Local Government

BRITISH OVERSEAS TERRITORIES: The dilemma for intervening in tax havens

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Philip Whiteman

Within academic literature much has been written on central-local relations and resource dependency relationships between principal and agency. To place this into context, few sub-central or local governments are truly autonomous of the central government.  Many are merely regarded as arms-length local administrations of the central state.  So what does the current tax haven scandal regarding the fourteen BOTs (British Overseas Territories) tell us?

 The Labour Party leader of HM Opposition, Jeremy Corbyn, today stated that the government should consider imposing “direct rule” on its overseas territories and dependencies if they do not comply with UK tax law. This reaction will clearly be chime with the domestic UK public and possibly with international tax authorities but nothing is ever simple.

We can count that tax haven BOTs as fairly wealthy by comparative standards to the non-tax havens.  Their strong financial footing reduces the resource dependency relationship with the UK Government. The Caribbean BTOs such as Bermuda, Turks and Caicos, Cayman Islands or Anguilla contrast strongly with Falklands, Ascension or St Helena, the latter group which are highly dependent upon UK political and financial support for their survival.  As with any resource dependency relationship, where the FCO is able to exert financial control then the greater their power. Some may call it colonial.

 Despite the UK Government’s ability exert a power dependency relationship, their ability to intervene has decreased in recent years.  With greater wealth comes greater self-determination and a greater resistance to perceived colonial interference. That is one reason why the UK Government introduced the British Overseas Territories Act permitting BOT residents to apply for full British citizenship.  Many of the BOTs have also become increasingly autonomous with their own local democratic governance arrangements.  Both measures are in part to stop independent movements gaining a stranglehold on the BOTs.

 Whilst the UK Government has become more relaxed in recent years to local self-determination, any perceived interference in the affairs of the wealthy tax-havens will have local consequences.  Aside from the South Atlantic BOTS, many have well entrenched opposition movements seeking freedom and total independence from UK control. 

 To take up Corbyn’s suggestion that the UK Government should take total control of BOT affairs would have dire local consequences. At worst, resentment could exceed the bounds of normal democratic resistance.  This leaves the Conservative led UK Government in a difficult position. On the hand it is obliged to ensure that the BOTs comply with UK tax policy, on the other it faces the prospects of severe local difficulties from territories that could easily go it alone.

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Dr Philip Whiteman is Teaching Quality Assurance Lead at the School of Government and Society and Director of Education at the Institute of Local Government Studies at the University of Birmingham.  He has research interests in the impact of central government and regulators on the role, service delivery and performance of local government and other local bodies.  

What should Local Gov be doing next digitally?

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Sarah Lay

A couple of weeks ago I was invited to take part in an event for managers from three Nottinghamshire district councils. It was one part of a longer programme of talks and workshops for them as they explored different areas of organisational process and strategic direction.

Hosted by Dr Stephen Jeffares, a Lecturer in Public Policy at the University of Birmingham my part was to be interviewed about all things digital and share some of my experience and thoughts with the group.

I really enjoyed the chat and talking not only about my most recent work at Nottinghamshire County Council on Digital First but further back over the 12 years I’ve been in local government, further back to the other experience of working online in private sector and as a regular user, and also to the founding and growth of LocalGov Digital.

There were lots of good questions from the group about situations they could see or had experienced in their own organisations and there was one question which really got me thinking: if back in 2008/2009 I was working at getting local authorities to recognise they should and could use social media and that’s now happening, what is it I’m tell councils they should be doing next, digitally?

There was a slightly flippant reply from me that councils while better at social media (and I include other areas of digital engagement in this term, such as email and text message) still weren’t making the most of it, generally, and certainly not keeping pace with the expectations of the public in this area. If they had started using it, they were still falling back to broadcast mode on many occasions, and it was a rare example indeed that had moved toward an fully integrated use of social media; in my view they are often using the technology as an informing tool but were not valuing the conversation for intelligence and influence. And just for clarity – when I talk of intelligence and influence I mean not manipulation but rather then leaving ego and ‘authority’ at the log-in and taking the relevant and appropriate place in online communities.

In terms of what I thought they should be looking to next – well, again, a lot of the ideas and statements of the last 12 years still stand summarised as: build better public services, stop doing the wrong digital things in a fairly average way.

