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Robert Neill (Bromley and Chislehurst) (Con): I acknowledge the Minister’s comments about the importance of local government and its traditions, and the contribution it makes to democracy and this country’s way of life. Local government is hugely important, and I say that as someone who started his political career in local government and spent about 16 years in it. I, like my Conservative colleagues, value the work that is done by men and women in local government; the work of officers and members should not be understated. I agree with the Minister on that point. He is right to say that much good work is done and to point out the degree to which
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local government is often better at achieving efficiency than centralised government—it is worth remembering that.

Having said that, we must step back a little; the traditions that created local government were largely based on considerable local discretion, but that has been eroded over a number of years. That erosion is, cumulatively, the biggest threat to the future of local government. I do not make a partisan point, as the process happens under parties of all kinds. There is a tendency in the British state for central Government to suck in more power to themselves. That applies in respect of all people, and we have to be alert to it. Not for nothing do some independent academics describe Britain— certainly England, post-devolution—as the most centralised state in the western world. It is important to find remedies to that process.

I am grateful to the Minister for updating us on his discussions, because this aspect of local government is uppermost in people’s minds in the short term—I shall return to other, long-term matters later. I am grateful for his candour with us thus far, but I wish to press him again on two points that my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) and I have raised.

First, there is a need for comprehensiveness in the list of where the exposure lies. I think that the Minister has understood that point, but it is important to hammer it on to the record. With respect, it may not be enough to rely simply on the Local Government Association in these circumstances, because we all know that many local services are delivered through housing associations and local private finance initiatives. We are aware that some universities are exposed, but what about the position of schools with devolved budgets? What about the position of the regional development agencies? We need a clear statement of the overall exposure of the local government sector. Secondly, I ask the Minister to consider again the question of setting out which local authorities are involved, as that is an important question of openness. Conservatives do not say those things in any partisan spirit, because it would assist everyone, including those in the local government sector, if we had clarity on both those points. I hope that the Minister will reflect on that as matters unfold.

In the longer term, it seems that there are threats to local government from a number of underlying structural problems to which I have already alluded. The Minister said that the Department for Communities and Local Government does what it says on the tin, but I would say that it does so only up to a point. The Department has presided over a number of measures whereby local government does what it can and achieves what we have referred to despite central Government rather than because of them. It is important that we recognise that.

David Taylor: I worked in the field for a long time and was an elected local government member for quite a period, too. Does the hon. Gentleman recall major local government restructuring in 1973-74 and 1996-97? Both cases sprang from decisions made by the Government of whom he was a supporter and were poorly consulted on, ill-conceived and cost vastly more than was ever promised at the time. Does he recollect those years?

Robert Neill: I made it clear at the outset and have always said that a centralising tendency applies across the piece. Given that the hon. Gentleman recognises
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that fact and given that he has experience in the field, I am sure that if it ever comes to it he will vote against the three unitary reorganisation proposals that are being pushed forward with no consultation and no local support. I hope that he will follow through the logic of his argument.

I want to consider the areas where there are impediments, and finance is one of them. The Minister quoted gross sums, as he has done on a number of occasions. However, he has to reflect on the fact that for the vast majority of local authorities and many people in this country the picture that he paints does not tally with reality. The distribution of the grant—never mind the size of the cake—is opaque, offers a number of perverse incentives and means that many local authorities have found themselves on the floor for years. Those authorities will find no benefit in the total increase in the cake, and we have never tackled the perverse incentives that are created for local authorities through a range of schemes. I hope that the Government will be prepared to consider on a cross-party basis the way in which indices of deprivation are sometimes changed and the lack of transparency in the criteria to see whether we can make the system more transparent.

John Healey: As the hon. Gentleman says, he has long experience of local government. He will remember that we introduced the system of floors in 2000. Would he abolish them?

Robert Neill: It seems to me that the Minister needs to reconsider the whole system of floors, caps and the grant formula. Would it not be much better if we could have greater independence in the setting of the criteria and if, rather than leaving local authorities caught with the cap, we adopted my party’s proposal that council tax increases of a certain size should be put to residents in a referendum? That would surely be democracy.

