Orders of the Day — Local Government Expenditure

– in the House of Commons at 4:33 am on 9th July 1992.

Alert me about debates like this

Photo of David Wilshire David Wilshire , Spelthorne 4:33 am, 9th July 1992

I am sure that you are well aware, Mr. Deputy Speaker, that Members who seek debates at this hour are probably either mad or feel strongly about a particular subject. In the next hour or so, I suspect that you will have the chance to decide which state of mind applies to me.

It seems that the subject needs an airing for the following reasons. Over the years, our debates about local government finance have led to repetitive legislation and repetitive failure. Every piece of legislation has resulted in continued lack of control. That has led to more legislation. The circle goes round and round.

There are appalling relations between local government and central Government and a lack of affection for local government by the public. This adds up to a shaky future for local government. That is why the subject needs an airing, but why does it need one at 4.30 am, shortly before Parliament rises for the summer recess? [Interruption.] There is a good answer to why 4.30 am—my luck ran out. If I had drawn a reasonable hour, others would have been mocked for turning up at 4.30 am and I could have gone to bed and slept soundly.

Whether at 4.30, 5.30 or 6.30 am, the issue certainly needs raising before the House rises for the summer recess. The Local Government Commission is about to embark on its review of structure and services and the Government are still examining accountability and local democracy. If those matters are being considered, finance must also be considered. They go together. One reason for the failure over the years to get local government reform right is that one minute we consider finance and the next we consider structure. Whether it is 4.30 am or not, there is a real urgency to make the point that finance needs to be considered alongside those other matters.

There may be a temptation for people to say, "Ah yes, but we have done that. We are replacing the community charge with the council tax." However, the review of the community charge and the introduction of the council tax do not constitute a review of local government finance, just a review of one bit—that is, how to raise income. My argument is about the totality of local government finance, not simply the council tax. The Government need to go further than that.

If the totality of finance is not reviewed, the work of the Local Government Commission will ultimately fail and the future of local government will stay in doubt. If it is not done in the right order, finance will dominate. If all that we do is change to the council tax and say that that is the review of finance and all else follows from it, local government will continue to be dominated by finance as an end in itself, rather than the means that it should be.

If my argument is that the totality of finance needs reviewing now, why have I applied to have a debate on expenditure control in the early hours of the morning? It is because, in all the issues involved in local government finance, expenditure control is the key political issue which must be tackled first in any complete review of local government finance. Finance is a finite resource; there is never sufficient money to go round, irrespective of the political ideology brought to bear on the problem. Yet politicians of all ideologies—my party is as bad as the others—find it desperately easy to pretend that finance is an infinite commodity. The result is that deficits, borrowings and so on are used to postpone the day of reckoning. Sooner or later, a total lack of realism develops, which leads to absurdities such as the lease and rent back of parking meters, and the whole issue of local government finance falls into further disrepute.

Expenditure control is the key priority and action is urgently needed. Expenditure must be kept within the finances available, whether we like that or not. Until that is achieved, all other financial issues—including whether we have a council tax, rates, or whatever—are red herrings. However—this is the rub—in this day and age the public find it intolerable that all their needs cannot be met at once, which leads to politicians finding it almost impossible to grapple with the problems of expenditure control. That makes expenditure control a high-risk topic, but that is inevitable. Those who ask the Government to face up to it usually end up being unpopular, but I am resigned to that.

To obtain effective expenditure control in local government, we must first control total expenditure, and that is highly controversial. Secondly, we must control properly the allocation of all the funds involved; that, too, is highly controversial. Thirdly, we must control and maximise the value obtained from the money that we spend. That should not be so controversial, but at the moment people seem to focus on that; yet it is mainly a managerial issue. It has become controversial because politicians have homed in on it and interfered in what is primarily a management matter, ducking the first two issues.

Perhaps I may digress slightly to say how we should not seek to achieve expenditure control, and that is by fretting over income. Looking back through Hansard, one sees recent attempts at that. There were debates about whether rates are the right way in which to obtain effective control, and it will be seen that that led to the introduction of the community charge. One of the great arguments was that that would make it easier to control things because it would result in greater accountability. That was discovered not to work, so the argument was deployed that the council tax would be the right way forward.

All those debates are about income and the methods of income control which have come on the back of that. First, we had rate capping—the capping of income. That did not work. We then had charge capping—the capping of income. The history of the whole subject proves that the approach of trying to control expenditure via income is doomed to failure. Any attempt to control expenditure via income leads to ever more draconian and ever more silly attempts at expenditure control. That route must be abandoned. The bad news for the Government is that capping will not work. The only way to control local government expenditure effectively is by controlling expenditure itself. That is what politicians hate, but unfortunately they have no choice but to do it.

