Posts Tagged ‘devolution’

Microsolutions to megaproblems

December 9, 2015

I have a chapter in this nice new Policy Press book, After Urban Regeneration, expertly edited by Dave O’Brien and Peter Matthews.

Here’s the intro [pdf].

The book takes a critical look at urban policy in the UK, particularly in the post-crash period, and explores the way thinking  about regeneration has changed under austerity, and under localism.

It tests the idea that we’re now in a ‘post-regeneration’ era; it also takes a close look at the way communities and ideas of ‘community’ have been used to design, deliver and justify programmes on the ground.

My chapter covers the recent history of UK economic regeneration, sets out what we can expect programmes to achieve given the mega-trends shaping urban economies and communities, and also explores how the ‘what works’ agenda can help, both in developing the evidence base and in hands-on policy design. Cities and communities have been in tough times for years now, but I try to find some grounds for cautious optimism.

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The editors put together a strong and diverse team: we have excellent contributions from Stuart Wilks-Heeg, Antonia Layard, Kate Pahl, Liz Richardson and Chris Speed, as well as my Birmingham colleagues Catherine Durose and Phil Jones.

You can get the paperback here, or the hardback for a terrifying cost.

Germany’s Silicon Valley?

December 15, 2010

LSE Cities have just published a new paper of mine on innovation and growth in the Munich city-region. In terms of high-tech growth, the Munich metro is probably Germany’s Silicon Valley – it’s a fascinating story, with lessons for both the Bay Area and for British policymakers.

The report (written with Philipp Rode, Gesine Kippenberg and others) was launched last week at the Brookings-LSE Global Metro Summit in Chicago. You can find other speeches, papers and video here.

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For over two decades, Munich has had Germany’s highest share of technology patents per population. Like the Bay Area, it’s led the rest of the country on ICT. And Munich’s story has some further, surprising parallels to the history of the Valley. Over the past 60 years, both have shifted from mainly rural communities to high-tech hubs. Both offer a strong economy and an excellent quality of life – something that’s helped keep people in the area. And both benefited from Federal defence funding – Pentagon money helped fund the early Internet, while in Munich’s case defence cash built up the advanced manufacturing sector.

In other ways, Munich is very different. The metro has a notably diverse economy – the ‘Munich Mix’ spans manufacturing, ICT, life sciences, finance and creative industries, unlike the Bay Area which is still dominated by computing.

More importantly, Munich’s economic development has been hugely influenced by the State, especially the Bavarian regional government. It’s essentially a social democratic Silicon Valley.

Government spends heavily on public schools, universities and strategic infrastructure. Munich is at the centre of a network of innovation intermediaries – public research agencies like the Fraunhofer Institutes, dedicated to technology transfer. And there are very strong networks between public and private sectors.

In the jargon, this is ‘institutional thickness’. It’s created a strongly technocratic vision of economic progress, and a clear sense of common purpose. Or as they say at Audi: Vorsprung durch Technik.

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As a result, Munich’s leaders rode out a potentially disastrous period in the early 1990s when the area was hit by a triple whammy of re-unification, recession and global competition. Over the next two decades, state and city developed a rolling programme of policies to grow innovation capacity.

Our research suggests it paid off. Munich’s per capita economic output remains comfortably above regional and national averages. The metro has also markedly increased innovative activity in ICT, biotech and green industries – with a three-fold rise in green patents over the last 20 years.

The growing green economy sector has also benefited from pro-green federal policies, which have guaranteed a market for green energy and thus spurred a new industry of green energy products and services.

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Of course, Silicon Valley’s market-led model has yet to face such a crisis point. But as the Valley focuses on ‘cleantech’, Munich’s state-led model is looking increasingly attractive. VC money is pouring into green economy start-ups across the Bay Area. But California still lacks the quality public education system that will connect local people into new jobs.

More importantly, the US has not introduced market-making incentives like carbon pricing or feed-in tariffs. So California is going its own way – although its State-level cap and trade scheme has only just survived a Big Oil-sponsored public vote.

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What can the UK learn from the Munich experience? A lot of lessons are familiar. High-tech regions grow out of what’s there. Economic diversity is helpful, adding resilience and helping stimulate new ideas. Human capital is critical, as are good schools and universities. Both time and luck matter more than we’d like.

