Community governance and the
new central–local relationship
Gerhard Banner
Introduction
Community Governance” shows how, over the
past few years, a large number of local governDecentralisation is usually regarded as a top- ments have stepped up their endogenous
down process with the state “granting” some problem-solving potential and developed a new
additional local autonomy. It is indeed the state’s kind of collective identity as “political
job to lay down the fundamental legal and fin- enterprises” (Häggroth 1993) with comprehenancial parameters for local government activity. sive responsibility for their territories and popuBut central governments or federal state govern- lations. Next, is a demonstration of how that
ments have rarely done this unilaterally. Most development towards “community governance”
often local governments and their associated comes up against limits if the state fails to
units have been assured a
support the process by
degree of participation.
means of changes to the
Gerhard Banner, a former deputy Chief
There can be no denying,
parameters defining the
Executive Officer of a large City
however, that for a long
scope of community action.
(Duisburg) and Director of the Kommunale Gemeinschaftsstelle (KGSt), the
time the influence of the
Central governments would
Local Government Centre for Managestate in this sector was
also stand to gain from
ment Studies, is now an honorary prodominant. Now
things
these changes. Finally, the
fessor at the German Postgraduate School
appear to be changing. For
last section advocates a proof Administrative Sciences and a consultsome time, the relationship
active strategy on the part of
ant to various organisations involved in
local government modernisation nationbetween central governlocal governments, taking
ally and internationally. His present
ments and relatively autondue account of the basic
research interest is in community governomous local authorities in
interests of the state.
ance and in the central–local relationship,
Western Europe usually
In line with the Habitat
both in international (comparative) perdescribed as “decentralisII Action Plan, the main
spective.
ation” has seemed to be
concern is to point out
shifting into a higher gear.
avenues for innovation and
More and more frequently, the impulses to mod- modernisation. The complexity of the subject
ify this relationship have been originating from and the limited space available impose conthe local government level, more especially cessions, which I hope will not significantly
from cities and agglomerations. Today, decen- impair the strength of my arguments.
tralisation drives go in both directions, top- Specifically, the statements made here apply
down and bottom-up. In this process, the only to the kind of nation state that I have
central–local balance has shifted towards the concentrated on, i.e., countries with welllocal – and particularly urban – level.
developed professional administrations at the
This paper is organised so that the outline local government level and a strong central
showing how the central–local relationship has government largely able to impose its legal
changed comes first. Then, “Emergence of system.
ISSJ 172/2002  UNESCO 2002. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA.
218
Changing relationships
between central and local
governments
There is a clear dividing line between developments on the European continent and those in
the UK. Whereas on the continent there has
been a notable withdrawal of the state from the
local government level since the mid 1970s,
central government in the UK has displayed a
firm resolve to penetrate the local government
sphere since the early 1980s. On the continent,
the state has transferred more and more
responsibilities to local government, while in
the United Kingdom, from the early 1930s up
to the present, there has been consistent erosion
of local-government powers and responsibilities.
The paradox is that despite these radical differences, we have reason to anticipate a form of
convergence between the two areas of Europe
rather than further discrepancies.
Continental constitutions accord local authorities a high degree of autonomy and a general
responsibility for local affairs. This special
status for local governments is grounded in the
doctrine of subsidiary powers, which decrees
that the responsibility for carrying out tasks
should be held at the lowest level of government competent to undertake them. On the other
hand, continental local governments have traditionally been closely linked with their central
governments. In the framework of a hierarchical
relationship, the community is regarded as the
base unit in the overall structure of public
administration of a nation state. As such, it is
an all-purpose authority dealing not only with
the “voluntary” matters of local selfadministration but also providing services and
regulation, which are grounded in state legislation. The state has transferred these tasks to
the local authorities, while at the same time
reserving rights of supervision and instruction
over the ways in which they implement them.
The use of local authorities as a base unit of
public administration means that central government is largely free of the necessity to set up
agencies of its own at the local level.
In the last 15 years central governments
have made a number of “withdrawals,” particularly withdrawal from legal supervision. For
a long time, state supervision exercised over the
voluntary self-administration functions of local
 UNESCO 2002.
Gerhard Banner
government has, in fact, ceased to be onerous.
An exception here is France, where up to 1982
all local council decisions had to be submitted
to the Prefect for approval before the local authorities could act upon them. This kind of exante supervision had a highly immobilising
effect. Today such ex-ante control mechanisms
are declining everywhere. Only in a few areas
have states retained rights of prior approval,
e.g., in connection with local government draft
budgets. But formal ex-post objections by state
supervisory bodies (or by administrative courts
acting on their initiative, as in France) have
become almost equally unusual. Obviously the
legality of administrative action is hardly
impaired at all by this withdrawal of the state.
One of the reasons for this is that in the last
25 years all Western European countries have
pursued a policy of community amalgamation.
Most of the new, large-scale communities can
now afford a professional and legally wellinformed administration. Again, France with its
over 36,000 independent communes is an
exception. Smaller communities can obtain legal
advice from the supervisory body or their local
authorities association and they make substantial
use of this opportunity. A further control function is performed by the citizens themselves,
who can appeal to the courts if they feel that
their rights have been violated by the administration.
