Local Government Finance Bill (Tenth sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Jones
I have been clear that the liability for rates will operate differently in relation to different types of market. I have also been clear that the same type of regime should apply to non-domestic property, which is certainly the case in this sense. It is for the valuation office to decide on the facts whether an individual market stall is rateable or not.
To conclude, I hope the Committee is reassured that the new clauses are not necessary and would not further our collective aims to support an independent and self-sufficient local government sector. I ask the hon. Member for Harrow West to withdraw the new clause.
Mr Thomas
I am grateful for the opportunity to sum up our debate on new clauses 4, 8 and 9. New clauses 8 and 9 were very much tabled as probing amendments. Although I am not 100% satisfied by the Minister’s response—something that I have had to get used to—I do not intend to divide the Committee on the new clauses.
New clause 4 was also a probing amendment, to find out the extent to which the Minister and his colleagues have really grasped the scale of the financial crisis facing both schools and hospitals. What we have had back from the Minister and from some Government Members in interventions suggests a profoundly worrying complacency about the financial situation in schools and hospitals. One has to hope that the Chancellor of the Exchequer sees things slightly differently, but we are where we are. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
Duty to ensure no loss of funding following withdrawal from the European Union
‘(1) This section applies where any funding is provided to a billing authority or Combined Authority by the Secretary of State in consequence of funds made available by EU institutions in the financial years beginning on 1 April 2017, 2018 and 2019.
(2) Where this section applies, it shall be the duty of the Secretary of State to ensure that, in the five year period beginning with the date on which the United Kingdom leaves the European Union, the funding made available to a billing authority in question is not reduced in respect of any funds that were made available by EU institutions in the period specified in subsection (1).’—(Jim McMahon.)
This new clause would ensure that funding available from EU institutions is replaced by funding from the Secretary of State for the five years after exit.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
I do not intend to spend a great deal of time on the new clause, which does what it says on the tin: it would secure the money that is currently provided to local areas through European funding post exit from the European Union. For many of our areas, that money is integral to their local economic development plans, to their education and training plans and, in many cases, to their devolution submissions. In a number of our areas, particularly those with combined authority arrangements in place, the local authority is the accountable body for EU funding in its area.
There is one thing that Members may not appreciate about European money. We always discuss whether it is being spent in the best possible way, although that is usually determined by the local community and not by the European Union. It is the communities themselves, through their councils, that make the applications, not the European Union. We talk about the north-south divide, but it is really London and the south-east that has a significantly different financial settlement from everywhere else in England. European funding and the way it is allocated by region provides an element of rebalancing.
I remind Members of the transport investment figures that have come out just this week, which highlighted that London gets £1,940 per head compared with £220 per head for those in the north-east, £680 per head for those in the north-west—although quite a lot of that is temporary funding; it is time limited—and just £190 per head for those living in Yorkshire and the Humber.
London gets £93 per head in European structural funds, compared with £285 in the north-east, £161 in the north-west and £150 in Yorkshire and the Humber. Therefore, there is a strong argument to say that European Union funding is being used partly to counterbalance a centralising Government in Westminster who advantage the London boroughs.
Jim McMahon
I beg to move, That the clause be read a Second time.
You will be pleased to hear that this will be a quick speech, Sir David. It should not be for anybody in this building to determine the relationship between local authorities and the council tax payers in their area. It is for local people to hold decision makers to account through the ballot box, as they do with central Government. When people go to vote in a general election, they take a view on the decisions of the Government during their period in office and whether their fiscal decisions have been good or bad for them and their families. Local people should have the same ability to do that with local government. It should not be for the Secretary of State to impose an arbitrary referendum limit. The LGA, a cross-party organisation, supports that view, too.
I would appreciate a response from the Minister. I am sure he appreciates the growing calls from local government to tell the Secretary of State to mind his own business, and I hope the Minister will look at the new clause and take that message back.
Mr Thomas
This is, if you like, Sir David, the David Hodge memorial clause. Surrey County Council has blown out of the water the rationale that the Government once used for referendums. There is a deep irony in the situation this year, where the one council that is likely to impose a 0% council tax rise will be a Labour council and the one council that proposed the single biggest increase in council tax this year is a Conservative council. We have to admire the chutzpah of Mr Hodge. He has managed to get himself a sweetheart deal by completely blowing away the rationale Ministers once had for referendums. It is in that spirit that we move this probing new clause.
Mr Jones
I thank the hon. Member for Oldham West and Royton for his explanation of new clause 12. It was a slightly more constructive effort than that of the hon. Member for Harrow West, who seems to be preoccupied with sweethearts. Perhaps that would have been best placed last week, when the House was in recess and it was Valentine’s day. He seems to persist with a misplaced line of questioning.
The new clause would remove chapter 4ZA from the Local Government Finance Act 1992 and thereby abolish the system of council tax referendums. That would allow local authorities to set whatever increases they choose, without having to seek the approval of local voters.
Arguments in favour of abolishing council tax referendums, or for not setting any referendum principles are certainly familiar to the Government. However, they are not arguments that the Government accept. Government defining an excessive increase has been part of the council tax system for decades. Council tax is currently 9% lower in real terms than it was in 2010-11. It will still be lower in real terms in 2019-20, but only if the Government continue to work with local authorities and maintain a referendum threshold, as promised in their manifesto.
The referendum threshold is not a cap. Councils can set any council tax increase that they like, provided that they have obtained the consent of their local electorate in a referendum. That is direct democracy in action. Local people have the right to choose whether they wish to pay extra council tax for additional spending and councils have the right to make the case to them.
In setting the referendum threshold, the Government listen to the views of local authorities, but clause 4 will formalise that by requiring the Secretary of State to consult their representatives. I believe that that flexible and constructive approach to setting excessiveness thresholds is crucial in striking the correct balance between funding for local services and protection of council tax payers.
Council tax is 9% lower than it was in 2010. That makes a significant case—unlike the 13 years before then, when council tax actually doubled during the Labour Government. I hope that, having reflected on the points I have made, the hon. Member for Oldham West and Royton will consider the challenge that this proposal would present to many council tax payers and withdraw his new clause.
Jim McMahon
I am about to wind up. Local government will say that the issue is beyond party politics, but when they look to this place they will see that the party speaking for local government devolution is the Labour party. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 13
Power to impose a charge for business rate appeals
‘(1) A billing authority or major precepting authority may charge a ratepayer a fee in connection with activities undertaken as a result of an appeal by that ratepayer to alter the authority’s local non-domestic rating list under section 55 of the Local Government Finance Act 1988.
(2) The amount of fee payable must be calculated by reference to costs incurred by the authority when undertaking activities relating to that ratepayer’s appeal and the amount of fee payable must not be calculated by reference to costs incurred by the authority in the undertaking of any other activities.
(3) The Secretary of State may, by regulations, make provision about the circumstances in which those fees are to be refunded.’ —(Mr Thomas.)
This new clause would enable billing authorities or major precepting authorities to charge fees on a cost recovery basis to ratepayers in connection with business rates appeals.
Brought up, and read the First time.
Mr Thomas
I beg to move, That the clause be read a Second time.
I understand that Ministers intend to charge £300 for large businesses and £150 for small businesses that want to make a business rate appeal. The new clause is a probing measure to explore how Ministers arrived at those figures. Given that there are likely to be substantially more appeals as a result of the current business rates revaluation, it would be good to understand what the thinking has been about the charges.
In the context of business rates bills being reduced on six out of nine warehouses of a very large business such as Amazon, one wonders whether £300 is not rather low. It costs £250 to submit a claim for unfair dismissal and £950 if the case goes to a tribunal. Funding has been cut from the Valuation Office Agency and I wonder whether a fee of £300 for a big business submitting a speculative revaluation claim is truly appropriate.
It would be good to hear what Ministers have to say and whether they will keep the matter under close review, with the potential for amending the charges as evidence begins to emerge.
Local Government Finance Bill (Ninth sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Jim McMahon
I thank the Minister for that intervention, but I can say with confidence that I have never knowingly made a flawed argument and I do not intend to start today. Landlords are of course there to make money from the rental of their properties. They have an expectation about the amount of money they will receive for the property, and in a number of cases they could well decide to pass the additional cost on to the tenant through rent increases. That could well be the impact, and of course if the tenant has to pay more money, they will look at the overall amount of money that they have to spend as part of their business operation and decide whether or not they can support a BID arrangement.
Mr Thomas
Will my hon. Friend reflect on the point that I made in an intervention on the Minister? Attractive as the opportunity to set up BIDs will be for property owners, the worry that I suspect they will have when they come to do the hard yards of putting the BID together will be access to the information about who actually owns the properties. Does my hon. Friend share my view that the gap between Committee and Report might be a good opportunity for the Minister to reflect on what else could be done to make it easier for the initiators of a BID to find the details of who really owns properties?
Jim McMahon
I absolutely agree with that point, not simply because what my hon. Friend refers to would be helpful—in fact, essential—to support the implementation of BIDs on the ground, but because it would help local authorities in a wider sense. Many local authorities have empty buildings in their areas, and tracking down the property owner can be very difficult. There may be health and safety issues or vandalism, antisocial behaviour or other illegal activity taking place. Finding out who the property owner is in those cases can be extremely difficult. Having a register that makes sense, whereby the owner is easily identifiable, would be important for what we are discussing, but it would also be beneficial for local authorities in a wider sense.
The levy that has been proposed evidently makes sense. This is more of a tidying-up exercise than a groundbreaking initiative, but sometimes tidying up is as important as breaking ground, so on that basis we perhaps should reflect. However, the Government could perhaps do slightly more to assist in the development of BIDs. I think that there is cross-party agreement that the way BIDs can be developed, not just in being able to generate the money but in the process by which local authorities and the business community have to develop a prospectus to get local support and win the vote on the day, is actually quite empowering. I am talking about getting that sense of ownership at local level and of being able actually to do something.
