Written evidence submitted by the Local Government Association [POD 014]

 

 


 

1.      About the Local Government Association

 

1.1.  The Local Government Association (LGA) is the national voice of local government. We are a politically-led, cross party membership organisation, representing councils from England and Wales. 

 

1.2.  Our role is to support, promote and improve local government, and raise national awareness of the work of councils. Our ultimate ambition is to support councils to deliver local solutions to national problems.

 

2.      Summary

 

2.1.  The Coronavirus pandemic has underlined the crucial role of councils in leading the local response and in preparing the ground for social and economic recovery. Throughout this period, councils have led from the front and delivered at speed, establishing a true partnership between national and local government and validating the significant trust placed in councils by their local communities.

 

2.2.  Since the Committee’s original call for evidence the Government has announced an English Devolution White Paper and made a commitment to ‘level up’ powers and investment in regions across England. The unprecedented challenge of economic and social recovery following the current crisis will require these plans to be accelerated and expanded.

 

2.3.  Councils across the country need greater powers and flexibilities devolved at pace so that they can get on and deliver an effective and sustainable recovery for communities and businesses. The process of devolution in the last decade has been underpinned by a series of transactional deals, driven by a process that brings a range of local partners together, who then agree to act for central Government to deliver enhanced outcomes in return for increased powers and funding.

 

2.4.  In London, Greater Manchester, the West Midlands and elsewhere, local leaders have demonstrated the success of this approach. They have also begun to test the limits of a policy based around the piecemeal transfer of funding and functional responsibilities.

 

2.5.  The scale of the challenge ahead means that a new approach to policy responsibility in England is now required, one that matches the place leadership of councils and their crucial role in convening wider public service delivery and investment with the need for locally tailored reconstruction and renewal.

 

2.6.  Drawing on devolution settlements of Scotland, Wales and Northern Ireland, areas across England should now be able to agree with Westminster a new English devolution baseline for their communities. Essentially, turning the process described above ‘right side up’, with local leaders bringing central government departments and agencies together to deliver locally determined and accountable outcomes for residents and businesses. This process should form a central part of the national recovery strategy and should be developed in partnership between Government and local authorities.

 

3.      The success and scope of devolution deals implemented, including the impact on local economies and health economies and the progress of all bids submitted by the September 2015 deadline.

 

3.1  In September 2015, 34 devolution bids from across the country were submitted to Government for consideration. Of these, 12 were brought forward initially for negotiation and 11 areas have confirmed devolution deals and signed off by both local and national leaders.

 

3.2  At the time, many areas felt they lacked a clear response from Government as to why their proposals were not taken forward. There was also concern that the criteria for success was not transparent enough or focused too heavily on the need for a directly elected Mayor. 

 

3.3  As each devolution agreement was the result of a bespoke deal between councils in a local area and national government, the deals themselves differed in scope and scale. For example, the Greater Manchester Combined Authority secured a degree of financial freedom (through the Life Chances Fund, Work and Health Programme funding and Housing Investment Fund) and policy decentralisation (the devolution of health and social care) that was significantly more substantial than other areas.

 

3.4  The agreed deals had a common focus on driving local economic growth, providing for the decentralisation of powers over skills and transport policy, the creation of a ‘single pot’ to support local investment and the ability to raise additional revenue through financial instruments such as a Mayoral precept.

 

3.5  The positive impact of devolution to local communities and economies includes:

 

3.6  These successes have left councils and combined authorities ambitious to do more. Some areas that did not initially secure a deal, have continued to pursue an ambitious devolution settlement with national government, for example the West Yorkshire Combined Authority devolution deal which was announced in the March 2020 Budget. Others, held back by delays to key reforms, such as the long awaited devolution framework and the place-based elements of the Industrial Strategy, have focused on delivering core services for their residents.

 

 

4.      The geographical spread of existing deals, including to non-metropolitan areas and the impact on adjoining areas.

 

4.1  There are 11 signed devolution deals and eight Mayoral Combined Authorities (MCAs). Of the MCAs, only Cambridgeshire and Peterborough and the North of Tyne might be considered to contain a substantial number of non-metropolitan areas and only Cornwall and London have managed to secure a deal without establishing a combined authority.

 

4.2  In response to the urban focus of existing devolution agreements, the LGA’s People and Places Board launched the Future of Non-metropolitan England Commission in January 2018.[iii] This refreshed the case for devolution to non-metropolitan areas.

