Local Government Finance Settlement

Baroness Janke Excerpts

Thursday 22nd January 2015 Lords Chamber

[Baroness Janke (LD)]

My Lords, I very much welcome this debate and thank the noble Lord, Lord Beecham, for initiating it. I also add my congratulations to my noble friend Lady Pinnock and the right reverend Prelate the Bishop of Southwark on their excellent and interesting maiden speeches. My own was very recent so I empathise with how they must feel at this moment, as has been said.

As we have heard, local government funding has been cut dramatically—by 40% by the end of 2015. After several years of cutbacks, the viability of some councils is now becoming a major concern. As a member of the LGA resources board and a serving councillor, I know that local government is seeking solutions to this very hard problem of financing local expenditure, both capital and revenue. With an ever-shrinking cake, we need to find other ways to fund the vital services that people rely on, or recognise that many of those services will disappear. There is great anxiety about care of the elderly, support for vulnerable people, respite care—they are fundamental to many people’s lives. Cuts to community services such as libraries, sports facilities and public health promotion programmes all hit the poorest people hard.

The UK, however, has one of the most centralised systems of government. Just 17% of local expenditure is raised locally in the UK, whereas the OECD average is 54%. Over the past 20 years, in my time in local government, I have been aware of an enormous amount of work which shows clear evidence that cities and city regions can generate economic growth and increase income in local economies. The core cities, the Centre for Cities and the City Growth Commission have produced a range of publications, research reports and recommendations which show that decisions about transport, housing, skills and employment—key economic drivers of local economies—are best taken at local level.

The most recent report from the Centre for Cities shows the potential of cities—not just the largest ones—to deliver economic growth and prosperity within their areas. I hear people asking, “What about areas outside cities?”. The Peace commission shows how non-metropolitan areas can, if given the powers, lead growth, expanding investment and employment in their own areas. The City Growth Commission report of last year describes how an evolving programme could devolve decision-making and financial powers to more strategic local government bodies, whether city regions, county regions or metro areas—all at a pace that suits them.

The evidence is clear that national economic performance could be boosted if all the areas of the UK were to achieve their potential, but that requires commitment from central government to accelerate the pace of devolution to local areas; by “devolution” I mean the devolution of powers, decision-making and financial flexibility, not decentralisation, which I see as much more of an administrative concept. Cities and counties are being prevented from regenerating the local economy by tight bureaucratic control of finances and unsuccessful remote management of key factors that affect economic performance.

It is time to recognise that local government in England needs to be set free from shrinking and conditional grants from central government and competitive bids that increase bureaucracy and are costly and time consuming to produce. When I was leader of my own city I found that my twin cities, especially Bordeaux, were astonished by the time it takes to achieve transport systems in English cities. They conceived of, built and were using their own tram in a fraction of the time it took Bristol to be told that it would not get one.

People in my city ask me why cities in this country are not free to invest in the transport system that suits their needs rather than standing in the queue at the DfT behind other cities and authorities, waiting their turn, when they could invest in the long term and raise revenue to support their investment as do other European and world cities. In the light of devolution of powers and decision-making in Scotland and Wales, there is now an opportunity for government to recognise the potential that devolution could bring and invite proposals that would attract financial freedoms as regards long-term investment and revenue-raising powers.

Local services are effectively in crisis, which is affecting other areas of public finance. There is ample evidence that devolution of financial powers and decision-making to the local level would enable councils to become increasingly self-sustaining as a result of improved economic performance. It is right that devolution of powers to Scotland and Wales is now becoming a reality. It is only fair that the strong local economies of England should not be left out.