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In that new settlement, local authorities would be able to do anything not prohibited by law, turning on its head the present injunction that prohibits them from doing anything unless it is expressly allowed by law. Like all public bodies, local government would have to perform its duties within a legitimate national inspection regime, and without infringing the human rights that
would be found in a modern and comprehensive British Bill of Rightsanother part of Britains governance jigsaw that we hope will be proposed in legislative form in the not-too-distant future. Local government could therefore be held to account by any citizen for any arbitrary breach of those rights.
The pull of centralism, however, is so great that even a Government who had created independent local government, as I hope our newly refreshed Government will, might succumb to the temptation to meddle unless such local rights were put constitutionally out of bounds. That could be achieved initially by an amendment to the Parliament Act 1911 that would allow the second Chamber to veto legislation that threatened the agreed rights of local government. In the longer term, such a fundamental bedrock of our democracy needs to be guaranteed by clauses in a written constitution for the United Kingdom. The 10th amendment of the American constitution provides a very helpful starting point.
Andrew George (St. Ives) (LD): I entirely endorse the hon. Gentlemans analysis, but until we obtain the changes that he proposes, we must describe what the Government call local government as it really is. It is the agent of central Government, given that it has very little latitude whatever.
Mr. Allen: Rather than be critical of any Government, I would seek all-party support for where we go from here. If there is to be constitutional change, it will need cross-party agreement if it is to stick and not be unpicked by parliamentary statute. I know that the hon. Gentleman supports the essence of what I have been saying.
I turn to what must be the second fundamental principle. Central to the concordat is that, while we may return ownership of local government to local people, we must also restore control to them. Political independence for councils would mean nothing without financial independence. The bulk of local authority spendingmore than halfis now provided by central Government and only a fraction, one eighth, is raised locally by the council tax. That dependency must end. Central Government must be removed from the financial equation and localism given monetary teeth. To do so, a radical new settlement on taxation needs to be implemented.
At present, income tax is first collected from local taxpayers by Her Majestys Revenue and Customs and then distributed back to localities via central Government. That essentially technical function of distribution has become politicised and arbitrary because of decades of governmental manipulation and the desire to impose central priorities and targets. In future, the same level of income tax revenue should still be collected by the Revenue, leaving the taxpayer and tax rates completely unaffected financially. However, the precise amount that currently goes to local government should be ring-fenced and go directly to it, not via the centre.
Central Government spending on local services in England and Wales is £54.6 billion and the income tax take is £109 billion, so in effect about 50 per cent. of the income tax take would become local, with 50 per cent. going to the Chancellor, as it does now. That redistribution could take place via the Local Government Association
or an independent commission, legally separate and dislocated from Whitehall. Yes, what we did for the Bank of England we must do for local government. Such a body would receive local governments slice of income tax directly from HMRC, and be charged with distributing it to councils and equalising it on exactly the same basis as the Department responsible for local government currently does.
There is no reason why most of such a commissions members should not be elected councillors from all parties. Local governments national bodies have shown themselves to be mature and confident in working cross-party and co-operating among themselves, and there is no reason why they could not perform the task. The amounts of income tax going to national and local expenditure would then be clearly identified on payslips as national income tax and local income tax, which would be a massive aid to accountability and to individuals in knowing the reality of what they pay for local services. It would be seen clearly and visibly, and therefore aid accountability.
Mr. David Chaytor (Bury, North) (Lab): I agree wholeheartedly with the argument that my hon. Friend is putting forward. On finance, is he saying that there should be no role for central Government in determining the distribution formula for different local authorities? That seems to me to be one of the essential political judgments that should remain the responsibility of central Government. I accept completely his argument about the need for greater financial autonomy at a local level.
Mr. Allen: I think that wepeople from the localitiesare perfectly capable of making such decisions. I do not need to abrogate that decision to a civil servant in the Department for Communities and Local Government. I am quite content that a sensible formula could be arrived at by ourselves, the Local Government Association and the people who wish this to succeed, rather than having nanny decide the formula for us. I know that that is not what my hon. Friend is saying, but if we are to mature and grow we need to look after ourselves and to take responsibility. That, in itself, can be quite a frightening task.
Central Government would still have the ability to intervene, as other federal Governments do in western democracies, for specific, time-limited purposes such as helping out with urban regeneration for five yearsmoving in and out, as often occurs in other democracies that have the maturity to run their local and national affairs without that involving a contradiction. It is only in the UKthe last country in the empirethat we feel that everybody has to be told what to do from the centre.
I hope that local councils, assured that the funding of most of their expenditure was secure, would then be free to raise the remaining part of their income from a menu of revenue-raising powers ranging from property taxes to sales taxes. Decisions on local tax and rates could be taken by local representatives and perhaps even endorsed in local referendums. My guess is that local authorities would mostly rely for their income on the local tax that I have described, a returned business rate and a property tax to meet their expenditures. Of course, they would continue to receive rental income
from their own housing, which, incidentally, might well have a dramatic revival if freed from central Government control.
