We are at a crossroads - which path will we take?

This white paper explains the ideas behind the LGIU@40: For the future of local government programme of work.

The UK faces a series of profound challenges. Increasing numbers of people have a sense that the country is just not working as it should. In March 2023, only 16% of people thought Britain was moving in the right direction.

These challenges have some immediate dimensions; double digit inflation, soaring energy prices and a turbulent twelve months in which we have seen three Prime Ministers and four Chancellors come and go.

But there are also some long running, structural problems that afflict the UK.

We have sluggish growth – forecast to be the lowest in the G7 in 2023 according to OECD and IMF estimates – and persistent challenges around skills and productivity.

Augmenting this are disparities both between and within regions and cities. These disparities are economic but we also see them in health, life expectancy, education, access to public services and social capital. They are inequalities which map on to each other in complex ways.

Meanwhile our public services are already in crisis. Immediate pressures – including underfunding, increasing demand and staff shortages – are obvious to all. They have been decades in the making and reflect the failure by successive governments to shift to a preventative, joined up, user-centred system.

In governance we have an asymmetric political settlement between England and the devolved nations. Both socially and politically a growing number of people feel left behind, taken for granted and disillusioned with democracy and with public institutions. Less than a third of people trust the UK government to work in the best interests of their local area.

These problems all play out against a backdrop of global developments, including:

• the climate crisis
• ageing populations
• the impact of new technologies (AI and crypto for example)
• geopolitical instability
• populism and declining trust in democracy.

Successive governments have attempted to respond to these problems – Levelling Up is just the most recent example – but none of these interventions has succeeded in shifting the dial.

In part, this is because they have consistently overlooked a vital part of the solution: a clear and central role for local democratic institutions.

So, what’s holding local government back?

Instead of playing the crucial role that it should be and that we need it to, local government is hindered by four major challenges.

1) Funding: more than a decade of savage funding cuts have left all councils under severe financial pressure. Some services have ceased entirely; others, including key statutory services, are now barely viable. Those councils that have gone bust are selling off assets and shedding staff to such an extent that it is reasonable to ask if they will continue to exist in any meaningful way. Meanwhile funding is delivered through a series of ad hoc one-year settlements and through ring fenced competitive bidding. In 2023 only 13.84% of senior council officials said they were confident in the sustainability of local government finance.

2)  Structure: government’s appetite for reorganisation ebbs and flows but there is an established trend towards larger units of sub-regional governance under directly elected mayors. These have some advantages; they enable efficiency of scale and effective strategic leadership at sub regional level. But they also hollow out the democratic space and inhibit productivity in the sector as a whole.

3)  The location of power: in parallel to centralisation and the creep towards larger units of governance, the last decade has seen an increased emphasis on deliberative democracy, participation and community power. These are all good things and LGIU has advocated for them since 2008. Too often, however, they are treated as an alternative to local government rather than part of a single system of governance and public service delivery. Community power needs to operate within a framework of democratic local institutions or it risks lacking legitimacy and failing to connect effectively with the complex functions of the state. In practice the big society is too often just the small state.

4)   Discontent and disengagement with democracy: a phenomenon seen around the world, with some particularly high-profile cases, that has threatened to undermine the democratic process in profound ways. This challenge comes home to roost in local elections, too. Turnout at the 2022 English local elections was only 33.6%.

Many of the changes to local government over the years have some merit: of course local government should be efficient, elected mayors provide a useful democratic focal point, community engagement in the design and delivery of public services is vital.

Together though, the changes taking place risk a bleak future of remote sub-regional authorities presiding over a skeleton framework of basic services while unsupported, unconnected community groups are left to pick up the pieces at local level.

Citizens get less: less public service provision, less agency, less control. And this creates a vicious circle of declining trust and disengagement from democracy.

Local government is hollowed out just when we need it most.

But it doesn’t have to be this way.

Whatever the question, the answer is often local government

What if local government could play the role we need it to? How could stronger local government power up our responses to the key challenges we face?

The LGIU@40 programme will be bringing together a set of new ideas about how local government could work better and how we can establish the foundations we need to navigate a turbulent and uncertain future.

We will be framing this work around five key provocation questions.

We know that the local government finance system is broken and is close to the point of being beyond repair. Our State of Local Government Finance survey shows that 8% of councils fear that they will not be able to fulfil their statutory obligations; that a majority of councils are cutting spending on services as well as raising council tax; and that just over half of councils are dipping into their reserves year after year.

It’s little surprise then that less than one in seven of those in leadership positions in local government have any confidence in the sustainability of the current system.

But we know from international comparisons that different ways of funding local government drive different outcomes and that strong sustainably funded local government is the best way to address regional inequalities and create sustainable growth.

There are a range of fiscal devolution measures we could look at including localised sales taxes and a localised share of income tax but these have been stifled by an increasingly obsolete discussion about business rate retention.

We urgently need to reframe this debate.

In 2015 we argued that:

“Britain remains one of the most centralised countries in the western world. Perhaps the starkest indication is that only 2% of taxation in the UK is raised locally, compared with at least double that in countries such as France, Germany, the United States or Canada. Spending is also dominated by central government which disposes of 72% of all public expenditure, compared to 35% in France and 19% in Germany.

“Central government continues to hold the purse strings determining the delivery of local services across the country … Local government relies on central government for its funding, is hedged with rules as to what it can and can’t do, and must go cap in hand to the treasury to negotiate new spending and income raising powers.”

