Local Audit and Accountability Bill [HL]

Debate between Earl of Lytton and Lord McKenzie of Luton

Tuesday 21st January 2014 Lords Chamber

[The Earl of Lytton]

I particularly welcome this amendment for all the reasons recited by the noble Baroness. I think that it will substantially modernise, improve and streamline the work of parish councils and make them more open, without having the negative impediments that have previously been associated with parish polls. I very much welcome this. In doing so, as I expressed when this was before us previously, I thank other noble Lords who supported this; the noble Baroness’s predecessor, the noble Baroness, Lady Hanham, who readily took this away; and the Bill team for the work that it did to fashion it and get it approved by the other place. I warmly welcome this measure for all the reasons given. It is very much a success all round, for which I claim only minority credit for having raised the matter in the first place.

[Lord McKenzie of Luton]

My Lords, we should thank the noble Earl, Lord Lytton, for raising this matter in the first place, and he should certainly claim a substantial amount of credit for it. He regaled us in Committee with some of the anomalies and archaic processes concerning parish meetings. Voting only between 4 pm and 9 pm with no provision for proxy or postal voting is hardly the stuff of inclusion. The noble Earl was convincing on the need to modernise arrangements, and the Government responded by providing for the Secretary of State to have the power to make regulations about the conduct of parish polls. We consented in the other place, as the Minister acknowledged, in widening the scope of the Bill to facilitate this.

The Government gave undertakings in another place—they have been reiterated tonight—about continued collaboration with the National Association of Local Councils and with the noble Earl, and we trust that the promised wide consultation on draft regulations will now proceed apace. This is an opportunity, as has been said, to provide a method for local communities to have a voice on issues directly related to parish matters, and it has our support.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, we accept that these are minor and technical amendments and have no points to raise.

This is my final utterance on this Bill so I, too, would like to take the opportunity to thank all those who have been involved, particularly the Bill team, who have been helpful during the passage of the Bill and in focusing on these amendments. I thank the stalwarts of our debates, the noble Lords, Lord Tope and Lord Shipley, the noble Earl, Lord Lytton, and my noble friend Lord Beecham, who brings with him not only a very serious understanding of local government and its challenges but the fantastic ability to deliver his thoughts in a light-hearted and challenging way. I also thank the noble Baroness, Lady Stowell, the noble Earl, Lord Attlee, and the noble Baroness’s predecessor, the noble Baroness, Lady Hanham.

[The Earl of Lytton]

My Lords, I follow the noble Lord in thanking the noble Baroness for her unfailing courtesy, and that of her Bill team, and particularly for keeping me in the loop as matters have proceeded through the other place. That was very welcome and I am extremely grateful for that, and I am sure I can say the same for the parish and town council movement for her consideration and care over this matter.

Local Audit and Accountability Bill [HL]

Debate between Earl of Lytton and Lord McKenzie of Luton

Wednesday 17th July 2013 Lords Chamber

[The Earl of Lytton]

My Lords, this amendment is a further attempt to remedy an issue concerning parish polls. I declare my interest as president of the National Association of Local Councils, which has a particular interest in this. The background to this is already recorded in the Official Report of 26 June. On that occasion I was very gratified to receive not only the general support of the Committee but recognition from the noble Lord, Lord Wallace of Saltaire, that there is a problem that needs addressing.

Since then, accompanied by the chief executive of NALC, I have had an extremely useful meeting with the noble Baroness, Lady Hanham, and her departmental officials, and I am extremely grateful to her for that opportunity. I was encouraged by her very positive stance on this, as well as the great care with which her officials had obviously looked into the whole matter.

To summarise, parish polls are a very important way in which matters of interest can be aired and views sought, but they are governed by some fairly archaic legislation, which is more than 40 years old and contained in Schedule 12 to the Local Government Act 1972, and they are open to abuse. The issues are fourfold. First, incredibly minimal requirements are necessary to trigger a parish poll, which I have referred to in the past. Secondly, although it has to be on a parish matter, “parish matter” as a term of art is nowhere defined. Thirdly, once triggered, the costs incurred by the principal authority in conducting the poll are recoverable from the parish. While these may not be great in the overall score of things, in proportionate terms for a parish budget, they are pretty significant. Fourthly, there is no obligation to act on the poll, regardless of its outcome. Indeed, a number of polls have had very poor turnouts and inconclusive or even contradictory outcomes, as was outlined in the report by Action with Communities in Rural England.

This problem can only get worse. In Grand Committee, it was made clear that the Bill might not be the place for such an amendment. I understand that and the reasons for it. Yet it does affect parish finance and has a clear bearing on the way in which a parish is held to account. Equally clearly, there is a dimension of audit, although usually long after the event, as a check that the expense has been properly incurred.

The effect of the amendment would simply be to give the Secretary of State the power to amend by order the provisions of the 1972 Act. It does not of itself change anything in the Bill. The main change in this amendment compared with the previous version is in the five words at the end of proposed new subsection (1),

“with implications for parish finance”.

That was my way of trying to get round the issues to do with the scope of the Bill in terms of financial accountability and audit, which I explained in more detail in Grand Committee.