We should be clear about the Government's role in the process of expenditure control in local government. That, too, is a highly controversial matter. If there were others silly enough to be here at this time of the morning, they would be jumping up and down saying that any discussion of the Government's role is all about centralisation and the removal of local democracy. That point is inevitably made, but it is nonsense. That, too, is a red herring.

There are two areas of expenditure control where the Government have a primary responsiblity about which we should be clear. The first is that, whether we like it or not, the Government have an on-going concern in all expenditure, simply because all expenditure affects the state of the economy, which means that the Government are bound to be involved. As all expenditure affects the state of the economy, that means that Government intervention in such matters is inevitable.

Again, if there were people here on the Conservative side they would be jumping up and down saying that we believe in non-intervention, but in a national economy even non-intervention has an effect on the economy. Therefore, non-intervention amounts to intervention. That particular circle will go round and round so that we end up concluding that, whether we like it or not, the Government have a role in all expenditure. We cannot get away from that. No amount of flag waving about local democracy can change that.

The second reason why the Government have a role to play in local government expenditure control is the good old principle of he who pays the piper calls the tune. Central Government currently provide some 86 per cent. of local government's money, and it follows as day follows night that the provider of such a large proportion of income will, quite properly, want an enormous say in how the money is spent. For better or worse, central Government are involved.

What should we do to control local government expenditure? I believe that there arc three requirements. First, we must be absolutely clear about the source of all the finance with which we are dealing. Secondly, we must be absolutely clear about the purpose of all expenditure. Thirdly, we must know on whose behalf the expenditure is taking place; we must be absolutely clear about that, too.

The first requirement is fundamental, for a simple reason. Each source of money requires its own method of control. Central Government, for instance, can best control their own expenditure by simply saying no. In the case of spending by private citizens, however, it is not sensible for the Government to say no; the best way of controlling private expenditure is the imposition of expenditure taxation.

One of the worst examples of categorisation by source of money is the category that we call local government expenditure—the subject of this debate. That is perhaps the best example of how not to do things. What we call local government expenditure has not one but two sources. The first is local money; the second is central Government money. The local source can be further subdivided. Local money comes in the form of local taxation, fees, charges, interest on investments, borrowing, and so forth. Each of those many sources raises different issues in regard to control, and each is best controlled in a different way. In reality, local government expenditure—the label that we apply to all that money—is a pool of funds from a number of different sources, rather than a category in itself. That must be put right.

The second requirement for the proper control of expenditure is the clarification of its purpose. Currently, huge sums are allocated in a very general way, and apportioned to a particular purpose later. The result of that process is entirely predictable: it is acrimony. The recipient of the money does with it what he thinks right; the provider, who has not got what he expected, objects —and rows break out. Hansard and the newspapers are littered with examples.

Why are we in this mess? There are two reasons. First, central Government, the provider of so much of the money, are in fact a multi-agency conglomerate with lots of different Ministries, all making their own allocations. Secondly, local government is a mini-government in its own right, and there are lots of different people deciding what to do with the money when they receive it. Each Ministry, and each council, determines its own priorities, and switches resources around as it thinks fit. Friction and muddle are inevitable in that process, and things are made worse by using the wrong approaches to try to solve that muddle. At present, attempts are made to control expenditure via the type of allocation rather than via the purpose of the expenditure.

For example, general allocations in local government are worked out using wondrous formulae. Allocations against bids, such as those for the housing improvement programme, are worked out in a general way. Allocations against bids for lumps of money or general allocations via grants are both incredibly easy to reallocate. If money is handed out in that way, we should not be surprised if it is not used for the purpose for which it was intended.

The other method is agency allocation. Motorway repair contracts are a good example of that. If money is allocated to repair the M3, it is incredibly difficult for the person who receives it to use it for any other purpose. It seems crystal clear, therefore, that we should allocate all money against specific purposes rather than shovelling it out in large sacks.

The third requirement that central Government must take on board is the need to clarify whether expenditure is being made to purchase a service or to provide a service. Those are fundamentally different functions. The test is to ask on whose behalf the expenditure is being made. Taking the fire service as an example, we must ask whether its expenditure is carried out on behalf of the Home Office or of local government. Confusion may arise, and some people may say that the money is spent on behalf of local government while others say that it is on behalf of the Home Office—but that is because many people fail to think through what local government really amounts to, and what it really does when it provides a specific service. Sometimes—as, I suggest, is true with the fire service— local government acts simply as a service delivery agent. The Home Office provides more than 85 per cent. of the money for the fire service and also sets the standard, so the Home Office is purchasing a service.