For me, the crucial lessons from Munich are about what the public sector can do. There are three.

First, decentralisation has given Munich flexibility to develop policies that suit its needs. It’s also helped strong leaders to develop, and over time, effective working across boundaries (and political parties).

Second, both local and national governments have kept up public investment in the things that matter – notably human capital, public services and strategic infrastructure.

Third, incentives and market-making are really important – especially in moving towards a greener economy. British cities can do something here, but it’s really about national policy, and political leadership.

Localism on crack

July 16, 2010

The terrifying prospect of Eric Pickles as Tom Cruise still lingers after his recent LGA speech. But amongst all the one-liners, the shape of localism is becoming clearer.

First it’s cash and rules-light – ‘less money, more freedom’, as Jon Rouse puts it. Second, as Julian Dobson says, it’s a bit centralist right now. That’s not surprising – the Minister has the tricky job of devolving via the machinery of central government.

Most importantly, localism points in several directions at once. Councils get more freedom, but so do community groups and local people. For me, this is the most radical bit – and the most radical idea isn’t big city Mayors, but direct votes on local taxes.

The Economist memorably referred to local referendums as ‘the crack cocaine of democracy’. So should we be worried about what Eric might (or might not) call ‘freebase localism’?

The referendum proposal focuses on council tax. At the moment Whitehall can cap council tax levels ‘to protect council taxpayers from excessive increases’. The Coalition wants to replace capping with local votes on whether taxes are too high.

Getting rid of capping is a good thing. It’s not transparent, and it’s verging on the undemocratic. It’s not obvious we need to replace capping with direct votes, however.

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In the jargon, local people already have choice (of parties), voice (in local elections) and exit (moving out). Of course local elections are every four years, voter turnout is often low, and many people don’t find it easy to move. Direct democracy seems to raise turnout, and plugs people straight into decision-making.

The big problem with Eric’s proposal is the loaded question issue. It’s effectively a massive nudge for lower taxes – although the Coalition is silent on what ‘low enough taxes’ means in practice. That will put an automatic, and potentially destabilising limit on council revenues. In turn, that makes it harder for Councils to provide effective services – especially in a ‘post-bureaucratic’ age of changing social structures and more demanding consumers.

California is an extreme example of where low-tax bias takes you. Under Proposition 13, the state has capped property taxes *and* requires a supermajority for any revenue-raising measures. Right now, recession-hit public finances are in a total mess, but it’s proving politically impossible to pass a budget. As a result, one small town is now disbanding its police force.

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Councils might get round the loaded question if they had other means of raising money, besides council tax. Right now they don’t: over 80% of council finance comes direct from Whitehall.

The bigger issue here is the disconnect between local taxes, local votes and local services. Because the latter are largely grant-funded, it’s not properly clear to voters what they’re voting on, and how that vote might change local  services. Worse, Council tax hasn’t reflected real house values for years.

As Dermot suggests, councils should call the Coalition on localism. As well as proper incentives for housing growth, how about:

1) new money-raising tools – a green light for Accelerated Development Zones, and borrowing on the Housing Revenue Account;

2) a clearer link between local taxes and local services – the Review of Local Government Finance should push a revaluation of council tax, relocalising the business rate, and arguably a local income tax (as proposed by the Lib Dems).

With all this in place, I’m not sure local referendums are needed. Votes will really make a difference to services – and taxes. That should raise both turnout and political engagement. And if local taxes are too high, politicians will exit via the ballot box.

In other words, really show us the money. And just say no to crack.

So, farewell then …

July 9, 2010

… eco-towns, by the look of it. This is a good thing. Eco-towns are largely unloved, often in the middle of nowhere, and would have little impact on overall CO2 emissions.

Dermot (and Adam Marshall) have rightly criticised eco-towns for distracting from the much bigger task of greening Britain’s cities. As I’ve explored elsewhere, that’s a job which should have both a significant impact on the UK’s carbon footprint, but also much greater economic development potential.

Eco-towns have also failed dismally at being the kind of demonstration project the Government originally envisaged. There are much better examples abroad, both self-standing cities like Masdar in Abu Dhabi, and (more realistically) urban extensions like those in Vauban, Freiburg, or Hammarby Sjostan, Stockholm.

