Local Government Independence

Brandon Lewis Excerpts

Wednesday 7th November 2012 Westminster Hall

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

It is a pleasure to serve under your chairmanship, Mrs Brooke, particularly when we debate a topic that I know is dear to your heart.

I congratulate and thank the hon. Member for Nottingham North (Mr Allen) on securing the debate. He and I have had some conversations on this topic in the few weeks since I took on my post, and I think we share a view that we must—and we want to—disperse power in our society. I acknowledge the work of his Select Committee and the parallel Local Government Association campaign to ensure that we do what we can to devolve power and empower local government.

The stated aim of the Select Committee’s inquiry is to

“explore constitutional and practical issues around the possibility of…writing down the principles and mechanics of the relationship between central and local government.”

The code is intended to strengthen the position of local government within the constitution and to provide a degree of protection from over-regulation. I am sympathetic, as the hon. Gentleman knows, to those aims. As things stand, however, and as I think he is aware, I have some concerns. It is only right that I outline those concerns before moving on to areas where there is probably more consensus.

There are problems with the terms of the practical application of the code and, more fundamentally, with the constitutional issues that might arise. I am not convinced that the solutions to the imbalance of power in this country should come from a single piece of legislation. What is required is sustained public debate extending beyond those people with an interest in local government, and practical reforms that shift powers into the hands of residents.

The proposed code would create a binding legal document that defines central and local relations, and of course we would need primary legislation for that. As proposed, the code would need to have the same status as the Parliament Act 1911, which would, in effect, remove the supremacy of the House of Commons to make and change primary legislation. That would be the core aim of that piece of legislation. The proposed code also states that central Government shall not restrict in any way a council’s powers to issue whatever taxes it wants. That would further limit Parliament. That Parliament determines the level of taxation in this country is a core principle at the heart of the British constitution.

As the hon. Gentleman mentioned, there are macro-economic considerations. New local authority taxation cannot be viewed in isolation, because it would affect the UK’s competitive position, depending on how that is structured, in the global economy, as well as the overall state of the nation’s public finances, and the local communities themselves. In addition, it is difficult to see how the proposed code offers greater power for citizens to hold their councils to account. I am sure the Select Committee will reflect further on those and other issues during the consultation exercise. I look forward to reading the final report with my Christmas pudding, as I have been so kindly invited to do. No doubt we can discuss the report over new year’s eve drinks, too.

[Mr Allen]

I thank the Minister for the spirit of his remarks. On the macro-economic problems that might occur and the anxieties that the Treasury may have about local government raising its own funds, whether through bonds, hotel tax or whatever, may I leave with him the thought that we have considered the matter seriously? Perhaps he might commission some research, from either his Department or the Treasury, on the way that every other democracy gets around such difficulties, rather than lumping them into the public sector borrowing requirement and saying, “We cannot therefore do it.” How do other people do it? Everyone seems to get around this apart from us. Will he undertake to consider the possibility of a proper research document?

[Brandon Lewis]

I take the hon. Gentleman’s point on board. I have looked at some of that in the past, particularly taxation on tourism in local areas. There are differences. We have to consider such things as a whole. For example, we do not have a VAT discount for tourism, unlike some of our European partners, but they effectively charge VAT on food, which we do not. There are swings and roundabouts, but I do take the point.

The Government have acted on the need for public debate and practical reforms. Between them, the Localism Act 2011 and the Local Government Finance Act 2012, which introduced business rates retention, give local authorities a much bigger stake in their local economy by greatly increasing the opportunity for them to benefit from growth. Allowing local authorities to use that money incentivises economic growth. Local government now has an even more distinct role to act as an autonomous political institution in building and leading communities. With the community right to buy and the community right to challenge, there is far more opportunity for communities. As the hon. Gentleman mentioned, we want to see as much involvement in communities as we do in the councils and other institutions. Moving power out into our communities is partly about empowering our communities and the people in them. For me, it is not about getting caught up in the dogma of power having to be in a particular institution—but that moves me a little from the point.

