a positive development or is it actually a step away from localised decision-making and, hence, from the very spirit of devolution?
Eamonn O'Brien: The LGA’s position is that there is a great deal of concern about these types of proposals, because it is certainly our belief that local councils represent their local communities and residents and their needs and are accountable back to those people for that. Therefore, anything that potentially takes away from that would undermine that position on localism. Ultimately, it will depend on your perspective of what is local and what is appropriate at a local level. The argument, I suppose, from the Government is that economic growth cannot be purely a local matter; there has to be an element of regional consideration of local growth. It is a debate that will continue to go around.
What we are keen to do at the LGA is to express those concerns, and also to highlight where it is already working quite well. It actually becomes less about powers and intervention and much more about relationships and co-operation, which are far better ways of establishing a system than purely one of hard-edged powers and intervention.
Lucy Nethsingha: There are a couple of things in your question that are really worth thinking about. First, local authorities frequently already have their decisions overturned by the national Planning Inspectorate or by Ministers. If that decision is coming to mayoral combined authorities, it is probably at least slightly closer and more accountable than if it is being done by the Planning Inspectorate or a Minister. As with all these discussions, it slightly depends on whether you are moving powers down or up.
When the Prime Minister talks about moving powers to mayors, I am constantly concerned about whether he means mayors very specifically—namely, one person—or whether he means a mayoral strategic authority. I would be enormously worried about significant planning decisions resting with one individual, because the potential for corruption in that particular circumstance is vast, and he should be really nervous about it.
Jonathan Stephenson: We at the LCN support strategic planning, but we feel it important that local accountability for planning decisions must remain with councils. Thinking about the decision-making piece, 90% of applications are decided at the local council level. Some 1.5 million properties have already had planning approval. The decision-making level is important, but decision-making is actually happening. We need to look at how we take a holistic approach to large schemes and long-term growth, because it is challenging at a local level to make those big decisions, while also not having support around sustainable infrastructure. That probably needs a more strategic, holistic view tailored to a place. Those local decisions on the place and the environment need to be made in the local area. There is definitely a role for strategic planning, but local accountability and decision-making should be at the local council level.
Q105 Baroness Penn: Continuing on from that theme but broadening it out, what powers and responsibilities should rest in your opinion with the different tiers and types of government as outlined in the English devolution Act? A lot of the focus that we have had so far from this new Administration is on the strategic authorities and mayors. Are the Government right to place their focus there versus local authorities, going beyond just the planning question to the whole gamut of policy areas and decision-making?
Lucy Nethsingha: My experience of working in a sometimes dysfunctional and sometimes more functional strategic authority is that the really important thing that a strategic authority can do is try and build local consensus and a shared vision across the place. If you get that shared vision, that is when you get a real driver of growth and a real sense that everybody is working in the same direction.
What we have had when we have been dysfunctional is one direction set by one mayor, then another mayor coming in and completely changing the direction. An enormous amount of time and money is wasted on mayor number one commissioning X reports, which then get put in the bin, then number two commissioning another set of reports.
The crucial thing is about making sure that everybody is incentivised to work together and that you do not end up with a system where it is very easy for people to veto other people’s ideas, or go off in a direction where they do not have the support of the broader area.
When you are thinking about the structures, the most important thing is that the structures support each other to build consensus, not necessarily giving this power to this person and that power to that person. Does that answer your question?
Baroness Penn: Does what is being put in place through the devolution Act and this Government’s plans do that? Do they provide the structure for building consensus across those areas?
Lucy Nethsingha: I do not think it is clear. It comes back to this question: when the Government are talking about mayors, are they talking about individuals or strategic authorities? If they are talking about strategic authorities, then it probably does build that consensus because you have to have the buy-in. It is clear that, whoever the mayor is, they have to work with their partner authorities and they cannot do things on their own.
But a lot of the way it is expressed is that it is about an individual. Putting all that emphasis on an individual is not helpful in relation to building that consensus. If you are going to get growth, you have to have long-term visions that will survive more than one individual. That is what happened in Manchester before and after Andy Burnham.
Eamonn O'Brien: I cannot complain about anything in Greater Manchester. I think the powers broadly set out make sense. Strategic authorities are well-placed to look at things like labour markets, travel-to-work areas, skills, housing markets—and transport would certainly be in that category.
