With a little help
from our friends
A report by Localis
Reviewed by Andrew Stevens

19 February 2009: The challenges affecting the balance between central and local governments are common to all societies. Local councils the world over are concerned about finance, performance management and structural reform. However, recent evidence shows that Britain is one of the most centralised in the developed world when compared to its peers.

The With A Little Help From Our Friends report was compiled by centre-right think tank Localis and sponsored by the Local Government Association of England and Wales. The report benchmarks English local government against a peer group of diverse sub-national systems in other countries, namely Australia, Canada, Denmark, France, Germany, Holland and South Africa. The purpose of the report is to illustrate how such a comparative understanding can contribute to the goal of a more balanced central-local relationship in England.

In spite of recent promises by politicians of all parties, Britain remains one of the most centralised states among the advanced democracies, if not the most, according to the report. In part this is a reflection of Britain’s informal (ie. unwritten) constitutional arrangements, local councils’ lack of clout at national level and the imbalance between their considerable functions and narrow tax-raising powers (leading to dependency on centrally-allocated grants). While other systems may not be transferable to the British context, understanding how they work is vital towards learning from their successes, it argues.

Initially the idea of local self-government remained a very British construct, tied up with the Victorian ideals of both Empire and a strong civic society in each locality. Centralisation was something the French but not the English did, according to the report. Over the last three decades however, a minor revolution has taken place on the continent, with power passing back from the centre, whose effects have not been felt in Britain. In order to understand how this situation came into being, it is important to compare the differences between Britain and its peers in Europe and the Commonwealth. The report sets itself the task of comparing the positions of local government in the respective countries, in terms of constitutional protection, role in national political life, provision of services, financial autonomy and the degree to which local government is subject to performance management and reorganisation from the centre.

In terms of the countries probed, this covers both federal and unitary states, small countries and those spread over entire continents. Denmark and South Africa offer a chance to assess very recent local government reform also. The two smallest countries of these, Denmark and the Netherlands, have the most simple sub-national arrangements: the lower tier municipalities and upper tier regions. France on the other hand has three tiers but the structure is at least uniform across the republic. Germany however has a number of different tiers, depending on the population size of the lower unit, for instance in the largest towns and cities local government is unitary while in more rural areas there are two-tiers. The three city states of Berlin, Bremen and Hamburg are federal states in their own right, as well as local governments. Similarly, urban authorities in South Africa are organised along unitary lines while others have two-tiers. Under Australia’s federal system, structures are left to each state to decide, with some considerable variations, but mostly along unitary lines. However, population in single tier areas can also vary, with some councils as small as 50 or so residents and others almost topping one million. In Canada, the majority of states use unitary systems, but in three there are either two tiers or a mixture of two-tier and unitary depending on city size.

France’s many communes are single out for their resistance to centrally-driven efforts to engage in merger processes, which has since given way to a process of encouraging inter-municipal cooperation. The 1999 law on urban communities create three forms of city regional partnership working available to the communes, each with some form of tax-raising powers, which now covers 82% of the French population. Germany also has a more modest suite of inter-municipal partnership arrangements available, but has also relied on mergers to achieve efficiencies in recent years. This is where the contrast with England is particularly stark, according to the report. The local government map of England is considerably more complex, with its patchwork of two-tier and unitary councils of varying size owing their existence to historical factors, compromise and political expediency. In particular, England has abnormally large lower tier authorities in terms of population served. It is also the case that “with the peculiar exception of London”, England has no elected regional tier, but considerable government functions performed at the regional level.

As noted, Britain’s almost unique unwritten constitution offers local government neither protection from central interference nor any actual definition of what its purpose and place is within the constitution. Central government decides “the rules of the game” entirely of its own accord, argues the report. Within the Commonwealth however, two of the three countries surveyed have federal systems, which to some extent promotes municipal autonomy, though in the case of Australia there is no specific recognition of local government in its federal constitution. In practice, this can often lead to state governments interfering directly in the affairs of local government, even going so far as to abolish or merge councils without any consultation. Canada, on the other hand, simply places local government as part of the states’ responsibilities under its constitution. Furthermore, this leads to huge variances across the federation in terms of the functions and size of local governments.

