Upstairs at Eric’s – What’s on the big guy’s mind?

Earlier this month Communities and Local Government launched what they describe as an ‘informal consultation exercise’ reviewing the statutory duties placed on local government.  It’s aiming to gather views on the full range of statutory duties with a view to identifying any that are no longer appropriate or necessary. The Department makes it clear that this is not an exercise expected to deliver short term outcomes. This is the long game. And it needs to be seen in context. The accompanying explanatory note makes this clear:

In order for this Government to achieve its goal, as announced in the Coalition Agreement, of decentralisation and promoting the radical devolution of power and greater financial autonomy to local government and community groups, clarity is needed about what the current demands on local authorities are and careful consideration as to whether they can continue to be justified in the move towards decentralisation and localism.

So one could see this as an exercise of profound significance. Yet, at another level, the way in which the exercise has been set up seems almost custom-made not to gather any very useful information. As with much that originates within the Pickles empire, it is an initiative that raises a host of profound questions.

Some commentators have already been scathing about the consultation. My good friend Dave over at Nearly Legal has written off the exercise as symbolic rather than serious, while the Pink Tape blog has been highly critical of the process and its intentions in the field of child protection in particular.

I am very willing to agree that this exercise is symbolic, but not in quite the way suggested. Symbolic policy – a la Murray Edelman – is a case of politicians appearing to do something, while never actually doing anything very useful. In contrast, I think this exercise tells us something about the extent of the Government’s ambition.

I think it raises some challenging questions.

Greater financial autonomy to local government is potentially a good thing, although we don’t quite know what is planned. At the moment our system is founded on extensive fiscal equalisation to compensate for the dramatically different revenue raising potential between localities. This is necessary if local authorities are going to be able to perform the range of statutory duties that are placed upon them. Clearly, if the government has in mind the long term goal of doing away with fiscal equalisation and making local authorities self-reliant then many of the statutory duties will have to go. Many local authorities outside of London and the South East will not have the local tax base to fund them.

Localism is, of course, a good thing. But looking at the CLG list it is interesting to reflect upon where the limits of localism lie. At what point does localism conflict with the argument that there are some activities and services that are effectively public goods or for which there are large externalities? There is net social benefit in such services being provided, but they will be underprovided if not mandated. That argument is usually used as the basis for a case for state provision because services won’t be funded through the private sector. But, in my view, we have to be equally concerned about the tyranny of the majority, as Public Choice theorists would frame it.

Living in one of the few cities in which there has been a referendum on local government spending increases, it is clear to me that many votes were primarily driven by a desire by individuals to pay less, rather than any understanding of the social benefit of certain types of spending. In one sense, the point of localism is to force local politicians to make the case for spending. But what if they are unable to make the case sufficiently forcefully – or indeed are unwilling to do so for ideological reasons? We might say that that is the price of local autonomy.

But if it is clear that as a consequence of a choice of local inaction the life chances of individuals are being impaired then where does the priority lie? If responsibility for the pupil premium were delegated and half of local authorities decided that, frankly, they didn’t think that poorer children needed an extra boost to maximise their chances of achieving their potential then would that be a matter of indifference? Two valued principles come into conflict. How would that be reconciled?

If we look at the CLG list we can see that it includes, for example, all duties relating to housing and homelessness and a range of duties under headings such as environmental protection, child protection, product safety, adult social care, public health and public transport. Over a thousand duties are identified: some are very broad and some are highly specific.

When I read through the list I was struck by the sense that it is steeped in the history of municipal activism and social progress. Some of the duties go back to the mid-nineteenth century, from the time when there was a growing recognition that leaving everything to the market, local self-organisation and private philanthropy was insufficient to allow populations to live healthy, safe and fulfilling lives. It was only through the emergence of an effective public realm that it was possible to deliver clean water, effective sewerage systems, safe food, care for those who do not have the resources – financial or social – to self-provide. And so it goes on.

The Government cannot seriously be thinking that if respondents to an internet based consultation suggested that it wasn’t necessary for local authorities to have any public health obligations, for example, that they would consider abolishing them. It would seem unlikely, given that at the same time they’ve just placed greater public health responsibilities on local authorities.

And if they are serious in questioning these duties at that level then their agenda is more radical, and more dangerous, than anyone has imagined. It would be little short of unpicking two hundred years of social progress. The consultation frames the duties placed upon local authorities as “burdens”, which tends to imply that someone inside CLG sees these duties as unnecessary impositions. Yet, without these responsibilities what would a local authority be for? Constitutionally in the UK the duties are centrally imposed, but that is a quirk of our system. It doesn’t mean that they are not appropriate activities for a local authority to be engaged in.

There is also a sense in which some of the work of local authorities is constitutive of markets. It is a way of overcoming market failures. To do away with it would be counterproductive. A lot of local authority work in areas such as trading standards, food hygiene and safety, weights and measures, and the like allows the market economy to function more effectively. The role of information, trust and confidence in facilitating market exchange is now central to much microeconomics. There is a recognition that systems of private or self-certification cannot always deliver the same assurance because the incentives are wrong – you only have to think of the role in the financial crisis of the credit rating agencies, who are paid by the banks to rate their financial products, to see a stark example of that. To even consider removing local authority duties in this type of area would be folly. So why ask the question?

That isn’t to say that all the duties on the CLG list should stay precisely as they are or that there aren’t some duties that could be removed. I am sure there are useful changes that could be made. But the consultation asks respondents to go through the –very long – list duty by duty saying whether it is necessary or not. Surely that isn’t the right way to do it. A more holistic approach would be better. The duties cannot be judged in isolation and in many policy areas they sit together as a suite of provisions. Removing individual duties without replacement could lead to the whole system unravelling. So surely the better approach is to start from a set of broad propositions: Should local authorities be involved in this policy area? Are the provisions as currently formulated the most effective and streamlined way of doing things? How might one achieve the objectives differently? That may well result in significant change: more outcome-focused regulation and less command and control, for example. But it seems unlikely that the sort of nuanced response required will be forthcoming from the consultation exercise as currently constructed.

In his chapter in Government and Markets: Toward a new theory of regulation, Joseph Stiglitz recently wrote:

No one can imagine a world today without food, safety and environmental regulations. The debate is only whether we have gone too far and whether we could have gotten the desired results at lower costs.

That seems a sensible and sustainable position. If that is all that the Government is seeking one might say fair enough. But I have a nasty feeling that it isn’t.

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