We find that, in many areas, people are looking at their town and city centres declining and asking, “What can we do about this?” It is happening because of the supermarkets and online retailing. It is almost being done to people, as opposed to their being able to get a grip themselves and have that shared vision. I see this route as one way whereby people can assert their own responsibility for taking control, and of course the way businesses can really get a grip of how the money is spent is quite important.
Of course, the money is ring-fenced, so when the prospectus is given to local businesses—local landlords as it will be—the money cannot be used by the local authority for any purpose other than improving the circumstances within that business improvement district. However, how that money is used in the business improvement district can be quite imaginative and flexible. It could be used to attract new visitors or provide events and activities. We have seen areas that pay to have their Christmas lights switched on, fireworks displays, Christmas markets or summer and Easter activities, and others that install CCTV or provide car parks to create a pleasant place for visitors.
The evidence shows that such measures increase footfall, and that people reflect afterwards that they ought to be supported. It would be helpful if the Government—not today, but at some point in future—outlined, perhaps in a letter to our team, what they intend to do to actively promote the further expansion of BIDs across the country, and their assessment of what the total impact of the business rate revaluation might be for the uptake in business improvement districts.
Mr Thomas
I used the example of the non-mayoral combined authorities to make a crucial point. This is a probing amendment and I am interested in hearing why Ministers want to exclude non-mayoral combined authorities. I say that in the context of my huge support for the Mayor of London, Sadiq Khan, who is doing an excellent job. I am conscious, though, that many council leaders and councillors have strong relationships with their local business community. I gently suggest that we should trust both business owners and local people who have elected councils to look at the merits of a particular proposal on infrastructure, rather than dictating from Whitehall whether they have to have a Mayor in order to levy a business rate supplement.
Jim McMahon
Does my hon. Friend agree that this is an absolute obsession with directly elected Mayors full stop? The Government use an example of a combined authority with a Mayor not even having to consult on the referendum result on business rate introduction. However, a city Mayor directly elected by the population has to have a vote in the same way as a Mayor of a combined authority.
Mr Thomas
My hon. Friend makes a good point. Now is the time to embrace the spirit of localism, which Ministers have previously professed to support, with investment in infrastructure and to trust local businesses. They will be able to smell perfectly easily whether a proposal for a business rate supplement is a sensible suggestion or not.
Local Government Finance Bill (Eighth sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
My hon. Friend makes a good point; it is a shame that the hon. Member for Waveney is not here to help us to think about the impact on coastal areas. When we talk to businesses—as the Opposition do regularly—infrastructure investment is one of the areas that they continue to cite as crucial for future economic growth. We are all aware of the regional inequality in this country and the need to try to generate further economic growth at a faster pace outside London and the south-east.
I am not surprised that the Chancellor of the Exchequer would want to go to Manchester, which is one of the leading districts where Labour authorities are leading the charge to help businesses. However, one needs to recognise that the advantages that Manchester has pursued—rightly, in terms of a levy for the purposes of investment in infrastructure—would also benefit authorities elsewhere in the north, the north-west and the midlands, and no doubt in Cornwall, Northamptonshire and other areas. This is a question of fairness and equality and of investment in areas that do not have a Mayor. I look forward to the Minister’s attempts to justify why authorities that do not have a Mayor should be denied the opportunity to benefit from this type of infrastructure investment.
Jim McMahon
This amendment is one of the most important to the Bill. A number of amendments have been crucial for obtaining information from the Government, but this one is absolutely critical to equality and the ability to grow our local economies.
The town that I represent is part of a combined authority. It has been part of joint working across Greater Manchester since 1986. I was the first leader of the council to sit on the new combined authority that had additional powers from Government; that combined authority is due to elect a Mayor in May. It is playing the game in the way that the Government set out, but that does not mean that every town in that area is able to develop its local economy in the way that it ought to.
Let me give an example. We already agree across 10 boroughs on the priority projects for the city region. The bar is set quite high: the question is, what will benefit 2.6 million people and the wider economy? More localised infrastructure investments never quite make it up the list of priorities, because they do not benefit the wider city region significantly enough, though they are extremely important locally. I am talking particularly about the remediation of brownfield sites that have been lying derelict.
Jim McMahon
I am not suggesting that at all. I am saying that differential devolution is being proposed—there is some devolution to Mayors in combined authorities that is not on offer to other billing authorities—and that does not create a relationship of equals. For instance, in Greater Manchester the Mayor would be able to introduce a 2% infrastructure levy; if the local authority had the same power, that would create a more level playing field and allow a mature debate about how that might be teemed and ladled. For instance, it might be agreed across Greater Manchester that 1.5% could go into the central pot for the city region and 0.5% retained locally for more localised infrastructure investment. Alternatively, under the provisions of the combined authority order, Oldham could choose to opt out of the combined authority. It could decide that the city region was not working for it, give the required notice period and come out. However, it should not then be disadvantaged by not having the retained powers that the Mayor has, when at that point, the Mayor would not be representing the area, while directly elected councillors would. That equality is what we are trying to get to.
My hon. Friend the Member for Harrow West, the shadow Minister, has gone into detail on the number of areas that have perhaps not got over the line and agreed to a Mayor, but there are more than 20 million people living in areas that are not even part of any mayoral discussion. Apart from the areas that have deliberately chosen not to have a Mayor, there are many areas that do not have the access to Government to even have that conversation. Are we saying that their economies are less important because of that? It strikes me as an odd approach, if we believe in localism and growing the economy locally, because let us be honest, the days of an employer opening a massive factory that employs 5,000 people in a community are long gone in many areas. Economies will grow from small and medium-sized businesses developing in the community, and hopefully growing in scale. However, if we do not plant the seeds to enable that, then I am afraid that we are saying that towns such as Oldham, which have weak economies that have not been rebuilt, will be left behind, and that is not good enough.
I can begrudgingly accept that the Mayor is a means to an end—I do not think that having a Mayor should be a requirement of a combined authority deal, although that is the game being offered and many areas are playing it—but I absolutely believe that local freedoms and local economic development powers should be available for every corner of the country, not just the hand-selected parts that have direct access to Department for Communities and Local Government civil servants and Ministers. I put it strongly: this is coming not just from Labour Members, but from a lot of Conservative council leaders, who are sick of this very urban/northern/midlands view of economic development. They feel that their area is being left behind by their own Government.
Jim McMahon
I absolutely agree. I attended the District Councils Network conference, and exactly the same message was coming from our district councils, which are billing authorities as well. They are saying: “We accept that the Government want to grow the city regions. We accept that that will be a priority, and we do not begrudge that. What we begrudge is being left behind and having no solutions for our localised economies.”
Throughout this process, the Government, almost on a point of principle, have refused every amendment suggested, regardless of its merit, the logic or the evidence base referred to. This amendment would galvanise support for the Bill from right across the House and across local government. It is the right thing to do. It would offer every part of the country the chance to grow and develop in line with local circumstances, and it would show everybody that the Government were serious about letting go.
I plead with the Minister; this is what council leaders have told us they want. Of all the amendments that he might want to make concessions on, this is the easiest one to give away. It is the most logical, and would galvanise support across every political shade of local government.
Local Government Finance Bill (Seventh sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Jim McMahon
Amendment 30 is linked to amendments 48 and 49, which would allow local authorities to set the multiplier at different levels in all or part of the area, so potentially that could happen. I will come to the reasons why those amendments were tabled, but if all the amendments were accepted—the Government may well choose to do that; we would be happy with that—there would be that provision.
A local authority could reduce the multiplier in an area. Take the example of a large warehousing, distribution, office-type business relocated to an area; say Google did not want to relocate to London, but thought Oldham was the place to be. That £1 billion of investment could make Oldham Council consider whether it was worth reducing the multiplier across the whole borough—unless, of course, Google said, “We have this agreement in Oldham, but let’s see what Rochdale, Tameside or Manchester can do for us.” It would not make sense to have that artificial competition in local areas.
Mr Thomas
My hon. Friend gives a number of examples, and we now know that Surrey has a sweetheart deal to be a business rates pilot in 2018-19. One could imagine a scenario in which Surrey County Council wanted to reduce business rates; amendment 30 not having been made, it would not have to talk to neighbouring areas, which might be a bit put out by that.
Jim McMahon
I take that point completely, but we may need to take Surry out of the equation, because there are rules for everybody and then there are separate rules for Surrey; we will need to account for that in future legislation. Obviously, if an elderly relative needs social care, Surrey is the place to be, but we must make laws for the whole country. This is about restricting artificial competition, where possible. One area may not be aware of discussions in the area next door because they may be covered by commercial sensitivity considerations. The risk of that information being released as a result of a random text message being mis-sent is very unlikely—I am sure it almost never happens—but local authorities could be set up artificially against each another.
Jim McMahon
Local authorities are independent units of government. They cannot be at the beck and call of their neighbour. Their working together constructively is important for local relationships and the local economy, and that is exactly what the amendment would provide for. “Consultation” includes an assumption that local authorities will reach out, be inclusive and share in a constructive and mature way with their neighbouring authorities. I cannot see why this small change would be contentious. Surely it is in the interests of all local government, as a family, and as a unit, that people work together to the same end. Of course we welcome investment from the private sector when it moves to an area, but that should not be used to create an artificial divide between neighbouring authorities. That is the point of the amendment.
Amendments 48 and 49 are simply about expanding the power available to some bodies to change the multiplier, so that it is available to all billing authorities, the Greater London Authority and county councils. Through these amendments, we are trying to say, “We respect every unit of local government, whether it is a combined authority with a Mayor, a metropolitan authority, a London authority, a district council or a county.” Every unit of government should have the right to affect the economy in its area.
