Levelling Up: Local Councils

John McDonnell Excerpts

Wednesday 8th December 2021 Westminster Hall

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House has considered the role of local councils in levelling up.

The debate is about the role of local councils in the levelling-up strategy that the Government are pursuing. I applied for it because I had hoped that the Government’s White Paper would have been published either last week or this week. Unfortunately, it has been delayed until the new year. Nevertheless, at least the debate gives us an opportunity to feed some last thoughts into the pre-White Paper discussions in Government on the way forward, although the reality is that the most valuable dialogue will most probably come as the Government plan the detail of the roll-out and delivery of the policies set out in the White Paper.

The Government have rightly put great emphasis on levelling up the country, so much so that we now have a new Department—the Department for Levelling Up, Housing and Communities. However, they have not yet defined what achieving levelling up would look like, what targets they have set themselves to achieve through that policy programme, or what the timescale for the programme will be. Hopefully, the White Paper will set out these things clearly when it is published in the new year.

There is widespread agreement that there is a need for levelling up. Way back in 2016, at a conference that I convened in Liverpool, I launched a similar policy with the CBI, using its regional government investment analysis at that time. That demonstrated the stark inequalities that exist. The figures are stark. London receives about twice as much capital investment per person as the south-west of England and the north-west of England receives only two thirds of the level that London receives.

Back then, I also used Department of Health statistics to demonstrate the consequences of inequality, and particularly the consequences of low incomes and poverty, with a difference in life expectancy of 20 years between Kensington in Liverpool and Kensington in London. The Minister may know that we have two Scousers in Westminster Hall today to evidence that.

The harsh reality, which we have all accepted, is that this imbalance of investment has meant that too much priority has been given to investment in parts of London and the south-east, as well as too many of the best jobs in the country. I speak as a London MP, because there are also grotesque levels of inequality within London and the south-east. Over-investment and the heat that it generates in such an particular economy has a negative impact on the area, with exorbitant housing costs that leave many workers priced out of ever owning their own home and paying a disproportionate amount of their wages in rent.

The other element, which I have drawn attention to in past debates, is the way that, just to keep a roof over their heads, families are working every hour God sends, which unfortunately undermines family life as well. The grotesque imbalances in our economy are not an accident, or even the invisible hand of the market. They are a deliberate, ongoing Government policy—one that has gone on for the last four decades, at least, regardless of the party in Government.

I looked at the detailed analysis of what the cost of levelling up would be. To bring every UK nation and region up to London’s level of funding would require an additional £30 billion in annual capital investment per year. Even to level up every nation and region to the current UK average, the capital spend required would be an additional £6 billion in funding.

To be successful, levelling up has to be about more than capital spend. It has to be about more than just physical infrastructure, important though that is. We need a comprehensive and holistic approach to building both the physical and the social capital of an area, but that cannot be done when local government funding from central Government is about £16 billion lower than it was in 2010. There has been a cumulative reduction of more than £100 billion in central Government funding for local councils over the last decade.

[Ian Byrne (Liverpool, West Derby) (Lab)]

It is an honour to serve under your chairmanship, Mrs Miller. On the funding aspect, Liverpool has lost £450 million since 2010, with further cuts of £32 million expected in April. Levelling up rings hollow in Liverpool. The sustained attacks that we have seen, starting with the Conservative and Liberal Democrat coalition in 2010, have ripped the heart out of the fabric of Liverpool, so levelling up is hollow rhetoric there. I look forward to the next Government spending review for local councils.

[John McDonnell]

The message I am trying to get across is that although the emphasis in Government announcements has been on capital spending, levelling up will not become a reality in cities like Liverpool and elsewhere unless we address the issue of council funding overall. When we debate the White Paper, I hope that we can have a serious and sensible debate about how, over time, we can address what has happened over the last 11 years. We can have a political knockabout about whether or not it was justified, but I think we just have to move on and look at how we can address the situation, perhaps being more creative than we have been in the past.

The situation is serious in Liverpool, but it is not just Liverpool. In recent years, we have seen three councils issue section 114 notices, while another dozen or so have had to call in exceptional financial support from the Government to avoid the same fate. I do not know whether the Minister saw the recent evidence session of the Public Accounts Committee, but we know that there are possibly dozens more councils in contact with the Department over their financial situation.

