Oral evidence: The future of devolution after the referendum, HC 700Thursday 6 November 2014
Oral evidence, 6 November 2014.
Witnesses
Councillor David Sparks OBE, Chair, Local Government Association, Mark Rogers, Chief Executive, Birmingham City Council, and Councillor David Finch, Leader, Essex County Council, gave evidence.
Chair
Welcome, David, David and Mark. It is good to see you all again. Thank you so much for sparing your very precious time to talk to the Committee this morning. Did you want to say anything by way of kick-off, or shall we jump straight into the questions?
Councillor Sparks
If I could, especially after listening to the previous session. It seems to me as the Chairman of the Local Government Association, and as the leader of a major council in the West Midlands in Dudley, that there are three points that we need to take into account in relation to local government post the Scottish referendum. The first one that we have identified, in discussions with the other local authority associations representing the Scottish, Welsh and Northern Irish local authorities, is that there is a common issue in terms of devolution. Our view is that we should aim for devolution through councils to communities. The paradox of devolution at the moment is that you could argue that Scotland and Wales are more centralist as a result of devolution than England. Devolution down to Edinburgh to the Scottish Parliament, and also the Welsh Assembly in Cardiff, has not necessarily meant devolution down to communities in those countries. The second point is that in the light of the experience of reorganisations and so on in the past and the regional vote in the north-east, our view is that there is a ready-made solution in England for devolution, and that is down to local authorities, albeit combinations of local authorities, but it does not necessarily need to have another tier of government. The third and I think most important point is that our view is that it should not be a one-model fits all type solution. In relation to England, there has to be a varied approach in particular so that we are also looking at rural as well as urban areas. It is not just about city regions; it is also about the rest of England.
Councillor Finch
I believe that the Scottish referendum has awoken the sleeping giant of England and I don’t think we are going to go back to the complacency there has been in England in the future. Clearly we welcome the devolution settlement for Greater Manchester. This is the start, not the limit, of the empowerment of local government. Our counties—I speak mainly for the counties—recognise there are other bodies; there are the cities, districts and boroughs. Counties cover nearly 50% of the population of England and have the largest rate of private sector job creation in the country. Devolution is an opportunity to revitalise our democracy and could help to unlock economic growth, as both Lord Heseltine and Lord Adonis have recognised. If we believe that people in cities such as Manchester, Chelmsford and Southend have the ability and the power to control their affairs, why not the counties, quite frankly. Why would we want to disenfranchise young people in Essex? Why would we want to make businesses second class when those counties are very able and very powerful groups of people? I have had to find savings within Essex over the last five years of nearly £0.5 billion. I have 73 libraries and 10 mobile libraries still open and active. Every one of our services is operating with greater efficiency than they used to, and I maintain that we have the ability within the county structure to deliver savings and improvements to deliver the austerity programme that the Government need delivering. I believe that if the spend of £13 billion within Essex was reordered with greater devolution of powers, we would see a more effective structure and more effective operation, and we would see that the money that was being spent was reduced and services improved.
Mark Rogers
Chief executives are, of course, interested in the next phase of the West Lothian question discussion, but not if it is just about a reinvention of centralised power. We welcome the added impetus to devolution, but it is not new, as I am sure your Committee knows. If it just leads to a re-engineering of the parliamentary system, a really big opportunity is lost—and I would say disastrously lost. Councils have many imperatives, but the economic growth one is at the top of our list. Even though we have other things in my city, in particular, none the less growth is there. We want to support the rebalancing of the economy. We want to see our people and places thrive, so we think that both the Government now, and all political parties, need to recognise what is becoming a received wisdom, which is that apparently after only Albania we are the most centralised democracy in the world. Cities, city regions and county regions, to pick up the earlier point, all need to benefit from decentralisation. It is not just about cities, although I would argue—I am from Birmingham—that there is plenty of evidence to suggest that if cities are not at the heart of this, we are missing a really big trick. There is an analogy here for us. If they are the economic engines—I am sorry if this makes you cringe—I suspect we are probably fossil-fuelled at the moment, whereas we should be jet-powered. I hope that that does not offend the environmentalists in the room. Local government has some asks, which I hope you will get into later, but we have them in partnership with other councils and with local enterprise partnerships as well. We need greater control over the economic strategies for our people and places because I think it is accepted—usually, but not universally—that power is best discharged at the local level and that local people know best about their places. We feel that we should have much greater control over council tax and business rates, and some ability either to raise new taxes or to make levies, and that is in particular because we do not have sufficient leverage over putting infrastructure in and we are not able to accelerate housing programmes in the way that we need to. We also believe that along with those asks we have offers. We accept that our strategies need to be robust and stress tested. We accept that there needs to be a strength of governance that persuades local people as well as others that we will govern well and make good decisions. Probably crucially, we need to prove delivery. We need to show that we have or will have a track record. I wanted to mention Michael Heseltine as well. Shortly after the publication of his No stone unturned report, the greater Birmingham area was the test bed for the Heseltine project. That project had one key characteristic that I think has been insufficiently recognised and developed: the local growth team, and that what you need in your local area is the councils and the other partners, and you also need the regional and national agencies to play in, but that vitally you need Whitehall officials and probably even a Westminster sponsor who is there not to check your homework, but to help you deliver the successes in your local area.