But it has to be a relationship of mutual respect and of mutualism, I suppose. Both have to exist together; you need the sort of symbiotic nature between local authorities and strategic authorities. I think you could easily compare the set-up and the way in which we work in a place like Greater Manchester—and it would be true for other places—with, say, London, where there is not quite the same relationship between the mayor, the mayor’s powers and role, and the 30-odd authorities across London.
The Prime Minister, before he had his current role, used to describe himself as the captain of the football team. It was helpful because there were 11 of us. We were all equal players but he was the person who brought us together around those objectives. By and large, that worked. In the time of the combined authority in Manchester, we have only had two votes at combined authority meetings. One of those was on the position on Brexit and the other was on bus franchising.
By and large, it has forged consensus across different political parties and different political leaders. So when it works, when it is founded on mutual respect and a sense of mutualism, then it works very well and it can work very well in those areas. But it has to be a partnership and it has to be a partnership of equals.
The risk in all of this is that we somehow recreate a two-tier system of government where one is the poor relation to the other. I think that is a risk; I do not think it is an inevitability.
Jonathan Stephenson: The only point to add there is to make sure that it is complementary with the strategic authorities and the local council. It needs to be a partnership. Moving forward, devolution does not stop at that. Strategic authority has to go down. The relationship is key to making that work. It might look different in different parts of the country with the functions and services. Some of those discussions will happen and it will be the right solution for that place.
Q106 Lord Carrington of Fulham: I want to follow up on that. The question of the power between the mayor, or the mayoral authority, and the local councils will largely come down to money, will it not? If there is serious money devolved to the regions—to the mayors is what they say, so we assume it is to the mayor personally in his elected capacity—he will have the money to be able to decide what goes to the local authorities that form his advisory council around him. The advisory council has no statutory power to be able to control the mayor, or does it?
Lucy Nethsingha: In my combined authority, the mayor cannot spend the money because it comes to the combined authority, and on most of the transport things, I and the other transport person have a veto power. So he cannot make decisions at the moment purely on his own basis. He has to do it in collaboration with the council leaders who form the combined authority and, in particular, the two upper tier transport authorities, because we can veto things.
That is not the narrative that you would get from government. That is why I think there is a lack of clarity about it. The money that was given to Manchester was not given to the mayor; it was given to the Manchester authority and it had to be decided by the people who sat on that authority. That is my understanding.
If you were to listen to the government narrative, it is all about mayors and giving money to mayors. I hope very much that they are not planning to give that money to an individual person because, again, I think that would be dangerous.
The Chair: Can I ask about politics and how that interferes? Of course, in Greater Manchester, you have been greatly helped by the fact that it has been pretty much a monopoly Labour place.
Lord Razzall: With one exception. Do not forget Stockport.
Eamonn O'Brien: Bolton was Conservative for a time.
The Chair: Okay, but what I am particularly interested in is the Cambridgeshire experience where a Conservative mayor was elected last year. Has the functioning of the authority been made more difficult as a result of having people from different political parties?
Lucy Nethsingha: The experience in Cambridgeshire is a salutary one for all sorts of reasons. We had a Conservative mayor and then a Labour mayor, and we now have another Conservative mayor, and, in between, we have had lots of changes in the make-up of the combined authority leadership itself.
The Chair: And Cambridgeshire has largely been Liberal Democrat.
Lucy Nethsingha: Well, it moved from being Conservative to being Liberal Democrat over the course of that period.
The Chair: Has that caused problems in the way the structure has worked? That is what I am asking really.
Lucy Nethsingha: In a sense, it has meant that it is really important for the newly elected Conservative mayor to recognise that he needs to work with partners because he cannot achieve things on his own. It did not take him very long to realise that, if he did not work with other people, he was not going to able to achieve much in that role.
He is quite good at working with other people, to be fair to him. We have sometimes robust and sometimes collaborative conversations, but the conversations are really important. What is also very important is the sense of trying to get everybody to work in the same direction and to try to get cross-party agreement on what are the priorities for our residents.
The bus example is a good one, in that it is very clear that our residents are supportive of the young people’s bus pass and there is cross-party consensus that it is an important thing. We are all struggling to make sure that we can afford to carry on doing that, in spite of the mayor’s manifesto pledge not to raise the precept. So there are complicated and sometimes tense cross-party conversations, but those conversations are the best thing for our area, because they are building consensus.
In some ways, it is almost more useful and constructive to have a combined authority in a place where you have a variety of different parties instead of where you, in effect, have a one-party state. You end up getting that consensus—in the end, you hope—if it is done well.
