Localism: The need for a new settlement – Alan Milburn

Speech by Rt Hon Alan Milburn MP Demos seminar, Design Council, London, Wednesday 21st January 2004

This is the first in a series of seminars looking at issues that will form part of the future political agenda. The issues are those where I believe this Labour government under Tony Blair can make the biggest contribution to transforming the political landscape in our country in a way only two previous governments have managed before – those of Clem Atlee and Margaret Thatcher. It is transformation not consolidation, more reform nor less, that is the approach I advocate.

Today I want to focus on the debate around localism – that is making services more locally accountable, devolving more power to local communities and, in the process, forging a modern relationship between the state, citizens and services.

Localism will be at the crux of the political debate not just in the lead up to the next general election but beyond. In recent years Tony Blair’s government has changed the terms of that debate by putting public services – not tax cuts – centre stage. Indeed taxes have been raised to pay for improvement. Delivery is the new mantra – and the key yardstick. There is a long way to go but good progress is underway.

With progress under our belts this is the right time to take stock and to set out the agenda for the next five to ten years. Making improvement sustainable depends on getting the right relationship between those providing services and those using them. Engaging citizens, strengthening democracy and delivering effective services should be unified not – as they often have been – separate policies. These are local relationships. And I can see three reasons why they are set to become ever more local.

First the impact of globalisation is driving people to take refuge in what they know – their families, communities, regions. Globalisation makes the case for civic institutions that offer security and opportunity. It also makes the case for localisation. Where people feel powerless in the face of global change, they feel the local can be influenced even if the global can not. If politics and services are to command trust and legitimacy they need to be structured so that they reflect that yearning for local control.

Second, in a more informed consumer society people seek services responsive to individual needs and offering greater choice. People are demanding a greater say. Hence the need to reform the one size fits all take it or leave it top down model of the 1940s.

Third politics is beginning to reflect the push to the local and the pull of the consumer. The new battleground is around the politics of localism. The Conservatives are desperate to claim this territory. The Liberals feel it is naturally theirs. Labour should make it our own.

Empowerment and equality are the essence of our values. They should be the touchstone of our future reforms. We have already introduced sweeping constitutional reform. Devolution to Scotland and Wales is fixed. Regional government in England – starting I hope in the North East – will further reshape governance in our country. But over and above that what is now desperately needed is a new settlement between the centre and the local. Just as Labour’s first term in office enshrined a new constitutional settlement between the nations of the United Kingdom so our next term should forge a new settlement between central government, local government and new forms of local governance.

There is no perfect system but the current one is a hotch potch. Take concerns about levels of council tax and funding of services. Underlying them is a lack of clarity about who is responsible for decisions – police authorities, local authorities, central government or a mixture of all three. Compared to most other European countries our finance system is highly centralised. Local councils object to central demands outweighing local priorities. There are similar concerns in the police and health services. Central government points to problems in service delivery and quality of local leadership. As we saw with schools funding ambiguity in accountability leaves the centre taking responsibility for when things go wrong without having the levers to put them right. Citizens are left bewildered, stuck somewhere between apathy and anger. Turnout falls at local elections. Dissatisfaction grows with local government services.

In short the relationship between central government, local services and citizens is characterised by a confusion of responsibilities and accountabilities.

In part this is a legacy of previous bursts of reform. As Demos points out in its Adaptive State report the local governance arrangements for our key public services are a curious hybrid of nineteenth century liberal administrative state structures, the more centralised approach embodied in the postwar welfare state, the neo-liberal contract culture of the 1980s and the performance management culture of the 1990s. To this confused cocktail have been added the changes of more recent years. When Labour came to office in 1997 we had to grapple with public services that were listing under the weight of neglect, fragmentation and shortage of resources. Our response was a plethora of service targets, inspection regimes and national standards. Together with extra resources they have helped put our public services back on an even keel. Although it is unfashionable to say it targets have undoubtedly helped raise performance. No one should kid themselves that without tough central targets on street crime, hospital waiting times, or school literacy such consistent progress would now be being made.

So targets do work. They work best when they are properly focussed around clearly defined outcomes. They work least when there are too many of them and when they inhibit the ability of local services to innovate in meeting local needs. I believe we have reached the high water mark of the post-1997 centrally-driven target-based approach.

That view is also widely shared in government. In the last couple of years the direction has been towards greater devolution in local government, health or education. The search is on for policies that can enshrine a more localised agenda. There are reviews underway of how local government should be financed and how police authorities should be structured. Following hard on the heels of NHS foundation hospitals, proposals have been floated for giving local people a greater say over how services as diverse as leisure and schools are run and organised.

