Economic Leadership for Cities

Lord McKenzie of Luton Excerpts

Thursday 11th December 2014 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, we should congratulate the noble Lord, Lord Shipley, on securing this debate for us this morning, and the noble Lord, Lord Lyell, on his clear attachment to and love of Liverpool—although I am advised that he is an Everton supporter. I also look forward to the three maiden speeches we will hear today. The notion that local councils—particularly cities; and I am happy to accept the definition of the noble Lord, Lord Shipley, for that term—with strong local leadership can be a force for economic progress is, of course, not new. But moving forward on this agenda has been given impetus by what my noble friend Lord Adonis has set out in his report, Mending the Fractured Economy: the link between economic growth and the living standards of ordinary people has been broken, and this dictates a fundamental reform in order to secure more balanced growth. This converges with the recognition that the scale of spending cuts facing local authorities will most effectively be delivered by the chance to join up, reconfigure and innovate at local level.

As the noble Lord, Lord Heseltine, concluded in his report No Stone Unturned: In Pursuit of Growth, too many decisions are taken in London without a full understanding of their local impact. I certainly agree with that. But he asserted that local authorities have been relegated to service providers—increasingly, commissioners of services—and that local economic leadership has all but disappeared. This is too sweeping an assertion, doubtless many noble Lords here today will know of the engagement of their local council in regeneration activities and a partnership working with the local business community—driven in many instances by the support of RDAs. It belies the leadership role of the Core Cities Group over some 15 years, I believe, and in particular its work which culminated in amendments to the Localism Bill—as it then was—agreed by an all-party consensus, which allowed Ministers to transfer local public functions from central government to local and combined authorities.

As we know, a range of city deals followed, not homogeneous arrangements, underlining the diverse needs of cities—and there are more to come. Important as they are, however, it is difficult to maintain that such arrangements are transformational; step change is required if the true potential of our towns and cities is to be realised. We should remember that the Secretary of State still holds the whip hand in these deals, being required to determine whether any transfer of functions would promote economic development or wealth creation or increase local accountability.

What should change entail? It raises issues of funding, powers and coverage. Again, as my noble friend Lord Adonis has proposed, we should devolve funding of £30 billion over the next five years to combined authorities, local authorities and LEPs to cover key economic levers—housing, transport, skills and business support. Of course, how funding is devolved is important and we must not replicate the past with endless bidding processes and bureaucracy, nor allow the Treasury to strangle such initiatives.

This agenda brings with it the thirst for more taxes to be devolved to English cities. City Centred campaigns for council tax, stamp duty land tax, business rates, annual tax on enveloped buildings and capital gains property disposal tax to be devolved. It properly asserts that this would be Exchequer-neutral because central grants to cities would be cut.

We would go some way along this path by giving control over the full revenue from business rates, which we would in any event reform, to powerful new city and county regions which come together in combined authorities. It would be an incentive to do so, but we would not insist on their needing to have an elected mayor.

It is important that there is scope within the system to address the differing needs and resources of local authorities and scope for a safety net for local economic shocks. This will be especially important in the near term, given the current local authority funding arrangements, which have hit the poorest areas the most. Of course one way to devolve economic power and funding would be to relocate more civil service posts outside London.

So far as combined authorities are concerned, we can look to Greater Manchester as a beacon. It in particular has been leading the way, and we should congratulate it and indeed the Government on its new deal with the Treasury. The opportunity to promote a northern powerhouse is obviously to be welcomed. It will build on some of the existing strengths of these regions, including in science and technology, and it chimes with my noble friend Lord Adonis’s proposals for a long-term innovation strategy.

However, these opportunities are not just about big cities, however important, nor just about the north. We need to mend the link between growth and living standards across the UK, so we will propose that local authorities covering any part of the country—Norwich or Luton included—will be able to become combined authorities, again with devolution of powers and funding. We would devolve funding to all local areas that reform their LEPs and create formal governance structures across local authorities at regional level, so that every part of the country would have the chance to make its decisions over how to invest in skills, infrastructure and business.

[Lord Popat (Con)]

My Lords, I am afraid that the noble Lord’s time is up.

[Lord McKenzie of Luton]

I am sorry, I shall wind up now. All the evidence shows that the economic benefits of devolving powers to local areas are too great to ignore. Devolving powers to cities is a start but not the end.