Devolution: English Cities

Motion to Take Note

Moved by

That the Grand Committee takes note of devolution to English cities in the light of Lord Heseltine's report Empowering English Cities, published on 2 July.

My Lords, our country faces a constitutional crisis unparalleled in peacetime. No one knows how the debate about our relationship with our European neighbours will change in the months and years ahead. Feelings run deep and penetrate every corner of society and we each have our views. I have no intention of pursuing that issue today. I have one very clear reason for that decision.

Whether we leave the European Union, form an accommodation with it or remain within it—whichever way—our future depends principally on the success of our great cities. They are the engines of our prosperity and the rock of our stability. They made this country what it is, and all our tomorrows are dependent on their strengths and are challenged by their weaknesses. Of course, London is one of the world’s greatest cities, but government defined and imposed in detail from London can never match the pride, motivation and—yes, let us be frank—self-interest of people who live, work and enjoy their leisure in our other great cities.

I joined this debate as a junior Minister in 1970. Throughout that time, as a nation, we have failed to reform our institutions and administrative systems to match the ever-escalating rate of change. The hurdles facing our political parties were just too high. The human instinct to protect the status quo was simply too strong. The consequence has been to change at the speed of the slowest ship in the convoy. Progress required compromise, consensus, fudge.

Let us again be frank—we can go on in the same old way. It is less controversial, more comfortable and the consequences will become apparent long after we, the present generation, have moved on. I ask your Lordships to reject such dereliction of duty, so careless a discharge of the legacy that we will bequeath.

My report, Empowering English Cities, attempts to portray a vision and sets out the detailed policies to achieve it. It is a tale of two cities: two interwoven cities, linked, interdependent and entwined. There is the city of excellence: great entrepreneurs, world-class companies, excellent universities, outstanding public servants, dedicated carers and social cohesion—a nation prosperous and at peace with itself. Of that city, much is heard, of which we are legitimately proud.

But there is another city—a city of the postcode lottery, the forgotten fringe, the lurking shadow. There is that place on the other side of the road, so easy to pass by: the failed school; the excluded child; and the gangland, where the moralities to which most of us subscribe and the philosophy in which we believe are objects of contempt, more appropriate for a television soap opera than the realities of everyday life. Knife crime is a symptom of social breakdown—a response requires an approach much more comprehensive than simply removing their blades.

It is nearly 40 years since I first walked the streets of Liverpool in the aftermath of the riots. Everybody there knew exactly what was wrong; you, him, them, it—everybody else, never me. But I knew what was wrong: there was no one in charge. Since then, in many of our great cities we have put somebody in charge: mayors, locally elected and publicly accountable. But it is a job half done. The fudge and compromise of politics is the DNA of the journey of reform: powers unevenly distributed, leadership constrained, Whitehall unreformed.

Hear, hear.

My Lords, Parliament and the country owe a huge debt of gratitude to the noble Lord, Lord Heseltine, for his long-standing and single-minded pursuit of this subject, reflected in this great report and, indeed, by the speech he has just made to your Lordships.

I can claim an affliction that is similar to what might almost be described by the noble Lord’s party colleagues as his obsession. As long ago as 1968, I was a co-author of a political pamphlet called Power to the Provinces. We had a number of themes which are as relevant today as they were then, and I will touch on them briefly. In doing so, I hope that the noble Lord will accept that my colleagues and I are here not to dilute his message, but to enhance and empower it still further. We believed then, and believe now, very strongly in the principle that decisions in a mature democracy should be taken as close as possible to the people they will affect. That has become known as subsidiarity. Devolution implies a degree of decision-making that is more extensive and holistic than simple delegation or decentralisation, however desirable they may also be.

I would draw the important distinction between, on the one hand, the delegation of funds—which, by its very nature, is a short-term decision—and devolution of fund-raising powers on the other: once that responsibility has been given it is extremely unlikely to be removed again. Allocation of a central government funding stream, by contrast, can be at the mercy of individual Governments and Chancellors. I am not sure whether this report clearly distinguishes between these two quite separate objectives and exercises: one can lead to the other, but the evolution does not happen automatically. It also follows from our starting point of principle that devolution does not stop at one sub-national or sub-federal level. Taking power from Whitehall or Westminster to national parliaments in Holyrood, Cardiff Bay, Stormont and, indeed, to the metropolitan cities in England does not absolve them from distributing powers and resources to lower levels of governance.