Taken as a package, these amendments would expand the freedoms that the Government are trying to progress—freedoms that local government has largely welcomed—and make them available to all local government, in the way that it is proposed they be made available to some. The amendments would enable local authorities to act in a mature way, consult their near neighbours and, hopefully, get agreement on the best way to administer a scheme, in tune with neighbouring authorities, rather than acting against them.
I do not propose to spend any more time on this matter, although we could go on at length about it for the sake of it. These are quite minor amendments in the scheme of things. They are certainly not contentious; they are more about tidying up the offer, and expanding it to a wider group of people. The consultation required with neighbouring authorities would be similar in spirit to the way in which local plans under development involve consultation with neighbouring authorities, so it would bring the Bill into line with other legislation affecting local government.
Mr Thomas
I am grateful for this opportunity to comment on the amendments. Amendment 30 is sensible, and is made all the more so by the new context that Surrey County Council has created for our deliberations. The deal that David Hodge, the leader of Surrey County Council, has done with Nick seems to have been a particularly interesting piece of negotiation. I am told that Surrey County Council met on Tuesday to consider whether to go ahead with the referendum, and that at the beginning of the meeting, David Hodge was determined to go ahead with it. It appears that a message—perhaps a text message from Nick or somebody else—was sent to him, and the meeting was suspended. He rushed out, and there was a sudden change in approach—
Jim McMahon
I am pleased about that. On a daily basis, there will be council leaders, cabinet members and other councillors and officers who, through the course of their business, will engage with their neighbouring authorities and other authorities in their sub-region. That is entirely appropriate and standard as a matter of course. We are talking about a duty, where the actions of an individual authority can have a fundamental impact on a neighbouring authority. It is there in legislation already for local planning development. When the tax base of a neighbouring authority is proposed to be changed, the same duty to co-operate and consult should be in place.
Jim McMahon
That is exactly the purpose. Consistency is the word that is most appropriate for the amendment. I am not sure why the Government want to be inconsistent. The only thing they are consistent in at the moment is the power grab by the Secretary of State to retain more power—we will come on to some of the Bill’s provisions on that a bit later. What we want is for local authorities to feel empowered, in a clear and understood framework, which provides safeguards for other areas that could be affected by their decisions. That is what amendment 30 would do.
Jim McMahon
In many ways the amendments are about understanding what the Government are trying to achieve in giving these powers to those at a local level. Our principle will always be that that is for local determination. That is exactly what localism and local accountability is about and it will be for the local authority, in consultation with its business community and residents, to make the case and find the right balance at a local level.
Mr Thomas
My hon. Friend will know that the Conservative party—or at least the Conservative party in Surrey—thought that an increase of 15% was acceptable for council tax. I do not know whether it thinks that a 15% increase in business rates is acceptable, but that clearly would not be acceptable to us. That is why we should again praise the contribution of Robert Evans, leader of Surrey County Council, for leading the charge against such an increase.
Jim McMahon
I should say for the record that David Hodge is the leader of Surrey County Council. He is an influential council leader, and I have thought that for a while. His stewardship as leader of the Conservative group of the LGA is well known. He is forthright and determined and does his research for meetings, and he knows how to build relationships to make progress.
Jim McMahon
I suppose I went back to my local government roots and felt the need to protect that council leader somewhat, because I fear that in the light of the leaked text messages he will be thrown under a bus by the Government—politically speaking, of course. It would not be surprising for a council leader to fall on his sword to protect a Government Minister—and, of course, Nick, who we are thinking about today. Is Nick still in post? Do we know where Nick is? Has anybody seen Nick? I am concerned for Nick. Sir David, if you could find that out for this afternoon I am sure that the Committee will run much more smoothly. We will be much more settled and calm knowing that Nick is in a safe place and that he has not been thrown under a political bus.
The amendments are about the balance of the base. It could be that any authority—let us use Surrey as an example—decides that increasing its business rate base is the right thing for its area. It would have to have a discussion with the business community affected, similar to the discussion that Surrey had when it floated the idea of a 15% increase in council tax. The Bill provides for that, but it does not provide for every billing authority to have the same power as hand-selected authorities to increase the base. We are again asking for consistency and for every billing authority to have that same power.
High streets in many areas are struggling with not only vacant units but inappropriate usage. We might want a targeted intervention to encourage the types of uses that would result in our high streets flourishing. The truth is that, given the way retail is going, far more is being spent online. If current trends continue, we will be spending £1 billion a week on online retail. A high street retailer has to pay to exist before it earns £1 over the till—it has to pay to be there—and that is a significant barrier for a lot of people who are trying to make ends meet.
We need to acknowledge that the world is changing. The Bill does not do that, so perhaps we need to have a separate conversation about how we tax business and support the local economy. The measure is at least a start, because it says that there will be an ability within a property-based system to teem and lade resources across a local authority area.
Mr Thomas
My hon. Friend will remember that some 66% of businesses pay no business rates at all because of small business rate relief. If the Government were minded, as a result of our probing amendment, to grant local authorities the power to raise business rates, that power would be levied on those business giants, such as Amazon, that perhaps struggle to pay tax in other forms. The amendment is not anti-small business, which we all want to encourage; it allows for big business to perhaps be asked to pay a little more.
Jim McMahon
That would be delightful. Perhaps he could even say whether a Surrey index could be used. A clarification would be helpful.
Jim McMahon
My recollection of that response was not as clear as that. I appreciate the direct nature of the Minister’s response today, but from my recollection we were told we were moving away from RPI, and we asked to what. He was unclear about that except to say, “What else is there, but CPI?” Well, a different measure could be created.
Mr Thomas
As my hon. Friend may remember, the Minister was involved in the Housing and Planning Bill and advocated with great certainty then measures that have now been rejected by other Ministers in the Department. Surely we cannot today take his word as gospel, which is why clarity in the Bill might be more useful than his words of wisdom now.
Jim McMahon
I often agree with my hon. Friend, but I do not want to paint the Minister as having little influence over his colleagues. I am sure they listened to his sound wisdom, reflected on it and took it on board. The Minister may not be the Minister tomorrow, however, and the legislation that we are creating transcends individuals. It is about having a framework in place to govern the nation.
Getting parity, prescription and consistency is important. I go on about consistency quite a lot because I have been on the other side of the argument when national Government passed legislation that was not clear or consistent. That only leads to confusion at local level.
The difference is that when central Government are confused, local government is confused and hundreds of individual authorities are confused, and that has cost and time implications. The more we can do to create a clear framework where duplication is not required to understand where the Government are trying to get to is to everyone’s benefit.
Jim McMahon
The Minister has provided a certain insight. I would not quite call it evidence, because I have seen nothing produced; there has not been an assessment to back up that claim, as far as I can see. We need a higher bar on what we mean by evidence than the Minister jumping to his feet in a fit of excitement.
As we progress through the Bill and explore where the Government are trying to get to, I hope that the Government will take time to use the probing amendments to reflect. If they really want to achieve localism, if they really want local councils to take responsibility for growing their economic base and their tax base, we need to recognise that within any area there will be micro housing markets and micro business markets, where that local variation and local power to deploy in a very different way in the local authority area is critical to being able to grow the economy from the grassroots up. This is not about an aggressive attack just for attack’s sake; it is about a genuine deal, and the deal would always be that a local authority would say to the public, “We want to do this over here, and it would mean increasing business rates, but we would use that money to support this initiative over here.”
I genuinely believe that many people in this country are witnessing the decline of their town centres and high streets and are in tears, because that is a reflection, a symbol, of how the town is doing more generally. When people go into their town centre, which is the heart of the community, and they see windows boarded up and “To Let” boards where local shops used to thrive, they genuinely feel that part of their identity has been taken away. Our high streets are more symbolic than just a retail space; they are part of our cultural identity. I therefore hope that the Minister will reflect on our suggestions and that, if not during this phase, we may see some of them coming forward in the near future.
Mr Thomas
I think that this amendment will come to be known as the Mackintosh-Hollinrake amendment part 2. I again draw your attention, Sir David, to the excellent report by the Communities and Local Government Committee on what 100% business rates retention might mean. I can assure you that present when the report was agreed was the hon. Member for Northampton South. The report makes very clear his support for the recommendation that the power to raise the multiplier for business rates should be introduced. He wanted, as did the rest of the Select Committee, rises capped so that they were limited to the increase in the average council tax. I do not know whether at that point he foresaw Surrey County Council wanting to increase council tax by 15%. Clearly, a 15% hike in business rates would be completely unacceptable, but it is interesting that members of the Select Committee propose that local authorities should have the power to raise business rates as
“an effective lever to stimulate and foster local economic growth.”
The reason I supported our tabling these as probing amendments was that it is important, during the passage of the Bill, to consider the sources of revenue that local authorities will have to pay for the vital public services that the people of England get from their councils. Given the huge reduction in revenue support grant that we are all familiar with English local authorities having experienced, the two principal sources of income will be business rates and council tax.
The power does exist in law to increase council tax. If that goes beyond a certain threshold—well, Ministers are varying the threshold up and down at will at the moment. There is the power to increase council tax, however, and one can go higher than the threshold if one can get the consent of one’s local residents. There is no similar power for business rates.
In the new Jerusalem that we heard the hon. Member for North Swindon set out at an earlier sitting—I am sure that by now, Sir David, you have had the chance to read his speech—he foresaw business rates being reduced and, across every local authority area that did that, great big new warehouses, out-of-town shopping centres, large businesses moving in and business rates income rising as a result. Unfortunately, in the course of—
Mr Thomas
I say gently to the hon. Gentleman that the old post office site is not vacant due to the closure of the post office; the post office transferred across to a slightly smaller site immediately opposite under a Labour Government. Sadly, that post office has now closed under a Conservative Government, and the Post Office now operates from a franchise in a small corner of the local WH Smith. Again, as part of the mentoring that we offer, I gently suggest that he might want to check his facts a little more before making interventions that are that easy to rebut.
