BLAIR’S BRITAIN, 1997–2007
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down policies that were disconnected from those in other parts of government. Local government became ‘governance’, embracing a number
of different organisations and requiring councils to lead coalitions of
local service providers. By 2005, the emphasis had shifted towards ‘neighbourhood’ and ‘community’ governance.
The programme of devolution that had started between 1997 and
2001 was to continue in 2004 with a referendum on whether or not to set
up an elected regional government for the North-East of England. The
voters rejected the idea, though the possibility of ‘city region’ government
was then proposed. There was no obvious end point to the programme of
continuing reform to neighbourhood, local and regional government. It
simply continued.
The development of ‘new localism’
The second Blair government undertook a number of reforms that came
to be described as ‘new localism’. As different ministers pursued departmental policies, a number of them evolved policies that could be seen as
being ‘local’, though they moved beyond traditional concepts of elected
local democracy. Thus, the evolution of autonomous schools, hospitals,
urban renewal partnerships, social housing providers and crime reduction partnerships made it possible for ministers to argue that a new kind
of ‘governance’ was being developed.
The New Local Government Network (NLGN), a think-tank, applied a
degree of intellectual coherence to a number of separately evolved policies that had bubbled up from the Blair government. In 2000, NLGN
published a document entitled Towards New Localism: A Discussion Paper
and in so doing kick-started the wider use of the term ‘new localism’.18
The purposes of the new policy were outlined:
Councils would develop a Partnership Contract proposal with their local
communities setting out how they intend to address the social, environmental and economic needs of their localities, supported by stakeholders
to deliver major improvements over a five-year period. As part of this, local
government would show how they would deliver on central government
18 New Local Government Network, Towards a New Localism: A Discussion Paper, by Lord
Filkin, Professor Gerry Stoker, Cllr Greg Wilkinson and John Williams (London: NLGN,
2000).
targets, as in Local PSAs. Central government would then enter into a
Partnership Contract with the council to support the delivery of local
objectives and national targets.
New localism would require the council to work with other local institutions to address a wide range of public policy questions, though they
would have to do so in such a way as to hit government targets. Whitehall
would agree to behave in a way that was consistent with this objective.
Local authorities would be the leader of this process, but not the sole
provider. Moreover, there was an acceptance of the legitimacy of a significant degree of central intervention.
Such pragmatism was reasonable. Local government, in common with
health authorities, the police, regeneration partnerships and housing
providers was expected to hit dozens of targets that were set for it.
Councils and other providers found themselves required to achieve a
number of – often inconsistent – objectives set by different parts of
Whitehall.19 One of the purposes of the new localism was to square this
particular circle.
Between 2001 and 2005, different departments of state moved to
strengthen or create new local institutions as the delivery vehicle for
public services. By far the most important of these new ‘micro’ institutions were NHS Foundation Trusts,20 announced in early 2002, and
which were intended to be independent local health service agencies.
Schools were to be given greater freedom to determine their own affairs.
New kinds of partly privately funded schools (‘academies’) were created
alongside many new ‘specialist’ institutions. From 2006–7, schools’
funding would come not as the result of local authority funding decisions
but through a nationally determined ring-fenced funding arrangement.21
In housing, social provision had for many years been gradually transferred away from local government control. Registered social landlords
(RSLs) (not-for-profit companies and trusts) had taken the role that up
to the 1980s had been the responsibility of local government. Much
council housing had been block-transferred to RSL control. Where this
had not happened, the Blair government had required the creation of
Arms-Length Management Organisations (ALMOs) or had insisted that
19 Public Administration Committee, On Target? Government by Measurement, Fifth Report,
vol. I: HC 62-I, Session 2002–3 (London: TSO, 2003).
20 Annabel Ferriman, ‘Milburn Announces Setting up of “Foundation” Hospitals’, British
Medical Journal, 19 January 2002.
21 Department for Education and Skills, Consultation on New School Funding: Arrangements
from 2006–07 (London: DfES, 2005).
authorities redeveloped their housing stock by means of Private Finance
Initiative (PFI) deals.22 Social housing was, therefore, in the hands of a
bewildering array of RSLs, ALMOs and, in some cases, local authorities.
Private developers were also involved because of planning deals that
required them to finance a proportion of ‘affordable’ housing as a condition of receiving planning permission. Regeneration partnerships, which
were generally funded either by Whitehall or by regional development
agencies, usually had developers, housing providers, local authorities and
several other key local players in membership.
