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Local Government

Volume 464: debated on Wednesday 10 October 2007

Before I say a few words about this democratic issue, perhaps I could dedicate the debate to one of the finest parliamentary democrats, John Garrett, who sadly passed away just a couple of weeks ago. He was an inspiration to many of us in the House, and I hope that this debate conforms to that long tradition.

The Prime Minister devoted his first White Paper to the governance of Britain, and he devoted his first speech to the House as Prime Minister to the topic of the new democratic settlement. He also promised the

“devolution of powers and responsibilities to local government and accountability of our local police and health services to their communities.”

I know that the Minister—keen to ensure that the Prime Minister’s wishes come to fruition—will take those words very seriously.

On the other side of the argument, Simon Milton, who runs the Local Government Association, has called for a “constitutional convention”, which I presume would grow out of the proposed concordat between local and national Government. What is certain is that any local power worth the name must be the right and property of local government, not of the centre. Local power that is loaned by central Government—by edict or even by parliamentary statute—is a sham, because it can be taken away just as quickly as it can be offered. Only Britain has such a dysfunctional political system that does not recognise local autonomy. Other western democracies take for granted independent local government that is backed by constitutional guarantee and genuine financial autonomy. Professor Michael Genovese, one of the foremost scholars of presidential politics, said recently, quoting Jefferson:

“Only on the basis of little republics will people be able and be trained to effectively participate in a mature democracy.”

Those words are as true today as when they were first coined.

As a result of genuine local democracy, people will benefit from activity and involvement locally, making a serious difference to the quality of life in our local communities. Given the reduction of local government over recent decades to little more than an agent of central Government, this proposal would amount to the largest denationalisation ever undertaken and the restoration to the public of their ownership of their own local government.

The centralisers in British politics have had their day. Whatever success they may or may not have had nationally over the past 40 years, they have delivered neither economic nor social progress locally. I speak not only as an MP but as the chair of a local strategic partnership. We see short-term finance, interference, distortion of local priorities, people spending much of their time bidding or working to protect their jobs, and a plethora of schemes and bodies to circumvent local democratic decision making, which is barely understood by anybody but a new cadre of local professionals.

Successive Governments have occasionally served dainty hors d’oeuvres of localism, but the main course has always been the same—a stodgy, lumpy stew of targets, orders and inspections that have been force-fed to local councils by central Governments of all political complexions. I hope that the concordat will offer us not more amuse-bouches but a completely new menu for local democracy.

Almost every business and every other democratic nation has concluded that the economic complexities in modern society are way beyond the capacities of a command economy. They not only speak the language of decentralisation, devolution, local budget holding, participation, and teamworking, but deliver its promises. The European charter of local self-government was signed by our Government, but its spirit still needs to be given form. Only the United Kingdom, and England in particular, stays stuck in a command-style politics that died with Leonid Brezhnev elsewhere in the world. That style is at its starkest and most wasteful in the central control of local government. It robs communities and individuals of the ability and ambition to run their own lives, and it has atrophied political parties of all colours. We know that that has happened throughout the United Kingdom, whatever else we pretend,

Free local democracy will provide more diversity and independence in our political system, in turn leading to more creativity, sensitivity and innovation throughout our society and economy. The mere removal of some of the worst excesses of centralism, such as ending the capping of local spending, democratising quangos, releasing capital receipts and adding a drizzle of “localist” jargon, has not been enough. We must put local independence beyond the reach of central Government, and admit that the gentleman in Whitehall—even if it is a Labour gentleman and a very good friend of mine—does not know best. Petty interference from the centre must be denied any legal or financial basis, and local government must be given unchallengeable legitimacy. That must be done in two ways.

Ambition must be at the heart of the concordat that the Government are to negotiate with local government. It should be able to slot easily into its rightful place in a written constitution, when that day comes, and the vision must be powered by the Prime Minister above all. Local government must be a part of the vision that he has outlined for a new democracy. It must be driven by local government leadership, which needs to get off its knees and argue for two fundamental principles of its own freedom.

First, to guarantee local authorities’ independence, they must be created in law as independent and sovereign entities. They would then be able to undertake, as of right, all the duties and functions for which they are elected locally. That power should be further guaranteed by a legally enforceable definition of subsidiarity in the European constitution. I shall not veer into the debate about the constitution, but it would be nice to have one, and, if we had one, to define subsidiarity so that it could defend British local government in the same way that it seeks to defend it in the other European Union nation states.