My Lords, the noble Lord, Lord Heseltine, and I go back a long way. I was the leader of Newcastle City Council during both periods in which he was Secretary of State at the Department of the Environment with responsibility for local government. We were by no means always in agreement, but his interest was genuine. I recall being invited by him to dinner on one occasion. I accepted with some trepidation: the venue was the Tower of London—not, I hasten to add, in the Beauchamp Tower. His concern for English cities is long-standing and welcome, but I have to say that I have reservations about some of his proposals.

One major component of the noble Lord’s programme is the requirement of elected mayors for what in many areas would be not just individual cities but city regions. Newcastle was one of a number of councils required to hold a referendum in 2012 on whether to have an elected mayor. As in a number of other places, the electorate rejected the idea. Now, we have an elected mayor for the North of Tyne Combined Authority, established this year as the price for what is a modest step towards a measure of local government reform, to which our neighbouring authorities south of the Tyne declined to subscribe.

The reward for the creation of this new body is very limited from a financial perspective; a much vaunted £600 million over 30 years amounts to little more than £6 million a year for each of the constituent authorities. As I have frequently pointed out, Newcastle alone has suffered a financial loss amounting to £280 million a year since 2010, rising to £330 million by 2022, from a combination of government cuts in funding and rising costs. As in other places, this is a 60%-plus cut in the council’s budget.

Nationally, since 2010, government core funding for local authorities will have been cut by £16 billion a year by 2020. Welcome though the Transforming Cities Fund is to its recipients, the amounts referred to in the noble Lord’s report are, to put it politely, modest, ranging from £250 million for the West Midlands to £59 million for Tees Valley. In addition to the Transforming Cities Fund, the Government have announced a Stronger Towns Fund. Perhaps the Minister could tell us whether a “supporting villages fund” is envisaged. The Stronger Towns Fund will dispense all of £1.6 billion up to 2026, with amounts ranging from £281 million for the north-west to £25 million for the east of England. That is hardly likely to make a significant impact. The very fact of there being two separate funds raises questions about the Government’s approach. It implies a two-tier approach to addressing the needs of our regions, instead of looking at the issues across whole areas such as the north-east, let alone between regions.

My Lords, while reading the excellent report by the noble Lord, Lord Heseltine, I was at times overcome by nostalgia, having followed the history of local government finance, functions and boundaries since I joined the Treasury in 1970. I remember in the early 1980s the Treasury was proud to have got local authority self-finance expenditure—LASFE to the cognoscenti—up to more than 60%, but only a decade later it was down below 25%. Local authorities have been stripped of functions and taken out of social housing and their boundaries are constantly reshuffled. How did this happen?

There was a narrative in Whitehall and Westminster that local authorities were incompetent and wasteful, out of touch with the interests of local residents, meddling in national politics, anti-business and anti-development. Was that a fair description? It was certainly not in all cases, but there were prominent examples that fitted the bill, such as my home borough of Lambeth, Brent, the GLC and Liverpool. One response was the introduction of a poll tax on the premise that business, which contributed much of local taxes, had no vote and many voters paid little in rates. The unwinding of the poll tax led to business rates being sequestered and captured as a national tax, and rates replaced by council tax, which was less buoyant and less progressive.

The Whitehall/Westminster narrative continued for several decades and to some degree lives on. Recently, education has been taken away from local authorities and cuts in spending imposed on them have been more severe than on government departments. The first thing that strikes one about the narrative is its sheer hypocrisy, the pot calling the kettle black, as though central government never had any major failures of policy or delivery. When I joined the Departure of the Environment as Permanent Secretary in 1994, with the noble Lord, Lord Deben, then Secretary of State, it was apparent even then that the narrative was outdated. I met many local government chief executives and found them impressive, possessing skills often lacking in Whitehall, which explains why, when senior civil service positions were opened up to open competition, many of them were successful. I also found that they were keen—desperate, even—to develop their communities.