I am not hopeful that the amendment will prove acceptable. My purpose is to get on the record a firmer commitment to do something about this. The questions really are, if not here and now in the Bill, by this amendment, can something not be done at Third Reading, perhaps with—dare I say it?—a tweak to the Long Title of the Bill; I say that in the knowledge that we will shortly be dealing with a tweak to the Long Title. The best solution would be to accept something along the lines of this amendment in the context of the Bill, because it will be the quickest way of actually achieving something rather than expending powder and shot on trying to find some other parliamentary workaround to deal with what is, after all, not really the biggest of nuts to crack and which should not require a huge hammer to deal with.

Public money is at stake. If my amendment is not acceptable, and there is no tinkering with words that will make it so, perhaps the Minister could undertake to use reasonable endeavours to see if the Commons, with its wider powers over the scope of Bills, could be persuaded to do something. I believe, and have to accept, that the regulatory reform procedure is of no help here. The fall-back position, as I understand it from Grand Committee, would be for a Private Member’s Bill to be brought forward in a future Session, but at the cost of a further delay. If that is the only way forward, although it seems an awfully long-winded way of achieving something that really should be fairly uncontroversial, so be it. I would be happy to offer any assistance or activity on my part that could bring that forward. Perhaps the Minister could give an indication of whether, in that fall-back event, such a single-issue Bill would, in principle, receive government support and, more crucially, time to see it through. I beg to move.

[Lord McKenzie of Luton]

My Lords, we are sympathetic to the position adopted by the noble Earl, Lord Lytton, As my noble friend Lord Beecham said in Committee, the noble Earl has explained the archaic regime that exists at the moment for parish polls, the small numbers involved in calling a poll, the fact that the poll is not binding and the financial cost being recoverable for the parish. I would have thought an effort to address that would be well worth while. Indeed, the noble Earl’s amendment suggests that there should be an order-making power inserted into the Bill. Obviously, once the amendment itself has been accepted, it is presumably within the scope of the Bill; otherwise it would not be on the Marshalled List.

I do not see why it cannot be done. Maybe the wording needs to be changed. If the Government are reluctant to pick this issue up because they think that there are broader issues involved and it needs to be dealt with in some different way, perhaps we could hear that. However, if there is sympathy for the noble Earl’s proposition, and we are just looking for a parliamentary process to facilitate that, why not an order-making power?

[Baroness Hanham]

My Lords, we, too, are sympathetic to this amendment, and I am grateful to the noble Earl for having brought it to the attention of the House. We all recognise that parish polls are a way for local people to achieve something they want that is relevant and appropriate to the area over which they have authority. The noble Earl made it clear in Committee that sometimes that area extends to the European Union, which seems rather beyond the competence. We accept that there are concerns about the threshold for polls being called. I am very grateful to the noble Earl for coming to spend a bit of time with us, and we have had an opportunity to talk about it.

The way in which the noble Earl has constructed this amendment just about puts it within the scope of this Bill, but it is not wide enough for all that needs to be done. We believe that the scope can be made wider in the other place. We need to look at that carefully and will come back to it. I hope very much that we will be able to say that we will take that up and see it dealt with in the other place. If we cannot, then we are in the sort of territory that the noble Earl has talked about—a Private Member’s Bill or a hand-out Bill. I assure him that the Government are supportive of what he has said, and I give an undertaking to the House to take this away and look at how we can get it implemented in the best and quickest way. I hope that the noble Earl will be willing to withdraw his amendment.

Local Audit and Accountability Bill [HL]

Debate between Earl of Lytton and Lord McKenzie of Luton

Wednesday 26th June 2013 Grand Committee

[The Earl of Lytton]

My Lords, first, I thank the noble Lord, Lord Tope, for his support and the noble Lords, Lord McKenzie and Lord Beecham, for their comments. All three have a much greater knowledge of local government matters than I can claim to possess but I would say to the noble Lord, Lord Beecham, in particular that it is important not to take amendments of this sort at this stage of the Bill too literally. The intention was to try to probe the parameters and get that on the record so that we know where we are.

Turning to the Minister’s comments, I hope I did not say that there would necessarily be mission creep, damage to democracy or any of the other things; only if it is uncontrolled and unconstrained could there be circumstances in which such things arise. But I am very comforted by what she said, particularly about the safeguards already in the Bill in connection with Amendment 18ZB.

It is my view that audit is a right and proper process. I am not suggesting for one minute that it should be removed, far from it; I do not think that anybody would advance that. However, it needs to be consistent with cost efficiency and done in a way that is not intrusive or that displaces other proper avenues of choice. I will leave it there for the time being but may return to it at a later stage.

[Lord McKenzie of Luton]

Before the noble Earl withdraws his amendment, can the Minister tell us any more about the value-for-money profiles, and in particular what the plans are to maintain those? Obviously that requires the compilation of data and comparative data.

[Baroness Hanham]

We are currently considering the future management of the Audit Commission’s value for money—the question asked. I cannot say anything more today but we will come back to this before Report, I hope, and I will certainly make sure that noble Lords are kept in touch with progress, which I think is what I said last time.