Daniel Kawczynski: My hon. Friend is making a powerful argument about the huge differences in funding for local areas. May I give him an exact example? Every child in Shropshire receives only about £3,300 a year for their education, whereas the figure in other parts of the country can be as high as £8,000 or £9,000. Those huge regional differences have put various primary schools in Shropshire under the threat of closure.

Robert Neill: My hon. Friend makes a valid point that can be recognised across the House, and it strikes me, representing as I do a suburban constituency—[Hon. Members: “Certainly on our side.”] My hon. Friends say that that point is certainly recognised on this side of the House, and the lack of transparency in the system creates a fear and a belief in many parts of the country that the formula can be manipulated in a way that is, frankly, not objective. That brings local government into disrepute and prevents it from delivering. We need to look more broadly at local government finance.

Julia Goldsworthy: I am listening to the hon. Gentleman very carefully, and I agree with much of what says about the vagaries of the existing funding formula. However, does he agree that his own party’s proposals for council tax rebates would reinforce the problems? The better funded councils would be in a better position to offer no increase in council tax, and would benefit from what
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would in effect be a direct grant from central Government. In contrast, councils funded at the lowest levels would find it most difficult to hold down council tax increases.

Robert Neill: With every respect to the hon. Lady, I think that she misses the point. We want to tackle the problem that, despite the supposedly record levels of spending, the way in which the money has trickled down has meant that council tax has doubled under this Government. That is of increasing concern at a time of economic pressure—and I do not think that it would be much helped by a local income tax, either.

David Taylor: Will the hon. Gentleman give way?

Robert Neill: I shall finish my point, and then happily give way. The hon. Member for Falmouth and Camborne (Julia Goldsworthy) fails to take on board the point that we are not seeking to compel local authorities to keep council tax down—rather, we want to work with local authorities and give them an incentive to do so by releasing funding identified from central budgets. If they can get to 2.5 per cent. they will get match funding, which will mean that they can reduce their budget and so have a council tax freeze. In the current circumstances, I would have hoped that the Liberal Democrat party welcomed a proposal that reduces costs to householders. We have come up with a specific proposal: it would lead to savings and could be implemented, but it is clear that the Liberal Democrats prefer high levels of taxation.

David Taylor: The hon. Gentleman is a well regarded and respected local authority member for the part of Greater London that he represents. I am sure that he will recall the regular allegations during the Conservative years—and they were often substantiated—of a skew towards the London area. Particular beneficiaries were the London boroughs of Westminster, where we are now, and of Wandsworth, which is about 3 miles down the road. However, my key point has to do with his remark that council tax has doubled over the years of this Government. That is true, but the average rate of increase in the 11 and a half years that this Government have been in power has been less than it was in the first five years after the previous Conservative Government introduced council tax in 1992.

Robert Neill: With respect, the fact that the hon. Gentleman feels that he has to resort to that type of allegation shows that he is rather behind the pace of the argument. Certainly, no one who represented an authority in suburban London that has been on the floor for six or seven years would say that Westminster or Wandsworth were benefiting from some illicit screwing—I am sorry, I mean skewing—of the system. [ Interruption.] Some might say that I was probably right the first time.

The system is getting to the stage where it is close to being broken. The Government are unwilling to grasp the nettle and make a serious change to the system: instead, they prefer to continue to apply a sticking plaster to it, and that is what is causing the ongoing problems.

John Healey: I am grateful to the hon. Gentleman for giving way a second time, and I was very interested in his council tax proposals. Good spin, flaky substance—it is not clear whether the 2.5 per cent that he has mentioned
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would be a budget increase or a council tax increase. However, does he recognise who said, “Talking about an efficiency drive is the one of the oldest tricks in the book, but the trouble is that too often it is just that—a trick”? It was his party leader, in a speech made in Birmingham in May.