The issue of central Government funding has to be addressed. The figures are pretty stark. Since the 2015-16 financial year, local authorities have lost 41% of their central Government funding—equivalent to the loss of £8.7 billion a year. Although I accept that some of that has been offset by the retention of business rates and raising council tax above inflation in recent years, it has still left councils with significant real-terms losses in their overall spending power. It has had real consequences for all parts of the country.

According to the briefing provided by Unison, the local government union, councils in England have closed more than 859 children’s centres since 2010, although that figure has been contested—some people think it is actually more. They listed 940 youth centres and 738 libraries that have been closed, while funding for more than 1,200 bus routes has been withdrawn. That has an impact on communities across the country that has to be addressed if we are going to genuinely level up.

I will give an example. It is difficult to see how local economies can be levelled up if childcare and support for parents is not available. How can we level up our town centres and high streets if people do not have a means of transport to get there, or even just basic public conveniences when they do? My argument is that, when we debate the levelling-up White Paper—I look forward to it—we need to debate both the revenue and capital funding that is needed. Let us look at one region, the north-west of England; this example will be relevant to my hon. Friend the Member for Liverpool, West Derby (Ian Byrne) and it is where I did the most intensive work on Labour’s policies, talking with local communities to find out what was needed. Local authorities in the north-west of England are receiving £1.2 billion less per year in 2021-22 in central Government funding than they did in 2015-16; that is a 36% cut. The calculation is that the north-west would need an extra £3.47 billion per year in capital funding just to reach London’s level. The north-west received nearly £500 less—well, £492 less—per person per year when compared with London.

We know of some councils that are so depleted by cuts that they did not have the in-house capacity to even submit bids for the levelling-up fund. These are funds that were allocated in the recent Budget, which we welcomed. We cannot have a begging-bowl approach, with councils fighting over scraps; we need a rising tide of funding that raises all local authority ships.

I want to talk about power. Levelling up must mean not just an injection of cash, but a redistribution of power as well. Councils need more than just greater resources in order to level up—they need to be given powers to do so. That is the message from all local authorities controlled by all political parties. I will watch with interest the Secretary of State’s recently floated idea for further Mayors—or governors, as he said—covering more of the country. It will be interesting to see how that can be rolled out. I am not opposed to it. I am not happy with the mayoral principle, but it has been established and it seems anomalous that there are Mayors for cities but not for other areas.

Let us talk about now. We have devolved Governments in the nations, and a dozen or so city-region Mayors in England. I hope the Government will listen to the demands from, for example, the Mayor of London for more powers. He is asking for more powers to set rent controls—powers which major cities around the world, from Berlin to New York, possess. Shelter, the housing charity, has recently published a report that explains the consequences of levelling-up infrastructure investment without taking housing need into account. I will use my area as an example; the Minister is welcome to come down and visit and we could have a discussion on site if necessary. In my area, a consequence of the welcome multi-billion pound investment in Crossrail is that land and house prices have shot up. Without new council housing or rent controls, local people are being forced out of the local housing market. Alongside the building of more council housing, a Mayor with powers of rent control would really help level up in London and areas like mine.

I hope the Government are going to listen and back the Mayors who are seeking to re-regulate the buses in Greater Manchester, Liverpool city region and West Yorkshire. It is a great policy. It is about improving infrastructure that will increase private investment, it is about a modal shift that will improve carbon emissions and improve air quality, and it is about increasing the act of travel, which has health benefits as well. I point the Minister towards the recent reports from Green Alliance, a coming together of various national environmental groups. They have pointed out how much more could be done on the Government’s climate change agenda if the powers and resources were made available to local government.

When I raised the issue before, Government Ministers have argued that council spending has been boosted by the retention of business rates and the ability to raise more through council tax in recent years. First of all, based on the National Audit Office’s figures, it is likely that councils’ overall spending power is now some £5 billion lower in real terms than it was in 2010. The Minister will also know that raising council tax has very unequal impacts: a 5% increase in Surrey raises about £38 million, while a 5% increase in Blackburn with Darwen raises £2.8 million. It is a similar story with business rate retention: councils with prosperous commercial centres can raise significant sums, whereas councils without such areas cannot.