Local Audit and Accountability Bill [HL]

Debate between Earl of Lytton and Lord McKenzie of Luton

Wednesday 19th June 2013 Grand Committee

[Lord McKenzie of Luton]

In speaking to Amendment 14ZA, I shall speak also to Amendment 14ZC. These amendments take us back to the debate at the start of our proceedings on Monday. When speaking to Amendment 1, I indicated that we had tabled a further amendment covering the same essential point: that of retaining the capability of enabling national or central procurement. These two amendments adopt an equivalent formulation to that provided for in Clause 5 relating to smaller authorities. It provides the Secretary of State with the opportunity to specify a person to appoint auditors for relevant authorities, and potentially provides relevant authorities with the opportunity to opt into or out of such arrangements. Absent the activation of such a capacity, the provisions on a local appointment would run. The amendment is not prescriptive of the person or persons whom the Secretary of State can designate to undertake these appointments.

I do not propose to restate in detail the arguments in favour of retaining a bulk purchase capacity. These were well aired on Monday and, I believe, well supported. In fact, I think it is fair to say that they found favour with the Minister, who said:

“It has been made clear that there is some appetite for developing this national procurement arrangement. If such arrangements for this national procurement maintained choice for local bodies—which is effectively what I have said—and allowed them to take part or appoint locally then we would be willing consider the scope for allowing it under the Bill”.—[Official Report, 17/6/13; col. GC5.]

We entirely accept that the Government would need to be assured about how such arrangements would work and be effective. However, these amendments offer a framework for this, and indeed the framework on which the Government are themselves seeking to rely in relation to smaller authorities. I look forward to a favourable reply, again, from the Minister.

I will wait for the noble Earl, Lord Lytton, and the noble Lord, Lord Tope, to speak to their amendments, the thrust of which I understand. However, for the idea to be credible it would presumably require the other body appointed to be subject to the rigours of this Bill. I am sure that was the intention. I beg to move.

[The Earl of Lytton]

My Lords, I shall speak to Amendment 14ZAA and its co-runner Amendment 14BZA, both of which are in my name and that of the noble Lord, Lord Tope.

The principle behind these two amendments is relatively simple; they seek to allow for a measure of delegation of the duty to appoint an auditor so that the actual procurement of auditors and their formal appointment can be made by another body on behalf of the authority. The issue arises by virtue of Clause 7(1), which states:

“A relevant authority must appoint an auditor”.

This, if taken literally, could be taken to mean the direct appointment of a named auditor in person on an exclusive and non-transferrable basis. I am sure that it is not intended to be quite as tight as that. It is certainly felt by the LGA, and others who have briefed me on this matter, that this might prevent any appointment as authorised proxy by an external person or body.

In reality, a firm is appointed to the task and nominates one of its number, often a partner or director, to head up a small team to handle the matter. The appointment of an auditor, to use that singular term of art, and as a specific named individual, is in any event customarily carried out per pro the authority by this means. For instance, most small charities and similar bodies appoint a firm rather than an individual. In the realms of a collective appointment via a national or sector-led service, this becomes more important. A large consultancy firm bidding for a sector-led contract will ultimately make an appointment itself of the named auditor as overseer and signatory to the auditor’s report

The gist of Amendment 14ZAA is quite simply to provide for the procurement of an auditor by way of a duly authorised proxy, including a large firm, a sector body or other similar large concern dealing with possibly several authorities. It does not make this mandatory, simply an option.

Amendment 14BZA follows from this. If the procurement is by way of another body charged with meeting the requirements of the Bill and thus delegated from the authority, it is unnecessary, or should be unnecessary, to have an audit panel, because the oversight of the auditor is carried out in accordance with the relevant rules of engagement via the proxy. The authority always remains responsible for whatever measures it has put in place. The appointed procurer of the audit service must observe all the criteria in the Bill for that activity.

The LGA, as I said, provided a useful brief on this and it is worth picking out a few salient points. The amendments would be consonant with the authorities’ need to have flexibility to procure their audit nationally, or in some form of grouped manner. It would make collaborative audit procurement more attractive and produce, as we heard on the previous day of this Committee, the potential for significant savings. That would be to the direct benefit of local finance. Some of the reasons why this is so have already been rehearsed, including the Audit Commission’s own modelling and its calculated saving of between £205 million and £250 million over a five-year period.

The Government’s own impact assessment does not refute this. Indeed, it concedes that local appointment may not procure the level of savings secured by the Audit Commission during its last procurement round. It seems obvious to me that each authority procuring its own auditors on a recurring basis replicates a cost base. There is an opportunity to save money here.

I will not go into the other details that have been discussed before, save to say that I agree that local appointment does not necessarily increase competition or cut costs. I have no proof of this, but my hunch is probably that not many firms would undertake a municipal audit in the first place. In reality one is probably looking at one of the larger firms, a point that we have heard before. I register the point made by the Minister on Monday. A paraphrase of her words is that there will be no recreation of the Audit Commission by the back door, but if the reality of this Bill’s proposals is to create some form of suboptimal procurement with waste by duplication, I have to say that I am against that as a principle. I hope the Minister will feel that subject to any safeguards that might be necessary to eliminate the risk of a “son of” Audit Commission coming about, the principle is acceptable, in which case we can work out the detail as we go forward. I beg to move.

Growth and Infrastructure Bill

Debate between Earl of Lytton and Lord McKenzie of Luton

Tuesday 12th March 2013 Lords Chamber

[Lord McKenzie of Luton]

My Lords, this amendment was retabled before we had the opportunity to meet representatives of the Valuation Office Agency. I thank the Minister for organising that meeting, representatives of the VOA who turned up and engaged with us, and other noble Lords who attended.

