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I know that Opposition Members want to fight the battles of the 1980s, and it is important to set this debate in its historical context. As all hon. Members will know, successive Governments have centralised power to themselves over the past 50 years. We live in one of the most centralised countries in the developed world in terms of the relative powers and funding of central and local government. Over the past 30 years there have been several reviews of those powers, going back to the Layfield and Lyons inquiries. In the last Parliament there was the Communities and Local Government Committee report on the current state of central-local relations, so a lot of blood has been spilled in the debate about the financing and funding of local government over the past three decades. There has been a lot of philosophical inquiry but very little action. The current economic and fiscal crisis provides a unique opportunity for those of us who have been banging the drum for decentralisation and localism over the past two to three years. That is why I welcome the coalition Government's commitment to a fundamental review of local government finance.
In 1890, 23% of local government revenue came from central grants, with the rest coming from local taxation. As we stand here today, that position has been almost completely reversed. The central point of today's debate, which has revolved around cuts and the 1980s, is that, as we all agree, we have rising demand from the public for services. We also have rising expectations from citizens and users of the services provided by local government, and a public perception that local government is accountable for the delivery of those services. However, as hon. Members have pointed out, local politicians control democratically only 5% of total local expenditure, with myriad other organisations spending the rest. As many Members have said, we have a unique opportunity today to rethink some of the assumptions on which the powers, functions and funding of local government are based.
The Opposition talk as though the idea of cuts in local government spending were an invention of the coalition, but if we look back at the Budget of 2008-09, we see that the previous Government were already contemplating local government spending cuts in excess of 20% over four years. There is a considerable mismatch between the last Government's rhetoric and their reality.
The first half of the previous Government's time in office was characterised by what I would call a Prescottian regionalisation-the creation of a great deal of institutional complexity and an unaccountable regional tier of government that served little or no purpose. The second half of the previous Government's time in office-the right hon. Member for Southampton, Itchen (Mr Denham) played a part in that-was spent in an attempt to unravel the mistakes of the first half.
Mr Kevan Jones (North Durham) (Lab): I am fascinated by the hon. Gentleman's history lesson, but I must point out that a Conservative Government-the Thatcher Government, I think-introduced regional offices and regionalisation.
James Morris: Under the previous Government, that regionalisation became an embedded policy. It was unaccountable, undemocratic and served no purpose in economic development or improving local government's accountability.
Despite attempts by Labour Ministers in the Department for Communities and Local Government to get traction on the localist agenda, there was no commitment to it from the top. The Prime Minister and other Cabinet members simply had no trust in local government or communities and were philosophically unable to let go and let local government get on with its job.
Institutional complexity goes to the heart of the relationship between central Government and local government in this country. In the past two decades, particularly the past 13 years, it has been characterised by excessive, top-down, performance management culture. Recent figures show that the annual cost of regulating local government from Whitehall was estimated at more than £2.5 billion. The distorting effects of that top-down performance culture could be considerably greater on the shape and management of public services in this country.
The right hon. Member for Salford and Eccles (Hazel Blears) elevated the debate with her discussion of Total Place. I agree that the recent Total Place pilots revealed the true cost of not only compliance but public spending flows in local areas. We certainly need to build on that. Her example of Greater Manchester was compelling and shows that, once we get a grip on and an understanding of the total public expenditure that flows through an area, the implications for the shape and potential reform of public services, and the relationship between local government, the health service, the police and other aspects of delivering public services locally, are great. We need to build on that. I am therefore grateful to the right hon. Lady because her contribution elevated a debate that had been characterised by a rather knee-jerk reaction to every single item of the cuts. If we are truly to start reforming the relationship between local government and other public services, we need to identify the precise public spending flows through different areas.
The performance management culture, which other hon. Members have discussed, needs to be stopped. I therefore greatly welcome the Secretary of State's removing the comprehensive area assessment. That performance management culture, which has dominated local government in the past 13 years, needs to be replaced by an age of innovation, spurred by the fiscal context in which we live. That is why I am keen for the coalition Government to press ahead with the work on the Total Place pilots. The fiscal position demands that we ask fundamental and difficult questions about local government's role in providing local services.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab):
Given that the average budgetary cuts for local authorities are 0.7%, how can a 1.2% cut for a borough of mine, Redcar and Cleveland council, with
some of the poorest rural wards, and a cut of 1.3%-the sixth highest in the UK-for Middlesbrough local authority, with some of the poorest urban wards, be justified? How can innovation be introduced equitably across local authorities if the budgetary cuts in some areas are double those in others?
