Examination of Witnesses (Questions 442-459)
RT HON
LORD HESELTINE
8 DECEMBER 2008
Q442 Chair: First of all, apologies for
the fact that the timetable has gone completely awry but you will
of course understand exactly why. Although the number of members
here may not be quite as great as earlier on the, quality is very
high. All of us here have had local government experience as well
as being parliamentarians. Can I start with a question about local
government finance? One of the issues that has come up very strongly
from previous witnesses is that unless local government raises
more of its finance itself it is going to be quite difficult for
voters to see the accountability between what they pay and what
they get. Obviously as a minister you had considerable experience
about local finance systems so can I ask you whether you think
the current council tax system needs to be reformed or whether
a much larger change is required to get a real change in balance
of power financially between local and national government.
Lord Heseltine: No, I do not think
there is a necessary linkage. I think there are a whole stack
of things that could happen to change the balance and I believe
that that balance should be changed. I have spent a lot of time
looking at the alternatives to local government finance and the
only coherent one I think is income tax and I would not be in
favour of doing that. All the others will lead to a very heavy
dependence of many authorities on central government redistributing
grant so you would be back where you are.
Q443 Chair: Do you think the proportion
of money raised by council tax and maybe business rate should
be greater?
Lord Heseltine: Personally I would
not touch the financial arrangements because it would take too
long and it will not actually improve the situation significantly.
Q444 Sir Paul Beresford: How do you
explain the fact that the council tax has risen tremendously over
the last three years?
Lord Heseltine: It will be part
inflation, part Treasury squeezing the grant. The Treasury has
a dilemma: it wants to try to contain expenditure so it squeezes
the grant and the gearing ratios of all the systems—it is
true of the rating system, it is true of the poll tax, it is true
of the council tax—means that there is a disproportionate
increase in the level of what the local people are left to pay.
Q445 Sir Paul Beresford: Local government
would say that they have had more to do and had more burdens put
upon them.
Lord Heseltine: That is part of
the argument and there is a certain amount of truth in that because
this place spends its life imposing more duties and obligations
or expectations on local government and they are never fully funded,
although you could of course argue that local government significantly
gold plates what it is expected to do. You have plenty of room
for blaming both sides, but that does not go to the heart of the
matter; the heart of the matter is the gearing of the grant relationships.
Q446 Mr Betts: How do you change
the gearing if local authorities are responsible for raising 25
per cent in total of the money they spend? Surely that is what
gives the gearing.
Lord Heseltine: Indeed, that is
an important point, but then you have to ask yourselves what are
you going to do by way of a change. As I say, I think the one
that is the intellectual runner is income tax but then you will
have a situation where you get national governments wanting to
reduce income tax and local governments putting it up. There would
then be a battle which the public will not fully understand as
to whose responsibility it was or is.
Q447 Mr Betts: We have just been
on a trip to Sweden and Denmark where they have a local income
tax and, in Sweden's case, a local income tax, a regional income
tax and a national income tax and it seems to work reasonably
well. The feeling there amongst all the political parties we spoke
to is that there is a settlement in both financial and power terms
which is generally reckoned to give more power and influence to
local authorities and the parties are in support of it and the
public seem to be in support of it as well.
Lord Heseltine: I have not studied
the Scandinavian position but I know what the reaction is here
and the idea that you can actually introduce a financial system
which causes the local people to look to the local authority to
account has not stood the test of time. The poll tax was the most
obvious example where the Government thought that it would make
local accountability through the poll tax system when actually
it became the millstone round the Government's neck.
Q448 Mr Betts: In some way they are
long lasting changes, not the poll tax because the poll tax was
eventually reversed back to a council tax with its origins in
a property based valuation. The real change was that the business
rate which used to be collected by local authorities and spent
within local authorities was centralised as part of the poll tax
arrangement and that has not been reversed. Would that not be
a change you could make?
Lord Heseltine: You could make
the business rate, certainly there is an argument for that, and
you can do it in whole or in part on the incremental element that
they have created. There is certainly flexibility there. I do
not think it would make a great deal of difference to people's
accountability of the local government; it would certainly make
a difference to the enthusiasm of local government to generate
extra rateable value.
