Public Spending: Barnett Formula

Lord Greenhalgh Excerpts

Wednesday 15th March 2023 Lords Chamber

[Lord Greenhalgh (Con)]

My Lords, I chose to spend my evening talking about the Barnett formula in large part because of the arrival of the noble Lord, Lord Hendy of Richmond Hill. I watched him be an absolute supremo of London’s transport system, whether it was on the surface—he loves his buses—or underneath the ground on something called the Underground, and he ran that with brilliance over many years, serving different masters equally well.

I am also a huge fan of the noble Lord, Lord Shipley, despite our being on opposing Benches, because we are both ex-Procter & Gamble people. We like to keep our comments brief and have some data, so I will leave all the data to him and give some emotion on the Barnett formula: it is a bit of a challenge. Some of the changes we have seen to the formula over 45 years have been changes in the way that taxes have been devolved, which has meant that there has been some compensation in the size of block grants, because there are greater tax-raising powers for the devolved Administrations, and also welfare was devolved so, again, we saw some increases. However, the noble Lord, Lord Shipley, makes the point that the Government have essentially bypassed the formula and focused on population rather than need. The great clarion call from the noble Lord is to focus on fairness. I will make a case that the Government should focus not on a needs- based analysis but on an opportunity-based analysis.

One of the things I discovered being responsible for a small part of west London in an area of extreme deprivation is that the more an area presented itself as being needy, the more government would spend on the area and nothing would get better. White City had initiative after initiative, for instance, based on its need, because its index of multiple deprivation being in the top 5% in the country, with the White City estate being a particularly poor area, and nothing worked. However, when we focused, as the previous Labour Administration started to do, on opportunity, and brought the jobs, with the opening of such things as Westfield and by encouraging Imperial College to come and have its “lung to the west” in White City, when we focused on growth, the jobs arrived and people had the opportunity to get on in life.

I think the agenda around this needs to be not around how we cut the cake to be fair, but how we create greater opportunities. I disagree fundamentally with the thinking that local government should be just about resource equalisation, so we all have equal resources. I actually think we will get better civic leadership if we start life as a race. Yes, we should ensure that people start equally, so resource equalisation should be around making sure that the starting line is equal; that, I understand. But when it comes to civic leaders, if we want the Joe Chamberlains and the big civic titans who transformed Birmingham, if we want the leaders who will make the north-east as competitive as London, we need people who have the vision to do that. They need to do more than just worry about how needy the area is so that they can get more money from Whitehall.

Where I am sure I will get agreement from the Liberal Democrats, if not perhaps from the Opposition, is around the need, in this case, for some change in policy. At the moment, all the policy from successive Governments is around devolution, with a mindset that Whitehall is there to tell the rest of government, above the level of the United Kingdom, how to govern: they should act as an agency of Whitehall. I think that is entirely wrong. What we need to see, if we want grown-up civic leadership, is a decentralisation of government, a letting go from No. 10 and No. 11, and then we will unleash those areas.

I wrote about this when I was perhaps in my political prime, in 2010. This is a great book, I will give it to the first person who wants to read it, A Magna Carta for Localism written by myself, Steven Greenhalgh, now Lord Greenhalgh; Sir Edward Lister, now my noble friend Lord Udny-Lister; and Colin Barrow—I do not know what happened to him, perhaps he will arrive shortly. The argument is around localism: how do we ensure that we break down the command state, the inspection industry, the service silos and financial dependency, so that local areas, now that we have left the EU, can do this? How do we ensure that local areas have the power to raise the taxes that they spend locally? I am not expecting the Minister to give an answer to any of that, because it is a pipe dream, potentially, but it is the right way forward.

We need to change things. We need to think about opportunity. I have served at every level of government, in the town hall for 16 years, in City Hall for four years—alongside the noble Baroness, Lady Jones, who was my biggest fan, let me tell you—and in national government for two and a half years, on that Bench where my noble friend the Minister is sitting. I sat there for nearly two and a half years and I enjoyed every second of it. I have to say that what I discovered is that there are great opportunities, even today, in local government. If we create an environment where you have genuine civic leadership, where you are responsible for your destiny, where you can spend the money you raise and think about how to attract investment to your local area without the dead hand of Whitehall, I think we would get a far better leadership, whether it is from the Labour Party, the Liberal Democrats or the Conservatives. That is what I believe needs to happen.

We need to ensure that the NHS focuses on health but that local authorities deliver care, which they do anyway. They know about that: they have contracted and commissioned care for at least 10, 15 or 20 years— I do not know how long, but the noble Lord, Lord Shipley, will. We need to get the DWP focusing on benefits policy rather than unemployment, because the initiatives happen closer to home. Local government knows how to get people back on to pathways for work better than the dead hand of Whitehall. The police need to focus on cutting crime rather than on social care.

These are the things that need to happen to avoid multiple levels of bureaucracy, where we have a national strategy for violence against women and girls, a city or mayoral strategy that does the opposite of the national strategy, and a local strategy that does something different. We need a focus that avoids these overlapping bureaucracies and sets our town halls, our city halls in our great cities and local government absolutely free to drive a pathway towards opportunity and growth. Where I agree with the noble Lord, Lord Shipley, is that the start point needs to be equal, but then set them free. I believe that is the way forward. Then we will see a great era of municipal leadership.

With that call for financial independence, which I can see everyone agrees with wholeheartedly, I hope my noble friend Lady Penn can pick something up from my thoughts.