Chair
There has been a tremendous growth of interest in all local government about devolution, particularly post-Scotland: LGA, county councils, SOLACE, the Mayor of London, the Core Cities Group, ResPublica, IPPR, Policy Exchange. There is a burgeoning of interest in this field that is wonderful at one level, but Whitehall is a quite simple beast. It likes to have one proposal that it can think for or against on. Is there a convergence of all those interesting ideas within local government so that there will be one offer to Whitehall and one offer on behalf of local government to the political leaders as they write their manifestos?
Councillor Finch
I believe that there is. I believe that the uniformity around the county councils and all local government is that there is greater ability within the business rate system to be able to vary those business rates. I believe that the skills funding should be devolved uniformly across the country and not be centrally controlled by the Government. There are things such as the single person’s discount, which has a perverse effect. If you are buying a house as a single person in Chelmsford, as an example, there is £500,000; you get a 25% discount because you are a single person. There will be a number of areas such as NNDR, local council tax and business rates that I think we can all agree are important areas where we can flex them, but with a degree of recognition that in some areas they can be flexed less or more.
Councillor Sparks
I think that the common factor as far as I am concerned is the economic unit. The emergence of combined authorities—they could be called city regions or whatever—around travel to work areas and other economic markets is the model that will be adopted. In some cases it will be—as is the case with Mark’s authority and my authority—Dudley and Birmingham, and the black country and some other west midlands authorities, probably as a combined authority, but in some areas, say for example Cornwall, it could be just based on the county council area. Our view is that it does need to take into account two things: the communities and the economic reality of that particular area. One of the major drivers is not necessarily a referendum result; it is the need for areas to be able to compete internationally. If our cities, for example, are to compete with Frankfurt and so on, they need to be reorganised so that they relate to the areas for which they produce the employment. A third of my population in Dudley probably works in Birmingham or elsewhere in the west midlands. Therefore, if I am to ensure that people in Dudley have a fair crack, I have to have the west midlands being competitive. The final point is that this is not just our view. This is the view of the private sector. I am a director of the Black Country LEP. The chairs and directors of the Black Country LEP and the Greater Birmingham and Solihull LEP have put pressure on the local authorities to organise ourselves in a way that we can compete with or be on the same level as Greater Manchester because they recognise in their world that if you are not competitive, you do not prosper.
Mark Rogers
You can oversimplify these things. If we overlay the right governance on the right travel to work geographies, that should be what we offer. The ask in return is the single pot so that you have all the money that you need to meet the priorities in that sensible, functional economic area.
Mark Durkan
It seems from what you have been saying that the consequences of the Scottish referendum are essentially for yourselves providing a new backlight to bring out issues and concerns around devolution from Whitehall and Westminster, and I notice you have used the term Whitehall more than Westminster so far in relation to some of these questions. Given that there seems to be some understanding around what sort of powers may now be part of the new tranche of devolution to Scotland, how far do you see those same powers necessarily having to be parcelled for other parts of the UK and particularly within England? How is it done? From the context of Northern Ireland, I see some people proposing that Scotland will get most or all of their revenue from gas and oil. On paper, Northern Ireland could be given that same revenue resource, but it would mean nothing to us unless we start fracking or something like that. In terms of English local government and devolution, has anybody looked at the econometrics as to how viable some of these revenue powers would be in different local government formats and catchments?