Jim McMahon
I took a slightly different emphasis from my hon. Friend’s contribution. It was not about post offices closing and relocating; it was about a site lying vacant for so long. If a more aggressive business rate regime were in place, it might prompt the owner of the site to bring it forward for development. That is what I took from his contribution.
Mr Thomas
My hon. Friend is absolutely right. We in Harrow are increasingly concerned about the time that it is taking the developer to bring the site back into use. Perhaps the Scots and the Welsh Labour Administration have got the rate of empty property relief right. I would be interested to hear from the Minister on that. These are probing amendments, and in that spirit, I look forward to the Minister’s response.
Mr Jones
It is always a pleasure to respond to the hon. Gentleman’s amendments. Clause 6 provides a power for authorities to introduce a multiplier discount, to incentivise businesses to invest in their areas and to stimulate local economic growth. Amendment 45 would introduce a wide-ranging power for the Secretary of State to provide in regulations for a local authority to be able, under certain circumstances, to raise the multiplier for its area. I understand the hon. Gentleman’s intention, but I am afraid that I do not agree that his approach is right, or that there is a justification for giving, or a need to give, local authorities a general, unfettered power to generate additional income by raising taxes on businesses.
Local authorities already have a range of more specific powers to raise additional income from businesses where authorities are delivering a specific improvement to the benefit of the local economy, including through business improvement districts and business rate supplements. In addition, the Bill would provide for a new infrastructure supplement for Mayors of combined authorities. These powers rightly include additional measures to ensure the effective engagement of businesses, and the additional income generated goes towards delivering specific improvements to benefit local businesses. Amendments 45 and 46 contain no such assurances or protections for business. Instead, they would allow local authorities to increase business rates without such checks and balances.
Amendment 46 would give the Secretary of State a wide-ranging power to make provision for a local authority, under certain circumstances, to increase the multiplier specifically for unoccupied premises. However, owners of such properties are already subject to full business rates, subject to the exemptions that may apply. The amendments would provide local authorities with powers to add additional costs to owners, who may not be receiving any rental income. That would be unnecessarily punitive and of very limited benefit.
I am therefore certain that the amendments would not be supported by the business community, and Labour Members offered no evidence to suggest that they would be. We need to provide business with the certainty it needs over rates bills, while allowing more flexibility for local government, for example through the new multiplier flexibilities. I hope that Labour Members will recognise the balance that we have struck in the Bill for business and local government. In that spirit, I hope that they will withdraw the amendment.
Local Government Finance Bill (Sixth sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
I am always grateful for your guidance, Sir David, but you intervened on me just as I had finished giving a very helpful resume of this morning’s debate.
I am delighted to have the opportunity to speak to amendment 31, which is in my name and that of my hon. Friend the Member for Oldham West and Royton. It would require the Secretary of State to assess whether each local authority has sufficient resources to provide all statutory services in its area. The explanatory notes state:
“These reforms to the local government finance system will move local authorities away from dependency on central government grant and towards greater self-sufficiency.”
Which side of the divide one sits depends on the extent to which one believes that statement.
A local authority may be able to reduce its business rates multiplier to encourage economic growth, or it may be incentivised to permit new business development, but there is no direct relationship between that and the number of people who need social care or who have been made homeless. A unitary authority at least has responsibility for both local taxation collection and service delivery, but the situation is more complex in areas with two tiers of local government, where one authority collects taxes and another provides some statutory services. I am sure we will return to the mechanism for enabling a billing authority and a presenting authority to consult as we debate the Bill. I want to concentrate on funding for statutory services and whether there is a full and proper assessment of the case for statutory provision at a local level.
We will reach 100% business rates retention in, I understand, April 2019, the revenue support grant and other grants will be phased out and additional responsibilities will be passed down to local government. The Minister tells us that the change will be fiscally neutral. What Ministers have not yet told us is what they envisage happening if local authority revenues diverge significantly from the funding needed to provide statutory services. As the hon. Member for Thirsk and Malton pointed out a number of times—or it might have been the hon. Member for coastal erosion or Waveney—the Government are conducting a fair funding review, but will set the needs baseline only at the point of transition from the current business rates system to the new 100% retention system. One might ask what happens if the overall funding in the system fails to keep pace with the cost of providing services.
It is worth paying close attention to the Government’s record on that point. The cross-party Local Government Association has calculated that local government faces a £5.8 billion funding gap by 2020. Local authorities have statutory obligations to provide several services. As we have said several times, we support the principle of 100% business rates retention, but we want an honest assessment of the implications for councils’ finances and their ability to continue to deliver the services they are obliged to provide.
I stress again that there is no inherent or causal link between a council’s ability to encourage local growth and boost its business rates revenue, and local demand for key services. The hon. Member for North Swindon said that the economic incentives in the Bill would cause a huge surge in business rates income. People who are perhaps more expert than him—there are clearly not that many—worry about whether his optimism is as justified as he might hope.
We heard before lunch that Ministers in Whitehall will retain huge power over the resources available to local authorities but are determined to face less scrutiny in Parliament. There are some 56 new powers in the Bill for the Secretary of State, the Treasury or some other bit of Whitehall to interfere with local government finances. Amendment 31 would place just one additional duty on the Secretary of State—a duty to assess whether each local authority has sufficient resources to provide all statutory services. You are a diligent Member of the House, Sir David, so you will be well aware of the crisis in adult social care, which is perhaps the most visible example of the funding pressures facing local authorities and, in terms of statutory services, the most pressing justification for amendment 31.
Just this weekend, Councillor David Coppinger, who is the cabinet member for adult services and health in the Prime Minister’s local authority, the Royal Borough of Windsor and Maidenhead, and Councillor Simon Dudley, the leader of that council, added their voices to the clamour for a solution to the adult social care crisis. Perhaps they were encouraged to speak out by my amendment 31. Councillor Dudley told The Observer:
“The burden is increasing disproportionately over time against a backdrop of more required efficiencies from local authorities. You see that with situations like Surrey”.
I remind hon. Members that Surrey wants to put up its council tax by 15% purely to pay for social care. [Hon. Members: “No it doesn’t!”] Well, it certainly did last week. Councillor Dudley went on to say that Surrey
“simply can’t achieve that, and there will be others. I have absolutely no doubts at all. Other local authorities will find themselves in the same situation as Surrey over the coming years.”
Jim McMahon (Oldham West and Royton) (Lab)
The situation as of today is that Surrey will not have a referendum on a 15% council tax increase. I understand that that is not because it assesses the need as any less but for other reasons. However, my hon. Friend’s fundamental point about social care funding is absolutely critical and needs addressing.
Mr Thomas
I am grateful to my hon. Friend for making that clear. It will be interesting to see what pressure was applied to the leader of Surrey County Council. He obviously has a close relationship with the Chancellor of the Exchequer, who is one of his Members of Parliament, and it will be interesting to see whether that had anything to do with that volte-face. My hon. Friend may not know this, but Surrey has the great advantage of having one Labour councillor. There is only one at the moment, but I am sure that will change after the elections. His name is Robert Evans. He is a former Member of the European Parliament and was leading the campaign, on behalf of those in Surrey who were only just about managing their finances, against the 15% increase in council tax. I am sure he will be feeling very proud today of the success that he has had in persuading Surrey County Council not to increase council tax and hit those in Surrey who are not so well off.
I will return to Councillor Coppinger of the Royal Borough of Windsor and Maidenhead. He believes that the current funding model for social care is sustainable for only two more years. It is worth remembering that the Prime Minister’s local social care authority is one of the few that has been able to increase spending on social care since 2010 by 5.7% in real terms.
To take another example, Liverpool has been able to increase spending by 6.7% in real terms over the same period. However, the situation there is even worse. Liverpool’s adult social care director, Samih Kalakeche, has tendered his resignation. He said that, as things stand, councils such as his will probably soon be unable to meet their statutory requirements:
“Frankly I can’t see social services surviving after two years. That’s the absolute maximum. If we don’t do something within the next six months, I believe social services will not exist by 2018-19. This isn’t scaremongering, this isn’t me asking you to feel sad for me—whoever is making decisions out there has looked at social care as the Cinderella of the service, which means more and more people are staying at home with high needs because of the removal of the prevention agenda. People are struggling, people are suffering, and we’re really only seeing the tip of the iceberg”.
The Minister may not be sympathetic to the former director of adult social care in Liverpool, but he might be more sympathetic when he considers that the Local Government Association shares similar concerns. He will probably be aware of what Councillor Izzi Seccombe said last month. She is Conservative leader of Warwickshire County Council—I am sure she is well known to the Minister. She is also chair of the LGA community wellbeing board. She said that
“the intentions and the spirit of the 2014 Care Act that aims to help people to live well and independently are in grave danger of falling apart and failing, unless new funding is announced by government for adult social care”.
The leader of the Minister’s own council has set out how grave is the funding for one key statutory service, which is all the more reason to tempt you, Sir David, to agree with the case for amendment 31, albeit you cannot do so given your position.
As far back as 2015, local authority representatives told the King’s Fund that they were struggling to meet their obligations under the Care Act 2014. Just 8% of council directors of adult social care say they are confident they can fulfil their duties under the Act in 2017-18, which is a pretty difficult situation. The LGA is not the sort to scaremonger, but it has been calling for urgent measures to plug a funding gap in social care. It says that £1.3 billion is needed, with the funding gap expected to rise to £2.6 billion by 2020 if nothing changes at all.
A new story seems to emerge every day to illustrate the crisis in social care and to underline the need for the assessment that is at the heart of amendment 31. Yesterday, we learned of the case of Iris Sibley, who was stuck in a hospital ward for six months as a suitable nursing home place could not be found. Mrs Sibley’s son has described how her mental and physical health deteriorated as she was stuck on the ward, well enough to be discharged but with nowhere suitable to go.