Frankly, however, the meeting did not move us much further forward except to the extent that it reinforced our concerns about the composition of the data relating to the revaluation deferral. When we debated this in Committee, the Minister was reassuring on the figures, saying:

“The agency believes that 800,000 ratepayers may face increases, compared to only 300,000 seeing reductions. The Valuation Office Agency provides pretty detailed and good valuations”.—[Official Report, 4/2/13; col. 124.]

One thing we know is that the information is not detailed. The VOA report and our meeting yesterday confirm that the analysis is “high level”, is based on limited rental data, was not a projection of the valuation on which a 2015 revaluation would be based—2013—and has not been subjected to the rigour of moderation and validation. Moreover, the categorisation “en bloc” of the “other” category of hereditaments as properties that would see a tax rise we consider to be flawed. This undermines the very basis of the claim that 800,000 ratepayers may face tax increases from a revaluation and only 300,000 a reduction.

We accept that, on the basis of the information available to the VOA, it may not have been possible to do a detailed disaggregation, but that is no excuse for making sweeping categorisations and drawing broad conclusions therefrom. The Government espouse the benefits of stability for business by deferral of the revaluation, but this would have had much greater credibility had it been supported by a prior, robust consultation. At least those who might have anticipated a business rate reduction could have had their voices heard.

Meetings with those affected once the decision has been taken are all very well, but they are no substitute for proper consultation. There is nowhere we can go with this amendment from where we are, but I am bound to say that it smacks of bad policy-making, no prior consultation and insufficient data to support the policy. It is a curious policy anyway that prays in aid of the Government’s own failure—the lack of growth in our economy and the upheaval that this is bringing to business—to justify this departure from what has been a consensus approach to this aspect of local government finance for more than 20 years. I beg to move.

[The Earl of Lytton]

My Lords, it is an invidious task to be rising at this hour to address this important issue. I, too, am very grateful to the Minister for having organised the meeting with officials from the Valuation Office Agency, some of whom I would even classify as old friends. As I said to her at the end of meeting, I was better informed but, I am afraid, none the wiser.

The Valuation Office Agency maintained that no more detailed breakdown of the figures was available and that it had disclosed everything that was at its disposal, and I have to accept that. However, I point out that it concludes that there are 817,000, which has been rounded down in popular parlance to 800,000, business hereditaments out of a total of 1.7 million nationally that are said to benefit from the deferral of the revaluation. We also learnt that 64.6% of that 817,000, or 528,000, are classified in a very broad and non-subdivided category of “other”: that is, “other” than the bulk classes of retail, office and industrial. The 528,000 represents 31% of the 1.7 million hereditaments nationally. The narrative goes that all the 528,000 would be gainers under the deferral.

Given the spread of gainers and losers in the far smaller bulk classes, the assertion that the whole 528,000 in that “other” class of non-bulk properties constitute gainers stretches credibility. In truth, and from what I know of the market, it is most unlikely to be correct. Moreover, if it is true that the Valuation Office Agency has no other more detailed breakdown of “other”, it is difficult to see how it could have reached a conclusion on the 817,000 beneficiaries. It is an untested, apparently untestable and unverified basis of valuation opinion.

My own view, for what it is worth, is that around 600,000 to 700,000 businesses will be losers under this proposal, but I can no more prove that than the Valuation Office Agency is able to convince me of the veracity of the figures, except that I have used the same figures that it has used. I think this House should be furnished—indeed, I believe Parliament is entitled to be better furnished—with information that is accurate in order to enable it to make an informed decision. We are told that that additional information cannot be provided without spending some £40 million on a revaluation, as I think the noble Baroness said during the previous stage of the Bill. That is not my understanding of the typical cost of an impact assessment on tax changes of a type that I used to get involved with when I was in the public sector. I do not think that consultation of the sort that the noble Lord, Lord McKenzie, has suggested could come anywhere near that sort of figure.

Local Government Finance Bill

Debate between Earl of Lytton and Lord McKenzie of Luton

Tuesday 10th July 2012 Grand Committee

[The Earl of Lytton]

My Lords, briefly, I stand guilty as charged in the sense that I made my maiden speech in this House during the passage of the Local Government Finance Act 1988, which introduced the poll tax. I said at the time that it was unfair and unlikely to work, but I was a greenhorn and my comments were probably not well informed.

I will follow on from what the noble Lord, Lord Beecham, said. The constraints that will fall on council tax payers, and in particular on those in receipt of relief, will of necessity enable those who are so advised to mount an appeal against their banding. In circumstances where the bandings are 21 years old, there will be every opportunity for a challenge to be successful on account of the age of the tax base. It was for that reason that I tabled my earlier amendment on the transfer of the loan to the valuation tribunal.

Dealing with the personal circumstances of individual claimants who are partly supported by benefits will not be quick. It will not be easy to dispose of such cases in a short time. The risk is that the system will become clogged by appeals that will take an inherently long time to resolve because they will have to delve into the details of individuals’ financial circumstances. We will debate an amendment tabled by the noble Baroness, Lady Hanham, which will probably assist us. None the less, the policy will produce a significant load on the system unless it is better resourced.

I make no comment on whether the process is destined to work. This goes into areas of local government finance that are beyond my ken. However, I warn against the inevitable transfer and the unforeseen consequence of what may happen in the wider domain of appeals.