 

4.3  Over 18 months the Commission took evidence from key stakeholders through eight regional roadshows, interviews, commissioned research and a call for evidence. Contributors routinely identified the progress made in the largely metropolitan devolution deal areas and signalled their desire for a comparable settlement to be fast-tracked for local communities in non-metropolitan England.

 

4.4  The Commission highlighted the ‘perfect storm’ facing rural areas, including a lack of suitable housing to support communities of all ages, limited mobile and broadband connectivity and a top-down skills system that is failing to equip job seekers with the skills they need.[iv] It also set out in detail how non-metropolitan areas face the prospect of a rapidly rising old age dependency ratio, with some reaching a ‘tipping point’ of more than 50 older age people (65+ years) per 100 working age people as soon as 2026.[v]

 

4.5  Devolution deals could secure benefits to economic growth and infrastructure provision that would help councils in non-metropolitan areas respond to these challenges, in particular the impact of an ageing population. Councils need greater flexibility to influence local factors vital to attracting younger people like transport provision, digital connectivity and high-quality job opportunities. It is difficult to be conclusive about the effect devolution would have on national migration flows, but the existing differential approach could leave local leaders in non-metropolitan areas unable to attract and retain current and potential residents.

 

4.6  In July 2019, the Commission published its final report.[vi] This called on the Government to pass power and resources to councils in three areas: growing more productive and inclusive economies; shaping future investment in rural places; and, building better connected places.

 

4.7  While Westminster and Whitehall were focused on the complexities of the UK’s withdrawal from the EU, councils delivered for their communities. The current Coronavirus crisis has again demonstrated local government’s capabilities and the trust placed in councils by communities. Local leaders should be given the responsibility and funding to address long-standing challenges and maximise opportunities for economic and social recovery. Bringing power and resources closer to people is the key to delivering better outcomes for communities and inclusive growth.

5.      Further powers that local areas have accumulated over time and powers they should have which they don’t have already, including the specific case for London.

 

5.1.  Every area will need bespoke powers and resources to better meet the challenges facing their communities. The LGA’s Future of Non-metropolitan England Commission identified several such proposals during its eight regional roadshows. In the South East, participants wanted greater control over infrastructure investment to ensure efficient freight access to ports and onto the global market. In the South West, representatives highlighted the opportunity that greater local influence over a domestic successor to Common Agricultural Policy could present to rethinking farming and land management in the UK’s largest region. In the North East, attendees outlined how a locally designed UK Shared Prosperity Fund could help local partners better address regional inequality.

 

5.2.  The common components of the current set of devolution deals provide the starting point for the powers that should be made available and tailored to all councils. This is supported by the LGA’s Councils Can report, which sets out how a new localism settlement could strengthen local government and help councils continue to support their communities.[vii]

 

5.3.  Although settlements should address differing local priorities, the devolution of skills and employment support is one of the most frequent requests of councils, both metropolitan and non-metropolitan.

 

5.4.  The reasons for this focus are well evidenced. Despite high levels of employment and low levels of unemployment, nine million adults lack functional literacy and numeracy, one in nine are in insecure work, and there is a 30 per cent employment rate gap between disabled people and non-disabled people.[viii]

 

5.5.  We estimate that by 2024 England’s skills gaps will widen, with four million too few highly skilled people to fill employer demand and eight million too many intermediate or low skilled than there are jobs. This puts at risk 4 per cent of future economic growth, thereby leaving the average worker £1,176 a year worse off.[ix] 

 

5.6.  The current national approach has struggled to address these challenges, with the £23 billion of public money spent on growth, regeneration and skills, fragmented across 70 different national funding streams and managed by 22 government departments and agencies. The need for reform of the current fragmented and centralised skills system is all the more acute given the impacts of the current crisis on employment and employers.

 

5.7.  In response, the LGA has developed Work Local as a practical vision for an integrated and devolved employment and skills service.[x] Combined authorities and groups of councils, working in partnership with local and national partners, would have the powers and funding to plan, commission and oversee a joined-up service. Bringing together advice and guidance, employment, skills, apprenticeships and business support for individuals and employers.

