Communities and Local Government (CSR)

Lord Jackson of Peterborough Excerpts

Thursday 13th January 2011 Westminster Hall

[Mr Betts]

I agree with that. I believe there are statistics to prove it, although other Members might come to a different conclusion when looking at the same statistics. We had a discussion with Ministers about that in our evidence session. I shall come on to that specific point, which is an important one.

Moving on from the spending for the Department at the centre to local government budgets, there will be a 28% reduction in Government grant over the four-year period. I believe that that figure is agreed; I do not think that anyone denies it. Why is local government taking a hit that is much larger than the average reduction in Government spending as a whole? There is a slight feeling that it is because it is easier to give the problem to someone else to deal with rather than dealing with it oneself. Pass it on to local government: it will deal with the difficult job and someone else might be blamed.

[Mr Stewart Jackson (Peterborough) (Con)]

I hear what the hon. Gentleman says. However, given that the right hon. Member for Edinburgh South West (Mr Darling) committed to 20% revenue reductions before the election, and that, as I understand it, the policy of the Opposition is not to ring-fence any particular Government Department, it is clear that local government would have had to take substantial reductions if Labour had been re-elected. The difference is that the reductions have never been quantified by the hon. Member for Sheffield South East (Mr Betts) or any of his colleagues.

[Mr Betts]

I said at the beginning that I do not want to get into a long debate about the overall nature of deficit reduction, apart from saying that the Labour party has a different view about the scale—reducing the deficit by half, not totally eliminating it, over the four-year period—and the pace, which would not have been as great. We would not have started the cuts in this financial year, before the economy had properly started growing. There are differences.

However, I come back to the point that, whatever the average level of cuts across Government, there still has to be a justification as to why spending on local government—the money passed on by central Government to local government—is taking a hit that is much bigger than the average for all Departments. Why is that happening, particularly when local government has a good track record in making efficiency savings? If one looks at government as a whole, it was local government that led the way, even under the previous Government: 2% year-on-year efficiency savings were built into its budgets.

If one looks at the impact of government services as a whole, the services that are provided by local government are some of the most immediate to our constituents. They include services to the disadvantaged and those in need: social services care provision, aids and adaptations. They are about the quality of life: things such as parks, libraries and sports centres. They are about essential provision for daily life from which everyone benefits, whether it be refuse collection, street cleaning, highway maintenance, street lights—the kinds of things that everyone benefits from in terms of the taxes that they pay and the services that they get. Why put those immediate services for most of our constituents at more risk than the average in terms of cuts of Government spending as a whole? The Government must answer that question.

[Mr Betts]

I accept what the Minister says about the different ways in which figures have been presented, and I shall come to that in a second. I am not going to complain about or disagree with how that was done, because it is important to look at spending power, but I come back to the point that I made. If central Government are looking to cut their spending, why have they cut the resources that they pass on to local government by more than the average cut in central Government spending as a whole? That seems a reasonable question, irrespective of the issue of local authorities’ spending power.

The second issue is: why have spending reductions been so front-loaded? Local government has rightly complained about that. There is no doubt at all that there is front-loading: of the 28%, 10% is in the first year and 8% in the second. Local authorities, not just the councillors but the officials, say that the immediacy of the actions they have to take means that decisions will be less well made and there will almost certainly be less opportunity for the transformation of service delivery, which we all agree can make savings without the need for service cuts. It also means that local authorities will be pushed back into the salami-slicing approach, which Ministers say they do not want. I am not making a party political point. Authorities of all political persuasions—Conservative, Liberal Democrat and Labour councillors in the Local Government Association—will all say the same thing: that the pressure of front-loading will lead to a less effective and less efficient use of the available resources.

The front-loading will also mean that authorities have less chance to use natural wastage to save money, and will be forced, to a greater extent, into making compulsory redundancies, which are expensive; the money used to pay people to leave and to enable cuts to be made, could have been used to provide service delivery. We know there is an argument there. In the evidence session, the Secretary of State said he thought that the LGA figure of 140,000 job losses in the next year was wrong, but we never quite got from him what the right figure was. Nevertheless, there will be significant job losses.