These are all welcome developments. But they are not without risk. First there is a danger that if we heap ad hoc reforms on what is an already complex system of governance we could make matters worse not better. And second, if reform is purely focussed on structural change it not only risks taking the eye off the ball of service improvement, it misses the crucial insight that localism only works if there is space for different solutions to be devised by different communities. Structural change is necessary to ensure that localism is real not rhetorical – and I will outline later some possible changes – but reform here has to be about cultural change as well. It should be about creating space so that local innovation can flourish and, crucially, so that community capacity can be built.

Hence the need for a broader settlement. The next Labour manifesto should contain an explicit vision of how services are organised and where responsibility lies. That vision needs to spell out what a modern relationship between citizens, services and the state will look like.

In the course of this speech I can do no more than sketch the outlines of this fuller picture. My starting point is this: the modern progressive cause is to spread opportunities throughout society. The role of the State is not to withdraw, leaving families and communities to the whim of a free market approach, as neo-conservatives on both sides of the Atlantic believe. Nor is it to assume responsibility for everything from the litter on the streets to the behaviour of children in the classroom. It is not the State that drops litter or disrupts classes. It is citizens. So where the old bonds of community – the male apprenticeships, the extended families, the churches and trades unions – are weaker, a new approach is needed to strengthen responsibility and aspiration in society. Today the priority must be to fashion an active citizenship where the State enables more people to make choices for themselves so they can realise their own aspirations for progress in their families and their communities. This is a new politics, of redistributing opportunity.

It is now widely recognised for example that if regeneration is to be sustainable it needs to extend real power into the hands of local communities themselves as the New Deal for Communities has begun to do. Government at all levels should focus more explicitly on helping local communities run things themselves – the council estates, the enhanced neighbourhood watch schemes, the Surestart programmes – with a bigger role for voluntary, community and residents organisations. Building social capital is the pre-condition for tackling the problems of urban decay, crime-ridden streets, educational failure.

Active citizenship. Community engagement. Co-production between providers and users. These are the modern routes to social justice. Those who say there are limits to the role of free markets are right. We should be as explicit in recognising there are limits to the role of centralised states.

If the eyes of local services are forever forced to look upwards to the centre for their accountability they will never be properly focussed on the specific needs of local communities. As Sir Ian Blair, the Deputy Police Commissioner in London, recently argued what the centre defines as the crime problem may not be the central concern of local residents. They are as likely to be worried about noisy neighbours and rowdy teenagers as they are about gang violence or house burglary.

Ours is a small country with big differences. Local problems require local solutions. Accountability should shift to users and communities. Indeed it should be an explicit objective for all of our key government departments to embark on reforms that shift accountability so that it is downwards and outwards not upwards. In the business world success today depends on being flexible enough to innovate and responsive enough to meet consumer demands. Public services have to apply the same lessons.

None of this means there should be no role for national standards still less for national governments. Innovation and improvement require both standards and flexibility. It is getting the right balance that counts. There is sometimes a rather naïve form of localism which assumes that the new world will be one of more money, an absence of rules and an easier life. That is not what I advocate or what is needed. Indeed for some services where local preferences vary little and which rely on highly specialised skills, more centralisation not less might be required. Fire services or housing benefit administration – perhaps controlled regionally – are examples. Services that fight drugs or serious crime – as Sir Ian has suggested – might be others. Equally, because they are so locally salient it would be wrong in my view to apply the same approach to either the way schools are managed or funded. As part of the wider settlement I advocate, there should be a guiding set of principles drawn up – perhaps jointly by central government and those representing local services – to determine where best the controlling interest should lie.

The overall presumption should be towards a more diverse, more devolved, more flexible system of governance. It should be towards more choice for users. It should no longer be about central government acting as the proxy for the choices of local communities but for local communities themselves to be empowered to make those choices. It should be for a quickening in the pace of reform.

The implications of what I propose are at least as profound for the centre as for the local. This is because in the end devolution depends upon power being relinquished. So let me try to spell out what some of this might mean for the role of the centre before I go on to describe some ways in which localism could be enshrined.

My starting point is that exhortations to good behaviour on the part of Ministers and civil servants will not be enough. I know. I’ve been there. Explicitly, localism will only thrive where there are limits on the size and influence of Whitehall. The Lyons review is a step in the right direction. There is a danger, however, of putting the cart before the horse. The size of Whitehall should be determined by the functions that are required in Whitehall – not the other way around. I believe we need a slimmer, more agile civil service machine focussed less on imposing solutions and more on spreading best practice. And to ensure that Whitehall is better able to serve I propose organisations representing local government, the police, the health service and others should form a working commission to set out what they would like to see it offer.

In the meantime Ministers could consider rationalising the multitude of inspecting bodies that now exist. Our ambition should be a single national body reporting to Parliament – perhaps merging the Audit Commission and the National Audit Office – under which a slimmer tier of specialist inspectorates would operate.

A moratorium on expanding ringfenced funding for local services could also be put in place. The presumption should be that any such funding should be strictly time limited and applied only to kickstart new central initiatives.

And there should be a new concerted cross-Whitehall effort to reduce the number of central targets so they are focussed more on outcomes and where that is not possible on outputs rather than inputs.