On the other hand, when local government acts as a mini-government in its own right, it is free to decide what to do. It cannot be acting in that capacity with the fire service, because it is not free to abandon its fire service or to lower the standards. One has to think that conclusion through. If we give local authorities large amounts of general money and leave them to get on with it, they will always act as mini-governments.

For example, the standard spending assessment for my county of Surrey says that the authority needs to spend a certain amount on social services, so it is given an allocation of money to spent that amount. But Surrey spends £8 million less than its allocation on social services, with the result that my mailbag is full of complaints about the poor standards of social services—yet the county still receives that money.

However, if we look on the process as one of purchasing services from local government, an authority is pinned down to acting as a contractor, not as a mini-government. Then one can control the expenditure if one provides the money, and can specify via a contract the standards that, as the provider of that money, one expects. Thus, effective expenditure control requires us to be absolutely clear when local government is acting as a contractor and when it is acting in its own right. That confusion must be sorted out.

How can central Government improve their role in the control of local government expenditure? The thought process starts with a paradox: the current arrangements appear to be designed to weaken rather than to strengthen expenditure control. The source categories are wrong and there are huge, generalised allocations—both marvellous ways of weakening control rather than strengthening it. If central Government want to control local government finance effectively, they must reorganise provision, allocate all moneys to specific services, end the use of general formulae, and specify the basis on which funds are transferred to local government.

The first step is to reorganise the provision of finance. I said that central Government is a multi-agency arrangement. The process is that central Government gather in most of their money via one Ministry—the Treasury. Many separate Ministries then decide expen-diture allocations, and the resources are then handed over to the Department of the Environment to pass on to local government.

That is a wondrously effective recipe for ineffective control. All sorts of different people have a finger in the pie. I argue that every Ministry should pass on its own funds direct to those whom it chooses to provide services. That is bad news for my hon. Friend the Minister, and I am sorry—but the Department of the Environment should be involved in handing on only money for which it is responsible, rather than in passing on money via a general allocation in respect of services in which the Home Office or the Department of Education, for example, is involved. That fundamental change must be made as quickly as possible.

The second step is for central Government to allocate all their funds to specific services and to specify and clarify the categories of service to which moneys are being allocated. The problem is that we do not get those categories right either. The general formula used now includes many categories which do not represent whole services. If money is allocated to such categories, attempts to exercise control become fragmented—with the result that the public's needs are not met, services are duplicated, and there is a great deal of waste. That is a recipe for disaster.

If service categories are too big, other problems arise. Education provides a classic example. As a label for local government purposes, it covers a wide range of provision —including nursery services, primary schools, secondary schools, school lunches, clothing grants, and special help for the poor and handicapped. They are all separate services, and they each raise different issues of service provision and control. If progress is to be made, they all require a different approach and must not be lumped together.

Education is seen as an all-embracing term, but for a local government councillor, it does not encompass private schools or universities. Muddle comes out of that. Large categories also mean different things to different people.

When councillors meet a Minister and say, "We want to talk about education," they mean schools, lunches, clothing grants, and special schools. However, the Minister in the Department of Education to whom they were speaking would not mean the same thing when he or she replied. The Minister would mean schools and universities, but the councillors would not be talking about universities. While listening to the councillors saying that it was very difficult to help the handicapped, the Minister would have no right to discuss that issue. Councillors would mean one set of services and the Minister would mean something else. That would be a dialogue between two people using different languages. Using too large categories can produce that kind of muddle and that must be sorted out.

The Government must move away from using formulas which are the consequence of having too large categories and simply shovelling out large amounts of money. Because they do not work, they become ever more complex and silly. The best example of that at the moment is the fact that the allocations of all councils in England have been affected in the current year by the number of tourists in London. That cannot be sensible or a recipe for effective service delivery or financial control.

The Government must also specify the basis on which they are handing over the money. By that I mean that they have three choices: they can tell local government that they are handing the money over as a grant; they can tell local government that they are lending the money and that they want it back at some stage in the future; or they can say that they are paying local government to do something for them.

If one gives someone a grant or loan, one puts a huge distance between oneself and the person who receives the grant or loan. If that distance is established, it is almost impossible to control what happens after one has made the grant. If one makes a payment for something, however, one maintains that link. If one focuses on making payments and treating local government as a service delivery contractor, one will have maximum control of expenditure and maximum input into the standards received.

