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Local Government Finance

Part of the debate – in Westminster Hall at 10:26 am on 3rd April 2001.

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Photo of Tom Brake Tom Brake Opposition Whip (Commons), Shadow Secretary of State for Communities and Local Government, Liberal Democrat Spokesperson (Communities and Local Government), Liberal Democrat Whip 10:26 am, 3rd April 2001

I congratulate Mr. Darvill on securing the debate. "Justice for Sutton" has a nice ring, and something might be germinating there. We had the first phase of the "Justice for Sutton" campaign when I took an all-party group of local councillors to see the relevant Minister to express concern that, on the present grant, the London borough of Sutton cannot deliver the education or community services that residents want.

I welcome the opportunity to debate local government finance. Perhaps it is not the most media-grabbing issue, but it is of great concern to local residents, whom it seriously affects. As the hon. Member for Upminster pointed out, one could make this a much more controversial debate about public-private partnership for London Underground. The appropriate Minister is here, and such partnership is a means of funding local government services. Does the Minister advise local authorities to pursue public-private partnership arrangements for the long-term financing of council services?

We could make the debate different again by extracting the "local" and the "finance" to end up with "Modernising government". Today's debate could have touched briefly on the need for a fixed term for a Parliament. We must discuss that in this Chamber at some point.

The Liberal Democrats broadly support the aims of the reforms in the Green Paper, "Modernising Local Government Finance". Local authorities need a strong democratic mandate from voters and the support and involvement of a wide range of local stakeholders, as well as clear, forward vision and firm leadership. We agree with the hon. Members who have said that local authorities can achieve nothing without money. We must get financing right and fund all local authorities adequately.

Local authorities should have a greater say in what constitutes adequate funding. The standard spending assessment is unloved and based on projections that are up to 10 years old. If local authorities had a greater involvement in the funding process, some of the authorities in the south-east to which hon. Members have referred could have the necessary resources to tackle their serious problems, such as attracting teachers and social workers.

We support the continuous improvement in service quality. We support predictability and stability. Local authorities cannot plan ahead with confidence if they are subject to large or unexpected variations in grant, or take on additional responsibilities, perhaps at short notice, without the adequate level of funding required to deliver them. We support the need for local authorities to have real financial freedom and responsibility, but do the Government?

The Government's Green Paper states that local authorities need clear forward vision and firm leadership, but when local authorities provide firm leadership, they are slapped down by central Government. I shall cite my borough as an example, for which, like other hon. Members, I apologise--it is the borough that I know best. The London borough of Sutton carried out a consultation a few years ago asking local people what local government structure they wanted. My authority expressed its preferred option; it showed leadership, in other words. It had thought about the issue and suggested proposals. However, the local authority was sent off with its tail between its legs and told to rerun the consultation because of having expressed a preference--so much for allowing local authorities to demonstrate leadership. It is hard to believe that the Government are committed to giving local authorities real financial freedom and responsibility. We should allow local authorities to make their own decisions and their own mistakes, for which they may subsequently pay via the ballot box.

The Green Paper refers to the need to be fair to those who need and pay for local authority services and to ensure that people are fully protected. I hope that the Minister will explain what that means and from whom local residents need to be protected. Is it a code word for what used to be called loony left councils? Accountability for financial decisions needs to be clear. If council tax increases are excessive, or services underfunded, people need to know why. It should be clear to people whether council tax increases are a result of something that the local authority has done, or of central Government cutting the grant, or whether they are due to central Government passing on responsibilities to the local authority without giving it the necessary funding to allow services to be delivered.

The Minister will have seen chart A in the Green Paper, which shows a 4 per cent. increase in revenue support grant in the year 2000-01. Will he confirm what the increase would be if it were weighted in favour of additional responsibilities that local authorities have had to take on? What sum will the real new money be that local authorities will receive? The process of Government finance should be intelligible and transparent to stakeholders. No one could disagree with that. At present, few people understand the way in which local government is financed or realise the impact that the level of grant from central Government has on services.

The Green Paper refers to partnership working, which is again something that we support. We also support consultation, although referendums have to be handled carefully. Local authorities embarking on referendums need to be careful about the promises that they make and how binding they will be. When committing themselves to a council tax increase of a certain percentage, they need to be careful to take into account outside factors, such as the Ken Livingstone factor on precepts, and the impact that that could have on services.

The Green Paper refers to people being held to account if services are not being delivered or are inadequate. That is all well and good, but it is not easy to hold people to account in a first-past-the-post electoral system. My local authority has a massive Liberal Democrat majority, which I hope will continue for years to come, but under the present system, there is relatively little scope for people to achieve a change in local government. It is difficult to hold people to account under that system.

I accept that some progress has been made. It was right to move to a three-year spending round to give local authorities some stability so that they could see what was coming over the horizon in budget terms. However, there have been some unwelcome developments, such as the increase in the use of ring-fenced grants, or grants being given to specific bodies. Does the Minister think that central Government giving grants to schools results in greater clarity in financial decision making or responsibility? Does that help people to understand what is happening with local government finance?

The Green Paper contains much more that is welcome. Liberal Democrats aim to restore local government independence, which can be achieved in part by modernising local government finance. Will the Minister consider local income tax as a means of making accountability much clearer? How can that be achieved other than by shifting the balance of how local tax is raised, from a central Government grant to local people paying for local services and seeing that clearly in local income tax bills? Before anyone starts distributing leaflets saying that council tax will be increased threefold, taxpayers would be compensated by equivalent reductions in national income tax.