The Government believe that £200 million of capitalisation will be sufficient to cover redundancy costs; the LGA says £2 billion. Even if the figure is somewhere in between, local authorities will struggle if redundancy costs are of that scale, because getting rid of people in the first year might not make savings and might actually become a cost. The offer that I think the Secretary of State made, that if he had to provide another £1 billion of capitalisation he would cut the revenue grant by a further £600 million, does not seem to be the best offer that local government has ever had from central Government on such matters. Indeed, I think the rather angry response to the evidence that the Committee received from Baroness Eaton on behalf of the LGA has been circulated. In it she states that her recollection of the discussions with the Secretary of State on capitalisation was slightly different to that of which he had informed the Select Committee. She could not understand why, if local government had to make necessary redundancies and wanted to capitalise that cost further, it would be penalised by the Government’s reducing the revenue grant. It would be helpful to have some comments from the Minister, bearing in mind the LGA’s response.

There is a very big issue here of the speed of the cuts and their front-loading, and the effect of that on local authorities’ ability to digest the cuts into their systems and make sense out of them, as opposed to having to salami-slice at least an element of the cuts and having to pay quite a bit of money out for redundancy costs that would otherwise not have been necessary.

I shall now respond to the Minister’s point about how the announcement was phrased. The Secretary of State obviously tries to get the figures down in his announcements, and I happen to agree that looking at spending power rather than at simply grant allocation is the proper approach. We still should look at the grant that central Government give as opposed to what they are doing to cut spending elsewhere in central Government, but it does matter in the end how much local authorities have to spend. When we look at the figures, however, we see a difference between the 8.9% maximum reduction in spending power that any authority has to face and the 0.1% increase that Dorset has managed to receive.

As my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) mentioned, there is a significant difference in the level of cuts and the reductions in spending power between the most and least deprived authorities. The figures that came out of the Library from the Scrutiny Unit show that the 10% most deprived single unitary authorities lost 8.4% of spending power and the least deprived 10% lost 2.2%. That is a significant difference. We have had a discussion about the Scrutiny Unit’s figures, and those figures clearly show a correlation between authority deprivation levels and how much spending would be cut. I do not think it is fair, but I accept, to a degree, that it is more difficult to protect authorities that have large grants because they are deprived, when grant cuts happen. I accept that the Government have done something, at least at the beginning of the process, with the £85 million transitional money to mitigate the problem, but whether that money will be available later in the spending round remains to be seen.

[Mr Stewart Jackson]

Surely, the hon. Gentleman misses a number of points. One is that he is not looking holistically at the cumulative picture over the past number of years of the grant settlement between local authorities in the south-east of England and those in the north-west and the north-east. Frankly, his Government, when in power, had the opportunity to deal with those issues through, for instance, working neighbourhoods funding, and only very belatedly disaggregated that into super-output areas to tackle the worst cases. They had that opportunity to tackle the underlying problems of social deprivation, but failed to do so.

[Mr Betts]

I do not agree. We can always have discussions and disagreements about the extent to which grant allocations are fair, and I do not think there has ever been a grant allocation about which some Member has not stood up in the Chamber and complained, saying that their area gets a raw deal. That will always be the case, no matter where we get to. What tended to happen during the spending settlements of the Labour Government was that it was Conservative Members from the leafy shires who tended to get up and complain that they were getting a raw deal and that Labour was doing too much to help deprived areas. That was the general theme of discussions. I think that funds such as the working neighbourhoods fund were, in the end, both reasonably targeted to help some areas of deprivation and reasonably effective. I accept that the Government have decided to abolish the fund and to incorporate it into the revenue support grant.

Fundamentally, this is a matter of principle: as long as a fair settlement can be obtained through the RSG, I am not against the initiative. Over the past few years, there has been a move—under the previous Government and now under this one—to reduce, and hopefully eventually to abolish, ring-fencing and I am generally supportive of that as a principle. With the proviso that the allocation is fair, it should be up to local councils, once the allocation is given to them, to determine how to spend the money in their areas. There will be certain statutory requirements, but essentially, as a move away from ring-fencing and towards a more open method of allocation, I am supportive of this.

