Cities and Local Government Devolution Bill [HL] — Second Reading

– in the House of Lords at 3:30 pm on 8th June 2015.

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Moved by Baroness Williams of Trafford

That the Bill be now read a second time.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Parliamentary Under-Secretary of State for Communities and Local Government 3:39 pm, 8th June 2015

My Lords, it is a pleasure to introduce the first Bill to receive its Second Reading in this House under this Parliament. It implements our manifesto commitments to allow cities and areas outside London to reach their economic potential. This Bill helps us to deliver on the promises we made that, if we were returned to government, there would be a clear economic plan and a brighter, more secure future for the whole country. Last week, we had an excellent and lively debate on the measures contained in the gracious Speech, including those in the Cities and Local Government Devolution Bill.

When speaking on the steps of Downing Street on the Friday after the election, the Prime Minister referred to closing the decades-old economic gap between north and south. For many years, under Governments of all political colours, our economy has become imbalanced and London has come to dominate more and more. In 2010, through our programme of decentralisation, we began to address this issue. We supported the development of local enterprise partnerships, concluded city deals with 27 cities, and took £12 billion out of Whitehall and put it in the hands of local people through growth deals, giving local areas more control to drive their own growth. In particular, in November 2014, the Government agreed a devolution deal with Greater Manchester, which will give local people greater control over their economy and powers over transport, housing, planning and policing. Greater Manchester will also gain new powers to support business growth and skills, and to help join up health and social care budgets.

In the last five years, we have been working with many partners—in business, across the political spectrum, and up and down the country—to move towards a more balanced economy. Two hundred years ago, when the country was at the height of the Industrial Revolution, Manchester was “Cottonopolis”, Liverpool’s ports welcomed ships from around the world and Birmingham was at the forefront of creative endeavour, registering three times as many patents as any other British town or city. But that economic diversity and strength was undermined by more than a century’s worth of power and decision-making being centralised in London. For decades, central government has made the rest of the country conform to a Whitehall template. The Bill calls time on that. Here, I pay tribute to three noble Lords in particular, although there are many others besides, from all political parties: the noble Lords, Lord Shipley and Lord Adonis, and my noble friend Lord Heseltine. They have been working hard on this agenda over the last decade, and, in the case of my noble friend Lord Heseltine, for three decades.

This is a devolutionary Bill that puts in place a legal framework enabling us to decentralise powers to our cities and counties, and across the country. The framework will allow us to ramp up what we started in the last Government, reversing 150 years of centralisation whereby powers were relentlessly drawn into Whitehall and London became ever more dominant. The framework will enable us to implement the Greater Manchester city deal and similar bespoke deals in other cities.

Decentralisation is the key to achieving economic growth and unlocking the potential for economic success in our cities. It enables places to take greater control over and responsibility for the key things that make it work. Any one-size-fits-all model is destined for failure. Every city and council is different. Through the decentralisation that the Bill will enable, each city will be empowered to forge its own path, to play to its own strengths and to find its own creative solutions to the particular challenges that they face. The power of decentralisation is to bring about change—to be the foundation of securing long-term sustainable growth, applying equally to towns and counties.

To be successful, decentralisation must involve not only devolving powers and budgets but having in each place the necessary leadership, governance and accountability so that powers are exercised properly and effectively, for the benefit of all. Where major powers are devolved, the Government are clear that there needs to be a single point of accountability. People need to know who is taking the decisions and whom to turn to if things go wrong.

Mayoral governance is an internationally proven model of governance for cities. Hence, as the Chancellor has made clear, where a significant suite of powers is being devolved to areas, metro mayors must be elected by the people. We will hand powers from the centre to those cities that choose to have a metro mayor, giving greater control over such things as transport, housing, skills and healthcare. A metro mayor may also, on a case-by-case basis, as in Greater Manchester, be given the powers of a police and crime commissioner. Cities will have the levers needed to grow their local economy and to make sure that the people in the city can keep the rewards.

Our Bill therefore puts in place not only the legal framework for devolving powers, but the framework to ensure that the strong and accountable governance necessary for devolution is in place. The Bill enables a mayoral combined authority to be a precepting body, and for a precept to be set to fund mayoral functions. Requirements relating to the setting of mayoral budgets may be specified by order. A combined authority’s other costs—those not incurred by the metro mayor—will be met from the budgets of the local authorities in its area. The Bill will also allow a combined authority to be given powers and to borrow money for particular purposes, if all the local authorities in its area agree.

The Bill allows, by more straightforward processes, the local governance of a place to be simplified. For example, where powers are devolved to one or more counties, putting in place the necessary governance may include making council mergers, moves to unitary structures, or simplifying the democratic representation with fewer councillors. This will be the case whether or not there is an elected metro mayor for the area.

The crucial point is that all the Bill’s provisions are to be used in the context of deals between government and places. Nothing is being imposed. Where there is a request for an ambitious devolution of a suite of powers to a combined authority, there must be a metro mayor, but no city will be forced to have a mayor and the powers that come with it. No county will be forced to make any changes of governance and to have the powers that can come with such governance changes.

