25th August 2014

Dear colleague,

These are difficult and challenging times for you, your fellow councillors and staff and above all for the communities you serve. Because of the financial circumstances the country faces you are being asked to do more with diminishing resources, and after the general election you are going to have to continue to manage with less central government funding. Local government has faced the biggest cuts of any part of the public sector. The LGA says that over this Parliament, local government core funding will fall by 40% and councils will have to make 20 billion of savings. As a result, you are having to take very tough decisions about the future of local services at a time when there are rising pressures, particularly the growing number of older people and childrens services.

Labour is committed to balance the books in the next parliament so budgets will be extremely tight. We will need to make big reforms without big spending. And as we will inherit, and stick to, the Governments spending plans for 2015/16, we will not have any more money to give to local government. But there will be one difference; the money we have will be distributed more fairly.

The Prime Minister and the Local Government Secretary say that tough times involve tough choices, but they have forgotten one very important principle. Tough times demand tough choices that are fair. And yet if we look at the way in which the Tory led Government has chosen to take most from those who have least the most deprived local authorities it is clear just how unfair and unjustifiable this is.

This is confirmed by the Joseph Rowntree Foundation which published research in November stating: Cuts in spending power and budgeted spend are systematically greater in more deprived local authorities than in more affluent ones

We have done an analysis of how the reductions in government funding for local authorities have affected different communities in different parts of the country. They show that under the Coalition, households in the ten most deprived local authorities in England will have faced a reduction in spending power per household 16 times greater than the ten least deprived.

What is more because of these decisions the principle of a local government grant settlement which equalises differences in needs and differences in resources between authorities is being eaten away. On current plans, the revenue support grant element, which recognises need, will shrink from 15.2 billion in 2013-14 to 9.3 billion by 2015-16.

To illustrate what this will mean, just look at the differing fortunes of Leeds, Newcastle, Sheffield and Wokingham using the government own preferred measure of spending power per dwelling. Spending power in Leeds will be lower than Wokinghams in 2014-15, and will fall every year despite higher service pressures. Spending power for Sheffield and Newcastle will broadly match Wokinghams in 2015-16 and then fall below it in future years despite greater need. Newcastle has 101 looked-after children per 10,000 people, whereas Wokingham has 24. Homelessness and supported housing costs are 145 per dwelling in Newcastle and 48 in Wokingham. Statutory concessionary travel costs are 85 per dwelling in Newcastle and 14 in Wokingham. How can anyone describe as fair a funding system that fails to recognise such large differences?

And this is not the only example of unfair choices the Coalition has made. They introduced the bedroom tax which penalises families in your area who are trying to stay in their own family home and they cut council tax support which has forced up council tax for over 2 million people on low incomes across the country. I know that many in local government have been doing their very best to support people who are now struggling to make ends meet.

David Camerons Government have made the wrong choices. They have ducked tough decisions and passed the hardest ones down to you, and they have failed to apply the basic principle of fairness. They had a choice, and they made the wrong one as far as communities up and down the country are concerned.

The other area in which they have made the wrong choice is localism. Theyve talked a great deal about it; indeed the first responsibility of the Department of Communities and Local Government is described as: Supporting local government by giving them at the power to act for their community without interference from central government.

Those words will raise a wry smile in town halls and council chambers up and down the country as elected representatives reflect on the Communities Secretarys determination to tell them how to collect the rubbish and control every local government publication. And they will remember the legislation he put in place to take planning powers away from local people.

But the real charge against the Coalition is that they have failed to take localism far enough. I do not think that they understand the scale of the choice that we face as a country about how to build our economy and provide local services in an era of less money.

For me, there is an inescapable conclusion. In these circumstances, and with these pressures, the centre has to be willing to let go so that local communities can decide on how best to use limited resources. Only by radically rethinking the relationship between central and local government in the years ahead will we manage to achieve better with less.

Local government was already recognised as the most efficient part of the public sector, and it has continued to lead on this. Adversity has also had one beneficial effect. It has encouraged innovation; things are happening now that would not have happened before.

England is crying out for devolution. Most people understand now that you cant run everything from the centre. And we will not address the crisis of confidence in politics unless and until we share power across England.

And that is why a Labour Government will offer a new deal for England. We will pass power, money and responsibility down to you and give you and your communities the tools so that you can do the job.

And in return, what we ask is that you use this power to work together towns and cities, counties and districts, joint committees, economic prosperity boards, combined authorities and be held to account locally for how you use this funding and these powers to answer the big questions we face.

How can we support businesses to grow, create the jobs that will pay good wages and build an economy that is sustainable? And with an ageing population, and a wish to tackle crime, nurture the next generation, and help families in difficulty, how can we provide public services in an age of less money in a way that is built around people and places and not institutions and silos?.

So what does this all mean in practice?

If we are going to build a strong economy for the future we must play to the strengths of our great cities and counties, and all parts of England. Britains industrial revolution changed the world. Innovation in technology, production and manufacturing was the foundation on which many of our great cities were built Leeds, Manchester and Birmingham among them. And as our economy has changed, we still have great companies, and successful new industries.

But for some people the link between growth and better living standards has been broken. Look at the use of zero-hours contracts, the rising housing benefit bill because more people who work need help to pay the rent, and the huge demand for food banks. Inequality is the problem we need to address both between people and between regions. Between 2007 and 2012, only one in eight of Englands second tier cities had output per head above the national average. In Germany, by contrast, all eight of their second tier cities were in that position.

How will we change that? By devolving 30 billion of existing public spending over the next 5 years - three times as much as the current government to local authorities, combined authorities, economic prosperity boards and local enterprise partnerships for economic development.

