Examination of Witnesses (Questions 640-659)
RT HON
HAZEL BLEARS
MP
12 JANUARY 2009
Q640 Jim Dobbin: I think it is really
interesting that if you look round the table here most of us have
had long periods in local government, including yourself, Secretary
of State.
Hazel Blears: Including myself.
Q641 Jim Dobbin: And it is going
to be interesting at the end of this evidence-taking session to
see just how many of us are still in agreement with everything
that is decided. I just think it is an interesting session. My
questions are on local variations in service provision and the
standards and whether those standards should be consistent across
local authorities. Is it acceptable for some councils to have
lower standards of public service than others?
Hazel Blears: I think probably
most citizens would want minimum standards in the essential services
that they rely on for their daily lives. Certainly that applies
in the Health Service in terms of postcode lotteries, access to
drugs. I think it also applies in relation to education standards
in their schools and the prospects for their children to do well
in their exams and to get on, so I think there are some core areas
where people very definitely want minimum standards. I think there
is room then for variation in terms of how much money do you want
to spend, how much investment do you want to make, how much council
tax do you want to pay in order to have a higher standard of service,
or have you got a particular focus. For example, and this is what
the LAA enables us to do, in Leicester they have decided to go
very much for climate change, the environment, recycling, and
make that a really big theme of the city's future prosperity,
so they might want to do higher standards than some other place
which has decided on a different theme and vision for their area.
I think it is minimum standards, variation after that, and absolutely
it is a matter for people's choice.
Q642 Jim Dobbin: Do you think there
are any areas of service delivery where in some local authorities
they do not achieve those standards, and do you think that is
not acceptable?
Hazel Blears: Yes. If you look
at the inspection regime that we have around the safeguarding
of children, I think there were four authorities that only scored
a one on the recent area performance assessment, and clearly local
citizens will be concerned about that. That is why we have to
have an inspection process that does draw out where there is poor
performance and why we have to have an intervention regime that
says if things are going wrong then, quite rightly, steps will
be taken to put them right, and I think that is what local people
want to see happen. Luckily now local authority, in general, is
performing at a much higher standard than it used to be but there
will always be some outliers on specific issues where they are
not as good as they might be and I think national government has
a responsibility to keep an eye on it, to monitor it and to intervene
if that is necessary.
Q643 Jim Dobbin: Would a power of
general competence make it easier for local authorities to play
a much stronger leading role in their communities?
Hazel Blears: I do not necessarily
think so. What worries me is that the power of wellbeing is virtually
a power of general competence. The power to do anything which
promotes the economic, social or environmental wellbeing of your
community—I cannot think of much that falls outside that
kind of definition and yet only one in 12 local authorities is
using that power. We recently wrote to local government to say,
"We are worried about this. Are there any particular concerns
as to why you are not doing it? Have you got any ideas that you
would like to do but you feel constrained from doing?", but
we have not had very much back and it will be quite interesting
to see the impact of the Sustainable Communities Act which asks
local authorities and communities to come up with things that
they need freedom around in order to make happen. I think the
first tranche of those ideas is going to be submitted fairly soon,
but I do not have a general sense that there are lots and lots
of things that local partners want to do that they are prevented
from doing because they do not have a legal base.
Q644 Chair: Secretary of State, it
has been pointed out to me that in fact there has been a court
case against London Councils challenging them in a proposal they
were intending to do and saying they could not do it under the
wellbeing power. If there are instances like that where it is
obvious that the general power of wellbeing is not allowing councils
to do it, is your Department monitoring it and will it be thinking
of changing the law so that they can? Your contention is that
councils can already do everything, that there is a power of general
competence that will allow them to do that, and yet the courts'
view is different.
Hazel Blears: I would want to
look very closely at the power that exists, how much it is being
used, what it is stopping people from doing, and if it is stopping
people from doing things which would be beneficial and are proper
things for them to do then obviously I want to examine whether
any changes would be necessary.
Q645 Jim Dobbin: Clive raised an
issue about local authorities being involved in delivering other
services and he mentioned the Health Service. To be able to do
that would local government need more powers? For example, another
couple of areas that they might want to get involved in and have
been involved in in the past have been policing and transport.
If they showed a willingness to go down that route would you be
willing to give them more devolutionary powers?
