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Devolution of power to local government

On 22nd September 2015 Reform Scotland’s director Geoff Mawdsley gave the following speech on the devolution of power to local government to a CIPFA Scotland conference.

I thought I would start today by talking about GDH Cole, who was the father of Guild Socialism.

He believed that the most important divide in politics was between centralisers and, as he put it, federalisers or those who think that power should be concentrated against those who think it should be dispersed.

I think he was right, although he was mainly talking about the Labour Party.

But, in my experience, this divide applies across the board.

To be clear, Reform Scotland is very firmly in the decentralising camp.

Localism, which requires a fundamental shift in power downwards from central government to local communities and people, is a theme which runs through much of the work that we have done since we were set up 7 and a half years ago.

That includes 3 reports which look specifically at the reform of local government, all of which are available on our website.

Today, I want to discuss:

  • what I think are the problems with the current centralising approach;
  • why we need to reverse the trend and adopt decentralising reform;
  • what it might look like;
  • and the prospects of achieving such fundamental change here in Scotland.


The failures of centralisation

The trend over the last century, and particularly since the second world war, has been one of greater centralisation of power.

This is not a party political point as this has happened under governments of various political persuasions.

In particular, we have seen power flow upwards from local to central government.

Over the years, as you will be well aware, a variety of policy measures have helped to bring this about.

Amongst other things, there has been a consolidation into larger units of local government and efforts to impose a symmetrical system.

Local authority power has been transferred to quangos.

Capping and the increase in the share of revenue coming in the form of central grant have reduced councils’ financial freedom.

And funding has become tied to central policy objectives with local authority room for manoeuvre further constrained by the array of central controls, directives and targets.

The establishment of the Scottish Parliament in 1999 has certainly seen democratic power transferred from Westminster to Holyrood.

However, it has not led to a corresponding transfer of power to local government or a serious attempt to examine the relationship between Holyrood and local authorities.

There have been positive moves such as the SNP Government establishing a new relationship with local authorities by signing a concordat with COSLA.

This reduced the amount of ring-fenced funding councils receive which is a welcome step in the right direction.

But it did so in return for a council tax freeze, so the centre is still exerting control, albeit by negotiation, over local taxation.

Further, we have seen other areas where responsibilities have been centralised, such as the creation of a Scotland-wide police force.

So the record since devolution is mixed at best and has not led to any fundamental shift in power to local communities.

As I see it, the main driver of potential change is an increasing awareness that centralisation, whether at Westminster or Holyrood, has not lived up to its billing.

This is despite the fact that it was often implemented with the best of intentions.

It was supposed to be the key to tackling social and economic problems, but has not delivered the changes and improvements that people were led to expect or wished to see.

When we look at the economy, the centralised nature of the United Kingdom has certainly seen the economy of London and the south east thrive.

The growth rates of London and the south east of England, as measured by GVA per head, are well ahead of the comparable figures for other parts of the UK.

Over recent decades, the general trend has been that the further away from London the worse the local economy performs, though thankfully Scotland has proved to be an exception to this rule.

What is clear is that economic policy that is right for London and the south east is not necessarily right for other regions and localities of the UK.

The economies of the different parts of the UK are very different and require different policy responses, yet these areas simply don’t have the ability to shape such responses.

The same problem exists within Scotland.

The economies of Edinburgh and Aberdeen, which is clearly a special case because of the oil industry, have flourished, while some other cities and regions are not doing so well.

Yet, despite the different structures of their economies and the different challenges they face, local areas throughout Scotland have limited ability to shape their own economic development which is holding them back.

Similar issues exist in relation to our public services.

Centralisation was sold as the way to deliver high and uniform standards and to do so at a lower cost.

But the main tools designed to deliver this improvement in recent years have been defective.

We have seen top-down management of performance and its familiar features of centrally-set targets, controls and directives together with tight control over expenditure.

The aim was to improve performance by trying to extract maximum value from the extra money invested in our main public services.

High, uniform standards would be ensured, for example, through the Best Value regime imposed on local government.

At the same time, the government sought to ensure the efficient use of resources through measures such as the sharing of services with this process being directed from the centre.

The common thread in the public service reform agenda in Scotland has been an attempt to engineer improvement from the centre.

However, although there have undoubtedly been some improvements, there is plenty of evidence that this approach still leaves us trailing other western European countries.

It has also failed to deal adequately with the problems of social disadvantage in our society, particularly in areas such as education, despite the enormous increases in expenditure prior to the financial crisis.

And it has not delivered uniformity of standards as there are still wide variations in performance across the country.

There are a number of reasons why this approach to improving local economies and public services has not been as successful as was hoped.