 

5.8.  Based on analysis of an anonymised medium sized combined authority, an integrated, Work Local model could lead to additional fiscal benefits for a local area of £280 million per year, with a benefit to the economy of £420 million. This would be associated with an additional 8,500 people leaving benefits, an additional 3,600 people achieving Level 2 skills, and an additional 2,100 people achieving Level 3.[xi]

 

6.      The commitment to devolution across Government and capacity in Whitehall to promote and monitor devolution, including the Government’s ability to capture relevant data at the right level – for example, in city region and combined authorities to assess the effectiveness of deals.

 

6.1.  Whilst devolution deals have remained a possibility, in recent years there has been a notable reduction in the momentum behind the devolution agenda. Progress has focused on urban areas and only two additional areas have agreed a devolution deal since the first combined authority mayoral elections in 2017.

 

6.2.  Following calls from the LGA for an English Devolution Act, the announcement of an English Devolution White Paper in the December 2019 Queen’s Speech was a welcome development that signalled a renewed enthusiasm for devolution across Government. The LGA has committed to working with government and councils to reignite this process, which will now be critical in building a sustainable recovery across the country.

 

6.3.  Previously, concerns have been raised in relation to the current monitoring and evaluation approach to existing devolution deals. These have focused on the need for greater clarity on outcomes; the top-down nature of the way the programmes have been designed; and potential duplication of activity as well as the significant drain on their own resources.

 

6.4.  Combined authorities are aware of the importance of effective evaluation and want to work with Government to ensure that they can produce robust evidence of progress. The LGA and the Cities and Local Growth Unit have worked with devolution areas to organise discussions about how to improve monitoring and evaluation of the deals across Whitehall departments.

 

6.5.  It is positive that Government is engaging on this question and recognises that this is a process of learning at national and local level. This openness of the approach must continue as the Gateway Reviews of local investment funds are undertaken.

 

6.6.  That said, there is clearly a tension between national and local leadership that runs right through the process of devolution and extends to the process of monitoring and evaluation. Currently, local areas secure deals with Government and are required to demonstrate their progress against agreed delivery targets. Genuine local devolution would not require this form of accountability to the centre, but would instead draw strength from the democratic process all locally elected leaders face.

 

6.7.  Leaders of place should first and foremost be accountable to their residents for the outcomes they achieve. Where reporting to national government is deemed to be necessary this should be funded by Westminster to demonstrate outcomes and aid learning, not simply achieve compliance with Government’s requirements.

 

 

7.      Governance and accountability: the impact of elected mayors and whether they are necessary to make devolution a success. Public engagement with the devolution process and how scrutiny is working in practice.

 

7.1.  The devolution deals signed to date demonstrate the Government’s preference for a single point of accountability in the form of a directly elected Mayor. Cornwall, a unitary council, is the only area to agree a deal without one.

 

7.2.  It is the LGA’s view that a Mayor should not be a necessary requirement of devolution, particularly in non-metropolitan areas. Areas should be free to choose the most appropriate model for their community and non-metropolitan areas should not be prevented from pursuing devolution if they have a clear proposition informed by good governance principles.

 

7.3.  Research commissioned by the LGA in 2016[xii] on models of sub-national governance articulated six principles of good governance that should be considered in any new model:

 

 

7.4.  It is clear that the mayors of the combined authorities have managed to establish a high profile on the sub-national and national stage. This has served to highlight local challenges and help hold national and local stakeholders to account.

 

7.5.  However, it is also clear from the experience of those areas that have established a Mayoral Combined Authority that issues of complex dependency and sustainable growth cannot be tackled through a single point of executive power. While Combined Authority Mayors, in their position as Chairs of their respective Combined Authorities have a broader public service remit, they are most effective when they work collectively with council leaders and other local stakeholders.

 

7.6.  There is no one-size-fits all approach and the needs and opportunities of an area should be what informs the development of an agreement. This can only be produced by working with local communities and businesses.

 

7.7.  The speed at which the existing devolution deals were negotiated, together with the, at times, opaque requirements from Whitehall did not create optimal conditions for engaging with communities. This should be taken into consideration in the design of future devolution processes. The LGA convenes a network of communications officers from devolution areas to help share good practice. We have also published guides for councils and combined authorities looking to improve their engagement. [xiii]

 

 

7.8.  Scrutiny in combined authorities will also differ from that in councils. This is due to the focus of combined authorities on longer term, strategic interventions rather than day-to-day service delivery (apart from on transport) and the interface between the Mayor, combined authority, LEP and constituent authorities. As part of our improvement offer to local government, the LGA and Centre for Public Scrutiny are working with officers in combined authorities as they develop their approaches to scrutiny and shared learning.

