Examination of Witnesses (Questions 200-219)
MR PETER
GILROY OBE, MR
PAUL CARTER,
MR DAVID
PETFORD AND
COUNCILLOR MIKE
FITZGERALD
10 NOVEMBER 2008
Q200 Mr Betts: There is probably
somebody else somewhere else who is collecting £5 million
and getting £35 million back, and they probably rather like
it.
Mr Petford: I am sure they do,
but they are not living with the industry and the commerce and
all that that goes with the £35 million. Therefore, this
gearing seems certainly to my members and to me totally inappropriate.
The gearing needs to be looked at. Also, if you are not using
lots of the NNDR (National Non-Domestic Rates) tax, the business
tax, you do not have that close relationship that I think you
really need with business. With taxation, a relationship builds
up, and it is far more fruitful if you can show business where
their money is going locally. Business is contributing, as it
sees it, to the council's funds, and if you can show business
where it is going, that seems far more appropriate. It just seems
the gearing at the moment, where you have, in Maidstone's case,
and I am sure there are those that are far worse than Maidstone,
seven to one, seems quite strange to me, frankly, quite odd.
Mr Carter: If I may, Chair, as
well as being leader of Kent County Council, I am also, for my
sins, chairman of the South East Regional Assembly, and it is
interesting to reflect on the amount the South East region contributes
to the Treasury, and how much the Treasury spends on public services
in the South East. We are the most significant contributor to
the Treasury, between the net input and what we get back, even
compared to the whole of the GLA (Greater London Authority) region.
There is only one other region in the country, which is the Eastern
region, which is a net contributor. Now our argument is that we
need again a fairer redistribution, but somewhere along the line,
equalisation has to come in. I mean, I am not in any way suggesting
that we could retain all of the commercial rates, but it is all
dependent upon how much revenue support grant you get back through
this opaque calculation about what Kent needs to fund its provision
of local government services. We would like to see a reform of
the LABGI (Local Authority Business Growth Incentive Scheme) because
the thresholds are far too high, the local business rate incentive,
to find a way, I think in the way that was suggested either by
Manchester or Birmingham before, that where you have new economic
development taking place, that you can retain the commercial rates
generated from that economic regeneration and economic development
function to help support and fund the infrastructure needs, which
in Kent, with 7,000 homes a year being planned between now and
2026, are massively significant. Again, when you look at the regional
infrastructure allocation from the South East, where we have the
bread basket of the UK economy, the distribution per capita
is the worst of the country. So if we are not careful, the South
East region is going to be shot in the foot by the distribution
mechanism which does not recognise the massive significance that
the component parts of the South East economy play.
Q201 Chair: You are assuming it would
come to the county, I imagine the districts are assuming it would
go to them?
Councillor FitzGerald: I would
just like to say, the point is it will bring businesses on board
and feel more part of what is going on. I think we put in our
report about financial devolution is real devolution, and as we
see it, we have suffered in terms of electoral support and the
rest of it, and democratic support, as a result of them not seeing
that we have the power to deliver for them.
Q202 Mr Betts: The business rate
comes back, there seems to be quite a widespread amount of support
for that, I think there is a general push in local government,
probably more support than I have ever known, for more devolution.
That seems to be a common message we are getting right across
the board. But if the business rate went back, we have really
only turned the financial position back to what it was before
the poll tax. Is there something more radical that you would like
to see in terms of financial devolution, and the ability to have
even more tax or revenue raising powers, or indeed the right to
simply decide how you will raise revenue, full stop?
Mr Carter: And how that is differentiated.
We all know that local government finance is the graveyard of
many. But when you actually look at the percentage of the turnover
of a small business, the commercial rates makes up of its component
parts of its expenditure, it is really significant, whereas for
big businesses, it is pretty peripheral, the significance of the
business rate to the bigger businesses. So it would be lovely
to be able to have your own way of supporting small and medium-sized
enterprises by having a different differential between what large
businesses are paying and what smaller businesses are paying.