[Lord McKenzie of Luton]

My Lords, the amendments in this group seek to include support for council tax as part of the universal credit. We support them all. My noble friend Lady Hollis made a typically powerful presentation, and the amendments were spoken to in a supportive way by almost every noble Lord, including my noble friends Lady Sherlock, Lady Lister and Lord Smith, and the noble Lord, Lord Greaves. The noble Lord, Lord Tope, expressed a degree of equivocation. The noble Lord, Lord True, issued the caveat that we should be careful about amendments that we had yet to debate.

Including council tax as part of universal credit is not a new position. We argued strenuously during the passage of the Welfare Reform Act that this was where it belonged, and we know that Ministers in the DWP agree. The Government’s arguments in favour of localising council tax support are that it can be varied across the country in accordance with local need; and, because the costs will fall on local councils, there is an incentive to promote employment so that people are floated off benefits. My noble friend Lady Hollis destroyed that argument pretty powerfully. Of course, the Government are pursuing two policies—one of supposed localisation and one of cuts. That is what makes these things particularly challenging. The incentive effect depends on how these cuts are to be applied since means-testing support for council tax more aggressively leads to weaker work incentives than reducing support for all claimants. As the IFS put it:

“Reforms that save the full 10% typically involve reducing support for those currently entitled to maximum CTB—those on the lowest incomes. And those options that do protect the poorest claimants either fail to generate large savings, or significantly weaken work incentives”.

That is why my noble friend Lady Sherlock pointedly asked: how, at one time, do you both help the poor and make people better off in work? That was the commitment made by the Government. How will they do it on this basis? Issues around work incentives for localised schemes are not straightforward and must be considered in the context of universal credit as well.

As my noble friend Lady Hollis made clear, we have supported the concept of universal credit—not every aspect of its proposed implementation, including payment frequency, second earners and wallet-and-purse issues, but the fundamental architecture. It is a structure that, as my noble friend explained, clearly simplifies the benefit system and provides a common taper which, together with income disregards, will make work pay and give clear incentives to work. It encompasses tax credits as well as benefits and is an “in and out of work” benefit. It is the natural home for council tax benefit and it is understood that this was the original intention. However, it would be good to have on the record the point in time at which the Government’s position on this changed and why.

Keeping council tax benefit outside universal credit, with the prospect of dozens if not hundreds of local schemes, undermines that simplification. It potentially undermines the rationalisation of work incentives, with the prospect of overlapping taper rates. These are not just theoretical matters. The Government have promulgated a default scheme that will be imposed on local councils that do not introduce a local scheme by next January. How does this default scheme sit alongside universal credit? In particular, how is universal credit to be treated for the purposes of the default scheme? My noble friend Lady Lister referred to an answer given to my honourable friend Stephen Timms in another place: it is up to local councils to decide how they do this. However, we are dealing here with a scheme that the Government have promulgated and that they will impose on local councils. Therefore, the Government must know how they will treat universal credit in that default scheme—that is the scheme that they are promoting.

At present, tax credits are taken into account as income for council tax benefit. Income-related benefits, such as JSA, IB and ESA, are not and passport individuals on to maximum council tax benefit. Universal credit substitutes for benefits and tax credits, so how will it be treated in the default scheme? Will the Minister also tell us how overlaps in tapers between universal credit and the default scheme are to be avoided, if they are? These are not just points of interest; they are fundamental to the operation of the scheme that the Government will impose in just a few months’ time. The logical route in all this is to follow my noble friend’s prescription and include council tax benefit as part of universal credit from the start. We do not doubt that this is where it will end up eventually.

My noble friend Lady Hollis made the point that the proposition advanced by the Government means that take-up campaigns will be deterred. With a number of noble Lords, she talked about the collection of small amounts and the difficulty that that will create. My noble friend Lord Smith and a number of noble Lords referred back to the poll tax and all that that entailed, particularly the point that young people disappeared from the system. We cannot allow that to happen again. My noble friend and the noble Lord, Lord Greaves, referred to the difficulty in budgeting that the proposed system will bring forward. I understand that there are not many second homes in Wigan and we do not have too many in Luton either.

Local Government Finance Bill

Debate between Earl of Lytton and Lord McKenzie of Luton

Thursday 5th July 2012 Grand Committee

[The Earl of Lytton]

My Lords, in moving Amendment 18 and speaking to Amendments 28 and 29, my purpose is primarily to flag up an issue of principle. I remind the Committee of my involvement with the first tier of local government, as president of the National Association of Local Councils, the national body representing parish and town councils, and whose assistance in this matter I acknowledge.

My support for the idea of a larger share of business rates going to billing authorities under the business rate retention scheme which we discussed on Tuesday was, I have to admit, not entirely altruistic. It was founded on the belief that too little was being channelled back to the billing authority given the many other claims on the funding stream implicit in that arrangement, certainly if we are to have any real incentive flowing from it. By implication, therefore, little or nothing would be available in practice, even if the principle of my amendments was agreed, to flow to the first tier of local government.

The Bill is—in part, at any rate, or so we are led to believe—about introducing the financial aspects of the Government’s localism agenda, which I support wholeheartedly. It is a process of trickling down powers and responsibilities from central government to local government and from local government to neighbourhoods and parishes. I hope that that is a given—I am glad to see the Minister nodding. At Second Reading, I flagged up an issue concerning a defect in the Bill, namely that the process of financial trickle-down seemed to halt at the principal authority level. There is nothing in the Bill for parish, town and neighbourhood councils. In short, and viewed in very local terms, the financial benefits do not flow to the very local level where the properties on which the tax is raised are actually located and in which locality exists a neighbourhood-based, statutorily constituted and precepting local authority.

