Michael Gove’s new restrictive powers over councils risks harming the levelling up agenda

New powers for the Secretary of State for Levelling Up, Housing and Communities over local government finances, announced in the Levelling Up and Regeneration Bill, is of significant concern for local authorities.

Paul Dennett, Labour Mayor of the City of Salford. www.politicshome.com 

These new powers appear to allow for the Secretary to cap borrowing and force any council to “divest itself of a specified asset” – powers which have traditionally been reserved for local authorities placed in special measures.

Britain is already considered to be amongst the most centralised of any state structure in the world – with vanishingly few powers for local authorities to raise or levy local taxes, to determine the areas priorities for expenditure or effectively plan for growth and development. All of these are increasingly determined by one-size-fits-all national frameworks, ring-fenced funding (often top-sliced from other pots with fewer restrictions on its usage) and an un-hypothecated formula for their distribution.

On top of this, 12 years of austerity have seen core Revenue Support Grant funding for local authorities cut by over 50 per cent – putting many areas onto the breadline.

In this situation, many councils (including my own) have made ambitious steps to become more fiscally independent – primarily through borrowing, the creation of revenue streams through the commercialisation of services, capital investments and rental services.

Salford’s capital programme is substantial and has been used in part to finance the creation of MediaCity, a huge asset for our city and country as well as a great source of employment growth and business rates, driving population growth and increased council tax. MediaCity is the largest hub for digital and tech businesses in the UK outside of London – a prime example of a project helping to level-up a post-industrial city, attract international investment in R&D and develop the industries of the future.

Wise investments are a key component in shielding local services from the impact of austerity, increasing fiscal self-reliance and fuelling growth.

The Secretary’s new powers seem to provide no distinction between good and bad council borrowing or investments. And we know that the Treasury and central government has a rigid and fiscally conservative approach to book-keeping, with a hugely constrained vision for local authorities still educated by the outdated “new public management” mantra – expected simply to preside over an ever-diminishing list of services, making cost savings by selling off those services and assets to bargain-basement private providers.

Local authorities have huge potential in the levelling up agenda, possessing a wealth of intricate and detailed knowledge of their local areas often overlooked by top-down Whitehall mandarins, in addition to a wealth of expertise in the delivery of services which is near universally overlooked and undervalued within our Westminster-centric politics.

The logic of this position appears to be formally accepted in the corridors of power – with a welcome focus on devolution being a central part of the levelling up conversation. Yet time and time again, when new policy announcements are brought forward, the same instinctive drive towards relentlessly restricting local government’s powers and reducing discretion over its spending continues to cut the rug from under our feet.

If more central funding is not an option for councils, then borrowing and growing asset bases must be an essential component of successful local government policy moving forward. Without it, we will see the condemnation of local authorities to a future of decline.