Hazel Blears: Yes. I think the
best example is in the multi area agreements. As the Local Transport
Bill was going through Parliament there was a provision adopted
that enabled the integrated transport authorities to align with
the multi area agreements so that you could be exercising transport
powers as part of those city regions and that was a good example
of joined-up government that provided the right powers in the
right place to be able to work on transport. Over the next few
months I am about to embark on a series of, not visits, but workshops
with local authorities and their partners to look at the local
area agreements and see whether there are other improvements that
we could make at the centre which would enable them to make more
progress. My first visit is to Barnsley on 26 January and the
Secretary of State for Work and Pensions is coming with me because
Barnsley is particularly focusing in its LAA (Local Area Agreement)
on worklessness and skills. I want them to tell me what they are
doing first of all in terms of delivery, but, secondly, whether
there are things that we can change in the system that will enable
them to deliver even more. I am then going to go to Essex and
I am going to Sunderland. There will be a whole series of these
and it will be proper, hands-on work around the LAA, how they
are coping with the economic downturn, is there more that we can
do to free them up to give them the ability to deliver at a local
level, and I am hoping to take other secretaries of state with
me. I think the one in Sunderland is particularly around health
inequalities. Essex is around skills in the economy, so that again
we get that whole government approach around what is happening
on the ground as a result of this new architecture.
Q646 Mr Betts: But eventually we
have to get round to money. Michael Lyons said he was disappointed
to some of us but he did conclude that what local government wanted
was not the ability to raise more of the money it spends itself
but the ability to determine how the money was spent to a greater
degree. Do you agree with that conclusion?
Hazel Blears: That local authorities
wanted to be able to —?
Q647 Mr Betts: That they wanted more
power to be able to determine how to spend the money they had
rather than the freedom to raise the money they spend.
Hazel Blears: I think local authorities
are pretty sensible about this. They know that there is only a
finite amount of money that you can raise, whether that is locally
or centrally. There is a finite pot around what you can do and
I do think that local authorities have wanted to have more say
about how they can spend the existing money out there without
necessarily raising vast amounts of extra money. I would hope
that through the new framework that we are providing they have
got more say. They now can set those 35 priorities, albeit in
a negotiation with the centre, and it is a pretty robust negotiation,
but for the first time they have got that instead of top-down
1,200 indicators and 88 separate ring-fenced schemes telling them
every "i" they should dot and every "t" they
should cross, so I hope they have got a bit more flexibility.
They will always press for more.
Q648 Mr Betts: If we look at international
comparators, and that is not an unreasonable thing to do, particularly
with the democratic countries within the EU with whom we may have
a reasonable comparison, whatever has been achieved in terms of
extra powers for local authorities—more flexibility, less
control from the centre, fewer targets--in the end any comparison
would show that we are the most centralised country in terms of
one thing at least, and that is the very small amount of money
that local authorities spend that they raise themselves. We went
on a trip as a committee to Denmark and Sweden recently where
it is almost the reverse position: they raise more than 80 per
cent of their own funds at local level, not around 20 per cent.
Hazel Blears: Obviously, there
are different cultures and different historical ways in which
various countries have organised themselves in terms of the balance
between central and local funding. I do not necessarily think
that debate is as resonant as it is portrayed because, no matter
where your funding comes from, you are going to have some kind
of performance framework and if you look at the performance framework
in Denmark and Sweden, it is there and central government expects
certain things to be delivered. In other places there is less
performance framework than in those Scandinavian countries, and
in fact when I visited the mayor of Karinya, I think about 18
months ago, I asked him about his performance framework and he
said to me, "Well, I get elected every four years. That is
my performance framework". I am sure that was slightly tongue-in-cheek
but there was very little national determination of what should
happen. As I said earlier on, I do not make any apology for saying
that in this country I think people have an expectation of a certain
level of good services, whether that is health, local government
or policing, and I do not think they would accept simply, "Here
is the money. All right, you raise 50 per cent of it locally.
You get on with it and do what you like with it".
Q649 Mr Betts: That does not really
answer the question, Secretary of State, with respect, does it?
You could still have national standards and an expectation that
certain things will be delivered to a certain standard at local
level, but in the end, given that we have this incredible centralisation
of the way money is raised for local government to spend and the
passing on of that 80 per cent of what local authorities spend
with no discussion at all about how it is raised or how much is
raised at local level, you have got this incredible gearing factor,
so if local authorities do want to choose to go beyond minimum
standards the impact on the percentage increase in the council
tax is enormous. We know what the gearing is; it is around four
to one. That means that it cuts straight across local accountability
and local democracy, does it not, when you have that sort of impact
on local decisions that local authorities take?
Hazel Blears: I think it is a
bit of a trade-off as well though because if you want to try and
have any degree of equity then the larger the amount you raise
at local level and the more freedom there is to spend that at
local level then again you find the tax base comes in as part
of that consideration. Poorer areas with a smaller tax base could
well find themselves losing out as a result of that, and I think
Government has a responsibility to look at equity as well as autonomy.