 

8.      How access to new sources of income – for example business rate growth – have impacted local areas and how broader devolution of financial powers will affect the success of the policy.

 

8.1.  Devolution of powers must be properly funded. The LGA are supportive of business rates retention reforms introduced in 2013. This has brought some financial benefit. However, at a local level, the picture is more varied and some areas have had issues arise due to appeals or avoidance.

 

8.2.  Since 2017/18 a few areas have been piloting 100 per cent business rates retention. This has resulted in a welcome additional funding boost in the short-term, but uncertainty over future arrangements is a cause for concern. The Government has not yet decided whether this 100 per cent arrangement will continue once 75 per cent business rates retention is rolled out nationally. The Treasury Select Committee has also recently encouraged Government to consider alternatives to business rates. This has an impact on the ability to plan financially for future years.

 

8.3.  The business rates system should be responsive to local needs and fair to all. It should promote growth through incentives such as those seen in the existing ‘gainshare’ arrangements in combined authorities. The Government urgently needs to confirm its intentions in relation to proposals for further retention of business rates in the light of the current COVID-19 pandemic.

 

8.4.  Income from business rates will be affected by what is going on in the wider economy and high street, and this will require robust monitoring to make sure that local authorities are protected from wider economic shocks and have sufficient resources on an ongoing basis to deliver services to their residents. The financial cost arising as a consequence of the Coronavirus crisis will bring this challenge into sharp relief.

 

8.5.  The trajectory of growth of business rates does not match the trajectory of growth in demand and its distribution. This is particularly true in relation to adult and children’s social care, public health and homelessness prevention services. These pressures on councils’ budgets mean that council tax and retained business rates alone, even if more business rates income is retained, will not be sufficient to sustainably fund the sector. Some form of additional funding will be needed.

 

8.6.  Government should consider allowing areas to raise new taxes, such as a tourist tax or an e-commerce levy, or to retain a proportion of nationally collected taxes or charges paid by their residents, such as income tax, fuel duty or stamp duty. Such consideration must include appropriate redistribution arrangements and local control over discounts and reductions. Furthermore, such freedom must not be used as a replacement for funding through general Government spending. New taxes will generate more income in wealthier areas. The levelling-up agenda needs to be supported by continued redistribution through the tax system and public spending, not reliance on taxes raised locally. Councils also need the freedom to collect current local taxes differently to support local priorities. Finally, councils should have the freedom to set planning fees to at least cover their costs.

 

9.      The adequacy of existing sources of income and the potential need for more sources of income for local authorities that acquire more powers. Whether further business rate retention would provide additional funding for devolved services.

 

9.1.  The 2020 Spending Round needs to make securing the sustainability of local services for the next financial year the top priority, particularly within the context of the current crisis, which has placed unprecedented demands on local finances. With the right funding and powers councils can continue to meet their legal duties to provide dignified care for people who are elderly or disabled, protect children, prevent and reduce homelessness and protect the wide-range of other valued local services which also make such a positive difference to communities and people’s lives.

 

9.2.  We support moves to make local authorities less dependent on Government decisions for their funding. The potential increase in funding due to expanding the tax bases for business rates and council tax would be an improvement on sustained reductions in government grant. However, central government continues to alter what is supposed to be a local tax through the introduction of various reliefs to business rates. Councils are normally compensated but that still leads to challenges. For example, the expansion of the small business rates relief means that councils will not see any direct financial benefit from new small businesses once the system is reset.

 

9.3.  When further powers are devolved to councils and combined authorities, it is critical that they are accompanied by adequate resources to enable them to be delivered effectively. The model to do so would need to be decided in close consultation between national and local budget holders.

 

9.4.  For combined authorities, the future of key funding streams to support devolution including business rates retention pilots and the Mayoral Capacity Fund remains uncertain. There also remains a lack of clarity on the future commitment of long-term investment funds (“gain share”) which are subject to approval through the Gateway Review process. This must be resolved as soon as possible to enable combined authorities to deliver on their commitments. Government needs to work with Councils and Combined Authorities to find a sustainable financial model for Combined Authorities, particularly in light of the financial challenges brought about by the impact of Covid-19 on transport revenues.

