Local Government: Reinvigorating Local Democracy

Lord Adonis Excerpts

Thursday 15th June 2023 Lords Chamber

[Lord Adonis (Lab)]

My Lords, I follow on immediately from the brilliant speech by the noble Lord, Lord Young, on the subject of housing.

The single biggest failure of local governance—as opposed to local government; and therefore incorporating the role of central government in local administration—in the last 50 years has been the failure to build enough houses and the collapse in public housebuilding over that period. A striking statistic in the Economist last week was that, while Britain and France have roughly the same populations, France has 12 million more dwellings—37 million against 25 million. A large part of the reason for that is the collapse in the increase in the number of dwellings in Britain over the last 50 years, which has not been mirrored in other European countries.

The noble Lord referred to the 300,000 figure, which has a kind of mythical status in Britain: under Harold Macmillan in the 1950s, the housebuilding figure was 300,000 a year, but then it was revisited. When you look at the history of housing statistics, the striking thing is that the only period when England—I need to keep the statistics on Scotland separate—built 300,000 units a year was in the late 1960s and early 1970s, when about half of them were built by local authorities.

The noble Lord managed to make my noble friend Lord Liddle seem extremely young by pointing out that he had been on Lambeth Council many years before my noble friend. Of course, that was many years before Ted Knight, when it was held in a different esteem. I had the great privilege of being a 23 year-old member of Oxford City Council, but 15 years after my noble friend. The biggest and most striking difference is that, while he referred to a debate in the 1970s about whether Oxford City Council should build 300 or 400 units of housing a year, by the time I became a member of Oxford City Council in 1987, it was building no units at all. Housebuilding had stopped entirely on the part of the local authority.

There is always a plethora of issues, and the right reverend Prelate mentioned many of them, such as local engagement and how you engage local people more in decisions taken in their neighbourhoods. But if you stand back from the many other issues and look at the big, critical, strategic functions of local authorities and local governments, the one that stands out far and away in its importance is housing. There are clearly three elements to housing which need to be addressed. Again, if you go back to the late 1960s and 1970s, when 300,000 units were consistently being produced each year, about half were directly provided by local government. We need a debate about the extent to which that should start again. The noble Baroness, Lady Eaton, said that local authorities have started building houses again in recent years, but the numbers are tiny compared to the past. This requires radical reallocation of capital budgets and local taxation if that is going to happen—a point I will return to in a moment. I very much hope that the next Labour Government will take a much more dramatic, strategic approach to this.

There was something else striking about the 1960s and 1970s: it was not just that local authorities were big builders of housing on behalf of the state; the state itself was a very big builder of housing, through the new towns. The peak year for the building of housing in Britain since the war, when more than 400,000 units were built, was 1967; but it was also, symbolically and importantly, the last year when a significant new town was designated: Milton Keynes.

Milton Keynes went on to be one of the largest of the new towns; indeed, Milton Keynes has an economy almost as large as the city of Liverpool, which tells you a lot about what has happened to Britain in the last 40 years. From the 1945 Labour Government until the 1980s, the state was itself a major provider and strategic planner of new housing through the setting up of development corporations to build the whole string of new towns that were developed very successfully, most of them in the south of England: Harlow, Stevenage, Crawley and so on. The last one was Milton Keynes.

It is very striking and significant that, at the point the state instructed local authorities to stop building housing, leaving it entirely to the private markets—I regret to say that it was the Government of whom the noble Lord, Lord Young, was a part—the state itself also ceased to engage in housebuilding. I see the two as two sides of the same coin. A state that regarded itself as no longer engaged in the business of housebuilding, stopped designating new towns and stopped being engaged in the strategic development of housing also instructed local authorities to follow the same route. What effectively happened is that the state in the 1980s removed itself entirely from the process of housebuilding—not just from providing social housing, which is important, but from the strategic planning and provision of housing directly through the new towns.

A big subject for a debate—which is worth having—is whether there should be a new generation of new towns. It is not an easy decision to take. It would be in the face of massive resistance from many of the local authorities either adjoining these proposed new towns or of the towns that are proposed to be extended, as was the case with the original new towns after the war. It is also the case that, if it happened, most of them would be in southern England.

It is a debate worth having because it is perfectly possible that a better way of getting the same result is to densify cities and have significant new development there. If that were to happen, it would also involve a big change on the part of the state, because the single biggest owners of housing in most of the areas you would want to densify are the local authorities. Local authorities have generally been averse to significant densification of their own estates, which are predominantly post-war council housing estates, through the same democratic pressures that have been against development in more rural areas.

The third reason we have difficulty in housebuilding is the regulation of the private sector, which the noble Lord, Lord Young, referred to. That may be in part because of the planning system, although a very large number of planning applications have not been taken up. I think it is also, much more significantly, because of the failure of public/private partnerships. Where the provision of housing has been left entirely to private developers, their only concern has been the margins and yields they can get from those houses. If there had been public/private partnerships—maybe though housing associations in many cases or directly through local authorities in the development of many of the bigger housing projects affecting localities—the local authorities would have more leverage over the private developers to see that they actually deliver on the planning permissions they are seeking. They would also have much more incentive to give the planning applications permission in the first place, because they would be a party to them.