But, again, this is flippant of me. What does that really mean? Well, at the time I said something about how councils need to stop thinking of digital as a presentation layer and move toward service design where digital is one, albeit quite powerful, means of delivery. I think local government needs to stop seeing digital as a prettier web page that will magically mean channel shift occurs and start to understand something more fundamental, more difficult – that harsh times and a changed world need radical redesign of services. They need to challenge themselves, or be challenged, to design better public services from the inside out.

So, that’s the what I think. The how?  Well it starts with not containing digital to a ‘digital team’ but seeing service design as a wider activity. It’s something that needs to take in procurement, and contracting, and IT, and HR, and leadership, and the community, and the service. It needs to be co-produced – not just tested with real users. We need to learn that services built in silos are experienced in bits – and this is never going to be best for the user, and if it’s not best for them it won’t unlock the things the organisation wants; savings and satisfaction.

There is no ‘quick win’, or silver bullet, or any of those other buzz words for short cut.

What do I think council’s need to do next? Arguably what they should have long ago done – stop thinking about ‘doing digital’ and start thinking about ‘better services first, better digital delivery as an outcome.’

Much thanks to Dr Stephen Jeffares for inviting me to be interviewed and to the group for their time and questions!

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Sarah Lay is the co-founder of LocalGov Digital.  You can find her on Twitter and find out more about her recent work with Nottinghamshire County Council on their blog.

This blog was first published on  www.sarahlay.com.

Time for an end to parent/child relationship with central government and sibling rivalry between local authorities

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Catherine Staite, Director of INLOGOV

It is universally recognized that England has the most centralised government in the western world. This is the result of many years of effort on the part of successive Conservative, Labour and Coalition governments. Motivations have varied between different governments but some key drivers have operated for the past 30 years.

Ideologically motivated governments don’t like power to rest with anyone they can’t control, including other parties or dissident factions within their own party. Even when the centralising motivations are more benign, for example, the avoidance of ‘postcode lotteries’, the results are rarely better.

Self-belief trumps evidence and makes governments vulnerable to airport book management gurus. For example, ‘Nudge’ theory is not the magic key to changed behaviour and reduced demand for public services.  There is a wealth of evidence about how a variety of approaches, applied coherently and intelligently, can have a significant and lasting impact on behaviour. To understand that, politicians would either need to read more than one book on their holidays or commission some research.

Centralisation creates a trap for central government because, by controlling so many aspects of local services, they set themselves up to fail. If they claim the ability to solve all ills, they become responsible for all ills. Central governments make disastrous micromanagers in spite of misplaced confidence in their superior intellect and technocratic abilities. They may take a helicopter view of a complex system and believe that by tinkering with one part of the system they can resolve all the problems within the system. The result is inevitable; a myriad of unintended consequences that then drive more centralized tinkering.   The numerous attempts to integrate health and social care demonstrate how helicopter-height theory doesn’t survive contact with ground-level cultural, professional and financial realities.

Centralisation disempowers local government and reduces its ability to work innovatively and creatively with the wider local public sector, business and community partners. The apparent empowerment, purportedly offered by policy or statute, is continually undermined by the constraints of the parent/child relationship characterised by regulation (‘my house, my rules’) as well as messy and inequitable funding arrangements (‘no you may not have more pocket money’).

But are these long established patterns of structural, functional and psychological centralization about to change? Talk of devolution and financial independence may lead you to think so – but think again. The underpinning relationship is still parent/child, as highlighted recently by Analysis on Radio 4 .

Now, some local authorities are making matters worse by demonstrating plenty of dysfunctional behaviour of their own, in the form of sibling rivalry. The mantra, ‘its not fair’ is used by many local politicians – about the actions of the county, the neighbouring unitary or by the next door district. True, there is plenty of unfairness built into the system but there is no hope of resolving that while different parts of the sector are engaged in internecine battles that only result in more inequity, more vitriol and more hostile takeover bids driven by more by narrow interests than the creation of public value.