Councillor Sparks
Our considered position on this is as follows. First of all, we have produced a document called The first 100 days of the next government, not in relation to the referendum. The document is signed up to by all the four party groupings at the LGA and it is deliberately designed to provide a framework for local government for all of the parties as they produce their manifestos for the next election. The relevance of that to your question is that in that document there are proposals in terms of fiscal devolution that are costed, with an appendix. In relation to the referendum, our considered opinion on this, again—I emphasise this is all of the four political groupings—is that we argue that there should be a constitutional convention. Part of the remit of that constitutional convention would be to examine everything that is offered to Scotland and/or Wales and/or Northern Ireland in relation to England. It might be that some is inappropriate, but equally it could be that some of the powers that may be devolved could be devolved down in England when that is desired. Again, our view is that it could be different so that what would be devolved in Greater Manchester might not necessarily be applicable to the west midlands. Equally, it might not be applicable to a coastal town. We are only interested in doing something that actually works and brings added value to what we already have.
Councillor Finch
To answer in part Mr Durkan’s question about the referendum waking England up, I think there has been a long-standing frustration within the county councils and local government generally that we seem to be in a financial straitjacket. As we already know, we are the most regulated and controlled of all the western economies with 73% of all the funding coming through central Government, whereas in France it is 35% and in Germany it is 19%. It is time for that devolution. I do think there is a common platform where there is greater fiscal devolution involving council tax, NNDR, air passenger duty, increased powers in relation to skills, which I emphasise again, and increased incentives that could be offered as part of the core offer to local government.
Mark Durkan
If you sense Whitehall resistance to that, do you see within that resistance possible reservations on the part of national parties who might be concerned about all the issues and conundrums that would arise, given that they have had difficulty coping with some of the conundrums and anomalies that devolution to date has brought?
Councillor Finch
I think where power rests there is always a reluctance to give up some of that power. That is a fact of life—a characteristic of the human being. But we do need to recognise the opportunity to unleash the power of local government, which actually has delivered significant savings to the Government—over 40% has been delivered from local government in the austerity programme—and therefore we should go further and encourage devolving more powers. I am not suggesting it should be something that is suddenly uniformly across the entire scope of England, but I do think, as we have started with cities, that we ought to be following through very quickly with some limited powers being devolved so that comfort from Government can be obtained that we are all doing the right things—that we are generating more jobs and more businesses, that we are increasing the total tax take and that we are putting people into employment so they can live better lives.
Mr Turner
Can I read this question? “The vote on Scottish independence has been taken as a clear indication of the demand for greater devolution to Scotland. Is there the same public demand for greater decentralisation of powers to England and in England?”
Councillor Finch
I believe the answer is yes. The evidence that I have seen in terms of public interest, media interest and the number of people that I have talked to all say uniformly the same thing: greater devolution to local authorities within England would improve the quality of life within England and improve prosperity within England as well.
Councillor Sparks
There are two answers on that one really. First of all, the LGA has commissioned polling over a period of time by MORI, which has shown—I think this is the latest statistic—that 79% of people trusted their council, whereas only 11% trusted central Government. It was followed up by other answers that substantiated the view that people wanted to have more local control over their services, hence our focus on communities. On a more anecdotal level, my own experience has been that, as Councillor Finch has stated, the referendum had the effect of a slow-burning fuse, and that as the referendum gained acceleration, for want of a better expression, people in England began to think, “Why aren’t we being asked a question on this?” Plus in the street you get people arguing about, “If we were in Scotland we would get this, if we were in Wales we would get that,” and so on, so I think it has captured the public imagination. The degree of interest in the media now is indicative of that, and you can’t put the top back on this particular bottle. Yes, there is a demand in England for devolution down to communities.
Mark Rogers
I think the key phrase from the quote that you have just read out is “in England”, which probably plays back to my original comments anyway. I belong to the Core Cities Group. For some considerable period of time, that group and others have very clearly demonstrated that there is an “in England” devolution question, which I suspect for many of us is more important than the “for England” question, because we are looking for devolution to our cities and our county regions. We are less looking to see a debate that may simply recentralise in a new and imaginative way powers that are already held in Westminster.
Mr Turner
Am I right in regarding it as more important to get devolution to towns and rural areas than to England?