--- Later in debate ---

[Mr Betts]

There is a role for different approaches to the provision of housing such as intermediate market rents, more private institutional investment in housing, or links between housing associations and private institutional investors. Those ideas are interesting, and I would welcome them if we were building social houses at existing rent levels at the same time. My concern is that the Government are withdrawing from that. The other ideas are interesting, and in some cases exciting. I support those ideas, but not to the exclusion of money for social housing or of funds to get all homes to a decent standard. I am worried about that, and my overall concern is that we are approaching a housing crisis. Levels of homelessness will rise as unemployment increases. It is not only a matter of Government funding being cut; it is about mortgage availability. With increased deposit levels, young people are not able to get on the housing ladder at present.

[Mr Stewart Jackson]

I hear what the hon. Gentleman says about the availability of housing. However, in a period of substantial economic growth, the previous Labour Government managed to build no more homes over the course of each year than were built in 1926. That seems faintly unbelievable. Despite the Rugg review of the private rented sector, the Treasury never produced realistic proposals on real estate investment trusts, which have had great success in Europe and north America. The previous Government had the opportunity in a growing market to look into such trusts and remove the fiscal and legal impediments to grow that market. They failed to do so.

[Mr Betts]

I am not going to defend the level of social housing building by the previous Government; I do not think that it was adequate and I have said that many times in the Chamber and in Committee. A lot of the things that the Labour Government did, including the decent homes programme, were good, but we ought to have built more social housing. I am not sure that the Government proposals will address that matter. There is effectively a total withdrawal of funding from social housing as we know it, so that does not address the reasonable criticism made by the hon. Gentleman.

We should perhaps look harder at the tax and other impediments to real estate investment trusts. They are a good idea. Yesterday, I met with organisations that seek a more direct way of getting institutional investment linked to people who may want to part rent, part own houses. Is the Minister willing to meet a delegation to look at that? Some interesting ideas ought to have cross-party support.

I am sorry for taking up so much time, Mr Robertson, but I have tried to take interventions. My questions for the Minister are: why are local governments taking cuts that are well above the average for other Departments? Why is such front-loading necessary? It creates particular hardships, as councils up and down the country are explaining. The cuts have been large and fast. Is that why the Government have not been able to make them fairer, meaning that they hit poorest areas the hardest? If changes are made to eligibility criteria for social care, if libraries and sports centres are closed and if bus services are withdrawn, will it not be those suffering the greatest deprivation and need who are hit hardest? Is it not likely that the housing crisis that is looming large will be worsened, not helped, by the Government’s measures?

Those are my questions, and it is probably appropriate to end on them. I am sure that the Minister will have positive and good things to say in answer to all of them, although whether I totally agree with him remains a matter for doubt.

[Mr Stewart Jackson (Peterborough) (Con)]

It is always a pleasure to serve under your chairmanship, Mr Robertson. Today, we have the opportunity to pay tribute to the Government, as you would expect me to, Mr Robertson, for being imaginative and innovative within the confines of the comprehensive spending review and for seeking to engineer a paradigm shift based on a philosophical underpinning of decentralisation, localism and the devolution of power. The Localism Bill, which will have its Second Reading next week, does not take a slash-and-burn approach to local government. Nor, incidentally, is it a refutation of everything that the former Labour Government did before 6 May last year. There is a general consensus that the current Government are in favour of what the hon. Member for Sheffield South East (Mr Betts) called a drive for transformational local services.

I am a glass-half-full kind of chap, so I see the Government’s measures as an opportunity to drive forward localism in the context of the big society. That concept is, I admit, misunderstood, not least by some in my own party, but it chimes with some of the issues that the former Government were talking about before they lost power. In the previous Parliament, I sat through the Committee stage of the Local Democracy, Economic Development and Construction Bill, which had come from the House of Lords. As hon. Members will know, my colleagues and I did not oppose every aspect of that important Bill; it was a bit of a spatchcock Bill, but we supported certain measures because we thought that they were going in the right direction by devolving power and responsibility to individual councillors and officers. One such measure was multi-area agreements and another was leaders boards, which could be seen as fledgling local enterprise partnerships.