I remind the Committee that local initiatives which would raise revenue in business rate terms are not by any means confined to principal authorities. Parish and town councils up and down the country are, and continue to be, involved in schemes to encourage retail, commercial and other value-added activity.

These amendments are framed in what I admit is a deliberately crude fashion with a view to highlighting the complete absence of a local council share in the retained element of the BRRS and to ask why, in the name of all that is called localism, the redistribution of this is limited to major precepting bodies only. Removing the word “major” from various provisions as a qualification to the beneficiary precepting bodies is intended thereby to include local councils which also have a precept in the redistribution benefit.

Before 1989—I think that was the date, but my memory may have failed me—parish and town councils did get such a share, but it was scrapped when the community charge was introduced. While that denial of benefit might have been appropriate at the time, local councils have made enormous advances and shown what they are capable of doing. Indeed, I have a list with me of the very many initiatives up and down the country which all show how much can be achieved with tiny sums of money. I think that the Minister would be amazed at just how much can be done with very little money if the collaborative ethos and common purpose that particularly hallmark neighbourhood and parish initiatives are given a fair chance. However, that cannot be done without any resources at all.

Many of these initiatives are specifically aimed at business activity. The demise in the ability of principal authorities to fund many services, let alone any new initiatives, leave the local council—often a parish or town council with quality council status and a real drive to benefit their community—to pick up the reins. As I have said, this cannot be achieved without some resources. We already know the common practice of principal authorities agreeing to pass services and functions to parishes yet simultaneously claiming that there is no budgetary allocation to pass on to enable those services to be provided in practice.

I do not entirely blame principal authorities. In fact, I have been involved on and off with principal authorities for rather longer than I have been involved with parish and town councils in many respects. Principal authorities have been caught financially between what can only be described as a rock and a hard place. However, at local council level it looks bad and in neighbourhood terms it seems almost like a financial sleight of hand, which is known in the jargon of the sector as double taxation; namely, the service is passed further down the line but none of the resources—which are somewhere implicit because there is a cost element in a principal authority’s budget—get passed on. The closure of public toilets in resort towns that rely heavily on coach loads of day visitors and attempts by the town councils to keep them open is just one exemplar of that situation.

I cannot know what the Minister’s response will be, although I have my suspicions. Probably the least likely outcome is that she will accept the amendment. The question then is: what does she propose? Will there be a line of funding that will benefit the local council sector, and what guarantees can she give that, if that money is made available via a principal authority, it will be passed on?

I am realistic about funding things at neighbourhood and local council level. I accept that the question of how to distribute such a local council share will arise if the principle is accepted, but that is further down the line. Furthermore, I also accept that the last thing that we need is a plethora of very small schemes or even those which are not worth while just because money is available or because it will be lost if it is not spent in a particular financial year. Worthwhile projects, unfortunately, have lead-in periods that do not sit conveniently into a fiscal year template. I am familiar with the undesirable effects of an overrestrictive “use it or lose it” regime.

The Government’s message regarding local government finance is clear: not only is there no new money but there will be a 10% cut. However, if anything is to work at neighbourhood, parish and town council level, there has to be some redistribution of resources, unless the Government are willing to stand accused of some sort of large-scale deception by the very constituents they promised to assist. I hope that that is not the case. However, given that the maximum effect can be achieved with tiny resources and the ability at local council level to leverage a huge amount of voluntary commitment, there is a very good reason to make a modest redistribution. I look forward with interest to the Minister’s response on this matter, which I believe is critical to the objectives of true localism. I beg to move.

[Lord McKenzie of Luton]

My Lords, this is an intriguing series of amendments, and we have a degree of sympathy with them. The amendments would include parish and town councils within the scope of those for whom billing authorities must share their portion of the business rates. I suspect that the difficulty with this is that other parts of the components of the scheme for business rate retention would have to be applied as well. You could not just make the payment without the other bits and apply it potentially to many thousands of authorities.

Under the current local government arrangements business rates are paid to central government and come back via the formula grant, not, I understand it, to local precepting authorities but to billing major precepting authorities. However, this does not work under the business rate retention scheme. The retained business rates have to be allocated between authorities and the proposed basis is that, with two-tier arrangements, 80% of the business rate would be allocated to district authorities and 20% to major precepting authorities—police and fire and rescue included. As I understand it, the rationale for the 80/20 split is that lower-tier authorities are typically responsible for planning and more able to influence economic development.

The noble Earl might well argue—he touched on this—that the new regime for neighbourhood planning opens up that opportunity more to parish and town councils. Some are already very much involved in a drive to improve the economy of their areas. However, if such councils are not to be encompassed within the tariff top-up arrangements for billing authorities, it would seem to follow that they should have their own calculation. It might not be difficult to establish the business rate base but to derive a funding amount would presumably require some breaking out of the formula grant, and I am not sure how easy that would be to do.

In passing, we should note that there will be a requirement for billing authorities to work with local precepting authorities to address the council tax support funding. If I have read the documentation correctly, it is envisaged that this could well involve a payment from such authorities to town and parish councils.

