Treasury to tighten grip on council spending

The treasury is to extend its grip over spending to Britain's local authorities and may set individual targets for every council to force them to improve performance and efficiency.

The treasury is to extend its grip over spending to Britain's local authorities and may set individual targets for every council to force them to improve performance and efficiency.

The controversial move is part of the Government's drive to raise standards across the public sector by "levelling up" the worst-performing bodies to the service provided by the best. Education and transport are two of the locally provided services in the Treasury's sights. Ministers have opened talks with the Local Government Association about whether the Treasury should set broad targets for all councils or individual ones for every town hall. Pilot schemes are expected later this year.

A senior Treasury source told The Independent the aim was "not to put the boot into the councils" and insisted the association was playing a constructive role.

Some town hall bosses have already accused ministers of "over-centralisation" after last month's Budget bypassed local education authorities by channelling cash direct to every school. Council leaders fear they will receive less cash from the Government if they fail to hit the proposed targets.

Andrew Smith, the Treasury Chief Secretary, admitted some critics believed Tony Blair's much-heralded plans to reform public services were based on "highly inflexible directives from the centre".

But he added: "The real challenge for the Government is not debating an artificial tension between local autonomy and central direction but in making sure that good practice from some of our most outstanding public services is successfully shared."

Mr Smith's plan emerged during his review of the 500 public service agreements struck between the Treasury and other Whitehall departments in 1998. The number will be cut to about 200 to focusmore departmental attention on their priorities.

The Treasury insists the other 300 agreements will be included in internal plans drawn up by departments. Each cabinet minister will have 10 or 12 targets, reflecting Labour's manifesto pledges and the Government's priorities. The new agreements, which were bolted on at the last minute during the 1988 government-wide spending review, are playing a central part in intense discussions between the Treasury and departments over a new three-year spending blueprint, which is to be published in July.

"Before we give people more money, we want to know how their bids measure up to their existing and new agreements," said a Treasury source. "This is the way to make sure extra money improves services."

There are tensions between the Treasury and Clare Short, the International Development Secretary, over her overseas aid budget. "It's not enough to put money in and hope something happens," said the source.

The review will also aim to prevent disputes over which department foots the bill during emergencies such as the Kosovo war or the floods in Mozambique, when Ms Short attacked the prices charged by the Ministry of Defence for helicopters.

In an attempt to ensure more "joined-up government," the Treasury review is conducting 15 reviews on issues that cut across different departments such as drugs, the jobless, the countryside and the criminal justice system.

In a radical departure, "lead departments" may be appointed and given control of a single budget to prevent in-fighting between Whitehall empires.