James Morris: As other hon. Members have pointed out, we have to deal with the fiscal situation. Even if there had been a new Labour Government, local government would have had to find considerable savings and efficiencies to drive innovation.
Andrew Griffiths (Burton) (Con): In my constituency, unemployment trebled in just over two years under the previous Labour Government. Businesses and households in my constituency had to tighten their belts. They have had to make substantial savings in their business incomes and their business and household expenditure. If I told them that they had to cut just 1% of their household budget, they would think that that was getting off lightly.
James Morris: My hon. Friend is right. The disciplines of the private sector are valuable and, in difficult times, we must be spurred on our way by looking innovatively at how we deliver services. We should not be afraid. Some hon. Members were derisive about the idea of a limited local authority, but it is perfectly valid to view local authorities as commissioners of services, not necessarily providers of all of them. We should consider innovative relationships between local government, social enterprise and the voluntary sector, and innovative ways to protect vulnerable people through relationships with social enterprise and the voluntary sector.
Opposition Members also made derisive comments about putting information in the public domain. An open and transparent information-sharing culture for local government and the public sector is precisely one of the ways in which we will drive innovation, reduce cost and continue to deliver excellent public services. There is no contradiction between those things.
It is important that regional quangos, operating as agents of central Government, do not dictate to us. We have heard little about democratic accountability and local people in the debate. We must ensure that we revert to the idea that funds that are controlled locally are spent in a way that is democratically accountable to the people. I am sure that my constituents in Halesowen and Rowley Regis would look forward to that.
I want to comment on two aspects of local government cuts that will affect the residents I represent in Wirral. I cannot claim to have as much experience of local government as some hon. Members, but I served as a local councillor for four years, which taught me a great deal about the impact that the cuts will have. I would like to bring that experience to the debate. I want to talk about employment in Wirral, our sense of place and the effect of the cuts on our localities.
In Merseyside, the future jobs fund helped 2,800 people find work. The impact of that cannot be underestimated. The employment picture in Merseyside, including Wirral, has historically been fragile. It was important that the Government stepped in during the downturn to help protect our position.
Richard Harrington (Watford) (Con): Would the hon. Lady like to comment on my research in my constituency, which found that the future jobs fund provided many people with short-term activities, but few long-term jobs afterwards?
Alison McGovern: I thank the hon. Gentleman for his intervention, and I would like to comment on it. It is too early to say, but I can comment from my own experience of meeting people-young people, especially-who have gained work through the future jobs fund. They told me that it was vital to keep their CV consistent over time, and that, although the job might have been short term or perhaps not in the sector they wanted to go into eventually, it gave them good, work-based experience that they could put on their CV. That could help them to find work, perhaps in a different sector, once we came out of the downturn. I cannot emphasise enough how important that continuity is. It was so important in places such as Wirral, and in Merseyside and the north-west generally, that the Government stepped in and helped to protect our employment picture. I shall say more about that in a moment. If we also consider the cutting of the working neighbourhoods fund, which was doing a great deal to address the really deep-rooted problems of unemployment in my part of the world, protecting employment through local government in Wirral starts to look a lot more difficult.
In a wider sense, we shall feel the impact of the regional development agencies being abolished in the emergency Budget. It is interesting to note that the Government seem to be all over the shop when it comes to RDAs. Perhaps the Minister would like to comment on the observations that have been made about listening to the views of local business, local authorities and perhaps local Members of Parliament on the importance of RDAs. The Budget has abolished them, however, and that will cause great difficulty in my area.
The local authority serving my constituents in Wirral has done important work on apprenticeships. The Government have said that they are keen to support apprenticeships, and that is fantastic. We all agree-brilliant! Let us get on with it! I do not see, however, how the local government cuts are going to help Wirral. We were at the forefront in providing the Wirral apprenticeships scheme, which worked alongside the private sector to increase the number of apprenticeships. The cuts will cast a shadow over the local authority officers who were working on that programme. I do not believe that the cuts will help to reduce the deficit over this economic cycle. I think that they will put people on the dole, which will increase the burden on the state. That is incredibly unfortunate.
Mr Kevan Jones: Does my hon. Friend agree that a misapprehension is being peddled-that making cuts in the public sector will have no effect on the private sector? For example, in local government in the north-east, £16 billion has been taken out of the county of Durham. That will directly affect not only suppliers to the county council but future building projects.
Alison McGovern: I could not agree more. If Conservative and Liberal Democrat Members do not agree with my hon. Friend and me, they are welcome to come and meet any of my constituents who run small businesses that have been helped by Invest Wirral or the regional development agency, or who have found apprentices through the Wirral apprenticeships scheme, and to ask them their views on working with the local authority, and on working alongside the public sector so that the public and private sectors can work together to address unemployment. That is the reality that we have seen over the past 13 years.