While I understand where the noble Earl is coming from on this, the practicalities make the amendment difficult to accept. However, I will be interested to hear the Minister’s response. There is the germ of an idea here that needs support.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, as we have heard, Amendment 35 requires that any review of tariffs and top-ups must be undertaken in conjunction with any revaluation of rateable values. As I understand it, that is broadly the intent of the Government. However, it would seem that locking into this approach effectively gives fixed reset periods. One of the problems with this, as the Government have identified, is that the further in advance a reset period is known, the more possible it becomes for local authorities to plan on that basis and potentially manage growth and investment in their areas to achieve maximum gains from the reset process. This could result in perverse outcomes as local authorities seek to defer growth in their local areas in the year before a reset is due. It also produces a rigidity in the system and an ability to have regard to how resources in the system are aligned to changing levels of underlying need.

In their response to the resource consultation, the Government have said that it is proposed to adjust each authority’s tariff or top-up following revaluation to ensure as far as possible that their income from business rates retention will be unaffected by the valuation. However, I am not sure whether that necessarily amounts to a full resetting involving the recalibration of the baseline; it seems to be a different process. Perhaps we can have some clarification on this. Indeed, I am not sure that it would be possible to use the formulation to set the baseline at the point of a revaluation because the business rate base would be the historic one, not the updated one. I would be grateful for some clarity as to what is involved in an adjusting of tariffs and top-ups that is not the full reset—I can see from the Box behind the Minister that that probably is the position. Of course, having regard to changes in relative needs in resources is absolutely key, and we support that.

It is a difficult balance between preserving the flexibility of earlier resets so that you can respond more quickly to changes in needs and resources and seeking the benefits of a practical update that perhaps has the benefit of a longer-term incentive. On balance, we would argue for the flexibility to be able to respond more readily, particularly given some of the data about how quickly the council tax base can change over time.

[The Earl of Lytton]

My Lords, I support the principle of what the noble Lord, Lord Tope, said in moving the amendment because we are in circumstances of unparalleled turmoil in the non-domestic sector. The present—2010—local rating lists are based on an antecedent date of 2008. It will not escape the Committee that that coincides with the peak of the market before much of the fallout of the financial situation had filtered its way though. One of the effects of that has been to produce some significant shifts in the way in which land use is now looked at. It will also be apparent to many noble Lords that there has been a growing level of conversions of properties that were once commercial into residential. This is, for many reasons, to do with the problems of building on greenfield sites, issues concerning the interim arrangements regarding the national planning policy framework and the removal—effectively the abolition—of the strategic planning system when the coalition came into being. I do not apportion any blame. We are where we are.

It is quite clear that a lot of businesses are paying rates on the basis of transitional relief escalation based on 2008 levels of value and are increasingly of the view that they are unsustainable. I have previously pointed out that on a like-for-like basis, non-domestic ratepayers appear to be paying more pro rata for their floor space than residential property owners pay under council tax for equivalent space. That may not be the case in central London—I have to defer to the noble Lord, Lord True, and others with greater knowledge of that—but in the rural shires, that certainly seems to be the situation. This fuels all sorts of things. If something is used for a commercial purpose, it fuels a lack of willingness to make any sort of declaration because people do not want it to go that way. One might say that there is no incentive on a billing authority to point something up as a non-domestic hereditament in circumstances where it gets 50% clawback. If it were under council tax, it would have got the lot, but I leave that for the time being because that is not the thrust of what I wish to say.

Next year we will have another antecedent valuation date for the 2015 valuation. The likelihood is that outside central London large numbers of values will fall. The transitional relief for substantial movement may well kick in, so as they have been counting up year on year towards 2015, after 2015 they may well be counting back down again. I have great concern about the reset not being until 2020 because the turmoil visited upon all sectors, residential and non-domestic, public sector and private sector alike, is making for great uncertainty and a great deal of unpredictability. It seems to me that by 2020, seven years down the road, assuming this comes into force in 2013, it will be so far out of date that something needs to be done about it before that time. I know that the Institute of Revenues Rating and Valuation, of which I am a member, is equally concerned about the long-term effects, given the problems with the arrangements for the reset and valuation being so out of kilter in their degree of modernity.

This is a science. One has to try to work out how many financial criteria dance on the head of one pin, and I might not be the best person to describe this in detail, but I foresee a problem and I would like to hear what the Minister has to say about it.

Localism Bill

Debate between Earl of Lytton and Lord McKenzie of Luton

Monday 17th October 2011 Lords Chamber

[The Earl of Lytton]

My Lords, I rise briefly first to declare an interest as a practising chartered surveyor and as someone who is involved with planning, although I am not a chartered town planner.

There seems to me to be three particular issues here. One of them, as has already been touched on by the noble Lord, Lord Cormack, is the corpus of knowledge that is currently involved in the planning system. If we uproot that, we will cause delay, doubt, risk and uncertainty. There are economic implications, so we must try to avoid that. We have seen some of the public pronouncements that are based on questions of doubt about what is intended here. A great deal of clarification is needed.

Secondly, the noble Lord, Lord Howarth of Newport, referred to the effect on economic growth. Yes, planning is a huge driver of economic growth in so many ways. While I would not wish to suggest that it is the be-all and end-all of economic growth, it is clearly something that is tangible that the general public can relate to. We must not lose sight of the fact that it is going to be one of the significant factors, if for instance what we are told about the lack of completions on housing is true.