I, like many noble Lords, started my political life in local government. I want to improve my local area and to see it develop and grow. The council that I sat on for 13 years will be part of the trailblazer devolution deal, reclaiming the power to decide its future. I hope that it will be the first of many, and that the Bill enables that to happen. With the Cities and Local Government Devolution Bill we will implement the manifesto commitments to,

“devolve far-reaching powers over economic development, transport and social care to large cities which choose to have elected mayors”, and to,

“deliver the historic deal for Greater Manchester”.

I beg to move.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Communities and Local Government) 3:47 pm, 8th June 2015

My Lords, I thank the noble Baroness, Lady Williams, for her clear introduction of the Bill and for facilitating our briefing meeting last week. It is a short Bill—just 14 clauses—which of itself devolves nothing, but its framework lays the groundwork for outcomes that could be of great constitutional significance. I say “could” because it depends on how the raft of powers in the Bill that accrue to the Secretary of State are deployed in practice. It also depends on the appetite and capacity of local authorities to engage.

As it stands, the Bill is a blank canvas. As we have heard, it could, with agreement, include devolution to a combined authority of seemingly any local authority function and any public authority function—including that of Ministers and government departments—exercisable in relation to the authority’s area. It could involve the conferring of a general power of competence on the combined authority. Further, as we heard, it enables changes by regulation to the constitution, membership, structure and boundaries of local authorities for devolution deals where a combined authority might not be appropriate.

We support the boundaries of this framework, but our task in Committee will be to probe the Government’s approach and the extent and manner in which it is intended these considerable powers be implemented and over what timescale. But we also recognise that it is not just about government; it is for local authorities, in the words of the City Growth Commission,

“to raise their game, building governance, policymaking and evaluation capacity”, and to develop their own vision for their areas.

We know that there are compelling reasons why we should support and encourage the devolution of greater powers and funding away from the centre and towards local authorities and communities. This agenda is not new. It has long been recognised that we have a high degree of centralisation in our system of government which is stifling initiative and creativity and holding back growth and regeneration. There have been a range of policies and initiatives over the years which have sought to address this in one way or another: UDCs, City Challenge, New Deal for Communities, RDAs, LEPs and the regional growth fund. We welcome the fact that the architects of some of these are with us this afternoon. However, the economic imperative—the need to enhance and sustain growth and reconfigure and join up services in the face of more cuts—and the democratic benefit which can flow from people having more power in their localities and communities require us to now address the benefits of devolution on a more profound and sustained basis.

Discussion hitherto has generated the concern that the Government’s focus in practice was only for devolution to our major northern cities—the city regions or metros. This is a debate driven very much by the City Growth Commission, which has recognised their potential to harness the benefits of agglomeration, connectivity and improved governance. It points to the success of London although, as we know from the London Councils briefing, London councils are seeking, not unreasonably, further devolution themselves.

We support the devolution of powers to great cities such as Manchester, Leeds, Sheffield and Liverpool, and not just because these are Labour led. We want to see devolution to every part of the country, not just to other cities or metros but to counties as well—not just to Tyne and Wear and the East Midlands but to Bristol, Southampton, Norfolk and Norwich—and not just to urban areas but to rural and coastal areas, too. The Bill as it stands enables this wider devolution and has been welcomed by a number of commentators, including the LGA. As I have said, it has our broad support, although we will want to see what this means in practice.

The wide scope of the Bill raises the question of how it is potentially to be delivered. There are currently five combined authorities and suggestions that there is active consideration of four more, covering Derbyshire, Nottinghamshire, the Tees Valley and Birmingham and the Black Country. The Bill is likely to whet the appetite of others, and we hope that it does. We have no idea, of course, how many proposals might emerge under Clause 10. Obviously, this cannot all be done at once, but perhaps the Minister will tell us what the strategy for delivery is and reassure us that it will not be a piecemeal approach. Presumably, progress does not rest just on who catches the Chancellor’s eye. Is there any presumption of metros first? How will the Government seek to ensure that counties in particular do not fall behind?

We should take the opportunity today to congratulate Greater Manchester on its innovative agreement with the Treasury. The 10 local authorities involved have a long record of collaboration, characterised by consistent leadership and hard work. That work has delivered the opportunity of a range of powers over a housing investment fund, transport, business support, strategic planning skills, complex dependency, the Work Programme and opportunities to integrate health and social care across the combined authority area—the tools needed to develop programmes that address local needs and develop a new “place-based” partnership with government.

We support the devolution and integration of health and care services but recognise from the MoU attached to the Manchester agreement that the issues are not straightforward. We would not want to see a disruptive structural reorganisation and are cautious about some areas such as workforce planning, research and commissioning of specialised services. There is a also a need to test where the buck ultimately stops in the event of major disruption to services—with the Secretary of State or with the combined authority. We need also to be mindful of the briefing, received just today, by the RCN.

