Local Government Funding

James Morris Excerpts

Monday 6th December 2010 Commons Chamber

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

It is a pleasure to follow the hon. Member for Liverpool, Wavertree (Luciana Berger).

As other hon. Members have remarked, the debate comes at a crucial time for local government. Many local authorities have been preparing for these tough times because, as others have pointed out, if there had been a Labour Government there would probably have been cuts of about 20 to 25% in local government anyway. Responsible local government leaders and chief executive officers have been making plans over the past two years to deal with the overall fiscal situation that we face. In my previous capacity before coming to the House, as chief executive of Localis, the local government think-tank, I worked with a number of local authorities across the country that were already beginning to make strategic plans to cope with the situation. They knew that whatever the outcome of the general election, there would be significant service transformation.

I think we would all agree that the outcome of the comprehensive spending review is a tough settlement. As has been pointed out, we do not know the exact figures that the Minister will reveal next week, but we know they will be tough. However, the review also provides local government with a serious opportunity to consider how it can transform its services and improve its service delivery.

Some Opposition Members have touched on the hypothetical distribution of the spending cuts around the country and questioned their potential fairness. As the hon. Member for Bermondsey and Old Southwark (Simon Hughes) pointed out, the way in which the formula grant is calculated is very complicated, and we would all agree that for many years it has been thought to be completely lacking in transparency. I agree with him that there is an urgent need to reform how we calculate the distribution. In fact, in the last Parliament, the Communities and Local Government Committee recommended that the Government increase the transparency of the existing grant allocation process. I hope that will form part of the Government’s review of local government finance, because more transparency in the allocation process is critical.

I represent a constituency that straddles two metropolitan authorities in the west midlands—Dudley and Sandwell—one of which is Conservative-controlled and the other is Labour-controlled. My central focus is to ensure fairness in the grant allocation process. However, there is a discrepancy between these two metropolitan authorities. Dudley metropolitan council receives £60 million less funding than Sandwell metropolitan authority. They have similar levels of population and deprivation, yet there is a £60 million discrepancy. I am not making a value judgment about either authority; I am simply saying that we need to get to a point where this grant allocation does not throw up such significant discrepancies, not just between metropolitan boroughs and the shires—that has been debated tonight—but between metropolitan authorities within particular regions.

Funding shortfalls were not the only legacy that Labour left the country. As my hon. Friends have argued, the previous Labour Government kept local government on a tight leash through centralised control and regional bureaucracy. The changes implemented over the past 13 years have stifled innovation locally, and given local government and communities the feeling that they have limited control and ability to make decisions and effect change. Unaccountable quangos, such as the Standards Board for England, the regional development agencies, including Advantage West Midlands, and the regional spatial strategies, all contributed to this feeling, and I am pleased to say that they are all on the way out. Removing those unelected, unaccountable and unwanted regional structures and bodies is a first step in a vital development for a new era of local government.

[Tom Blenkinsop]

What will areas without a local enterprise partnership do to get money through the regional growth fund?

[James Morris]

They will need to make clear arguments to the Department for Business, Innovation and Skills and the Department for Communities and Local Government about why there should be a local enterprise partnership. However, local politicians should be arguing in favour of making applications to the regional growth fund because, even outside the LEPs, businesses, the voluntary sector and local authorities can make applications to the regional growth fund.

Local authorities will now be given back responsibility from central Government to start making real decisions about how they spend their money. As the Secretary of State said, the Government have freed up, or un-ring-fenced, grants worth £7 billion from 2011-12 onwards, which the Local Government Association described as

“an important move towards a simpler funding mechanism that will help councils do their job”.

However, that should be only the beginning. There is huge scope for the introduction of other levels of financial innovation in local government. For example, hon. Members have talked about the potential productive use of tax increment financing. This lack of ring-fencing, this devolution of financial autonomy to local government, should be only the beginning. We also need a systemic reform of the services delivered and a re-evaluation of how local people can influence the way services are run. This transformation, with the coming presentation of the localism and decentralisation Bill, is at the heart of Government policy. A bottom-up approach to service provision is vital.

