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Local Government Finance

Part of the debate – in Westminster Hall at 9:30 am on 3rd April 2001.

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Photo of Mr Keith Darvill Mr Keith Darvill Labour, Upminster 9:30 am, 3rd April 2001

It is a privilege to open this important debate on modernising local government finance and on the Green Paper on the subject that was published on 19 September. The Green Paper sought views on the Government's aims and proposals for modernising local government finance and invited responses by 8 December. More than 16,000 responses were received, which must be a record--I myself responded in detail. I look forward to seeing the White Paper later this year. While hon. Members had that opportunity to respond to the Green Paper, it is also useful for Green and White Papers to be debated in the House whenever possible. It is by such listening and debate that hon. Members can formulate ideas and opinions. Perhaps naively, one is also ever hopeful of persuading Ministers that general and specific proposals have merit and will be adopted as policy.

In addition to the broad point of principle about the opportunity to debate important issues such as this one, I was struck by the number of hon. Members who wanted to participate in the revenue support grant debates earlier this year but were unable to do so. It was disappointing that the Opposition insisted on separate debates for the special grant report and the rate support grant, leaving limited time to explore individual constituency grievances. Despite considerable latitude by the Deputy Speaker, the House had inadequate opportunity to debate this year's revenue support grant.

That small but important issue is relevant to this morning's debate. Hon. Members believe that the existing system is defective and will no doubt use this and other forums for debate to argue for changes based on experiences from their own local authority and perhaps their own experiences of local government. I hope that they will not only dwell on the defects but comment on the alternatives, particularly those set out in the Green Paper.

In his foreword to the Green Paper, my right hon. Friend the Deputy Prime Minister said:

"Our local government finance system is complex. Few people make the effort to understand it. Fewer still succeed." I am not an expert on that system and, indeed, have not fully understood it, but I am one of those few people who have made an effort to do so. I am convinced of the need for reform. Change should not be delayed beyond the timetable required to consult, decide and legislate because there is an overriding feeling that the existing system is unfair, has created many anomalies and is in need of urgent reform.

Unison, the union to which 1.3 million public service workers--including 850,000 in local government--belong, sent me a copy of its response to the Green Paper. That response, with which I very much agree, stated:

"We believe that the system of local government finance is long overdue for reform. We welcome the general approach which the Government has adopted in relation to the issue. For too long local government has suffered from the effects of cuts in funding coupled with restraints on freedom of action. The effects of persistent neglect can be seen in declining local services and underinvestment in staffing and infrastructure. Tackling these problems will require imagination and initiative together with the resources to really make a difference."

Local authorities play different roles and provide a diverse range of public services. A substantial proportion of local authority activity effectively involves the delivery of Government-determined services, on which there is little variation between each local authority. As the Green Paper states, local government implements key national policies at local level. I expect that few right hon. and hon. Members disagree with the aims of reform: to fund all authorities adequately; to promote continuous improvement; to provide a reasonable degree of predictability and stability; to provide balanced funding for local government's delivery of national priorities and targets, with real financial freedom and responsibility; to be fair; to clarify accountability for financial decisions because, if council tax increases are excessive or services are underfunded, people should know whom to hold to account; to be intelligible and transparent; to make partnership working easier; and to encourage consultation, particularly with local taxpayers.

Some progress has been made on a number of fronts. I welcome the increased level of funding; the inbuilding of certainty with three-year spending rounds; the moratorium on changes to the grant-distribution formulae; the replacement of compulsory competitive tendering with best value and of crude and universal capping with new reserve powers; and pilot schemes for local public service agreements.

Despite those improvements, there is still much to do. As the Green Paper admits, the grant system and capital finance systems are especially complex and opaque. As I have said, the case for reform is overwhelming. Despite what the Green Paper says, the current system, which has been in place for the past decade or so, does not fulfil its single, explicit objective: to ensure that council tax bills for properties in the same council tax band are the same everywhere in England. They could be if every authority budgeted to spend in line with its standard spending assessment. Nor do I agree with the general assertion that the system has been able to cope with substantial change in the structures and responsibilities of local authorities. Paragraph 3.2 of the Green Paper sets out four weaknesses that have become apparent.