Commission meeting with Lord John Shipley Tuesday 6 February 2024

The Commission welcomed Lord John Shipley at its meeting to launch an inquiry into how to empower local government. John Shipley was Leader of Newcastle City Council before his appointment to the House of Lords, is a LibDem peer and is a Vice-President of the Local Government Association.

The Commission is looking at local government across England, as the devolved nations have different arrangements.

Lord Shipley introduced the issue by saying that money has become a crisis in local government and that Section 114 notices (which ban any future spending commitments except for safeguarding and provision of statutory services) are being issued by councils that face being unable to produce a budget. The crisis in some councils like Birmingham and Nottingham have generated media concern but more councils are going to follow suit.

He said that the power struggle between national and local government was becoming a national crisis. National government has increasingly tried to run local services from the centre, including education via academies and Ofsted. The Treasury has come to see business rates as a national tax.

The financial crisis has been growing over time due to the failure to confront the business rates problem and changed shopping patterns impacting on the retail sector and the anachronistic domestic council tax bands that are still based on valuations made thirty years ago. 

There are dangerous levels of debt in some councils, estimated in total across local government to be £97 billion. The abolition of the Audit Commission has led to a big gap in standards of audit and scrutiny. Too many councils have got involved in risky borrowing and unrealistic capital investment schemes.

The fundamental question is how local government is to be funded. LibDems used to favour a local income tax but have now ditched that idea and have moved towards keeping a reformed local property tax. Commissioners felt that a redistributive system and a fairer distribution of funding based on need was required.

Central government control has been stifling, with local councils having to ask permission to increase council tax above 5%. Lord Shipley suggested that councils should be able to increase taxes above that rate. He suggested that road charging was probably inevitable given the likely decline in fuel tax, and it should be to the benefit of local councils.

Last year more than two thirds of councils' discretionary spending was on social care for adults and children, leaving only a third for all other services that local people expect from their council tax. The consequence has been closures of leisure and cultural venues and reductions in many services such as supporting young people.

There is a need to reform and restructure the local government landscape and Lord Shipley favoured simplified levels leaving councils with a decent size of population to enable the running of complex and specialist services like child protection. He also favoured the committee system rather than the cabinet model in conjunction with mayors which can provide expertise on issues like social services.

The powers, responsibilities and capacity of local government have been hollowed out. Lord Shipley favoured the return of schools to form part of local government responsibilities.

The Commission agreed that devolving power meant giving power to local people and that this would mean differences in services across the country. The provision of services to local people should not be a source of profit to companies and local services should not be out-sourced. The private sector is legitimately driven by profit, but local government should be driven by the public good.

The Commission agreed that a new social contract was needed between government and people.

An idea would be to devolve job centres to local councils. A concern was raised that increasingly services were having to resort to crowd-funding and charitable funds, with the example of Citizens' Advice Bureau.