After nearly a decade of “devolution” how much has really changed?

We have seen continuing progress in the city regions and there’s recent talk of single “departmental style” budgets in Greater Manchester and the West Midlands. These would represent progress but elsewhere the devolution revolution has failed to materialise. The Levelling Up Bill sets out a form of devolution that is limited in scope and ambition and which operates to a template framed by central government. Meanwhile councils are put through a beauty parade of competitive bidding for ring-fenced funding pots.

The devolution debate has been dominated by a “rush to structure” and has become bogged down in sterile arguments about combined authorities, elected mayors and local government reorganisation. We need a different type of conversation about this: one in which form follows function to enable services to be delivered, citizens engaged and decisions made at the appropriate level.

Public trust in the way we conduct our politics is broken. This is mirrored by a declining trust in our institutions and administrators. This trust deficit erodes civic life and prevents us from shifting to the sort of co-designed public services we need.

The pressures on local government as a service delivery institution and the pressures on it as a democratic institution often appear to pull in different directions, but it doesn’t have to be an insuperable dilemma.

Rebuilding public trust is a job for government at all levels. But local democratic institutions – embedded in the very heart of our communities – are in a position to be the keystone of a new understanding.

This must mean local government starting real conversations about place, engaging the community in its decisions and acting as a catalyst for civic action beyond the institutional boundaries of the council.

And it must mean central government allowing this relationship to develop apart from itself, in the knowledge that what is good for local democracy will benefit the democratic health of the nation as a whole.

It won’t be a quick process, but without it the long-term future of local government looks very different.

Trust in local democratic institutions provides a platform for community engagement. We know from our research that 61% of people want to get involved or better understand decision making in their neighbourhood.

In 2021 we published A New Settlement: place and well being in local government in which we explored how the relationship between residents, the place they live and the local authority is at the heart of successful place shaping agendas. When residents are involved and invested in the shaping of the local areas, they can work with the council and other landowners to create something special. However, this is often not the case in reality.

There seems to be a lack of coherent and consistent approaches by local authorities
to engage residents in their place-shaping agendas. This can be linked to a mixed understanding of what local residents want out of these kinds of projects and how interested they are in the places where they live.

Collaborative place leadership remains a priority.

It’s important for pride in place, for well-being and for the creation of social capital but it also sets an essential platform for public service reform.

We know that solving the public services challenges of the 21st century – climate, ageing populations, the rise of AI – cannot be done through business as usual. And it cannot be achieved by government – central or local – acting alone.

Instead we will need to tap into the civic energy and creative insights of citizens and communities, to generate a culture of adaptive innovation.

But if generating greater participation was easy we would have done it by now.

Citizens assemblies, participative budgeting and other forms of deliberative democracy have all had moments of momentum but have remained relatively marginal.

And participative democracy brings challenges as well: how do we ensure that everyone’s voice is heard, how do we retain a focus on the long-term strategic vision?

We live in a world in which networks are rapidly replacing institutions as our primary mode of organisation. Many of our most powerful emergent forces for change are non-hierarchical, non-organisational networks, Extinction Rebellion, for example, or Just Stop Oil. We’re often told that we need organisation without organisations and it’s certainly true that most organisations (including local government) have been to slow to open up and allow different forms of connections and action.

But institutions did not develop solely to entrench existing power structures (though that can be their effect in their mature form), they evolved to solve human problems. If there are human virtues and system virtues, there are also institutional virtues such as representation, accountability and the balancing of competing interests. If we are too quick to abandon these institutional virtues we may find that we come to miss them. So maybe alongside a new localism we need some sort of new institutionalism? Can institutions adjust and adapt or do we have to start again?

We think we can act most powerfully when we build on past success as well as learning from past failures.

So we begin from a central hypothesis; based on the 40 years’ experience of working with local government. If you want to solve the big problems we face you need to begin with the local. You need networks of local action and innovation. But crucially, you need these to be facilitated by local democratic institutions. What we have called connected localism: connected across geographies, across sectors and across the public realm. This is both a democratic and a practical imperative.

But we also need to recognise that we, along with many others, have been making this case for many years and not much has changed. A decade of commitment to various forms of devolution has not shifted the dial significantly. LGIU is forty this year. Over this time local government has transformed beyond recognition and has improved in many, many ways. We’re proud to have played a part in that journey. Can we say though that the power, status and capacity of local government stands higher than it did forty yeast ago? That would be a bold claim.

We should not despair though. There is an ebb and flow of events and the nature of a global and interconnected world will continue to drive some elements of power upwards and downwards away from national governments. We need to see that not as a zero sum transfer but as a relocation of power to the places where it can have the most impact. (Incidentally this should be seen as a positive vision for national government in which it is freed up to concentrate its resources on the things that only it can deliver).

In freeing up councils to deliver we are not just fixing local government we are giving the nation the right tools to confront our most pressing challenges. It would be hyperbole to claim that only local government can save the world; but it would not be completely untrue.

Over the course of our LGIU@40 campaign we will launch a conversation with our members and others about how we can power up local government to face the future.

We will map a way forward together and take steps to move from aspiration to practical action. Ahead of a general election we will define what we need from government and what we can deliver for ourselves locally.

We hope that this exercise sets out a framework that will put local government on the right path for the next forty years and will help it to be the force for change that we all need.

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