For example, if one makes a general grant to a local education authority, one has very little control over what happens in that LEA, but if one makes a payment to a grant-maintained school, one has a great deal of say in what happens in that school.

It follows that deciding who purchases each service is at the heart of getting effective expenditure control. However, local government seems to be obsessed with what it controls, even though it provides only 15 per cent. of the finance. In other words, it does not control what it thinks it controls, but only a very small part of it. That thought process must end. I believe that in future local government should control only what it actually purchases with its own money. It should not control what it purchases on behalf of central Government using central Government money. That amounts to a fundamental change in the role of local government.

We must be careful when we ask ourselves who should purchase what. My argument is that those who decide what needs will be met, and what standards should be achieved, should be the people who purchase the service. If we break that link and the person doing the purchasing does not decide the needs or standards, there will be an endless dispute about the adequacy of money, about value for money and about standards. That is exactly what we have now.

Although that approach is radical, I believe that it is the only way to achieve what we seek. Turning every central Government Ministry into the purchaser of its own services would enable each Ministry to decide who to use. Of course, the Ministries will want to continue to use local government when local government seems to he the best way to deliver the service, but they will have a choice. That route will maximise effectiveness and improve value for money, because there will he a much closer specification of what is expected from the allocation of money than there is at present.

There will be some who say that such an argument appears to preclude any local input. That is the centralising argument which will crop up from time to time. Nevertheless, there is a role for local government and for local governing bodies, and that must be strengthened; however, I would digress if I went down that track.

Those proposals add up to a radical overhaul of local government finance. Central Government must assume responsibility for their own expenditure. Each Ministry must do its own purchasing. Local government, when acting as a service delivery agent, must compete for the work that it wants to carry out. Each service delivery organisation, be it local government or the voluntary sector, must have it own governing body. The impact of that for local government is clearly profound. Some say that it will take away power, but the impact on local government will he to free local government from its preoccupation with the limited range of services that it currently provides.

Local government will be free to play a monitoring role in all local services, whether or not it provides them, which is a great enhancement of the role of local government and would give it scope to have an input into meeting all local needs. Even if local government does not provide the service, it will have a role in saying how such needs should be met.

The result for local government is not bad news, but good news. It will make local government focus on the needs of the people, which is what it should be doing. It will make councillors' work much more rewarding and much more respected by the public. It will also give central Government Ministries far better control over their own standards. It will mean that central Government will be seen for what they are—the source of help when a service is provided and when central Government pay for it. Councils will be free to spend their own funds in any way they wish. For the money that they raise locally, it will be much easier for them to set their own priorities. Local taxation will be drastically cut and, with a bit of luck and a following wind, there will be far fewer debates on local taxation. The real bottom line of that train of thought is that, for the first time in a very long time, we shall achieve expenditure control in local government.

The benefits of such a radical rethink are huge. We shall have an increased diversity of services, greater sensitivity to needs, better management, increased competition, reduced centralisation, and greater accountability to the public. We shall actually have stronger local democracy, because it will be more respected, and there will be more scope for citizens to do their own thing and to take part. That list of benefits was to be found in every party manifesto at the previous general election, so my points should not upset any hon. Members, whether they support my party or somebody else's party. That radical rethink leads to what all manifestos want. Therefore, I not only urge my hon. Friend the Minister to go down that track but hope that Labour Members and others will encourage him.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch 5:08 am, 9th July 1992

I am grateful to my hon. Friend the Member for Spelthorne (Mr. Wilshire) for the lucid way in which he made his case. At the very least, he has ensured that, in years to come, if I am asked whether I have lost sleep over control of local authority finance, I can answer in the affirmative.

My hon. Friend and I go back a number of years. On the Environment Select Committee, we somehow contrived not to discuss that issue, but we have obviously enjoyed the experience today. I have a certain sense of déjà vu coming to another debate about the control of local government expenditure so soon after we have completed the capping round for 1992–93. My hon. Friend has, however, taken this opportunity to raise a number of significant issues about the way forward.

I am, of course, happy to set out why we have attached and will continue to attach great importance to the level of local government spending. Although there is a good deal of common ground between us, I feel that the approach which he advocated, which would involve a much greater role for central Government as the purchaser of services that are currently the responsibility of local Government, has distinctively different emphases from the vision which my right hon. and learned Friend the Secretary of State recently expressed as to how we see the future of local government.

The starting point of expenditure control must be that Governments are responsible for the overall management of the economy. I know that I am at one with my hon. Friend on that point. The Government are concerned with levels of borrowing, spending and taxation at national and local level. There is nothing new in that. Parliament has always exercised control over the financing of local government as regards the nature of local government's sources of revenue and the extent to which local expenditure is supported by central Government.