Q449 Mr Betts: It would affect the
gearing as well significantly.
Lord Heseltine: In those areas
which are lucky enough to have the potential, but we will not
have many of those in the next couple of years.
Q450 Sir Paul Beresford: If you went
down that road you would need equalisation to slant it back.
Lord Heseltine: Yes, that is what
the Treasury will try to do but given that in theory this is within
the gift of Government it does not necessarily have to happen.
In practice the Treasury will try to do it, yes.
Q451 Chair: Can I just take you back
to when you were a minister, Lord Heseltine, do you think the
relationship between central and local government has changed?
Lord Heseltine: Over the 40 years
enormously and to the detriment, in my view, of the way we run
this country.
Q452 Chair: Can you give one or two
specific examples?
Lord Heseltine: All governments
have done it, they have hollowed out local government. Local government
is now a creature of Whitehall and the process of management is
much more dependent on the loyalties that the individual specialist
departments in local government feel towards their parent department
in Whitehall than to any local community of self interest within
the community. That is reinforced and has been over many years
by all the traditional methods we are very familiar with: the
growth of quangos, circulars, directives, ringfenced grants. You
name it, we have done it. I think it is enormously to the disadvantage
of the proper balance in this country. We now have a deeply centralised
and conformist society.
Q453 Chair: What specific powers
would you push back to local government?
Lord Heseltine: I would start
with the one thing that always matters in life and that is looking
at the person in charge. I would go for directly elected chief
executives; I would combine the chief executive and the leader
into one job; I would pay properly; I would have a franchise of
the whole authority. I would then have a bonfire of the controls
which central government has created and I would abolish most
of the big quangos that have become the vehicle for capital expenditure.
I could name £10 billion pounds of easy money starting with
the Housing Corporation, English Partnerships, the Regional Development
Agencies; you name them, they are all there. This is over £10
billion a year, this is on capital account. I would move to a
system which is really City Challenge built large; it would not
just be the impoverished communities, with up to 30 000 people,
which we dealt with in City Challenge, it would be the whole authority
and the authority would bid for capital funding based on corporate
plans spread over a five or ten year period and they would get
money dependent upon the ability of the community[1]
to satisfy central government that they would use the money effectively
and that they have a lot of local support for additional cash
to add to what the public sector provides.
Q454 Chair: How would that devolve power
to local communities if they are just bidding into central government?
Lord Heseltine: They would be
creating a plan of their own based on local requirements, local
interests, local experimentation and there is not the slightest
doubt that anyone who looked to see what City Challenge did would
realise that it had the most profound effect on the head of local
authorities both in the way in which they harnessed local enthusiasms
and extra cash from different aspects of the local community.
Perhaps even more so for the first time the officials in local
authorities had to look at the community interests as opposed
to the functional interests from which their money came.
Q455 Sir Paul Beresford: I would
agree with almost everything you said except the very first part.
When you were secretary of state back in the 1980s local government
had much more freedom than it does now I believe. There were some
quite big names—some of which you liked and some of which
you did not like—who were leaders and did the same as you
are talking about of elected mayors without being elected. One
of the difficulties with the elected mayors point or leaders point
is that if we do not have the characters and the strength to do
it it does not work.
Lord Heseltine: I understand that
argument and it is a very depressing argument: we have bad leaders,
we cannot get good leaders therefore we accept bad leaders. I
do not personally think we should be as negative as that. My own
view is that one reason why we do not have a range of the sort
of talent that one could look to—although there are some
exceptions, it must be said—is that you expect people to
do a totally thankless job seven days a week, 24 hours a day for
£30,000. That is not real. The guy who runs the authority
gets between £150,000 and £200,000; that is real and
it is preposterous frankly that the chief executive of a major
authority is earning in the top decile of income in his or her
community whereas the leader is in the lowest decile. If you want
a formula for disaster administratively that is it.
Q456 Mr Betts: Some might argue that
in the past the leaders might be better paid, but to concentrate
more power in the hands of one individual what happens if local
communities do not want that particular model? Would it be enforced
on them? The point we had discussions about before, if you concentrate
power in the hands of one individual, does that not actually undermine
the whole roll of political activism at local level and eventually
take away the life of the political party?
