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Why our councils need competition – Business 7

Geoff Mawdsley
\r\nBusiness 7, 18 July 2008

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\r\nMention local government to people in the business community and you will often be met with groans of dismay.
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\r\nThe reason is they or their companies have had a bad experience of dealing with councils.
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\r\nThe usual litany of complaints about councils is trotted out – the excessive cost, the unresponsive bureaucracy and the interminable delays.
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\r\nSuch a response is understandable when the performance of local authorities can have such a direct bearing on the success or failure of a particular project or on a company as a whole. And there\’s no doubt the performance of some local authorities has not been good enough in the past. The question is, how can we improve things in the future?
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\r\nSome challenge the need for local councils at all. They suggest either handing their functions over to the Scottish Government or to private companies. Reform Scotland believes this would be a mistake.
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\r\nHanding further power to Holyrood is a recipe for further centralisation and we have already seen too much of that in Scotland. Our research shows that this is the principal reason that our public services lag behind those of other countries in many respects.
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\r\nEqually, local government has long been recognised as an essential foundation of a democratic society and certain functions, for example in relation to tackling crime, could not be performed by private companies as they require local accountability.
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\r\nSo how can we improve the performance of local authorities? In Reform Scotland\’s view, as set out in our latest report \’Local Power\’, the best way to achieve this is through a radical decentralisation of power from central government in Scotland to local authorities.
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\r\nI accept many will wonder why we want to give more power to people who have not always performed adequately. However, our view is not underpinned by a particular faith in the people running our councils, but in the process of competition.
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\r\nCompetition between local authorities has been stifled by too much central control exerted through an array of directives, restrictions and targets. Giving councils more autonomy would allow them to decide for themselves how to provide services, thus encouraging diversity rather than uniformity.
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\r\nThere is no one right way to deliver public services, which is why central control is so damaging to new ideas. The greater diversity encouraged by this local provision would enable councils to experiment with different ways of providing services so they can discover what works best for their area.
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\r\nFor example, they could provide a service directly, enter into a contract with the private or voluntary sector to provide the service or leave it to others to do it. At the same time, local authorities would be able to learn from each others\’ experiences, driving up standards.
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\r\nThis creative, competitive process is well known in business because it drives the constant improvement required by companies in the marketplace.
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\r\nFor this process to work properly, though, local authorities must be responsible for raising more of their own revenue. This means councils setting tax levels.
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\r\nAt present, councils only have the power to set the level and retain the revenue of one tax – council tax.
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\r\nThis accounts for only nine per cent of the total income of Scottish local authorities and even when sales, fees and charges are included the figure only increases to 19 per cent. This is not only one of the lowest proportions in Europe, but also gives councils little incentive to improve their performance.
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\r\nCouncils in Scotland need to be competing to attract people and businesses so that they can raise extra revenue. This will give them a real incentive to provide an attractive environment in which to live and work as well as real value for local taxpayers\’ money.
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\r\nTherefore, our aim, over time, should be that councils raise half their own income putting them on a par with others in Europe.
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\r\nThe best way to achieve this is to give councils discretion over more than one form of taxation. This cannot be done overnight, but we can make a start by returning control over business rates to local government.
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\r\nWhilst some businesses may be apprehensive about this, it would restore the link between local economic development and higher revenues for councils.
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\r\nIf councils still pursued policies that damaged businesses, then it would give those in the business community much greater cause and encouragement to get involved in local politics in an effort to effect change.
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\r\nAnd wider participation in local politics would not only be welcome both politically and socially; it would inevitably help improve the performance of our councils.
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\r\nReform Scotland is an independent think-tank that aims to set out a better way to deliver more effective public services based on the traditional Scottish principles of limited government, diversity and personal responsibility.
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\r\n\’Councils in Scotland need to be competing to attract people and businesses so that they can raise extra revenue\’
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\r\n\’Competition between local authorities has been stifled by too much central control\’
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\r\nGeoff Mawdsley is director of Reform Scotland

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Read the Business 7 article here.
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