As such, alongside discussing the levelling-up agenda in investment terms, it is now time to have a serious discussion in Government about a more radical reform of local government finance to provide a stable, locally determined income stream from councils. There have been discussions in all our political parties about options for doing so, but we need to bring those options forward more rapidly. For example, I am interested—as are a number of Conservative MPs—in some version of land value taxation that might transfer both resources and, more effectively, power to the local level.

I also want to raise the issue of debt, in the Liverpool context as well as that of other local authorities. We have a responsibility here: to be frank, central Government have encouraged local authorities to borrow, often heavily, to go into property deals in order to secure much-needed additional revenue income. The result is that the local government debt burden is now becoming crippling for some, which is why the Government should explore new mechanisms for debt relief for local authorities. I was here during the banking crash, and can remember when that whole exercise was undertaken and the bad debt bank was established to sort out the debts of the banks involved. It may well be that the most responsible thing at the moment is for the Government to take over some of that debt, and even write some of it off through a debt jubilee for some local authorities.

Finally, I am concerned that as the levelling-up policy programme is developed, it must be seen to be fair. We all have a responsibility on a cross-party basis to not allow even the perception of pork barrel politics to take hold in this country, which is why there must be the fullest openness, transparency, objectivity, and engagement in decision making about the distribution of resources. One proposal is to consider a Barnett formula-type approach, one that would be objectively based on population, to determine the distribution of capital investment alongside the local government finance formula. Another is the establishment of government structures that bring local government representatives into government more effectively. Some ideas have been floated on all sides, such as a new Cabinet sub-committee that invites Mayors and other representatives to participate, or—as suggested by the Local Government Association—a national taskforce on levelling up that, again, rebalances some of the relationship between local and central Government.

In conclusion, I hope that a central plank of the Government’s levelling-up White Paper and the subsequent policy direction will be the empowering of local government to show that councils can play their role in levelling up our nations and regions. The Minister and the Government will not find local councils lacking, either in enthusiasm or in commitment.

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Neil O'Brien)]

It is a pleasure to serve under your chairmanship, Mrs Miller. I congratulate the right hon. Member for Hayes and Harlington (John McDonnell) on securing this very important debate. I am not sure whether he or I will be more alarmed to find that we are, as he suggested, in quite strong agreement on much of this agenda.

[John McDonnell]

I am so convincing, do not worry.

[Neil O'Brien]

The right hon. Gentleman is always convincing when he talks about the lost opportunities caused by having parts of the economy overheating where people cannot afford a house, whereas other parts of the economy are crying out for investment. I felt that his was an echo of the Prime Minister’s speech, so we all find ourselves in at least a pretty high level of agreement on the challenge.

[John McDonnell]

Does the Minister recognise that the Prime Minister is my next-door constituency neighbour?

[Neil O'Brien]

I thank the right hon. Gentleman for that intervention. We are being run by a west London mafia.

As a lifelong advocate for ending the kinds of regional disparities that run through the country, I want to reiterate the importance that I, and the Government, feel about restoring a sense of local pride right across the country. I will start by stating a very obvious point, which is that local councils are an absolutely central part of our levelling-up agenda. They have to be. They have long been huge parts of the democratic fabric of this country and I firmly believe that our huge ambitions for levelling up will not be realised unless local leaders and communities are properly empowered to deliver for their local areas.

Levelling up must now go beyond the first stage of devolution. It must be a mission that gives local leaders and communities the tools they really need, as the right hon. Gentleman said, to take control of their own destiny, boost people’s living standards and spread opportunity. It will not be an exercise in levelling down London or the south-east in order to lift up other areas; it will be one with a clear-eyed focus on using local leadership to spread opportunities to parts of the country that have long felt that Governments in successive decades have not been interested in their city or their region.

The levelling-up agenda will recognise that disparities are not just between everyone who lives north of Watford Gap on the one hand and everyone else. Cookie-cutter policies are not going to bridge the divides that exist between Leeds and Bradford, between Blackpool and Manchester, and between different boroughs in London. We recognise that there are some of the same issues in Darlington and in Hayes and Harlington. We also recognise that levelling up—I agree with the right hon. Gentleman—is a major challenge that will take some time, but work is well under way.