As we have seen, local authorities perform
extensive services grounded in state legislation.
Here the state often prescribes, in detail, how
these services are to be performed, to ensure
high standards and guaranteed access. The
invariable effect of this type of specific legislation is to make services more expensive. In
addition, the law frequently enjoins the local
authorities to provide services either free of
charge or for fees that are far from covering
the cost. But today the financial condition of
many communities is so critical that they cannot
afford the prescribed quality of service any
more. The local authorities associations thus put
increasing pressure on central governments and
legislators to revoke this interventionist system
of regulation. At present, deregulation is on the
agenda almost everywhere, with the state usually not abandoning its influence altogether but
merely reducing it. The main instances of
deregulation are the waiving or reduction of
Community governance and the new central–local relationship
standards (e.g., over the architecture of school
buildings or the maximum size of nursery
school groups) and the empowering of local
authorities to charge user fees for certain services that are higher than those hitherto permitted. All this amplifies the local scope of action.
Much the same effect is achieved when central
governments transform special-purpose grants
into grants which local authorities are free to
use as they think fit. This, too, is a current
trend.
The ever-increasing intervention of the
state in local-level service provision was a
phenomenon attendant on the extension of the
welfare state in the decades of high economic
growth. Today, with the welfare state in crisis,
the logical expectation would be for central
governments to cut back on intervention. This
is, however, something that they are frequently
reluctant to do. For example, in 1997 the parliament of the German federal state of North
Rhine-Westphalia was debating a bill providing
for a five-year pilot project in which 25% of
the local authorities in the state would be
empowered to undercut the standards prescribed
and/or to charge the citizens higher fees in a
total of eight laws! The local authorities of
North Rhine-Westphalia were up in arms about
the restricted scope of this model, which they
considered to be arbitrary and absolutely
unrealistic in terms of their financial situation.
Instead, they called for a more drastic overhaul
of the state intervention system on a permanent
basis. With the pressure of the crisis behind
them it seemed quite likely that they would
ultimately succeed. One inevitable consequence
of ongoing deregulation is a higher degree of
inequality in service standards from one local
authority to another. In recent years, the readiness to accept such differences has grown
everywhere.
In the 1960s, many national governments
believed it feasible to “develop” their entire
territory along the lines of broadly conceived
central planning schemes. Today, insight into
the limitations placed on central regulation and,
above all, the decline of economic growth and
tax revenue, has put an end to this kind of
ambition. Here again, France is an exception;
remnants of the old central planning philosophy
still survive. With money no longer so freely
available, the tendency is to concentrate on a
 UNESCO 2002.
219
limited number of priority projects combining
central, local, and private funds. The resulting
public–private partnerships rest on complex
contractual relationships. These, in turn, tend
to make the relationship between the central
government and the cities less hierarchical.
Also, cities and agglomerations are indispensable as an implementation ground for central
government urban regeneration and regional
development policies and are fully capable of
mobilising forces against central government
objectives that are not compatible with their
own ideas or cannot be made palatable to their
citizens.
Hence,
something
like
coadministration tends to evolve in this sector.
The devolution of tasks from central to
local government may also be interpreted as a
symptom of state withdrawal. In France this
took place in the 1980s on a massive, intentional scale in the framework of decentralisation. In other countries, the process has been
more gradual and unspectacular. The usual
official justification proffered for shifting tasks
to local government is that of strengthening
local self-administration. On closer inspection it
usually becomes apparent that central government motives are not quite so selfless. In many
cases a task is indeed devolved, but not the full
amount of money required for its fulfilment.
The state thus sheds a burden at the expense
of local government.
Altogether, the progressive withdrawal of
the state from the local government arena has
indeed tipped the scales in favour of local authorities in the central–local balance of power.
Although state withdrawal is enforced rather
than voluntary – the main factor here being the
fiscal crisis – the process has been benevolent
rather than antagonistic and has done little or
nothing to impair what has usually been a correct and cooperative relationship between central and local governments.
In Britain there has been no withdrawal of
this kind. On the contrary, there has been a
massive intervention by central government into
the local sphere. For centuries, British local
authorities enjoyed a degree of autonomy
unrivalled anywhere else in the world. But this
autonomy has no constitutional grounding, so
that local authorities were always fully exposed
to central government legislation. In addition,
local authorities were traditionally regarded as
220
institutions for the provision of services rather
than a foundation of society and an integral
part of the organic unity of the democratic state.
The assumption that local government was the
all-purpose local provider faded after the 1920s.
A long list can be made of the functions lost
over time: assistance for the unemployed
(1934); hospitals (1946); the Poor Law duties
of relieving destitution and assisting the needy
(1948); the control of river pollution (1948);
electricity and gas supply under nationalisation
programmes (circa 1948); water supply,
conservation, and sewage disposal (1974); and
personal health functions. Even the local
government role widely found elsewhere of providing the “safety net below the safety net” for
those in distress has largely disappeared, with
the exception of child care (Norton 1989: 5).