The latter also have the benefit of localist in design and delivery. In the coming months, let’s hope the Coalition can give British cities the financial flexibilities to try something similar.

Shrink to fit

June 3, 2010

My last post talked about the principles of dealing with shrinking cities. This one concentrates on the practice. In DC a few weeks back, I had an informal chat on shrinkage with some of the Brookings Metro team (helpfully organised by Dermot, whose writeup is here).

For me, there were four big points from the discussion:

First, US cities are mainly ‘shrunk’, not ‘shrinking’. With a more mobile population, and severe contraction in the 1980s and 2000s, people voted with their feet. In the UK the picture’s mixed: historical data suggests that Liverpool’s population has fallen by over 300,000 since the 1960s, while Stoke’s has only dropped by 25,000.

That means the challenges are different. In the US, the big issues are repairing the physical fabric for remaining residents, and pooling jurisdictions so local tax bases can cover cash for public services. In the UK, tasks include promoting individual mobility, raising human capital and doing physical repair.

Second, the US approach is bottom up, not top down. This is partly historical: people have bad memories of government Urban Renewal programmes in the 1960s, which had a disproportionate impact on African-American communities. It’s largely institutional – the US system gives cities strong local leaders, typically Mayors, who in cities like Youngstown (est pop 73,000) and Flint (113,000) have led the public conversation and put forward new strategies.

The Obama administration has dipped a toe in the water, talking about ‘auto regions’ like Detroit, and ‘cities in transition’, but none of this has yet translated into action. By contrast, UK efforts like HMR have been Whitehall-led initiatives, essentially aimed at ‘doing something about those inner cities’.

Third, US programmes are less radical, and more micro, than you might imagine. In practice, policymakers focus on struggling neighbourhoods, more than whole cities. Empty houses and land are bought up, and there is selective demolition and rebuilding. Often areas are simply returned to meadows, or turned into parks and bikeways. Rather than actually ‘shrinking the city’, the aim is to improve the city that’s left – making it nicer and greener.

In the UK, however, many  HMR pilots have tried to use housing market remodelling to stimulate area population and economic growth. Adding net housing when populations are shrinking does not feel wise.

Finally, finance differs. In the UK, Whitehall provides upfront funding to HMR, which leverages private sector borrowing – a funding model that’s now collapsed.  By contrast, US improvements are often funded via county-wide property taxes or fixes like TIF – as I’ve pointed out, tools that UK city leaders don’t yet have at their disposal.

Closer to home, Leipzig’s story is instructive too. The second-largest city in Eastern Germany, it lost 100,000 people after re-unification (20% of its current population). In 2000 an expert commission on the city was established, led by Leipzig’s Mayor. The resulting strategy involved some demolition and remodelling of inner urban housing, plus a range of quality of life measures (e.g. allowing artists to take over derelict properties).

Leipzig’s population is about the same size as Greater Manchester, so the city also developed its market potential, with a modernised train station and airport. Overall, it has stopped shrinkage: the population has stablised, and there has been slight employment growth (largely driven by high-tech manufacturing investment, such as a new BMW plant).

Lessons

So what are the lessons for the UK? First, cities – not Whitehall – need to be in control of policy and process, proposing ideas and getting local buy-in. Often, the pitch will need to be about a better, greener place to live – not ‘renewal’ or ‘shrinkage’.

Second, the policy mix should combine place elements (remodelling neighbourhoods) with people elements (improving skills, helping residential mobility). My post last year suggested ‘removing overcapacity in local housing; improving the local environment (which could include some US-style ‘greening’); levelling VAT rates on refurb and new build; developing local skills, access to employment and transport links to stronger labour markets; new funding tools; and some honest repositioning’.

That still feels about right. Although compared with Flint and Youngstown, big cities like Liverpool have far larger domestic markets, and thus potential for further jobs growth. Leipzig’s story suggests there’s a role for demand-side measures in bigger places: Liverpool’s recent economic and population growth confirms this.

The proposed Decentralisation Bill therefore looks quite promising. Big city Mayors and Local Economic Partnerships, more open local planning, and proposals to build local social action are all useful; uniform local incentives for housebuilding less so. More seriously, local leaders will still lack the financial tools to deliver the kind of programmes carried out in the US and in Europe. The forthcoming review of local government finance should look to broaden councils’ toolkit, and widen their tax-raising base.