As we have heard, the Bill also enables for the first time a combined authority to have an elected mayor who by virtue of that office chairs the combined authority, and with an obligation to appoint a deputy. The Secretary of State can by order require that any function of the combined authority can be carried out only by the mayor, and to these can be added the role of the PCC. We will express our concerns that this could lead to a very substantial concentration of power in the hands of one individual—mandatory scrutiny arrangements notwithstanding—and we will take time in Committee to probe the potential boundaries of these arrangements.

The position of elected mayor still requires some clarification from the Minister, our earlier exchange at Questions notwithstanding. I think we are clear that the Bill does not appear to make it a precondition that the combined authority must have an elected mayor in order to gain the additional functions covered in the draft legislation, yet the rhetoric of Ministers, particularly the Chancellor, has suggested otherwise. He said in a recent speech:

“So with these new powers for cities must come new city-wide elected mayors who work with local councils. I will not impose this model on anyone. But nor will I settle for less”.

We acknowledge the importance of clear leadership and accountability in driving through reforms to stimulate economic growth but question why there should be only one acceptable leadership model.

At our briefing meeting, the Minister suggested that matters might be more flexible than this. To an extent she has confirmed that again today, but can we have it on the record that a city region can have the powers under the Bill without having an elected mayor? What about the existing combined authorities? Does the Minister accept that, given that all bar one of the cities holding a compulsory referendum last time rejected elected mayors, the insistence on having one could be a barrier to the devolution process? Of course, once the position of elected mayor is accepted, there is no going back. The prospect of an elected mayor taking on some or all of the duties of a PCC would seem to be an admission of failure. Where does that leave situations where the boundaries of the combined authority and the remit of the PCC are not co-terminous?

The opportunities and challenges that the Bill presents will be heavily dependent on funding arrangements, not only the specific arrangements for individual deals but the continuing underlying funding for local government. I do not propose today to revisit the sorry saga of unfair cuts visited by the previous Government—a coalition of Tories and Lib Dems, we should recognise —on our most deprived communities, which we know are to continue, except to say that devolution must not be a cynical route to unloading responsibilities on local authorities without proper funding. Of course, the previous Government have history on this. The Bill provides, as we heard, for levying powers of a combined authority except for mayoral functions, in respect of which a combined authority becomes a precepting authority. This would appear to lead to situations where the same function is funded differently, depending on whether or not it is a mayoral function. We will look to better understand the consequences of this in Committee.

There is no general provision in the Bill whereby sources of revenue accrue directly to local authorities as part of a devolution process, so far as I can see. In formulating our plans, we have proposed the retention of all business rate growth but it looks from the Manchester agreement that these matters will be negotiated on a case-by-case basis. In his No Stone Unturned in Pursuit of Growth report, the noble Lord, Lord Heseltine, cautioned against what he called the “penny packets” approach to devolution—that is,

“Parcels of cash attached to specific projects, each with their own particular objectives, timetable and requirements”.

Does the Minister accept this caution and can she tell us what the Government’s approach is in this regard? What is the size of their ambition and what is the measure of central public authority funding potentially available in this Parliament? Indeed, what funding streams are available?

Time marches on. There is much else for Committee, including mandatory scrutiny, which we support; the electoral process for elected mayors, which seems to have absorbed the drafters of the Bill; and the level of parliamentary scrutiny. But the Bill opens up huge opportunities and we will play our part in encouraging local government to take maximum advantage.

Photo of Lord Shipley Lord Shipley Liberal Democrat Lords Spokesperson (Communities, Decentralisation and the Northern Powerhouse) 3:59 pm, 8th June 2015

My Lords, I welcome the Second Reading of the Bill and I am grateful to the Minister for her kind comments earlier. I welcome the Bill not because everything in it is right but because it represents a further and very important stage in achieving greater decentralisation and fiscal devolution within England, through which growth can be increased outside London faster and local government can make more effective use of public money by joining up service delivery. There will be a number of contributions today from these Benches and I welcome that, because there is a wealth of practical experience here to draw on. Some colleagues who are not able to speak today will be speaking in Committee.

The Minister was right to say that the record of the last Government in encouraging decentralisation was impressive. It was, however, only a start. Crucially, there is now a much clearer understanding that you cannot run the whole of England from London, so I support the principle behind the Bill. It will decentralise power out of Whitehall and enable fiscal devolution. Because it is an enabling Bill, it means that one size need not fit all and that it can be voluntary for combined authorities or councils to propose schemes that are generated locally and have some local ownership.

In recent months, we have seen a host of reports as diverse as No Stone Unturned: In Pursuit of Growth by the noble Lord, Lord Heseltine, from the City Growth Commission, from the Independent Commission on Local Government Finance, the Independent Commission on Economic Growth and the Future of Public Services in Non-Metropolitan England and the London Finance Commission. There have also been a host of reports from think tanks, in particular the ResPublica reports—not least Devo Max-Devo Manc—and work done by IPPR and the Local Government Association, of which

I am a vice-president. There has also been a huge amount of work done by the English core cities network. All that work points in the same direction.

