Local Government Financing

Part of Opposition Day — [2nd Allotted Day] – in the House of Commons at 6:35 pm on 29th June 2010.

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Photo of James Morris James Morris Conservative, Halesowen and Rowley Regis 6:35 pm, 29th June 2010

I, too, congratulate my hon. Friend Paul Uppal on his fine maiden speech.

I know that Opposition Members want to fight the battles of the 1980s, and it is important to set this debate in its historical context. As all hon. Members will know, successive Governments have centralised power to themselves over the past 50 years. We live in one of the most centralised countries in the developed world in terms of the relative powers and funding of central and local government. Over the past 30 years there have been several reviews of those powers, going back to the Layfield and Lyons inquiries. In the last Parliament there was the Communities and Local Government Select Committee report on the current state of central-local relations, so a lot of blood has been spilled in the debate about the financing and funding of local government over the past three decades. There has been a lot of philosophical inquiry but very little action. The current economic and fiscal crisis provides a unique opportunity for those of us who have been banging the drum for decentralisation and localism over the past two to three years. That is why I welcome the coalition Government's commitment to a fundamental review of local government finance.

In 1890, 23% of local government revenue came from central grants, with the rest coming from local taxation. As we stand here today, that position has been almost completely reversed. The central point of today's debate, which has revolved around cuts and the 1980s, is that, as we all agree, we have rising demand from the public for services. We also have rising expectations from citizens and users of the services provided by local government, and a public perception that local government is accountable for the delivery of those services. However, as hon. Members have pointed out, local politicians control democratically only 5% of total local expenditure, with myriad other organisations spending the rest. As many Members have said, we have a unique opportunity today to rethink some of the assumptions on which the powers, functions and funding of local government are based.

The Opposition talk as though the idea of cuts in local government spending were an invention of the coalition, but if we look back at the Budget of 2008-09, we see that the previous Government were already contemplating local government spending cuts in excess of 20% over four years. There is a considerable mismatch between the last Government's rhetoric and their reality.

The first half of the previous Government's time in office was characterised by what I would call a Prescottian regionalisation-the creation of a great deal of institutional complexity and an unaccountable regional tier of government that served little or no purpose. The second half of the previous Government's time in office-Mr Denham played a part in that-was spent in an attempt to unravel the mistakes of the first half.

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