Lord Carrington of Fulham: London is very different, though. London is often talked about as the model that the Government are using to decide how fiscal devolution should work. Do you see London having to change? How do you see this developing?
Lucy Nethsingha: I do not think that there has been much discussion about everywhere getting to the same position as London, because there is no sense that other places will have an assembly to hold the mayor to account. The model that is talked about more often is the Yorkshire one, in which there is a strategic authority with, I think, two upper-tier councils and a mayor, and the mayor is first among equals and cannot make decisions on his own. It is not quite the same as the London model. Certainly the sense that I have from other places is not that they are planning to move the London model to everywhere else, although the mayors of other places all want the same powers.
Lord Carrington of Fulham: The one that has been suggested is planning powers: the Mayor of London has greater planning powers than, say, the Mayor of Manchester, as I understand it. If that happens—if you give that power to mayors who do not have it currently—will you still end up with the same degree of co-operation between the combined authorities and constituent councils?
Eamonn O'Brien: In my experience it will absolutely create tension. It should be seen as a fairly extraordinary power, almost a last resort. It should be seen as the mayor and mayor’s office becoming a greater stakeholder in discussions around a particular planning application. I would imagine that these interventions would be only on planning applications of some size and significance.
However, you are absolutely right to say that there are certain things that the Mayor of London has that no other mayors do. Equally, London is not a combined authority. Therefore, London councils look quite jealously at other places in the country on a variety of things and say, “We don’t get to do that”. So you might say that there is a typically British contradiction here, in that there are very different systems in different places. I am not sure that there is a rush to turn London into a combined authority, at the moment. I am not quite sure how that would work in practice. You are right though; there is a disparity there.
Going back to the point, it would create a tension but, if the foundation is one of co-operation and mutual respect, that tension would not be fatal to the set-up that we have at the moment.
Q107 Lord Burns: Is it possible to live with the large number of different models that there are or should we be trying to work towards a smaller number, so that the public can understand the powers and responsibilities of the different tiers? It seems to me that there are so many different systems in play at the moment that it is very difficult to make clear choices when one talks about what the responsibilities should be.
Lucy Nethsingha: You are absolutely right that there is a need to make it clearer, so that people understand who is making which decision, at which point. In Cambridgeshire at the moment, we have five or six organisations making decisions about transport, for example. It is almost impossible for the public to know who to hold responsible for the fact that their road is closed again. It would be much better if there was more clarity.
Lord Burns: Is there more similarity between different parts of the country?
Eamonn O'Brien: This is where local government reorganisation—if I dare mention it—comes into the conversation. In certain parts of the country, people may be represented by a town or parish council, a district council, a county council, an MP, a mayor and a police and crime commissioner. We have to try to make sense of all that when next door may have two or three layers fewer than that.
Q108 Lord Razzall: I have given previous notice of what I was going to say and you are absolutely right. The conversation so far, until your comment at the end, was all on the assumption that the issue is the mayor and strategic authorities. But the truth is that very few parts of the country actually have a mayor and strategic authorities, and the announcement yesterday postpones that even further. What about accountability in that context? What is the accountability for the provision of service in these areas? Obviously, it is clearer where you have a mayor and strategic authority, but what is the accountability to all the other levels of local government, all of which Eamonn ably listed, so I do not need to repeat them? How will it work in this hybrid world of different authorities and powers? Where will the money go and who will be accountable? By the way, I agreed with what you said about the mayor and corruption.
Lucy Nethsingha: One of the biggest concerns from the County Councils Network is that some of our rural areas are already behind in the devolution race, as it were. The announcement yesterday may make that happen even more slowly.
Lord Razzall: Sussex was going to elect a mayor but it was not clear—
Lucy Nethsingha: It is not clear what the strategic authority is, yes. There is a real concern from many rural areas that the constant chopping and changing means that they are endlessly disadvantaged, because they do not have mayors. They have been told to hang on and get their unitary authorities, but now that has been postponed. It is a very serious concern across a lot of places and, if there is going to be fiscal devolution, I think it needs to be clear that that, if it is coming to strategic authorities, it also needs to come to county councils where those are the highest level of place—if that makes sense.
Lord Razzall: Do you think that that will happen in the short term?
Lucy Nethsingha: I hope so. That does not necessarily mean that I think it will, but I hope so.
