Decentralisation Options

[John Short]

This document may be political and have a self- (commercial) interest focus, but offers some opportunity for discussion.

[FitzFord]

John,

Took me a while to block the time necessary to read the paper, but I managed to get it done today. It is an interesting proposal based on a variety of public-private partnership models ,and we could have interesting discussions on each of them. However, I was struck by the absence of discussion of what I would have thought of a basic principle of local government management and that is, the ability of local governments to determine at least a portion of its revenue structure. The presentation seems to take  it as given that the revenue constraints are established, and the only option is, how to get the most bang for the buck. Was the revenue question off the table? Are local governments allowed to raise their own revenues outside of service provision? The absence of any local revenue authority would severely limit the potential for service delivery in response to local demands, even in partnership with the private sector or using innovative delivery models.

That should not necessarily discourage us from debating the models that have been presented.

Fitz.

[John Short]

Fitz,

You are going to force me to read it rather than skim it –I have hours in 3 airports coming up Friday!  UK local authority revenue is not big - some fees and charges and some property tax income but transfers from the centre dominate so perhaps that element has been dismissed!   
John

[FitzFord]

John,

OK, you have given me leave for my opening comment to be that: the first and more fundamental reform should be to give local governments reasonable authority to raise revenues so that they have a full array of instruments with which to do their job. I would argue - conventionally - that their closenesss to their constituents make them more accessible to discussion and hence justification of appropriate measures and simultaneously, to punishment for failure. In that context, designing programs that are financially self-sufficient or close to it becomes a more viable strategy as it does not divert the LGs from considering the full array of needs/demands of their constituents. With that as a starting point, I will try to see if there is a classification pattern to the type of programs that are being proposed/evaluated/promoted in the paper from which we can draw useful lessions. Hopefully, our colleagues will jump in as usual!

Enjoy the airport waiting areas - our favorite places...

Fitz.

[John Short]

One airport and one flight reading, second airport posting.  Two more airports and two flights – that‘s what happens living on the periphery!
Nothing about revenues but I suppose revenue models would have to follow the main tenets of the three key questions that the paper says need to be asked and answered:
1. Is this service necessary, should the council be doing it at all?
2. If yes, what is the right model of delivering the service?
3. Who is best placed to deliver the service?
I imagine no service would be sacrosanct – it is a question of efficient cost reduction services at the local level using the “best” placed providers.  Non tertiary publically provided education is being subject to this already with Free Schools and Academies.  Remove services mainly funded from central Government transfers and the link between local revenue and services will become greater – but there needs to be a review of local government taxation as well. 
Anyone for a local income tax?

[John Short]

There appears to be a lot being written on efficiency and change of delivery modes in the past few days:
http://www.ft.com/cms/s/0/a1a9a73a-03f0-11e2-9322-00144feabdc0.html#axzz27OYXf9gK
http://www.cbi.org.uk/business-issues/public-services/open-access-report/open-access-report-in-full/
http://www.ippr.org/publication/55/9633/pressures-and-priorities-the-long-term-outlook-for-britains-public-finances
http://www.economist.com/node/21563324

[FitzFord]

John,

Thanks for those links. At the moment we seem to be having a conversation between the two of us, but I am hopeful that other will join, soon. This is an important and timely topic. In the hope of stimulating a response, I will make a confession: early in my life in the public sector I was put in charge of creating a housing bank. I will not lay out the details unless responses make it necessary, but the short version of the story is that I modeled the bank on a private sector model: it could not take any money from the budget and it could not give any money to the government budget. Instead it would pay the (enforced) depositors the same rate of return as if they had made their deposits to a commercial bank, benefits (low interest loans) would be allocated by lottery (live on TV) and borrowers would pay a positive rate of return. It has been very successful and is over 30 years old now. The lesson I would argue that this experience provides is that establishing private model rules (but not profit maximizing) and complete transparency, hiring very capable people and paying them accordingly and keeping political involvement out of operations, can work in appropriate circumstances. I would be inclined to argue that that model could be modified appropriately to apply to several services. An example of an "appropriate modification" could be a fixed formula payment by government for specific levels of service delivery that would subsidize the recipients to a level that public policy deems affordable - this seems to be part of the models that are being proposed.

Fitz.