For a start, economies and public services are extremely complex and have many dimensions.

This makes it impossible for those at the centre to have the knowledge necessary to direct services effectively and appropriately for all parts of the country.

Specifically in relation to public services, by setting targets for certain aspects of a service, attention becomes focussed on meeting them at the expense of other aspects which may be just as important.

This leads to distorted priorities.

Monitoring and administering this vast array of targets also requires a large bureaucracy which is not the best use of available resources.

Further, centrally-directed services which encourage uniformity are less likely to lead to the innovation necessary to raise standards.

But, there is another area in which centralisation has a seriously damaging effect and that is in relation to political participation.

The recent referendum campaign saw a welcome upturn in political participation in Scotland.

However, this was very much the exception to the prevailing rule which has seen increasing dissatisfaction with our centralised political system.

This has manifested itself in decreasing electoral turnout and increasing dissatisfaction, particularly with Westminster.

There is a sense that politicians there are remote and don’t understand the problems facing many people in their communities.

This has led to a public perception that the UK government is insensitive to the needs of local communities which was certainly a key factor in the referendum campaign and support for independence.

I would argue that centralisation has also increased the feeling that there is a privileged political class in the UK, cut off from the mainstream of society.

This group is seen as a self perpetuating elite of professional politicians which is extremely difficult to break into.

Yes, despite these problems associated with centralisation, they have not so far led to a search for different approaches, but instead to the intensification of these processes.

Of course, repeating the same mistake and expecting a different result was Einstein’s definition of insanity, so we do need to look for alternatives.


Reversing the Trend

What, then, should we be doing differently?

The starting point for decentralising reform is a recognition that communities have different needs, priorities and capacities.

The 19th century philosopher John Stuart Mill summed this up when he said that, ‘The very object of having local representation is in order that those who have any interest in common, which they do not share with the general body of their countrymen, may manage that joint interest by themselves.’

Such differences are particularly prevalent in a country as geographically diverse as Scotland.

Communities, therefore, must be able to respond to their own local needs and demands which requires a strong and effective local democracy.

If we require inspiration, we need only look at many of our western European neighbours who have either not followed us down the centralising path or have turned off it.

In fact, they have been going in a very different direction and one that offers important lessons for Scotland.

Of course, a variety of different models of public service provision exist in comparable countries, but they have some important common features.

And the most important is that public services tend to be more directly accountable to the people and local communities they serve with decisions taken at a more local level.

This makes services more responsive to their users and helps to implement changes quickly that can make the service more effective both in terms of quality and cost.

Such local accountability can also address the fragmentation of services which is such a problem in relation to health and social care here.

For example, the difficulties faced by hospital A&E departments are exacerbated by the problem of delayed discharge, which is, in turn, caused by the lack of co-ordination between health and social care services.

One possible way to deal with this issue would be to give responsibility for the funding, management and operation of much of healthcare to local councils which is what happens in countries such as Denmark and Sweden.

As well as joined-up services, this leads to different priorities in different parts of the country and a strong resistance to centrally-driven initiatives.

It is also no coincidence that the Danish health system enjoys extremely high levels of public satisfaction.

So the challenge for us in Scotland is to develop a programme of decentralising reform that allows us to move in this direction.


Reviving local democracy

Although decentralising reform does not stop at the level of the local authority, devolving greater power to local authorities is the necessary starting point for any serious attempt to revive local democracy.

It requires much more fundamental reform than we have seen so far and I believe the starting point should be the principles set out by the Commission on Strengthening Local Democracy in its report ‘Effective Democracy: Reconnecting with Communities.’

I should declare an interest here because I was a member of that commission.

It was an enjoyable and interesting experience and COSLA, which set up the commission, should be congratulated on what I think was a very worthwhile initiative.

The commission’s report set out 7 key principles for stronger democracy in Scotland:

  • The first is Sovereignty, where democratic power lies with people and communities who give some of that power to governments and local governments, not the other way round;
  • The second is Subsidiarity, with decisions taken as close to communities as possible and where the shape and form of local governance has to be right for the people and places it serves;
  • The third is Transparency, ensuring democratic governance is clear and understandable to communities, with clear lines of accountability;
  • The fourth is Participation, whereby all communities must be able to participate in the decision making that affects their lives and their communities;
  • The fifth is Spheres of Governance which have distinct jobs to do set out in competencies, rather than tiers which depend on powers being handed down from higher levels of governance;
  • The sixth is Interdependency with every sphere of governance supporting the others; and
  • The seventh is Wellbeing acknowledging that the purpose of all democratic governance is to improve opportunities and outcomes for the individuals and communities that empower it.