Eamonn O'Brien: There is no getting around it: an absolutely necessary part of making devolution work is a clear, understandable and coherent map on which you can put devolved arrangements. I suppose that, if there is an irony in the devolution debate, while the criticisms of local government reorganisation are that it potentially lifts levels of governance away from communities, the argument we would all make is that we need to find ways of bringing services much closer to people, communities and neighbourhoods, and to work with public services around people rather than processes. So there is still a battle to be fought around structures.
Clearly, yesterday’s decision will prolong that, but missing in that debate is that, regardless of the details of that structure—and there needs to be a structure—we need to find a way of making public services much more engaged and responsive to people, communities and neighbourhoods. We are not spending as much time talking about that, because it is difficult and complex, as we are about the size of new councils, what level they should be, what we should call them and whether there should be a mayor or not. As important as those issues are, they are only one side of the debate on this.
Jonathan Stephenson: We in this room find it very challenging to understand local government and the public sector. Imagine how the public find it, especially with different announcements and different decisions on different days. The day before yesterday was about LGR, but now it is not. Mayors are coming, then mayors are not. To navigate that world for people outside of this space, clarity and accountability are key, and devolution should be to that lowest point, that local community. It is not about taking powers up from that local community to the strategic authority; it is about passing them down—passing them down from the Government to the strategic authority, and passing them down with clear, accountable processes.
But it is more of a challenge with the landscape changing. It was easier when we were looking at unitarisation. We were looking at a different number of shareholders in that space with the mayor and now it is different landscapes. Cambridge has got different landscapes equivalent to Manchester as well.
But they can be different. We need a framework. We need to be careful not to create a franchise. If we create a franchise then everybody is the same. Localities need to be different. We need a strong framework rather than a franchise where everybody does exactly the same. That will not be suitable for each place. There will be differences between Manchester and Cambridgeshire and Peterborough, and they need to be recognised as well.
Lord Razzall: London will clearly be a problem because London has the most resources and the most powerful local authorities. You touched on the powers of the mayor, but actually the mayor’s powers are relatively limited in London, and local authorities are not going to give up those powers. So how much of the money are they going to get, and what is the accountability for it?
Lucy Nethsingha: There is an interesting example of a place that has a devolution deal but no mayor: Cornwall, where they have been given quite a lot of the freedoms that other strategic authorities have. They are designated as a strategic authority even though they do not have a mayor. There is very clear accountability because there is one council.
The Chair: There is a lot of interest in this topic. Baroness Wolf, Lord Newby and Lord Reid all have questions. I shall go first to Baroness Wolf.
Q109 Baroness Wolf of Dulwich: You said that there needs to be a clear structure. Everybody always wants a clear structure, but this country has never had a clear structure, and every time we try to create one, we fail. So I will throw this back to you slightly and ask: do we really need a completely clear structure?
Let us take skills, for example, where they have not devolved control over the funding, but they have devolved control over how the money is spent in very varied degrees. The system has not fallen apart as a result. There is DfE still sitting on a chunk of it.
If you looked at it the other way and asked what would be the minimum level of uniformity or reorganisation that would result in a genuine shift towards more local control, more local efficiency and more local accountability, what would it be?
Lucy Nethsingha: It is an interesting question. Looking at Cornwall is quite an interesting example. They have a level of responsibility and accountability but they do not have all the powers that Manchester has. I think they are very keen to get more, but they have clearly been able to do some things well. We can go back to buses. They have been much more effective in managing their bus services than other places. They have not used all the powers they have, but because they had them, they were able to have different conversations with bus operators.
If lots of places did not get further than Cornwall, that would be disappointing. But from a base of saying, “Everywhere should have this”, you could start building from that.
Eamonn O'Brien: A good foundation or starting point is probably economic geography. That is probably one of the reasons why Greater Manchester has done as well as it has. It has a pretty coherent economic geography as well as decades—arguably centuries—of informal relationships. It works well there. With the travel-to-work patterns, the transport infrastructure and historic connectivity, it all adds up to something that makes sense.
So that is a good starting point, but I appreciate that there are many parts of the country that will not have that starting point. If you are looking at this from an economic affairs point of view, what is going to help drive things like economic growth? What is going to help facilitate genuine public service reform? Reorganisation is part of that.
You start with that. I think you are right that we are never going to get to a position where it is completely clear. As I said, this is only England as well. We have to look at this more broadly and accept that there will be different arrangements in different places, but it will be about the principles that we are coming at this from. What is going to help drive economic growth? What is going to help better public services and, therefore, better outcomes for people?