My right hon. Friend the Member for Henley (Mr. Heseltine) made this point to the House with his accustomed eloquence on 5 December 1990 when he said: in the end, power lies in this House … no Chancellor of the Exchequer can tolerate a challenge to his authority to manage the economy with prudence and discipline."—[Official Report, 5 December 1990; Vol. 182, c. 319.] Local authority revenue expenditure, whether it is financed by national or local taxation, affects the overall burden of taxation in the economy. Local authority taxation—whether community charges under the current system or council taxes from next April—feeds directly into the retail prices index. Indeed, what I might call the twin purposes of capping are to contribute to the control of public spending, thereby continuing the pressure on inflation and maintaining economic progress, and to limit the burden of national and local taxation.

It is worth reminding ourselves that local authorities are responsible for more than a quarter of all public spending. As my hon. Friend the Minister for Local Government and Inner Cities told the House during the recent debate on the capping order, local government expenditure is now running at some £65 billion. That is well over £1,000 for every man, woman and child every year.

The need for some control over that volume of expenditure is scarcely a new idea. I recall that it was a Labour Secretary of State for the Environment who declared all those many years ago—indeed, even before the hon. Member for Brent, South (Mr. Boateng) and I were thought of in political terms—"The party's over." He secured a considerable reduction in the level of local government current and capital expenditure.

Photo of Mr Paul Boateng Mr Paul Boateng Shadow Minister (Business, Innovation and Skills), Shadow Minister (Lord Chancellor's Department)

When the then Secretary of State said of local government that the party was over, I am sure that he did not mean that the wake was about to begin. The tragedy for local government under the stewardship of the Conservative party is that that stewardship precipitated the end of local government as we knew it and the beginning of something different, totally centralised, grossly under-resourced and ill-equipped to do its job.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

I reject that view of what has happened in local government. As I said not a moment ago, when local government spends some £1,000 each year for every man, woman and child, I would have to go a long way to recognise the description that the hon. Gentleman gives.

We take the view that it remains reasonable in the interests of our wider economic goals to expect local authorities to play their part in restraining their expenditure, just like others, throughout the public and private sectors.

Indeed, I may embarrass my hon. Friend the Member for Spelthorne by quoting back at him, with approval, some remarks that he made at the time of the capping debate in 1990. That debate, which I am sure that many hon. Members will recall, was a somewhat highly charged affair, full of speeches about savage cuts in services which came to assume the generic, if not necessarily elegant, title of "bleeding stumps". His comments then were a salutary corrective to some of the wilder allegations and, if I may make so bold, form an excellent summary of the Government's position. He said: The debate … is not about how local government is financed …. It is not about the structure and size of local government … Nor is it directly about services themselves … However important services might be, and I do not seek to underplay them … This debate is about how much local government spends … at the end of the day we cannot spend what we have not got. In 1990–91, local authorities used the move to the new system as a smokescreen to disguise vastly increased expenditure. Spending rose by 13·5 per cent. and during the two-year period to April 1991, spending had risen by about a quarter. That was, I am afraid, the result of allowing authorities to decide what level of expenditure they felt appropriate. Such increases could only be described as staggering.

With the fundamental shift from local to national taxation for the funding of local services, which my right hon. Friend the Chancellor of the Exchequer announced in the 1991 Budget, we were even more determined to ensure that there should be no repetition of such overspending.

I am happy to report that those extra resources from national taxpayers have not been frittered away. Although I am sure that that is in large part due to a greater sense of realism on the part of authorities, it is also because we signalled our determination that it should not happen.

For 1991–92 and 1992–93, we took action to announce provisional capping criteria, so that authorities were aware of our intentions before setting their budgets. As a result, local authority spending came out only about 1 per cent. above the amount for which we had made provision in the settlement.

This year, more than 400 authorities have budgeted within, or very close to, the limits implied by our provisional criteria. That is a result in which local government can take considerable satisfaction. It is also one which shows that some of the more hyperbolic statements made from time to time about capping are, to put it mildly, exaggerated.

That is where we are. There is certainly room for improvement. We would wish to see—and my right hon. and learned Friend has expressed the hope—the year when no authority will be capped. For 1993–94, we have signalled our intention to follow the precedent of this year and the preceding one, and to announce provisional capping criteria in the autumn, so that those can be taken into account by authorities in the process of setting their budgets for the year.