In that new settlement, local authorities would be able to do anything not prohibited by law, turning on its head the present injunction that prohibits them from doing anything unless it is expressly allowed by law. Like all public bodies, local government would have to perform its duties within a legitimate national inspection regime, and without infringing the human rights that would be found in a modern and comprehensive British Bill of Rights—another part of Britain’s governance jigsaw that we hope will be proposed in legislative form in the not-too-distant future. Local government could therefore be held to account by any citizen for any arbitrary breach of those rights.

The pull of centralism, however, is so great that even a Government who had created independent local government, as I hope our newly refreshed Government will, might succumb to the temptation to meddle unless such local rights were put constitutionally out of bounds. That could be achieved initially by an amendment to the Parliament Act 1911 that would allow the second Chamber to veto legislation that threatened the agreed rights of local government. In the longer term, such a fundamental bedrock of our democracy needs to be guaranteed by clauses in a written constitution for the United Kingdom. The 10th amendment of the American constitution provides a very helpful starting point.

I entirely endorse the hon. Gentleman’s analysis, but until we obtain the changes that he proposes, we must describe what the Government call “local government” as it really is. It is the agent of central Government, given that it has very little latitude whatever.

Rather than be critical of any Government, I would seek all-party support for where we go from here. If there is to be constitutional change, it will need cross-party agreement if it is to stick and not be unpicked by parliamentary statute. I know that the hon. Gentleman supports the essence of what I have been saying.

I turn to what must be the second fundamental principle. Central to the concordat is that, while we may return ownership of local government to local people, we must also restore control to them. Political independence for councils would mean nothing without financial independence. The bulk of local authority spending—more than half—is now provided by central Government and only a fraction, one eighth, is raised locally by the council tax. That dependency must end. Central Government must be removed from the financial equation and localism given monetary teeth. To do so, a radical new settlement on taxation needs to be implemented.

At present, income tax is first collected from local taxpayers by Her Majesty’s Revenue and Customs and then distributed back to localities via central Government. That essentially technical function of distribution has become politicised and arbitrary because of decades of governmental manipulation and the desire to impose central priorities and targets. In future, the same level of income tax revenue should still be collected by the Revenue, leaving the taxpayer and tax rates completely unaffected financially. However, the precise amount that currently goes to local government should be ring-fenced and go directly to it, not via the centre.

Central Government spending on local services in England and Wales is £54.6 billion and the income tax take is £109 billion, so in effect about 50 per cent. of the income tax take would become local, with 50 per cent. going to the Chancellor, as it does now. That redistribution could take place via the Local Government Association or an independent commission, legally separate and dislocated from Whitehall. Yes, what we did for the Bank of England we must do for local government. Such a body would receive local government’s slice of income tax directly from HMRC, and be charged with distributing it to councils and equalising it on exactly the same basis as the Department responsible for local government currently does.

There is no reason why most of such a commission’s members should not be elected councillors from all parties. Local government’s national bodies have shown themselves to be mature and confident in working cross-party and co-operating among themselves, and there is no reason why they could not perform the task. The amounts of income tax going to national and local expenditure would then be clearly identified on payslips as national income tax and local income tax, which would be a massive aid to accountability and to individuals in knowing the reality of what they pay for local services. It would be seen clearly and visibly, and therefore aid accountability.

I agree wholeheartedly with the argument that my hon. Friend is putting forward. On finance, is he saying that there should be no role for central Government in determining the distribution formula for different local authorities? That seems to me to be one of the essential political judgments that should remain the responsibility of central Government. I accept completely his argument about the need for greater financial autonomy at a local level.

I think that we—people from the localities—are perfectly capable of making such decisions. I do not need to abrogate that decision to a civil servant in the Department for Communities and Local Government. I am quite content that a sensible formula could be arrived at by ourselves, the Local Government Association and the people who wish this to succeed, rather than having nanny decide the formula for us. I know that that is not what my hon. Friend is saying, but if we are to mature and grow we need to look after ourselves and to take responsibility. That, in itself, can be quite a frightening task.

Central Government would still have the ability to intervene, as other federal Governments do in western democracies, for specific, time-limited purposes such as helping out with urban regeneration for five years—moving in and out, as often occurs in other democracies that have the maturity to run their local and national affairs without that involving a contradiction. It is only in the UK—the last country in the empire—that we feel that everybody has to be told what to do from the centre.

