Local Government Finance Settlement

Lord Whitby Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord Whitby (Con)]

My Lords, since the recent Scottish referendum on independence and the ensuing frenzied end game, devolution has become a major political issue and has stimulated an intense debate over how new powers and resources can be devolved to the most relevant, effective and inclusive political structure. I believe passionately—certainly in local government—that we should celebrate cultural diversity and recognise the significance of regional identity embraced within a national state. So I am very relieved and happy that we are still a United Kingdom.

Britain, however, has one of the most centralised systems of government in the world in terms of its relationship between local government and central government. Just 5% of all the taxes raised by our local people in our great cities is under the control of the city council. The remaining 95% goes to the Treasury and comes back through a multitude of funding streams controlled by Whitehall. Research has shown—and it has been alluded to in this debate—that nations that allow more freedom and independence to their cities tend to have better performing cities and a more balanced economy.

Sadly, our cities have underperformed the economic performances of most of our major European cities. It is imperative that we recognise that. I believe that the coalition Government are rectifying this dilemma and meeting the challenge. As a former city leader of the largest local authority in the United Kingdom, and as a vice-president of the LGA, I welcome the debate on the local government finance settlement, the implications of devolved power and the ramifications of direct funding to our cities. The coalition Government have listened and delegated, in an unprecedented manner, power, decision-making and direct funding—especially to the city of Birmingham—in addition to the financial settlement. While the settlement reduces Birmingham’s revenue spending power by 6%, as already mentioned, the revenue spending power per household in Birmingham is still £2,461 per dwelling—considerably larger than almost all local authorities. Its gross expenditure is still in the region of £3.2 billion.

The Government have devolved power and funding in a sophisticated and imaginative manner. Birmingham Council and the city are benefiting from a range of new freedoms and funds being made available. My friend the noble Lord, Lord Rooker, asked: what has Birmingham done and how has it benefited? A range of investments outside the financial settlement have allowed us to encourage 19,000 new start-ups in 2014. We are already attracting more FDI investment than any other region outside Birmingham. During the period of my administration, we grew tourism from £29 million to £34 million, generating formidable wealth for local industry and small businesses. We left a city that was proud, pointing outward, attracting Chinese investment, and building a whole range of entities that allowed us to be quoted, by the Mercer survey, as one of the only English cities in the top 100 in the world for quality of life. It was local government doing what it should do—making its city globally relevant but caring for its community.

As someone who has worked with Labour and Conservative-led Governments, I know the evolution of devolution has been, at times, extremely slow. Ultimately, however, the coalition Government’s attitude to local government—in particular, their generosity to the city of Birmingham—has to be measured not simply by the financial settlement but through the devolution of power and the many hundreds of millions of pounds that Birmingham has received through the direct, innovative funding streams that are now acceptable through the coalition Government.