Local Government Independence
7th November 2012
If we can but see it, our politics is now pregnant with new life. Three of the four nations of the Union are producing the exciting, creative fruits of devolution. England, the last country in the empire still ruled from Whitehall, can join the family of devolved nations in a stronger, modern Union. Local government in England is ready to start its own exciting and challenging journey of independence. All such births are difficult, and a separation from Whitehall will be no exception, but I hope that we all, especially the Minister, can be welcoming and professional midwives to help with the delivery. Over the past year, the Political and Constitutional Reform Committee, which I have the honour to chair, has been conducting an inquiry into the prospects for codifying the relationship between central and local government. Previous inquiries into the balance of power between central and local government have all found that power is hopelessly skewed towards the centre and away from the localities. The House of Lords 1996 report, “Rebuilding Trust” and the more recent 2007 report by our sister Committee—the Communities and Local Government Committee, with which we have worked closely on this issue—entitled “The Balance of Power: Central and Local Government” were excellent but largely ignored by the then Governments. This Government are relatively new, but they are committed to localism and have the chance to make this happen on an honest and sustainable basis. My all-party Select Committee decided that it wanted to do something to follow on from those reports, but something beyond lamenting local government being bossed and bullied, so we commissioned a draft statutory code to manage relations between central and local government, to define the relations more accurately than ever before. The code is out to public consultation, and the Select Committee has received a record 89 separate responses. The responses are mainly from councils and councillors, with the vast majority in support of setting the relationship down in statute and supporting it by means of entrenchment, which I will talk about later.
We have also been working closely with the Local Government Association, and I thank its chair, Sir Merrick Cockell, all the political parties that have supported the initiative at LGA level and the staff and others at the association who have worked so hard with us. They have helped to set up many events up and down the country, and Sir Merrick, many other colleagues and I have helped to raise awareness of the consultation among local councillors and local people. I took part in events at all three political party conferences, which I think was well beyond the call of duty, but none the less an enjoyable experience. Wherever I have gone, I have been overwhelmed by support. At first, there is some disbelief and scepticism, and then, when people get a bit of confidence, they say, “Why can’t we do this? Every other western democracy does this, so why can’t we go for greater localism and autonomy in our local areas?” I would like all political parties to consider, through their internal processes—including the coalition partners through their mid-term refresh—the advantages of a statutory code, so that local government can benefit from a constitutional protection and be given an unchallengeable right to exist. At the moment, local government is just the creature of parliamentary statute, and it could be abolished over night if the Executive power wanted that. That does not occur in any other western democracy. We are not the market leader; we are the odd one out in not having local government on a firm, long-sustainable footing.
Such a code would fundamentally reboot the relationship between central and local government, making the latter an equal partner, with a guaranteed share of the income tax yield, instead of, as is all too often the case, little more than a delivery arm of central Government. I can, if the Minister wishes, go into the financial side on another occasion. That side will obviously be tender and difficult, but this can be done, and done simply and without changing the rates of taxation or the means that we currently employ to equalise. It is the least-disruptive option, and it clarifies and makes transparent the line of account of the money, which will be a tremendous boost for local politics and for people who want to get involved in it. Moving to create the rate support grant as a single funding stream for every locality is to be welcomed if the single pot is ultimately floated off from the centre and owned totally by the localities. Let there be no more dabbling and no more meddling; let people get on with the job as they see it locally. Previous attempts to redress the balance of power have had no legal force and have been little more than window dressing. The 2007 central-local concordat quickly fell into disuse, and European declarations about local government have all gone the same way. The Government commit to localism, and I commend that—it is laudable—but the concept that I am putting on the table today and that the Select Committee and the LGA have opened up for discussion is to take localism another step forward. The city deals and the power of general competence are important steps towards the goal, but we cannot stop there. We all know that unless we press on towards independence the centralisers will claw back every power ceded, as they always have. There is no steady state that we can have