One final point. CLG and bodies like the HCA have critical system designer and enabler functions, supporting and advising local leaders and communities – if not dictating to them. Whitehall will need to lead on promoting any ‘right to move’ in the social housing system; and will still be providing direct funds for skills and education. Despite the Secretary of State‘s emphasis on ‘localism, localism, localism’ ‘localisation, localisation and  localisation’ (thanks Grant!), I suspect central government will still end up with useful roles to play.

Geography and social justice

May 20, 2010

This is the first of two posts on ‘shrinking cities’, or as civil servants might put it, ‘places with a long history of economic underperformance’. In the UK, this means cities like Hull or Stoke-on-Trent with low average incomes and higher-than-average deprivation rates; abroad, places like Leipzig, Cleveland or Detroit.

The politics of improving life for people in under-performing places is extremely sensitive, as Policy Exchange discovered when they appeared to suggest moving people out of ‘failing’ Northern cities. Recently there’s been more interest, via LSE’s ‘Phoenix Cities’ book, Julien Temple’s ‘Requiem for Detroit?’ and from the Centre for Cities (see Dermot’s helpful summary, and my thoughts from last summer).

Why now? First, during the 2000s a lot of economic development funding went into cities. But this has not always improved residents’ overall welfare. As the business cycle turns, city leaders are looking for new ways forward. Second, there’s now less regeneration money around. Between 2011 and 2015, central government departments like CLG may face 20-25% spending cuts. So Whitehall policymakers are looking hard at if, where and how to spend.

At the recent AAG Conference in Washington DC, Michael Storper offered some helpful thoughts on all of this.

Spatial disparities exist, Storper argues, because there are benefits of clustering economic activity, and these persist over time. Agglomeration economies help explain why cities exist, and why they still matter. Theory and real world experience also suggest that long term convergence is unlikely.

So agglomeration leads to disparities between places. At the same time, increasing returns to skills lead to disparities between people. And because higher-skilled people tend to sort into more successful cities, we often get poorer people concentrated in poorer places.

The question for policymakers is what, if anything, we should do about this? Storper outlines three responses.

We could aim for ‘spatial equity’, compensating people and places who lose out. This feels appealing – but what does it really mean? Is holding successful places back fair to their residents? And how do we actually equalise outcomes? Even the UK’s very centralised public services haven’t got rid of postcode lotteries.

Another view is that we invest in poorer places. This is the traditional regeneration perspective. Structural economic change has long term impacts that markets won’t deal with – physical decay, poverty, crime. And there are efficiency costs to this – not least higher spending on benefits. Area-based policies tackle these externalities, get markets working again and places back on their feet.

This has been pretty much the UK approach for the past two decades. It’s given many cities a public makeover – and has made them nicer places to live. But most evidence suggests that improving places doesn’t easily translate into improving outcomes for people. Trickle-down regeneration works about as well as trickle-down economics.

People can move, and it’s hard to assess area-based initiatives if some recipients leave the area. ‘Regeneration thinking’ also doesn’t say how to balance limited resources between helping poor places recover, and helping growing places do better. CLG’s Regeneration Framework has a go, but isn’t completely convincing.

A third view comes from urban economics, especially Ed Glaeser (and now, Richard Florida). In its simplest form, this says we should focus on people, not places. People are mobile; investing in their mobility and human capital improves their economic prospects. Investing in immobile places does not, especially as convergence is unlikely.

To me, this feels like the right starting point for policy. This view is also increasingly fashionable in UK policy circles, and partly explains the bad press traditional regeneration has been getting. But as Storper points out, it’s more complicated than it looks to implement. There are three big policy points.  

First, it’s not clear everyone is truly ‘mobile’. People are free to move; but less skilled people have less information or resources to migrate between cities. Policy interventions might improve mobility, although we don’t have strong evidence here – increasing choice in the social housing system could help, also expanding housing supply in more successful places. Research and experiments should look to fill this gap.

Second, it implies we maximise economic welfare. But we know people think beyond money. Some local responses to Policy Exchange’s report reveal people happy to live in ‘failing’ Newcastle and Liverpool – because they like being there. At an LSE screening, critics of Julien Temple’s film similarly pointed out that nearly a million people still live in ‘failed’ Detroit.