The move should be towards a limited number of floor targets. These represent a nationally guaranteed minimum set of standards which the public in all parts of the country can expect. Some services – libraries might be an example – may not be covered by national floor targets at all.

In this new world, the centre will need to accept there will be local variations. Local services will need to accept explicit new national rules so that where local services exceed the minima more rewards will be made available but where they are not met intervention will be more swift. In normal circumstances the role of central government will be limited to challenging local services and enabling improvement. But where there is failure – perhaps highlighted by locally generated petitions or ballots – the centre has a responsibility to step in. That will help focus the job of the centre – including that of Ministers – on raising performance in the poorest performers. Services that are not capable of rapid improvement should as a matter of course be put out to open competition. By that I mean the management of services and not just provision. Indeed the best local service performers should be able to compete to manage others probably through arms-length community interest companies. In time there could be chains of these management companies specialising in running groups of primary care trusts, hospitals, leisure, social services and other local government services.

Greater financial freedoms should flow too. Our over centralised system of local government funding is creaking. It is a recipe for confusion and is crying out for reform. Whatever the outcomes of the Government’s review of the current council tax system the transition must be towards more equality between local and national funding. We should examine whether over time a 50/50 overall split is feasible. Of course that would require local authorities – and perhaps other local services with a local democratic mandate – having the freedom to raise more income locally staring perhaps with small taxes and charges balanced by popular permission being sought through local referenda. As in the USA, Canada, Australia and many other countries locally elected bodies should be able to borrow either from the markets or through local bond issues.

The direction of travel should be towards greater autonomy for local services. But a word of warning is needed here. There is precious little evidence that the simple devolution of powers from one tier of government to another of itself produces services that are more responsive or effective. It is this for this reason that devolution cannot stop at the town hall door. Instead it has to reach down into local communities and empower individual users. Active citizenship will not be forged by a local elite running a managerialist state any more than a national elite running one. To be responsive local services have to be accountable. Freeing local services from central accountability cannot mean no accountability. It will mean a new accountability – to local communities and, where feasible, to individual users.

Local authorities will increasingly focus on commissioning not providing. They will exercise genuine community leadership by building communities own capacity to lead. There will be more diversity in supply not just from private providers but from voluntary and community sectors too so that social entreneurship blossoms. More services will be opened to the individual choices of users whether they be patients or carers, parents or tenants.

And where there is less opportunity for individuals to exercise consumer choices – policing being a good example – it will mean passing power downwards and outwards to local communities. In other words, our accent should be on strengthening both individual and collective choice. There will be more use of local referenda. Turnouts in housing transfer ballots already exceed 70% – well in excess of that at the last general election. Indeed we could take the whole concept further by legislating to allow locally generated petitions to require the removal of poorly performing services.

Direct elections to some services should also be considered. Obvious candidates are at least some of the places on PCT boards, police boards and maybe school governing bodies. For local representation to be real, however, key criteria would need to be met. Two spring to mind immediately. The power to control – or maybe raise – at least some of the finances local boards have at their disposal. And the power to dismiss senior executives who have failed to raise standards and performance. The alternative to direct elections here is for locally elected Mayors to have those powers.

All of this will help foster civic renewal. It will help give people a stake in their communities. Of course, it is at the very local neighbourhood or village level that people’s sense of belonging appears to be strongest. In many rural areas parishes reflect that sense of identity. But they are largely absent from urban areas. Some local authorities are moving to correct that local deficit by establishing area committees but these often lack real power and legitimacy.

And yet it is at this level that crime and grime issues – anti social behaviour and street cleaning – are probably best dealt with. Directly elected neighbourhood councils could provide a focus for enlisting the local community to help tackle these local quality of life issues. They could provide openings for more local people who want to play a part in their community having the power to do so. They could have limited precept powers but would probably be mainly funded via the local authority. It would be responsible for monitoring standards and stepping in where the neighbourhood council defaults. That would allow the existing local authorities to focus on more strategic issues and so reduce their existing councillor numbers.

I would urge the Government to consider this proposal for inclusion in its next election manifesto. It is a means of making localism real, growing active citizenship and providing services that are more responsive to communities. It could be the lynchpin of a new settlement in which governance is given to the people.

One final point. In my view our approach should be one of demand-led devolution. Where people want it they should have it. Where they don’t it should not be imposed. Again localism only works if it provides the opportunity for the people to decide.

It is one of those great political ironies that the very figure most identified with the centralised statist approach of the last century should have formulated what I believe should be our political mantra for this new century. When Nye Bevan proclaimed that the purpose of winning political power was to give it away he reached into a rich labour movement heritage in which empowerment for individuals and communities was the great progressive cause. It should be our cause today. To coin a rather more modern phrase when it comes to localism it is time to stop talking the talk and start walking the walk. That is what I hope we will now do.