It is 40 years ago that I was first elected to Newcastle City Council, and I well remember the turf wars between that council and Tyne and Wear County Council. They competed too much and it did not help that their memberships were separate rather than shared. The met counties, as we know, were abolished some 30 years ago, but problems of integrating with the wider region remained, not least in strategic planning and transport. Then, in 2004, we had the referendum in the north-east on creating a regional assembly. On a turnout of half the electorate, only 22% voted yes. It failed despite the best efforts of a number of Members of your Lordships’ House, not least the noble Lord, Lord Prescott, because it had no real powers and was seen as a talking shop and another layer of government, when power would still in reality reside in Whitehall. I think that things have changed. The north-east of England did not see the need then, but, given the further devolution planned for Scotland, that is no longer the case. This Bill gives the scope that we need. It is the next essential stage without which Cornwall, for example, or the existing combined authorities would not be able to go any further in securing devolution.

What of my own party’s position? Our general election manifesto said that we would:

“Build on the success of City Deals and Growth Deals to devolve more power and resources to groups of Local Authorities and Local Enterprise Partnerships … Establish a Government process to deliver greater devolution of financial responsibility to English Local Authorities, and any new devolved bodies in England, building on the work of the Independent Commission on Local Government Finance”.

We also said:

“Any changes must balance the objectives of more local autonomy and fair equalisation between communities. In some areas of England there is an even greater appetite for powers, but not every part of the country wants to move at the same speed and there cannot be a one-size-fits-all approach”.

We therefore said that we would,

“introduce Devolution on Demand, enabling even greater devolution of powers from Westminster to Councils or groups of Councils working together—for example to a Cornish Assembly”.

We now need local government to propose workable structures as central government accepts that one size does not fit all—both of which, of course, the Bill recognises and enables.

I may have given the impression so far in my contribution that we are debating a perfect Bill at Second Reading and that nothing needs to change, or be further defined or examined. In my view, that is far from the case. There are issues that we need to examine closely when we reach Committee in a fortnight’s time. The first relates to democratic legitimacy: that is, a new structure of local governance, and public support for that structure. I recognise that in the case of Greater Manchester it was made clear in the Conservative Party manifesto that a Conservative Government would,

“legislate to deliver the historic deal for Greater Manchester”.

However, it is also the case that most electors in Greater Manchester did not vote for the Conservative Party in the general election. I have come to the conclusion that it must always be right to test proposed constitutional changes such as these in a local referendum. We must return to this issue in a fortnight’s time when we start Committee.

Secondly, when elections for the mayor take place—assuming the Bill becomes an Act—there will be a direct connection with the ballot box at least for the person entrusted with the huge powers an elected mayor will have. However, the range of powers is potentially so vast that I doubt one person can do it all, which means in practice that much will be delegated. We need to think very carefully about running policing, social care and health, strategic planning, housing, skills, transport, economic development and regeneration all through one person.

Thirdly, in London there is an assembly with powers of scrutiny over the mayor. Something similar is needed as part of the Bill. I noted the comments of the Chancellor of the Exchequer on May 14 in Manchester, when he said that the metro mayor would be,

“a powerful point of accountability”, because they would be:

“A person vested with the authority of direct election”.

However, he also said that,

“the Manchester model of devolution is not like London. We haven’t created a new Assembly here. We’ve built on the excellent cooperation you’ve established with your combined authority, as you asked me to do”.

I am not convinced that this is enough. We run the risk of creating a one-party state in which one party controls the metro mayor, the metro mayor’s appointment of the deputy, the combined authority—at least in terms of having a majority of seats—and the scrutiny of the mayor and of the combined authority. This concentration of power in the hands of a very limited number of people, when this Bill is all about devolving power, seems to me to need some urgent revision.

I also have some questions around the voting system and what the preferred voting system should be, and again around the powers to precept and what in practice that will mean when applied. I hope that we can look at those further in Committee. I am an advocate of proportional representation in local government, and it has occurred to me that this might be the moment for your Lordships’ House to give some further thought, given that it applies in Scotland, to the desirability of making local government elections by proportional representation. If we did, some of the problems that I have identified could be solved.

To conclude, the principle of enhanced devolution as proposed in the Bill is most welcome. It is the detailed set of proposals that we need to spend time examining now in Committee.

Photo of The Earl of Listowel The Earl of Listowel Crossbench 4:09 pm, 8th June 2015

My Lords, I declare my interest in the register in property development. It is also perhaps worth reminding the House that I am treasurer of the All-Party Parliamentary Group for Children.

I hesitate somewhat to take part in this debate as I am afraid I may be straying where angels fear to tread. However, I am so concerned about the issues around housing supply in this country, particularly social housing for our poorest families, and our need for key worker housing so that we have the excellent teachers and social workers who can intervene with these families and help to turn their lives around, that I feel I need to speak. In principle, I very warmly welcome what the Government propose. It seems quite evident that if we strengthen the north of England and its economies, there will be less burden on housing in London and the south-east, and we will relieve the strain that some of our poorest families experience. The principle of delegation of powers within this Bill also seems very welcome.