Most of these functions were reorganised in
special agencies under national control because
this was held to be more effective. Under the
governments headed by Mrs Thatcher things
finally came to a head in an openly antagonistic
relationship between central and local governments. Almost 200 acts were passed restricting
the scope of local government action. The most
palpable impact was achieved through laws limiting local government expenditure, as well as
those which made it possible to opt out of
local government control in the housing and
education sectors, and those which subjected a
growing number of local government services –
ultimately including white-collar services – to
compulsory competitive tendering. Thus the
regulation of local government administration
reached a level entirely comparable with the
continent of Europe, and in some cases even
exceeding it.
On the other hand, this avalanche of legislation also shook out undesirable rigidities
within local government and generated substantial energies and stimuli. Compulsory competitive tendering, in particular, forced local
authorities to reorganise if they wanted to survive competition with the private sector. The
tidal wave of privatisation feared by so many
failed to materialise. In fact, 80% of the competitive tenders were won by the local authorities (Walsh 1995: 136). Under pressure from
the centre, British local government has become
more entrepreneurial, innovative, and in some
cases, more customer-oriented than its continen UNESCO 2002.
Gerhard Banner
tal counterparts. Under John Major the relationship between central and local government
became more relaxed, and it can be expected
that that relaxation will continue to gravitate
towards a more “continental” pattern under the
present Labour government (DETR 1998).
In other respects, continental Europe
appears to be going more towards the British
pattern. The “monistic” notion of local government administration as a lower-level “extension
of the state”, as found in France and Germany,
is obviously losing its persuasiveness. Instead,
we appear to be moving towards a kind of
“co-operative dualism”, by increasingly playing
down the traditional hierarchical elements in the
relationship between central and local governments. Right up to the present, the close
intertwining between local authorities and the
state in continental European countries has
inhibited modernisation at both ends. The dualism characteristic of the Anglo-American model
holds out prospects for a sustained dialogue
between central and local government on innovations in the public sector and their implementation.
Emergence of community
governance
The last 15 years have seen dynamic developments in local government. This section is
designed to illustrate the extent to which the
identity and the operating modes of dynamic
innovative cities have moved away from the
traditional running of a local bureaucracy, as
well as the development deficits they still need
to remedy. In the more dynamic city administrations there is empirical evidence of new attitudes and substantial differentiation in the extent
of local government activity. Both these factors
are already effecting profound changes in the
character of traditional local government administration. Particularly notable are:
• Growing awareness of the fact that one’s own
city is engaged in competition with other
locations, at regional, European, and sometimes even worldwide levels. Thus the cardinal priority is to “carve out a niche for oneself”, to capitalise on the strengths of one’s
own location and then “sell” them to the best
Community governance and the new central–local relationship
possible advantage, using every marketing
resource in the book. This means looking far
beyond the city limits, and keeping an eye
out for competitors, potential investors and
national and European sources of funding.
• Turning away from the monopolistic attitude
hitherto typical of administrative thinking,
and turning towards partnerships, joint ventures and contracting with other public, private, voluntary and grassroots organisations,
with a view to making development projects,
as well as services, politically acceptable and
financially affordable.
• Bidding to be competitive, so that the market – or market surrogates like comparative
performance measurement or benchmarking –
are systematically used to offer citizens quality services and at the same time to increase
efficiency within the bureaucracy.
• Changing attitudes to citizens, with local
authorities laboriously doing their best no
longer to envisage citizens as potential disturbers of professional administrative work
but as a problem-solving resource that should
be harnessed as extensively as possible for
the good of the local community. This leads
to an intensification of communication with
citizens, increasingly with the help of modern media.
• Reorganising the bureaucracy in order to achieve the objectives of globalisation, market
orientation, and democratisation.
These changes represent nothing less than
a new collective identity and a new operating
code for local authorities referred to as “Community Governance”. The term suggests a
broadening of the notion of local government
beyond its traditional role in the delivery of
services to encompass greater breadth in “governing” all aspects of the local community. This
implies a shift of emphasis for the local authority from public administration towards political leadership in civil society. Even in the UK,
where traditional thinking would appear to be
anything but conducive to viewing local government as the central agency for civic leadership
and the natural convenor and coordinator of
differing local and supra-local interests, most
local authorities do indeed appear to be moving
in the direction of the model of community
governance (DETR 1998, Leach et al. 1994:
242–243).
 UNESCO 2002.
221
Community governance is infinitely more
complex and difficult than the customary handling of hierarchies and monopolies. It calls for
the rehearsal of new roles in which the local
authority frequently has very little say.1 What
is it that prompts local politicians and top management teams to embark on an obstacle course
for which their staff and their organisation are
usually anything but adequately prepared? The
answer is the increasing pressure they are coming under. The driving exogenous forces are:
• globalisation, unleashing market forces worldwide and exacerbating location rivalry
between cities and agglomerations;
• removing obstacles to competition, the development in Europe is again strengthening the
influence of the market (particularly in telecommunications,
energy,
and
public
transport), while at the same time using the
structural funds to cushion untrammelled market impact;
• state pressure on local governments to modernise by throttling back on funds, prescribing
reform (as in New Zealand) or exposing them
to the market mechanisms (as in the UK); and
• citizens, who want a performing local authority, becoming more and more vocal in their
refusal to have decisions affecting them taken
over their heads.
