Yorkshire cities ‘are held back by lack of powers’

A study by the Centre for Cities think-tank warns metropolitan councils are trapped in a “half-way house” where they are expected to drive growth with just a handful of new powers over their own budgets.

The report concludes major city councils need “far greater control” over their own finances if they are to help shape local economies and support business expansion.

The findings come ahead of the Government’s crucial spending review next month, when Chancellor George Osborne will unveil spending plans for the post-2015 period.

His speech is expected to reveal the extent to which the Government will implement Lord Heseltine’s plan for regional growth, which centres around devolving vast sums of Whitehall spending to local areas to spend for themselves.

The Centre for Cities report praises both the Heseltine plan and last year’s ‘City Deals’ – packages of extra powers and funding agreed with England’s eight largest cities, including Leeds and Sheffield – but warns Ministers must go further to spark economic growth in urban areas.

It recommends stripping away much of the red tape which prevents councils from raising and spending money as they see fit, allowing them to focus on promoting business growth.

Alexandra Jones, chief executive of Centre for Cities, said: “Cities are currently at risk of being trapped in a halfway house when it comes to local government reform. Despite being critical to the Government’s growth strategy, cities do not yet have all the freedoms and flexibilities they require in order to drive growth and raise revenue.”

The Coalition government has made “localism” a central component of its reform agenda.

A raft of new powers have been handed to local councils in a bid to give them more control over local economies – including allowing them to keep half the business rates they collect, so giving them an incentive to promote growth.

However, the report finds that councils still remain too dependent on central Government for funding, and much of the money they receive comes with strings attached which prevent them from investing it as they see fit.

Council tax remains a small portion of their income, and Communities Secretary Eric Pickles has introduced new rules preventing them from raising taxes past a certain level without a local referendum.

“If the size of cities’ budgets is increasingly going to depend on the performance of their local economy, then they need far greater control to shape their economies, and discretion to take decisions over how money in their area is invested,” Ms Jones said.

“This will allow them to prioritise initiatives that will make a real difference to the local economy.”

The report was welcomed by civic leaders in Leeds, Yorkshire’s largest local authority, who have campaigned to be given greater powers by Whitehall.

Chief executive Tom Riordan said: “Cities like Leeds are currently facing enormous challenges due to a growing and ageing population, housing growth needs, the impact of welfare reforms and an extremely difficult general economic situation. Local authorities play a pivotal role in this, and yet our resources are being squeezed with grants being reduced and council tax being heavily restricted by Whitehall rules.”

Mr Riordan said the City Deal agreed with Ministers last year was a welcome start, but that the Government must now go further if cities such as Leeds are to recognise their economic potential.

Comment: Page 10.