I hope that local councils, assured that the funding of most of their expenditure was secure, would then be free to raise the remaining part of their income from a menu of revenue-raising powers ranging from property taxes to sales taxes. Decisions on local tax and rates could be taken by local representatives and perhaps even endorsed in local referendums. My guess is that local authorities would mostly rely for their income on the local tax that I have described, a returned business rate and a property tax to meet their expenditures. Of course, they would continue to receive rental income from their own housing, which, incidentally, might well have a dramatic revival if freed from central Government control.

In a mature democracy, local authorities would be confident and competent enough to raise and spend what they decided was appropriate, always needing to balance service delivery and revenue raising with the electoral consequences of no taxation without explanation. Citizens, knowing what they paid and why, and holding their local representatives to account, would constitute a far firmer discipline and stronger bulwark against central interference than any statute that we might want to pass in this place. They would own their local government once again.

Local authorities already have a record of financial expertise and economic management that bears comparison with a central Government who so often wish to lecture them. However, as a constitutional safeguard, local authorities would be obliged to operate a balanced budget provision—the self-discipline operated by most American state governments. Annual income would have to match annual spending, and local borrowing, provided that its costs were met from annual income, need not be controlled by Whitehall or appear in the old public sector borrowing requirement, which we now call the public sector net cash requirement.

Throwing away the crutch of central Government will be frightening as well as exciting. There will be no one else to blame any more. However, devoted public service has always characterised local councillors of all parties, and they will respond to their liberty. Let local people decide on their spending and their services, on their electoral system or the use of direct democracy.

Returning real decision-making power to local areas would also give a much-needed stimulus to local political parties. Many individuals—we all know them—have opted out of local politics. They do not want to be rubber-stamping the decisions of local and regional bureaucrats. We have lost a lot of good people that way. They would be drawn back into public service, and once again it would really matter who got elected locally and how well they were politically prepared and technically trained to handle the onerous local duties of independent local government. We would re-create that invaluable network of citizen politicians of all parties, in touch with their communities and close to their constituents, empowered and empowering their local areas.

An era is ending. The current agency relationship between the centre and the localities cannot be sustained. Now is the time for some bold leadership and to let go—to release and return power to our local communities. I hope that the Minister will make a bold response and that it will be matched by a vision from leaders in local government, who have so far by and large shown themselves to be happy just to quibble over the scraps, rather than fight for their freedom. They should seize the opportunity that the concordat presents for independence and autonomy and remake our local government, making it fit for the next 100 years.

I congratulate my hon. Friend the Member for Nottingham, North (Mr. Allen) on securing this worthwhile and interesting debate. I shall attempt to respond not with mechanistic, localist jargon, or indeed by invoking the spirit of Leonid Brezhnev, but I hope more in the spirit of glasnost and perestroika. The debate is about the constitutional status of local government, as my hon. Friend said. I also congratulate and thank my hon. Friend the Member for Bury, North (Mr. Chaytor) for his contribution, with which I agree, and the hon. Member for St. Ives (Andrew George) for taking part.

While I agree with much of what my hon. Friend the Member for Nottingham, North said, I must begin by making two contentions. First, it is the freedom and flexibility on the ground and willingness between partners to co-operate that deliver the best outcomes. I know that we agree on that. The issue is not the constitutional status of those partners, but what happens on the ground. Secondly, the Government have taken successive and radical steps—recently in particular, but also in the past decade—to deliver more freedom and much more flexibility, and we are committed to doing more. However, my hon. Friend’s comments concern me, because they mean that there are people in local government who are not taking best advantage of some of the opportunities available to them.

My hon. Friend challenges local leaders to display vision and leadership. I suggest that the freedom and flexibility that the Government provide to local leaders offers them that opportunity. Their challenge is to work together with local partners, including local strategic partnerships—my hon. Friend is the only MP I know of who chairs his own local strategic partnership, One Nottingham—to achieve the best outcomes for local people.

The Government are committed to localism and devolution. Successive policies and legislation have returned power to local authorities and strengthened their roles as local leaders, although that is not to say that there is not still much more to do. The last election manifesto contained the commitment that the Government would

“build upon our unprecedented programme of constitutional reform embedding a culture of devolved government at the centre and self-government in our communities.”

The provisions of the local government White Paper and the Local Government and Public Involvement in Health Bill take that further and represent a new settlement between local and central Government—a transfer of power from Whitehall to the town hall, alongside devolution, and right to the doorstep.