I have always been a bit unfashionable among members of my party in that I have—[Interruption.] I am getting sedentary interventions from my hon. Friend the Member for Brigg and Goole (Andrew Percy). I have always been quite in favour of at least looking at city regions as super local enterprise partnerships and as a vehicle for driving regeneration, and it is important that we continue to debate that. I am talking not about reconstituting metropolitan or non-metropolitan county councils, but about having bodies with real resonance. Local enterprise partnerships go some way in that direction on key issues such as post-16 education, public health and strategic transport.

[Andrew Percy]

I thank my hon. Friend for allowing me to mention the local economic partnership for the Humber region in the Minister’s presence. A huge argument is going on between our four local unitary authorities—the estuarial authorities—which seem unable to agree with businesses about the need for a Humber-wide economic partnership. We need such a body for the simple reason that it would, just as my hon. Friend says, represent the sub-regional unit, as opposed to the area defined by the more historic boundaries. I thank my hon. Friend for allowing me to make that point once again to the Minister.

[Mr Jackson]

I am always happy to facilitate an advertising break for Yorkshire and the Humber, as I am sure the Chairman of the Select Committee, the hon. Member for Sheffield South East, would be. In the previous Parliament, a report published by the Local Government Association found that the specific argument against regional development agencies was that they had not overcome the differences in economic growth within or between their areas, and work by management consultants Ernst and Young also found that.

The philosophical underpinning for local enterprise partnerships is that we recognise that there are very local economies. Even in an area such as the north-east of England—I am mindful of the need not to go off the point too much, Mr Robertson—there is a quantum difference between the economic issues that inform decisions taken on Teesside and those that inform decisions taken in Tynemouth, north of Newcastle or in Stockton-on-Tees. Even within that area, there are sub-regional economies, so I think we have made the right decision on local enterprise partnerships.

I want to talk now about the less than benign fiscal climate that we face. I think we will have a mature and grown-up debate today, but it is worth saying that Her Majesty’s Opposition committed themselves to a 20% reduction in local government funding. If members of the Labour party in Parliament and beyond are not going to make that reduction now, and given the Minister’s very good point about the Office for Budget Responsibility having looked at the net reduction as a function of local authorities being able to recoup funding in a way that the Ministry of Justice, for instance, cannot necessarily do, the question is what core services Labour party members will cut.

We have had a lot of lectures from the Labour party recently about local government cuts, so let us look at one example: Durham county council. The unitary authority there will see its formula grant reduced from £263 million to £235 million. We should bear it in mind that Surrey county council, for instance, will see its grant reduced from £178 million to £152 million. Durham seems to find enough funds to spend £3.73 million on communication. It has five diversity officers, four European officers, two climate change officers and an undisclosed number of staff working full time for trade unions. It has also refused to say how much its chief executive is paid. Funnily enough, it is sitting on £93 million of reserves. If I can be slightly partisan, my colleagues and I will accept lectures about the impact of cuts only if all the alternatives to cuts are being pursued.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I assume that the hon. Gentleman is proud to be giving a £1 billion cut in corporation tax to the banks in the coming year. That is value for money, is it?

[Mr Jackson]

I am mindful of the fact that the hon. Gentleman has great expertise as a member of the shadow Treasury team. That is true not least of local government issues, because he and I sit on the board of the New Local Government Network. However, to pick up on the exchanges at Prime Minister’s questions yesterday, the former Government’s lack of effort and application speaks volumes about how imperative they saw the need to deal with that issue.

[James Morris (Halesowen and Rowley Regis) (Con)]

Is not my hon. Friend’s real point that although we hear a lot from the Labour party about the unexpected depth of cuts, preparations have been going on in local government for at least two years in the expectation that fundamental change would come along the line, irrespective of the party that was in government?

[Mr Jackson]

Absolutely. Credit where it is due; authorities of all political colours were mindful of the fact that, whichever party was elected, there would be a reduction in the revenue stream because of events in the world economy and the financial collapse. We should also mention the three pillars of the previous Labour Government’s economic policy. One was house building, which, as we have seen, did not work out too well. Another was unlimited public expenditure without proper reform. The third was financial services. I am afraid that all three pillars crumbled, and we are now having to pick up the bricks and mortar left by the parlous economic mismanagement of the elusive right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

That is the situation that we face. Let us remember that we are now paying £120 million a day in debt interest. In September last year, we were borrowing £15.6 billion a month. During the same month, interest payments on borrowing rose to £2.3 billion, up 150% on the same period in the previous year. Indeed, at the present rate of borrowing, had the Government not taken the decisions that they did, Government debt as a percentage of gross domestic product would peak in 2014 at 70.3%. We would be in the Portugal, Greece, Iceland and Ireland ballpark. For the Opposition to say that the Government should not have taken the decisions they took in the emergency Budget and comprehensive spending review is extremely irresponsible.