Robert Neill: In a previous incarnation, the Minister was not beyond referring to efficiency drives himself. The Gershon review was not without an interest in efficiency drives, so that might not be the best point for him to make. Moreover, if he will forgive my saying so, I will not take a lesson in spin from him, given the sudden detour into the ideology of the big or small state in local government.

There is a lack of transparency in the local government finance system. The hon. Member for Cambridge (David Howarth) made a very useful point about a number of perverse incentives attached to specific grants and to the distribution formula. As it happens, that situation is mirrored in my local authority. The swimming project, for example, does not take account of our population demographics. Bromley would actually be worse off under the scheme. Despite the Minister’s laudable ambition, there does not yet seem to be a co-ordination of criteria across the various Departments that fund local government.

The multiplicity of funding streams is also an issue. A very high percentage of grant remains ring-fenced and, although I acknowledge there has been some reduction in that practice, its application reduces local discretion. If local authorities are squeezed as a result of the caps-and-ceilings regime and face a higher percentage of ring-fencing, their scope to shift money around within their budgets to reflect local priorities is significantly reduced.

Mark Hunter: The hon. Gentleman was dismissive of the comment made by my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy), who is on our Front Bench. That is particularly unfair given the vagueness of the alternative local government finance proposals that the Conservative party is putting forward. I have listened closely to what he has to say, and I agree somewhat with the Minister: the hon. Gentleman is good on analysis, but there is not actually any Conservative alternative. Perhaps he could use some of the time remaining to him to tell us what the Conservatives propose as an alternative to the current arrangements. He may not agree with us, but he knows that the Liberal Democrats advocate local income tax because it addresses the fundamental problem with the current system, which is that council tax is not related to ability to pay. Until that nettle is grasped, the system will continue to be unfair to many millions of people across the UK. He may not agree with our policy, but at least we have—

Mr. Deputy Speaker (Sir Michael Lord): Order. That intervention was definitely becoming a speech.

Robert Neill: It is interesting that the hon. Gentleman is anxious to get away from council tax; I am not surprised when I look at the rates of council tax charged by Liberal Democrat authorities, which are among the highest in the country. I am conscious that that is a sore point for him. With respect, the figures in my party’s proposal were checked by the Institute for Fiscal Studies,
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and are based on savings identified by the National Audit Office, which indicated that there is something like five times the spend on the same items in the private sector.

Julia Goldsworthy rose—

Robert Neill: I have been generous to the hon. Lady, and I would like to make a little more progress. The reality is that there is a failure to grasp the fact that a doubling of council tax, particularly in current circumstances, is unacceptable. Only one party in this House has come up with a proposal to freeze the burden of council tax on householders. The others just argue about the level of the increase, and that is not what people are looking for. There is a real issue as far as financing is concerned. There is a link, of course; because there is a lack of transparency and a multiplicity of funding streams, and because there is still too heavy a reliance on ring-fencing, it is difficult to give local communities incentives to take on board growth, new populations and new developments. They do not see any return. They lose out as a result of the perverse operations of clawback. Only yesterday, the Minister had drawn to his attention what seems to be a perverse consequence of the Prime Minister’s initiative, introduced when he was Chancellor, to change the rules on empty commercial property relief. There are still too many opportunities for perverse and unintended consequences to occur in an over-complicated system.

Another thing that reduces local authorities’ discretion is micro-management through the targets regime. I appreciate that the number of targets has been reduced from about 1,000, but I have to ask the Minister: who brought in the 1,000 in the first place? It is a case of the sinner repenting a bit. However, there are still 198 “sins” in place. Moses managed with 10 commandments, and I do not see why the Government cannot get a bit closer to that, frankly. It seems that there is still a significant measure of micro-management. Again, many independent observers note that a perverse consequence of the current target system is that very often, local authorities and their officers are pushed to tick the box, rather than deliver the service. They have to tick the box to get the funding, although ticking the box may not deliver what is needed locally. That situation cannot be allowed to continue.

