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.

Stamp Duty Land Tax (Temporary Relief) Bill

Lord Greenhalgh Excerpts

2nd reading & 3rd reading & Committee negatived
Wednesday 18th January 2023 Lords Chamber

[Lord Greenhalgh (Con)]

My Lords, I thank my noble friend the Minister for that very articulate exposition of government policy around the desire to increase home ownership and how important it is to remove the barriers, not only for first-time buyers but for people who own their homes to be able to move. I thank noble Lords who have remained in the Chamber; it is always nice to have at least a few people here on what I consider a seminal topic.

The herd, if you like, gathered around the Levelling-up and Regeneration Bill—I would have been one of about 75 Back-Bench Peers speaking if I had participated in that Second Reading debate—but the key to housing is often what we would call the second-hand market. Some 90% of transactions in housing are, essentially, as with motor cars, in second-hand homes.

If you tax mobility, as you do through the stamp duty land tax, people tend not to move. My parents’ generation moved every seven years, but now people typically do not move at all. That often means that elderly people reside in homes bigger than they feel comfortable in. They may want to stay in the family home, but as you age it becomes harder to climb the stairs and so forth; even with housing adaptations, it is inappropriate for them, and they might like to downsize. That is often harder than we think because of an absence of retirement community homes. Mobility generally has shrunk over the decades. It is important that we bring about changes to increase mobility so that people can get on to and climb the housing ladder of opportunity.

I went to the House of Lords Library. I had never used it for research before, but I really wanted to see whether the Laffer curve applied—that if you cut stamp duty land tax, your tax take would increase. I thought that maybe it would, but I was absolutely wrong. It is obvious when you think about it; I have about 65 charts I could share with noble Lords but I do not think that would be particularly helpful. Essentially, the housing market is driven by the wider economy, but what you do see from the statistics is this: if you increase stamp duty, as we have done remorselessly in the decades from 2000 to the present day—except for this brief respite, and a previous respite for a period of time under Chancellor George Osborne—you will see a reduction in the number of transactions overall. That comes through very clearly. As soon as the first relief was introduced because of Covid, transaction levels in London rose from 4,800 to 5,300, and in the rest of the United Kingdom transactions also rose dramatically. While the tax take may not have, people were moving more, which I think is a good thing.

My first question to the Minister is: is there a longer- term commitment to reduce this tax on mobility so that we can see people moving and can get closer to the era when people could move more easily—rather than building sideways, upwards and downwards—to homes that are appropriate for their needs, so they have a bigger home when they have a family and then can downsize in their older years?

My next point is the other side of what the noble Baroness said about the north-east. Okay, six out of 10 properties do not pay any stamp duty at all, but this is a tax that falls on London. As a Londoner, I am conscious of the fact that, until recently, two-thirds of stamp duty was raised in London alone. That has dropped a little with the tax reduction to 55%, but we have to be cognisant that jamming up the London market is not necessarily good for our capital city or for the wider economy. We need to be aware that stamp duty is simply much higher than what we were used to. In the first decade of the 2000s, the highest you could pay on a property transaction was 3%, but we have seen that balloon over time.

I am delighted to support the Government on this. As someone who started in a town hall and worked through to City Hall, I know that it is important to create that housing ladder of opportunity: out of public housing into part-owning your own home to fully owning your own home. That is a noble thing to encourage, and I am delighted that the Government are setting forward, with a sense of consistency, the need to reduce stamp duty to land tax levels.

I have one last question, which was raised with me by the noble Baroness, Lady Watkins, about a nurse. We know that nurses struggle, but this nurse got a shared-ownership property, owning 25% of her home and paying rent on the remaining 75%. That tenure is not full-blown home ownership; it is not on the last rung but, if you like, the first rung of the ladder of home ownership. She is now looking to purchase a home further away but to fully own it with a mortgage. Does the relief that has now increased from £500,000 to £625,000 still apply to that move? Will she be seen as a first-time buyer? I ask the Minister to find out the particulars of that.

I congratulate the Government. Whether you are the right honourable Member for Spelthorne or the right honourable Member for, I think, somewhere in Surrey, both Chancellors are absolutely behind the idea that, over time, we must bring down the burden of this tax on the ability to move home.