Local Government Financing

Part of Opposition Day — [2nd Allotted Day] – in the House of Commons at 5:11 pm on 29th June 2010.

Alert me about debates like this

Photo of Paul Beresford Paul Beresford Conservative, Mole Valley 5:11 pm, 29th June 2010

I always find that the shadow Secretary of State's speeches display a convenient forgettery: he gets out his paint brush, forgets the damage that he and his predecessors did to local government, comes up with a few colourful pieces and ignores the fact that, time after time, the Communities and Local Government Committee told him and his predecessors where they were going wrong-and now he has suddenly changed his tune.

Under Labour, the local authorities central grant became less fair as the funding formula was progressively manipulated to the disbenefit of London and the south-east. Many services, along with funding, were moved to regional authorities and quangos, capital receipts were centralised for Government selective redistribution, and local government was crushed with inspections by most Departments of State and by targets in their hundreds if not thousands. New scheme after new scheme was brought forward and money applied to it, but it was allocated specifically, carefully and frequently politically by the Labour Government.

Like it or lump it, the committee structure, which enabled every councillor to have a say before decisions were made, was removed, and a new system of executive decisions inspected afterwards by committees was landed on councils regardless of cost increases. Standards committees and the standards quango were set up, again costing money, for frequently frivolous complaints that were easily dealt with under the previous regime. Central Government imposed rules and regulations on the private sector, making competing for local government functions utterly pointless, and the so-called best-value legislation was imposed, further limiting local authority freedoms.

Most of the centralising and manipulation was introduced by the then Deputy Prime Minister, with his clear desire to make local authorities effectively direct agents of his Department. The effect on local councils' morale was disastrous, and many complained that although they were local councils they were no longer local government. Incentives for lateral thinking to improve services and cut costs were destroyed, and local authorities in London and the south-east lost grant funding as the formula was changed three times. Even under the Conservatives, Surrey and places such as Wandsworth got among the lowest grants, but he came in and hit them with three funding formula changes, the last of which is notorious in Surrey. Under that change, it did not lose just a few million; the year-on-year loss to Surrey county council was £39 million. Event the Audit Commission pointed out the grant funding bias.

Over the years, the local government Select Committee, in its various guises, has increasingly pointed out the diminution of the freedom of local government. The last report was emphatic, and was swept aside. Latterly, there have been some gestures from various Secretaries of State. With a great flourish, one Secretary of State announced that the number of targets set by her Department would be diminished. The number had risen under her and her predecessors to well over 1,000. She was right; she did reduce the raw numbers. However, much of that was offset because there was a combining of targets, so they were still there, and there was increasing auditing of decisions made under the new freedom regulations. Although her Department tried, others did not, of course, so the number of targets increased.

My right hon. Friend the Secretary of State for Communities and Local Government, along with his Ministers, now have a unique opportunity, as the Minister has just said, to give local government back its freedom. From the removal of regulations, a massive reduction in Government expenditure and the removal of constant auditing will come enormous savings. From the point of view of the council tax payer, many of those savings may be quadrupled because it will be a case of reverse gearing.

I hope that my right hon. Friend will be generous enough to consider a few thoughts. Most of us believe that Government and local government should be small and efficient. To expand on one of the Minister's comments, the supermarket-type motto of "more, better, for less" is appropriate at this time. For local authorities to say that they are surprised about cuts is astonishing. They are not numerically dyslexic; they have been looking at these; they know they are coming; they have been working towards them.

In order to enable local authorities to respond, there must be a huge bonfire of regulations and inspections. The savings to local councils could amount to millions upon millions of pounds each from that alone. The reduction in the costs of the Audit Commission will be commensurate, as should the reduction of officials from the Department. Among the restrictive legislation that my right hon. Friend must remove should be the various incremental changes that made competitive tendering of the private sector for council functions non-competitive tendering. Local authorities should be encouraged to divest themselves of unused or unwanted properties by being able to retain the capital receipts, at least in part, for their own use. The business rate portion of Government grant should be separated from the actual Government grant.

Furthermore, I suggest that my right hon. Friend and his officials look at a slightly different approach to central funding. Education amounts to approximately 60% of local government expenditure. Under the previous Government, that was predominantly funded directly to schools, but through local education authorities. With the move for more independence of state or local authority schools, it would be timely to stop the previous Government's pretence and fund the schools directly.

If that were the case, the slight adjustments for local authorities could be effectively funded by the national business rate, distributed by a fair equalisation formula and by the council tax, which councils should be allowed to set themselves without interference. That would mean that local council tax payers-of course, they are almost always voters-would have a much more direct relationship with the local council in respect of its council tax and services.

In addition, if council tax benefits were paid directly to the recipient and estimated on a fairly applied standard spending assessment basis, to use an old phrase, there would be a further incentive for these people to put pressure on their council. By that I mean that if the local authority set the council tax higher than had been estimated, those on benefits would have to pay more. Equally, where an efficient council sets a lower tax, the benefit recipient would pocket the difference.

Many Members want to speak, and the Minister has talked about many things. He has to build much more on those things to produce a bonanza Bill that cuts regulations. There is now a unique opportunity to turn back what the previous Government did to mutilate, damage and brutalise local government in this country.

Embed this video

Copy and paste this code on your website