Communities and Local Government (CSR)

David Mowat Excerpts

Thursday 13th January 2011 Westminster Hall

[Bob Blackman]

I thank my hon. Friend for that intervention. I have not done a study on all these things, but I reckon that virtually every chief executive of every metropolitan authority is probably earning more than the Prime Minister, and that is a serious concern. Is it right? There has to be a measure, because all the chief officers and those below take their lead from the chief executive. That is clearly a concern.

I also ask the Minister to consider seriously the fact that local authorities desperately want certainty over funding. I understand why the settlement this year is difficult, but I have had experience of a three-year funding settlement. Even though it was not too good, one was at least certain about what one would get. Planning for the future is all important, so a long-term settlement that gives local authorities knowledge about the funding they will receive for a multiple of years is something that we absolutely should put in place.

Other hon. Members have mentioned new sources of funding. I am afraid that I do not agree with the hon. Member for Sheffield South East (Mr Betts) on returning the setting of business rates to local authorities. I can imagine nothing worse for business people—they would quake in their shoes—than allowing people at town halls, civic centres and so on to set business rates that potentially could put them out of business in a big way. However, we have to move away from just Government grants, the council tax and the share of business rates as sources of income. We must accept the concept that we need other sources of money, and an attractive way of consulting people on what those sources should be.

We must also examine the Barnett formula, which has been in operation since the 1970s. The Labour Government did not do anything about it, nor did the previous Conservative Government. Lord Barnett, who set it up, has probably forgotten how it was developed. My hon. Friend the Member for Croydon Central (Gavin Barwell) has done a study of local authority funding over several years. It is bizarre how the formula grant has changed inappropriately—this is not a partisan point or a matter for authorities of particular political control. There must be a complete review of all the different indices for the formula so that funding is seen to be fair and understandable. At present, I do not believe that anyone could possibly understand it.

[David Mowat (Warrington South) (Con)]

My hon. Friend mentioned the Barnett formula, and Lord Barnett’s view on it. He does actually have a view on it, which he made clear at the House of Lords Select Committee on the Barnett Formula. His view is that it should be replaced by a formula that is much more needs-based than the current one. The consequence of the current formula is revenue misallocation in the order of £4 billion per year. That is £4 billion that does not come to the English regions but goes to Scotland and enables it to pay for things that we cannot have.

[Bob Blackman]

I welcome that intervention.

I also want to mention buying power, to which I referred in an intervention. I would also ask people to look at the creative use of reserves. In the London borough of Harrow in 2006, the outgoing Labour administration set a reserves level of £1 million, with unidentified savings of some £3 million. I would challenge that as an almost illegal budget, but it was allowed through under the processes. Across the country, there are some authorities that have huge reserves and others that do not have any. My view on reserves and balances is that they are money taken from the taxpayer almost as a form of theft, because they are not used for the benefit of services but are stored up for a rainy day.

Finally, there must be a fundamental review of housing finance in this country; the current proposals do not go far enough. We have to make it much easier for registered social landlords and other people to borrow money to build houses, to ensure that we get the properties that we need and homes for people.

To summarise, I have put forward a series of concerns and issues that are challenges for both local authorities and our ministerial team.