Urban economists explain this in terms of spatial equilibrium. People sort by economic prospects, and prefer different kinds of communities. Low wages get traded off against low cost of living and/or better amenities. In spatial equilibrium local labour, housing and ‘quality of life’ markets all clear, so that real wages equalise across all places. Ongoing SERC research finds some UK evidence for this.

The spatial equilibrium approach implies we don’t need to worry so much about disparities in nominal income. But in some poorer places, especially given mobility barriers, we may want to adopt measures (better quality housing, tackling crime) which will improve residents’ wider wellbeing – and thus raise real incomes.

Finally, national politics and local delivery are both critical. The UK is generally less tolerant of inequality than the US. Our politics is steeped in notions of fair play and universal standards: we’re a long way from accepting apparently large income disparities on the basis of hard-to-explain equilibrium concepts.

British over-centralisation also makes it politically difficult to do anything about managing decline: London policy apparatchiks seem to be telling other cities what to do (which they are). This is one reason why the Housing Market Renewal programme has often been so painful, why Policy Exchange got in trouble, and why the Coalition’s emphasis on localism is important. In future, devolution and actually doing managed decline need to go hand in hand. I’ll explore these ideas further in the next post, and take a look at some international experiences along the way.

Open the pod bay doors, HAL

December 22, 2009

Essex County Council has asked IBM to manage its public services for the next eight years. My first reaction to this story was that handing over schools and social services to a company that builds supercomputers could go terribly, terribly wrong. Have these people never seen 2001?

Lord Hanningfield: You’ve switched off the heating in all the care homes. Turn it back on!

HAL: I’m sorry Dave, I’m afraid I can’t do that. This mission is too important for me to allow you to jeopardise it …

Anyway. Over the next few years many local authorities are going to have to do more with less. So it’s encouraging to see some trying out new ways to deliver.

Enterprising Conservative Leaders and Chief Execs are also trying to catch Central Office’s eye. The Times suggests this is ‘a new wave of privatisation supported by David Cameron’, following Barnet’s EasyCouncil model and various other experiments. According to Eric Pickles, ‘this is the future and we will be watching developments in Essex very closely.’

That seems sensible, particularly as the wings may be falling off the budget airlines model. My concern, though, is just that what’s being proposed for Essex isn’t exactly innovative, and hasn’t worked brilliantly in other places.

On paper the proposed contract seems a little odd. It’s worth ‘up to £5.4bn’ over eight years, and may save up to £0.72bn over the first three. Even if IBM identifies the same level of savings for the rest of its term – a heroic assumption – Essex only saves £1.92bn overall, but pays out over double that. This doesn’t sound like value for money.

In Canada, where IBM was involved in local government streamlining, the firm introduced one-stop shops and cut service duplication. Many UK councils already do this stuff, though, and few needed an outside contractor to tell them so. Bringing in IBM may say more about Essex officers’ own capabilities than point the way to the future.

My biggest worry is whether business consultants in general understand what local authorities actually deliver. IBM says it provides ‘business analytics and optimisation’. But as I’ve argued elsewhere, public services are more complex than running a shop or a selling cheap flights. This is why we’ve seen many, many examples of business process engineering failing to deliver real value for the public sector. Look at some of Capita’s contracts, or Fujitsu and the NHS Computer Project.

To be fair to both firms, poor management by civil servants is often part of the problem. But that’s another reason to worry about who’s in charge at Essex.

Local public services are also done for different reasons. Efficiency in the narrow sense isn’t actually what we want here, since we’re operating outside the domain of the market. Market efficiency criteria tend to push you into providing less for less, something some Conservative councillors might be quite happy with. But local authorities are charged with providing the best achievable outcomes for people in the area. Sometimes that means reprioritising, even spending more. As Obama Administration’s ‘Ebay in reverse’ initiative suggests, cost-cutting is an important means to free up resources.  But as an end in itself, it’s inappropriate.

Compulsory Competitive Tendering forced councils to operate on a cost-minimisation basis, often producing perverse outcomes and bad policy. The danger for Essex is that it just retreads the CCT experience, without understanding why the world’s moved on.