To move on to the issues about local government, the CSR is an opportunity for local government to scrutinise spending, make financial savings and redesign the way it provides services. It is also a challenge for local authorities to consider not only the costs of services but their value to communities. The CSR is pushing councils in the direction of being more innovative and involving the private sector, the voluntary sector and business sectors—I shall talk about some practical examples of the big society a little later—in a dynamic and intelligent use of resources. Removing the ring-fencing of grants, and the aggregation of grant funding from 90 income streams to 10 is exactly the right way to do things. I shall talk later about some of the additional funding issues that will give sustenance to local government in looking to the future, when the economy begins to grow and we have reduced public sector debt, such as the regional growth fund, the new homes bonus and, of course, early intervention grant. All those are extremely important.

As the Minister said, we are facing a net reduction of 26% in real terms between now and 2015, but the likely reduction estimated by the Office for Budget Responsibility is 14%. Of course that is speculative because we do not know the level of the income streams, and how each council will innovate to maximise income and assets. The Localism Bill contains good news for councils about their ability to exert more control over assets and share community assets with local people. My local authority is involving the private sector. Peterborough’s core front-line services, such as street cleaning, recycling, grounds maintenance and household waste, will be handled by a preferred bidder, Enterprise Managed Services Ltd. That is an example of a local authority that is innovating, and that has in recent years been thinking hard, with a business transformation team, to prepare for less than benign financial circumstances.

I was an Opposition Front-Bench spokesman on Communities and Local Government, and I want to think about areas that could have been examined, but were not. Fire control was an utter shambles. The predecessor of the hon. Member for Sheffield South East as Chair of the Select Committee, the sometimes fearsome Dr Starkey, was pretty straightforward and robust in her analysis. It was a financial, management and political disaster on many levels. It was bad. Now, because the Government have bravely picked up the baton of dealing with that issue, local authorities are being forced to think in innovative ways. They were doing that before, anyway. I visited Wiltshire and Swindon fire authority, in the constituency of my hon. Friend the Member for North Swindon (Justin Tomlinson), 18 months ago. The authority was already working with Vosper Thornycroft and with Avon and Gloucestershire on such things as premises, training and vehicle maintenance. The CSR will, I believe, be a catalytic change, so that fire authorities can do that. It will spread throughout payroll, human resources, senior management training and that kind of thing, and we will all agree with that.

One of my responsibilities in opposition was to think about the Thames Gateway. If ever there was an alphabet soup of shambolic mismanagement, it was that—100 separate bodies receiving grant funding, and about 120 statutory consultees. It was the Schleswig-Holstein question of local government. Anyone who understood the Thames Gateway was either mad or dead. I was neither, and did not understand it. That is now being subsumed into mainstream funding.

I want to talk about tax increment financing. One of my criticisms of the Government is that although they talk about it, they are not as yet persuading their Treasury colleagues to buy into the concept of supporting it practically. For want of a better expression, invest to save: with a little bit here there will, further along the line, be a lot. That will be a catalyst for building local economic regeneration and renaissance. I am still not convinced that the Treasury is fully committed to that, in the same way it was, incidentally, to other initiatives of the Labour Government in the previous Parliament.

I have already talked about ring-fencing and the general need for fiscal consolidation. I believe that the issue of targets and ring-fencing gives an important message to local government that we believe in localism. The power of general competence is an enormously important message to local government about civic renaissance, civic pride and putting local people in the driving seat. I am mindful of the fact that the Labour Government promised that in 1997. For some reason—I do not know why—it was not delivered. I think we can all agree that trusting local authorities, which is what the enactment of the power of local competence will achieve, will give councils of all parties that strong and powerful message. I suspect that in the next two or three years there may be a few more councils of the party of the hon. Member for Sheffield South East than of mine—but no names, no pack drill.