My concern somewhat echoes that which the CBI raised in its briefing: certain issues need a strategic authority strong enough to balance many vociferous and powerful opposing forces. In particular, the CBI talked about transport. I am concerned that in housing supply it is important to consult and think hard about local residents’ concerns. It is very important to think about the environment. However, it is also important to weigh up with that people’s need for social and key worker housing. That can be such a difficult issue for an institution to resolve. Whatever new authorities we establish to process these decisions, they need to be robust enough in terms of residential development. Local people, particularly those who own their own homes, understandably feel very concerned about any prospect of development in their local area. It can be very difficult for local politicians to put the other side, about the need for new homes for social or key worker housing. Local media may feel very much that they must put the case that most concerns local people. Whatever authority tries to balance up the interests in that area, it will have a very difficult job to do and needs to be robust enough to do it. I hope the Minister can reassure me that the institutions that she seeks to establish through the Bill will be robust enough to make the right decisions in all our interests when these things come up. Furthermore, I urge the House to look at this Bill as an opportunity to think about how we can increase the supply of affordable homes, key worker housing and social housing in this country.

I pay tribute to the noble Lord, Lord Heseltine. Some time ago, with the All-Party Parliamentary Group on Homelessness and Housing Need, I visited Walthamstow housing action trust. I hope my memory serves me correctly, but the residents there told me that they had been rather late to apply for housing action status. I think they actually approached the noble Lord with some rubble—the masonry that fell from their buildings. Anyway, they were very grateful to be granted that special status with all the opportunities to influence their crumbling housing estate and change it for the better. I pay tribute to the noble Lord for what he did for them in particular.

If I may highlight the issues around homelessness, there were 90,000 homeless children in Britain in November, as recorded by Shelter. There were more than 2,000 families living in bed-and-breakfast accommodation in England last June—and that is on the increase. In Wales and Scotland, the numbers of such families are decreasing but in England they are on the increase. I visited the University of East London in Stratford recently to talk with four academics undertaking some research around housing and perinatal mental health. We discussed the recent report from the London School of Economics looking at perinatal mental health which highlighted the fact that failing to meet the perinatal mental-health needs of mothers cost the nation £8 billion per year. That is £10,000 per birth. The bulk of that extraordinary cost—some 72% of it—arises from the fact that when mothers are depressed or suffering postnatal depression their relationship with their child is disturbed and that child then fails to thrive, which influences their later development.

The academics are looking at how housing can influence the mental health particularly of mothers around birth. There is evidence from Chicago on the impact of homelessness on the mental health of mothers. Visiting with health visitors in Redbridge and Waltham Forest, I have seen mothers in appalling conditions, living in the most tragic circumstances, in overcrowded houses in multiple occupation, sharing facilities with several other families. We walked in and found the door left open and a mother with a baby only a few weeks old living in that very unsatisfactory situation. It really reinforces to me why we need to do all we can to improve the supply of key worker and social housing.

Not so long ago, I spoke to the head teacher of a primary school in Kings Cross who told me that one of her best teachers had recently been in her office in tears because she had to move out of London to establish her family and have a home that she could afford. Again and again, I hear from our key workers that, when they have gained experience in London and the south-east, they move up north to establish their families. This really has an impact on issues such as the number of agency staff employed by the National Health Service.

The issue of immigration is so much on our minds. There is perhaps nothing that causes more tension in communities than the fact that there is a shortage of housing, so that people in our country have to compete with immigrants over housing supply. That should not be necessary; we should have built enough housing so that we can accommodate both the immigrants we need and those who live in this country. It is a red rag to a bull. Margaret Hodge MP has raised this issue in the past, and the Governor of the Bank of England recently highlighted how supply of housing impacts on the security of the economy. It may well have impacts on productivity, too—it was good to hear the noble Lord, Lord O’Neill of Gatley, talk about that earlier.

There is much to welcome in what the Government are doing in terms of the 275,000 new affordable houses promised by the end of the five years. There is much to welcome in the Bill, but I hope that your Lordships will keep it very much in mind that this will be an opportunity to increase the supply of social and key worker housing.

Photo of Lord Heseltine Lord Heseltine Conservative 4:17 pm, 8th June 2015

My Lords, I congratulate my noble friend Lady Williams on the very clear way in which she summarised this fascinating piece of legislation, which is immensely wide in its potential and dependent almost entirely on the detail of offers that other people are yet to make. I am sure that noble Lords will appreciate that we have heard two speeches from opposition parties that were very helpful and supportive of what the Bill intends to do. In my view, we are discussing and implementing in this Bill an historic shift.