Similarly, Germany’s federal constitution places more emphasis on the role of state governments and asserts that local government remains under their competence. However, the constitution does recognise and guarantee the existence of local self-government through elected local councils. Furthermore, interpretation of these constitutional precepts allows local councils to appeal laws created at state level which could run contrary to their right to self-government. France, on the other hand, offers an interesting example of a reformed unitary state offering a more ad hoc (therefore retractable) set of local self-government arrangements. The French commune predates all of the country’s republics established during the 20th century, with the first law to permit them to exist and enjoy general competence being enacted in 1884. While the communes were once comparatively weak vis-à-vis the central state, several decades of successive decentralisation measures have given rise to a more powerful form of local democracy.

Denmark and the Netherlands are both fairly reticent on local government’s status in their constitutions, with some ambiguity in the Danish document. However, in practice Denmark is, as the report notes, a decentralised state. The Dutch place the status of local government and its organization as a matter for parliament. The position of South Africa however, is unique insofar as its post-apartheid constitution recognises the traditional weakness in local democracy and the task ahead in rectifying this. This is further underlined by the constitutional right for councils to have non-voting representation in the upper house of parliament and mandatory consultation required by national and state governments in matters affecting local government.

As the report notes, written texts are only part of the story in any nation's constitutional practice. For local government however, its standing in national politics is dependent on some form of constitutional role at national level. This can come in many forms, such as guaranteed representation in the upper house of a legislature, but there are other means of representation and consultation which can play a part. In the British context, this is limited to the Central-Local Partnership supported by HM Government and the Local Government Association, which recently gave rise to the Concordat on central-local relations agreed between the two. But these are simply voluntary mechanisms which can be withdrawn at any time.

In terms of possible upper house representation for local government, there are some interesting examples across the countries studied. In Britain, there have been a number of calls to consider some form of guaranteed representation for local councils as part of plans to reform the House of Lords, most recently by the Chairman of the Local Government Association but also among think tanks. Of the countries, three cannot be considered - Denmark is unicameral, Canada's Senate is appointed and Australia's is directly elected. Of the remainder, the report illustrates, the French Senate ensures guaranteed representation of local government by virtue of the constitution, with elected public officials throughout the republic electing its members through an electoral college. As the report acknowledges, this is hardly uncontroversial in France itself, with the most numerous members of the college belonging to its many small communes. As such, 84% of Senators hold local office, with one third of the Senate being composed of serving mayors (in contrast to just 10 members of Britain's upper house with recent local government experience). The German upper house (or Bundesrat), on the other hand, is an expressly territorial entity, its membership appointed directly from the 16 federal states. But this representation is reserved solely for regional purposes, with no involvement from local government itself, the report notes. However, as with France, this does act as a check against the centre to some extent, with local interests being reflected at national level, breaking down the federal government's monopoly on legislative affairs.

In the case of South Africa, its upper house, the National Council of the Provinces, has an explicitly territorial dimension to its representation, with members appointed by each provincial legislature, as well as 10 non-voting representatives from the South African Local Government Association. This gives local interests an effective veto on national legislation, which requires majority backing among the provinces for legislation to proceed. In particular, legislation affecting provincial and local governments, including their constitutional or territorial basis, requires a two thirds majority in this house. In the Netherlands, the Senate is also elected by the 12 provincial assemblies, with Senators under constant scrutiny by provincial and municipal interests. As such, the report notes, central government can often be thwarted in its efforts to effect changes to local government, such as in 2005 when the upper house voted down proposals to introduce directly elected mayors.

As the report notes, France is unique among the countries in having such a strong connection between the tiers of government. This is due in part to the fact that local office is not seen as a first step in a career in national politics but as something which can be combined with it, with plenty of politicians returning to enjoy successful terms in office locally after stints in national government. The most prominent examples cited here are Raymond Barre, who served as mayor of Lyon after being prime minister, and the city of Lille, which has in recent times been governed by a former prime minister (Pierre Mauroy) and subsequently a former cabinet minister who went on to lead the Socialist Party (Martine Aubry). Elsewhere, the picture is largely similar to that of Britain's.

