Draft text of the speech - may differ from the delivered version.
Video - funding the future
Let me start by saying the obvious: it was a tough settlement. I know councils are facing very difficult choices.
But so is the nation.
Public debt is now approaching nearly a trillion pounds.
Last year, the government was borrowing one pound in every four it spent.
It spent more on interest payments on public debt than on schools.
It was completely unsustainable. It risked our economic credibility and our economic future.
You can’t ignore a quarter of public spending, and councils recognise that they have an important role to play in bringing down public sector debt.
But given the track record that local authorities have - more prudent, more efficient than other parts of the public sector over the past few years - I have every confidence that local authorities will rise to the challenge.
Against that background it is not easy to increase productivity and reduce back office services - without hitting front line services.
Leicestershire and Nottingham, planning to save £2 million a year through sharing their back offices.
West London councils looking to go even further and share front line services.
Bath cutting their top team - so the money can go to the frontline.
Leighton Buzzard saving money thanks to good housekeeping over the past few years - which they can now invest in actually improving some services.
I’m really pleased about the numbers of councils who are coming together to share services and work through these challenges together.
I’m really impressed with the numbers who are biting the bullet on senior pay and sharing chief executives.
And I’m grateful to those who are recognising the importance of transparency - I’m pleased to report that more than 200 councils have now put their spending online.
Now of course, there are some councils who have been out grandstanding in the media.
But if you’ll forgive me, I’m not going to address them today.
Because they aren’t listening.
I am much more interested in working with the majority of you who have stepped up to the plate.
I want to make sure you have everything you need to tackle these challenges head on.
The Localism Bill will make a very big difference.
And I want to thank the NLGN who have worked so constructively with us to shape the best possible deal.
You helped organise a meeting that framed my idea of the operation of the general power of competence - and I hope you will work with us again as we start looking at the repatriation of business rates.
For the first time in decades, councils will have real bite, real powers, a real say over the issues that matter to residents.
All part of a much more radical distribution of power - so community groups and residents have much greater control over their lives.
This is an incredible opportunity for those ambitious, radical councils with a powerful vision for their area.
But there is also a big threat to localism on the horizon.
An issue which fills middle England with rage.
Cuts to bin collections.
If councils can deliver a service that the public like and have confidence in, that’s a matter for them.
But, we need to remember that rubbish is the most visible, most frontline service of all, in return for paying £120 a month in council tax.
If we don’t sort this out, we will set the cause of localism back by a generation, by creating an army of residents who view their council with resentment rather than respect.
There is genuine anger that in the past decade their council tax bills have doubled, but their bin collections have halved.
In the public’s experience, the iron fist of the municipal state has come down on people for the most minor of bin breaches.
State officials - a town hall bin police - rifle through families’ bins without their consent.
Good Samaritans who pick up a fly-tip are admonished for dropping it off at the local dump.
And pensioners face larger fines than shoplifters for the offence of not closing a bin lid.
I could not think of anything more corrosive to destroy trust in local councils than a stealthy imposition of bin cuts, bin fines and bin taxes.
It is naive to think this has been purely a consequence of local discretion. It most certainly has not. All of these bin policies came from central government interventions and interference.
Cooked up in Whitehall, with councils picking up the blame.
With almost no debate in Parliament, the law was changed, weakening the requirement to collect bins, and allowing bin charging.
The Audit Commission marked down councils which refused to go fortnightly, and issued guidance cajoling councils to restrict their service to households, while quangos urged councils to impose fortnightly collections - recommending doing so after local elections to avoid it being a ‘political issue’ and - quote - to overcome ‘public resistance’.
These central policies resulted in perverse local outcomes which need to change.
So we’ve already taken steps to abolish bin taxes.
We are scrapping the Audit Commission’s interfering inspections.
We’ve issued new guidance to stop bin snooping.
And the government’s Waste Review will set out a proper route map.
We intend to work with councils to increase the frequency and quality of rubbish collections - starting with removing the perverse incentives that have pushed councils to cut services.
We want to make it easier to go green - championing innovative schemes like Recyclebank which reward recycling.
And we will tackle public concerns over the civil liberty aspects of inappropriate enforcement practices; while clamping down on genuine fly-tipping which blights our lay-bys, our side streets and our countryside.
The local government sector must wake up to the fact that - even with the best of intentions - public policy on bin collections went horribly wrong in recent years.
But if we need to address the issues which threaten localism - we also need to look at those forces which will really give it bite.
In particular, I want to make sure that councils have economic freedom to go with their political independence.
We’ve taken some steps in the right direction.
With a couple of exceptions we’ve ended ringfencing so that councils get their money with no strings attached.
We will also be letting them borrow against future growth in business rates.
But we need more fundamental reform.
So the system is more transparent - not a formula Einstein himself would struggle to understand.
And so we break councils’ financial dependency on central government. Having to come round with the begging bowl, saying ‘please sir, I want some more’ isn’t the mature relationship we need.
The key is letting councils keep much more of their business rates.
In one fell swoop, you make the system more straightforward.
Make councils more self-sufficient.
Give them a genuine financial stake in the local economy - which goes hand in hand with our proposals for local enterprise partnerships.
Of course, this is not without its challenges.
There are important issues we need to work out.
We need to keep protecting the most vulnerable councils, who don’t have a strong tradition of private enterprise. We won’t simply be cutting all councils loose.
And we need to make sure the business community has the certainty and stability it needs.
I want to give councils the green light to become more innovative and work more closely with business - not to rack up the business rates.
But I think with your input, we can sort these issues out sensibly.
We can strike a new balance.
So those councils who can be more self-sufficient, aren’t trapped in a financial straightjacket anymore.
And all councils, whatever their circumstances, are rewarded for promoting growth.
So in the short term, I know that councils have got some tough decisions to make.
But I also feel very optimistic about the long term.
I believe that in a relatively short period, councils will be almost unrecognisable from today.
Much stronger, more dynamic, more powerful.
With political autonomy and financial independence.
And with a much more direct, responsive, relationship to residents.
The most ambitious, the most innovative councils are already heading down that road.
There is a tremendous opportunity for everyone to follow suit.