Indeed, if we want to encourage the creative industries into Kent,
for example, to be able to have freedom and flexibility in saying,
well, for five or 10 years, to get that underlying investment
in various technologies, various business sectors, we could then
discount the commercial rates to encourage and incentivise new
businesses of a particular type coming into the Kent economy,
that would be a really useful tool to have. But at the end of
the day, everything is interdependent on A leads to B leads to
C, and the amount of pounds, shillings and pence that we end up
with to provide the local government services within the family
of local government, including obviously the 12 districts and
the 12 boroughs.
Q203 Chair: I think Mr Betts was
asking whether there were some other things apart from business
rates.
Mr Gilroy: What you are raising
is, for me, going back to first principles. What is the relationship
between central government and local government? Whether or not
it requires a constitutional shift, because one of the real issues
certainly I feel acutely as a chief exec, and have so for some
years, is when you have a government that sets its own policies
and its own aspirations, and it then wishes those to be delivered,
it is true, since the war, that governments have not been very
good at delivery, it is not something they do well. If you look
historically, local government has been very good at delivering
things, when you go back in the last century, local government
has done very well in that. If you look at how effective local
government as a family have been, it is true, they have been more
efficient, over the last 10 years it has just been extraordinary.
Now they can get better, but if you really want to sweat the public
assets financially, it is not simply about the business rates,
it is actually about having a better, more mature relationship
with central government, both in its aspirations, in terms of
its policy, what it wishes to achieve, and what local government
wishes to achieve. I always remember, we were one of the first
authorities in the country to do the public service agreement
1, and we had a very simple relationship with Government, very
mature, the strategic targets were very few, and we delivered
all of them, and they were all stretched targets. So I would come
back to whether it is a constitutional change or whether it is
just a simple change in the relationship between central government
and local government, I think the time is right for that conversation
to happen, because I think you then reduce your public expenditure
in a way that you would not imagine.
Q204 Sir Paul Beresford: So what
you are actually saying is the bureaucracy imposed upon you by
central government in checking up on everything you do, setting
targets, et cetera, costs you big money, and that going
over here, because of gearing, costs the council taxpayer an enormous
amount of money?
Mr Gilroy: An enormous amount.
Q205 Sir Paul Beresford: Have you
ever tried to assess what it could be brought down to?
Mr Gilroy: If you look at the
current attempt by Government, and ministers I think have been
genuinely trying to reduce the burden, they called it reduce the
burden of PIs (Performance Indicators), and I think they did,
but if you look at what has actually happened, all the regulators
have said, yes, we will go down to, whatever it is, 230 targets,
but quite frankly we still expect you to provide exactly the same
information as before, so in terms of this as my business commercially,
as I say, actually my costs have not changed, they are still the
same, so the burden is still the same financially. So I think
there is a new relationship that we could develop which would
reduce that regulation, but it would still deliver on a new relationship,
the real things, the important things that Government wants.
Q206 Chair: Mr Petford, do you have
some suggestions for additional sources of funds?
Mr Petford: I think it is important
that the Committee appreciates perhaps where the funds come from.
We have three areas, one is income, about a third of our income
in a District Council is purely from car parking charges, crematorium,
whatever; there is then, of course, government grant; and then
tax. Now I do not think it is about more taxation, because that
is just not possible, the economy cannot possibly deal with that,
but I think it is about more income, and councils could do a lot
more. You have given us freedom to trade, and that is very good.
But I think it is also about more flexibilities around that, and
we need to look at that and get to the heart of that, what councils
can and cannot do. I mentioned right at the start about extra
responsibilities and duties, and I think if we could look at that
then we could free up some extra money for local government, and
I think one of the keys is around income. I think the other is
around government grants, we have mentioned the business rates,
I think that is just—in some areas, it is just so unfair,
and we need to look at that, but I think you have already accepted
that certainly that needs to be looked at. Whether you agree or
not is another matter, but I think around income, there is quite
a lot that we could do. I do accept that in overall taxation terms,
that is probably not possible, and certainly not possible at the
moment, but around income we could do a lot more, given more flexibility
and freedoms.