The commission was rightly not too prescriptive in its recommendations.

However, I want to highlight a number of changes that flow from these principles and which are also in tune with work we have done at Reform Scotland.

Real localisation to me means giving communities autonomy.

The power to disagree with central government and do something different.

I think this requires a new relationship between the Scottish Government and local authorities, which frees up councils to take action in the interests of their communities unless specifically prohibited from doing so.

This is the principle adopted in many European states and is also the one that governs the relationship between Westminster and Holyrood.

Reform Scotland has argued strongly for reform which devolves responsibilities from Westminster to Holyrood, but this must be part of a broader process that sees power flow on downwards to local communities.

That is why the principle of subsidiarity is so important to ensure that tasks are carried out as close to those affected as practical.

But there is room for far greater transparency and democratic accountability in the way this is done.

Reform Scotland believes that this requires, amongst other things, a fundamental rethink of the role of quangos.

We have called for a thorough review of all quangos to ensure their functions are either brought back under proper democratic control, and given to local authorities wherever possible, or made genuinely independent.

However, this greater local autonomy needs to be underpinned by a new financial relationship.

The link between taxation, representation and expenditure is an important one in an effective democracy.

But this link has been eroded for local authorities with the council tax freeze coming at the expense of local autonomy and democratic accountability.

Councils have no real control over their own tax income and raise less than 20 per cent of their own revenue.

In this respect, Scotland is out of line with many other European countries where councils raise far more of what they spend.

What is needed is a better balance between central and local government funding of our councils.

We think that councils should raise far more of their own revenue, ideally around a half, and I am delighted that this is an area where we share much common ground with CIPFA.

This would still leave plenty of room for central grant to ensure that more rural areas or those with high levels of social deprivation are not penalised.

This enhanced fiscal responsibility for councils will increase their autonomy and accountability.

Councils must have the means to do things differently and to control how their areas develop.

Giving councils the ability to raise more of their own revenue would enable them to find the right balance between taxation and expenditure for their area.

However, crucially, it would ensure that local people largely bear the financial consequences of these local decisions.

It would also give councils a real incentive to provide the highest quality of service at the lowest possible cost which will, in turn, attract people and businesses and therefore extra revenue.

Further, it would strengthen local democratic accountability.

If local elected representatives wished to do things differently, for example to spend more on a particular area or to deal with a particular problem, then they would have to justify their decisions on levels of taxation and spending to local electors.

This would have the added benefit of helping to create better engagement with communities about their concerns and so strengthen local democracy.

So how can we enhance local fiscal responsibility?

I think that the best way to do this is to broaden local government’s tax base and enable councils to levy a range of taxes rather than just council tax.

It is common in other countries for local authorities, many of which are much smaller than Scottish councils, to have the ability to levy a combination of property, income and business taxes and, in some cases, other taxes such as local sales taxes as well.

This is the model we should adopt, starting with returning council tax and business rates to full local control.

However, we recognise that this would require transitional arrangements to be put in place for the transfer of business rates to adjust grant and ensure no council was initially penalised unfairly.

This would also restore the link between local economic development and higher revenues, giving councils a greater incentive to work with local businesses to improve the local economy.

These changes would be a significant step in the right direction.

However, we recognise that the fiscal powers of the Scottish Parliament are currently extremely limited.

So further fiscal autonomy for councils should follow when the Scottish Parliament itself gains greater fiscal powers over the coming years.

The decentralisation of power we envisage would make local authorities responsible for providing the bulk of public services free from excessive central control.

It would limit the role of central government to those areas where it has exclusive competence, as well as vital areas such as the enforcement of essential rights and ensuring fairness in the allocation of resources through the grant process.

In turn, this new-found freedom for councils would encourage diversity rather than uniformity.

This reflects the fact that there is no one right way to improve local economies or deliver public services.

That is why central control is so damaging to new ideas and initiatives.

The greater diversity encouraged by local provision would enable councils to look at different ways of providing services to find out what works best for their area.

There is no perfect balance appropriate at all times and in all parts of Scotland so, for example, some councils may want to provide a service directly, whilst others contract it out.

The results of these different approaches can then be compared and local authorities will be able to learn from each others’ experiences, with this process driving up standards across the board.

We should remember that local government in this country used to be the engine of innovation.

Nearly all the public services we now take for granted – education, social welfare, water, sewerage and gas – were pioneered by enterprising local corporations whose leaders brought real improvements to life in their cities and communities.

Of course, the usual argument against such an approach is that it will lead to a so-called postcode lottery with standards varying across the country.