One wonders what it would take for Ministers to act. Perhaps amendment 31 might prompt more action, more quickly from Ministers.
Jim McMahon
I beg to move amendment 27, in schedule 1, page 35, line 32, leave out sub-paragraph (1).
This amendment would retain levy accounts.
It is a pleasure to serve under your chairmanship, Sir David. You have not had the pleasure of attending many of the debates we have had and I will refrain from repeating them, although they were fascinating in many ways. They were a source of great training and education from my hon. Friend the shadow Minister. I would hope that, on reflection, the Minister picks up some of the points about attention to detail, really understanding the brief and assessing the impact of decisions made in Parliament.
I have the honour of explaining some of the more technocratic parts of this Bill. If you are interested, Sir David, in what a levy account is, and that mysterious way of working and why it is there, this is the amendment for you. Amendment 27, which is in my name and that of my hon. Friend the shadow Minister, is in many ways technical, but it is also very important—I will explain why in my short summary of support for it. I say at the outset that it is a probing amendment because I want the Minister to pay attention to my contribution and to address the issues I raise.
The last levy account, covering 2015-16, was presented to Parliament under the requirements of the Local Government Finance Act 1988. If the Minister wants to look it up, it is dealt with in paragraph 19 of schedule 7B. The business rates retention scheme introduced on 1 April 2013 allowed local authorities to retain 50% of rates collected in their area. Cash flows in respect of that scheme are reported in two White Paper accounts: the main non-domestic rating account and the levy account. The amendment refers to the latter.
In simple terms, the levy account provides transparency of cash flows between local authorities and the Government in respect of the 2013 scheme. A reasonable response would be: “We’re moving away from the 2013 scheme, which provided 50% of rate retention, to 100% rate retention,” but, critically, the levy is basically just a mechanism for bringing money in from areas that pay a tariff, and sending it back out to areas that have depressed business rate bases—it effectively provides the accounting mechanism to allow those payments to take place. If we had 100% retention but also intended to create a safety net to support local authorities that have experienced unforeseen impacts on their business rates bases, the levy account could perform that function, regardless of how much was retained and redistributed locally, which is important if we consider that 326 billing authorities in the country may well have a claim on the levy account. Some will use it only temporarily. For instance, there is a facility for mid-year payments to be made from the levy account and, when the accounts are made up at the end of the financial year, if a local authority has been overpaid, the amount will be recouped and paid back into the levy account.
The levy account has an interesting history, some of which is contentious, if I am honest, to local government friends. Several years ago, a top-slice was taken from the revenue support grant. That meant that less money was distributed to councils in the first place, but at least it provided a safety net. For instance, last year £50 million of additional money from the RSG was sent into the levy account to support councils that had had an unforeseen depression in their tax base.
That raises an important question about where the Bill is going. We have talked about support in principle for rate retention, and for a system of tariffs and top-ups whereby areas that could not retain the money they needed locally would have sufficient money to pay for public services in their area. We have talked about what formula could be used, rural areas and urban deprivation—we have talked about a range of issues. In some ways, that is not for this amendment, which is solely about the mechanism by which safety net payments are provided.
It is fair to say that, during our debates on the Bill, no information has been provided about what mechanism will replace the levy account, which raises a question: if there is a desire for some kind of safety net to support councils that fall on difficult times, how will it be provided if the mechanism is deleted?
Jim McMahon
This has been a theme throughout the Committee’s sittings. We are having a debate in almost complete isolation, without knowing where the Government intend to go on the fair funding formula—as has been discussed, that is absolutely critical and underpins the Bill—and without understanding the sector’s views. We debate issues and make laws to which other people have to adhere, and they have real-life consequences. The local authorities that have to live with the consequences, and that know the impact on the frontline, have responded to that consultation, but we are discussing the Bill without sight of their responses. I am not sure whether that is due to a Trump-esque view—if something does not support someone’s view of the world, it is dismissed as fake polling data or fake news. Is it possible that those consultation returns are being screened for “fake” consultation responses? How long does it take to compile the information submitted by the sector and send it out in a report? Even the raw data—a copy and paste of what had been provided—rather than a summary would at least mean we could scrutinise it and undertake the questioning and answering that should take place.
Mr Thomas
I thank my hon. Friend for his support for my request for at least a summary of the responses on the levy when the Minister replies. Does my hon. Friend not share my view that it would be particularly interesting to hear what contribution the Prime Minister’s authority made, not least as it is one of the local authorities that stands to benefit, in business rate terms, when a third runway is built at Heathrow?
Jim McMahon
I absolutely agree with that point. It has been made a number of times, but the Minister has consistently failed to address it. The Minister may well have been passed the answer by one of his advisers; perhaps he can share that knowledge with us in his response—that would be very helpful.
The important thing about the levy account is that it is not just about the mechanism; it is also about how much money is put in the pot that can be used to support councils with a depressed local business rate base. Critically, that relies on a vote of Parliament. We talked about parliamentary scrutiny of the annual financial settlement that will support local government, and about the referendum limits and how that would be subject to a parliamentary vote. The Government seem determined to make sure that Parliament does not have a role in how local government is funded. This is another example of Back Benchers not having a say on how much money is provided for any kind of safety net.
I am not sure what confidence we are meant to have in the system, when we do not know what local government has said as we are debating and scrutinising the Bill, what the method of redistribution will be, or how much will be provided by way of a safety net—or even whether that mechanism will be inside or outside Government, because in the consultation, there has been a nod to a semi-independent body potentially being established. However, we are of course framing our own view and interpreting the Minister’s limited responses in these debates, rather than seeing that set down on paper.
The scale of the payments from the levy account are quite important. These are not small payments—well, sometimes they are, but the scale of the call on that budget is significant. For 2015-16, the Secretary of State approved payments of £112 million to support local council services. Imagine what £112 million could pay for—how many day care and youth centres that would fund, and how many older people could be looked after in their own home with that. If that money was not there, what would be the human cost of councils being told to sink or swim without having that safety net in place? Some clarity on that from the Minister would be greatly appreciated.
In all this, we are trying to understand what the end will look like. We are aware of what is being taken away, and of how the Secretary of State, and the Minister in this Committee, are reducing the role of Parliament and parliamentary scrutiny; we are less clear on what the end will be. All of us in politics accept that to make good legislation and good decisions, we have to make difficult decisions at times, but we should never go forward with a bad decision based on a lack of information and half-reports. Please say what mechanism will be there to support the levy account. We can then hopefully have a meaningful debate on what the safety net and mechanism will be, and can test whether it is fit for purpose.
Mr Thomas
I rise in support of amendment 27. It is worth touching on a couple of the ways in which the levy rate works. Tariff authorities may be subject to a further levy on growth in business rates income. Each such authority was set a levy rate of between 0% and 50% at the outset of the 50% business rates retention scheme in 2013-14. An authority with a 0% levy rate will keep all its growth in revenue. An authority with a positive rate—over 0%—must pay that percentage of its growth in revenue to the Government. The purpose of the levy is to ensure that authorities with very high business rates tax bases relative to their assessed needs do not benefit disproportionately from the system. As my hon. Friend so eloquently set out, the Bill will remove the Secretary of State’s power to set such a levy. Clearly, our amendment would retain that power.
I have already mentioned the example of Maidenhead’s council, the Royal Borough of Windsor and Maidenhead, which has a 50% rate—the highest rate that it can have. Presumably, this is because the council already benefits from its proximity to Heathrow, and from all the businesses that want to be close to Heathrow to export their goods to markets around the world. We commend Maidenhead on its good fortune, but surely as it benefits from a major piece of infrastructure—Britain’s most crucial hub airport—it has not had to do huge amounts to encourage that growth in business rates income, although I am sure that the council’s leader would point to one or two things it has done to encourage business. However, even Maidenhead would struggle to claim that it has not benefited from being so close to a major airport. I cannot see anyone in this room who is an opponent to a third runway at Heathrow.
Jim McMahon
I thank the hon. Gentleman for that intervention. He was at the hearing when that question was asked. The answer was less than forthcoming, but there was an answer of sorts. The question from my hon. Friend Member for Wolverhampton South West is in Hansard. It is on the record, as a matter of fact. It is also a matter of fact that the answer has not been provided.
Mr Thomas
My hon. Friend’s point is about the lack of evidence for the great assertions by the hon. Members for Thirsk and Malton and for North Swindon, never mind the Minister, that economic incentives will flow afresh. One would have thought that Ministers would have had some sort of economic impact analysis to offer, but there is no Green Paper, no White Paper and no sign of any evidence that this will be the new Jerusalem we have been promised.
Jim McMahon
There is a theme running through this group of amendments, as there has been previously. We have talked about the mechanism by which we account for the money coming in being paid out to local authorities. We have talked about the principle of having the levy account in place. The amendment is about the purpose of the safety net payments to local authorities.
The principle of the safety net is fairly clear-cut: it provides an element of protection that is completely in line with the concerns raised by the Select Committee inquiry. That was not a press release or report from nowhere; it was the result of a number of thoughtful, well researched hearings, where the evidence base was scrutinised. The headline was that it is absolutely right, and to be welcomed, that we move towards 100% retention, but serious questions remained about how we redistribute within the system and about what safety net mechanism would be in place to ensure that if a local authority had a shock to its business rate base there would be sufficient funds somewhere for it to draw on.
It is fair to say that, although the Select Committee showed support for the first element, the safety net issue has not been resolved satisfactorily. We have not had details about what system might be in place. We have not been told how much will be provided in the safety net pot to ensure that it is sufficient to provide for the different types of shocks. We have not been told, for instance, by what percentage a business rate base would have to fall before a local authority was eligible for a safety net payment. All those points, which are fundamental to understanding whether a safety net is a true safety net or whether it has gaping holes in it, are critical to the debate. That is why we tabled these amendments.