The report seeks to draw mainly on examples of sub-national government providing local services. For instance, in Germany the arrangements can be quite complex depending on the state, as it is in Canada and Australia (the three federal subjects). In France, the regional government system is considered to be local government, as opposed to simply sub-national government. As such, in all countries, there were a number of overlaps which defied neat categorisation. In all countries examined, local government had a defining role in the local physical environment, while there were severe disparities in the role of providing large scale public services. For instance, only in Denmark and Germany did local authorities provide healthcare, while education was handled by other sub-national government in those countries, with local government relegated to maintaining school buildings and providing transport. All European local governments played a key role in social services, while this was handled differently in the Commonwealth countries studied. Dutch local authorities in particular were tasked with strong roles in providing welfare for local citizens. Overall, Danish local government had the most responsibilities, thanks in part to recent local government reform there. The Commonwealth countries local government played a narrower role in the state in contrast, according to the report.

In terms of local government finance, the report repeats the often held view that it is generally thought to be a boring and obscure subject and is therefore poorly understood. However, the British example has shown that it can also bring down a prime minister (Margaret Thatcher) if not handled according to the public's satisfaction. The question of local government finance, according to the report, is simply what does local government spend in relation to other sub-national government and what do both raise through taxation? The study presents a myriad of answers to the question, based mainly on the diverse range of functions exercised by those systems examined. Most broadly however, it breaks the systems down into four types:
- high spending, high self-sufficiency: Denmark
- medium spending, high self-sufficiency: France, Germany
- low spending, high self-sufficiency: Australia, Canada
- high spending, low self-sufficiency: Netherlands, United Kingdom

South Africa is presented as defying categorisation here as much of its income is generated through charges on gas, electricity and water, as well as sanitation. Denmark again tops the table in terms spending and self-financing, while Australia and Canada both have fairly autonomous local governments with both narrow tax bases and responsibilities. In Australia councils rely solely on property taxes, while in Canada they also have access to sales taxes. English local authorities remain subjugate to central government on levels of local taxation, a situation replicated in some Australian states.

Finally, the report argues that under any system, some form of retained central government control is inevitable. This can take many forms, for instance in Germany where central government is overly prescriptive in its legislation, detailing how it expects policies to be carried out locally. Denmark, on the other hand, serves to contrast this through its recent local government reform, aimed at reducing central prescription. Even in decentralised France, the communes must pay due regard to a plethora of national and regional policy guidelines when setting out their own local plans. In practice, planning reforms in France have not had the desired decentralising effect, the report notes, owing to communes being dependent on central government staff, despite receiving competency in this area. Urban policy in particular is dependent on all partners acting in concert. The Netherlands also has the highest level of central government intervention in local government, understood as "co-governance" under the constitution, through both its role in appointing local mayors and the plethora of ministerially-appointed agencies providing local services. In this respect, it closest to the situation in England. As the report notes, central government retains two "big sticks" in most systems, that of performance management and reorganisation.

The report concludes in drawing up a series of demands based on the practices found elsewhere during the study and recommends these as a basis for action to bring about the same kind of step change as experienced in France over the past three decades:
1) a resolution of Parliament to entrench the role of local government in the British constitution, drawing on the European Charter of Local Self-Government
2) local government to be represented in a reformed House of Lords
3) special parliamentary procedures for legislation affecting local government, with a right for local government leaders to speak in committee
4) a more mixed form of local government funding, including a reformed council tax, a relocalised business rate and an income tax element
5) fairer funding for any new burdens placed on local government, with councils able to act as an equal partner in any negotiations with central government
6) central government grant distribution to English local authorities to be handled by an independent grants commission
7) scaling back of central government performance management of local councils
8) a wider review of powers over skills, employment, infrastructure and economic development, with these passed from unaccountable agencies back to local councils