Lord Heseltine: I do not think
that activists have ever found a limitation on their abilities
to activate whatever system of government exists. If you look
at Stansted today activists have emerged to give a message. I
think you have to look at the scale of the challenge. Running
a great city is an enormous responsibility with huge significance
for the macro-economic policies. I think it needs people of talent
and energy and it needs a certain amount of time. It needs leadership
and trying to get that leadership out of the checks and balances
of the present councillor system is not compatible with the scale
of the challenge. We all know, let us be frank, that every party
now ends up grubbing around trying to find candidates to stand
for these council seats. This is a highly professional world;
people are busy. There are not a lot of people wandering around
with the time available to do the sort of thankless task that
being a councillor involves. You have a very limited number of
people prepared to do it and that tends to mean you are going
to get certain sorts of people doing it, a rather narrow choice.
Once they have got there then you have got all the compromises
that come from having 40 or 60 people all wanting their share
of the action and I do not myself believe that that is what drives
a great city. So it is a balance. You are perfectly sensible in
asking the question, but it is the wrong way for the present balance
in the 21st century.
Q457 Andrew George: Could I come
back to the image you gave us of the Heseltine Mark II, if you
like, reforms of local government where, let us say we have had
the bonfires and the abolitions and the re-organisation of a much
more involved local government where they are no longer the creature
of Whitehall. How do you put in place a mechanism or a structure
to stop the slide of power going back again into Whitehall? Is
there a need for a constitutional change? Is there a need for
something to happen to ensure that local authorities are able
to keep their powers once they have been given?
Lord Heseltine: I would not put
that anywhere near any list of priorities that I have in mind.
First of all, the Commons would never accept a final barrier of
the constitutional bill of rights or anything of that sort. Governments
are elected; governments will change the rules as they are elected
to do. Unless you are going to start having a British constitution
I think it would be unrealistic to say that we are going to have
a local government constitution.
Q458 Andrew George: You know, as
a former minister, that whenever there is a crisis at a local
level ministers are demanded to be responsible or at least to
answer, whether it be a childcare issue in Haringey, ministers
are called upon to have an opinion about it and sound decisive,
to intervene and to have something to say on the issue.
Lord Heseltine: Yes they do and
I think that is one of the weaknesses of our system, that that
is exactly the background where they have created a paraphernalia
of detailed control in order to give the impression they are in
charge and that they can do something. The fact is, they cannot.
If you think about what a minister can do, they are sitting in
Whitehall, they get very good advice from very dedicated officials
and, as a result of that, they come up with a set of proposals
which are broadly the compromise the system demands. Then they
impose a pattern of behaviour that is supposed to fit every community
in the land. Then something goes wrong. As we are a very small
geographic country and we have a national press which is unlike
most other countries of our sort, the whole thing focuses on what
Parliament wants to do. I cannot think of many ministers who have
ever done it, but they have not turned round and said, "Look,
this is not my responsibility; it is the leader of the council's
responsibility". I wish to goodness that there was such a
dialogue. There should be because they have no sense of reality
about what ministers can and cannot do.
Q459 Mr Betts: At an earlier discussion
it was pointed out that that position may be starting to change
a bit with regard to the Scottish Parliament where ministers now
would not assume they were responsible for everything. You are
saying with the British constitution it would change the constitutional
base of local government, but without a British constitution we
have changed the basis on which Scotland relates to the United
Kingdom now, by an act of Parliament I accept, but one which this
Parliament would not be able to change in practice without some
agreement with people in Scotland. Is there not a model there
of some kind?
Lord Heseltine: Constitutionally
they could change it. I do not say for a minute they will or should,
but they could at the moment. However, I think that argument then
comes back to reinforce my point. What conceivable argument is
there that with the level of public expenditure that sustains
the Scottish economy, that they should have a degree of devolution
and yet Birmingham or London, with bigger wealth and less public
expenditure, should have far less power? I do not understand that
argument.
1 Note by witness: "community" should
read authority Back
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