Next year is, of course, an important one. My hon. Friend the Minister for Local Government and Inner Cities mentioned in the debate on the capping order that local government needs an independent tax which can be brought in at sensible and affordable levels. Next year is the first year of the council tax. Some things will change. Perhaps most significantly—unlike both the rates and the community charge—the council tax is both a property tax and a personal tax. But, although the nature of the tax will change, the wider context will not.

We remain committed to the principle that local authorities should not be able to obscure their true levels of expenditure from their domestic taxpayers. That is had for business and had for accountability. We consider that there should be stable grant system to equalise bills throughout the country. The council tax system will not be accompanied by significant changes to the revenue support grant system. We remain committed to the principle that overspending against standard spending assessment should come home directly to those who pick up the bill. But we are also determined to safeguard the position of local residents, as both local and national taxpayers. We have taken powers in the Local Government Finance Act 1992, which are analogous to the current charge-capping powers.

Those with good memories may, however, recall that, for the first year of capping under the community charge, we used only the "absolute excessiveness" criterion—the comparison between an authority's budget and its SSA. That allowed many very significant increases in budget from the last year of the old rating system to go largely unchecked. I should therefore mention that our powers under the 1992 Act allow us to specify a base position at the start of the new system for measuring increases in budget for 1993–94. That is important.

Looking further ahead, we can expect the structure of local government to change as the Local Government Commission goes about its work. Although organisation and functions may alter, there is no reason why local taxpayers should be exposed to higher bills as a result. They will be receiving the same services albeit, perhaps, from a new authority. Nor is there any reason why new authorities should be removed for the first year of their existence from the capping regime, as far as increases in budget are concerned. Thus, for the years after 1993–94, we shall also be able to specify a base position for measuring increases in budget, where there has been structural or functional change. However, although we must ensure that we are able to take action, as I have said, we very much hope that it will not be necessary to do so.

My hon. Friend has suggested that the achievement of financial control is concerned with three issues. The first is the control of total expenditure, and as I have said, I think that we are at one on that. Secondly, my hon. Friend suggests that the allocation of funding between competing needs should be directly controlled. His concern is that purchasers of services should be identified and have responsibility for the necessary resources; thus, central Government would assume full control of much expenditure and would directly purchase those services that it funds. Local government would raise only that amount of funding required to meet community needs that are truly local.

My hon. Friend's third main point relates to the importance of maximising value for money. It is a point closely related to the purchasing of services and is something to which I wish to return a little later. My immediate concern is with his proposals for the allocation of responsibility for certain services and their associated funding. That issue is, at heart, about local accountability and responsibility. My hon. Friend had some words of wisdom in the capping debate in 1990 with which I cannot but agree. He said: Local councils are best at assessing local need, and in responding to it. They are best at service assessment and arranging service provision. Parliament exists to settle what is best for the nation … the Government will settle what expenditure limits there must be, and local councils, which arc closest to the people, must sort out the priorities."—[Official Report, 11 July 1990; Vol 176, c. 416–420.] We do not wish to tell local councils how to order their priorities or which services to provide.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

Yes, but I do not want to do so too often.

Photo of David Wilshire David Wilshire , Spelthorne

I should like to draw my hon. Friend's attention to the fact that central Government, quite properly, do not leave those things to local government. If I understand the situation correctly, Derbyshire police force, which is a local government matter, has been refused a certificate of competence. The Government have stepped in, entirely correctly, because they recognise that certain things cannot be left to local government although the money goes to it. Is that not the point that I have been trying to make?

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

I draw a distinction between the monitoring of areas of local authority expenditure. including the example that my hon. Friend cited, that will often fall either on Government or on a Government agency, and, quite separately, the centralised funding of local authority services where, as my hon. Friend knows and as I am seeking to make clear, the Government believe that local authorities should be able to determine their priorities. It is the proper exercise of that local discretion that forms the basis of local accountability by which we all set considerable store.

As my right hon. and learned Friend the Secretary of State made clear in his recent speech to the Association of District Councils' annual conference, we do not need to imagine that central and local government will agree about everything to accept that there can and should be a good working relationship between the two within a broad consensus. There will never be complete agreement about spending. That is perhaps too much to ask. However, the vast majority of authorities have accepted the need— albeit, perhaps unwelcome—for restraint and the need to set sensible budgets which local people and the country can afford. But within those broad constraints there is considerable scope for authorities to improve the quality and the value of their services while setting reasonable levels of council tax.