 

9.5.  While the devolution of funding streams for growth has been a positive step, there is a need for a new programme of devolution to create a single investment pot rather than the current approach of decentralisation of funding streams. These arrangements should also come with greater flexibility over the revenue/capital split within the single pot that reflects the need for different types of funding during project development.

 

9.6.  We believe that the guiding principles to help inform decisions on the suitability of responsibilities to devolved to local government and funded through retained business rates were that such responsibilities would:

 

9.7.  In the context of additional funding (for example the move to further business rates retention), tackling existing pressures should be considered first before any further responsibilities are devolved.

 

10.  The potential scope of a devolution framework. Whether the current practice of bespoke deals for local areas is working or should some powers be made available to any local authority that chooses to adopt them.

 

10.1.        Over the course of the last two years the Government was believed to be working on a ‘devolution framework’, a mechanism for progressing devolution in those largely non-metropolitan areas without a devolution deal. Although unpublished, soundings taken during this period suggested a familiar, transactional approach to devolution, with local areas encouraged to bid for a centrally determined set of powers in exchange for some degree of governance reform. This perspective has been reinforced by the recent proposal to ‘level up’ the existing Mayoral Combined Authorities.

 

10.2.        We are aware that following the announcement of an English Devolution White Paper conversations took place both nationally and locally about the possibility of local government reorganisation. While not explicit, formal commitments in this direction have been made and suggestions of a more top-down approach have been noted. The LGA’s view has been that any change in governance must be led from the bottom up, and that one size does not fit all. Councils should be free to suggest governance arrangements that work for their area and communities.

 

10.3.        The refreshed enthusiasm of Government for devolution has encouraged the LGA to consider the scope of a new English devolution baseline. In developing the detail of this approach the LGA has been guided by the following principles:

 

 

10.4.        In considering how these principles might apply practically it is useful to reflect on the kind of place-based cross-cutting challenges that local areas will seek to address and the powers and resources they have to do so. The challenge brought about by the global Coronavirus pandemic has few precedents, but is has served to demonstrate the unique place-based leadership of councils in supporting their businesses and protecting their residents.

 

10.5.        In a similar vein, meeting the pressures of climate change through decarbonisation, modal shift, behavioural incentives, mitigation and adaptation will demand collaborative local leadership underpinned by a holistic package of powers and resources. Such an approach is likely to stretch the previous process of negotiating bespoke devolution deals beyond usefulness and instead speaks to directly to the need for a much more ambitious focus on place-based leadership.

 

May 2020

 

 


[i] Greater Manchester Health and Social Care Partnership, Transforming the health of our population in Greater Manchester – progress and next steps http://www.gmhsc.org.uk/wp-content/uploads/2019/08/GMHSCP-Population-Health-Plan-FINAL.pdf  

[ii] https://www.cornwall.gov.uk/media/36590228/cornwall-deal-impact-assessment-final.pdf

[iii] Local Government Association, The Future of Non-Metropolitan England https://www.local.gov.uk/devoforall

[iv]https://www.local.gov.uk/sites/default/files/documents/27.1%20Post%20Brexit%20England%20Commission_v06WEB.pdf

[v]https://www.local.gov.uk/sites/default/files/documents/27.2%202019%20Post%20Brexit%20England%20Commission_v08_WEB_0.pdf

[vi]https://www.local.gov.uk/sites/default/files/documents/27.2%202019%20Post%20Brexit%20England%20Commission_v08_WEB_0.pdf

[vii] https://www.local.gov.uk/councils-can-2019-conference-paper

[viii] Local Government Association, Work Local https://www.local.gov.uk/topics/employment-and-skills/work-local

[ix] Local Government Association, Work Local https://www.local.gov.uk/topics/employment-and-skills/work-local

[x] Local Government Association, Work Local https://www.local.gov.uk/topics/employment-and-skills/work-local

[xi] Local Government Association, Work Local https://www.local.gov.uk/topics/employment-and-skills/work-local

[xii] https://www.local.gov.uk/english-devolution-learning-lessons-international-models-sub-national-governance

[xiii] https://local.gov.uk/topics/devolution/engaging-citizens-devolution, https://local.gov.uk/our-support/guidance-and-resources/community-action, https://local.gov.uk/our-support/guidance-and-resources/comms-hub-communications-support, https://local.gov.uk/topics/devolution/local-industrial-strategies-online-hub/module-2-engaging-business-and