As well as the centralised target regime, the third aspect that reduces local discretion is the artificial regional agenda. It is artificial because most of the Government offices bear no relation to anybody’s sense of community, identity or history, or to patterns of economic activity. It is very difficult to see how the Government can claim to be giving powers back to local communities if they are taking more and more powers in relation to issues that really matter, such as what housing is built where, how planning decisions are taken and by whom. How can the Government make that claim if they transfer, for example, regional planning and housing powers from an indirectly elected regional assembly to an even less directly elected regional development agency? That is just shifting the deckchairs around on the Titanic. If the Government are serious about returning powers to local government, they should scrap the regional planning regime and the regional spatial strategies, and hand those powers back to local authorities. That would be a real transfer of power back to local people, but the Government shy away from doing that.

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Julia Goldsworthy: The hon. Gentleman mentioned the targets and priorities that are set by local councils. The number of targets may have been reduced, but I know of local authorities that have been very reluctant to set some of the priorities imposed by the remaining targets, such as the preventing violent extremism priority.

Robert Neill: The hon. Lady makes an interesting point. There is real concern about the relevance of some of the targets, and I shall touch on some of those later. However, my hon. Friend the Member for Wycombe (Mr. Goodman) has taken a particular interest in work on extremism and community cohesion and he will deal with that specifically when he winds up. I hope the hon. Lady will therefore forgive me if I do not go into more detail.

The artificial regional agenda also inhibits councillors in doing their job. They are inhibited by an over-engineered Standards Board regime, which should be scrapped. Failure to tackle the gold-plating of the code of conduct by many monitoring officers inhibits many councillors in representing their constituents honestly and openly when it comes to planning applications. When the Local Government and Public Involvement in Health Act 2007 was considered in Committee, the Minister’s predecessor promised to take a look at the concerns that are regularly raised by councillors of all political persuasions about the operation of the common law predetermination rules in relation to the consideration of planning matters and how they interface with the code of conduct. We have heard nothing more since. It is daft if local councillors feel inhibited about saying whether they oppose a particular development on open space in their ward because of a fear that they might then be regarded as having pre-determined the issue. That is the sort of thing that undermines local democracy, and the Government are not tackling it, despite the opportunity to do so.

Mark Hunter: I agree entirely with the hon. Gentleman about the iniquity of the planning system. Does he agree with me that to tackle that problem truly we would need to give objectors the same right of appeal as applicants? Until that unfairness is addressed, the system will continue to let down many people.

Robert Neill: That is an interesting point, but I shall not commit myself on it. We have to try to strike a balance. People need to feel that they have had their say, and that is why we are concerned about aspects of the Planning Bill, which will make it harder for people to have their say on planning matters, especially those on a large scale, by removing the right to representation and to cross-examine and—through clause 151—restricting the ability of authorities to take action when nuisance and pollution arise as a result of developments.

Susan Kramer (Richmond Park) (LD) I thank the hon. Gentleman for giving way.

Mike Penning: Have you just wandered in?

Susan Kramer: I have been in for a while.

Does the hon. Gentleman agree that there is a real problem in the planning system because of the lack of authority for local government to rule in the best interests of the local community? There is a developer bias because of law imposed from Whitehall.

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Robert Neill: We dealt with that point before the hon. Lady arrived. We need to get the balance right, and it is currently wrong for the reasons that we have set out. Restrictions are placed on councillors in the operation of planning.

I have referred to the needless reorganisation of structures in local government. We have seen the Government’s proposal for large unitary councils, which is based on a methodology that has been comprehensively discredited. If anyone has not read the book “Botched Business”—the title is appropriate—by Professors Chisholm and Leach, I urge them to do so. It demonstrates that the financial claims for that reorganisation were based on fundamentally flawed methodology. We have seen that work out in practice in Northumberland, where what was alleged to be a saving of about £17 million is turning into an overspend of about £55 million. To use the Minister’s phrase, it simply did not deliver what it said on the tin. Against that background, it is not surprising that Professors Chisholm and Leach describe the Department’s conduct as verging

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