Of course the Bill also contains a duty to co-operate on infrastructure. That is important for a facilitation of strategic partnerships with primary care trusts and other larger and smaller local authorities. There are local authorities in west London sharing chief executives, and some smaller local authorities—South Holland, and one in Leicestershire, but I forget which—are also doing so, with a significant revenue effect.

[Bob Blackman (Harrow East) (Con)]

Will my hon. Friend give way?

[Mr Jackson]

I am happy to give way to my hon. Friend, who has great experience in local government.

[Bob Blackman]

Does my hon. Friend agree that, although the sharing of services and offices is being talked about adequately, what is not being put forward or debated is the question of councils coming together to use their buying power in the market, rather than getting into a reverse auction in which they compete to buy services, and must pay more than they would otherwise have to?

[Mr Jackson]

My hon. Friend makes an astute point. In fairness, one interesting success—my hon. Friend the Minister may not agree—was the Firebuy initiative. It was mixed, admittedly, but the model was that, in the procurement of equipment for the fire service—whether helmets, appliances or other kit—instead of the authorities making 46 pitches and carrying out 46 tests and experiments, there were economies of scale and purchasing power. It never quite worked, but I think it was on the right track. No doubt the Minister will consider my words when he thinks about the future of Firebuy. However, my hon. Friend the Member for Harrow East (Bob Blackman) is right that that side of local government function has not worked as well as it could and should.

Local government makes a massive impact in local economies in terms of people who work for local government and people who contract with local government. In fairness to the present Government, throwing open the contracting process, the tender process and the purchasing process in terms of who makes the decisions and what value judgments they make on what they are buying is being looked at by the Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), and by others, including, I think, my right hon. Friend the Minister for the Cabinet Office and Paymaster General, to revolutionise transparency and openness in local government, so that we know why it costs £400 for every 1,000 wheelie bins in Reigate and Banstead but in Windsor it costs only £250. People have every right to know that in this age of transparency. After all, if they know how many toilet rolls that the Member of Parliament for wherever is buying for his office, they should certainly know about and care about how their money is being spent on key services, although God help the concept of the Independent Parliamentary Standards Authority being involved in purchasing in local government.

[Mr Betts]

It would treble the cost, probably.

[John Robertson (in the Chair)]

Order.

[Mr Jackson]

We could rely on it, though, to have a very well paid communications officer to explain to us why that was the case.

I am also slightly worried about community budgets in relation to early interventions. We need to roll that out across the country. There are substantial issues of economic and social deprivation in many parts of the country. Sixteen projects is good, but we need to draw on the lessons from the work by my right hon. Friend the Secretary of State for Work and Pensions and by the hon. Member for Nottingham North (Mr Allen) on early interventions. The hon. Member for Nottingham East (Chris Leslie) will know that his colleague has done a fantastic job in raising the profile of early interventions. We need to take forward some of the work that he has done.

Following on from that, we should be cognisant of the work that the Dilnot commission is doing on social care, because that will inform the Government’s position with regard to the £2 billion boost to social care funding. We are sitting on a demographic time bomb. There are things that we need to be doing in preparing for the number of over-85s doubling in the next 20 years, for instance. Ministers need to be working across Departments to ensure that those demographic changes are reviewed and reflected in the grant, particularly for personal social services.

As for social housing, the hon. Member for Sheffield South East and I have had a rather party political debate. To be fair, I pay tribute to the right hon. Member for Don Valley (Caroline Flint), who issued the rallying cry about tenure. She was royally slapped down by most people in the Labour party, but she was brave enough to mention tenure reform while in government. We must have that debate, as my hon. Friend the Member for Meon Valley (George Hollingbery) said, because it cannot be right that those who need housing most are not necessarily the ones who are prioritised, because of the existing tenure culture.

I see things in a very positive way, because I think that the linking of market values—80% of market values—to the provision of social housing will create significantly greater income streams for registered social landlords, to deliver not just social rented properties but intermediate housing, particularly key worker housing, which is very important in my constituency, and shared equity housing. So many local authorities and so many cities and towns in our country, particularly in the south and midlands, face the issue of the huge disparity between what working people can afford and the price and availability of mortgages.