Many local authorities do demonstrate heroic and commendable behavior, collaborating and supporting each other. Even the best of them find it hard going in the face of so many systemic challenges. Local government is too complicated. There are too many local authorities, capacity is spread too thinly and the costs of democracy are too high. Piecemeal tinkering, in the form of small-scale reorganizations, minor changes to functions and governance, spin-offs and bolt-ons, have only made matters worse. This has been going on for so long that everyone now takes it all for granted – but it’s not inevitable. Some grown up actions would put local government on the road to adulthood and more in control of it’s own destiny.

  • Establish a cross party commission to review all the key drivers for financial and structural change in local government. Perhaps the LGA, SOLACE and CIPFA could work together to set up a commission.
  • Agree Terms of Reference – ideally to be driven by evidence and the public good and as bold, radical and creative in their recommendations as possible, to;
    • Design a new geography – that combines economies of scope and scale with recognizable places. It won’t be perfect because there are always borderlands but it will at least be underpinned by some design principles, as opposed to the current system which is the creature of a series of historical constructs and the intermittent application of political whims.
    • Design a new geometry – that enables local authorities to have much greater impact on all the ‘wicked’ issues – from low educational attainment to obesity – which are at the root of many of the relentless and unsustainable pressures on public services. This geometry could include flexible, integrated governance arrangements, ranging from large clusters of councils tackling the infrastructure challenges (let’s call them Combined Authorities), to neighbourhood level engagement which co-produces solutions to local issues.
    • Design a new funding model – with a system of income generation and redistribution, that combines maximum autonomy with maximum equity, agreed and managed by local government for local government.

If we do what we’ve always done, we’ll get what we’ve always got – a messy, sub-optimal system of local government riven by in-fighting and self-interest. If local government continues to divide itself, it will always be ruled by others.

 

Catherine Staite

Catherine Staite is the Director of INLOGOV. She provides consultancy and facilitation to local authorities and their partners, on a wide range of issues including on improving outcomes, efficiency, partnership working, strategic planning and organisational development, including integration of services and functions.

Local Government Studies – virtual special issue on budgeting

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Alison Gardner & Vivien Lowndes

Anyone following the news over the last nine months might be forgiven for thinking that the UK’s relationship with austerity had taken a rollercoaster ride.  In June 2015, George Osborne told central government departments to plan for 25-40% spending cuts, citing his aim for the UK to become ‘a country that lives within its means’.  His ‘fiscal charter’ signalled a departure from a historic reliance on government borrowing financed through economic growth, towards an aspiration to consistently deliver a budget surplus from 2019-20 onwards.  Then in the 2015 autumn statement and Comprehensive Spending Review, forecast cuts to many departments were mitigated, prompting parts of the press to herald an ‘end to austerity’.  Nonetheless Osborne has since been keen to emphasise ongoing threats within the global economy, arguing that austerity remains a necessity.

From the point of view of English local authorities, continuing austerity – including a reduction in central grant funding of 60% – has been balanced against a ‘devolution revolution’: a promise of increased powers and fiscal autonomy for councils that are prepared to join together to create ‘combined authorities’ reflecting  ‘functional economic geography’.   For some local government advocates, devolution represents a long-sought opportunity for the sector to break free from Whitehall’s straightjacket of fiscal control.  However, from a critical perspective, devolution may also represent a diversion:  a convenient sleight of hand that allows the government to disavow responsibility for underfunded local services, whilst breaking Labour’s urban power base in the cities, and increasing central leverage over core areas of policy.

Our new article ‘Local Governance under the Conservatives: Super Austerity, Devolution and the Smarter State’ argues that – despite reports of a ‘flat’ comprehensive spending review funding settlement –  local government is in fact entering a period of super-austerity, underpinned by a consistent trajectory towards reducing the size of the local state.  Cuts, such as the recently announced 6.7% real terms reduction in spending power, are downplayed or obfuscated, while assumptions of growth in local sources of income will be realised unequally.  Under the Coalition government , spending cuts impacted most severely upon the poorest localities, and (despite recent changes to the DCLG grant funding formula)  future funding reductions – as well as unequal opportunities to raise income – threaten  to reinforce a distinctive geography of austerity with deepening  spatial inequalities.