In a mature democracy, local authorities would be confident and competent enough to raise and spend what they decided was appropriate, always needing to balance service delivery and revenue raising with the electoral consequences of no taxation without explanation. Citizens, knowing what they paid and why, and holding their local representatives to account, would constitute a far firmer discipline and stronger bulwark against central interference than any statute that we might want to pass in this place. They would own their local government once again.
Local authorities already have a record of financial expertise and economic management that bears comparison with a central Government who so often wish to lecture them. However, as a constitutional safeguard, local authorities would be obliged to operate a balanced budget provisionthe self-discipline operated by most American state governments. Annual income would have to match annual spending, and local borrowing, provided that its costs were met from annual income, need not be controlled by Whitehall or appear in the old public sector borrowing requirement, which we now call the public sector net cash requirement.
Throwing away the crutch of central Government will be frightening as well as exciting. There will be no one else to blame any more. However, devoted public service has always characterised local councillors of all parties, and they will respond to their liberty. Let local people decide on their spending and their services, on their electoral system or the use of direct democracy.
Returning real decision-making power to local areas would also give a much-needed stimulus to local political parties. Many individualswe all know themhave opted out of local politics. They do not want to be rubber-stamping the decisions of local and regional bureaucrats. We have lost a lot of good people that way. They would be drawn back into public service, and once again it would really matter who got elected locally and how well they were politically prepared and technically trained to handle the onerous local duties of independent local government. We would re-create that invaluable network of citizen politicians of all parties, in touch with their communities and close to their constituents, empowered and empowering their local areas.
An era is ending. The current agency relationship between the centre and the localities cannot be sustained. Now is the time for some bold leadership and to let goto release and return power to our local communities. I hope that the Minister will make a bold response and that it will be matched by a vision from leaders in local government, who have so far by and large shown themselves to be happy just to quibble over the scraps, rather than fight for their freedom. They should seize the opportunity that the concordat presents for independence and autonomy and remake our local government, making it fit for the next 100 years.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr. Parmjit Dhanda):
I congratulate my hon. Friend the Member for Nottingham, North (Mr. Allen) on securing this
worthwhile and interesting debate. I shall attempt to respond not with mechanistic, localist jargon, or indeed by invoking the spirit of Leonid Brezhnev, but I hope more in the spirit of glasnost and perestroika. The debate is about the constitutional status of local government, as my hon. Friend said. I also congratulate and thank my hon. Friend the Member for Bury, North (Mr. Chaytor) for his contribution, with which I agree, and the hon. Member for St. Ives (Andrew George) for taking part.
While I agree with much of what my hon. Friend the Member for Nottingham, North said, I must begin by making two contentions. First, it is the freedom and flexibility on the ground and willingness between partners to co-operate that deliver the best outcomes. I know that we agree on that. The issue is not the constitutional status of those partners, but what happens on the ground. Secondly, the Government have taken successive and radical stepsrecently in particular, but also in the past decadeto deliver more freedom and much more flexibility, and we are committed to doing more. However, my hon. Friends comments concern me, because they mean that there are people in local government who are not taking best advantage of some of the opportunities available to them.
My hon. Friend challenges local leaders to display vision and leadership. I suggest that the freedom and flexibility that the Government provide to local leaders offers them that opportunity. Their challenge is to work together with local partners, including local strategic partnershipsmy hon. Friend is the only MP I know of who chairs his own local strategic partnership, One Nottinghamto achieve the best outcomes for local people.
The Government are committed to localism and devolution. Successive policies and legislation have returned power to local authorities and strengthened their roles as local leaders, although that is not to say that there is not still much more to do. The last election manifesto contained the commitment that the Government would
build upon our unprecedented programme of constitutional reform embedding a culture of devolved government at the centre and self-government in our communities.
The provisions of the local government White Paper and the Local Government and Public Involvement in Health Bill take that further and represent a new settlement between local and central Governmenta transfer of power from Whitehall to the town hall, alongside devolution, and right to the doorstep.
So where are we now? We face a big opportunity and, at the same time, a big challenge. It is time to turn devolution into a reality in our local communities and show what local democracy can achieve with all the tools that we are trying to provide to local government. The new local area agreements coming in next year take devolution a step further. They give local government greater space to deliver for communities and ensure that local communities have a bigger say in influencing the future of where they live. They put a premium on all local partners working together to deliver better services and deliver a big cut in red tape. They also provide local authorities with greater freedom to direct funding towards local priorities and will lead to real debate between Whitehall, local authorities and communities about the future of their areas.
My hon. Friend talked about the hand of Whitehall and the burdens that it places on local government, but the new LAAs will reduce the number of indicators from about 1,200 to about 200, of which only about 35 will be answerable to central Government. We have to get the balance right in this House. I have taken part in several debates both wearing this hat and as an education Minister, and recall one, in particular, when the Education and Inspections Bill was going through Parliament, in which I was lobbied hard by Members about the need to enforce on local government the statutory need for a youth service. So there are bare minimum standards out there, and it is important that we support local government in retaining them for the benefit of our communities.