Under the onslaught of these four major
forces for change, more and more local authorities are realising that the bureaucratic
operating code of the past is no longer adequate
to ensure effective collective action, to retain
the loyalty of their citizens, and to avoid being
torn apart by social polarisation. The need to
rethink local government has obviously
become imperative.
In order for the existing infrastructure to
function, community governance requires support from the entire local organisation. Its corporate identity, organisational culture, work
structures, and management styles must all be
geared to this vision. What does the existing
organisational infrastructure for community
governance look like, as things stand at the
moment? This question has been looked into
by the Science Centre Berlin in a major international research project headed by the late Professor Frieder Naschold. The initial impulse for
this research came from the prize awarded by
222
the Bertelsmann Foundation in 1993 for
“Democracy and Efficiency in Local Government,” the criteria for which were very similar
to
the
community
governance
model
(Bertelsmann Foundation 1993). On the basis
of international inquiries conducted by experts
on local government, 10 cities from 9 countries
(Denmark, Finland, Germany, Great Britain, the
Netherlands, Switzerland, Canada, USA, and
New Zealand) were nominated the front-runners
in local-government modernisation in their
respective countries. The prize went to Phoenix,
Arizona, and Christchurch, New Zealand. Two
years later, the Science Centre Berlin began
studying the cities nominated for the prize and
a number of other cities notable for their modernisation drive with a view to identifying the
innovations undertaken there and the effects
they were having. The aim of the research was
to enrich the exchange of international experience and also to exploit the insights gained as
a spur to local government modernisation in
Germany. There are two important publications
related to the project (Naschold et al. 1997,
1998). Naschold and his colleagues have
revealed that for all the individual differences
registered, all the cities studied displayed the
following modernisation profile (Naschold 1997,
Naschold & Daley 1999: 31–32):
• The internal modernisation of the administrative organisation along private-sector lines has
gone farthest. This is reflected in the formation of business units with a high degree of
managerial scope. These units are expected to
achieve clearly defined results and are given
globalised budgets for the purpose. The high
degree of autonomy granted to the business
units has the spin-off effect of strengthening
the centrifugal forces operative in the organisation; this makes consistent corporate policymaking and strategic management more difficult.
• Less marked, at present, is the degree of
market orientation (competitive tender for
local authority services, sometimes resulting
in privatisation and legal autonomy for
administrative units). However, the trend in
this direction is a very dynamic one.
• Least well developed are democratisation
strategies. These are defined by the research
team as the degree of freedom of local authorities from central government intervention,
 UNESCO 2002.
Gerhard Banner
the co-development of administrative and
political organisation, and above all, citizen
and community participation in the definition
and surveillance of local government services
and policies. A large number of instruments
are being employed to this end, but they
have yet to be incorporated into a consistent
democratisation strategy. Also, this area has
the smallest growth rate.
Naschold has established that in half the
cities studied the modernisation process appears
to have achieved stability, while the other half
display stagnation or even de-modernisation
tendencies (Naschold 1997: 23–24). In his view,
the reason for this is that in the latter the modernisation process is too closely modelled in the
image of the traditional bureaucracy. Sufficient
outside pressure for modernisation has not been
brought to bear on the bureaucratic apparatus.
According to Naschold, the major external “performance boosters,” without which a genuine
modernisation breakthrough cannot succeed, are
competition and a quality policy involving
empowerment of the citizens and the community. Both contextual factors do indeed have
major strategic significance for the realisation
of community governance.
A typical feature of bureaucracies is the
existence of “structural” cost drivers. When the
work in one section of an administrative unit
increases, the managers in that area instinctively
call for more resources: staff, established positions, money, rooms, etc. As long as the
bureaucracy is non-transparent, local politicians
frequently have no choice but to reluctantly
agree to increase the resources. So the elevator
only ever travels upwards. Managers are hardly
inclined to exhaust all the internal means of
reallocating the resources at their disposal
before calling for additional resources. The reason is that an increase in budget and staff is
generally considered good for one’s career prospects. The creation of result-accountable
business units with a fixed budget and defined
performance goals does go some way towards
counteracting this mechanism, but it does not
remove it altogether.
The only thing that can eliminate structural
cost drivers is competition. By far the most
effective form of competition is genuine market
testing (Wegener 1997). Here the services delivered by the local administration have to com-
Community governance and the new central–local relationship
A water pump in Selinkegny (Mali).
 UNESCO 2002.