So where are we now? We face a big opportunity and, at the same time, a big challenge. It is time to turn devolution into a reality in our local communities and show what local democracy can achieve with all the tools that we are trying to provide to local government. The new local area agreements coming in next year take devolution a step further. They give local government greater space to deliver for communities and ensure that local communities have a bigger say in influencing the future of where they live. They put a premium on all local partners working together to deliver better services and deliver a big cut in red tape. They also provide local authorities with greater freedom to direct funding towards local priorities and will lead to real debate between Whitehall, local authorities and communities about the future of their areas.

My hon. Friend talked about the hand of Whitehall and the burdens that it places on local government, but the new LAAs will reduce the number of indicators from about 1,200 to about 200, of which only about 35 will be answerable to central Government. We have to get the balance right in this House. I have taken part in several debates both wearing this hat and as an education Minister, and recall one, in particular, when the Education and Inspections Bill was going through Parliament, in which I was lobbied hard by Members about the need to enforce on local government the statutory need for a youth service. So there are bare minimum standards out there, and it is important that we support local government in retaining them for the benefit of our communities.

LAAs will ensure that public services meet people’s needs. As they bring different people together, they have the potential to be the best solution to some of the complex, cross-cutting problems that we face in our communities.

I apologise for perhaps taking a little too long with my remarks, but I am keen to hear what the Minister has to say about the concordat and how it might help to move us forward.

I shall come to the concordat in the next five minutes. My hon. Friend referred to it several times, and it is important, but a lot of work on it is ongoing. I hope to be able to give him more detail on it as the autumn progresses. I shall be keen to correspond with him in detail on the progress that we are making, because he is right that it is important in relation to balance and the day-to-day work between central and local government and our councillors.

My hon. Friend describes an inherent paradox in our plans between centralism and devolution. He argues that agreeing a single set of indicators across government will lead to less flexibility, not more. I do not agree. LAAs are not a centralising measure; indeed, they are quite the opposite. They are a genuine central/local negotiation that allows local leaders to have direction over funding. The outcome is a deal that hands over responsibility and frees funding for local government and local partners to take the actions that they decide are best for their areas. The new agreements give room for local authorities and their partners to focus on the issues that local partners think are most important.

My hon. Friend also mentioned leadership. The success of devolution and the new localism depends, in part, on strong leadership in local government—leadership that recognises and tackles local priorities, forms active partnerships and gives local communities and local people a bigger say in what happens in their areas. As strategic leaders for their areas, it is the responsibility of local authorities to ensure the social, environmental and economic well-being of their communities. The role of a strategic leader is not to deliver everything oneself, but to use one’s influence and democratic mandate to make sure that the services that people need and the priorities for the area are tackled.

Last week, the Department for Communities and Local Government published a report highlighting the link between stable and powerful political leadership and customer satisfaction with services. As my colleague the Minister for Local Government said in welcoming the report:

“This study shows that giving councils a more visible and effective leadership role has led to faster decision making, better services and improved public satisfaction.”

Having stronger local leadership will allow local government to invoke many of the powers that make it more responsive to the local communities that my hon. Friend talks about.

In the context of leadership, will the Minister admit into the talks about the concordat between local and national Government, if the LGA leadership wants it, a discussion about the concept of constitutionally independent local government? Has anything been ruled out of those discussions?

I do not want the concordat to be a dry paper, and I am sure that we need to have an in-depth and worthwhile discussion on it. However, I disagree with the principle of having something that is constitutionally independent of Government rather than statutorily independent, because, as I said at the outset, this issue is about delivery on the ground. That is what matters most to local people.

In the time available, I shall respond to some of the comments that have been made about funding, particularly on a point made by my hon. Friend the Member for Bury, North. We must not leave some of the very important decisions about Government funding to a quango. We must ultimately accept, as a Government and as Ministers, when we have formulae for local government, that we are accountable. We in central Government are accountable for those decisions and that should continue to be the case, although we must also respect local decisions and accept that people must decide locally how best to spend those resources. They might have innovative ideas for the future about how best to raise more resources.

I have not been able to cover as many points as I would have liked to in the time available, so I will write to my hon. Friend, if that is agreeable to him. I hope to keep the dialogue between us ongoing as we move towards a concordat.

Sitting suspended until half-past Two o’clock.