Ten things you need to know about the Localism Bill

Last week’s Localism Bill introduced a range of novel measures, from elected mayors to local referendums. We’ve put together a list of Ten Things You Need To Know about it, by way of a primer for CoffeeHousers.

The bill marks an important leap into the unknown. The dangers are less political – it’s hard for Labour to attack the principle of decentralisation – than practical, because it involves a genuine and significant loss of control for the centre. Pickles and company can’t predict what councils do with the new “general powers of competence,” nor what will happen if and when a new community-run service goes awry.

But these challenges will only emerge in time. For now, localism – whether it's called the Big Society or old-fashioned People Power – is the glue that binds the coalition together. These policies should (mostly) warm the cockles of Liberal and Tory activists, and, by placing the Lib Dems front and centre on the issue, the government can help the party recover from its tuition fees trauma. Nick Clegg, notably, takes the lead in the government’s glossy briefing paper on the Localism Bill.  

Anyway, here are the ten points:

1) Introducing 12 mayors immediately

In 2012, twelve English cities will have a referendum on whether to have elected mayors: Birmingham, Bradford, Bristol, Coventry, Leeds, Leicester, Liverpool, Manchester, Newcastle, Nottingham, Sheffield and Wakefield. Ahead of the referendums, current council leaders in these cities will become “shadow mayors” with full powers, whether they want to or not.

As the Economist’s Bagehot suggests, these mayors could make Britain a more diverse, multi-polar place by providing a voice for major cities outside London. On the other hand, these mayors will not necessarily be more well-known than current council leaders or Tower Hamlet’s much-lamented Mayor Lutfur Rahman.

2) New powers for councillors…

The Localism Bill will give councillors greater freedom to implement new ideas and policies. These include:

i) Introducing a “general power of competence” granting local authorities the right to do anything that is not already forbidden. By giving councillors reassurance about potential legal risks, the government hopes to encourage innovation in everything from service provision to consolidation across councils.

ii) Abolishing the “Standards Board”, making councillors only accountable to their local constituents for propriety and behaviour issues. iii) Abolishing “predetermination rules” that can prevent councillors from speaking out on local issues because of the risk of being accused of prejudice or bias.

These moves build on Pickles’ landmark decision to do away with the Audit Commission, and the Spending Review’s reduction of ring-fenced council grants.

3) …but the focus is on individuals and communities

That said, the bulk of the government’s new localism policies focus on empowering parishes, individuals and community groups, bypassing local authorities. These include:

i) Giving communities a “right to challenge” council-run services. If a community group, social enterprise or parish council expresses interest in taking over a council service, the local authority will have to consider their bid and, if it is rejected, publish the reasons.

ii) Giving communities a “right to buy” local assets threatened with closure. When a community-designated local asset, such as a post office or pub, is threatened with closure, local groups will have a ‘community countdown’ window to raise funding and takeover the asset before it goes on sale to the open market. iii) Introducing non-binding “local referendums,” that give local residents the right to initiate a local referendum on any issue. Public authorities will only be required to take the outcome “into account” but such referendums will help ensure that public concerns are not dismissed as the work of isolated agitators or nimbys. iv) Introducing binding council tax referendums. Instead of a hard central cap on council tax increases, local residents will have referendums on increases above a DCLG-set threshold. v) Requiring local authorities (and fire and rescue authorities) to publish annual senior pay policy statements

In many ways, the Bill seeks not just to decentralise power, but also rebalance the relationship between councils and their constituents. The government hopes that these new powers will be a tool for community groups to open insulated local services.

4) Local funding through the Community Infrastructure Levy

Further empowering communities and parishes, local authorities will have to share a “meaningful proportion” of the Community Infrastructure Levy with the neighbourhoods from which the revenue is raised. Previously, private developers paid CIL fees – intended as compensation for the externalities caused by their work – to the relevant local authority, which could then spend the money without benefiting those affected by the development. Since CIL fees are worth hundreds of millions of pounds a year and communities will receive up to 50 percent of this, Mark Easton has called this “the biggest change to grass-roots politics in England since universal suffrage.”

5) Bottom-up planning law

The Bill will radically reform the planning system to give local people new rights to shape the development of their communities. New “local plans” developed by parish councils, neighbourhood forums and community groups will set-up local planning rules, which will then be voted on in local referendums. Communities will also get a “right to build” that enables them to authorise development without planning permission, if the project meets certain safeguards and gets the votes of 50 percent of local citizens in a local referendum.

These new local plans will be shielded from intervention from above – the Planning Inspectorate will only judge whether plans are "sound," and suggest changes if requested by the local authority. Large-scale developers will also be forced to consult local people before submitting planning applications, enabling early-stage input.

On a related note, Home Information Packs have been abolished, although the energy performance certification element will remain.

6) Further cutting back regional government

It’s not fair to say that the Labour government only centralised power; however, under Blair, decentralisation took place primarily through the empowerment of regional associations and devolved governments.

In the Localism Bill, by contrast, the word “devolution” never appears. The government has instead sought to bolster councils, communities and individuals. So, the Bill eliminates regional strategies – aimed at building three million homes by 2020 – and replaces them with local plans. This builds on the previous DCLG moves to abolish Comprehensive Area Assessment and Local Area Agreements.

7) Transforming social housing

Councils will have far greater freedom to control who gets social housing and what kind of housing they get. Although central government will determine what categories have the “greatest” need of housing, councils will decide who fits in each category.

Changes to the “homelessness” duty will enable councils to offer people private sector accommodation instead of social housing, and the homeless will not be allowed to refuse a council’s offer of housing. Councils can also introduce fixed-term tenancies for new tenants, ending the right to a council house for life.

The inefficient web of social housing financing and regulation will also be reformed. Councils now have the right to keep rental income to spend on maintaining homes and abolish the Tenant Services Authority.

8) New powers for London

Although the London Development Agency will be abolished, London’s mayor and boroughs will get more powers over housing, planning and development. The Mayor will be responsible for overseeing EU and regeneration funding (previously under the LDA), and will be allowed to create "mayoral development corporations". But the Mayor’s oversight of local planning decisions will be limited to the largest applications, with London boroughs getting more control.

9) QUESTION FOR THE FUTURE: Is the Localism Bill introducing moral hazard?

Although the Localism Bill encourages the transfer of public services from state-run bodies to independent community groups, doing so risks creating a moral hazard in service delivery: what happens if such a service goes bust? Will councils live with the consequences, or step in to pick up the pieces?

The government tries to pre-empt this argument by arguing that the when “centralised systems…fail, they fail everywhere…when innovation is locally led, the consequences of failure remain localised too.” This works, but only if services operate under the right incentives, making the risk of moral hazard an issue for the future.

10) QUESTION FOR THE FUTURE: When will councils get fiscal autonomy?

As many critics have pointed out, the Bill does not grant real local fiscal empowerment, along the lines of US state or town-level governments. While the central government has cut some ring-fenced local grants, the next step is to cede more control over taxation and spending.

The Bill only enables local authorities to give local business rate discounts, but going forward the government needs to encourage greater fiscal autonomy to unlock long-term local innovation and diversity.