HOC

Why business is thinking locally

Portland’s new Public Affairs Partner explores how the localism agenda is shaping business

The good news is that I want to give you a lot more power. The bad news is that there won’t be a lot more money.’

David Cameron wasn’t kidding when he set out his stall to the LGA before the General Election: the Spending Review included real terms reductions in local authority budgets of around 28 per cent on average (with significant variation between individual authorities).

That doesn’t translate to a 28 per cent cut on the ground, of course, as councils have other sources of income than government grant, including Council Tax, parking and charging for care services for example. But at around £5.5bn cash over the period, the reduction is certainly not trivial and the fact that the profile of the spending squeeze in local authorities is significantly front-loaded means that many people’s first direct experience of the deficit reduction programme will be delivered by their council.

At the same time the Localism Bill is giving councils significant extra powers, including a ‘general power of competence’, and greater powers over planning and local housing and, in Richard Lambert’s view at least, giving business significant cause for concern.

Taken together, these changes mark a momentous shift for local government and for the large numbers of businesses for which councils are either customers or regulators.

There is a school of thought that says business should simply wait for all this to blow over. New Governments tend to come to power after a long march through the town halls and naturally make the case for their importance. But once installed in Whitehall, the argument runs, all Governments learn the same lesson: the levers of power in the British state are few and hard enough to move without giving any leverage away.

The attraction of handing away powers to councils tends to wane sharply once a governing party starts losing council seats and town halls and in any conflict between the priorities of the centre and the locality, the centre will win. This has already been demonstrated in the proposed cap on local authority borrowing for housing investment under the much-vaunted ‘self financing’ model to protect deficit reduction targets.

It is also not clear to what extent the Government’s localism agenda is about giving power to councils or taking it away from them in favour of a more balanced local ecosystem where local residents are empowered to fight their local authorities to bitter deadlock through referenda on policy, council tax and parish-level planning or to go around their local authority altogether, for example on free schools.

There are good reasons why businesses should take the localism agenda seriously.

First, in Eric Pickles, the enthusiasts for localism have found a rare champion in recent British politics: a Cabinet-level heavy hitter with deep roots in local government. Pickles understands local political streetfighting; he knows how decisions are made in town halls; what councils can and can’t do; how to give them meaningful autonomy and how to bend them to his will.

Secondly, the Coalition’s commitment to localism is of a different order to that usually seen in wide-eyed new incumbents. The Liberal Democrats’ deep roots in local campaigning have helped to anchor and strengthen the devolving instincts of many of those at the heart of the Cameron project who are committed to an updated campaign against an over-large state and a necessary building block of the Big Society.

Finally, the deficit reduction programme is the great non-negotiable of this Government. Not only is local government a very large part of the mix, but it will not be possible to meet the ambitious savings targets set out for the sector without significant change on the ground.

So, what does this mean for business?

  • For suppliers to local government, the market will start to contract fast. Local government will remain a major spender but pressure to demonstrate value will be more acute.
  • Back-office and procurement consolidation in local government will create new bodies to negotiate with and sell to (as will PCT successor organisations in health). This may mean fewer and larger contracts but the political interaction between the new procuring bodies, the councils on whose behalf they negotiate and the elected representatives on those councils are uncharted waters.
  • New levels of transparency around local Government spending will mean that local government suppliers will have to build communications and a value narrative into their contracts helping local authorities to defend expenditure from local armchair accountants.
  • The general power of competence and wider localist approach could see a patchwork of regulations evolving, potentially adding significantly to compliance costs, for example in licensing.
  • New referendum powers for local people will require businesses to look beyond local council stakeholders and engage directly with local communities on a wide range of issues – particularly planning – at the same time as new technology is making it increasingly easy for local campaigners to organise effectively and learn from each other.
  • Finally, looking further ahead, if councils can realise their long-term ambitions for repatriation of the business rate, local authority engagement will move rapidly up business’s list of priorities.

The common strand in all this is that local engagement will become an increasingly important capability for businesses of all sorts. Their capacity to engage will need to stretch beyond a few key councillors and move into the communities they represent. Ultimately, on contested issues, businesses must work hard to mobilise support or concede the field to small and potentially unrepresentative but newly empowered local groups.

Oliver Pauley is Portland’s Public Affairs Partner. He recently joined Portland from Fleishman-Hillard.