Mr Thomas
My hon. Friend will remember the intervention from the hon. Member for Thirsk and Malton, in which he prayed in aid the Communities and Local Government Committee report in defence of his case. Has my hon. Friend noted at paragraph 56 of that report the concern of Sharon Gregory, who said that Cambridgeshire and Northamptonshire county councils
“have some very big businesses that represent a large proportion of the business rates base, and there are significant risks around those businesses leaving or failing”?
Surely that underlines his concern on the safety net.
Jim McMahon
I absolutely agree with that point and on the thrust of the challenge to come. I hope that in response the Minister will address that issue and those raised by the Select Committee and the LGA, and in the lesser-spotted consultation response, which hopefully we will get a flavour of later.
When the safety net system was set up, the statement of intent—this was in 2012—was clear in its aims. It said:
“The Rates Retention Scheme will include a safety net to protect local authorities from significant negative shocks to their income by guaranteeing that no authority will see its income from business rates fall beyond a set percentage of its spending baseline.”
That essentially means that central Government accept that there is an inherent cost in providing public services at a local level across the range of 700 or so council services, and local authorities and communities should not be put at risk to such a degree. Let us say that a local supermarket decides to close. In many areas that could be a £1 million a year business rate base taken away from a town. That would have a significant impact on local public services, and the local authorities could call on the safety net.
There was always a facility to say, “A business might leave today, but tomorrow you might attract further investment, and that could make up the difference.” There is a facility in the system to recoup any overpayments above the baseline. The safety net is there for the right reasons and the principles are sound. They are supported by the LGA and, I assume, by the Select Committee. They are supported by individual local authorities, which call on that fund because it absolutely makes sense. Their youth centres, day care centres or support for older people in the community should not be vulnerable to Tesco or Sainsbury’s deciding to up and leave town. That would instinctively be the wrong way to run a fair and balanced community. As I have said, the payments that have been made from that account are not insignificant. In 2015-16, the Secretary of State paid £112 million to local authorities. I will not repeat the point about the types of services that can be provided for that kind of money, but we can imagine that, across a range of 326 local authorities, that would have a significant impact on their business rates.
If I think of my own local authority of Oldham, I consider it to be a double cruelty that the Government are closing central Government departments in my town, such as the HMRC offices and jobcentre offices. The county court is closing soon, the magistrates court has already closed, and the number of police stations has reduced to a third of the number before. The local authority has closed day care centres and youth centres and a range of public buildings just to try to balance the books. Is it not cruel that because of that its business rate base will be affected? Not only has it reduced the number of public services because its revenue support grant has been taken away, but it is potentially having the safety net snatched away that would have protected it from the loss of business rates in those areas.
It is beyond negligent; it is almost vindictive now. The Government are kicking local authorities when they are down and some local authorities are absolutely down on their knees. We have heard about the issues in North Yorkshire. It is right that Members are here to represent their constituents.
Mr Thomas
On that point, does my hon. Friend want to try to stimulate the interest of the hon. Member for Thirsk and Malton in Stockton-on-Tees Borough Council and its concerns about the safety net? He was on the Select Committee when it gave evidence. It said:
“The safety net is set too low with local authorities being required to accommodate very significant reductions in income before triggering it. Based on the current system, Stockton would need to lose approximately £5 million in one year before it is activated”.
Does that not underline my hon. Friend’s concern?
Jim McMahon
I take the Minister’s point entirely. It would be easier if we had a scheme that we could review and scrutinise and ask questions about, based on the scheme that was presented. In the absence of that, we are relying on the Minister sharing every now and again the fount of wisdom from the notes that are passed to him by his advisers, which is one way of doing government, I suppose. Another way of doing government is to consult, to speak to the sector and to understand what is coming back. We know a consultation has been conducted and we look forward to the results of that, but a consultation was also undertaken when the scheme was introduced in 2012. At that time, the Government reviewed the type of safety net that would be needed for it to be fair and balanced. At the time, the percentages that were considered were 7.5% to 10%. In the end, the Government erred on the side of caution and went for the 7.5% level. That was the result of that consultation. It was the result of an assessment of what type of safety net would be robust and provide certainty. So we have been there; we have done that. We have been through that process.
Mr Thomas
It is interesting that the Minister should stand up and pray in his defence the pilot authorities and the way in which they are implementing the safety net scheme, if indeed they are doing so. We could have used that information to inform our contributions, but sadly the Minister is not intending to publish any details of how those pilot authority schemes are going to work until after this Committee has concluded its deliberations.
Jim McMahon
I am going to be charitable. Perhaps I am too soft for my own good. I feel a slight degree of charity towards the Minister given the fairly rough ride that he has had—a rough ride of his own making. I will not prolong that. Labour Members question whether the knowledge is there, even, for the Minister to understand the Bill, whether the diligence has been there to assess the impact that that has had, and whether the capacity is there to bring forward the type of information that would lead to a meaningful debate. I would be far more generous than that and say that perhaps today is just not the Minister’s day. However, we will be here again and we can review the information when it comes. I hope that we will have a better session, the Minister will feel far more empowered, better informed and on the front foot, and we as an Opposition will feel that we are able to hold the Government to account, which is why we are here. We are not here to have circular discussions that take hours and hours of parliamentary time. We are here to get to the root of what the Bill is intended to do and the impact of the Bill. By doing that, we make good laws—we know the impact and we know, collectively, that we are making the right decision, not a bad decision in the absence of that information.
We have heard that there will be some kind of safety net, although we do not know what the criteria or threshold will be. We are discussing the pilots that are taking place, but a number of pilot authorities have not been told what the safety net will be. We are expected, outside of those pilot authorities, to make an assessment—a leap of faith almost—that those pilot authorities will deliver the evidence base required, when they themselves do not know what the new settlement will be, and they are waiting for the Secretary of State to confirm that to them.
A lot of people in this place and in local government are waiting for some clarity. I am pleased that, during the exchanges, we have at least agreed a principle that a safety net is required. However, the real test is not words. The real test is the application of the legislation going through.
I hope that the Minister will answer this. The threshold is 7.5% below the base. Members will know from our amendments that we are suggesting a more favourable rate of 5%. The reason is that, as revenue support grant is being taken away, local authorities are more vulnerable to business rates and it feels as if that is the right balance to strike. I ask for a quick response from the Minister: what will the percentage be?
Jim McMahon
We are moving naturally through the principles of a levy account system being maintained, a safety net being provided and, as the Minister referred to, the business rate pooling arrangements that are being piloted in a number of areas.
The principle of pooling is sound. It is one that local government has asked for and one I personally support. We recognise that the development of a business base is not necessarily predicated on local authority boundaries. We have heard the example of Heathrow and the impact there. The same is true in Greater Manchester, where we see the economic area and the businesses developing in that city region acting separately from the local authority boundaries because they are acting as one economic unit. I fully understand the principle behind that and why we would want, on that basis, to have a single budget or business rate pooling across that area.
Where pooling works—this is true of the pilot—it is because, first, there is an understanding of the financial relationship. Sir David, I do not know whether you have taken the opportunity, as I have during one of my nights of insomnia, to go on the DCLG website. People can type in the details of their local authority into the website and assess whether business rate pooling would leave them in a better or worse net position. The idea of that is to give agency to local authorities to determine for themselves what is right for them before they even enter into negotiations with central Government. That is an empowering way of doing that.
Local authorities then speak to areas within a natural pool. Where they have a logical economic centre and want to come together, they can assess what that new settlement would be, and whether they would be in a better or worse position as a result. They will get together; discuss with their neighbouring authorities what works in their locality; agree which local authority will be the lead local authority; and, on that basis, make a bid to the Government to be a pilot authority. In the spirit of localism, that is the right way of doing it. We are allowing a grassroots organisation to take place, where people come together, have the information to hand to make an informed decision, and come to the Government and say, “We think this is the best deal for our community.”
That is inspiring, but unfortunately, the Bill is an absolute shift in the culture and balance of that relationship. Rather than local authorities being able to come together and co-produce, and rather than it being a relationship of equals in which local authorities choose other authorities to join and then present to the Government, the Secretary of State can mandate local authorities to come together, potentially against their wishes, and can mandate who the lead authority will be. The direction of travel is very unsettling.
In any relationship of equals at a local level, coming together to create a business rate pool is usually only one element of a complex relationship of working together in the interests of a locality. I worry that, by imposing one lead authority, potentially against the wishes of other neighbouring authorities, the Government will fundamentally change the balance of trust and the relationship within that locality. That could impact not just the business rate pool and support for it, but other joint work that will be critical for the successful delivery of public services and economic growth in our areas. When the Minister responds, it would be helpful to get a flavour of where he, on behalf of the Secretary of the State, believes that the power could be implemented in future.
Jim McMahon
It is. I worry about scale. The 18 business rate pools reported to have come forward so far have a collective rate base of £159 million above their baseline, so they are net beneficiaries. We can see why they would want to adopt that position and make that application. However, some areas could be disadvantaged as a result of being in a business rate pooling arrangement. Those areas may not want to be part of a business rate pooling arrangement that is forced on them.
We have heard about the 56 additional powers that the Secretary of State is introducing for himself. We are meant to be about localism, and about giving power back to communities and to their directly elected local authorities. That is not the flavour of the Bill—the opposite runs right through the core of every element in it. The Bill is about an empowered Secretary of State, and a complete lack of parliamentary scrutiny, oversight, challenge and a democratic vote.
The Bill is also not even about Government doing deals with local authorities in smoke-filled rooms, which has been the nature of devolution discussions so far, when areas are picked off against each other. That at least required local authorities to consent. Even though it lacked transparency, and even though it lacked a national framework so people knew what they were bidding for at a local level, it at least required that they were consenting parties to that relationship. That will not be the case. Unless the amendments are accepted, the Secretary of State will have absolute power to impose his will on local authorities whether they like it or not, and whether or not it is in their interests and right for their communities, and to hell with consequences for the local relationships that could be affected.
