Barnet has unveiled some pretty radical ideas on local services. The Guardian-dubbed ‘Tory test-pilot of no-frills government’ wants to shrink the council, outsourcing most tasks via a for-profit joint venture company. In future people might have to buy in ‘premium’ services, or make do with cheaper basics.
As Tony Travers suggests, we might see a lot more of this if David Cameron wins the next General Election. So will it work?
First, the ‘budget airline approach’ doesn’t really transfer to local government. The typical local authority provides hundreds of goods and services. Airlines typically offer four or five – flights, insurance, car rental, hotels, meals (plus optional customer service). And shouldn’t I be able to set up a rival Council offering a better deal – free bus tickets or lower taxes, maybe? Plus new and improved Councillors?
Second, there are well-known drawbacks to outsourcing as a business strategy. Direct costs are likely to fall. But principal-agent problems – like contract-setting and monitoring – may then raise indirect costs, particularly if privatisation is part of a money-saving drive.
Third, there are some unworked-out tensions. How to achieve ‘shrinking the organisation’, ‘more personalised services’ and behaviour change? How much say do I get about improving my health if the Council has already cut back on fitness centres, for example?
It’s not clear if Barnet is trying to do more with less, or less with less – in other words, whether this is a pragmatic strategy or an ideological one. The council faces a growing, ageing and more demanding local population, all of which puts pressure on services. At the same time, council tax and development receipts are falling, and public spending is getter much tighter. But there also seems to be a strong preference for contracting out, encouraging self-reliance and keeping council tax low.
More broadly, should Councils have more freedom to do this kind of thing? In theory, devolution allows agents to exploit local knowledge, promote policy innovation and match local services (and taxes) to preferences. Citizens express choice through voice and exit (voting or moving to a preferred authority, as in the Tiebout model). So devolution also leads to greater competition between Councils.
In practice there isn’t clearcut evidence that devolution pays off. And in Britain policy innovation has mostly been incremental, not radical. Part of the problem here is a lack of strong local leadership. The obvious solution is more powerful Mayors, which both main parties now favour (to differing extents).
The bigger unsolved issue is fairness. Technically, postcode lotteries are a red herring – the UK is highly centralised but public service quality is still uneven across local areas. Besides, differences in services can also express local choice. But both voice and exit are limited. Turnout in local elections is low, and so are levels of domestic mobility. So spatial sorting may not always work out as theory suggests.
And politically, fairness is the crux of the debate. Barnet has a majority of wealthy people, and those opposing Future Shape worry about the poor. Nationally, Conservatives and Labour agree that councils need more freedom over means – via general powers of wellbeing or competence. But neither is very clear on freedom over ends.
Labour wants both ironclad national standards and devolution – but is tripping up on what devolution really means. David Cameron wants localism – potentially, much more freedom for local authorities – but also national targets and a progressive direction overall. I’m not sure he can have all of this. For starters, in some policy areas (like welfare to work) the evidence suggests local authorities would be better off collaborating, not competing. And what if some Tory councils go further than Barnet? It will be interesting to see how bright the blue flame of localism really burns.