Optimists point to the opportunities of devolution, reform and efficiency.  Devolution has gathered cross-party parliamentary support, and large cities such as Manchester have been keen to be at the forefront of governance innovations such as combined authorities, and devolved health spending.  Proposals to localise business rates, and allow (limited) flexibility to elected mayors in increasing council tax have also been welcomed.  However, the economic benefits arising from devolution are uncertain and disputed, playing out unevenly and over the longer term, whilst spending cuts are front-loaded.   ‘Devolution’ also effectively provides for some key functions – such as economic development – to be centralised from local government to a new sub-regional level.

In addition, rather than emerging organically as a symbol of local confidence, devolution has in recent months been focussed on strategies to mitigate local deficits, driven forward under conditions of compromise and constraint.  Progress on creating combined authorities, initiated cautiously under the 2010-2015 Coalition, was rapidly accelerated by a Treasury invitation for all local authorities to submit ‘fiscally neutral’ devolution proposals in advance of the comprehensive spending review.  The summer of 2015 saw an unseemly scramble to submit hastily negotiated proposals, with some awkward alliances constructed under the threat of further spending cuts.  The Government has also insisted on directly elected mayors as a cornerstone to devolution deals, despite a rejection of the principle across many English cities in 2012, in a move that could potentially short-circuit existing local political structures, and diminish local democratic representation.

In relation to the wider public sector, David Cameron has outlined a vision for a “smarter state”, but proposals appear to rehash new public management principles, with relatively little focus on local government.    Most local authorities are already well advanced in implementing the reforms which the government describes, and multiple studies suggest that local authorities are reaching the limits of ‘efficiencies’.   Increasingly local communities are being called upon to construct their own safety nets.

In effect, the direction of local governance under the Conservatives appears to point towards a form of ‘roll-out’ neo-liberalism, signalling an active construction of an alternative and right wing model of the local state, in contrast to the deconstructive ‘roll back’ neoliberalism practiced by the Coalition.  Whilst this brave new world will create opportunities – especially for areas that are already prospering – prospects are less certain for areas without strong local economies.  This radical transformation also implies a technocratic transfer of power, taking place with minimal public engagement.

Dr Alison Gardner and Professor Vivien Lowndes have just published Local governance under the Conservatives: super-austerity, devolution and the ‘smarter state’ in Local Government Studies. You can get free access to the paper through the virtual special issue on local authority budgeting. 

 

Alison Gardner

Alison Gardner has recently completed a PhD at the University of Nottingham.  Her research interests include local responses to austerity, and the changing relationship between civil society and the local state.  She previously worked in policy roles with local authorities, the IDeA, Local Government Association and the civil service.

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Vivien Lowndes is Professor of Public Policy at the Institute of Local Government Studies, University of Birmingham UK.  She has been researching institutional change in local governance for 25 years, including recently Why Institutions Matter (Palgrave 2013).  Current work looks at gender and institutional change and the impacts of migration.

Combined Authorities and Del Boy Devolution

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Chris Game

It was quicker than a full-term pregnancy. In late January, less than nine months after the General Election, the Cities and Local Government Devolution Act (CLGDA) received its Royal Proclamation – sorry, Assent. By which time eight bonny ‘devolution deals’ had already been hatched out into the local government world.

For the record and terminological clarity, these comprise the five established Combined Authorities (CAs) – Greater Manchester, Sheffield and Liverpool City Regions, West Yorkshire, and North East – the announced West Midlands and Tees Valley CAs, plus unitary Cornwall’s non-CA deal. All but West Yorkshire and Cornwall are elected mayor-based. An eighth proposed CA, North Midlands – Derbyshire and Nottinghamshire – could be said to be experiencing Labour pains, since one reported cause of its delayed confirmation was local Conservative MPs’ concern that the two Labour-inclined counties could elect the wrong kind of mayor.

Had these devo deals been babies, suspicious relatives might have been making legitimacy checks by counting the weeks. Here, though, the concern is less legitimacy than motive. Was all this haste confirmation of the Government’s, and particularly Chancellor George Osborne’s, genuine commitment to overthrowing “the old, broken model of trying to run everything in our country from the centre of London”? Or/and something else?

The Commons Communities & Local Government Committee, while welcoming the principle of the Government’s ‘bespoke’ approach to devolution, wasn’t convinced of either its commitment or capacity to deliver. It judged the policy so far to have been rushed, politically driven, and lacking in direction, rigour, assessable outcomes, and democratic or public engagement. The Institute for Government (p.9) was similarly critical: a compressed and “opaque proposal and negotiation process …”, comprising “unspoken expectations … [and] unwritten rules”.