The amendment is fundamental to what we believe devolution and localism to be. I intend to press amendment 47 to a vote, because we feel so strongly about giving our councils agency and independence and a genuine relationship of equals with the Government. If the Government do not accept the amendment, it will be a message not only to the Opposition but to every local authority in the country. The Government will be saying, “What you want is not as important. It’s not for you to determine what’s right for your local area. If we want to do it and feel like doing it, we can impose our will whether you like it or not.” That is a very slippery slope.
Jim McMahon
We have not settled the balance of the relationship between central Government and local authorities that may or may not want to form a business rate pooling arrangement. The Minister’s response was not satisfactory from our point of view. It is not satisfactory for local government either. I do not intend to press the amendment to a Division, but the Secretary of State will have to convince local government that devolution, economic growth, the reform of public services and business rate pooling are genuinely about the community coming together and determining for itself what its future will be. At the moment, the jury is out. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 ordered to stand part of the Bill.
Clause 4
Determination of principles for determining whether council tax excessive
Mr Thomas
I beg to move amendment 20, in clause 4, page 6, line 41, at end insert—
“(c) must include conclusions from the assessment of needs that has been carried out in respect of the local authority area; and
(d) must include details of efficiency savings made by the local authority.”
This amendment would require the report published by the Secretary of State on the set of principles to include conclusions from an assessment of needs carried out for the local authority area and details of efficiency savings undertaken by the local authority.
It is a great pleasure to move this probing amendment. It is inspired in part by the example of Surrey County Council and, perhaps surprisingly, some words of wisdom from the previous Prime Minister, who famously described local government as
“officially the most efficient part of the public sector.”
That is one of the few things he said as leader of the Conservative party that I am tempted to agree with. The Conservative party has a tendency—Ministers have been doing it again today in the run-up to the housing White Paper—to blame all the ills of the world on local councils.
Amendment 20 is merely an attempt to make clear, not only to Ministers but to those who watch and read our proceedings, that there is a more complex picture about the scale of the challenges facing local government that should be taken into account, whereby those residents make an assessment as to whether the council tax ask they are expected to pay—if, indeed, it goes above the threshold—is excessive or not.
Surely there is a case for recognition of some assessment of need. Surely there is also for recognition of the scale of efficiency savings that councils have sought down the years—they ought to be taken into account. My council, Harrow, has led the way in seeking to become a commercial council. It has worked with organisations such as IBM on new social care apps that have dramatically improved the quality of the marketplace, to use the language of Conservative Members, for private social care providers at a local level. They are commercialising the app that they have developed and generating significant revenues for the local authority. The product they have offered is innovative, increases efficiency and leads to a better quality of service. Sadly, we do not hear enough examples like that. It is in that spirit that I move amendment 20. Much has been made of the £5.8 billion funding gap that the LGA says will be present by 2020. Again, that is a further demonstration of the need for and demand on local authority services. Surely that should be taken into account.
If there ever was a decision by a county council that was well-timed, it is surely the decision of Surrey County Council today not to go ahead with its 15% referendum. The council leader apparently reported to his fellow councillors that he has had lengthy conversations with the Government and has received various reassurances—he would not say what those were, funnily enough. As a result, he has recommended to his council that the referendum should not go ahead, which it has accepted. I suspect that the tireless campaigning of my friend Robert Evans, the one Labour councillor in Surrey, has intimidated the Conservative leader into backing down. If that is not the case, one has to praise the political skill of the leader of Surrey County Council—if the cheque is in the post to him, as it sounds as though it is—for his act of brinkmanship.
What Conservative councils will take from Surrey’s experience, if indeed the cheque does eventually arrive, is that all they need to do is threaten big council tax increases and the Government will bend to their will. If at some future point my friend Robert Evans were to become the leader of Surrey County Council—I suspect that prospect is not too far off—and propose a 15% council tax referendum, it would be seized on by the Minister, and various nonsense about the profligacy of Labour councils would be repeated ad infinitum on the Floor of the House and in Committees left, right and centre.
Surrey County Council has exposed the weakness of Ministers’ arguments around the threshold. Nevertheless, it will perhaps be interesting to hear the Minister take this opportunity to acknowledge the scale of the funding gap that the LGA has identified and praise local authorities such as Harrow Council for the work it has done to offer more efficient services.
Local Government Finance Bill (Fifth sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
I appreciate the fact that the Minister may have had too much caffeine in the wake of very few hours’ sleep, but I encourage him to be patient. I will come to the merit of the amendments and what they seek to achieve.
I would not have thought that the Minister was naturally frightened of appearing before the House, although he has a track record of getting things wrong. He was recently a member of the Standing Committee that considered the Housing and Planning Bill, which tried to introduce a pay-to-stay scheme. Our parliamentary scrutiny in that debate helped to begin the process of getting Ministers to cave in and to recognise that they were wrong. There is a strong case, not for less parliamentary scrutiny, as the Minister envisages with this Bill, but at least for maintaining, if not increasing, the scrutiny of local government on the Floor of the House.
Jim McMahon (Oldham West and Royton) (Lab)
Does my hon. Friend agree that it is difficult to give an adequate response when the Minister has not bothered to say why scrutiny has been taken away in the first place?
Mr Thomas
As my hon. Friend knows, one of the reasons that I tabled the amendments was to try to draw out from the Minister why he does not want sustained and effective scrutiny of local government finance.
There is a timing issue. You will remember, Mr Gapes, from our debates last week that under the Minister’s plans we can expect a series of new responsibilities to be devolved to local government as the quid pro quo for the extra £12.5 billion being handed down under the 100% business rates devolution. Surely there should be an opportunity, when we know what those new responsibilities are, to be able to debate how, in the context of local government finance, they are likely to be handled by local government up and down the country. Again, proper parliamentary scrutiny and a clear requirement for the House to approve the principles of allocation statement would provide an opportunity for a debate on how those new responsibilities will work in practice.
In addition, this is effectively a completely new system of finance. Sure, we have been working with 50% business rates devolution for three or four years now, but to have 100% of business rates devolved and the revenue support grant, along with a whole series of other Government grants, axed is a very different landscape for local government finance. Surely there should be a regular opportunity to test how that new system of finance for vital public services up and down England is working. It would be sensible to at least maintain the current level of parliamentary scrutiny as part of the new order.
There are also significant unknowns about the future pattern of local government finance. We do not know how the system of tariffs and top-ups will work in practice. We have had only mild illumination from the Minister. We know that people who reduce their business rates will not be entitled to a top-up, but we do not know any arrangements for tariffs. Last week I gave the example of Heathrow and the third runway. I will come back to that later, too, but what about tariffs that might or might not be imposed on Hillingdon and Maidenhead councils, both of which potentially stand to gain significantly from a third runway at Heathrow? Many local authorities want to know whether there will be an enhanced contribution from such local authorities to help with the redistribution process. Surely how little we know about how tariffs and top-ups will work in practice underlines the case for at least maintaining, if not enhancing, the level of parliamentary scrutiny.
I know that England matters hugely to you, Mr Gapes, with your ongoing interest in West Ham football club. In essence, the local government finance settlement is an opportunity for England to take centre stage in the House of Commons and in our political process. Conservative Members, however, seem determined to axe an opportunity for England to take centre stage. That, frankly, is something that we are profoundly disturbed about.
Lastly—well, not “lastly”, I would not want to create a false impression—under the Bill, a range of powers will be available to the Treasury, to the Department for Communities and Local Government and to the Minister to interfere in local government finance. Although the Minister likes to see himself as the Che Guevara of local government finance, ushering in a radical new process, in practice there will be plenty of scope for the nanny state in the form of the Department for Communities and Local Government to continue to meddle in local government finance up and down the country. Indeed, thanks to the House of Commons Library, we know that the Bill—should it go through unamended—contains at least 56 new opportunities for the Treasury, the Minister or other Communities and Local Government Ministers to meddle in how local government finance will operate. Surely that makes another aspect of the case for continued serious scrutiny by the House of Commons and the House of Lords.
The Treasury or the Department for Communities and Local Government may want to introduce new reliefs to help business in future. The official Opposition, as a pro-business party, want to help businesses—[Interruption.]
Jim McMahon
I am intrigued that Conservative Members have to check Google to find out what their manifesto commitments were. We are very clear what ours were, and we are very clear that a number of them have been taken on in the Housing and Planning Act 2016 and the Bill. Does my hon. Friend agree that the Labour party’s manifesto commitment was very clear: the local government and health budgets would be brought together, with local government in the driving seat making efficiencies in health to help properly fund adult social care?
Mr Thomas
The hon. Gentleman, in his usually charming way, is tempting me down a path that will get me into a lot of trouble with the shadow Chancellor. [Interruption.] “Be brave!” say Conservative Members, and I am, but nevertheless I will not use the Committee to announce future Labour party policy. It would feel like a missed opportunity if only a few party members were present to hear about the new direction that Labour will take when it returns to government.
Jim McMahon
I find it ridiculous of Conservative Members to suggest that a tax bombshell is waiting, when we know that the only one being suggested is the council tax bombshell—a 25% increase throughout the country. That is the only tax bombshell being discussed, although not at anywhere near the level of detail that is justified. Does my hon. Friend agree that we need to see the funding formula in the round before making a decision on the Bill?
Mr Thomas
I do agree. I have described the changes as a triptych. One normally thinks of triptychs in connection with great works of art, and I suppose the hon. Member for Thirsk and Malton, who believes that the Bill will be a radical transformation of local government, might be tempted to see it as one, but we know that that is a long way from the truth. The Bill is only one relatively small part of the package; the needs assessment and the fair funding review will have to be done before we truly know the impact of 100% business rates retention and whether it is in the interest of all local authorities, as Conservative Members claim.