This is a side issue, but I really hope that the Financial Services Authority keeps in mind the needs of first-time buyers and the availability of mortgages in its mortgage market review. I pay tribute to my right hon. Friend the Minister for Housing and Local Government, who met representatives of the FSA the other day to make the point that it should not be unduly prescriptive and prevent young people in particular from getting on the housing ladder. Developers and house builders are a major part of all our local economies, and for the sake of the country, we need that market to improve.

That is obviously part of the comprehensive spending review, but I will resist the temptation to meander down the path of having a full-blown debate on housing. We are not a million miles apart in many respects, although we have had some disputes about housing benefit and related issues.

It is a pretty stark statistic that in 1970, about 20% of people who lived in social housing were not in paid work, whereas now the figure is not far off 70%. It cannot be right that in the sixth biggest economy in the world, we are embedding welfare dependency in social housing. We need to break up the mono-tenure culture of social housing, because to leave millions of families, including millions of children, in the twilight world of welfare dependency and poor housing is immoral. That is why, if the Government do nothing else, they must tackle welfare dependency, poor housing and the other, related issues.

We need to have a bigger debate, and I hope that the Select Committee looks at the bigger debate, about the fiscal autonomy of local government. A very interesting document was produced not that long ago by the TaxPayers Alliance. It is not always friendly to Members of Parliament, I have to say, but it does produce some very good documents, and one was about the fact that we are the most centralised country, as between central and local government, in the developed world. Well under 20% of local authorities’ revenues come from taxes that they raise themselves locally; the average for Britain’s G7 competitors is more than 60%. This is the key point: the countries with the most efficient public sectors are all much less centralised than the United Kingdom. According to the European Central Bank, the United States, Australia, Japan and Switzerland enjoy an average efficiency lead over Britain of 20%. If Britain could match that efficiency level, spending could be cut by £140 billion with no diminution in the standard of public services.

The Treasury needs to consider that challenge. If we are not just talking, going through the motions, shadow-boxing and engaging in rhetoric about localism, trust and a renaissance of local government, we need to be thinking in the local government review about providing real power in terms of asset-backed vehicles, tax income and financing and other fiscal measures—for instance, the issuance of municipal bonds for bridges, community centres, street lighting and so on.

I do not always agree with my local authority on everything, but it has set up an asset-backed vehicle called the Peterborough development partnership, because it realised what the position was. Mine is a new city, and the Peterborough development corporation ceased in 1988. We simply cannot refresh and renovate all our infrastructure, which was built between 1968 and 1988 by the Peterborough development corporation, without accessing private capital through an asset-backed vehicle. It is vital for the Treasury to understand that and to make the requisite changes in policy in the course of this Parliament.

To finish, may I say a little about the big society? It constitutes a great opportunity and a paradigm shift for local authorities. I draw the House’s attention to a project in my constituency that is not necessarily linked closely to local government, but is nevertheless an exemplar: the St Giles Trust social impact bond at Peterborough prison. The charities involved will receive 46% of the indicative revenue funding to keep a prisoner in prison for a year if they keep that prisoner away from recidivism for a whole year. That is a good example because it gives a fiscal incentive for the charities to do that and it is good for society and good for the prisoners. We need to think more about such initiatives.

An example more closely linked to local government is that of Sandwell Community Caring Trust in the west midlands. That charitable trust has significantly reduced, for instance, staff sickness and the cost of delivering personal and social care, particularly to elderly people. It has been so successful that in 2008 it won the contract from Torbay unitary authority to do its social care. The trust is using the assets in the public realm to deliver more cheaply than local government. I do not see that it is a challenge for local government to work with such organisations; it is a question of square pegs for square holes. Local government is better at some things than others.

I pay tribute to my hon. Friend the Member for Dover (Charlie Elphicke) and his people’s port campaign in his constituency. It is an example of something that was going to slip from local and national control to an international consortium, which would have had little feedback from and interaction with people who care about the local area and the regeneration of the port of Dover, and in the long term, about the viability of that economy and that town. It helps to have Vera Lynn launching your campaign. I think she can sing better than my hon. Friend. That campaign is an example of people working together along the model of the big society.