My last point is to do with neighbourhood plans. I must declare another interest here as the president of the National Association of Local Councils, whose member parish and town councils may be those very bodies that are having to draw up a neighbourhood plan. A neighbourhood plan has to be in conformity with the principal authority’s local plan, and if the principal authority’s local plan is not in place, or is in disarray or is out of date, then we have a problem. This has a knock-on effect. I ask the Minister to give the House some reassurance that there is going to be some sort of seamless transition that will take place. I do not wish to add to what has already been said about the timescale over which that is to be done; and there may be different timescales for different bits for all I know, but the transition does have to be, to some degree, seamless. With regard to my first point about the economics of doubt, it is very important that we get this right.

[Lord McKenzie of Luton]

My Lords, like all noble Lords who have spoken in this debate today, we support the need for transitional provisions that have clarity as to their meaning as well as a reasonable timescale that reflects the capacity both of local planning authorities and of the inspectorate. Like the noble Lord, Lord Greaves, I believe that this is probably the most serious issue left unresolved from Part 5 of the Bill. We hope that we will get a clear message from the Minister today. We added our name to the original amendment of the noble Lord, Lord Best, which bit the dust by being pre-empted, and we support the thrust of the amendments of the noble Lords, Lord Best and Lord Greaves.

It is imperative that we avoid a lacuna, with the prospect of all or most local plans being absent, silent or indeterminate or having policies that are out of date under the current NPPF formulation. Under the presumption in favour of development, this would lead to an emphasis on approving development proposals unless the adverse impacts of development would significantly and demonstrably outweigh the benefits when assessed against the framework policies. I assert that 50-odd pages of framework cannot be an effective substitute for all the local plans and the thousands of pages of guidance that currently exist.

Localism Bill

Debate between Earl of Lytton and Lord McKenzie of Luton

Thursday 7th July 2011 Lords Chamber

[Lord McKenzie of Luton]

I start by reiterating that I hope it is clear that we on these Benches very much want to see the Government achieve their aspirations in these provisions. However, Amendment 144A in particular illustrates the danger we are getting into of making this very complicated and bureaucratic. For example, there is a proposition that transfers between companies in the same group should not be a relevant disposal. Let us reflect on how you would cast that provision. There are plenty of differing definitions of groups of companies around. If we think one step beyond that, what happens if you sell the shares of a company that owns the asset, but not the asset itself? If that company were not only to have the asset but another asset, for example, the group of pubs mentioned by the noble Lord, Lord Hodgson, where does that leave you? We ought to be focusing on something that is deliverable, even if at the edges it is a bit rough and not technically watertight. It offends me as an accountant to suggest that, but this group of amendments and the issues that were raised in respect of the previous amendment illustrate the complexity that we are in danger of building into this provision which could undermine it completely.

[The Earl of Lytton]

What the noble Lord, Lord McKenzie, has just said highlights the fact that we are trying to talk about exclusions from something that would cover a potentially vast range of circumstances. I support the thrust of what he said. We need to reverse that so that we catch the transactions that need to be caught because in the global family and order of property transactions that could potentially be caught, the class of transaction that we are trying to catch is very small. The problem is the lack of definition, and therefore the clause has to be all-encompassing, and it sweeps up all these other things that other noble Lords have referred to. I think of situations where there might be transfers of assets one way or another between parish and rural community councils or between community groups of whatever form and structure. What about transfers of assets between various tiers of authorities? Are all these to be caught up? It seems to me that we are almost at the point of needing a category of owner that gets caught by the Bill, but I am not going to suggest that because I think there might be a simpler way of dealing with it, as the noble Lord, Lord McKenzie, suggested. However, there is a relatively narrow class of circumstances, and it all boils down to the fact that we have these open-ended definitions. I plead with the Minister to find some way of rendering this down so that we can get to the nub of the issue and not have a one-line provision and then 1,000 lines of exclusions and caveats and things to try to exclude all the bits that have got caught up and should not be in there in the first place.

Localism Bill

Debate between Earl of Lytton and Lord McKenzie of Luton

Thursday 30th June 2011 Lords Chamber

[The Earl of Lytton]

In response to the very wise comments of the noble Lord, Lord Beecham, it may well be a cumbersome way of doing it but the point is that we do not yet know what the precise trigger is going to be, or the subject matter. The provisions of the Bill cover a very large spectrum of possibilities and we are effectively empowering the Secretary of State to make orders. It is legitimate to lay down a marker as to what the parameters might be—I suspect that is all the noble Lord, Lord Jenkin, is doing at the moment—and just to sound a word of warning. It is timely in that context.

[Lord McKenzie of Luton]

I am going to speak in support of what my noble friend Lord Beecham said. It is the mention of airports that I cannot resist, of course, because we have one in Luton. I know how important it is to the local community and what a generator of jobs it is. In many ways, airports are the organisations least likely to need the measure that the noble Lord proposes because they have consultative committees anyway so there is automatically a wide engagement with the community. The principle of somebody who is potentially on the receiving end of a referendum or a petition knowing about that and the local authority having to make a decision to engage with them seems to be entirely reasonable. What we are balking at is that the specific amendment is a little too prescriptive and takes us too far down an unfortunate path. However, we are all well aware of the challenges that airports in particular face.