Standing back from all this, we need a revolution in our whole approach to housebuilding over the next generation. Otherwise, a whole generation of young people will not be able to access housing, particularly in London and the south-east, and we will see the disillusionment, which has been growing in recent years over the failure of government to deliver the basic needs of the people, increasing radically.

The fact that there is not even a department of housing at the moment is deeply telling and needs to be changed. One of the biggest and most important changes in the machinery of government that I think the next Government should make is to create a department of housing. All through the post-war period, until the recent past, there has been a department of housing. It was set up as a separate department, splitting from the Department of Health, in 1951. No one would think of putting housing in with health again.

The other big failure of governance affecting local government in the last 50 years has been the complete collapse in the sound system of local finance, which the noble Lord, Lord Young, also referred to. I am afraid that was also a result of misgovernment in the 1980s. The really terrible decision to replace the rating system with a per-head poll tax in 1989 led to a complete collapse in the system of local taxation, and the only reason why the council tax was thought to be an acceptable system was because it succeeded an even less acceptable system of taxation. Those of us of a certain age will remember the chaos and confusion created by the attempts to introduce the council tax in 1989-90, such as attempts to collect a per-head tax of nearly £500 in Hackney, and 20% of that from people who had no income and were on benefits. It was a project of mind-boggling ludicrousness, the only example of which I have seen since was by the next Conservative Government, which did Brexit. We have not recovered in local governance from the chaos and confusion created by the collapse in the rating system in the 1980s, the chaos and crisis produced by the poll tax and the introduction of the council tax.

The problem with the council tax is not just extremes—which the noble Lord, Lord Campbell-Savours, has made great play of—but averages. It is important to understand the impact that averages have on the council tax. Of the 10 local authorities in England with the lowest council tax, an average council tax at band D of just over £1,000, nine are in London. Of the 10 local authorities with the highest council tax—over £2,000 in all cases—only three are in London and the south-east. All the others are in other regions. At the moment, the poorest regions with the least capacity to raise money are the ones with the highest council tax, and the richest regions with the highest-valued property are the ones with the lowest. If levelling up was going to be anything more than a slogan, the first thing it should have addressed on local governance was the inequity of the council tax; there should have been a radical reform. But, of course, the Government were not prepared to do that.

The noble Lord asked—somewhat disingenuously, I thought, because he is a politician—why we still have 1991 valuations for the council tax. The answer is because no Government have wanted to go through a wholesale revaluation of domestic property since. It has been hard enough to do with business properties, and businesses do not have votes, but with domestic properties it has been very hard. I say good luck to the Government who decide to do a comprehensive revaluation that leads overnight to a systematic increase of 20% or more in council tax bills in London and the south-east.

The only way of dealing with this that will work is radical incremental reform. There has not been enough incremental reform. The Government of whom I was a part introduced one new band on the council tax; as the noble Lord says, there is a strong case for having two additional bands. I would introduce them in successive years, not all in one go. Reform of the council tax to raise more from higher-valued properties, which have grown disproportionately in value since 1991, is a very significant reform. This is the key point: if levelling up is to mean anything, that money should be redistributed directly to authorities in the Midlands and the north. If that were done, there would be a greater degree of equity quite quickly in the council tax system.

In respect of reforming business rates to localise them, it would be a very retrograde step if the localisation of business rates did not maintain a significant measure of equalisation across the country. I think we need to face the reality that, without that equalisation, you will get an even greater disparity in funding across regions.

The other big area that needs to be addressed in respect of local taxation, which the noble Baroness, Lady Eaton, briefly referred to, is devolving other property taxes besides the council tax. It seems to me that the case for devolving those taxes, particularly the large revenue from stamp duty, is unanswerable and would give a very big development incentive to local authorities if they were the recipients of all the benefits of what is essentially a development tax. It might also enable them to distribute taxation more equally across different heads, because the level of stamp duty is now excessively high and is a big obstacle to people moving houses. It might be that a shift towards council tax, if there were more bands, would be a sensible step in that direction.

Progressively reforming local taxation and making it more equitable is clearly absolutely vital to addressing all the issues raised in this debate. Unless local authorities have greater, equitable access to more funding, they will not be able to address all the other issues that need to be addressed or the crisis in the delivery of many local services.

I hope that when we debate these issues in 30 or 40 years’ time, we will not have this massive disparity in housing between Britain and France; we will at last have done something about council tax; we will not still be relying on 1991 valuations for property as the basis of our main local taxation system; and we will have radically addressed the important underlying message of levelling up—the drawing and pulling apart of London and the south-east from the rest of the country.