Q650 Mr Betts: I do not know if you
could think of another country where only five per cent of total
taxes are actually raised by local government and even then central
government caps the amount that can be raised as well. This is
a real constitutional problem, a complete imbalance between central
and local level. Are we ever really going to tackle the issue
of the almost subservience of local government to central government
and put it on a slightly more equal footing unless we tackle the
taxation issue and the ability to raise money?
Hazel Blears: I do not see this
in the same terms, as a kind of supplicant master/servant relationship.
I think it is what I have tried to say throughout this evidence,
that I do not think it is the system, I do not think it is about
who has the power in the system necessarily. I think it is about
what are you able to deliver out there. That is where you get
your respect from. That is where you get the sense that you are
an important player in our constitution, not by, if you like,
winning the argument with the centre. It is about what can you
do to make a difference to the people that you serve. If your
system inhibits you from doing that then you need to look at the
system. If your system is not inhibiting what you can do then
I think the challenge is what is your system now, what are the
bits that stop you doing things you want to do? Come and tell
me about that, whether that is in a multi area agreement, whether
it is in your local area agreement. I do not think it is just
about a constitutional settlement that then says that because
you have this degree of ability to raise money locally automatically
things will be better in your community. I do not make that relationship.
Q651 Mr Betts: But the type of agreement
is then one you are making as Secretary of State, is it not? You
are denying the right to the local community to make that decision
for themselves.
Hazel Blears: Oh, no.
Q652 Mr Betts: If the community wants
to spend an extra five per cent on the services basically it cannot,
can it? It is capped.
Hazel Blears: It is capped if
it is excessive. It is not capped if it is not.
Q653 Mr Betts: But the Secretary
of State determines what is excessive.
Hazel Blears: Again, I think we
have a responsibility to protect people. Last year council tax
went up by 3.9 per cent, the lowest rise for 14 years. I think
people broadly welcomed that. Local government has had to make
some difficult decisions; I am under no illusion about that, but
some of the increases that took place in previous years were very
high indeed and in the current economic climate when people are
struggling to pay their bills, again, I think the pressures will
be on councils to try and keep those council tax rises at a reasonable
level.
Q654 Mr Betts: But should not the
community be putting those pressures on? Whenever the Secretary
of State rides in and says, "It is my responsibility",
there is not that relationship between the elected councillors
and their community. You undermine that completely to cut right
across local authority accountability when you say, "I in
the end am going to fix the maximum amount by which councils can
increase their council tax". Is there any possibility that
you are going to remove the capping powers?
Hazel Blears: No, and I do not
necessarily agree with that. I think there is accountability in
terms of the choices that you make, the way you spend your money,
are you any good at it, do you get value for money, what are your
standards like, what are you doing to make things work better
in the local area, how much do you involve local people, do they
get a say, do you do participatory budgeting? All of that, I think,
contributes to local accountability. If you are intending to put
your council tax up by an excessive amount then I think national
government has a responsibility to protect taxpayers.
Q655 Sir Paul Beresford: I think
we agree with all of the last preamble that you have gone through,
except that Clive was putting a point really early on, and that
was that changing your expenditure has an enormous effect, a four-fold
effect. What are you going to do about that, and, secondly, you
do talk about percentages and yet in your last answer you were
talking about amounts. Why is it that a local authority with very
low expenditure and good services is clobbered if it has a slight
change and lists a slight change in money terms but a huge change
in percentage terms?
Hazel Blears: Let me try and deal
with those two issues. The first one is about the gearing, and
I know this is a subject of great concern and irritation and frustration
for local government and clearly goes to the heart of the current
system whereby a small amount is raised locally and the majority
of it is raised nationally. If we were to change that we would
have to look at the whole system. I can say to you that we constantly
keep the system under review. We have had Michael Lyons' report,
we have had various analyses. I think there are more documents
in the bottom drawers of people in CLG about the council tax system
than we could possibly imagine. I do not think there is an easy
answer to that without fundamentally rebalancing the system, and
it may well be that the Committee decides to make some comments
around that. At the moment we have no plans to change that in
terms of how it operates. The second issue I used to come across
when I was the Police Minister, and when police authorities were
asking to put up their precepts by 20 per cent they would say
to me, "It is the equivalent of a can of Coca-Cola a week
and people are prepared to pay this in order to keep their streets
safe". That may well have some merit in it but the fact is
that the percentage increases are the things that people experience,
that is what they feel, and, no matter what arguments you make
around small amounts on lower taxing authorities, I think that
council tax is the most visible tax. People pay it every month.
It does not get taken out of your wages. It is an unpopular tax.
No taxes are popular but council tax is very unpopular. People
have seen increases in recent years and I feel quite strongly
that as far as we can we have to protect people from the increases,
and percentage increases are what they get faced with, unfortunately.
