Public Services Management: Counting the cost of autonomy: Paul Gosling reports on the reorganisation of the London borough of Tower Hamlets

TOWER HAMLETS has an unfortunate reputation. It has long been regarded as one of the least efficient councils in the country, and its image was further tarnished last month with the first-ever election victory for a representative of the neo-Nazi British National Party.

Yet the Liberal Democrat-controlled council has embarked on one of the bravest reorganisations ever seen in local government. The borough has been split into seven neighbourhoods, each with considerable autonomy. The inefficient centre has been replaced by smaller local operations where councillors have more influence.

A notoriously badly run borough has become, well, much better. How it compares with neighbouring boroughs will become clearer next year, after the Audit Commission has completed its first comparison of all authorities according to standard performance indicators.

There will still be a need for the council to monitor neighbourhoods and to decide what to do about below standard performance. This is where television personality Vincent Hanna comes in, via management consultants Capita. Mr Hanna is, until next month, non-executive director - in effect chairman of the board - reviewing the authority's ways of working and recommending new structures.

Tower Hamlets borough was the artificial creation of the 1965 local government reorganisation of London. Not only did the name mean nothing, but it was resented by the very real communities of Bow, Poplar, Stepney, the Isle of Dogs, Globe Town, Bethnal Green and Wapping. Those areas were resurrected as neighbourhood councils after the Liberals won the election of 1986.

Despite the political will for autonomy, the centre has to be retained for legally defined responsibilities. Neighbourhoods can decide how they spend money but the council as a whole must set the council tax. The borough distributes the general fund according to the Standard Spending Assessment (SSA) formula, even though the borough and the neighbourhoods oppose the SSA.

In other respects the neighbourhoods are autonomous. Over 80 per cent of spending, excluding education, is decided at neighbourhood level. Neighbourhoods award their own contracts, and operate their own direct service organisations.

Bow neighbourhood was able to successfully apply for a Housing Action Trust Scheme and Design Improvement Controlled Experiment scheme, attracting estate improvement money, without needing approval from the council as a whole.

Neighbourhoods determine their own housing allocation policies, with Liberal and Labour controlled neighbourhoods favouring different priorities. All the Liberal controlled neighbourhoods have adopted the controversial policy of favouring sons and daughters of borough residents.

The policy of autonomy gives power to Labour controlled neighbourhoods (there are no Conservatives on the council). The BNP stands to benefit from this if it can win all three seats in the Millwall ward next year at the full elections, and would then control the Isle of Dogs neighbourhood.

Liberal Democrat councillor Gwyneth Deakins, chair of policy strategy for the borough, says: 'We have taken the view that people get what they vote for, and that is, through clenched teeth, our view.'

Contrary to the national trend, councillors have gained extra power and responsibility in Tower Hamlets. Each councillor is on each neighbourhood committee, deciding on licences, housing policy, the running of parks, the giving of grants and considering planning applications (except on the Isle of Dogs, where the London Docklands Development Corporation is the planning authority).

The quality of decisions is improved, with councillors having a more intimate knowledge of matters discussed, say the advocates of the system. Critics argue that bad or corrupt councillors can have too much power.

The organisation of each neighbourhood - its personnel policy, how and when its committees meet - is up to the neighbourhood itself. In Bow, one of the sub-committees is a 'residents' forum', able to bring forward matters of local concern. It consists not only of councillors, but also of two local schools' heads, two representatives of local businesses, and 16 members of the public. The public are themselves subject to an election, by proportional representation. However, with electoral participation running between 5 and 12 per cent this has not caught the public's interest, and must be ripe for takeover by extremists.

A policy of autonomy inevitably suffers from contradictions. What should be done if neighbourhoods fail to provide good quality services? This dilemma has led to an internal argument. The most likely solution is a charter for residents, guaranteeing minimum standards. The centre would then contract with neighbourhoods, through service level agreements, to meet those minimum standards. This has led to accusations of back- tracking on autonomy.

It is the success of decentralisation that has forced the council to consider a mechanism for resolving internal arguments, says Mr Hanna. But attempts at dispute resolution can be seen as an attempt at reimposing centralisation, and are therefore strongly resisted by those who fought hard for neighbourhoods. 'The management heresy then becomes anti- decentralisation,' he adds .

Service provision that has remained in the centre - such as homelessness and finance - is combined in the business services division, which has been reorganised five times in six years, and may be about to be sold off or contracted out. Price Waterhouse are rumoured to be interested in buying up the service, but the division's management are keen on a management and employee buyout. In some instances, such as payroll, the division is competing against operations provided by the neighbourhoods themselves, thereby creating an internal market, with the objective of forcing down costs and improving efficiency.

The borough's direct service organisation is broken down into neighbourhood operations. Some DSOs have closed, either because they were unable to meet their statutory rates of return or because they lost contracts. Neighbourhood DSOs have occasionally combined to put in bids for large council work, such as parks maintenance and refuse collection, to make them more competitive.

The council has achieved savings of pounds 6m over the next 10 years by moving central support staff from a range of old buildings scattered around the borough into one new block.

Further savings have been achieved by 130 staff taking voluntary redundancy, with fewer staff now needed in the central services. Three chief officers have left so far, with further senior staff expected to go.

Despite the revolution in the council since 1986 the speed of change shows no sign of slackening. Even the name is not sacrosanct. Corporate identity will now be as 'the East End', and the monthly municipal newspaper will be relaunched as a full colour weekly, called 'East End Life'.

The recent election success of the BNP might suggest that local people are unhappy with the council's performance. Liberals argue that the BNP vote was a protest at the local Labour-controlled neighbourhood, not the council.

Labour say that if they take control of the council they will retain local service delivery and consultation, but scrap neighbourhood decision making. Labour argues that having seven neighbourhood chief executives, plus senior central services management, creates an unacceptable management cost, and built-in inefficiency.

Liberal Democrats argue that the improvement in service delivery justifies the extra cost. It is, they say, the cost of democracy.

(Photograph omitted)