I am sure that the majority of authorities no longer consider that there is a pot of gold from which an endless supply of resources can be provided. They accept that it is for the Government and Parliament to decide what the country can afford and for local authorities themselves to use that provision to the best possible effect. In doing so, they should be mindful not only of costs but of the quality of the service provided. Through our powers to cap. we can exert restraint on the amount that authorities can raise from local people so that they are not soaked. Through our other initiatives to encourage greater efficiency, particularly the client-provider split and increased competition, we can move towards securing a better return for those resources.

I know that my hon. Friend has consistently argued that councils should be representative of the whole range of local services rather than those which are currently the responsibility of local government. Our views about the future structure of local government will he well known to my hon. Friend. He has made a valuable contribution to the final form of the legislation and his views have helped to shape the guidance which we will issue to the Commission. I know that there are still differences between us on some specific points, but certainly we share the same goals. We want the authorities emerging from the Commission's work to be well placed to address the needs of local people. We want a structure of local government to suit the needs and wishes of local people, not the administrative convenience of service deliverers. There is nothing between us on that.

Local authorities are responsible for a wide range of functions and it is in discharging those functions that they meet or fail to meet the demands and proper expectations of their people. We therefore must have a structure of local government which enables local authorities to carry out their functions effectively and conveniently. That is not, of course, to say that the authorities must deliver all their services themselves—far from it. The best way to meet local needs is to check all the options for service delivery and to go for the best. That is the heart of our policy on the enabling role of local authorities.

Our view of the role of local government is one of facilitating the provision of services and of acting in partnership with central Government and others to secure that provision. We see a clear role for local government as the representatives of local communities, responsive to their needs and—this is the vital point—best able to assess in many instances their requirements. It is being close to the grass roots, to those for whom the service is being provided, that is important. Local government in many cases fulfils that role and does so effectively. It is therefore frequently appropriate for local government to decide how it responds to local needs.

I know that my hon. Friend distinguishes very clearly between the centralised purchase of specific services and the provision of those services. Some of the initiatives that we have developed—I am thinking here of grant-maintained schools—show that it is not necessarily local government which is best placed. Sometimes it is possible to move even closer to the grass roots and to respond, for example, to the views of parents. In these cases, we are providing people with greater say on choice and we are involving people more directly in the way that services are run.

I have my doubts that creating councillors who are responsible for monitoring the standards of local services but who are not responsible for securing their provision and who raise only a very small amount of money locally is likely to enhance local accountability.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

I am delighted to welcome the hon. Gentleman for the second time.

Photo of Mr Paul Boateng Mr Paul Boateng Shadow Minister (Business, Innovation and Skills), Shadow Minister (Lord Chancellor's Department)

Is not that precisely what the Government have done in housing? They have taken away from local authorities the responsibility for the direct provision of housing. given it to the Housing Corporation and housing associations and then expected local authorities to provide for the homeless and to have an overall monitoring role. Given the hon. Gentleman's rational analysis. is it any surprise that that simply is not working?

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

The House will have difficulty recognising reality in what the hon. Gentleman says. My memory is that, in the current year, local authorities are still spending up to £3 billion, which is a significant sum by any standard. Many of those authorities are spending it wisely to improve their existing stock. If they are also bringing into use many of the empty properties that, sadly, too many local authorities still have, they will be doing a double service to their local charge payers.

It seems to me that the principle of local accountability must rest on the decisions of local councillors—rather than central Government—who are responsible for services which their communities use and who raise a reasonable amount of money locally to contribute towards those services. I suspect that, if local taxation were to be marginalised to the extent that my hon. Friend suggests, the importance of local government would be correspondingly reduced and there would certainly be problems with accountability if they had only limited influence over service issues.

It seems to us that the key to securing better value for money in the provision of local services does indeed lie with the purchaser-provider split. We believe that the closer the purchaser is to those for whom the service is being provided. the more responsive and effective will he that service. It is for this reason that we believe that local authorities will continue to have a major role as a facilitator and hence purchaser of services for local people.

The purchaser-provider split in local government is a major force in securing value for money on behalf of councils' residents. It ensures that councils are accountable not only for the choices which they make between competing priorities but for the efficient delivery of high-quality services to meet those needs.

Local government has historically been at the forefront of delivering services, often of a high quality, to the general public. The challenge facing local authorities is to identify local requirements, establish priorities, determine the appropriate levels of service which charge payers need and demand and ensure that those levels of service are consistently achieved. Those tasks are the very heart of what a local authority should be achieving for local people. An authority is not simply a bureaucracy which imposes restrictions on their aspirations; it is the means by which local communities can secure a better quality of public service and a better quality of life.