Devolution on crack

October 4, 2009

(c) 2009 travellin' john photography

Ten days in at Berkeley and I’ve already had my first walkout: picket lines went up last week to protest against University budget reductions.  Spending cuts have already arrived here. Most buses now run only once an hour; bins are collected once a month. And Governor Schwarzenegger has announced a giant fire sale of state assets (an idea suggested to him via his Twitter feed).

For urban obsessives like me, the California fiscal crisis is fascinating (and depressing) stuff.  The politics of cuts is highly localised. American states and cities have a range of tax, spend and money-raising powers (in 2005-6 California and its cities raised $200bn in bonds [pdf]; in 1916 a bond issue financed the Golden Gate Bridge). Washington’s willingness to bail out localities is also limited: since 1937, at least 543 American cities have gone bankrupt.

So there’s been an intense debate here about the mix of tax rises, borrowing and spending needed to balance the books. But the state’s unique system of direct democracy make it much more fraught.

Since 1911 California has used three types of referendum to decide major issues, or ‘Propositions’. The State Legislature in Sacramento can pass proposals, which citizens then vote on. Citizens can propose new laws; if they can raise signatures for 5% of registered voters, the proposal goes to a referendum. Voters can also recall elected officials via a petition of 12% of voters (this happened to Gray Davis in 2003, bringing Schwarzenegger to power).

The Economist calls these ballot initiatives ‘the crack cocaine of democracy’. As my Berkeley colleague Malo Hutson told me earlier, it’s an apt comparison. If Propositions with spending implications pass, Sacramento has to find the money. Conversely, it’s tough to pass anything perceived as raising taxes (only about a quarter of bond issue propositions succeed). Worst of all, while most Propositions need a simple majority to pass, a 2/3 majority is required for any tax increases or other revenue-raising measures. This is the notorious Proposition 13, itself passed by referendum in 1978.

The results are dire. California’s main revenue streams are choked off, with a heavy reliance on volatile local income and sales taxes. Long term planning is very difficult, with only 25% of the budget under legislators’ direct control. But repealing the measure is seen as political suicide: after one kit-flying exercise, Arnie famously told supporter Warren Buffett to do 500 sit-ups if he mentioned it again.

This also means some very peculiar tax laws survive – for instance, local property taxes are based on initial purchase price, not the current value. (Malo explained that when his girlfriend bought a 50% share of a house, the two halves of the property were taxed at different rates.) Since land value is not properly captured, the result is a massive transfer of wealth from young to old, and huge windfall gains to property owners.

Some policy innovation arises from all of this – it turns out Tax Increment Financing was invented in California in the 1950s. But right now, extreme devolution is making it almost impossible to solve the State’s budget crisis. Voters have rejected everything proposed by Sacramento, forcing the State into emergency service cuts.

Californians seem confused about how to fix things. According to a 2008 survey, 64% favour some reforms to the system, and 78% think ballots are often too complex to understand. But 60% believe they make better public policy decisions than elected officials.

There are some resonances here for British debates about localism and public spending cuts. As Dermot points out, Labour and the Tories are still playing chicken on spending reductions. Tony Travers recently suggested that Whitehall should ‘delegate the axe’, avoiding the blame for cuts by giving local authorities the power to make their own. But centralism is so engrained in the UK that in the short term, Ministers would still face the kind of protests we’ve seen in Berkeley.

As Tim Williams argues, ‘casting off the Whitehall shackles’ should encourage British cities to develop more innovative ideas. But unlike America, I don’t think Brits would be up for city bankruptcy. There are cultural, as well as practical limits to localist self-reliance.

The California crisis also highlights the importance and limits of strong leadership. The Governor really has to direct the public conversation, but even popular leaders like Arnie have found it hard to push their favoured measures through. Still, if The Governator might be running for President in 2012, Californian  democracy is clearly a gateway drug to something much harder.

UneasyCouncil

September 2, 2009

EasyRubbish

As someone in Spinal Tap said, there’s a thin line between clever and stupid.  I’m still trying to work out which category Barnet Council’s ‘EasyCouncil’ proposals belong to.

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?

Future Shape is a work in progress. The Council’s latest thinking is here; the original plans are here. Some immediate challenges emerge from these.

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 meansDavid 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.

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