Simon Parker’s new book looks forward to a new era of localism in which the public will take power back from the central state. He celebrates the successes of the pre-1948 welfare era in which municipal authorities such as the GLC ran 70% of hospital provision – and he looks forward to an era in which local authorities will fund themselves from the proceeds of economic growth, aided by the Government’s decision to allow local authorities to retain all the business rates for their jurisdiction.
No doubt some local authorities are looking forward to doing just that. But what are the downsides of these proposals? The period which Parker describes was one in which the capacity of local authorities to deliver public services was highly constrained by their economic base. Following the Local Government Act of 1929, county councils and County boroughs had obtained the power to provide hospital services. The mechanism through which they undertook any capital developments was loan finance. In a contribution to the British Medical Journal I pointed out some of the limitations that this had, which are relevant to a consideration of the government’s proposals.
Essentially local authorities had to take out loans in order to fund capital developments, including hospitals and major housing schemes, and this required the approval of the Ministry of Health. Unfortunately for some of the poorest local authorities in the country, which of course also tended to be those with the greatest health needs, the Ministry used assessments of their economic prospects in determining whether approval would be granted. If they were regarded as potential defaulters because of their poor economic prospects, they were likely to be denied funds. Stephen Ward pointed out the consequences of this logic for the heavily depressed local authorities suffering from structural economic decline; my example here relates to hospital policy. Even localities where the Ministry recognised the need for additional hospital accommodation was greatest, such as County Durham, were reminded by officials of the likely burden on the rates of taking out additional loans. This helped to deter them from proceeding with new developments, and the consequence was the retention of inadequate hospital provision inherited from the Poor Law. This market logic may be designed to force local authorities to compete in a race to the bottom but it is inimical to needs-based planning. In the interwar period the combination of an essentially market system of voluntary hospital provision, and a public hospital system which was dependent on the prosperity of the local economy, meant that variations in hospital provision were endemic – your chances of obtaining hospital treatment varied by a factor of about 10 between local authorities.
The challenge for cities may well be to come up with ways of solving their problems, as Parker states. The challenge for society is what degree of inequality we are prepared to tolerate in this bright new era.