It is not about arbitrary numbers based on size. Whether it is true or not, there was the famous story of Michael Heseltine going up in a helicopter and looking down on places and drawing maps off the back of it. I do not know whether that story is true but, you know, it illustrates this idea of arbitrary decision-making. I do not think that will be accepted by local authorities and strategic authorities. Ultimately, decision-making will fall apart if it is not founded on something as solid as economic geography.
Lucy Nethsingha: I would challenge that slightly to say that, actually, in my part of the country, economic geography is extremely muddled. The travel-to-work area is vast. The travel-to-work area around Cambridge covers lots and lots of different economic geographies, including London. But there are some building blocks. The county structure in this country has been here for many centuries and is very much recognised. Those are places that people recognise.
If you are going to start thinking about what structures this country is built on, it has been built on our counties for a very long time. If you want to have bigger geographies than a county, you can build counties to make regions. People know broadly what county they live in, across at least the majority of England, even in Manchester.
Eamonn O'Brien: There are still people in Greater Manchester who think they live in Lancashire.
Q110 Lord Newby: I want to pick up two points that you made, Lucy: one about Cornwall and one about counties. Cornwall is a unitary that is getting devolution. It is not getting a mayor. If I am a county that currently does not have a mayor, presumably I will be saying that I want to be like Cornwall. Why bother? As you say, here is a well-understood region. It has an infrastructure in the unitary authority. It would be a lot easier just giving them more powers rather than establishing a mayor. What is your answer to my request, as Hampshire, to remain as Hampshire?
Lucy Nethsingha: Cornwall is a county that is a unitary. It slightly depends on whether Hampshire wants to become a unitary; that is an open question at the moment. The Government have said that every strategic authority has to consist of more than one unitary. If they change that rule, then I think you will have lots of counties asking, “Why should we not have these powers?”
Lord Newby: Except Cornwall?
Lucy Nethsingha: Exactly: except the exceptions. But at present, Cornwall does not have all the powers that Cambridgeshire has. Why it should not have them is an open question. If you give the leader of a county all the same powers as a mayor, that person becomes very powerful. We come back to my point about not giving too much power to any one individual. My point about mayors originally was that they have to build consensus across a wider area, and they need to be first among equals in a group of people.
County leaders are sort of that because they are answerable to their county councillors. Like the Prime Minister, they can be kicked out by their colleagues at any moment. So they are not completely independent. They are not quite as open to people putting their arm up their back for whatever reason. Nevertheless, there are questions about giving all of that power to one person, and it might be better to try and encourage collaboration across different regions.
Cornwall is also not a vast county. The population size of some of our counties is enormous. Essex is clearly big enough to be a strategic authority, but to have the leader of Essex managing all the things that a mayor does and all of the things that a county council leader does would be a lot of power to give one person.
The Chair: Cornwall is sui generis because of its geographical position and its cultural heritage.
Lucy Nethsingha: The response about Cornwall was on the question: what is the baseline? I think most people would not want to stay at the baseline forever but there would be other ways of collaborating.
Q111 Lord Reid of Cardowan: This follows on from a point made by Baroness Wolf, who said that local democratic structures have always been messy; I think that was the word she used. However, they are not only messy and complicated: at the moment, they seem to be in almost constant flux as well. It is a case of, “We’re going to start things, we’re going to pause things, we’re going to change things”.
My question is a very simple one. Obviously, if you want fiscal devolution, you have to start planning. However, in the present circumstances, given the existing complexity and the state of flux, in terms of what is going on at present, does it make sense to start implementing devolution until that has settled down or reconciled? In other words, should we be moving beyond the planning and thinking stage to trying to deliver devolution when the autonomous units are constantly moving?
Eamonn O'Brien: I have heard it said that we are building the plane as it is trying to fly. There is an argument that that is what the Government’s agenda is pushing us towards so that, by the end of this Parliament, we will have a clear, settled and coherent—whatever that means—map for devolution to be pushed on.
Lord Reid of Cardowan: In every postcode?
Eamonn O'Brien: Yes, in every postcode. The questions is: what do you do for places that are already well developed? Do you allow them to continue to race ahead and, potentially, to create vast gulfs between places that have nothing and places that have everything? It is reasonable challenge for us, as the system, to try to come together in order to deliver something by the end of this Parliament. Yesterday’s decision will unquestionably make that more difficult, but it is a fair objective to have in mind: we should be able to have something by the end of this Parliament that settles, or gets us most of the way towards settling, a clear and coherent map of devolution.