It is unfashionable to quote Nick Clegg these days, but he gave a trenchant response to this criticism in a speech to the LGA in 2008.

He said ‘A postcode lottery is a terrible thing.  But the terrible part of the postcode lottery isn’t that things are different in different areas.  The terrible part is the lottery – it’s that you don’t get to choose what fits you or fits your postcode.  I want things to be different in different places.  I want things to be different for different people.  I just want people to be able to choose what suits them – not have it handed out arbitrarily by a bureaucratic lottery that no one understands.’

He is quite right.

What we are talking about here is not a lottery, which is a process of chance, but a process which is subject to clear democratic control.

And, as I mentioned earlier, it is not as if centralisation has delivered consistently high standards since there is a wide variation in performance between the best and worst at present.

Diversity of provision does not necessarily mean that services are better or worse, merely that they reflect different local priorities.

However, if there are differences in quality, the dynamism associated with decentralised systems is more likely to lead to higher standards.

This means that the average is usually better than the best achieved within a centralised, uniform system.

That is why countries such as Sweden, France and Spain have all decentralised power believing it to be the key both to better public services and a stronger, more cohesive society.

Scotland needs to learn the lessons from these countries and restore our own tradition of local self government.

 

Prospects for Change

But how likely is such change in Scotland?

Personally, I think there are grounds to be optimistic.

Although I know that many in local government are not hugely enthusiastic about the Scottish Parliament, I think the debate about further devolution has helped to develop support for the concept of decentralisation.

Where I would agree with those in local government is that there is no point in ending centralised Westminster control, only to see it replaced by centralised control at Holyrood.

That is why Reform Scotland has consistently argued that as Holyrood gains new responsibilities, particularly fiscal responsibilities, power should be devolved further wherever practical.

Such decentralisation is also popular with the public according to opinion polling conducted for the Commission on Strengthening Local Democracy and the evidence provided by a range of people and organisations to the commission.

The key question is how to persuade politicians to move in this direction.

The first step is to make the intellectual case.

Much excellent work has already been done in this respect by the Christie Commission, Our Islands Our Future and the Commission on Strengthening Local Democracy.

The question is how this can be turned into a genuine consensus around a programme of decentralising reform.

This may take some time and arguably it should do to ensure that we get it right.

It may also require a comprehensive study of local governance structures as the last one was the Royal Commission on Local Government under Lord Wheatley.

In this respect, the Scottish Government and COSLA Commission on Local Tax Reform is a welcome step.

Although it is looking specifically at reform or replacement of the Council Tax, I hope it will kickstart a broader debate about local democratic empowerment.

Certainly, much more is needed.

I have been struck by the campaign being run by the IPPR think tank in England which is advocating a ‘decentralisation decade’.

This would be a 10-year programme of decentralisation built on cross-party support and based on a clear set of principles; safeguards to avoid major risks; and a timetable for the decentralisation of administrative, fiscal and political functions.

This is in keeping with broader moves down south.

Something seems to be stirring with the new city deals and powers being transferred to Manchester and other cities as part of the UK Government’s ‘Northern Powerhouse’ programme.

There seems little enthusiasm on the part of The Treasury, in particular, for the greater local control of taxation that I advocated earlier.

But the devolution of control over the health budget to Manchester was a very welcome and significant move.

I hope that we can soon start to make similar progress here in Scotland.

Cross-party support for such fundamental change is essential because otherwise it is all too easy for parties to give in to the temptation to score political points.

The cross-party nature of the Commission on Strengthening Local Democracy was one of its strongest features and we need to build on that.

Reform Scotland is certainly keen to work with any organisations or people that wish to develop a practical programme of decentralising reform and that will certainly be our aim.

 

Conclusion

We have had much recent debate on Scotland’s constitutional future and, no doubt, there will be plenty more to come over the coming months and years.

In this debate, I think it is worth reminding people that in 1995 the Scottish Constitutional Convention declared in Scotland’s Parliament, Scotland’s Right that, ‘The value of local government stems from three essential attributes:

  • First, it provides for the dispersal of power both to bring the reality of government nearer to the people and also to prevent the concentration of power at the centre;
  • Second, participation, local government is government by local communities rather than – as in the case of non-elected bodies – of local communities; and
  • Thirdly, responsiveness, through which it contributes to meeting local needs by delivering services.’

Sadly, this importance has not always been recognised in the years that followed.

It is high time it was because centralisation has not delivered the general prosperity, improved public services and greater political participation that we all want to see.

So it is time to try a different approach – one based on giving local communities far more power to shape their own futures.

That is the key to the progress which I believe only decentralisation can deliver.