Nobody understands the needs of a local area as well as the people elected to serve as the leadership of that local area in local councils. We are taking forward several programmes that will press ahead with meaningful devolution, including the new county deals that the right hon. Gentleman talked about, to spread devolution across the whole of England beyond the larger cities, and new funding streams to give people the financial firepower to make the changes they want to see in their communities. For example, we have agreements with 101 towns across England that have seen £2.4 billion allocated to local projects through the towns fund and the efforts we are making to resurrect our high streets as we continue to respond to the economic headwinds of the pandemic, with £100 million of combined investment from our welcome back fund and the reopening high streets safely fund.

Those investments are just the start. My right hon. Friend the Chancellor and the Treasury have shown that they are foursquare behind the levelling-up agenda with the recent spending review. As part of that review, we committed £1.7 billion in the first round of our flagship £4.8 billion levelling-up fund, backing 105 different initiatives across the country, from the South Derby growth zone to an upgrade to the ferries to the Isles of Scilly. Both received nearly £50 million from the fund. Other successful bids that we have been funding through the levelling-up fund include the Bolton College of Medical Sciences, the reopening of the world’s oldest suspension bridge in County Durham, and the redevelopment of Leicester train station quite near to me. Those are examples of how the fund is flexible in backing the ambitions of different local places, whatever they may be. The funding builds on the foundations laid in the March Budget this year, with plans to bring regeneration, new prosperity and restored pride to 10 different places through the new freeports, which are levelling up in action. In fact, only three weeks ago Teesside became the first of those amazing freeports to open its doors for business and future investment from top-end employers.

In the time remaining, I would like to turn to local government finance. The right hon. Gentleman talked about the need to move on from the debates we had for a long time at the start of the 2010s. I think that is right. There is no point in re-rehearsing those arguments. We will not convince each other of our positions at this point. He talked about a rising tide of funding. We now have a rising tide of funding. For the last couple of years, our core spending power in local government has started to go up. At the spending review, the Treasury backed councils with an average annual increase in the core spending power of local government of 3% in real-terms per year.

[Neil O'Brien]

As I said, the core spending power of local government will be going up in real terms each year by 3%, on top of all the other things we are doing through the future high streets fund, the levelling-up fund and the forthcoming UK shared prosperity fund, to invest heavily in areas such as Liverpool and the wider Merseyside area. All those things are, at their heart, about investing in locally delivered early help for families of the exact kind that the hon. Gentleman would like.

[John McDonnell]

The example of Liverpool has been given. It would be incredibly helpful, just to bring the Minister up to speed on a specific example of what is happening, if he would meet a delegation of the Liverpool MPs, maybe with the council leader, to talk about issues there.

[Neil O'Brien]

I am planning to meet various leaders from Liverpool city region as part of the Mersey Dee alliance discussions, so I would be delighted to have that conversation. I am very proud of the progress we made for that city through the devolution deal, bringing new powers, new funding and the defragmentation of local government that I think we all agree on in principle.

In the months ahead we will set out in more detail our plans for the levelling-up agenda, with the White Paper that will give us the long-term blueprint, but that is not the end of the story. We have a levelling up Department that will continue to power ahead with this agenda over the coming years. The Prime Minister already gave a clear indication of our position in July when he said we take a flexible approach to devolution, so local leaders in our great cities and historic towns have the tools they need to make things happen for their communities.

Exceptional Mayors are already making a huge difference. If anyone wants to see levelling up in action, I suggest they take a trip to Teesside where, during his four years at the helm, Ben Houchen has managed to secure a brand-new economic campus in Darlington with civil servants from the Treasury, moving the Tees crossing to alleviate congestion and bringing the Teesside airport into public ownership, on top of the freeport that I mentioned. That shows that local areas do not need to be micromanaged out of SW1; they can get ahead if they are given the financial power and the local powers and leadership that they need.

There is no reason we cannot bottle and replicate the brand of leadership embodied in people such as Ben Houchen and Andy Street, our fantastic West Midlands Mayor, and apply it to other areas of the country, and so use local leadership and local government to drive forward this incredibly important levelling-up agenda that we all agree on.

Question put and agreed to.