here—we will either move forward or slip back—and I very much hope that consideration will be given to the next step on this long road. The Minister and the Secretary of State for Communities and Local Government are, like me, instinctive devolvers, but the Minister knows that despite the best efforts at political level, the Whitehall default position of control and micro-management automatically generates legislation, guidance, advice and budgetary leverage, which inevitably centralise power. Just this week, £150 million is being nationalised from the local early intervention grant, and I could give many other such examples. Whitehall just cannot help it. Temptation has to be put beyond its reach, and then councils will be able to propose the solutions that best suit their areas and their economic circumstances. A statutory code for relations between local authorities and the centre is the key defence to protect a new settlement for local government. However, it is essential to entrench such a statute to protect it from easy repeal. That is the next step—not just a statute but entrenchment —and the most obvious way to do it is with a simple amendment to the Parliament Act 1911, to protect the rights of local government. We would then have someone other than the Executive looking after the interests of, and keeping an eye on and keeping secure the rights of, local government. England is getting ready, and national politicians need to give it a voice. Independence for local councils is an obvious answer to what I think we are now calling, more and more, the English question: what form should devolution take in England now that other nations in the Union have their devolved settlements? As we look across our borders and see the legislative and financial powers available to devolved assemblies and legislatures, English citizens are correct to ask for their rights over devolved power, too. If Wales can decide to forgo spending in one area and win over the consent of its people, to provide free prescriptions let us say, why not Essex? If Scotland has no university fees, why cannot my constituency of Nottingham North, which sends fewer young people to university than any constituency in the UK, think about how we might do something similar to improve the situation?
If local government were independent, local people could make those choices for themselves. Local elections, local parties and local interest would be rejuvenated at a stroke; good people would come back into the localities. We all know that parties from all points of the political spectrum are hollowed out, which is sometimes reflected by the interest of councillors and ordinary citizens in the conduct of local government. That interest might be massively revived if we give clear power and finance to the localities.
Our draft code, which can be accessed on the Committee’s website, does not pretend to be perfect—it would need a lot work to be turned into statute—but it encompasses the broad principles of equality and autonomy that are an essential starting point. Having spoken to the Secretary of State, I know we need to deepen the dialogue with citizens across England on what independent local government could do for them directly. On the economy, I hope that our friends in the Treasury will realise that there is more potential in macro-management than in micro-management and that independent local government could play a serious part in the economic revival and health of our nation. We should tackle our economic problems with both hands, not just the central one. Lots of options for progress exist. Part of my objective today is to ensure that the Minister, as I know he does, understands that there is not just one way to go and that there is not just one answer. A dialogue might find a way forward on a broad front. The mid-term refresh is an obvious place to do that, as are manifesto commitments from all parties, a draft Bill or an all-party agreement—imagine that—on implementing independence. Lots of options exist, and there are lots of ways forward. Much remains to be done, and I am not asking for a snap response; indeed, I am asking for the opposite. Our Select Committee inquiry has yet to report, but it has uncovered a new thirst for freedom and a practical desire to work closely with central Government to evolve something for the future.
I ask the Minister to note the work of the Select Committee and the LGA and to encourage further thinking by the LGA and councils in open dialogue with his officials. I hope that he receives our report before Christmas and that, perhaps after the Christmas pudding, he is able to ponder further how we might ease the birth of independent English local councils that are finally liberated from the dead hand of Whitehall and can make the sort of contribution to our local and national life that is commonplace in all other western democracies. That could be the prelude for many happy new years to come for central and local government—not an unhealthy, unsustainable relationship, unique among western democracies, of dominance and subordination, but an adult, mature and democratic relationship: a partnership of equals working together for the common good. That will happen one day, and I hope the Minister, through thoughtful consideration, will ensure that it happens sooner rather than later. The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis): It is a pleasure to serve under your chairmanship, Mrs Brooke, particularly when we debate a topic that I know is dear to your heart.