Regeneration bodies, along with the police, health authorities, transport providers and a number of regional agencies, were by no means the
only other players involved in ‘new localism’. ‘Faith communities’, nongovernmental organisations, business leaders, utilities providers and
innumerable government agencies were often drawn in. Taken together,
these bodies came increasingly to be known as ‘governance’. Each ‘stakeholder’ had a role to play in the achievement of goals for an area.
After a short period at the start of Blair’s second government, during
which different micro-units of provision had evolved, efforts were initiated to encourage councils and other local institutions to work together.23
Ministers realised there were difficulties in having innumerable singleservice providers operating alongside local government.
A number of policy developments occurred between 2001 and 2005,
including Best Value plans, Local Public Service Agreements (LPSAs),
Local Area Agreements (LAAs) and, predictably, a raft of further consultation papers. LPSAs were agreements between the Treasury and individual councils about the achievement of particular public service
objectives.24 Additional resources were provided both to fund new initiatives and as a reward if improvements were delivered. LAAs, which
evolved in 2004 and 2005, involved replacing a number of different
funding streams with a single one that would generally be paid to an
area’s Local Strategic Partnership (LSP).25 Such partnerships, which were
a further manifestatio
n of new localism, brought together the council,
22 Office of the Deputy Prime Minister, The Decent Homes Target Implementation Plan
(London: ODPM, 2003).
23 Office of the Deputy Prime Minister, Supporting Strategic Service Delivery Partnerships in
Local Government: A Research and Development Programme (London: ODPM, 2001).
24 See, for example, Local Government Association, Improving Local Services Local Public
Service Agreements (London: LGA, 2001).
25 Office of the Deputy Prime Minister, Local Area Agreements: A Prospectus (London:
ODPM, 2004).
health authority, police, business, the voluntary sector and others into
another new local institution.
The Local Government Association and its leadership were suspicious
of new localism,26 fearing it would damage traditional local government
by encouraging new single-service micro-units of government and/or by
accepting the supremacy of the centre in requiring councils to hit targets.
By 2005, new localism had started to evolve into something rather
different from the ideas outlined in the period from 2000 to 2003.
New localism did not demonstrably improve either the quality of
public services or the strength of local democracy in the way its proponents had hoped. For example, the interest shown in elections for membership of Foundation Hospital boards proved minimal. Partnerships
often proved complex to administer and, in the case of some regeneration
projects, could actually inhibit effective delivery.27 The very term ‘joinedup’ government had become a cliché. The time had arrived for new localism to move on.
From new localism to community governance
In the summer of 2004, the government published a document28 entitled
The Future of Local Government. The government accepted there had
been too many central controls, targets and random initiatives. There
should be more citizen engagement, better local leadership and improved
service delivery. The government believed greater citizen engagement
was an essential element in improving the quality of provision while
simultaneously ‘re-engaging citizens in civic life and building social
capital’. ‘Alongside local elections, as well as voter turnouts, there need to
be more and better opportunities to participate and exert influence on
local issues and decisions. Devolution should not stop at the town hall.’
In a document entitled Sustainable Communities: People, Places and
Prosperity, published early in 2005, the government expanded on its new,
community-based, policy.29 The government’s ‘programme of action’ for
26 See, for example, Jeremy Beecham, ‘Heading Back to the Silo’, Public Finance, 21–27
March (London: CIPFA, 2003).
27 Audit Commission, Governing Partnerships Bridging the Accountability Gap (London:
Audit Commission, 2005).
28 Office of the Deputy Prime Minister, The Future of Local Government Developing a 10 Year
Vision (London: ODPM, 2004).
29 Office of the Deputy Prime Minister, Sustainable Communities: People, Places and
Prosperity (London: ODPM, 2005).
communities would provide ‘opportunities for all communities to have
more control over their own neighbourhoods’. There would be a
‘Neighbourhoods Charter’ which would allow communities to own local
assets (for example, playgrounds or community centres), to trigger
action by public authorities, to have devolved budgets and to use byelaws. Schools, health services and the police would be required to be
‘more responsive’. Local councillors would provide democratically legitimate leadership for any new neighbourhood arrangements.
Yet another document,30 published at the same time as the Sustainable
Communities paper cited above, explained that the government wanted
to use new forms of community and neighbourhood governance to
change the very nature of British democracy.
