Local government minister Nick Raynsford is preparing the ground for the abolition of counties
'Looking into the longer term, there is a very big issue here because it is clear that in a number of counties the presence of two tiers of local government has prevented a more holistic approach than would have been possible if there had been unitaries.'
He is adamant that when three northern regions vote on whether to establish directly elected regional assemblies with unitary local government, any region voting 'no' will not have unitary councils imposed.
But he says he is heartened by the positive response to the unitary idea: 'The debate in the north over the last year in the course of the regional agenda has shown a dramatic change in mood about the benefits of establishing unitaries.
'When we began this regional referendum process, a lot of people were very negative and said unitary reorganisation was unnecessary. I am glad people
have seen the potential benefits of unitary local government, even if they still have reservations about
our regional plans.
'In the longer term, there will inevitably be a need to look at whether there are benefits of moving towards unitary government on a wider scale.'
Of the 10-year strategy, he says: 'It is one of the issues that obviously comes into play. In the past year, such as through local public service agreements, we've seen districts and counties working closer together, for example with districts wanting to get the benefits of economies of scale on e-government or procurement initiatives. That has tended to raise the question about whether there is a need for a more fundamental reorganisation in order to achieve the benefits of both economies of scale and to deliver services in a more holistic way.'
The review of local government structure led by Sir John Banham in the 1990s was badly chaired, badly managed and in some areas led to highly personal rows between councillors and officers in opposing tiers. It was no surprise, therefore, that the incoming Labour government in 1997 had no appetite to revisit the structure of shire councils.
'My colleagues in government are much more cautious [than me] about change because many of them are scarred by the Banham review.'
But the combination of a more effective review committee, a better process and a more mature approach from councils has shown ministers that local government reorganisation can work: 'I have been pleasantly surprised at the changing tone of the debate about unitary government. Discussion in the north has generally been much more constructive and much less acrimonious than during the Banham era, and that is a thoroughly good thing. The experience of the last year has been reassuring.'
Mr Raynsford is keen to portray this unitary impetus as coming from local, not central, government.
'I think the voice is coming more from local government. Councils are aware that if they are to build effective partnerships with the private sector, the health service, the police and so on, they need to operate on a scale that requires resources that are not available to many small district councils. That is an important consideration and I hear that coming from the local government community.'
Relaxed and animated in an armchair at the ODPM's outpost in Whitehall, Mr Raynsford says his initiative to develop a 10-year plan supported across government to revitalise local democracy has prime minister Tony Blair's full backing: 'This initiative would not be happening if it was not supported by the prime minister, the chancellor and obviously the deputy prime minister. We are discussing around government the way in which central and local government can work more effectively together.'
It is well known that relations between councils and some government departments, notably the Department of Health and the Department for Education & Skills, have often been poor. But he says they are generally supporting his objective of finding an agreed policy.
'The overall reaction from departments is very positive because people recognise there must be an approach which brings government together in a coherent way.
'Inevitably there are going to be different perspectives and different points of view, and part of our discussions are designed to address the concerns. Some colleagues in government are nervous about the devolution of more power to local government, and are keeping a close watch on what's happening in their particular area of responsibility. I understand that, because we are a small island, the electorate does turn to central government when things go wrong, and it is unrealistic to expect central government to say we are going to leave it all to councils.
'What we want is a mature relationship where local government realises that central government has an interest and must be involved, but where central government equally recognises local authorities
must have freedom to shape responses to needs in their area. There is a common interest in getting clarity about the right relationship between central and local government, rather than the standoff which has often occurred in the past.'
He acknowledges the chasm in performance between the best and worst councillors, and describes raising the standard of leadership as one of the key themes he is pursuing. 'How do we get the leaders that will ensure the success of local government - and that is both political and officer leadership. As far as councillors are concerned, we need to make the job an attractive one that will bring people with a range of talents from diverse backgrounds wanting to serve and being confident that they can make an impact, rather than simply being shoehorned in because the party needs a candidate.'
An issue Labour has been grappling with from the days of its policy document during the last years in opposition - Renewing democracy, rebuilding communities - is the role of councils in influencing and scrutinising other public services. Mr Raynsford tacitly acknowledges there have been many problems with the much-vaunted scrutiny role. In health, for example, while some have been using the opportunity to develop a joint understanding, less progressive councils have simply taken the opportunity to put local health officials through two or three hours of pointless humiliation.
'We are in a transitional phase with scrutiny. This has been a period of development. It is fair to say it has worked better in some areas than others, and we have been learning from the process.'
If the ongoing balance of funding review fails to address the flaws in the funding system, all Mr Raynsford's plans will be jeopardised. There have been signs of an unwillingness to tackle some of the more contentious issues, such as the drop in business contributions to council tax from 28% to 22%, with local people being left to pick up the difference. But he is keen to dispel the idea that his review is shying away from the biggest difficulties: 'One of the issues which has to be addressed is the shift since the introduction of the council tax in the proportion paid by business and citizens. In our report, we are addressing these issues.'
The leaked Treasury report by Sir Peter Gershon on efficiency highlighted the savings to be gained from reducing the number and complexity of funding streams and giving more spending discretion. Mr Raynsford says 'we are absolutely committed to that', but adds: 'There is an enormous amount of work involved in getting from the initial objective to a workable solution.'
At least in the early days some ring-fencing of projects, such as Sure Start for young mothers and children, is desirable 'to make those services possible', he argues.
Although devolution to neighbourhood bodies is not a theme which Mr Raynsford pursues with the same vigour as other senior Labour figures, such as former health secretary Alan Milburn, he sees it as part of local government's future. 'There is an important debate opening up about devolution below the council to neighbourhood bodies or parishes to ensure they engage with their communities,' he says.
'Local authorities have a central and crucial role because they are the only organisation elected to represent the whole community, but it does not entitle them to say that no other form of election or representation is valid. Some councils have made the mistake of ignoring the benefits of engaging with other organisations which also have an important role to play. Local government does not have a monopoly.'