While economy, efficiency and effectiveness are very much at the top of most local councils' agendas, there is much less talk about another important 'e' in local government - the ethics agenda. Yet, internationally, the UK is still highly regarded because of its independent civil service, its direct focus on equalities and diversity issues and its performance management practices. The recent London study visit of a delegation of senior staff from the Inspection Board of the Turkish Home Office sheds some light on new developments in the UK.

First of all, some watchdogs have already gone or are going to disappear. As the Turkish delegates learnt during their visit to the Local Government Association, the government agency Standards for England ceased to operate from 31 January 2012. Established as a result of the Local Government Act 2000, the agency was responsible for promoting high ethical standards in local democracy. In particular, it oversaw the Code of Conduct, which covers elected and co-opted members of local councils, and other public agencies. However, the overwhelming majority of local councils have opted to keep their Standards Committees. So it seems that standards at local level still matter.

Moreover, the Audit Commission, a public corporation (independent of government) who appoints auditors to councils, NHS bodies, police authorities and other local public services in England, and oversees their work, will soon be closed as well. The Turkish delegates were very surprised to hear at the Audit Commission that all external audits will eventually be done by private audit companies and wondered about safeguards to corruption and public service ethos. The UK will be the first country in Europe to have fully privatised local government audit.

At the same time, much information about the performance of important local services, which was previously widely available to the public, has already disappeared.  It is no longer possible for residents to compare which councils have better refuse collection services or to be running things well in general.  Clearly, no other country in Europe has had such a wealth of public service performance information as in the UK - indeed, some critics have argued that there has been too much! It raises the question as to why the government has bounced from such a probably 'over-the-top' approach all the way to the other extreme, scrapping so much performance information completely? Again, the good news is that many local councils (as we heard from the London Borough of Westminster) continue to gather and use performance information systematically for their internal performance management systems.

In place of service output and outcome information, the coalition government has imposed the requirement on all local authorities that local citizens should now be able to find out exactly how their local council spends taxpayers' money, down to the last £500. But do residents care?  There is so far very little evidence of the effectiveness of 'armchair auditors'.

Many ICT officers have indicated that they now have to deal with more Freedom of Information requests which may be a positive indication that at least some citizens make use of the new data available. The London Borough of Barnet even intends to publish information on gifts and hospitality in the case of senior officers on its website in order to increase public trust.

So is there now more or less fraud and corruption in local government? Or is it possible that, in these tough times, public sector staff and citizens pay less attention to the rules and regulations, so there is an increase in fraud?

The 2010/11 Fraud Survey of the Audit Commission shows that local councils and related bodies detected £18 million of fraud in 1990. Today that figure has shot up to £185 million. Of course, this does not mean that there is necessarily more fraud - it may simply be that local councils have got better at detecting it. For example, in the old days, 90% of all detection was benefit fraud. Professionalisation in the field of tackling benefit fraud had the spin-off benefit that it helped to skill up those working on non-benefit fraud detection. As a result, today the split is 60 per cent benefit fraud and 40 per cent non-benefit fraud.

Not surprisingly, the biggest fraud not related to benefits is in procurement. The visit to the London Borough of Haringey was highly revealing of the very sophisticated systems which have now been put in place to deter and detect fraudulent practices in procurement. Haringey has developed such a thorough approach that it is now the lead procurement agency for the whole of London local government in the fields of construction and of energy. It was a matter of considerable satisfaction to the managers of this system, that the recent exposure by the Office of Fair Trading of over 100 building companies which had been operating price fixing in public sector construction contracts, did not find a single contract which had been let through this Haringey system.

Interestingly, the visit revealed a number of ways in which members of staff and the general public play a key role in revealing cases of fraud. Indeed, most fraud cases only get detected because of reporting by staff or the public. The Turkish delegates were concerned, however, that citizens might be deterred in playing this 'whistleblower' role where they had to address their complaints or suspicions to the very same local council that they suspected of committing fraud,  given that most people would not know any other body to address. They thought that an independent anti-fraud hot-line (such as operated by Child Line of NSPCC for those suspecting the existence of child abuse) might be a better solution.

The final visit to the National Fraud Authority in the Home Office made us all aware that effective anti-fraud strategies require partnership working across a wide range of private sector companies, the third sector and public agencies. Most importantly, it requires a public debate on what is right and wrong and which standards we want to stick to. Obviously, this will always be culture-bound but the Turkish delegates felt that the lessons learnt in the UK and policy changes would be very useful to inform this debate in Turkey.

Governance International would like to thank all hosts of the study visit for their excellent presentations and their contributions to the discussion, including:

• ChildLine
• Centre for Public Scrutiny
• City of Westminster Council
• Department of Health
• London Borough of Haringey
• London Borough of Barnet
• Local Government Association
• National Fraud Authority, Home Office
• National Audit Commission

There has recently been a public consultation in 12 English cities about whether to introduce directly-elected mayors. The debate on this issue has been lively, with leading organisations and national and local political figures falling into the 'for' and 'against' camps. Governance International is principally based in Birmingham and, as Birmingham will be voting in May 2012 on whether to have a directly elected mayor, we thought it was worth throwing in our two penny's worth.

