The Localism Agenda, Privatisation, and the Emergence of Hyper-plural Local Governance

Mike RacoBartlett School of PlanningUniversity College London

Introduction

• What does the Coalition ‘see’, what remains ‘invisible’ and what explains its selective visions?

• Barriers to localism and the changing nature of the ‘state’

• Not too much government but too much governance• The key role of asset ownership• Implications for (local) democracy and the future of

the democratic state• The politics of ‘perpetual crisis’ or the ‘end times’

(Ẑiẑek, 2011)• What has been left for the state to do?

Localities as Subjects and Objects of Policy

• ‘Localities themselves are best placed to understand the drivers and barriers to local growth and prosperity, and as such localities should lead their own development to release their economic potential. Local authorities, working with local businesses and others can help create the right conditions for investment and innovation….[Aim to] promote efficient and dynamic markets and increasing confidence to invest…with focused investment’

A Dependency Culture?

• “The Coalition Government is ambitious for all of our communities, and we recognise that the challenges they face are not the same. So we are also investing in a £1.4 billion Regional Growth Fund over the next three years, which will help areas which depend too heavily on the public sector for jobs, helping create more sustainable private sector employment” (Clegg, 2010: p.3)

Barriers to Localism

• Key role of legacies and policy de-construction• The ‘judicialisation’ of public policy• States regulated by the private sector and private

sector regulated by states (Braithwaite, 2008)• Hyper-pluralisation of ownership structures and

post-political institutional landscapes• Institutional re-placing of power and

accountability away from the local scale in the 1990s and 2000s

• The post-politics of the new localism

Broader Geopolitical Changes

• Acquiring contracts to build and operate EU welfare assets is the world’s biggest business opportunity (Murphy, 2011)

• The rise of ‘regulatory capitalism’ (Braithwaite, 2008)

• General Agreement on Trade in Services (GATS):– Article I(3) of the GATS excludes “services supplied in

the exercise of governmental authority”. • Global firms are calling for ‘liberalisation’ • Austerity governance and privatisation

• ‘private industry has discovered that rather than trying to innovate new products in an uncertain consumer marketplace it is much easier to make profits from the certain commodities that people are always going to need, such as health, education, local government services and so on that we once the preserve of government’, (Richard Murphy, 2011: p.5)

• New forms of elitism have been established in which powerful private sector investors benefit by ‘securing irrevocable contractual claims over taxation revenues that they will manage henceforth in their own private companies which they claim will undertake the tasks of the state so much better than the state could do itself’ (Richard Murphy, 2011: p.30)

Governance: Key role of assets• Land Ownership

– Unequal distribution of land ownership (e.g. 30% land in England and Wales unregistered; 69% owned by 0.6% of the population)

– No national register of assets– Land banking and planning permission – Taxation of unearned wealth – Land Value Taxes

• Changing nature of state assets:– Privatisation and Private Finance Initiatives– £280billion+ of repayment liabilities for services and

assets• New assets to be funded by international investors

Private Finance Initiatives (PFI)

• A prolific type of Public-Private-Partnership• Private companies are not just partners but:

– Design– Build – Finance – Operate

• The state pays nothing to start with but then pays private company under long-term contract

• Model copied across EU, Australasia, and North America

Problems with PFI model

• Antithesis of localism agenda• Removal or ‘re-placing’ of democratic

accountability• The increased costs of private finance and poor

value for money• Loss of strategic planning control over key welfare

infrastructure• Representative or participative democracy?• Public sector institutions lack the skills to

negotiate effectively with private companies

Stakeholder Types Greenwich (Queen Elizabeth Hospital)

Bromley (Princess Royal University Hospital)

Lewisham (University Hospital Redevelopment)

Public Sector Authority Advisors Herbert Smith Ltd – Legal KPMG – Financial

Herbert Smith Ltd. – Legal Arthur Andersen – Financial Charterhouse – Financial Cyril Sweett AYH – Technical Richard Ellis

Ernst & Young – Financial Cundall Johnston –

Technical Cyril Sweett Bevan Brittan – Legal Llwewlyn-Davies Architects

Private Sector Contractor Meridian Hospital Company Plc

United Healthcare (Farnborough Hospital) Ltd

Ravensbourne Health Services Ltd

Shareholders/Members/Partners Innisfree (50%) Kvaerner (50%)

Barclays Private Equity (42.55%)

Innisfree (42.55%) Taylor Woodrow Construction

(14.9%)