Councillor Sparks
If you are talking about England as a single entity, yes, that is entirely the thrust of our view—you need a varied solution within England.
Mr Turner
That means that we would not have that level of devolution in England because people in Wales, Scotland and Northern Ireland would have a say about how things in England are devolved.
Councillor Sparks
Our response on that is that we would aim to have more devolution in England, Scotland and Wales. That is the point about the focus on communities because the devolved assemblies have not necessarily led to devolution down to communities.
Mark Rogers
If it is possible to resolve the West Lothian question, fine—good luck to you. I shall watch as an interested citizen. I am much more concerned to deliver things that I know to be tangible and possible. All our cities perform below the national average for delivering jobs and growth, in complete contrast to our European and international competitors. That is, frankly, an unacceptable situation, and I suspect that how that plays out in cities also plays out in towns and counties as well. Although Mark has now gone, the golden thread of devolution from Scotland for me is the one of fiscal devolution to city regions and county regions. I watch Westminster with interest. I do have views, but I am a local government chief executive and I understand how our cities could be much more powerful in generating prosperity, and therefore well-being, for the communities that we serve.
Fabian Hamilton
Gentlemen, your various written submissions to this Committee outline several areas where there should be greater devolution of powers and financing to local authorities. I did 10 years on Leeds city council, so I am well aware of this. You include health, social care, housing and transport as areas that were once the province of local government. What do you think are the adverse effects of not devolving those particular functions at present to local government?
Councillor Sparks
I think that you are talking about probably a spectrum. At one end of the spectrum is value for money; you don’t get the best value for money. We have shown this, as we have demonstrated that when we have collaborated with central Government on a more localised approach, it has invariably led to savings. The other end of the spectrum is that the quality of services tends not to be the same because you get a blanket national approach that does not lead to the same quality that people want in their individual communities. For example, we are currently working with the Government, as we have done on numerous occasions, through DWP on job creation and so on. When you are talking about using local agencies, you are quite often able to reach, for example, those who are long-term unemployed more easily and more effectively than if it is just some national programme.
Fabian Hamilton
The Government would argue that savings for bulk purchase are greater than if you devolve to local authorities and each local authority does it differently. Are you convinced that local government can make the savings and provide a more efficient service than a regionally or nationally-provided service?
Councillor Sparks
We have a commission chaired by Darra Singh that is about to report on the very topic of the finances of local government so that we are quite confident on this. But the fundamental point is that we are not necessarily talking, in the context of devolution, about individual local authorities. We are talking about combinations of local authorities where you would be able to get the economies of scale.
Councillor Finch
To add to my colleague’s comments there, if I think about the programme that we have run on transformation within Essex over the last five years, as I said earlier, we have saved nearly £0.5 billion and we still have to do another £237 million by 2016-17. Of that £0.5 billion, over £180 million came from us doing better procurement, negotiating better, and doing better and smarter deals. I suspect that the argument about a national procurement body that oversees procurements and uses that as the vehicle to get better prices is flawed in the context that it is only as good as the people who are doing the negotiation. If you sharpen the people you have locally, you can still get better deals than you get nationally.
Councillor Sparks
If we do not have some form of devolution on the lines that we are suggesting, the biggest disadvantage—the biggest loss—would be that there would be much less chance of getting over the silo mentality that you have in Whitehall. What we are talking about is not the traditional view of local government that existed, say, 10 years ago. We are talking about local government in the 21st century where you have more and more emphasis on common budgets and community budgets, where the public sector budget as a whole is more localised, and where there is a specific brief to overcome departmental boundaries. Our experience is based on numerous pathfinders or pilots that we have done over the years across the board in terms of our activities with central Government. We feel that it is only by a localised approach that you can break out of Whitehall and the Whitehall silos, and you get better value for money.
Councillor Finch
Under the national scheme for affording funds to cities that want to deal with youth unemployment, places like Brighton and Oxford could bid for those funds, but Essex county council could not bid for them and yet I have one of the most deprived areas in the country in Tendring, which is the Jaywick area. The perversity there is that there is money for youth unemployment that I can’t bid for because I am not a city.