I was particularly interested in what the noble Earl, Lord Listowel, had to say. If there is an area of this country’s administration where devolution is necessary, it is in the poorest communities, which are all fragmented into different streams of funding from central government. There is no correlation or process at local level that draws the funding together and asks fundamental questions. If you live in that sort of circumstance—and no one in this noble House does—the one thing that is missing is a ladder of aspiration. There is no machine showing you how you can change the structure. There are lots of very well-meaning people with very substantial sums of money, but there is no central point where we can try to change the assumptions of deprivation that exist on a wide scale and in many different forms. The noble Earl may well be surprised, as this process unfolds, that there is great potential for the poorest communities in particular.

I think that the whole House recognises that today we are involved in an historic shift. We all understand how this process of centralism came about. We were a pre-eminent world power in the 18th century, and the driving force and motive was that of the accumulation of wealth, which created conditions for people that were totally unacceptable. In order to ameliorate the condition of the people, it was necessary for central government increasingly over more than a century to centralise the processes that would create an equality of adequate public service. It was a very benign and necessary part of the evolution of parliamentary democracy.

However, if the intention was benign, the consequences were not quite as happy. First, because it was very largely public sector-driven, the people who had created the wealth in the first place were marginalised, and in the process of decision-making they were largely eliminated over a very long period of time. Secondly, the process of redistributing the money that had to be collected locally to provide the services that were required led to a fragmentation of function in the great spending departments of London. I can remember only one occasion in my entire political career when the subject on the agenda was a city, and it was Liverpool after the riots of 1981. Many discussions took place about housing, policing, education and whatever, but at no meeting I can remember did we sit down and ask what we should be doing about the totality of this vital community called Liverpool, Leeds, Birmingham, Manchester or whatever it may be.

So the functionalism of the central process was extremely fragmenting in the application of opportunity for those areas. Frankly, and in many ways more sadly, it created a culture of deference, because the weight of money flowing back to local people and local communities was so heavy and the systems by which it flowed back were so intrusive that the culture that developed at local level was, “Tell us what to do” and “Show us what you want”. The willingness to challenge the central machine became inbuilt into the assumptions of too many people living in our great cities.

The consequence of all this is that in this country we have devised a system of government unlike any other advanced economy. There is no economy of which I am aware—it may be that other noble Lords have a different experience—which has so concentrated power in its capital city and dictated by circular, edict, specific grant or ring-fence the precise detail in which a commonly devised formula is imposed on the whole of the economy. Noble Lords will realise that this Bill is about creating a better balance. It is not a revolution. Noble Lords who have spoken so far have talked about what has happened in the past, and there are many examples over the years. I know that the noble Lord, Lord Prescott, was very interested in this subject. The Labour Party can claim credit for creating the mayoralty of London.

I heard the noble Lord, Lord Shipley, make the proud claim that it is 40 years since he was first elected a councillor. I have to tell noble Lords that it is 45 years since as a junior Minister I entered the DCLG where I now have the honour to be a special adviser to the Secretary of State. I am glad that nobody has taken the trouble to look at the preposterous and ridiculous things I said about local government—that I created councils, destroyed councils and changed boundaries. All these things I did in the name of better governance, I said at the time. I come before your Lordships’ House today as a sinner that repenteth.

The precedent of the London mayor has been an exciting one, and no one would take it away, but there are many other mayors today. There is a Mayor of Liverpool. Nobody asked for a referendum in Liverpool. I disagree with the noble Lord, Lord Shipley, on this issue. A former Labour MP is now the Mayor of Leicester and is doing, so far as I can see—forgive the party politics—a perfectly acceptable job. Nobody suggested that there should be a referendum in Leicester. Built into the statute is endless provision for new mayors to be created within the existing framework of local government without a referendum, so why should we be preoccupied with this delaying tactic—because we know that that is what it will be?

Of course, the argument is that we did have a referendum, which from the point of view of those of us who believe in mayoral government was a disaster. Why was it a disaster? First, because it was completely controlled by the party machines, which were basically against anything that threatened their existence; and, secondly, because nobody bothered to vote. So on the idea that we are once again going to subject our great cities to a referendum—with perhaps the exception of Manchester, which has opted to take the leading steps towards one—I hope that when we get to Committee the House will come to the view that the opportunity, the prize and the timing are so urgent that we might be able to get on with the job and transfer power back to where we have taken it from over the past 150 years.

As I said, this is not a revolution. The last Government were, I think, extremely constructive. They worked with local enterprise partnerships, city deals, growth deals, the single pot and the northern powerhouse in pushing this agenda with determination and excitement. It is an evolution, not a revolution, but it is an evolution that is moving in a direction that will change the history of our country. There are things that will flow from it. First, there will be a massive potential saving in costs. I do not wish to trespass on the discussions about public expenditure cuts and the reviews that are coming; they would come under any Government, as we all know. But the fact is that with the local authority structure that we have today there is a massive overlay of costs, which will be challenged because the cuts that are coming will increase the pressure. They will not create it—the pressure is already there, and a whole range of dialogues are proceeding as to how local authorities can co-operate, amalgamate or whatever in order to cut not the services but the overhead costs of providing the services. That will be a benefit.