The Minister will no doubt refer to the Localism Bill, in which we will see on Monday the right to challenge, to take over assets and encouragement for communities to run what the local authority may not want, or have the financial resources, to run. That is the bigger picture about tackling the concept of asset inequality, because, whether we like it or not, too few people control assets. I am very proud to say that my party ameliorated that in the 1980s with the right to buy, which was a wealth transfer to ordinary working people of assets to give them control over their lives. It was one of the best policies, if not the best, ever put forward by a radical, free-market supporting Government in this country. It gave people, and their children, a stake in their futures and their communities. I will never resile from the fact that it was positive. I see that and the growth of mutualism as positive developments in the Localism Bill. This Government, in many respects, is most radical on those issues, as with their welfare changes.

I am delighted to participate in this debate. The Opposition need to move on from the paradigm that more money will deliver better services. They need to understand that that model has been tested to destruction. There is a new model. It is important to take the best of what has been done before, under both Governments, but principally to trust local people in our communities and their elected representatives. They have the capacity and the commitment to deliver the goods for local communities now and in future.

[John Robertson (in the Chair)]

Order. Before we go any further, may I say that the two contributions we have had have been somewhat lengthy—well over half an hour in each case? If that were the case for the next few speakers, they would be all who would be allowed to speak. Would Members please look at the time? I intend to call the reply from the Committee at quarter to 5 and then the summing-ups. You have an hour between you, so you can work out how long you should speak for.

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[Mr Stewart Jackson]

On that point, Manchester city council, which is by no means the largest bottom-tier authority in the country, has already been mentioned. Its chief executive earns £90,000 more than the Prime Minister. Does that situation not point to the fact that my hon. Friend’s comments are absolutely right?

[Bob Blackman]

I thank my hon. Friend for that intervention. I have not done a study on all these things, but I reckon that virtually every chief executive of every metropolitan authority is probably earning more than the Prime Minister, and that is a serious concern. Is it right? There has to be a measure, because all the chief officers and those below take their lead from the chief executive. That is clearly a concern.

I also ask the Minister to consider seriously the fact that local authorities desperately want certainty over funding. I understand why the settlement this year is difficult, but I have had experience of a three-year funding settlement. Even though it was not too good, one was at least certain about what one would get. Planning for the future is all important, so a long-term settlement that gives local authorities knowledge about the funding they will receive for a multiple of years is something that we absolutely should put in place.

Other hon. Members have mentioned new sources of funding. I am afraid that I do not agree with the hon. Member for Sheffield South East (Mr Betts) on returning the setting of business rates to local authorities. I can imagine nothing worse for business people—they would quake in their shoes—than allowing people at town halls, civic centres and so on to set business rates that potentially could put them out of business in a big way. However, we have to move away from just Government grants, the council tax and the share of business rates as sources of income. We must accept the concept that we need other sources of money, and an attractive way of consulting people on what those sources should be.

We must also examine the Barnett formula, which has been in operation since the 1970s. The Labour Government did not do anything about it, nor did the previous Conservative Government. Lord Barnett, who set it up, has probably forgotten how it was developed. My hon. Friend the Member for Croydon Central (Gavin Barwell) has done a study of local authority funding over several years. It is bizarre how the formula grant has changed inappropriately—this is not a partisan point or a matter for authorities of particular political control. There must be a complete review of all the different indices for the formula so that funding is seen to be fair and understandable. At present, I do not believe that anyone could possibly understand it.

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[Mr Stewart Jackson]

rose—

[John Robertson (in the Chair)]

Order. Before the hon. Gentleman intervenes, I must ask the right hon. Member for Tottenham (Mr Lammy) to bring his comments to a conclusion.

[Mr Jackson]

Perhaps I could be so bold as to say that what kept the right hon. Gentleman on the straight and narrow was being educated at one of the best schools in the country—the King’s school, Peterborough. Looking more positively at some of the changes that are about to take place, I believe that they will encourage faith and community groups into the public square to take on work and to work collaboratively with local authorities to tackle very difficult social issues, such as social exclusion, deprivation, homelessness and drug misuse. They have not done that hitherto because there has been an element of institutionalisation in those groups.

[John Robertson (in the Chair)]

Will the hon. Gentleman please sit down?