Communities and Local Government (CSR)

Debate between Alison Seabeck and James Morris

Thursday 13th January 2011 Westminster Hall

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

It is a pleasure to speak before you for the first time, Mr Robertson. As a member of the Select Committee on Communities and Local Government, I welcome the opportunity to speak in this important debate. In the spirit in which the hon. Member for Sheffield South East (Mr Betts) started the debate, I will reflect on some of the important realities of the settlement for local government.

As other hon. Members have said, this is clearly a challenging time for local government. I represent a seat in the metropolitan west midlands that straddles the Dudley and Sandwell metropolitan boroughs, and I know that both those local authorities are having to make difficult decisions about their budgets and priorities. There is no way around that. However, as other hon. Members have also said, the environment might be challenging but it is not unexpectedly so. Even if a Labour Government had been elected, significant cuts in local government expenditure would have had to be made. That is a point of context that must be made in order to inject some reality into the implications of the comprehensive spending review and its impact on the DCLG and local government. The spending review has presented the Department with a difficult series of choices; there is no way around that. The spending review and some of the evidence that we in the Committee have gathered raise interesting questions and present opportunities for local government.

Over the past 20 years, there has been an obsession with top-down performance management in local government. We must now move forward into an age of innovation and collaboration. One perhaps unintended consequence of the CSR is that it has focused attention on the funding relationship between central and local government, which we must examine rigorously, as it is clearly important.

The scale of the fiscal consolidation that the Government are undertaking and its impact on DCLG and local government has produced some welcome and important initiatives. Other hon. Members have discussed the removal of ring-fencing, which is a significant change to the financing of local government. The previous Labour Administration can be considered as a game of two halves. The first half involved a Prescottian vision of regionalisation and central control. The second involved an acknowledgment—other hon. Members have mentioned this; it is not a time to be particularly partisan—that that was the wrong approach and that we needed to move toward more flexibility in grant funding. Now we need to move forward to the next stage in that flexibility. It is not a trivial but a major change in the relationship between central and local government and in funding.

One consequence of the CSR is that a fundamental review has been necessary of the Department’s costs. A 33% reduction in DCLG administrative costs has been announced, which reflects the changing balance of priorities. If we are moving toward a more localist future, DCLG must examine its central costs to see where administrative overheads and costs can be transferred out to the front line. That is an important recognition of the changing balance between central and local government.

As the hon. Member for Sheffield South East said, it is useful, practical and a positive move forward to view local authority funding in terms of the totality of local authority spending power rather than focusing merely on the totality of the formula grant. That way, we will get a true picture, especially considering some of the new grants coming forward into local government, such as in public health and adult social care. At least we will begin to get a sensible picture and a recognition that considering such spending power is a much more rigorous and important way to examine the total funding of local authorities.

Other Members have discussed funding for Supporting People. That funding has been relatively protected within the CSR. It has also been devolved. Again, that is part of a radical change. Central Government are giving local authorities much more discretion to understand the nature of their local communities and make decisions accordingly, which is to be welcomed.

One thing that has emerged from the Committee’s deliberations—I stress this to the Minister; I have raised this point before on the Floor of the House—is that everybody who has observed local government, including me in my previous role as chief executive of Localis, the local government think-tank, would agree that the grant distribution process for local government is opaque and fundamentally flawed. Discrepancies arise not just between metropolitan boroughs, counties and shires but between metropolitan boroughs themselves. Nobody understands how it works. There are always disputes and special pleading. I welcome the efforts made to ensure that fairness is built into the settlement through banding and transitional funding, but however much we try to mitigate it, it does not change the fact that the process of grant allocation needs fundamental reform. We need a more independent and transparent process, and I hope that will emerge from the Government’s review of local government resources and finance. It is fundamental to the future of local government.

The financial crisis and the tough decisions taken in the CSR create an opportunity. Crises are often catalysts for change in systems, whether biological, evolutionary or political and economic. That is no less true for local government today. The current pressure on local government, which we all acknowledge, is providing a catalyst for change. Across the political spectrum, local authorities the length and breadth of the country are taking seriously the challenge of a new environment in which innovation, particularly financial innovation, is central.

[Alison Seabeck]

The hon. Gentleman is making a thoughtful and well-informed speech. However, he mentioned innovation. Does he not share the concerns of Baroness Eaton? She said today:

“Local government will have to make cuts this year of around £2 billion more than we originally anticipated. This stifles the opportunities for innovation”.

[James Morris]

I do not agree. Baroness Eaton is obviously doing her job on behalf of the Local Government Association, and she is doing it well, but I know from my experience as a business entrepreneur that having one’s feet against the fire is a profound stimulus for innovation and transformative change.

The hon. Member for Sheffield South East said rather dismissively that a few local authorities getting together to share back-office services would not get us far. I agree that that will not plug the whole gap in certain contexts, but we must take the idea of shared services seriously. In my constituency, we are beginning to see partnership working across the political spectrum really deliver efficiencies and change, for example through new commissioning structures in local government. That must be the future, where local government does not take the role of the service delivery arm, but instead takes on more of a commissioning role. We need to look at new funding arrangements.