Michael Heseltine: A historic shift of power back to communities

We are involved in an historic shift of power. We all understand how this process of centralism came about. We were a pre-eminent world power in the 18th century, and the driving force and motive was that of the accumulation of wealth, which created conditions for people that were totally unacceptable. In order to ameliorate the condition of the people, it was necessary for central government increasingly over more than a century to centralise the processes that would create an equality of adequate public service. It was a very benign and necessary part of the evolution of Parliamentary democracy.

However, if the intention was benign, the consequences were not quite as happy. First, because it was very largely public sector-driven, the people who had created the wealth in the first place were marginalised, and in the process of decision-making they were largely eliminated over a very long period of time.

Secondly, the process of redistributing the money that had to be collected locally to provide the services that were required led to a fragmentation of function in the great spending departments of London.

I can remember only one occasion in my entire political career when the subject on the agenda was a city, and it was Liverpool after the riots of 1981. Many discussions took place about housing, policing, education and whatever, but at no meeting I can remember did we sit down and ask what we should be doing about the totality of this vital community.

So the functionalism of the central process was extremely fragmenting in the application of opportunity for those areas. Frankly, and in many ways more sadly, it created a culture of deference, because the weight of money flowing back to local people and local communities was so heavy and the systems by which it flowed back were so intrusive that the culture that developed at local level was, “Tell us what to do” and “Show us what you want”. The willingness to challenge the central machine became in-built into the assumptions of too many people living in our great cities.

The consequence of all this is that in this country we have devised a system of government unlike any other advanced economy. There is no economy of which I am aware which has so concentrated power in its capital.

The precedent of the London Mayor has been an exciting one, and no one would take it away, but there are many other mayors today. The last Government were, I think, extremely constructive. They worked with Local Enterprise Partnerships, city deals, growth deals, the single pot and the Northern Powerhouse in pushing this agenda with determination and excitement. It is an evolution, not a revolution, but it is an evolution that is moving in a direction that will change the history of our country.

There are things that will flow from it. First, there will be a massive potential saving in costs. I do not wish to trespass on the discussions about public expenditure cuts and the reviews that are coming; they would come under any Government, as we all know. But the fact is that with the local authority structure that we have today there is a massive overlay of costs, which will be challenged because the cuts that are coming will increase the pressure. They will not create it – the pressure is already there, and a whole range of dialogues are proceeding as to how local authorities can co-operate, amalgamate or whatever in order to cut not the services but the overhead costs.

It is a huge change. Billions of pounds a year will be spent not because the functional apparatus of central London so designs but because local people say: “If we can spend it this way, we will get better results.”

The next argument that flows from that is that if you distribute public money by competition, you get gearing. We have shown increasingly that if you use money in a competitive sense – such as the urban development corporations, the City Challenge, the Regional Growth Fund – you get a significant enhancement of what the taxpayer can afford. The ratios are exciting; the most exciting of all, of course, was London Docklands at 10 times what the public had to pay, but the regional growth fund still returns something like five or six times what the taxpayer could afford.

So although we talk of cuts, the reality will be that in employment terms there will be no cuts, because the use of public money in a competitive environment, and the gearing that it will produce, will dwarf in increased employment the jobs lost in the public sector.

Michael Heseltine is a former Deputy Prime Minister who spoke in a House of Lords debate on the Cities and Local Government Devolution Bill. This is an edited version.