Mark Rogers
The economies of scale from bulking up procurement are well understood, but there are some other policy areas that you have to bear in mind, which is that we are very interested in personalisation, and we know that bulking up often contradicts the personalisation agenda. The best example that I am aware of at the moment is the Work programme, where on the whole somewhere between 11% and 12% of people remain in the programme and complete it and potentially enter some form of sustainable employment, although the pilot areas—I think Liverpool was one of them—could get up to 35% to 40% retention in the programme. So you buy this thing at bulk nationally, send it down the tubes to us locally and you get a 90% attrition rate. If you break it down and have a regional or sub-regional level of delivery of a bulk-procured programme, you get four times the results because what you deal with is the personalisation element.
Fabian Hamilton
But as we have already said, we are one of the most over-centralised nations in Europe, if not in the world. We all know that, especially those of us who have served in local government. Councillor Sparks, in the written evidence we have received from the LGA, you call for a sharing out of tax and spending between the four countries of the union that needs to be put on to a new, sustainable and fair basis. Could you explain a bit more as to how you think this would look in reality?
Councillor Sparks
Our approach to the Barnett formula is that it is symptomatic of a problem that we have in this country—and probably a problem across the board in other countries—of how you address need while at the same time maintaining and enhancing local independence. We don’t think that we have that right. We don’t think that the Barnett formula addresses it at all because you end up with a situation where, for example, people who are in need in Dudley are just as in need as people in Dundee or Dolgethin, but the resources are not allocated on a fair basis. There is an injustice that needs to be sorted out. My view is that the way we do that if we are trying to get a solution—this has now been recognised by our colleagues in Scotland, Wales and Northern Ireland—is that we try to find whether we can come up with a better formula that gives a fairer distribution. What we are suggesting is that this is one of the things that could be examined by a constitutional convention. If not, there should be an independent expert body set up to have a look at, in a transparent way, how we can better allocate resources on those lines. If you have the input from Wales, Scotland, Northern Ireland and England, you are more likely to come up with a method of distributing resources that is better and that cements the United Kingdom in a better way.
Chair
Would that include the Scottish example of income tax assignment?
Councillor Sparks
Yes. Our view on that is there is a lot of scope for imaginative thinking in relation to fiscal devolution within England, Wales and Scotland. It might very well be the case that the principle of fiscal devolution to England may apply in different ways, as I said earlier on, because different places have different resource bases, but you would then end up with a situation of an allocation of resources that was more defensible and sensible, and something that would result in a better country.
Fabian Hamilton
Do you think the problem is that Whitehall and this Parliament don’t trust elected councillors in the regions and the cities of the United Kingdom? Is that the issue, or maybe they feel challenged by the fact that you have a perhaps closer proximity to the electorate in local authorities?
Councillor Sparks
We are more experienced in getting value for money. Our record has shown this, in a perverse way as a result of austerity. The reality is—it has been recognised by numerous independent institutions and studies—that we are the most efficient part of the public sector. Whether we are trusted or not is beside the issue. The fact of the matter is that our record speaks for itself.
Fabian Hamilton
That has obviously not convinced Whitehall up to now, has it?
Councillor Sparks
We are working on it.
Fabian Hamilton
I am on your side on this.
Councillor Sparks
I am hardly likely to slag off the people I am going to go and try to persuade.
Chair
A brief comment from David and Mark on the question of income tax assignment and whether that is one of the options. If Scotland has got it, is it good enough for England too, or are we not capable of handling that?
Councillor Finch
I think we are capable of handling that. It is an opportunity that needs to be explored, but in taking the programme or the vehicle of devolution forward, we have to do it in a way that makes Government, the centre, more comfortable. As David has said, we need to continue to prove to Government that we are very capable of delivering significant change and significant savings as well.
Mark Rogers
I would like to explore it, but I would like to explore something else first, which is the point about business rates. I think there is much more opportunity much more quickly, with the appropriate checks and balances between different places in the country, to use business rates in a much more constructive manner than we presently do. To stray very briefly into political territory, I think local government faces the conundrum or even the dilemma of on the one hand locally elected, locally determined stuff but we are not always consistently excellent across every single area of local government. What Westminster and Whitehall are able to do is to say, “You argue your case very nicely, thank you very much, to the people who have elected you, and you have appointed officials like me, but you are not consistent in your delivery”. I think there is an element of hypocrisy in that, and that is what is holding back the trusting relationship of either elected members or officers. The small number of people who don’t do what they should do always seem to manage to hold back the rest. You experience that in Westminster and we experience that out in Birmingham.