If we are going to get the benefits of this, we absolutely need to do that. We cannot have a system where the vast majority of things are devolved in Greater Manchester but nothing is devolved next door to us in Lancashire. We have to make progress on this, even if it is a bit messy and even if we are building it as we go. I am not sure that there is an alternative where we can leisurely pursue a situation that covers every part of England.
Lucy Nethsingha: I absolutely agree. I also think that, if you try to wait until you have a nice, neat, tidy map where everybody in England is in a similar position, it will never happen. You will never devolve.
Lord Reid of Cardowan: I am not asking for everybody to be in a similar position; I am just asking for the rearrangement to be concluded before you start to implement, not before you start to plan. Presumably, you are now suspicious that it will never happen, then.
Jonathan Stephenson: In an ideal world, yes. There are a lot of moving parts in local government but, after yesterday, there are now lots more. Some parts have stopped moving.
Moving forward, in trying to get there, we should definitely aim for that blueprint. That should be the case. On whether everybody gets there at the same time, that is what we need to work through. If you try to get everybody in that box together, you will leave a few people; they will pop out at the same time as you bring some in. Create the blueprint, create the ambition, create the vision, get some delivery and use some good practice. Hopefully, others will then follow. I hope that we will learn from them as well, because there will be new strategic authorities set up outside of Manchester, Cambridge and Peterborough.
Lord Reid of Cardowan: I have one very short question. Does that mean that you would accept an incremental application of devolution, rather than a big bang?
Lucy Nethsingha: We have to, I think.
Jonathan Stephenson: We have just seen 21 county areas go through LGR—local government reorganisation—which has been a huge challenge for the sector. We are talking about 60% or 70% of local government at once. That is a huge challenge, especially when most of us are in a very difficult space. We would love to be in that R&D space and looking at the future, but most of us are in the A&E space and looking at trying to keep people alive; I mean that metaphorically.
Lucy Nethsingha: Incremental steps towards that are also really important because a combined authority or a strategic authority does not immediately come into existence fully staffed and with all of its finances up and running. You have to start in an incremental way. What has happened in Manchester has happened over 20 years, not just in the short term. In Cambridgeshire and Peterborough, where we were starting from scratch, it has taken us at least eight years to get to a position where we have enough staff to be able to run trailblazer schemes and things.
Q112 Baroness Wheatcroft: You have all had long and varied careers in local government. Obviously I understand its workings but, from the outside, it looks every bit as messy as Baroness Wolf said. As you, Jonathan, said, a lot of local government is in A&E rather than R&D. Is there the right calibre of people working in local government to take on the extra responsibilities and extra power that devolution could bring? We have seen some pretty horrendous examples of incompetence in local government.
Jonathan Stephenson: If you look at the scale of local government in context, there have been very small amounts of failure. With regard to capability in the sector, we have amazing people who, if they had the time and resource, could be in that R&D space and looking at new ideas and new ways to prevent the challenges of things such as obesity and health inequalities. We should at least aim for that but, at the moment, most people are firefighting. We need to get them out of that space.
Fiscal devolution being one part of that jigsaw and playing a part will make a huge difference, but we still need to collaborate and work together on this with both central and local government.
Baroness Wheatcroft: That is a very optimistic way of looking at it, but how can you get them out of that space so that they can benefit from devolution? How can they get their finances sorted out?
Eamonn O'Brien: There is the question of how you will pay for it and the question of how you will get the right capacity. The Government’s announcement, which suggested moving people out of Whitehall and into strategic authorities, is a start. One way in which you could do that would be to move people away from the centre and put them into places. The Government could go further on that and, potentially, look at much more flexible and permeable ways down into local government. That would be a short-term solution to put more capacity into this.
If we had longer-term certainty around funding, there is a huge amount that we could be doing around things such as apprenticeships for new generations of workers coming through. At the moment, a lot of local authorities will say that there are real shortages in places such as planning, building control, highway maintenance, engineers and the legal profession. Some councils have completely stripped out any sense of growth and economic development. So there are big gaps.
You are right to be realistic about the starting point from where we are, but, if we had an element of even medium-term to long-term certainty around additional funding, as well as more resources, we could start to plan around a lot of that. The vast majority of what was the apprenticeship levy is not being spent by local councils; it is being shipped back to the Treasury. Much more flexibility was needed around how that could be used so that we could solve some of these challenges.