We think there is a lot to learn from the German experience of directly elected mayors.  While Bavaria and Baden-Württemberg have long-standing experience with directly elected mayors, the rest of Germany only adopted the 'directly elected mayor' model between 1990 and 1995. In this set-up, the directly elected mayor chairs the council and prepares and implements council decisions, without a separate chief executive. All this takes place, of course, in the context of German 'local self-government', as a result of which local authorities have significant decision-making autonomy on local issues. Indeed, what the Localism Bill is trying to achieve in the UK has long been the constitutional position in Germany.

Although this the new directly elected mayors system has only recently become the  standard throughout Germany, in practice it has already become taken for granted as the obvious way to govern local councils in all the 16 German Länder (states). This means that Germany has no Whitehall department like CLG nor a Secretary of State in central government responsible for local government, no centrally defined performance indicators, no performance audits - as a matter of fact, there is no proper translation for the concept of 'public accountability' in the German language! (The audit commission of each Land merely undertakes a probity audit, checking whether local government acts in accordance with the law). Public accountability is therefore mainly exercised at local level, specifically through the mechanism of the directly elected mayor. Interestingly, the performance of the various mayoral systems has been quite different across Germany. We believe this gives valuable insights into what might happen in British cities if they move to having directly elected mayors.

The experiences of North-Rhine Westphalia and Baden-Württemberg are very instructive as these states represent two very different ways of operating an electoral model based on a 'directly elected mayor'. Whereas the Baden-Württemberg electoral system is based on a flexible list system, voters in North-Rhine Westphalia cannot change the order of the candidates on the lists nominated by local political parties for council elections. As a result, the council is strongly dominated by party politics, which makes the co-operation with the directly elected mayor difficult. In fact, there are often party coalitions for or against the mayor. Furthermore, the chairs of council committees have the power to define the agenda in agreement with the mayor. This gives council chairs a lot of visibility and makes this post very popular. As a result, the number of council committees is high. The main way for council chairs to demonstrate success is to implement new projects, which means additional expenditure. The fact is that more than one third of local authorities in NorthRhine-Westphalia have accumulated so much debt that they have now lost much of their budget autonomy and have to negotiate major investment expenditures with the audit commission of the Land, as they are at or near the limit of prudential borrowing.

The budget situation of local authorities is Baden-Württemberg is very different. According to the German local government expert and former Director of Governance International, Gerhard Banner, the superior performance of the Baden-Wuerttemberg local government system in terms of sound budget management and efficient public services is due to the strong co-operation between a strong mayor and a strong council which encourages their co-operation even on contentious issues. How can such a co-operative relationship develop?

Gerhard Banner (click here to see his website in German) suggests three key factors:

1. The strong powers of the mayor to chair all committees and the council and to determine the agenda, which means that issues the mayor does not like (or believes cannot be financed) do not even get on the agenda. At the same time, the mayor seeks to build consensus and achieve the agreement of the local council in all important local government matters, including the local budget - indeed, it is not uncommon that local councils in Baden-Württemberg agree the budget unanimously. As we can see from the US, polarised politics is not conducive to balancing budgets!

2. The person-oriented electoral system for mayors and councillors, which makes both mayors and councillors primarily accountable to local citizens and not to the political party which they may represent. Both the mechanism of cumulating votes (up to three votes can be given to one candidate) and mixing votes (votes can be given to from different lists) means that voters are not restricted to the lists presented by political parties or by the other associations formed by independent candidates and other interest groups. Typically, the smaller the local authority, the more use is made of this flexibility by local voters - in smaller local authorities in Germany, some candidates tend to be personally known to the voters. But even in big cities such as the Stuttgart, the capital city Baden-Wuerttemberg, with 600,000 inhabitants, there is cross-list voting in more than 50% of the voting forms. In the recent mayoral election in Nürtingen, voters even added to the voting form the name of a woman who was not standing as a candidate -  Claudia Grau's candidature was promoted by a citizens' movement in a skilful social media campaign (similar to US 'write-in' campaigns) and came very close to beating the incumbent mayor. Councillors are very well aware of the fact that they have been elected due to their personality and not simply because their name is on a party list. In fact, more than 40% of local councillors candidates in Baden-Wuerttemberg stand as Independent. The fact that the election of the mayor (who serves an 8 year term) does not coincide with the election of the local council (with a 5 year term) also helps to reduce the influence of party politics.

3. The highly professional administrative expertise of the mayor who, in many cases, has considerable administrative experience in local government. Indeed, many mayors have occupied leading administrative positions in local government for many years and often have worked closely with other mayors, so they know the business and the legal framework inside out. Clearly, the voters in Baden-Wuerttemberg have matured over time and learnt that it is important to give a lot of weight to the professional qualifications of mayoral candidates.  It also helps that the local government constitution requires mayoral candidates to present themselves at a public hearing, which tends to be very well attended and reported, where they have to answer questions from local citizens - this makes very transparent the experience and professional qualification of the candidates.  

