Two-speed Britain

Last Tuesday evening, the House of Commons met to discuss the second reading of the Local Government Finance Bill, which, despite opposition from Labour MPs, progressed to the Committee Stage. This Bill is a very worrying prospect for all those interested in social justice and a fairer Britain. If passed, it will pick the pockets of the poorest councils in Britain to the benefit of the wealthier ones, and lead to far greater levels of regional inequality.

The Local Government Finance Bill would allow local councils to keep whatever business rate receipts they can generate from local enterprises, overturning the complicated redistributive mechanisms that have until now been in place. Given that about 80% of local authorities’ central government grant comes from business rates, this is a very important issue. Poorer regions would be less able to produce economic activity on their own patch and would therefore suffer greatly as a result. The Bill also seeks to give the councils ‘responsibility’ for local council tax benefit, but at the same time cuts their budgets for this by 10%.

The Government has said it will introduce a number of top-up levers to ensure fairness in the system, but as has been proved time and time again these will not prevent huge disparities in councils’ spending power form emerging.

Pickles’ justification for this is that the current system does not sufficiently incentivise councils to produce local economic growth. Having been warned by many economists and the Labour Party for over a year about the importance of growth to reducing the deficit, this Bill is the Department for Communities and Local Government’s attempt to achieve this at a local level. By letting councils keep the proceeds of their own business rates, the Government hopes to encourage local authorities to encourage economic activity.

Does Mr Pickles genuinely think that businesses in areas like County Durham will be able to ‘incentivise’ growth out of thin air? Companies are attracted to setting up business in more affluent areas like London and the South East, because of all the established advantages this brings. Attracting businesses to the North East is far more difficult. That the Government thinks this will happen at the drop of a hat, shows just how out of touch it is with the lives of many ordinary Britons who do not live in the South East of England.

As I said in the House in Tuesday, my great concern, and that shared by many of my Labour colleagues, is that this Bill would increase the regional wealth gap even further and put us further down the path of a two-speed Britain.

In spite of these proposed changes, it is exactly in regions like the North East where demand for services and need is greatest. Sunderland has 34 neighbourhoods in the top 10% most deprived areas nationally. And almost 1.5 times as many people in Durham are in receipt of a community service per 1,000 of the population than in Surrey. The Government’s reforms completely overlook these statistics and many others like them. The fact is that it is the worst off councils that have to provide the greatest level of services. With this Bill, the Tories and their Liberal Democrat colleagues have got one thing in mind, and it isn’t the hard working councils and families of the poorest parts of the United Kingdom.

All of this comes on top of the substantial cuts to local government grants announced last year. In 2011-12, for example, Durham County Council saw its revenue spending power fall by 6.73%. Many other Government reforms will also hit the North East particularly hard. For example, the abolition of the Regional Development Agencies will mean the closure of One North East, which, having created or protected some 160,000 jobs has been a huge success by anybody’s standards. The region has also come off worst from George Osborne’s disastrous economic policies, with unemployment reaching some 11.7% of the local population, a shocking 3.4% higher than the national average.

This Bill doesn’t even meet the Government’s own standard of fairness. How Cameron and Clegg can square this with their Rose Garden vows to ‘ensure that fairness is at the heart of decisions so that all those most in need are protected’, is beyond me. With these reforms, we have yet more evidence that what the Tories say and what the Tories mean are very different things. It is precisely the councils which are most in need that will be hit hardest by this Bill, and it is precisely the people who rely on local services the most that will suffer the most as a result.

The truth is that these regressive changes to local government finance have more to do with ideology than with localism. When the Government talks about empowering local communities, what it actually means is impoverishing many of what are already the poorest in our society. The Local Government Finance Bill isn’t about localism, as many councils will actually see their power decrease substantially as a result. For example, the Government talks big on freedoms for local government, but then sets about curbing those through diktats on council tax freezes and rubbish bin collections.

Many members of the current Government claim to be ‘one nation Tories’, but Bills like this show where their true allegiances lie. Here we have, again, a Conservative dominated Government looking after the interests of Conservative-run councils and Conservative-voting heartlands on the backs of our most vulnerable councils and on the backs of our most vulnerable citizens. This Bill brings with it the very real and dangerous prospect of a two-speed Britain.

Kevan Jones is the Labour MP for North Durham