Mowlem (50%) Barclays European

Infrastructure (50%)

Private Sector Contractors Skanska – Design & Build ISS Mediclean Ltd – Soft FM Skanska Rashleigh

Weatherfoil Facilities Services – Hard FM

George Trew Dunn – Architect

Taylor Woodrow - Design & Build

ISS Mediclean Ltd. Taylor Woodrow – Hard FM Scottish Hydro-Electric plc Healthsource Ltd. Barratt Homes Healthcare Environments Coda Architects

Mowlem – Design & Build Sovereign Hospital Services

– Hard FM Healthcare Environments RTKL Associates

Private Sector Advisor(s) N/A Desdner Kleinwort Benson – Financial

DLA Piper – Legal The Denis Wilson Partnership

Ltd. Waterman Partnership –

Technical Zisman Bowyer & Partners -

Technical James Nisbet & Partners –

Technical

Espirito Santo Investments – Financial

Linklaters – Legal Aon – Insurance Gleeds Troupe Bywaters & Anders Healthcare Environments Jacobs Gibb – Technical

Principal Bank/Bond Arranger Barclays Capital Plc. Dresdner Kleinwort Benson ABN AMRO Paribas Lloyds-TSB

Dexia Public Finance Bank Sumitomo Mitsui Banking

Corporation

Past / Future Commitments by Sector (£m)

Defense

Education

Emergency services

Energy

Environment

Health

Housing

IT

Justice

Leisure

London Underground / DLR

Office accomodation

Transport

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Post-2011

Pre-2011

72,949

41,049

Social Housing PFIs in the UK

• Treasury Figures:– 22 projects - £1.156billion of capital spending– Total of £3.716billion in re-payments– Re-payment span 2000-2040

• Emergence of super-companies under DFBO rules

• Taking on more and more of local government’s traditional roles

Housing PFI in the UK

• Major firms now organise:– Costs and – Community ‘consultation’– Service provision

• Citizens’ experiences of ‘the state’ shape wider legitimacy and broader understandings

• Linked to wider changes – 30 year Housing Revenue Account Business Plans

• New Investment and Service Partnerships

Stakeholder Types CompaniesPublic Sector Authority Advisors PricewaterhouseCoopers (PwC) – Financial

Gardner & Theobold – Technical

Trowers & Hamlins – Legal

Jardine Lloyd Thompson Risk Solutions Ltd - Insurance

Private Sector Contractor Building Best Value in Brockley (B3)Shareholders/Members/Partners Regenter 100%:

John Laing Pinnacle

Private Sector Contractors Higgins Construction - Design & Build

Pinnacle - Soft FM

Equipe - Hard FM (bought out by the Rydon Group 2010)

Private Sector Advisor(s) Gleeds – Technical Navigant Consulting – Financial Denton Wilde Spate – Legal JLT - Insurance

Principal Bank/Bond Arranger Barclays Capital Plc.

Implications of the PFI

• Re-payments of £314m over 20 years• Costs – over £2million spent on legal bills alone• Time delays - 44 month delay between the

estimated date of contract completion in October 2003 and its realisation in June 2007

• Major contractual inflexibilities and policy lock-in• Incentives to increase costs to boost profits• But all homes reached ‘Decent Standard’ by 2010

Housing Reform in South East London

• A costly ‘democratic premium’• New locations of authority and power at the

local level• International firms, bondholders, regulators,

lawyers, accountants, business services advisers

• Exemplifies wider trends under localist agenda • Infrastructure as an investment space

Response to Local Demands/complaints

• ‘The PFI is by its nature a contractual relationship between the Council and the PFI contractor Regenter B3. The contract was subject to a competitive tendering process and part of the contractual obligations relating to both parties are of course financial. The Council regularly reviews progress but any changes in the current arrangements may prejudice the basis of the contract and so have to be taken fully into account’ (Mayor of Lewisham, p.11).

The New Lexicon of Localism…

• Capital Costs• Competitive Dialogue Procurement Process• Contractual compliance• De-scoping of risks• Derogation Approval• Interface/risk matrices• Liabilities• Risk Profiles• Special Purpose Vehicles• Etc, etc. etc….

Conclusions

• Too much governance not enough government• The local as a space to be broken up and

converted into investment opportunities• State reforms justified by a politics of ‘perpetual

crisis’• Agenda intent on further pluralisation, not

localisation • What does localism mean in this context?