Queen’s Speech

Lord Kerslake Excerpts

Tuesday 2nd June 2015 Lords Chamber

[Lord Kerslake (CB) (Maiden Speech)]

My Lords, I want to touch on three issues in my speech today: local government, devolution and housing.

But let me first say how delighted I am to have become a Member of this House. It seems a long journey from the small village primary school in Somerset, where my father was the head teacher. He left school without qualifications and lied about his age in order to join the Royal Air Force and fight in Bomber Command. Subsequently, he trained as a teacher, having caught up on his education in a prisoner-of-war camp. My mother came over from Ireland to train as a nurse and they met at the Royal United in Bath after the war, where my father was being treated for an injury he sustained when he was shot down over Germany—I am in almost every sense a product of the NHS. To use the current in-vogue phrase, my parents were not just aspirational for their children; they were fiercely ambitious. The route to success for them was for their children to make the very most of a good state education. My only sadness is that neither is here today to listen to this speech.

I sit as a Cross-Bencher, having served political Administrations led by all three of the main political parties. Since standing down from the Civil Service, I have taken on a number of new roles, including chair of King’s College Hospital, chair of Peabody housing association and chair of the Centre for Public Scrutiny. I declare these as interests in the debate today.

Let me turn first to local government. By some margin, the biggest issue facing local authorities is the prospect of further significant spending reductions in this Parliament. They will follow on from some of the largest budget reductions experienced by any part of the public sector in the previous Parliament. In my view, local government acquitted itself well during that exceptionally demanding period: staffing was reduced, back-office services were shared and efficiencies were found, but every effort was made to protect front-line services, particularly for the most vulnerable. The temptation for this Government would be to conclude that, because local government performed so well in the previous Parliament, all that is needed is simply to re-run the record. That would be a grave error. The inevitable consequence would be a deterioration in the visible services, such as street cleaning, and massive pressure on the social care budgets, in turn adding to the considerable pressures on the NHS.

To avoid this, a much more comprehensive approach will be needed which looks specifically at social care, revisits the distribution of funding between authorities, considers new sources of income and promotes the integration of local public services. Close working with the Local Government Association and the sector will be essential. This will not make the task easy or risk free. The alternative, though, will be a great deal worse.

The greatest opportunity for local government in this Parliament, and my second theme, is the prospect of greater devolution. I have long been a passionate advocate of devolution as a way to promote economic growth and improve public services. Since my time as chief executive of Sheffield City Council, I have also championed the economic potential of our major cities outside London. So for me, the Cities and Local Government Devolution Bill, which received its First Reading in this House last week, is entirely welcome. It provides the opportunity to build on the ground-breaking deal done by the previous Government with Greater Manchester and deliver far-reaching devolution of powers and budgets to boost local growth. I was fortunate to work closely with the new Secretary of State for Communities and Local Government, Greg Clark, on the city and local growth deals. I saw at first hand the skill, creativity and attention to detail he brought to that and the success he made of that initiative. One of the most striking features of the Minister’s approach was his inclusivity, so that every part of the country benefited from a deal. It is important that this inclusive approach is also followed on devolution, so that the opportunities are not confined just to cities and not just to those city regions that are ready to agree to a metro mayor.

In his foreword to the excellent City Growth Commission report, the noble Lord, Lord O’Neill, refers to “ManSheffLeedsPool”—get your mind around that one—as an area of 7 million people that could provide the economic scale to compare with London. I very much hope, therefore, that the Sheffield city region will follow on soon to benefit from the opportunities of this Bill. The noble Lord, Lord Scriven, spoke eloquently about Sheffield in his maiden speech in December. With the brilliant Advanced Manufacturing Park in Rotherham, the new National College for High Speed Rail in Doncaster and the key development sites at Markham Vale and junction 31 of the M1, the area has enormous economic opportunities. It has a well-regarded local enterprise partnership and a combined authority chaired by one of the most experienced and able leaders in local government, Sir Steve Houghton. It is in everyone’s interests that discussions to build on the deal agreed at the end of the previous Parliament begin soon. One important issue that should be revisited as part of these discussions is the location of the HS2 station in Sheffield. The impact on growth, jobs and business rates if this is located in the centre of Sheffield is significantly higher than the alternative of an out-of-town parkway station. It also keeps open the future opportunity to create a genuine economic powerhouse through improved connectivity with Leeds and Manchester.

The third and final area that I want to talk about today is housing. There were a lot of good and productive initiatives in the coalition Government to promote the building of more housing and more affordable homes. It is with great regret, therefore, that I find myself so completely opposed to the Government’s proposals to extend right to buy to housing associations and to force local authorities to sell off their highest-value properties as they become vacant. In its current form, this policy seems to me to be both wrong in principle and wrong in practice. It is wrong in principle because these are not the Government’s assets to sell. Housing associations are private, mostly charitable, bodies. They have built up their housing stock over long periods of time to provide for those who are most in need. Peabody, for example, has been in existence for 153 years, only 40 of which have involved any public subsidy.

To fund the cost of the discounts, local authorities will be compelled to sell their highest-value properties as they become vacant. There is a good case for local authorities being able selectively to sell off some of their high-value properties to reinvest. However, a top-down, one-size-fits-all approach is contrary to the spirit of greater devolution and will bring with it unintended consequences. In London, for example, the top third by value of properties will be concentrated in the central London boroughs of Wandsworth, Westminster and Kensington and Chelsea, which stand to lose nearly two-thirds of their stock over time.

The plans are wrong in practice because they will not advance the Government’s stated aims; indeed, I fear that they will move them backwards. Housing associations have been key players in the delivery of new housing in recent years, accounting for over one-third of all new housing. Many have built not just for rent but for sale. They have developed some excellent and innovative schemes to promote home ownership. These new homes, however, are substantially funded through private borrowing against future rental streams. The proposed RTB policy, combined with changes in benefits, will make housing associations much more cautious about investing in new-build programmes and, crucially, lenders much more cautious about lending. The knock-on consequences of this on new-build and regeneration schemes could be very serious.

There are also real doubts in my mind as to whether the receipts from the sale of high-value local authority properties can simultaneously cover the cost of the discount, the re-provision of new affordable homes and a contribution to the brownfield regeneration fund. At the very least this should be subject to a full independent financial review. What is clear, though, is that there would be a substantial flow of funds out of London, potentially of the order of £5 billion, to other parts of the country to make the numbers balance. The level of sales in London could reach 5,000 a year, which would be almost impossible for the London boroughs to match with new-build affordable homes—a fact borne out by the current experience of the one-for-one policy. This loss of affordable homes and redistribution of funds out of London at a time when its housing needs are so acute seems to be completely counterproductive.

For all these reasons, and for the others set out so well by others, including the noble Lord, Lord Best, I urge the Government to reconsider. They should meet urgently with the sector to discuss how the policy can be amended and its deficiencies addressed. Ultimately, the route to more home ownership, which I support passionately, is to build more homes. There is a real risk that this policy will distract from that vital, urgent task.

These three issues—local government, devolution and housing—are my current passions. In time, no doubt, drawing on my experience from the brilliant King’s College Hospital, I am likely to add health. I look forward to contributing to these debates in future.