Q207 Anne Main: Moving on to the
effect of regional bodies on your ability to make local decisions,
speaking as someone from the East of England, I have enormous
sympathies with being a net contributor. So do you think the funding
stream should be devolved down from, for example, the RDAs to
a more local level?
Mr Carter: Of course. I think
that answer will be no surprise to you. I am very disappointed
by Lord Mandelson starting to suggest that the centralist model
is going to come back. We were promised some real prizes potentially
under the sub-national review, I very much hope that they are
not removed, on economic development, funds being devolved to
sub-regions. I have been the author of a paper called The Kent
Solution, looking at solutions for real economic sub-regions where
we can match the skills agenda with the needs and economies of
the businesses within our local area. I ran population massings
of about 2 million populace, which has gained considerable popularity
actually, certainly amongst all the South East leaders of all
political persuasions, and has been well received elsewhere in
the country. So I am very much of the belief that the regional
architecture needs to be dismantled and sub-regions really need
to be empowered. I accept that the regions up and down the country
are all very different, but when you have a region the size and
scale of the South East of England, where there is very little
commonality between Milton Keynes, the Isle of Wight and a peninsular
authority the size and scale of Kent, big issues. Now how can
an RDA grapple with the diversity of the economies that are functioning
within that South East region? They cannot. Therefore, devolve
and empower to local government to do what they know best in their
sub-region of the South Eastern economy.
Anne Main: I am sure you have a view
on the fact that, for example, the Government made a decision
to take 300 million away —
Chair: Can we not divert into that area,
please?
Q208 Anne Main: No, I am not diverting
away, it is particularly germane to this: would you be saying
then that you would not want the funding to be diverted off into
other government targets?
Mr Carter: Of course not.
Q209 Anne Main: And you would like
to retain the control over the funding, for new business, for
new housing, whatever?
Mr Carter: Yes, and likewise I
think the real exciting prize to be won is being able to determine
how the post-16 funding is spent, as I say, to match the skills
agenda —
Q210 Chair: Which you will be getting,
with the LSCs going.
Mr Carter: It depends. If they
are still going to work to a national prescribed formula, it is
going to be a massive missed opportunity. You talk to every FE
(Further Education) college principal in Kent, and say if we had
total freedom and flexibility in the way that we spent that money,
would we be running, collectively with the FE principals, completely
different FE post-16 institutions with our school sixth forms?
And the honest answer is yes, of course we can, because of the
ridiculous perversities in post-16 funding, which is not matching
the ambitions and aspirations of young people to the ambitions
and aspirations of the local economy.
Q211 Andrew George: Can I just be
clear, Mr Carter, that you are saying that there is in fact no
relevance any longer in maintaining the existing structure of
quangos for planning, economic development, transport and health
within the government zone of the South East?
Mr Carter: I think there is the
need for a vestigial function, which would be in strategic transport
planning and strategic infrastructure planning for the Greater
South East, and also looking at the impact of the GLA to make
sure that we respond to whatever Boris may have on his list, and
I am meeting him later this week as part of the Eastern region/South
East region to discuss the impact of the Greater London economy
on the peripheral counties and unitaries outside that. So I think
there is a core function, but it is pretty minimalistic, compared
to the current architecture in the regional landscape.
Q212 Andrew George: Would a better
solution be the creation of voluntary partnerships between the
local authorities working together, where there is clear need
for strategic —
Mr Carter: Absolutely, through
multi-area agreements or whatever.
Q213 Andrew George: And you are saying
that the economies of scale required for the delivery of some
of those decisions would be around the 2 million mark, not the
current —
Mr Carter: Well, if you are looking
at a devolved agenda, from Westminster, you cannot just sort out
the solutions in the South East, you have to have a template that
fits the whole of the country, and if you end up with population
massings of about 2 million people, I think I am right in saying
that including the city regions built into that, you end up with
about 28 to 30 sub-regions. Now could central government from
Westminster devolve and empower to 28 to 32 sub-regions and have
a pretty good handle on what is going on within them? Yes, I think
it could. So there is a logic, by the application of common sense,
in the empowerment with local government taking a real strategic
lead in the devolved powers that could be delivered to those sub-regions
of the country.