I congratulate and thank the hon. Member for Nottingham North (Mr Allen) on securing the debate. He and I have had some conversations on this topic in the few weeks since I took on my post, and I think we share a view that we must—and we want to—disperse power in our society. I acknowledge the work of his Select Committee and the parallel Local Government Association campaign to ensure that we do what we can to ensure that we devolve power and empower local government. The stated aim of the Select Committee’s inquiry is to “explore constitutional and practical issues around the possibility of…writing down the principles and mechanics of the relationship between central and local government.” The code is intended to strengthen the position of local government within the constitution and to provide a degree of protection from over-regulation. I am sympathetic, as the hon. Gentleman knows, to those aims. As things stand, however, and as I think he is aware, I have some concerns. It is only right that I outline those concerns before moving on to areas where there is probably more consensus. There are problems with the terms of the practical application of the code and, more fundamentally, with the constitutional issues that might arise. I am not convinced that the solutions to the imbalance of power in this country should come from a single piece of legislation. What is required is sustained public debate extending beyond those people with an interest in local government, and practical reforms that shift powers into the hands of residents. The proposed code would create a binding legal document that defines central and local relations, and of course we would need primary legislation for that. As proposed, the code would need to have the same status as the Parliament Act 1911, which would, in effect, remove the supremacy of the House of Commons to make and change primary legislation. That would be the core aim of that piece of legislation. The proposed code also states that central Government shall not restrict in any way a council’s powers to issue whatever taxes it wants. That would further limit Parliament. That Parliament determines the level of taxation in this country is a core principle at the heart of the British constitution.
As the hon. Gentleman mentioned, there are macro-economic considerations. New local authority taxation cannot be viewed in isolation, because it would affect the UK’s competitive position, depending on how that is structured, in the global economy, as well as the overall state of the nation’s public finances, and the local communities themselves. In addition, it is difficult to see how the proposed code offers greater power for citizens to hold their councils to account. I am sure the Select Committee will reflect further on those and other issues during the consultation exercise. I look forward to reading the final report with my Christmas pudding, as I have been so kindly invited to do. No doubt we can discuss the report over new year’s eve drinks, too. Mr Allen: I thank the Minister for the spirit of his remarks. On the macro-economic problems that might occur and the anxieties that the Treasury may have about local government raising its own funds, whether through bonds, hotel tax or whatever, may I leave with him the thought that we have considered the matter seriously? Perhaps he might commission some research, from either his Department or the Treasury, on the way that every other democracy gets around such difficulties, rather than lumping them into the public sector borrowing requirement and saying, “We cannot therefore do it.” How do other people do it? Everyone seems to get around this apart from us. Will he undertake to consider the possibility of a proper research document? Brandon Lewis: I take the hon. Gentleman’s point on board. I have looked at some of that in the past, particularly taxation on tourism in local areas. There are differences. We have to consider such things as a whole. For example, we do not have a VAT discount for tourism, unlike some of our European partners, but they effectively charge VAT on food, which we do not. There are swings and roundabouts, but I do take the point.
The Government have acted on the need for public debate and practical reforms. Between them, the Localism Act 2011 and the Local Government Finance Act 2012, which introduced business rates retention, give local authorities a much bigger stake in their local economy by greatly increasing the opportunity for them to benefit from growth. Allowing local authorities to use that money incentivises economic growth. Local government now has an even more distinct role to act as an autonomous political institution in building and leading communities. With the community right to buy and the community right to challenge, there is far more opportunity for communities. As the hon. Gentleman mentioned, we want to see as much involvement in communities as we do in the councils and other institutions. Moving power out into our communities is partly about empowering our communities and the people in them. For me, it is not about getting caught up in the dogma of power having to be in a particular institution—but that moves me a little from the point. Mr Allen: If the Minister is happy to have a dialogue, he might concede that individual citizens’ voices at local level are more likely to be heard if that is structured by local councils and local authorities, who are closer, rather than by Whitehall. Might he have a moment in his incredibly busy schedule to read a fairly brief article in The Independent by Philip Blond and me? We went into a little more detail about the potential for a blossoming of neighbourhood councils, parishes and many other forms of even more local administration, which, to be frank, Whitehall is not the best engine to promote. Brandon Lewis: I will have a look at that article. I will look it up, unless the hon. Gentleman wants to e-mail it to me, so I can have a quick read directly.