A Pinogues/CIRC
223
224
pete with services offered by private, non-profit,
or other public producers. If, after a fair transition period, the local authority provider proves
unable to compete, it loses the service. For local
authorities accepting this challenge, market
orientation is spectacular in its effect, as almost
90% of services performed by local authorities
are (or could be) performed as well by external
providers. Thus, in principle, they could be privatised – though there are numerous cases where
it would be inexpedient to do so because of
prohibitive transaction costs or lack of competition in the market (Deubel 1997: 130, 146).
This applies both to local authority end-user
services (such as looking after parks and gardens or refuse disposal) and internal services
provided by one unit for another (such as personnel administration, accounting, and legal
advice). Practical experience indicates that the
very announcement by politicians and top management that a service is to be exposed to
competitive tendering is sufficient to spark off
major rationalisation drives and restructuring,
such as the division of purchaser and provider
roles. Thus, as a rule, the introduction of market
orientation does not lead to privatisation but to
competitive provision of services by the local
bureaucracy. As we have seen, about 80% of
the services put up for compulsory tender in
the UK were won by local authority providers.
The range of instruments employed to
strengthen the influence of citizen participation
and community involvement in the definition of
services and local government decision-making
is broad. They include additional options for
choice alongside local authority services in the
fields of social services, education and health;
service and quality assurances along the lines
of the British Citizens’ Charter movement; user
panels; citizen and customer surveys; complaints and suggestion systems; citizen consultation prior to final Council decision-making,
e.g., on issues of town planning, economic
development, or (in New Zealand) on the draft
budget; user representation bodies in the fields
of housing, social services, and education; support for neighbourhood initiatives to improve
the environment, townscape, safety/security, and
social integration; the running of institutions by
the citizens themselves (on a fixed budget provided by the Council) in the fields of sport,
leisure, and youth; and co-planning by local
 UNESCO 2002.
Gerhard Banner
authority plus local community in the fields of
environment, transport, urban renewal, and
urban development (Oppen 1997: 241,
Ståhlberg 1997).
The city of Hämenlinna in Finland is the
only one to use all these instruments. In fact,
Scandinavia in general is conspicuous by its
practice of what is termed “small democracy”
in the Nordic countries. In most cases, however,
these instruments are not employed cumulatively to form a consistent participation strategy
giving the community any genuine influence on
local government decision-making. Most
bureaucracies still find it hard to see citizens
as a problem-solving resource, and indeed, the
ultimate goal of local policy-making.
Generally speaking, government is judged
against two sets of criteria: efficiency and
democracy/legitimacy. These are perceived to
be in conflict with each other, at least to some
extent, and the values are accorded different
emphasis at different times. In the 1960s and
1970s, legitimacy and community participation
were considered to be the important values. In
the 1980s efficiency was writ large. The 1990s
seem to be a period in which the concern is
explicitly to strike a balance between legitimacy
and efficiency (Ståhlberg 1997: 78). The most
important single measure for increasing
efficiency is market testing. It leads to a drop
in prices. This is not only an advantage for the
fee/rate-paying citizen but also for the community as a whole, as the local authority can
invest the funds thus saved in other priority
areas. The result is that services prized by the
citizens need not be cut back, and facilities like
lending libraries and swimming facilities do not
have to close down.
One danger market orientation may bring
is a preoccupation with price rather than quality.
This is why the service policy must not be
dictated by the market alone but also by the
community. User and community participation,
rightly applied, can indicate to politicians the
kind of service profile the citizens want or are
happy with. A different danger may also rear
its head, that of the affected groups demanding
maximum quality (frequently synonymous with
maximum cost) for the services they are interested in and thus behaving irresponsibly in
terms of the good of the community as a whole.
In other words, radical efficiency drives via
Community governance and the new central–local relationship
market orientation may lead to undesirable
losses in quality, while radical legitimacy drives
via participation may lead to a cost spiral that
cannot be financed. It is the job of political
leadership and top management to maintain an
equilibrium between the two performance boosters – market and community. This requires
permanent persuasion strategies aimed at producing “responsible citizens”. Community
governance needs responsible citizens, but one
can only demand responsible behaviour in the
spirit of community interests if citizens are not
only informed about the issues that happen to
interest them personally, but are also provided
with an overview of the tasks and problems the
city as a whole faces. Thus it is of decisive
importance for political leaders and top management to make problems, issues, constraints and
decision-making processes transparent, and to
communicate them competently. Clientelism
and a privy-council mentality may sometimes
be difficult to avoid, but they are not exactly
suitable methods of achieving efficiency or
legitimacy.
Community governance needs
support from the state
It is frequently asserted that the corset of legal
regulations applied by central governments is
so tight that it leaves local authorities no room
for modernisation. No one will dispute that
some regulations are indeed inimical to modernisation. But as the pioneering cities referred to
above illustrate, they still leave an astonishing
degree of latitude and room to manoeuvre. The
large majority of local authorities fail to make
use of the scope thus afforded them. There is
a general reluctance to embark on changes that
are likely to encounter internal resistance
because they are not “bureaucracy-compatible”.