The German debate shows that the issue is not just whether to have directly elected mayors or not. Directly elected mayors are not a panacea for strong local leadership. As the German experience shows, the way the mayor interacts with the local council is one key success factor. Of course, another question is also which influence local people have on local budgets and local decisions. This will be discussed in our next blog.

And if you are a polyglot Gerhard's website has an online mayor check to help voters check the competence of candidates (click here - in German).

In July, Governance International arranged a visit of Martin Huber, CEO of the Salzburg Local Government Association, to LGiU to share practice between the two organisations and to learn from each other. Laura Wilkes, LGiU, organised a very interesting programme at LGiU and also set up a visit to Birmingham City Council. Here is what Martin Huber learnt from the two visits:

My recent visit to London and Birmingham was to look into how English local government is trying to cope with the fiscal crisis. It left a lasting impression on me.

Firstly the scale of the  challenges facing local authorities in the UK is remarkable. The current social and economic problems are far greater than in Austria - and quite a lot tougher than I had presumed. Indeed, the reductions in local council staff in the UK would be unthinkable in Austrian local government. Basically, local authorities in Austria cannot dismiss staff, as people are civil servants for life or have a very strongly protected employment status. Therefore, Austrian local authorities have to cut other costs in order to reduce current expenditure levels. Indeed, seven out of ten local authorities in Austria are currently not able to balance their budgets anymore. I was interested in learning about the kinds of strategies that UK local authorities use in order to achieve efficiency savings and to see if these strategies might be transferable.

For me it was thought-provoking to find out how local authorities are weighing up very different options for delivering various public services in the future: providing the services themselves, externalising them to private or third sector providers, or sharing the provision with someone else, or - where no cost-effective way is found - stopping the service, either completely or  partially. In Birmingham, for example, the City Council has set up a public-private partnership, Service Birmingham, to undertake all its customer contact and to help it transform all its public services - this is a joint venture, partly owned by the City Council and partly by Capita, a large private sector provider of public services, with the profits to be shared by the two partners. 

In Austria, many local authorities have also semi-privatised their utilities and other public services but local authorities still have a long way to go in sharing provision with other local authorities or even other administrative levels. Smaller local authorities have already become active in running shared services with neighbouring local authorities but in big cities an Austrian citizen may find two Citizen Advice Bureaus within 100 metres offering exactly the same services, one run by the municipality and the other one by the county. Stopping a service is also almost impossible when a local authority has to provide a service on behalf of central or Land (regional) government - as is the case for most public services in health and social care. This is why we currently have a very strong political debate about reform of the central-Land-municipality financial redistribution system in Austria.

I believe that we can also learn from the UK approach to commissioning from the voluntary sector. At present, most local authorities in Austria provide funding to voluntary associations on the assumption that a vibrant civil society is important for a strong local democracy. However, as local authorities have to reduce grants to football clubs, local music bands or other local associations there is now a debate on meaningful performance indicators which demonstrate to what degree their activities contribute to socially desirable outcomes. Most progress has already been made in the grants system for improving the quality of life of young people.

What struck me in the UK is that localism is now a hot topic, but the position of central government is still very strong. I am convinced that British central government will sooner or later realise that one of the most important requirements for solving the current economic problems and social conflicts is to strengthen the local level now. I believe this because locally people have real capacity to make things better - and to give them sufficient resources, funding and responsibilities to take on more of the tasks which central government is less able to perform.

Actually, if UK local authorities are still uncertain about what 'localism' means in practice, they need to visit Austria. Here, local councils benefit from local autonomy in budget decisions and public services and are free from interference from central and Land levels of government. This means there is no 'one size fits all' solution but things are done differently in different places - without the widespread criticism that I heard in England about the inequities of the 'postcode lottery'. There is also strong local accountability through a directly elected mayor - most Austrian regions have adopted this model for their municipalities.

Although administrative structures in the UK and Austria are quite different there are similarities in  the current challenges we face. This includes: demographic change (particularly the ageing population in rural areas); loss of confidence in the political establishment at several levels (especially the European level); 'booming growth' in the metropolitan engine of the economy (London in the UK, Vienna in Austria) - these are only a few examples. At the same time, there are also stark differences - for example, social cohesion is a lot stronger in Austria than in the UK. This is partly because the level of unemployment in Austria is much lower in the UK but also because Austria has always had a strong tradition of a welfare state, characterised by a culture of dialogue and partnership working between social partners.

However, with increasing costs of public health and social care, we need to reform the Austrian welfare state model. In this respect the current UK debate on the 'Big Society' and public service co-production is very instructive. So maybe we are all working towards the same vision of a more collaborative state, even though we are coming from different directions: In Austria, we clearly need less government but need to trust citizens more, accepting that they can help themselves. It seems to me that in the UK the state needs to rebuild trust with some of disenfranchised parts of society and invest resources into peer support schemes. Although this is already showing first results, it could be much more effective if it were systematically supported by the state.