Funding not for projects decided in Whitehall, but funding for local plans to get the right infrastructure in place to help people, goods and digital commerce move about. Support for the right skills, more high quality apprenticeships and the businesses of tomorrow. And more homes to tackle the acute housing crisis. Housing completions are half what we need, the building of social homes is at a 20 year low, and more and more families in private rented accommodation find themselves paying off someone elses mortgage instead of paying off a mortgage on a home of their own.

We will abolish the bedroom tax, and we will give the 9 million people now renting privately including a growing number of families with children greater stability and peace of mind with longer term tenancies and ceilings on subsequent rent increases.

We will devolve other funding as well. 100% of business rate revenue to combined authorities to help you generate growth and benefit from it, while ensuring that there would still be redistribution within the system to ensure fairness. This is something that the LGA has specifically asked for.

This will not just be an offer to cities. It will be for all of you, counties and districts as well as cities, because we need, and you want, to develop the economy everywhere.

The other big challenge local government faces is providing services in a way that best meets the needs of people. In order to do that, we need to give local government the maximum flexibility to take decisions about how they do this and we need to pool money to get the most effective outcome. So, instead of Whitehall setting local authorities annual budgets, a Labour Government will provide longer term funding settlements so councils can plan ahead and reinvest savings.

And a Labour government will legislate to give local areas new powers.

Keeping elderly and vulnerable people out of hospital with locally-managed integration of health and social care, focused on the whole person and not just their individual conditions.

Developing Whole Person Care commissioning plans for people with long-term conditions, disability and frailty. Treating the budget for them as a whole across health and care services, from which services will be commissioned over a year through a year of care tariff.

And we will go further, so that you can too. We will legislate to allow even more ambitious areas to move towards a single commissioning budget across all of health and social care so that we take the money and staff we have in our hospitals, clinical commissioning groups and local authorities to work together to provide better care.

To help give young people the skills they need to succeed, we will give local authorities control over 1.5 billion of funding for further education for 19 to 24 year-olds and responsibility for a new service for under-21s looking for work.

This will help you to meet existing commitments to support those not in education or training, raise the participation age and help young people make the transition into work.

On community safety and reducing crime, our police serve local communities and they should be accountable to local communities. We will enable those communities to set priorities for combating crime.

We know that the right local partnerships between councils, police, probation, health and education can change the lives of young offenders, with sharp falls in youth crime and the number of young people behind bars over the last ten years. There is an overwhelming case for applying these lessons to young adults too.

And for troubled families, the programme that builds on our family intervention projects is an approach that works, but its a long haul and it needs sustained support rather than headlines about turning lives around. We will make the criteria for identifying the families more flexible so that you can work with those you see as a priority.

This example shows that public services are rarely more important and influential than when they help to give children a good start in life, from health checks at birth to child care and education. Investing at the start makes the biggest difference later on, yet support for young children can be fragmented and poorly co-ordinated across communities.

Thats why we need all childcare providers and health services to co-operate with Sure Start centres locally as the new hubs of family support in communities.

And we will overturn the current top down approach in education by strengthening local accountability for all schools regardless of structure. New Local Education Panels will work with the new Directors of Schools to restore a local voice and a local say in education after the extraordinary centralisation of the last four years. The aim of all this is to help fit the bits better together.

And where you as councils decide that you want more control, and have a strong track record of delivery and effective statutory governance, you will be able to negotiate further devolution of powers and funding to tackle high cost, complex demand pressures on public services like the work programme, criminal justice and health.

All decisions about public expenditure involve a choice, those who take decisions must be held to account for the choices they make. So alongside this significant devolution of power will be stronger local accountability with local Public Accounts Committees in every area so that elected members can hold council and other public services to account.

I hope it is clear from all this that the next Labour government will make different choices about the relationship between central and local government. Local government asked us to take money from Whitehall and pass it down. We will do that. It asked for multi-year budgets, retention of 100% of business rate income, place-based budgets, local leadership on skills and training, co-commissioning of the replacement for the Work Programme and much greater control over transport infrastructure investment so that we end the nonsense of every project making the long, slow journey down to Whitehall for a civil servant to give it a tick or a cross. We will do that too.

And the form in which all this devolution will be received will be for local government choose, whether it is to establish combined authorities, economic prosperity boards, or joint committees. Different places will decide on different arrangements, but all will have a single aim - to provide the best possible services to people.

All this will represent a very big change; above all, a change in culture. And the biggest question will be this: what will you and the communities you serve do with these new powers and responsibilities? How are we going to move from the cry of What are you going to do for us? to answering the question What are we going to do for ourselves?

The answer will be to get organised for this change. Working out what more can be done on your economic plans. Supporting firms that can create better jobs with higher pay. Nurture entrepreneurs and start-ups. Ensure that people have the skills employers want and the homes they need.

And if there is any scepticism about what is possible in tough times, remember what we have achieved together before. Earlier this summer we commemorated the 70th anniversary of the D-Day landings which paved the way for the defeat of fascism. When victory was won, our nation was battered and exhausted by nearly six years of terrible conflict. And yet, in the years that followed, we emerged stronger and fairer than before.

Communities pulled together. Even with rationing and money tight, as a nation we defiantly raised our sights. The NHS was founded. Much-needed homes were built. The family allowance was created. And the first national parks were established.

If we were able to achieve these great things in the midst of the ashes of the greatest conflict of the 20th century, then surely it cannot be beyond our collective ability to harness the same energy, determination, ideas and passion to meet the great challenges of the 21st century? All the qualities are to be found in abundance in England, and unleashing that spirit will carry you through the most difficult of times.

The time for devolution in England has now come. I look forward to working with you to make it happen.

Yours sincerely,

Rt Hon Hilary Benn MPShadow Secretary of State for Communities and Local Government