Neither review, though, noted more than in passing the question that’s increasingly preoccupied the local government world for the past several not months, but years: is the real agenda behind much of this devolution stuff reorganisation or unitarisation by stealth? About doing covertly what Sir Eric Pickles denied himself overtly as Communities Secretary with his 2008 promise to shoot with his pearl-handled revolver the first civil servant proposing local government reorqanisation? It was there in the original Bill but largely overlooked, then boosted by one of several late Government amendments. Now, it seems, any erstwhile stealth has been supplanted by something resembling Del Boy Devolution.

Various INLOGOV colleagues have commented in these columns on aspects of the Government’s devolution policy virtually since the CLGDA’s conception (and that really is the last outing for this metaphor). It’s an appropriate moment, therefore, for an update, focusing particularly on some of those late and under-reported changes during the Bill’s parliamentary progress.

First, though, a bullet-point summary of what is an essentially enabling Act, whose main legislative function is to amend and extend the 2009 Local Democracy, Economic Development and Construction Act (LDEDCA) that introduced CAs. With little reference to the content to the ‘devolution deals’ that are its chief product, the CLGDA’s core provisions relating to CAs:

  • empower the Secretary of State (SoS) to create mayoral CAs with a directly elected  Mayor who will chair the CA and may, with the SoS’s approval, raise a precept on constituent authorities’ council tax bills;
  • extend CAs’ limited remit of economic development, regeneration and transport to include any local government function, including health service functions;
  • remove CAs’ boundary restrictions prohibiting non-contiguous or doughnut- shaped areas;
  • empower the SoS to require the mayor to exercise specified functions individually, including those of the Police and Crime Commissioner;
  • empower the SoS to transfer to mayoral CAs the functions of other public authorities in the CA’s area, including government departments, but not county or district councils; also to confer on a CA the general power of competence;
  • require CAs to appoint audit and overview and scrutiny committees.

It’s hard to believe that, without the apparently irresistible rhyme, even George Osborne would have dared label as a ‘Devolution Revolution’ a package involving minimal fiscal devolution, no subsidiarity presumption, and no formula for lastingly rebalancing the relationship between central and local government. Certainly, the recurring ‘empower the SoS’ mantra in the bullet-point summary makes it manifest who in the first instance is the chief enablee here. This is a top-down, Osborne-controlled, ministerially managed devolution – or ‘Treasury Power Grab’, as Jim McMahon, Oldham’s new MP, former council leader and Northern Powerhouse architect, described it in his recent maiden speech (Jan 19, Col. 1369).

But that’s not the main point in this particular blog, which is more about the legislation’s footnotes. As summarised above, the Act’s key provisions read much as they did in the original Bill – though not necessarily the same as in interim versions. The required elected mayor was critics’ main target throughout, and, perhaps distractingly for those rushing to prepare devolution bids, from July onwards (within days of Cornwall’s non-mayoral deal being announced) the Bill contained a Lords amendment overruling the requirement that an elected mayor be a precondition for the transfer of functions to a CA.

In December, predictably enough, the requirement was restored by the Commons, and indeed strengthened. Notwithstanding the arguments of the LGA (p.17) and others that an elected mayor is not the only, or invariably the most effective, accountability model available, the amendment would, claimed ministers, risk jeopardising the Greater Manchester and Sheffield deals already negotiated. Besides which, it was in the Conservative manifesto, and thus merited strengthening. The SoS’s power to require an existing CA to adopt an elected mayor and remove a dissenting council now allows such an order to be made when more than just one council dissents, provided two constituent councils plus the CA do consent. As we’ll see again shortly, consent is not a big thing with this Government.

There’s a rambly bit in St Matthew’s gospel that struck me as relevant here. After warning about false prophets and wolves in sheep’s clothing, it switches to bad trees not bearing good fruit – and therefore “by their fruits ye shall know them”. Here, I’d suggest that “by their late amendments ye shall know them”.