LAAs will ensure that public services meet peoples needs. As they bring different people together, they have the potential to be the best solution to some of the complex, cross-cutting problems that we face in our communities.
Mr. Dhanda: I shall come to the concordat in the next five minutes. My hon. Friend referred to it several times, and it is important, but a lot of work on it is ongoing. I hope to be able to give him more detail on it as the autumn progresses. I shall be keen to correspond with him in detail on the progress that we are making, because he is right that it is important in relation to balance and the day-to-day work between central and local government and our councillors.
My hon. Friend describes an inherent paradox in our plans between centralism and devolution. He argues that agreeing a single set of indicators across government will lead to less flexibility, not more. I do not agree. LAAs are not a centralising measure; indeed, they are quite the opposite. They are a genuine central/local negotiation that allows local leaders to have direction over funding. The outcome is a deal that hands over responsibility and frees funding for local government and local partners to take the actions that they decide are best for their areas. The new agreements give room for local authorities and their partners to focus on the issues that local partners think are most important.
My hon. Friend also mentioned leadership. The success of devolution and the new localism depends, in part, on strong leadership in local governmentleadership that recognises and tackles local priorities, forms active partnerships and gives local communities and local people a bigger say in what happens in their areas. As strategic leaders for their areas, it is the responsibility of local authorities to ensure the social, environmental
and economic well-being of their communities. The role of a strategic leader is not to deliver everything oneself, but to use ones influence and democratic mandate to make sure that the services that people need and the priorities for the area are tackled.
Last week, the Department for Communities and Local Government published a report highlighting the link between stable and powerful political leadership and customer satisfaction with services. As my colleague the Minister for Local Government said in welcoming the report:
This study shows that giving councils a more visible and effective leadership role has led to faster decision making, better services and improved public satisfaction.
Mr. Allen: In the context of leadership, will the Minister admit into the talks about the concordat between local and national Government, if the LGA leadership wants it, a discussion about the concept of constitutionally independent local government? Has anything been ruled out of those discussions?
Mr. Dhanda: I do not want the concordat to be a dry paper, and I am sure that we need to have an in-depth and worthwhile discussion on it. However, I disagree with the principle of having something that is constitutionally independent of Government rather than statutorily independent, because, as I said at the outset, this issue is about delivery on the ground. That is what matters most to local people.
In the time available, I shall respond to some of the comments that have been made about funding, particularly on a point made by my hon. Friend the Member for Bury, North. We must not leave some of the very important decisions about Government funding to a quango. We must ultimately accept, as a Government and as Ministers, when we have formulae for local government, that we are accountable. We in central Government are accountable for those decisions and that should continue to be the case, although we must also respect local decisions and accept that people must decide locally how best to spend those resources. They might have innovative ideas for the future about how best to raise more resources.
I have not been able to cover as many points as I would have liked to in the time available, so I will write to my hon. Friend, if that is agreeable to him. I hope to keep the dialogue between us ongoing as we move towards a concordat.
Tony Baldry (Banbury) (Con): I suspect that the Ministers effective response to this debate will be short. In so far as the reconfiguration of local hospital services is concerned, I imagine that she will say, first, that such reconfiguration is a matter for local medical opinion, and, secondly, that Ministers will act in such matters on the advice of the independent reconfiguration panel. If the Minister were to say that, she would be wrong.
Local general practitioners are against the cuts, as are those hospital staff who have been able to speak out against them. Patients and local residents are petitioning and rallying against the cuts to general hospitals in their tens of thousands. In my constituency, local medical opinion is overwhelmingly against the proposed changes to services at Horton general hospital, but it has simply been ignored, and, although the existence of the IRP is welcome, it can, of course, only advise the Government within the policy parameters set by them.
For example, the Government have given some clear indications as to what they consider should be the minimum size of a consultant-led maternity unit, although it should be observed that our European neighbours safely manage consultant-led maternity units substantially smaller than those in the UK. Indeed, the existing maternity unit at the John Radcliffe in Oxford is already larger than practically every consultant-led maternity unit in Germany, France, Holland and Belgium.
I believe that everyone can understand, after the turmoil of the junior doctors training fiasco and the somewhat patronising approach of the previous Secretary of State, that when the present Secretary of State came to office, he was keen to give the impression of drawing a line in the sand and to institute a year-long review of the national health service. I suppose he hoped that that would buy him time to sort out what was going on in the NHS, to try to understand why so much extra investment has led to so little by way of improved outcomes and, in the meantime, to try to shuffle off any difficult decisions to the IRP. Indeed, a study published at the beginning of this month found that health services in the UK are some of the worst in Europe. The UK is in the same league as countries such as Slovenia and Hungary, which spend far less on health, and is languishing below Estonia and the Czech Republic in respect of health care.
Unfortunately for the Secretary of State and his ministerial colleagues, the approach of seeking to shuffle off decisions was completely undermined as soon as the present Prime Minister walked into No. 10, because one of his first actions was to appoint to the health ministerial team Professor Darzi, now Lord Darzi of Denham. On the day that Lord Darzi was appointed, he observed to The Guardian that:
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