My Lords, I congratulate my noble friend on his powerful follow-up to his original 2012 report, No Stone Unturned. I make it clear at the beginning that I have no great experience in local government. My contribution to today’s debate flows from four—or maybe three and a half—episodes. The first is the year that I spent chairing a Select Committee of your Lordships’ House looking into citizenship and civic engagement. My noble friend Lady Eaton, who was a doughty member of the committee, will speak later. We looked at some of the underpinnings of the issues that my noble friend referred to in his remarks. The second is my chairmanship of several companies, both in the English regions and abroad—they are all declared in the register of your Lordships’ House—which has given me some economic thoughts. The third is my personal belief that we have created and are creating two nations: London, with its environs in the south-east, and the rest of the country. If that trend continues for the next quarter of a century, we will create strains to our social cohesion that we will come to regret. The last—this is maybe the half—is the fact that, for a very few years, I was the Member of Parliament for Walsall North. This gives me an opportunity to thank my noble friend, who came to speak for me in my by-election all those years ago.

I share the view of my noble friend that, unless we find a way to create at Whitehall a central focus for the regions, the possibility of developing the vision that he has is doomed. There is far too great a danger that critical issues either fall between the departmental cracks or become the subject of departmental turf wars. In the civic engagement committee, we saw this in spades. Our recommendations went to the Department for Education, the Home Office and the Cabinet Office. Indeed, my two noble friends on the Front Bench have in turn replied to them in different ways. We recommended that there ought to be a Minister with overarching responsibility for this matter. I regret to say that all that we have achieved so far is an interministerial working group and we feel relatively neutered.

My Lords, the noble Lord, Lord Heseltine, has done the House a service in securing this debate so soon after the publication of his timely and visionary report, which I read with great interest. I agree with his description of the challenge facing us here today: to harness and unleash the talents of people across England and ensure that communities nationwide feel the benefits more deeply. I declare an interest as the chair of the National Housing Federation, the trade body for housing associations.

Devolution has empowered a new can-do spirit in our city regions, enabling local people to tackle local challenges through partnerships and policies which make sense for them. It has been uplifting to witness regions confront issues such as housing, social care and transport in a way that makes the most of the strengths of their region. However, there is of course more to be done. Many city region mayors and combined authorities remain beholden to Westminster for the critical investment and decisions that their local communities need. Many more areas are yet to benefit from any of the flexibilities enjoyed by combined authorities. I hope, therefore, that in his response to the debate the Minister will agree that the benefits of devolution should be extended more deeply where they already exist, and more widely where they do not, so that every place is given the opportunity to thrive.

As chair of the National Housing Federation, I am well aware of the value of empowering cities and regions. Housing associations are not-for-profit providers that invest any operating surplus into their local communities. They are shaped by the communities they serve and, in turn, shape the homes and services they provide to meet the needs of their community. They are busy putting into practice the principles of empowering people and communities across England every day.

My Lords, I pay tribute to the work of the noble Lord, Lord Heseltine, whose focus on the economic futures of cities, particularly across the north of England, has been crucial to their revitalisation. From the 1980s, they have in many cases become places with a new vibrancy, often related to the expansion of their universities and the achievement of the Urban Development Corporation. I strongly support the recommendations and conclusions reached by the noble Lord on a new department for English regions, how to replace EU structural funds, the allocation method of capital funding by the Treasury, the need for new Select Committees in both Houses to review devolution and the dispersal of the offices of Whitehall. These are all fundamental to delivering the success that we all want.

On Monday, I was asked to meet researchers from the OECD who were investigating why productivity in UK cities and their surrounding city regions is not higher. I suggested that if they simply read the reports of the noble Lord, Lord Heseltine, over the years, they could save themselves a great deal of time in writing their report.

I concur with very many of the conclusions that the noble Lord has reached. However, if I may, I want to correct a small error on page 20: my noble friend Lord Goddard of Stockport was the Liberal Democrat leader of Stockport as opposed to the Labour leader. This is clearly a typing error.

There has been other work carried out, such as that of the noble Lord, Lord Adonis, and the Institute for Government, which, with the Centre for Cities, produced a report in 2011 subtitled How Elected Mayors Can Help Drive Growth. The noble Lord, Lord Kerslake, has just produced a report of the UK2070 Commission, and there have been many reviews and reports on the northern powerhouse.

This is not a new issue. In 1962, then Prime Minister Harold Macmillan said that he was determined to,

Sitting suspended for a Division in the House.