Changes of more than negligible import will
invariably have an impact on existing power
structures and that means there will be losers
as well as winners. What assistance can be
given to the faint-hearted authorities hesitating
to join the modernisation movement? Support
from the state is indispensable, and must bring
its influence to bear on certain strategic “leverage points” and thus alter the framework of
local authority action. The following examples
 UNESCO 2002.
225
illustrate that this does not mean reinforcing the
present system of detailed regulations, single
interventions, and controls – a system in which
the state is not at the helm but is actually
rowing the boat, sometimes on the village pond.
What is needed is genuine steering, and steering
here means changing the parameters of local
collective action to provide sufficient incentive
for local governments to move towards greater
efficiency and more democracy.
The following list of measures is indicative
and by no means exhaustive.
• Competition: The state should instruct local
authorities to expose their services to market
competition or, where this is not possible,
expedient or desired, to inter-authority performance comparisons (Adamaschek & Banner 1997, Bovaird 2001). The results of this
comparison should be reported to the Council
and the public. It takes competition to make
new structures like business units really effective; competition galvanises them into action.
It will be necessary for the state to pass
some general regulations ensuring that local
authorities engage in fair competition with
the private sector.
• Citizen and community empowerment for
quality services: Local authorities are citizens
governing themselves. Thus local politicians
and local government bureaucracies are
obliged to realise the will of the citizens.
This is only possible if the local authority
cooperates with the citizens when it comes
to deciding what services are to be performed
and how they are to be performed. Less
articulate or well-organised groups must also
be involved in this process. The state should
obligate the local authorities to report at regular intervals to the citizenry on the way it
has involved the community in policy-making
and
implementation.
Such
obligatory
reporting will spur competition and support
the dissemination of both domestic and international model examples of community
empowerment.
• Civic leadership: There seems to be a growing awareness that successful community
governance, and in particular the strategically
important convenor role of local government,
are best fulfilled by a visible political executive as it exists in most European countries,
with the notable exception of Scandinavia
226
and, until recently, the UK. Such executives
can take the form of either an elected mayor
or an elected multi-person executive
(Hambleton 2000). But an additional problem
has arisen. Changing hierarchically organised
administrative set-ups into result-accountable
business units and re-routing local government activity away from City Hall and
towards legally autonomous companies or
associations means transforming local government into a conglomerate body that is
increasingly difficult to steer. The weight of
traditional City Hall bureaucracy and its political and administrative leadership declines,
while the centrifugal forces of the “periphery”
increase. It is therefore necessary to create a
leadership structure that preserves the ability
of elected politicians and top management to
steer the local programmes and services in
the overall interests of the community,
whether they are performed by the City Hall
bureaucracy, city-controlled companies or
associations, voluntary non-profit organisations or the private sector. This steering
function is at the heart of community governance in action. Here the Scandinavian free
commune experiments might be emulated,
introducing an experimentation clause,2 which
on a trial basis frees interested communes
from legal regulations prescribing a specific
leadership structure or a specific legal status
for leaders. In this way various models could
be tried out in practice before being cemented
in the form of legislation. What legislators
should do right now, however, is to obligate
the local councils to concern themselves with
the entire range of local services – not only
the ones provided by City Hall itself – and
to report on this to their communities.
• Responsible citizens: In New Zealand, the
Councils are legally obliged to present the
draft annual plan – a compact, understandable
version of the draft budget emphasising the
political priorities – to their citizens and to
discuss it with the existing community boards
and the various local interest groups before
the council finally passes it. The result is
regarded as a contract between the council
and the community. If, in the course of the
year, the council decides it needs to deviate
from the plan to any significant extent, it has
to put this to the citizens for approval. The
 UNESCO 2002.
Gerhard Banner
discussion of the draft annual plan, involving
council members and top managers on the
local government side, is extremely intensive
and usually takes four weeks (Gray 1994:
54). This procedure guarantees two things:
first, the council can be sure that the plan is
adopted in full cognisance of the will of the
citizens – at least to the extent that the citizenry and local groups have put their views
forward. This makes it more likely that the
council’s policies will be accepted. Second,
the council thus ensures that, at one point in
the year at least, interested citizens are given
a general overview of the problems facing
the city. As such, it is an attempt to mitigate
the one-issue mentality normally (and
understandably) displayed by the general public and to appeal to the “responsible citizen”.
In some countries – Germany, for instance –
the citizens can initiate referenda, the outcome of which is binding on the council.
This tends to have a de-legitimising effect on
council decisions. Consultation on the annual
plan, as practised in New Zealand, would in
many cases indicate the citizens’ will to the
council in such a way as to give it ample
time to respond.