Q214 Andrew George: If you take the
issue of planning and say, for example, housing numbers, where
the regional spatial strategy largely sets the tone and provides
for the numbers in Kent, in what way would the dynamics change,
if you like, to the advantage of Kent, as you see it, if you remove
the regional tier?
Mr Carter: We would be empowered
with Kent and Medway, Medway being a unitary, to sort out a realistic
housing growth agenda against a government target that may be
suggesting that the numbers are there or thereabouts, and having
a really good dialogue with the 12 districts plus Medway in working
out the sensible allocation, the infrastructure needs for the
sub-region; as I have said, working with retained function of
a greater area on some of the cross sub-region transport infrastructure
needs, which is absolutely essential and absolutely important.
The roads infrastructure as well as the rail infrastructure will
obviously be part of it.
Q215 Andrew George: But a Secretary
of State would seek to impose through the examination process
the numbers which central government required in the same way
as they are through the RSS (Regional Spatial Strategies).
Mr Carter: Yes, but it does not
mean to say that the sub-regional structure, in my view, would
work much better, be much more streamlined and much more efficient
than regions trying to tell the unitaries and the local government
authorities what is good for them when they do not have the democratic
accountability, and they do not have the intimate knowledge of
those sub-regions in the way that I would hope I do in Kent and
Medway.
Q216 Andrew George: But as a chair
of a regional assembly, you are democratically accountable, presumably
the majority members of that assembly are also accountable, so
are they not democratically accountable indirectly for the decisions
they take?
Mr Carter: You will know only
too well, obviously, that there is democratic fudge in all the
regional assemblies up and down the country. You have the social
and environmental lobby imposed in that forum, and a sub-national
review in the South South East that is saying that we want a minimum
of 60 or 70% of democratically elected leaders of councils on
the RDA body. That at the moment is causing John Healey an enormous
amount of tension and friction in trying to resolve the sub-national
review for the South South East; a big issue, but it has to be
resolved, and in my view it has to engage democracy in the appropriate
way.
Q217 Chair: Mr Petford, do you have
any comment?
Mr Petford: I think in all of
these things, size matters. I think one thing that is clear at
the moment is the scale is too big. I think my council would agree
with Mr Carter, the scale is too big, it needs to be smaller and
more local. Where you pitch that is a different issue, and probably
my council would take a more localised arrangement than that explained
by Mr Carter. But certainly, size is a real problem. It feels
very remote. We are a growth point in Maidstone, and traditionally,
over the years, we have certainly provided the houses over the
years, in recent years, we have provided quite a large range of
housing. We have achieved that, and done it rather successfully,
but it is only by working with communities, understanding what
communities need, what communities want, and dealing with it that
way, so certainly it is far too big at the moment.
Councillor FitzGerald: We do want
democratic accountability. We are going to get empowerment as
it goes down, we will not get it unless we get democratic accountability.
Q218 John Cummings: Whilst localism
might be a popular political stance, opinion polls indicate that
it is not very popular amongst the British public. How do you
think your residents would react, do you think they would be in
favour of local authorities having additional powers, and if you
do think so, what evidence do you have to present to this Committee
to support that?
Mr Gilroy: It depends on what
conversations you have with your local residents on any given
day of the week. Localism is a jargon word —
Q219 John Cummings: That would be
the same for the local government in their opinion polls.
Mr Gilroy: If you talk to ordinary
people about local government, in the main, they are not going
to be terribly excited. We are doing this at the moment in Kent
on ICT (Information and Communications Technology), on our mobile
technology, talking to youngsters about local government, and
of course the reaction you get is about their life, their personal
circumstances. People are interested in local government when
they need local government. It is interesting, when we went down
the route of a very interesting dynamic in Kent which was Kent
TV, a broadband TV channel, I can tell you that most of the pundits,
the chattering classes, people like us, were against it, and people
would not wish to have it. Well, we now have nearly a million
people watching it, and we have 40% of the video streams being
produced by local people. If you ask them a question, would you
wish your local authority to develop these sorts of services for
you, you will get an absolute answer, yes. If you ask them on
another day, do you think —
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