Alison McGovern: I am glad that the hon. Gentleman asked me that, because there has been a misapprehension that Labour had no plans when we were in government, and that we did not set any of them out. That is all very convenient, but the proposals were in our March Budget. There was a great deal of discussion about efficiencies, about what we would have done with the future jobs fund and the working neighbourhoods fund, and about how we would have looked at those funding programmes. All the detail is in our March Budget. My problem with the proposals in last week's Budget is not that we have to make cuts or that we have to reduce the deficit; it is the timing.
I want to talk about place shaping, and about the things that make Wirral a great place to live. I have spoken before about the importance of sport, the arts and culture to who we are in Wirral. The cutting of the free swimming programme will not help the Oval sports centre in my constituency to be successful. The cutting of free school meals will not help Grove Street primary school to carry on its great work on increasing food sustainability and nutrition. Getting rid of the libraries modernisation fund will certainly not help Wirral to bring our libraries up to the standard that my constituents expect.
The cuts could, of course, help to reduce the deficit-I do not disagree with that at all-and there are certain efficiencies that we might need to look at. My argument is that we are talking about marginal amounts. Cutting the libraries modernisation fund will not have a massive impact on reducing the deficit. The thing that will reduce the deficit is getting people back into employment. If we cut the deficit at the expense of all the things that people have come to rely on, we shall see a hollowing-out of town centres, and the retreat of the Government from supporting people in the things that they want to do in their lives. I do not think that that would be worth while. The impact of the cuts on employment and on the things in our communities that we hold dear will be very grave in Wirral.
It is worth mentioning the differential impact of the cuts. Wirral will be hit a lot harder than those in nearby Cheshire, or in Oxfordshire, who will not feel the same impact at all. For the past 13 years, the Labour Government made great strides towards resetting the economy. People no longer had to leave Merseyside to get a job. We have done great work on that, and it needed to continue. I fear that this withdrawal of the state from our area will result in our sliding back into the problems we had before. The Government's proposals represent a withdrawal of activist government.
The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), has spoken about removing layers of government, as though it were possible simply to cut away pieces of the work being done by regional development agencies or local authorities, and to hand the money over to someone else, in the expectation that the work would still be done. My experience of local authorities might be limited, but I believe that to be unrealistic. The regeneration practices that local authorities have developed should be prized and used, and their proactive work with RDAs should not be overturned overnight in order to remove a layer of government. That is phraseology for the sake of it, and I do not think that it will help our country to develop economically.
Andrew Gwynne: My hon. Friend is making an excellent case for regional development agencies. One of the important roles of the RDAs was to put in place regional programmes of investment for major transport schemes. Does she think a region such as the north-west would be able to put together a major programme of transport improvements if it were left to the individual local authorities from Cumbria down to Crewe?
Alison McGovern: It would not be able to do it. Travel-to-work distances are a problem in Wirral-compared with, say, south-east England-and we simply do not have adequate connectivity to centres of employment such as Manchester, Warrington and the north Wales coast. The RDA was doing fantastic work in addressing that connectivity problem, working hand in hand with local authorities. I do not think that the Government fully understand those practices.
Certain ideologies in the Government are driving the cuts. The first is that less government is better. Conservative and Liberal Democrat Members might say that, but I believe-please forgive the truism-that better government is better. This is not the time for the state to withdraw entirely. Secondly, the Government believe that pure deficit reduction is all that matters, and that reducing the deficit will itself drive growth if we demonstrate to the City and the markets that we are being tough. I do not think that there is any evidence for that. I am a great believer in evidence-based policy making, and I would like to see some evidence for that.
Gavin Barwell: The hon. Lady asks for evidence: a report from Goldman Sachs looks at every fiscal correction in major world economies since 1975 and shows that those based on reductions in spending work and actually boost growth.
Alison McGovern: I always look carefully at reports from the likes of Goldman Sachs, PWC and others-and one thing that being a local councillor taught me was never to believe at first glance what the consultants say. However, I will certainly look into the report that the hon. Gentleman mentions. I have an open mind.
The Government want us to believe that there is no alternative. I have mentioned already that Labour's Budget in March detailed much that we could do to find efficiencies, and talked about many of the things that we have heard from the Government. The question is not about reducing the deficit: it is about the timing and the manner in which it is done. I can only hope that my words today will make the Government realise some of the impact that their actions will have on my constituents in Wirral.
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