Q656 Mr Hands: I have a question
on the future of council tax itself. Obviously, there has been
pretty much a concern over the last 15 years or so not to touch
it. I guess the collective wisdom is that the danger of touching
local government finance far and away outweighs any potential
benefits from serious reform. How close an eye are you keeping—and
I am not trying to elicit a party political answer—on what
is going on in Scotland and the merits of the debate there on
a move towards local income tax, whether that might be something
that could inform a change across the UK and whether—and
I am assuming that you disagree with what the Scottish Government
is proposing—you might at least concede that it is a brave
move for them to consider that change.
Hazel Blears: We could probably
spend a whole session discussing the merits and demerits of local
income tax, and I am sure we would all have a variety of views
around that in terms of the way in which it would shift liabilities
between different parts of the population and who would have to
pick up the bill. I think it reinforces one of my points to Mr
Betts, that there is a finite pot and at the end of the day somebody
has to pay for it, whether it is local, national, which balance
of individuals pays for it. There appears to be a consensus that
having some element of property tax is a sensible thing to do
in terms of fairness and collection and the fact that it is more
difficult to evade than local income tax. There is a whole debate
around all of that. I am keeping very close, obviously, to developments
in Scotland. One of the interesting things is that we have a proposal
to abolish council tax; we do not have a proposal to abolish council
tax benefit, and many of the calculations are done on the basis
that although there will be no council tax there will still be
something like £3 million of council tax benefits, so the
figures are not exactly as robust as they might have been presented.
Q657 Dr Pugh: If I may pursue Clive's
question, what would be the objection to the Department if it
were the case that they wanted to cap a local authority but the
local authority could prove that the increase they had scheduled
had the endorsement, by referendum or whatever, of the local population?
There could be no argument against that circumstance, could there?
Under the Treasury argument you are increasing public spending
but then that means you are not safeguarding the population from
the council tax; you are doing something else altogether.
Hazel Blears: I think first of
all you have to have a fairly robust regime that says, "We
want to protect people from excessive council tax rises",
and I will argue and protect that. I think the legal framework
now provides that you can have referenda and it also provides
that the Secretary of State, I think, in determining what the
principles of "excessive" might be, should take into
account the views of local people in terms of reaching a view
on whether or not that is excessive and therefore complies with
the principles that you set. There is provision to have that say
and I am not aware of a situation that has arisen of the kind
that you have set out. In fact, there have been some referenda
around council tax rates and in most of them, I think I am right
to say, people have either gone for the middle option or very
often they have gone for the cheapest option when they have been
asked in the referendum what they would like to pay.
Q658 Mr Betts: Is it not all too
difficult really, trying to reform local government finance? That
is the impression. One of the obvious things that could be done
and that is not very difficult would have been the transfer of
the business rate setting back to local councils and link them
together, as the old domestic and non-domestic rates were, so
you cannot increase business rates without the council tax being
increased. In fact, would it not be relatively simple to do and
halve the gearing effect overnight?
Hazel Blears: I think it is difficult
to make decisions in this area. All the decisions have different
implications and in the modelling that goes on you see winners,
losers, people who would be hard hit as a result of changes and
you would have to be constantly aware of destabilising the system.
At the moment we have something like 97 per cent council tax collection,
which is pretty high and pretty good. Clearly, we are in difficult
economic circumstances at the moment but having that destabilisation
I think would be quite a problem. In terms of business rates,
obviously, we have got our Supplementary Business Rates Bill in
the House as we speak, so there will be some more flexibility
around that. If you simply allow the business rate to lie where
it falls then again you come up against the issue of equity in
the places which perhaps do not have the capacity to draw in as
much business as other places will find themselves in a worse
position. Again, I see the attractiveness of saying, "You
have got the business, you have got the fumes, you have got the
industrial capacity", but for those places that are not able
to do that they would lose out.
Q659 Chair: Just asking about another
aspect of local authority finances, which is local authority reserves,
which I believe are about £25 billion-£30 billion, do
you have a view as to whether those reserves might not be more
usefully deployed in putting a Keynesian boost into the economy,
for example?
Hazel Blears: Some local authorities
have already decided to go down that route in terms of the assistance
that they can offer to their communities. Part of the purpose
of my visits to various places across the country will be to explore
what local authorities and their partners are able to do to mitigate
that and assist people during the downturn in terms of homes and
jobs. I am sure some places will be looking at some kind of fiscal
boost if they can. The reserves are clearly an issue. They are
required by auditors to be prudent and to have an appropriate
level of reserves, and they have a three-year settlement now,
and therefore they do need to have some contingency and flexibility
to meet requirements. That is a good thing about the three-year
settlement, that they are able to do that, but I would want to
discuss with people what more they can do to try and help people
during this economic situation because I think that is probably
the biggest responsibility that all of us have.
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