• Budget discipline: Central governments legitimately attempt to force local authorities to
balance their budgets. To this end they use
a variety of control instruments. A plethora
of unbalanced local authority budgets would
put the central government itself into a political and financial dilemma, but especially in
times of public finance crises, it is difficult
for central governments to keep local budgets
on course via legal supervision. This is
especially true of large, politically influential
cities. The reason behind this is that many
councils are generous in spending and do not
regard a balanced budget as a primary political goal. They prefer to do the things that
will please the voters. If things get out of
hand, the central government will always step
in, or so they hope. Hence the state should
discontinue its attempts to warrant balanced
local authority budgets and leave this business to the market, i.e., the banks providing
the loans (and the bond subscribers). As soon
as the market no longer has the feeling that
the state will stand in for local authority
debts, there will be more interest in the fin-
Community governance and the new central–local relationship
ancial standing of their local authority
debtors, and that means ratings. This, in its
turn, will make the financial standing of each
and every local authority into a public issue.
At the next election, the voters can punish the
councillors for mismanagement. The result is
that a balanced budget will immediately
become a top political priority (Banner
1997b). This is indispensable, both politically
and economically, because only a sound
budget contains the action options needed by
any local authority if it wants to take advantage of development opportunities and offset
development risks in time. A budget deep in
debt, on the other hand, spells the end of any
meaningful local autonomy.
• Charging: Subsidising services (whoever provides them) should be restricted to those
cases where there are sound socio-political,
macroeconomic, or local economic reasons
not to charge them in full or in part to their
beneficiaries. Moreover, the state should not
force local authorities to provide services free
of charge or below cost, as this leads to a
misallocation of resources. Experience shows
that citizens who have to pay for local services are more likely to keep an eye on local
decision-making processes and also keep tabs
on the local bureaucracy. Hence local authorities should be obligated to report on how
high the fees they charge are in comparison
with other local authorities.
• State funding of local authorities: In countries
where the state partly finances local authorities via general-purpose grants, it should
make a substantial part of the allocation
dependent on the individual authority’s modernisation achievements. This would provide
incentives for local authorities to improve
performance
and enhance community
involvement. Such a measure promises major
impact, as we know from experience that
local authorities are highly reluctant to expose
themselves to criticism for failing to capitalise on government funding.
• Territories and powers for the meaningful
exercise of democratic governance: In some
countries (e.g., France), the majority of local
communities are small, and this makes them
too low in performance and powers to
implement a meaningful form of community
governance. This defect can be offset to some
 UNESCO 2002.
227
extent via organised cooperation among local
authorities, but only if the population directly
elects the supra-local political body. Frequently, however, indirect voting takes place.
The consequence of this is that a major proportion of local services are divorced from
direct political legitimisation. The same effect
sets in if a large number of services of purely
local relevance are performed by special
agencies, again not subject to election by the
voters. This is the case in the UK. Central
government should create territories with an
area and responsibilities sufficient to ensure
that community governance can in fact be
realised and the voters can genuinely hold
their elected representatives accountable for
what they do.
The measures proposed here are by no
means synonymous with (possibly unlawful or
even unconstitutional) interference in the autonomy of local authorities. The point being urged
is that it is imperative to change the existing
parameters in such a way as to provide an
incentive for local politicians and leading managers to actually do what they are expected to
do by law: run their communities responsibly,
economically, and in accordance with the will
of the citizens.
In view of all this, there are many indications that in future central governments will
steer local authorities by means of a newly
designed legal framework integrating three
high-impact factors: (1) empowerment of the
market via competition; (2) empowerment of
the local community via participation; and (3)
transparency of and sustained public discussion
on City Hall performance. Such a renewed legal
framework will release so much responsible
self-steering potential at the local level that the
state can afford to further reduce its traditional
arsenal of individual interventions and controls.
This means that it can largely do without a
control apparatus that is both costly and, as we
have seen, increasingly ineffective.
If the state gradually cuts back on its traditional system of checks, and moves over to
“new steering”, this would have no repercussions on its basic development, compensation, and financing responsibilities, nor on its
continuing general responsibility for local
government. What changes for central government are its steering philosophy and the “tools”
228
that it uses. The definition of expedient parameters for action at the local level and the
constant updating of those parameters is a complex strategic task demanding more from the
state than simply issuing regulations and making
sure they are observed. However, the really big
challenge coming from such changes is for local
authorities. The new framework places them
under much greater pressure to deliver
efficiently than the state could ever exert via
extra regulations and controls.
Might this whole thing be a zero-sum game
in which the state loses out and only local
authorities and communities stand to gain?
True, the state will no longer be able to regard
local authorities as a kind of downward extension of the state bureaucracy and the state
budget. Its new relationship to the local authorities is marked by less hierarchy and greater
partnership in the form of “cooperative dualism.” Instead of the part the state has traditionally played in rowing, it performs a steering
role that is not only more effective but also
frees it of control functions. As well, greater
autonomy and responsibility accorded to the
local authorities has the congenial effect, for
the state, that local authorities have to take the
blame themselves for their failures and can no
longer pass the blame to the state. This also
works in the opposite direction, of course. So
both central government and the local authorities stand to gain. This, in itself, should be
sufficient to prompt both sides to take advantage
of the new opportunities for change. For a
highly eloquent example of a renewed central–
local relationship we need only look to New
Zealand (Banner 1997a).