The other way of looking at this is that we need to have a pretty flexible relationship between strategic authorities and local authorities. There is a risk that, if you set up a lot of strategic authorities overnight, they will simply take from an existing small pool. We, the Local Government Association, are going to help manage that risk by looking at training and development courses. It will then take some extra resource to lift that new talent—the new generation—coming through. We could be looking at more secondments and, again, more flexibility in the short term, but this is going to take years to turn around. It is going to take years to build that capacity. You cannot just click your fingers and get people into social care or into the highest positions in planning authorities. This will take a really concerted effort.
I look at the opportunities within that. I see great opportunities for a new generation of people to come into these organisations and provide lots of new perspectives, new energy and new ways of working. However, that can be done only if we sort the finances out. That is where it will always go back to in local government: do we have a sufficient level of resource to do all of this work? At the moment, we do not.
Baroness Wheatcroft: That is the crunch question. I wonder whether the LGA has put a figure on how much it would take to get local government on a sound footing before devolution and all these wonderful visions.
Eamonn O'Brien: The figure at the moment is £7 billion.
Lucy Nethsingha: I will just touch on your point about the calibre of people in local government. My experience of recruiting into the Cambridgeshire and Peterborough Combined Authority is that, because it is now seen as an exciting and functional organisation and as an exciting place to work, when we recruit people, we get high-calibre applicants. Lots of people really want to work in their local place; they want their local place to be successful and to achieve. On the other hand, trying to recruit into Cambridgeshire County Council, with LGR hanging over us, is not easy at all, because it is very difficult for people to know what the long-term future of the council will be—and it will be even more difficult after yesterday’s announcement. The uncertainty is really hard, but if you provide certainty and a sense that this will be an exciting place to work, people will come.
Q113 Lord Butler of Brockwell: I want to return to the question of building a framework as a basis for devolution. Having heard your evidence today, I think you three are absolutely ideal to do that. Do you feel you are being properly consulted? If this committee were to recommend a mechanism for building the framework, what should it be?
Lucy Nethsingha: We are probably not being properly consulted. It has very much felt as though devolution is being done to local government and has been a very top-down process and not very collaborative.
On how that framework ought to look, I think that the CCN, the Local Councils Network and the LGA would be absolutely keen to be involved in looking at what a framework ought to look like and how it can be more collaborative. As you will have noticed, many of us think about it quite a lot. There would be enormous willingness to collaborate on what that framework should look like. Probably the sensible thing to do would be to build on what has happened and look at what has been successful already in terms of steps towards Manchester or London, rather than saying that everywhere needs to start from there, because you need to build the capacity and that takes time.
Baroness Wolf of Dulwich: I have a similar point on how we might frame what we say. You started off by pointing out that one of the things you are facing at the moment is a legal obligation to provide services that you simply do not have the resources to provide. To pick up on Baroness Wheatcroft’s point, if we are going to start down a road of greater devolution, it will be very difficult for any local authority or strategic authority to succeed if it starts from that position. My question is quite straightforward. If you took special education and social care out of the equation, would you then feel that you were in a position to start delivering in a more accountable, efficient and creative way? Are they the two key things?
Jonathan Stephenson: I have worked across unitary, district and borough councils. When I was in a unitary council, adult and children’s services was the priority when we balanced the budget. Nine times out of 10, some of the place-making opportunities are the things that are taken off the table. It is challenging to do some of the things that we need to do as a place to stimulate growth, because they sometimes come off the list. A child in care or a vulnerable adult has to come first. That is a real burden. That is part of our role in the public sector, but it means that some of those other things that we need to help stimulate local growth, and to help with GDP at a government level, get taken off the table. We are really limited on that.
I started in local government in areas where 50% of the budget was for adults and children; now it is 80% or 90% in some of those councils. They are left with about 10% to do that place work, or they have to be very creative with financial opportunities to look at investment. Again, you can be creative, but with some of those parameters that I talked about earlier, it is really difficult to move some of those things on.
Eamonn O'Brien: There will be a lot of debate about this in the Casey review into adult social care, but I remain of the opinion that there is a lot that local authorities should do around adult social care that we are currently not able to do. The cost of that has been picked up elsewhere in the system—for instance, by the NHS. Potentially, you could take it all out and create a national care service, and maybe it could even be merged with the NHS; you could have ICBs and NHS bodies dealing with it. However, I think that that would be quite a backwards step, because the solution is not a bureaucratic one; the solution is purely to ask whether we are spending the money in the right places—and we are not.