Western democracies are all facing a decline in interest in conventional
forms of politics. Voter turnout at elections in England has generally
declined. The gap between local and national turnout remains high . . .
Fewer people are willing to participate in political parties and traditional democratic processes. All this has serious implications for the legitimacy of existing political institutions and the priorities they set for public
services.
It would be possible for new neighbourhood or parish bodies to write
contracts with local authorities and other service providers (presumably
including the NHS, police or social landlords). Local councils would be
allowed to pass new bye-laws to allow neighbourhoods to control particular activities within their areas. The costs of the new neighbourhood
governance would be limited, but not zero. Arrangements were ‘principally about using existing resources more effectively, not about increasing expenditure overall’.
Thus, by the end of the second Blair government, new localism had
evolved into a new, neighbourhood-oriented (as yet theoretical) variant
of itself. This new type of institutional mechanism would have to operate
in a way that allowed choice and which was responsive. It had to take
account of the needs of a wide variety of groups, including faith communities, pensioners, patients, the young, those concerned with transport,
and of course local residents within a geographical area. But in operating
successfully, these new bodies also had to adhere to public service
requirements for equity, fairness and accountability.
30 Office of the Deputy Prime Minister and the Home Office, Citizen Engagement and Public
Services: Why Neighbourhoods Matter (London: ODPM, 2005).
The ‘balance of funding’ issue
The second Blair term of office inherited the unfinished business of the
first. Local government continued to complain about the ‘balance of
funding’ between central and local government. Three-quarters of
council revenue income derived from Whitehall grants, with only a
quarter coming from council tax. This balance meant that, at the margin,
if a council added 1% to its spending, there would be a 4% increase in
local taxation. Within government, this phenomenon was referred to as
‘the gearing effect’.
By the end of 2002, the government could no longer put off the reform
of grants. The Revenue Support Grant for 2003–4 would be based on new
‘Formula Spending Shares’, a somewhat reformed version of the previous
measures. Then, in January 2003, a review was set up under the chairmanship of Nick Raynsford to consider the balance of central and local
resources for councils.
Just as the ‘balance of funding’ review was getting under way in the
early months of 2003, the impact of the grant reforms introduced in the
RSG settlement began to bite. Because grant was redistributed – albeit
modestly – the heavily geared impact of these reforms led to an average
rise in council tax of 13% over England as a whole. More awkwardly for
the government, many schools found they were receiving far less additional cash than ministers had suggested they would fr
om a settlement
that was, overall, intended to raise education expenditure at a rate well
above inflation.
Later in 2003, the Audit Commission published a report31 that, in
effect, blamed the government for the 2003–4 council tax hike. A second
report from the Commission suggested that, in fact, councils had allocated more money to schools than the government had originally projected.32 There had never really been a significant funding ‘crisis’, though
some schools had fared less well than they expected because of the redistribution of government grant between authorities and because a
number of specific-purpose grants had been abolished.
As a result of the difficulties that had faced school funding in 2003, the
Department for Education and Skills announced that, from 2004–5, there
would be a ‘minimum funding guarantee’ for each school. Starting in
31 Audit Commission, Council Tax Increases 2003/04: Why Were They So High? (London:
TSO, 2003).
32 Audit Commission, Education Funding: The Impact and Effectiveness of Measures to
Stabilise School Funding (London: TSO, 2004).
2006–7, school funding would be ring-fenced and, in effect, removed
from the general resources provided to local government.
The 13% jump in council tax in 2003 led the government to decide to
threaten to reuse their briefly dormant capping powers. Having scrapped
the universal capping of local tax they had inherited from the Major government, Labour now found themselves under intense pressure – particularly from pensioners – to limit or abolish council tax.
The Raynsford review published its final report in July 2004, addressing
the central issue of whether the existing balance of funding between councils’ central and local resource-raising was, in fact, a problem. In paragraph 1.33, it concluded ‘there are strong arguments in favour of a shift in
the balance of funding, but the case for any shift depends on the feasibility
and desirability of any measures which might be used to achieve it’.
Gearing ‘can cloud the accountability and transparency of local spending
decisions and can contribute to unsustainable council tax increases’.33
The acceptance that there were arguments in favour of a change in the
balance of funding was heavily tempered by the idea that ‘the feasibility