Wednesday, 19 February 2014

Putting fairness back into local government finance

It is families and businesses in local communities that are paying the price of George Osborne and David Cameron’s failure nationally on growth and the deficit.

The next Labour government will not be able to stop the cuts or turn back the clock. We can, though, offer hope to local government that we both understand the depth of the financial challenge that councils face and are committed to finding a way forward. We will start by putting fairness at the heart of the relationship between central and local government and our approach to local government finance.

We will acknowledge the difficulties councils face. We will respect the decisions they make at a local level about how to use resources, and not criticise and carp from Whitehall as Eric Pickles does about everything from levels of reserves to bin collections. The next Labour government will, of course, want councils to meet the needs of communities, whether in adult social care or raising educational standards, but our approach will be one of partnership, underpinned by fair funding.


It is simply wrong that the most deprived local authorities, the communities who can least afford it, are being hit hardest. The Tories claim this shift in funding is aimed at reducing "dependence", but the truth is that it is often the areas with the highest demand for services that have the least capacity to raise income through business rates or council tax. Labour will end the bias against our poorest areas by reviewing the funding formula to ensure that the funding we have is distributed more fairly.

Next week will see Hyndburn Borough Council and Lancashire County Council announce their budget plans for the forthcoming financial years. I thought it might be worthwhile making Labour’s case for local government finance reform. It’s also worth pointing out that we have only seen 40% of the cuts local government faces, with a further 60% of the cuts still to come.

Hyndburn Council has to make over £1m in savings this year and Lancashire County Council needs to make over £300m

It is crucial that we support councils to deliver economic growth in all areas of the country. To do that, we will extend the model of city deals throughout local government. We want to devolve power over housing and planning, jobs and skills, but councils will need to come together to decide how best to use these powers. Local economies differ so we will not set down a model from Whitehall, but will ask local areas to develop arrangements that suit local needs in a New English Deal.

We will take the process of devolving power from the centre much further. Labour's Total Place programme has stalled under this government. The current Whole Place scheme is too limited in scope, but the potential is clear. Evaluation of the pilots showed potential for better services and savings of between £9.4 billion and £20.6 billion over five years if all places adopted the approaches on health and social care, troubled families and work and skills. That's why we must be radical in breaking down the barriers to integrated working, including ending Whitehall's silo mentality.

The Local Government Innovation Taskforce, set up by Ed Miliband, is looking at how Labour in local government is already innovating and responding to the challenges our communities face. Labour's localism will be an ambitious programme requiring central and local government to work together as we transfer much more power and responsibility to councils. In this way, while resources will be very tight, councils will have a fair chance to find a way forward for their communities.

Getting money out of Whitehall and down to the Town Hall is also essential if we are going to address the crisis of confidence, and alienation, in our politics. To rebuild confidence in the power of people working together to create something better, we must give people the power to do precisely that for themselves.