How do you deal with a problem like the £7 billion gap, which is growing? How do you deal with the demand in housing, which is growing? These are big, serious issues, and they will need big, serious, radical changes. Without that, the risk is that devolution flops a little bit, because the constituent parts of strategic authorities—the councils—are just far too busy and taken up with dealing with that crisis. It will be like driving around in first gear all the time. It will feel like we could maybe get there, but it is going to be slow, sluggish, irritating and poor, compared with an alternative that we can see but we cannot quite do.
We have not mentioned it yet, but I think No. 10 North is an interesting innovation in this space—this idea that it can become a sort of engine room to deliver this rewiring. This is a new dynamic in the system, and I am really looking forward, as the LGA—not just because the commute will be shorter for me—to working with No. 10 North and the officials there to try to improve the consultation and engagement, which has been underwhelming so far. So there is an opportunity in that to correct some of the mistakes of the past few years.
Q114 Lord Petitgas: I am going to move from first gear to 33,000 feet, as we come to an end. Obviously you have an immense amount of experience and have been thinking about this a lot. That is very impressive. We are also looking for thematics and the top questions to ask as this devolution framework is being put in place. Top of mind—I am asking each of you: what are the top three questions that should be answered and that one should really be thinking about to get this right? It could be about governance, equalisation, structures of local government, et cetera.
Lucy Nethsingha: A really important question is: where do the public think their taxes go and what do they think they pay for? How can you better align the way in which people feel their taxes are going out of their pockets with what they feel is being delivered in their local area? We need to increase the accountability and responsibility between those things. At the moment, it feels as if there is an absolutely incomprehensible gulf between what people see going out of their pay packets and what they receive. There is no way of joining up the levers. Part of that is because all of it goes into the Treasury, goes through some completely incomprehensible formula and comes out the other end in a way that even we do not understand.
Eamonn O'Brien: Does it provide sufficient resources to meet our commitments and deliver on our commitments—our local priorities, our legal obligations and our public services? Does it provide an avenue for greater efficiency? So you might see sufficiency as the first one and efficiency as the second. Does it provide an avenue to make more efficient public services work better together, more collaboratively, reduce the silo working and potentially even merge budgets together?
Then the third one would be accountability: how do we create a system that is coherent and accountable enough that it gives confidence to the Treasury, civil servants generally and Governments to say, “We can let go of the reins because the system will take care of itself”? It would be on rare occasions that we need to intervene when there are particular points of failure. So you need accountability downwards to the residents, but at this stage it is fair to say that, if we are to get to a position where everyone is on board with this, there needs to be an understanding of accountability back up, as well.
Jonathan Stephenson: We need to be partners in devolution. We picked up earlier words about consultation; we need to be properly engaged. It is not consultation at the end of a solution when someone says, “What do you think of this?” We cannot be bystanders in this; we need to be properly engaged. Central and local government need that relationship, and both parties need to play ball in that space.
Meaningful devolution must be local as well as regional. I mentioned that earlier, but we really need to think about that, so that it is not just coming down on strategic authorities but is local. We need to think about the framework to do that. We need to make sure that they focus on the key outcomes: adults and children, and health and well-being are key outcomes in our places. The healthier people are, the more prosperous places will be, so we need to work in that space together.
We need to be really careful just to create structures. Society is challenging out there. How do we change society or societal behaviours? At the moment, people in society think that I or the council drop litter. They think that the police cause crime. They think that Health is there to repair them when they have been injured. Actually, it is the other way round: society has dropped litter, someone in society has caused the crime and someone else has injured themselves, not the NHS. How do we get people thinking differently? The only way to do that is to have a stronger contract between local and central government to focus on those things together. That societal change is huge.
We can structure things. You can merge two commercial organisations, but you have to look at the human side and the behaviours of those workforces coming together. It is the same with this: we can put new structures in place, but how do we look at society and see their roles? They need to be accountable, as well as us, the public sector. They want to be.
There is an element, at the moment, of a lot of people on the street saying, “We don’t want the council telling us what to do, but we also want the council to do everything for us”. That is a really odd situation that we need to get better at. On the transfer of resources with responsibility, we are happy to find solutions together that are not just about passing money down saying, “Over to you to deliver”. We should be able to reduce cost and put funding into that R&D space that I mentioned earlier, rather than firefighting in a non-prevention way. Otherwise, it is just a race to the bottom.
The Chair: I found that very enlightening. It helped to clarify a lot of this in my mind and we owe the three of you a lot of thanks for that. On that basis, I close the public part of our meeting.