The hon. Gentleman makes a good point. That is one area on which we have a huge amount of agreement. I am on record saying that we in Whitehall do our job of empowering local authorities and localism best if we have the courage to move power out to local communities and local authorities—to our county councils, metropolitan councils, unitary councils, district councils and, in essence, our town and parish councils. People in local communities, even if they do not have a parish council, can come together as a neighbourhood group. We are making it easier for them to set up neighbourhood groups to get the things that matter to them in their community done, without necessarily having to move up to a big scale. It is a fair point. The whole drive of the Localism Act 2011 was the recognition that the people in a community are the best people to decide what their community needs, and are often in the best position to do so in the most cost-effective and efficient way. A huge amount of progress has been made.
It is no secret that this country, as the hon. Gentleman said, has one of the most centralised systems of local government finance in the world. Through the Local Government Finance Act 2012, which received Royal Assent last week, we have put in place proposals to encourage local economic growth, reduce the financial deficit and give local communities and local authorities greater control over their resources. There are strong incentives, therefore, to cut fraud, promote local enterprise and encourage more people into work, and a range of measures that we introduced in that Act and the Localism Act 2011 build on that. The country has been and is still facing a large financial deficit. Local government has its part to play in both dealing with that deficit and driving growth in local communities. We know that by giving power away, we can free authorities to focus on the priorities that matter most to their communities and to achieve more and better for less. Under current financial arrangements, for example, councils see no reward for any growth from business rates. By retaining 50% of them in future as a starting point, together with 50% of any growth, councils will gain autonomy over the finances in their areas. Our analysis indicates that that alone could generate an extra £10.1 billion in GDP in the next seven years. Although central Government will be able to share some of the reward from positive growth, it will bear some of the risks. Mr Allen: On an almost tongue-in-cheek point, comparing the propriety of central Government with that of local government, I do not think that local government has ever led us into a recession, increased interest rates or led us to high inflation. Local government has a good record in terms of its credit rating and of being prudent with taxpayers’ money. Central Government may not be the body to lecture local government on propriety—although that might be going beyond the spirit of partnership. Perhaps we can all learn from each other. Brandon Lewis: I am determined that we will maintain this good spirit of partnership. The hon. Gentleman has done superb work, both cross-party and across a number of different organisations and agencies, to bring the issues together and secure this debate. One of the most important parts of this work—today’s debate is a good example—is getting the debate going and getting the conversation out into the public domain. The more we talk about it, including about how to move power out, and whatever the format it develops into, the better it will be for our communities.
The hon. Gentleman will bear with me when I say that some years ago I was a council leader. We took over from another party, whose council tax rises were approaching 20% per year. My residents would have had a different view on their balancing of finances.
I am aware of the time, so I will close by outlining a couple of things that I hope can take us forward. Following the end of the Select Committee’s consultation and this debate, there will be time to reflect on the proposition that addresses the concerns that I have outlined and to illustrate in practical terms the benefits for citizens. A fair bit of that has been done this afternoon. This Government believe strongly that local authorities are capable and willing to take on the challenges and opportunities now being created. Some are grabbing the opportunities with both hands and running with them. That is how we can strengthen our democracy, revitalise our public services and underpin our prosperity as a nation. As the hon. Gentleman said, we have a chance now to move forward or slip back. I hope that we run forward. More to the point, I hope that rather than our driving something, local authorities take the baton and run with it, make the most of it and challenge us about what can come next. I will certainly take on board his three specific requests. He asked first that I note the work. I do, absolutely. Secondly, he asked for further dialogue, and I am happy to engage in that. On his third request, I would never refuse to receive a Select Committee report, and I look forward to seeing this one. Question put and agreed to.