Proactive strategy by local
governments
The interface between the state and the local
community traditionally develops in the form
of discrete changes. The initiative usually comes
from the state. The normal course is for the
central government to propose an alteration to
existing legislation and for local authorities to
react to that proposal. Such discrete responses
represent a dispersal of local government energies, which are thus frequently invested in
issues of secondary importance. This is a game
 UNESCO 2002.
Gerhard Banner
in which the local authorities have nothing to
gain and the state can do nothing to halt the
erosion of its controlling influence. Breaking
away from an ever more dysfunctional hierarchical system of central–local relations and
redefining them along partnership lines cannot
be achieved by piecemeal adaptation; there has
to be an overall strategy behind it.
Local authorities are going to have to take
the initiative and the conceptual leadership in
such an overall strategy. There are two reasons
for this. The first has to do with the respective
stakes involved. The political energy of the state
is fully absorbed by the large policy sectors,
such as education, the labour market, pensions,
the social system, health, and public finance.
Almost everywhere, these sectors are in a state
of crisis and hence the subject of heated public
discussion. Sector policies are of existential
moment for the state; redefining the relationship
with local government is not. Hence the local
authorities have to be the motor for change and
pull the state along with them.
The second reason calling for a proactive
strategy by local authorities is their distinctive
management capability. In all the countries considered here, the organisation and processes of
local government – this applies not only to the
front-runners previously mentioned – are more
flexible and modern than central government
structures. The main reason for greater modernity at the local level is probably that financial
constraints and the increasingly vocal demands
of the citizens have a much greater immediate
effect locally than centrally. Whereas local authorities feel the need to modernise, many central
governments still believe they can carry on
much as before. A notable exception to this
rule is the central governments of Britain and
New Zealand. In continental European countries, however, there appear to be few prospects
in the next few years for state-initiated reforms
aiming at a redefinition of the central–local
relationship.
However, there is another reason for the
higher degree of modernity at the local level.
Ironically, local authorities take a more “cosmopolitan” approach than central governments.
They are incorporated into multi-faceted international networks: town-twinning schemes;
numerous international local government organisations with general political or more special-
Community governance and the new central–local relationship
ised objectives; spontaneous exchange of
experience between local authorities with
“affinities”,
e.g.,
within
Scandinavia
(Baldersheim 1996), between the UK and the
USA (Hambleton 1997) or between the AngloAmerican countries and the quasi-Englishspeaking areas of Europe (Scandinavia, the
Netherlands);3 and international networks
explicitly committed to the modernisation of
local government administration such as the
International Network for Better Local Government sponsored by the Bertelsmann Foundation
(Pröhl 1997). When mayors or leading managers meet at an international level, discussion
is bound to turn to the different parameters
determining local government action in various
countries: political and administrative leadership
structures; the relationship between elected politicians and the local bureaucracy; the relationship with the citizens; and the relationship with
central government. International contacts at the
central government level have very different
agendas. Thus, at least in the big cities, many
local politicians and leading managers are usually well informed about local government
developments in other countries. Of course,
229
their interest in learning from others is also
fuelled by the fact that local government structures are easier to change than national constitutions. If this international and innovative
knowledge is to be made fruitful for the national
redefinition of the central–local relationship, the
local authorities are going to have to introduce
it proactively into the debate with central
government.
For the local authorities associations conducting negotiations with ministers on behalf of
their member communities, a proactive strategy
is bound up with unaccustomed requirements.
As this strategy can only be successful on a
partnership basis, the local authorities associations will ultimately have to regard it as a joint
venture with the state – a negotiating position
frequently unfamiliar to them. In a traditionally
hierarchical relationship it is not easy to be both
the weaker partner and the conceptually superior
force and yet at the same time negotiate successfully. Ultimately, however, the breakthrough
to a new central–local relationship will depend
on the speed and determination with which local
authorities themselves assert their allegiance to
the emerging new local identity.
Notes
1. A detailed distinction of local
government roles in bringing about
strategic objectives was found in
Christchurch, New Zealand:
Leading Agency (the most
influential player); Joint Leading
Agency (several major players);
Support role (lesser player
supporting other lead players);
Monitoring/Influencing role (seek
mainly to influence other players);
and No Direct Influence (but have
spin-off or indirect effect on an
objective). The following means of
expressing these roles were
 UNESCO 2002.
registered: Provider (carry out using
own resources); Funder (invest in,
grant finance to, or contract others
to provide); Regulator (develop and
enforce rules governing procedure
or behaviour); Promotor/Facilitator
(encourage progress or existence of,
often by organising or securing
financial support); and Advocate
(express support for or recommend
publicly) (Richardson 1997).
2. The Scandinavian
experimentation clauses have been
replicated in the local government
statutes of most German federal
states, but their scope has been
narrowed more or less to budgetary
and accounting matters.
3. The late start of Germany into
local government modernisation in
the early 1990s can be partly
explained by the fact that Germany
is not a quasi-English-speaking
country. The German reform
movement got most of its early
inspiration from the Netherlands,
and in particular from the City of
Tilburg (KGSt 1993, 1992).
230
Gerhard Banner
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