It is a huge change. Billions of pounds a year will be spent not because the functional apparatus of central London so designs but because local people say, “If we can spend it this way, we will get better results”—and that will build on the strength that exists in our communities and enhance the opportunities as local people see them.

It is a fact that it is a competitive process. There is no compulsion on any local authority or combination to come together to advance this cause, but if they do it will be by negotiation with central government, and in negotiating with central government they will want to ask basic questions about the administrative capability of the new structure to carry through the enhanced responsibilities that they will enjoy. That will mean that the new structure that emerges will have every incentive to diversify to encourage choice and to show ways in which it can do better than other competing local groupings—and that will raise standards as the more successful pioneer an enhanced form of service.

The next argument that flows from that is that if you distribute public money by competition, you get gearing. Many Members of this House will have been part of the process of the last 20 or 30 years in which we have shown increasingly that if you use money in a competitive sense—such as the urban development corporations, the City Challenge, the regional growth fund, city deals, the single pot—you get a significant enhancement of what the taxpayer can afford. The ratios are exciting; the most exciting of all, of course, was London Docklands at 10 times what the public had to pay, but the regional growth fund still returns something like five or six times what the taxpayer could afford. So although we talk of cuts—which, legitimately, members of the opposition party will want to do—the reality will be that in employment terms there will be no cuts, because the use of public money in a competitive environment, and the gearing that it will produce, will dwarf in increased employment the jobs lost in the public sector.

So there are many arguments in favour of the distribution of public money to the localities, but it is important to realise that this is not a take-it-or-leave-it, “Here’s the money; tell us how you got on” system. This is a new form of partnership and, whichever party is in power, it is entitled to see its manifesto implemented. Maybe the Government will have been elected to create more housing, or better health or higher education standards; whatever it may be, we are not in any way challenging the right of central government to have its manifesto implemented. What is different is that in the implementation of government policies the talent of the nation is involved in trying to do the best they can to implement that, as suits their own localities.

The devolution process is conducted by negotiation: by voluntary offers from the local communities in whatever form they want to combine, but then by agreement. One of the questions that they will have to answer, and rightly so, is: “What is the administrative structure that will actually carry out this new vision that you have put forward for your town, city, county or rural area?”. It follows that they may actually turn round and say, “Well, what is central government doing about the administrative way in which it deals with us?”. If one were a businessman, which of course as a politician one certainly is not, one would not accept one’s company being run in the way that central government runs its administrative relationships with local communities. So in asking local authorities and local enterprise partnerships how they would reorganise themselves to carry the responsibility now being devolved, it might well be that they will turn around and say to central government, “Will you please do something about reorganising yourselves so that we have a central point of contact with whom we can do business?”.

I hope that the good will expressed by all noble Lords who have spoken today will be carried through in the implementation of the Bill. The country, as we all know, faces an ever more competitive challenge, but the opportunities out there are equally attractive. The Bill is about encouraging people all over the country to help this nation grasp those new opportunities for themselves, their communities and local people.

Photo of Lord Prescott Lord Prescott Labour 4:33 pm, 8th June 2015

My Lords, it is a great pleasure to follow the noble Lord, Lord Heseltine. His words are often beguiling but you have to look at the small print. He has an excellent reputation for urban development in different parts of the United Kingdom, for which I give him credit. He was the man who welcomed me as a Back-Bencher on my maiden speech, so we have both been around for a bit. I recall that when I was in a Labour Cabinet, I had to get the Cabinet to agree to rescue his Dome, which turned out to be profitable, and then I had to rescue the Channel Tunnel rail link, HS1; it had collapsed in the private sector but the public sector solved it. So he and I have worked together to achieve some of the benefits of urban development.

It has been a great joy to listen to the noble Lord today but I have to say, when he talks of a “historic moment”, that he was in the Lobbies lobbying and voting against all the devolution proposals that were brought in by the Labour Government. Devolution in Scotland, Wales and Northern Ireland and a Greater London Authority with an elected mayor were all brought about by a Labour Government. Therefore it is not that historic at the moment; it has been there for a while, and most of it, with the noble Lord’s help, was basically abolished, or voted against, by the previous Administration.

I am therefore delighted to be here in a debate talking about devolution and how that can affect the north in particular. Again, the noble Lord, Lord Heseltine, has helped the development of the north a great deal.

No Stone Unturned was a very important document that advanced some of the arguments he has just given. He always has solutions—except for the time he got kicked out of the Cabinet, but I will leave that alone at this moment—that are well thought-out and well respected in the areas they operate in.

I want to say to the noble Lord that devolution started two decades ago, and this is an extension of it. It is not the same kind of devolution; it is in a way considerably different from the kinds that we developed. As the noble Lord probably knows from the past, in 2006, when I was the Secretary of State, we produced the Northern Way. Everything in the powerhouse of the north was embodied in that document. So when they say, “Ah, the powerhouse of the north!” it is not original or historic—we did that 10 years ago. The real problem is that the Liberal Democrat and Conservative Government abolished it. As soon as they came in, in 2010, the Chancellor got rid of it and the regional development agencies—I suspect that the noble Lord, Lord Heseltine, rather admired them as a body; they did bring things together—but today this Government have taken that in a different direction.