[Mr Allen]

If the Minister is happy to have a dialogue, he might concede that individual citizens’ voices at local level are more likely to be heard if that is structured by local councils and local authorities, who are closer, rather than by Whitehall. Might he have a moment in his incredibly busy schedule to read a fairly brief article in The Independent by Philip Blond and me? We went into a little more detail about the potential for a blossoming of neighbourhood councils, parishes and many other forms of even more local administration, which, to be frank, Whitehall is not the best engine to promote.

[Brandon Lewis]

I will have a look at that article. I will look it up, unless the hon. Gentleman wants to e-mail it to me, so I can have a quick read directly.

The hon. Gentleman makes a good point. That is one area on which we have a huge amount of agreement. I am on record saying that we in Whitehall do our job of empowering local authorities and localism best if we have the courage to move power out to local communities and local authorities—to our county councils, metropolitan councils, unitary councils, district councils and, in essence, our town and parish councils. People in local communities, even if they do not have a parish council, can come together as a neighbourhood group. We are making it easier for them to set up neighbourhood groups to get the things that matter to them in their community done, without necessarily having to move up to a big scale. It is a fair point. The whole drive of the Localism Act 2011 was the recognition that the people in a community are the best people to decide what their community needs, and are often in the best position to do so in the most cost-effective and efficient way. A huge amount of progress has been made.

It is no secret that this country, as the hon. Gentleman said, has one of the most centralised systems of local government finance in the world. Through the Local Government Finance Act 2012, which received Royal Assent last week, we have put in place proposals to encourage local economic growth, reduce the financial deficit and give local communities and local authorities greater control over their resources. There are strong incentives, therefore, to cut fraud, promote local enterprise and encourage more people into work, and a range of measures that we introduced in that Act and the Localism Act 2011 build on that.

The country has been and is still facing a large financial deficit. Local government has its part to play in both dealing with that deficit and driving growth in local communities. We know that by giving power away, we can free authorities to focus on the priorities that matter most to their communities and to achieve more and better for less. Under current financial arrangements, for example, councils see no reward for any growth from business rates. By retaining 50% of them in future as a starting point, together with 50% of any growth, councils will gain autonomy over the finances in their areas. Our analysis indicates that that alone could generate an extra £10.1 billion in GDP in the next seven years. Although central Government will be able to share some of the reward from positive growth, it will bear some of the risks.

[Mr Allen]

On an almost tongue-in-cheek point, comparing the propriety of central Government with that of local government, I do not think that local government has ever led us into a recession, increased interest rates or led us to high inflation. Local government has a good record in terms of its credit rating and of being prudent with taxpayers’ money. Central Government may not be the body to lecture local government on propriety—although that might be going beyond the spirit of partnership. Perhaps we can all learn from each other.

[Brandon Lewis]

I am determined that we will maintain this good spirit of partnership. The hon. Gentleman has done superb work, both cross-party and across a number of different organisations and agencies, to bring the issues together and secure this debate. One of the most important parts of this work—today’s debate is a good example—is getting the debate going and getting the conversation out into the public domain. The more we talk about it, including about how to move power out, and whatever the format it develops into, the better it will be for our communities.

The hon. Gentleman will bear with me when I say that some years ago I was a council leader. We took over from another party, whose council tax rises were approaching 20% per year. My residents would have had a different view on their balancing of finances.

I am aware of the time, so I will close by outlining a couple of things that I hope can take us forward. Following the end of the Select Committee’s consultation and this debate, there will be time to reflect on the proposition that addresses the concerns that I have outlined and to illustrate in practical terms the benefits for citizens. A fair bit of that has been done this afternoon. This Government believe strongly that local authorities are capable and willing to take on the challenges and opportunities now being created. Some are grabbing the opportunities with both hands and running with them. That is how we can strengthen our democracy, revitalise our public services and underpin our prosperity as a nation.

As the hon. Gentleman said, we have a chance now to move forward or slip back. I hope that we run forward. More to the point, I hope that rather than our driving something, local authorities take the baton and run with it, make the most of it and challenge us about what can come next. I will certainly take on board his three specific requests. He asked first that I note the work. I do, absolutely. Secondly, he asked for further dialogue, and I am happy to engage in that. On his third request, I would never refuse to receive a Select Committee report, and I look forward to seeing this one.

Question put and agreed to.