There was an exceptional number – 87 Government amendments alone considered by the Lords on Jan 12 (Col. 139) – partly due presumably to the speed of the Bill’s drafting and partly to its being sent to the Lords first. Many were uncontentious drafting changes – but most of the substantive ones, like elected mayors, took the form of restoring the status quo ante, the Government’s Commons majority having now rejected an earlier Lords amendment.

There was the odd conciliatory concession, like agreeing to the SoS providing annual reports to Parliament detailing devolution progress in all areas of England – harmless enough, with the information presumably already in the public domain. But anything conceivably problematic – requiring all Government Bills to include a ‘devolution statement’ that they are consistent with the principle of devolving power to the most appropriate level, or removing the SoS’s discretion in assigning CAs the general power of competence, or reducing the voting age for local government elections from 18 to 16 – forget it.

Which brings us to reorganisation. There were two relevant clauses in the original Bill, neither initially attracting great attention. One streamlined the procedure for creating a CA or amending the structure of an existing one by empowering the SoS (once again) to make an order, rather than wait for the relevant authorities to produce a ‘scheme’.

A late Government amendment took this streamlining further – or, as ministers prefer, increased local flexibility – by removing councils’ vetoes over CA boundaries. A district council can now join a CA without requiring its county council’s consent; likewise, even collectively, districts can no longer veto their county council joining a CA. Late it may have been, but it has potentially big implications – for Nottinghamshire and Derbyshire, for example, both of whose northern districts would now be able to join Sheffield City Region without their county councils’ consent.

The other clause, in a different section altogether from CAs in the original Bill, was also directed at two-tier areas. Acknowledging some such areas’ dearth of enthusiasm for particularly mayoral CAs, it provided for the devolution of functions and powers to single local authorities acting alone. Orders could be made (by the SoS, of course) to introduce fast-track changes in respect of boundary reviews (as in Cornwall’s deal) and governance arrangements, which, it was explained, “may involve mergers of councils, moves to unitary structures, or changing the democratic representation of the area with different electoral cycles and fewer councillors”.

It seems a kind of Del Boy approach to devolution that presumably comes naturally to a business-driven government. The rack rate for devolved powers is an elected mayor, but get together with your mates or offer us up a few councillors and we should be able to do you a deal. Indeed, possibly a streamlined deal, as another late Government amendment enables the SoS to make changes in council boundaries with the consent, if necessary, of just one authority in the relevant area.

This is the reorganisation or unitarisation by stealth that exercises councillors and MPs alike, and it produced some of the most agitated contributions to the Bill’s Commons Report Stage – the only thing being, as the Minister pointed out, that it’s hardly by stealth, since the Government has had the power to impose structural change without the consent of local councils since the 2007 Local Government and Public Involvement in Health Act.

Chris Game - pic

Chris Game is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.

Local Government Studies – virtual special issue on budgeting

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Peter Matthews

This February to April local councils across the UK will be setting their budgets for 2016/17 in unprecedented times. The Comprehensive Spending Review has set local government in England on a new course where it will be expected to raise far more of its own income through Council Tax and Non-Domestic Rates. Revenue Support Grant, which transfers money between local authorities, is essentially being abolished by 2020 – to be discussed in greater length in a paper to be published in Local Government Studies soon.

Local government in the UK has to continue providing a range of statutory services. The budgetary pressures upon them are leading to strategic choices to remodel services through outsourcing and co-producing services with local communities. The editorial team of Local Government Studies has put together a virtual special issue gathering together recent publications to inform this debate. The papers present academic research and commentary on the situation UK local government finds itself in now: with review articles by Peter John, Vivien Lowndes and Laurence Pratchett, and John Stewart, along with a review of the extent of the cuts and how local councils are coping from Bailey et al.

We then turn to specific contributions as to how local government is responding, or might respond, to the austerity it faces: through case studies of the devolution of risk to local communities and individuals in Bristol and Liverpool; a discussion of resilience; place-based leadership and innovation and finally strategic commissioning of outcome-focused services. We close the special issue by drawing on international evidence to ask how we might understand the financial risks local authorities face, but also the difficult link between public attitudes and fiscal challenges and choices.

The following articles are free to read through this link only until 31 December 2016.

 

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Peter Matthews is a Lecturer in Social Policy at the University of Stirling. He is a member of the editorial team of Local Government Studies published in association with INLOGOV.