Compulsory competitive tendering has not just been a financial success but has made local authorities consider carefully, perhaps for the first time, what levels of service are required and how to measure outputs to ensure that those services are properly provided. That has given local authorities the ability to decide what standard of service they should seek. They have found that there is often room for quality to improve without a corresponding increase in costs. It is generally recognised that CCT has encouraged greater efficiency. Far from declininig, standards of service in the activities subject to CCT have, in fact, generally been maintained or improved. Authorities have taken advantage of the need to sit down and think through the needs of their communities and to demand higher standards. CCT has made a direct contribution to an improved quality of public service and we look to seeing it continue to do so in services currently subject to competition.

I think that most people accept that CCT for manual services has been successful in terms of the benefits which it has delivered both to local authorities and to their charge payers. However, now is not the time for authorities to sit back contented, or perhaps even to breathe a sigh of relief. There are other local authority activities that could benefit equally from the improved levels of service, greater efficiency and better value for money which can be realised through competition.

Many authorities have already recognised that and have gone beyond the requirements of legislation to try novel approaches to the delivery of a much greater range of services—[Laughter.] A number have organised service departments into separate business units that now act as contractors, working to the specification of the client core of the authority. Others have market-tested or contracted out a range of professional and executive services, and all have found that they have shown financial benefits or benefits in the quality of service delivered, sometimes both.

I note that some of my comments in the past few minutes have apparently aroused amusement in the hon. Member for Brent, South (Mr. Boateng).

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

And among the massed Back Benchers.

As recently as yesterday, I met and spent a long time with representatives of a county council who convinced me of the many significant steps that they were already taking, in advance of any legal requirements, to make themselves more efficient and effective. I congratulate them on that, as I do all authorities that are taking such steps. I do not regard that as humorous; I regard it as in everybody's wider interests.

Photo of Mr Paul Boateng Mr Paul Boateng Shadow Minister (Business, Innovation and Skills), Shadow Minister (Lord Chancellor's Department)

It is because one of us has a certain fondness for the Minister, remembering him in his role as the representative—sometimes the lone representative—of sanity among the Conservative ranks against the then Government, and as a distinguished member of the Select Committee on the Environment, that I laugh now to hear him become so very much the perfect ministerial man. He repeats a brief—

Photo of Mr Paul Boateng Mr Paul Boateng Shadow Minister (Business, Innovation and Skills), Shadow Minister (Lord Chancellor's Department)

As my hon. Friend says, the Minister parrots a brief that bears no resemblance to what he must know is the case on the ground—the tragedy of what local government has become.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

My only response is to regret that the hon. Gentleman—who indeed spent many happy hours in my company on the Select Committee on the Environment—has lost contact with what is happening in local authorities since he turned his attention to Treasury matters.

Photo of Greg Knight Greg Knight Government Whip

The hon. Gentleman has become an embittered man.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

As my hon. Friend suggests, the hon. Gentleman may have become an embittered man. It is very sad.

The Government have made clear their commitment to the principle of extending competition in the provision of local authorities. The proposals contain plans to extend CCT to the construction-related professions such as architectural, engineering and property management services. We recognise that those services differ in character from the blue-collar services that are already subject to competition. The evaluation of tenders, for example, is not simply a matter of price. Authorities may also need to evaluate the quality of tenders, in itself sometimes a subjective judgment.

The areas to which we have proposed to extend CCT are different from those activities that have thus far been subject to the regime, and the consultation paper recognises that there may be a need to modify legislation in some cases. I cannot pretend that there has been a positive rush of support from all sides of local government for our proposals. Perhaps many of the objections stem from a misunderstanding of what we propose. It is clearly not sensible simply to apply the existing CCT regime to professional services which are themselves different in character from services such as refuse collection or street cleaning.

The question that we need to ask is not whether competition is appropriate for these services but how best it can be achieved, and how best to balance the flexibility that authorities rightly seek against the need to ensure that the benefits of competition can be brought to authorities unwilling to look properly at alternative forms of service delivery.

Both central and local government have as their raison d'être the provision of high-quality services to the general public. The citizens charter will play an important part in promoting high standards. Local authorities are already responding to the challenge. Competition has also proved an effective tool in improving public services and has benefited not only local taxpayers but authorities themselves.

We have successfully moved away from the idea that in order to improve services, it is necessary to spend more. I think that there is also broad acceptance of the need to spend only what the country can afford. I hope that this will mean that our capping powers become more a symbol of our determination not to let up on the need for sensible and affordable budgets, rather than being a tool which we frequently use to curb the excesses of individual authorities. I hope that all this will mean that we can concentrate on the real job of local government, which is to facilitate the provision of services to their local communities, which are high in quality and low in cost, and to he accountable to them for the results.