Chair
That was a very helpful exchange, but it was a long one, and it meant that Bob, who has been very patient, has had to wait so long to make his point.
Robert Neill
That is very useful, and apologies for missing the beginning of the session. If I can follow up the point, I am very sympathetic to where you are all coming from. Would it chime with your experience that, if anything, central Government are much less willing to break down silos than local government? Is one of those reasons perhaps that many of the civil servants who advise Ministers have significantly less experience of actual service delivery than local government officers? Am I right, and how might we seek to rectify some of that?
Councillor Sparks
As a leading local government officer, I will let Mark pick up on that.
Mark Rogers
I agree with the premise, and it goes back to my earlier point about local growth teams. Sorry, I think you were not here when I said that. There is an opportunity to create a new way of working in local areas that would give civil servants—and Ministers, actually—the experience, if they have not previously had it, of how things operate at our end and vice versa. I absolutely agree with you, it is almost in plain view for us that we don’t say it anymore; Whitehall appears really siloed. We struggle with our own but we have more success. I think what we actually need to do, especially when we are talking about the economy for example, is to take forward the Heseltine thinking of creating teams that have in them people from Whitehall and Westminster fighting the same fight, championing the same priorities and delivering on them, and then all of you get the necessary experience of the inner workings of local government, the national agencies, Whitehall or Westminster. I am quite interested in a blended model—one that is led locally, I have to say, and still politically led, and also with the private sector alongside, that brings in civil servants. In greater Birmingham we have had that experience. We have had temporary secondees from BIS working on growth agendas with us and we have had ministerial sponsorships. We probably think that Greg Clark is a West Midlands MP, when obviously he is not. That kind of thing works really well if you also have the local powerhouse to drive the strategy and delivery.
Robert Neill
I wanted to raise a couple of short financial points. When we talk about devolution to county and city regions, I suspect that what you are saying—it is worth stressing—is that we are not talking necessarily about the old Government office-type regions that we had before. It could be a very different beast both physically and in terms of organisation.
Councillor Sparks
That is definitely what we are not talking about, you are absolutely right. As I said right at the beginning, before you were here, one of our crucial points is that we feel that when you are talking about devolving down to communities through councils, you are more likely to get a reflection of what England actually is. The regional administrative boundaries are completely arbitrary. If you look at the history of them, you find that they were dreamt up by civil servants in 1945 and have no relevance other than what it was to those civil servants at the time.
Councillor Finch
I think that the confidence of civil servants in Whitehall in local government would grow immeasurably if they actually served time in local government.
Mr Browne
If your analysis is true that the public have so much more faith in local government than they do in national politics, why do you think that so many more people vote in national elections than they do in local elections?
Councillor Sparks
Because when we propose to close a school, a library or anything like that, we get more people turning up to the meeting than vote in the general election.
Mr Browne
So when we get turnouts of only 35%, which is quite typical for a local election—I don’t know if that is typical in your areas; it varies in some parts of the countries to others—are the two thirds of the public who are not sufficiently interested to go and vote for their local councillors just stupid? Is it that they don’t realise that this is where all the action is taking place? Is this where the people who really know what is going on reside and they are just neglectful of their duties?
Councillor Sparks
No. It is just that the reality of local democracy needs to take into account the total picture, and the total picture is that there is involvement by people in community activity and community politics across the board, but it is not always expressed by them going to the ballot box. That is why my view is that it is particularly important that we constantly focus on communities. We are not talking about councils per se.
Mr Browne
I am just trying to make the conversation a bit more interesting, but it seems to me that if huge amounts of power are to be vested in local councils, it is only right that there is confidence across the board that the public think that those councils can and should exercise that power. At the moment, that seems to me to be a bit more ambivalent. I am standing down at the election in six months’ time, but several local councillors have put their hats in the ring to succeed me. I don’t understand why they are going in the wrong direction. Why aren’t they staying where the action is and where the power should reside in the bit of the apparatus that people have confidence in, rather than coming to this hollowed-out, defunct institution that we are sitting in today?
Councillor Sparks
That is a matter for them but, as I said at the beginning, our polling—
Chair
Can we suspend the session? The future of devolution after the referendum, HC 700