I want to make a historic point about the documents produced at that time, but we are thankful that we are now moving to more decentralisation. The analysis given by the noble Lord, Lord Heseltine, on centralised government is absolutely right. I have felt that all my life here in Parliament. I was given the job by Michael Foot, who was the leader of the party in 1980, when we failed in the first referendum for Scottish devolution to find a solution for the English regions. The north-east, as the noble Lord, Lord Shipley, said, was very annoyed at how many powers could be given to Scotland but not to the north-east. I admit to my failure: I could not convince the Labour Government to give similar powers to English regions as they had given to Scotland. We gave them a referendum and we failed in the north-east, largely because I could not convince my colleagues to give more powers.

The situation now is very different. The position in Manchester now is about what was effected in Scotland. People say, “Right—we want these powers for the English regions”, and I fully support that and think that is right. However, as to how you interpret that, we must wait for the debate that will happen on how the resources are to come and what the powers will be. There will be some disagreement about turning local authorities into premier, championship and lower local authorities, all of which will now be given different powers and resources. On saving money, I can remember the other change in local government—I have been around long enough—when the county local authorities were set up. They did not save money; they cost a lot more in the end, and they had to be broken up in the main. Therefore, there are many lessons to be learned.

I will end on the point about the local and combined authorities. I am sure that it will be known to the noble Baroness, Lady Williams, because it is about what the noble Lord, Lord Heseltine, has been involved in, on which we are now again joined with him: how you unite the ports of the north. Hull and Manchester are on a great corridor, not just for Britain to go to the

European market; we are beginning to see an Atlantic super-port in Liverpool, with big container wharf developments; international negotiations are now taking place on the new American trade between the US and Europe; and there is the development and growth of the East, and the big consumer market in Europe. That land route between Manchester and Hull will be one of the big global corridors, which is very important.

The problem for me, now, is that one port—Merseyside—is in a combined authority, while Hull is not. It is always left on the side—we do not deal with Hull. When you look at the transport policy that was produced by those combined authorities, it stopped at Leeds. It never came into Yorkshire or saw the East Riding. If you want to develop a port strategy, which would be a great asset for the north, you need to develop both ports. The Humber is becoming a massive energy base for renewables and is a major port that looks to Europe, while Merseyside looks to the Atlantic. They are the two important ports. So what is my complaint? My complaint is that, as we have found already with the transport document produced by the combined authorities, they can only really begin to opt in people from Hull and other areas but these are not part of the decision-making process. With two big gateways like that which are connected for trade and transport, it is stupid to have one authority that has the power and resources and is combined authority, such as Liverpool, with massive investment from the Peel organisation, and the other authority in Hull which is not included.

I want to put a question to the noble Baroness, Lady Williams. I do not know whether she realises that she attended one of my meetings where I made this argument, and I hope that that does not damage her career. However, it was very good that she came to Hull, which involves a long journey. Hull wants this development but it cannot get into the game. It has already written to Richard Leese and asked whether it can be included as a city region but it has been told, “No, you can’t”. Now it is expanding. Cardiff, Birmingham and Glasgow have been brought in and there is now a big national grouping of authorities. They are the ones that will really have the influence on government, and they are the ones who are promising to have a Lord in charge. I mean a mayor in charge, although it may be a Lord—who knows? Basically they need to be on the same footing. I have a letter from Richard Leese, who is now the chairman of all the combined authorities and whose name is on my Northern Way document. Basically, Richard Leese has said that city regions such as Hull—and there are many others—cannot get into the game when the priority is being given to the combined authorities.

I have a question for the noble Baroness. The notes to the Bill say that certain authorities can, under order, join in. A commission in Hull has just reported. The arguments between Hull and Beverley are in the past; they have come together. The first combined authority was developed in 2006, when we were in government, so the current Government are not unique or historic in that respect. There is now talk of Leeds being involved. Leeds is looking at how to have a big North Yorkshire authority, involving the whole area and the authorities in Humberside. How would that work? Would they just make an application—a promise to have an election for a mayor? Of course, with decentralisation the Government tell you what you have to have, but I will leave that to one side. Authorities want to know how to do that, and not only Hull—a big one will be put together if it goes in with Leeds. How will that process work and how long will it take? I feel it is important that local authorities are given these answers.

Hull just wants to be in the game. It is an important gateway to Europe and there is an important trade barrier. Hull needs to be part of this. It is always being left aside as a fishing port. Well, it ain’t now; it is a major port crucial to the development of the northern economy. I do not care whether you call it a powerhouse economy—the northern powerhouse—or the northern way. We need to get on with the investment. That is an essential part of economic and transport development, coupling with what is happening in the London of the north—namely, Manchester. Perhaps the Minister can give us some information about that.