[Graham Jones]

Does the hon. Gentleman agree that a bottom-up process involves cost, and local authorities are worried now that such a process, which he has suggested, will double the pain following the cuts in the comprehensive spending review?

[James Morris]

Over the past 13 years, as I said, we have had centralised policy dictated from Whitehall. At a difficult time for local government, it is even more important that we invert that pyramid and have a bottom-up decision-making process in which local government can take more control of its decision making.

[Mike Freer (Finchley and Golders Green) (Con)]

Does my hon. Friend agree that top-down policies cost more than bottom-up ones? Under the previous Government, local authorities had more than 1,000 targets to report on, which cost my local authority £3 million a year.

--- Later in debate ---

[James Morris]

My hon. Friend makes a very good point. What he says is true.

The Government have asked local authorities and businesses to join forces in a bottom-up process, where they feel it appropriate, and through local enterprise partnerships, rather than top-down, regionally imposed structures. That will allow for economic development to be based on genuine local economic geographies, for investment to be tailored to local areas, and for LEPs, such as the one I have been advocating for the black country, to focus with laser precision on the particular issues affecting the 1 million people living in the black country.

That also illustrates that local authorities are capable of working together, often across political boundaries, to deliver services more proactively. In my region, Dudley, Sandwell, Wolverhampton and Walsall councils are demonstrating, by working together on shared services, such as information technology, trading standards, legal services and human resources, that we can save money and deliver better services for local people. That is happening across the country. For example, Hammersmith and Fulham, Westminster and Kensington and Chelsea councils are implementing a substantial shared-services programme across education and other services.

[Andrew Bingham]

My councillors would not forgive me if I did not intervene at this point. I have mentioned High Peak borough council already, but with its shared services with Staffordshire Moorlands district council, we saved more than £1 million last year, and will save a further £1.27 million this year. That exemplifies my hon. Friend’s point.

[James Morris]

My hon. Friend makes a very good point. This is the future of local government—working together, shared services and making savings, while delivering services more effectively.

I have long been an advocate of place-based budgets, which were touched on at the beginning of the debate. To give the previous Government their due, they introduced the Total Place pilots. Regrettably, it took them12 years to come up with the idea, but it was a good one. The implementation of place-based budgeting can radically change how services are delivered by pooling funding from a wide range of public, private and third sector organisations to tackle specific issues. I welcome the fact that the Government have announced that initially 16 areas will focus on the broad theme of helping families with complex needs. That model will help to make the delivery of services cheaper and allow for an improved focus on the needs of specific communities and individual users. This model needs to be expanded to encapsulate further policy objectives in the medium term. The Local Government Association estimates that doing so could save £20 billion a year by the end of this Parliament.

There are examples up and down the country of local authorities taking up this strategic challenge. As the Minister remarked, the recent announcements on public health demonstrate new roles and potential funding streams for local authorities that are also very welcome. However, that is not the only way to improve service delivery. The Cabinet Office recently introduced a right to provide for employees of public sector organisations. What this will mean in practice is the extension of mutuals and co-operatives in the provision of public services. The people at ground level often have a knowledge and understanding of the issues at hand, and they will now be able to start delivering services better. I am keen to see this model progressing in my constituency, and I can see the potential of mutuals in offering local services and youth services. The Government are also committed to providing local people with specific powers to improve their local area. These include devolving planning reform back to communities from unaccountable regional quangos, allowing local people to elect their own mayors and police commissioners, and extending the use of local referendums.

In summary, therefore, power is being handed back to local authorities, public sector workers and local people. Unlike what happened during the past 13 years, this will be real localism in practice, not the top-down centralisation that was passed down by the previous Labour Government. Such an approach can lead to a more personalised approach to the delivery of services, greater accountability and transparency and, crucially, given the economic mess, real savings, which the Local Government Association estimates could be as high as £20 billion over this Parliament. Local authorities need to see the current situation as an opportunity fundamentally to rethink how they deliver services, so that they can begin to do so more efficiently, more effectively and in the interests of the local people they serve.

[Several hon. Members]

rose—