On the quantum of local government finance, I gently point out to the hon. Gentleman that Unison research shows that there is a surplus in the main non-domestic account for business rates that could be used to fund an increase in social care, if Ministers so chose. If my amendments are not agreed to, we risk having fewer opportunities to debate the quantum of local government finance, the question of how it is allocated and the consequences for the public services that local authorities throughout England are allowed to offer.
I am beginning to contemplate the conclusion of my remarks, but let me first dwell on delayed transfers of care. If my amendments are not agreed to, there will be fewer opportunities for the House of Commons to consider those, too. I have some sympathy—not a lot, but some—with the Prime Minister’s point that the speed and quality of transfers of people from hospital back to a social care setting varies among local authorities and clinical commissioning groups. I do not want to explore that issue in detail, because that would be outwith the purview of the debate, but when Hampshire County Council, a Conservative-led local authority, is responsible for the highest number of delayed transfers of care—more than 8,000 in November alone—I have to wonder whether there is a problem with its funding. I do not represent Hampshire, but I recognise that as Members of Parliament we have a responsibility to think about the fortunes of people in England, not just in our areas but in others, and I worry about what that statistic says about the state of local government finance in Hampshire. Whenever there is a change in local government finance, there should be a regular opportunity for Members of Parliament to explore the situation, not just for each of our authorities, but for others throughout the land.
If Hampshire does not inspire concern among Conservative Members, what about Essex County Council, which had 5,684 delayed transfers of care in last November alone? In Northamptonshire, which at least one hon. Member may have some interest in, there were more than 5,400 delayed transfers of care in November; again, that suggests some difficulties with the authority’s social care funding. Surely it is our responsibility as Members of Parliament not just to focus on the authorities that we represent—on Harrow or Oldham—but to think about the citizens of Northamptonshire, and to worry and ask questions about what their local authorities’ finances look like.
In Kent, there were 4,884 delayed transfers of care—the sixth highest number in the country—in November alone. What does that say about the state of Kent County Council’s finances? Much of that wonderful county is taken up with agricultural land, so in the brave new world of 100% business rates retention, there are likely to be fewer opportunities for business rates growth there than in other areas. Again, those of us who can think strategically should be worried about the situation that Kent County Council faces. I offer those four examples of delayed transfers of care as a reason for concern, and I look forward to the Minister’s explanation of why local government finances should not be debated regularly on the Floor of the House and why the Secretary of State should not have to answer for what he plans to do.
Jim McMahon
I thank the Minister for his intervention and for showing that in some ways he may have a slightly better grasp of his brief than I thought. However, 97% of local authorities have submitted their multi-year financial settlement. The Minister has still not confirmed how many of those local authorities have identified a funding deficit. It is all very well saying that local authorities have submitted the plan. What we have not had is the detail of how many are in deficit and will not be able to fund statutory services over the life of that multi-year settlement. That is why the annual scrutiny of public finances in local government is really important.
We do not yet know what the safety net arrangements will be. If there is an in-year shock to the business rate base, how will we know that that will be rectified in the formula that is being assessed? How will we know that any new formula will take into account the very different geographies and demographics in our areas? It may need to be rectified mid-year. That would be picked up in an annual review.
Mr Thomas
I accept the Minister’s point that the question of a vote on an annual basis may raise some uncertainty for local government, but it has coped with that for decades. Is there not an issue about the uncertainty for local government from new decisions that the Treasury may make on, say, small business rate relief? I think of the Budget measure that the previous Chancellor introduced to extend business rate relief to smaller businesses and shops, which took £7 billion out of the total business rate taken in. Arguably, that had more impact on local government finances than any tiny uncertainty about a vote in the House of Commons.
Jim McMahon
That is absolutely right and I fully concur with it. I intend to wrap up now so the shadow Minister can respond more fully and we can hopefully move to a vote.
Think about where politics is not just in this country but in the world. People are fed up of having things done to them and being told that their lot is what it is, and that they have no voice. Parliament’s very important function is to give people a voice. When people talked about getting back control, they did not mean taking power from Brussels and giving it to junior Ministers; they meant that their elected representatives should have a voice in Parliament and real power. For the Minister and the Government to introduce 56 new powers on top of local government and take away the role of Parliament is absolutely unacceptable in today’s political climate.
Mr Thomas
It is a pleasure to have the chance to summarise the debate so far. I indicated in the middle of my remarks that at least a couple of these amendments are probing amendments. At this stage, I do not intend to press amendments 24 and 25 to a vote. I will come to amendment 26 in a second.
I gently suggest that the Minister needs to reflect a little more on this debate and the question of the accountability of the House of Commons. In his response, he did not justify taking away the requirement for the House of Commons to approve the principles of allocation statement and the amending statement, although he made a perfectly fair debating point about whether it should take place annually.
The broad thrust of my remarks was to challenge the notion that Parliament should not have to approve the principles of allocation statement and any amending statement. We will want to return to that on Report. The Minister hinted on Second Reading that he might take seriously the concern of the Chair of the Communities and Local Government Committee about the reduction in scrutiny of local government finance. When the Minister’s feeling that he has been subjected to tough love on this Committee has subsided, I hope he will reflect more positively on the case for parliamentary scrutiny. He may not be able to see it at the moment, riding high as he is in the Department for Communities and Local Government, but things do come around and Governments do change colour. Perhaps he will still be a Member of Parliament in those circumstances, and perhaps the people of Nuneaton and Warwickshire will wonder why he is not doing more to raise questions about the financing of their local public services on the Floor of the House of Commons. The measure that he is locking into the Bill risks denying him an opportunity to give his constituents satisfaction in future.
I take the point that an annual vote on local government might inject an element of uncertainty into the proceedings, but the brutal truth is that parliamentary arithmetic normally allows the Government to get their way, so that element of uncertainty is rather overstated. In that context, I gently say to the Committee that, at a suitable time, I intend to press amendment 26 to a vote, because parliamentary scrutiny is so important. I hope the Minister reflects further on the fact that Conservative Members will table amendments on Report. The issue of parliamentary scrutiny no longer seeks to divide Members on both sides of the House, committed as we all are to the principles of the Bill. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Local Government Finance Bill (Third sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
My hon. Friend speaks to one of the tensions at the heart of the Bill. On Tuesday, we heard considerable concern about the impact of that tension from the witnesses in both the morning session and the afternoon session. I want to dwell on that tension in due course.
The other question associated with the concern about redistribution, and I hope the Minister will be willing to dwell on this in his response, is, what are the key principles that the fair funding formula will operate on? As I understand it, the fair funding review is currently working its way through his Department. We have no idea, sadly, when we can expect publication of that document. We are none the wiser about the rules by which the fair funding review is being conducted and the criteria that are being used.
Jim McMahon (Oldham West and Royton) (Lab)
Does my hon. Friend agree that this point is critical to assessing the impact of this measure, whether a positive or negative change is being made, and the way in which the Minister has tried to decouple the framework from the actual financial impact on local authorities?
Mr Thomas
I do agree. One wonders what the rush is to get this Bill through now, before the fair funding review and the draft regulations associated with the Bill have been published to allow proper scrutiny. Perhaps Ministers’ minds are focusing on the provision later in the Bill to delete any annual consideration of the state of local government finance and the scrutiny thereof, and that is motivating them to rush the Bill through. That is something I want to come to later in the Committee’s proceedings, if I may.
Mr Thomas
There does seem to be a pattern of Ministers shying away from parliamentary scrutiny. I do not know why, because we always enjoy the Minister’s appearances, but it is a concern, as my hon. Friend the Member for Oldham West and Royton also made clear. Given that this measure is one leg of the triptych of elements that are associated with 100% business rates devolution—the paving Bill, which we are discussing here, the fair funding review and the detailed regulations—one would have thought it better to have seen all those together at one moment so that we could have assessed the benefits or not.
Jim McMahon
That is a very good point. Given our assessment of this, it is very easy to be cynical about the motives for not wanting parliamentary scrutiny. It could well be that the plan is so bad that there is a fear of parliamentary scrutiny, but it could be that the Minister is just very nervous. If it is any help to the Minister, perhaps we can say that we will be gentle, encouraging and supportive during that scrutiny and that he should not fear it.
Mr Thomas
My hon. Friend makes a very interesting point. On Second Reading, I mentioned some Institute for Fiscal Studies analysis that bears repeating. When the IFS considered what would have happened between 2013-14 and now if 100% of business rates income were retained at that point rather than having the 50% business rates retention scheme, it found that 16 councils would have seen their funding increase by 20% or more, whereas only one council saw its funding go up by 20% or more under the current scheme. Conversely, on the basis of the IFS analysis, 122 councils would have seen their funding fall under 100% business rates retention between 2013-14 and now, with 12 of those councils losing more than 2% of their income. No council has lost that much under the 50% scheme.
Therefore, the concern put by my hon. Friend in his usual forceful manner—it was about whether there might be further serious cuts in the spending power of local authorities and, crucially, how they would be distributed—was a point well made. That is a genuine concern, which the Minister needs to address.
Jim McMahon
Local authorities have commented that, because business rate valuations are so heavily dependent on rental values, every time there is a revaluation it has a bias to London authorities, where the rental market is overheated, and disadvantages local authorities outside London. There is a risk that, without the top-ups, tariffs and safety nets, presented in such a way that we can scrutinise them, local authorities could be seriously disadvantaged at the next revaluation.
Mr Thomas
My hon. Friend makes a good point. I would not say that the concern from the business community about business rates revaluation has dominated the pages of the Evening Standard, but it has been a significant theme for those who follow local government in London and business rates issues, as I do.
To return to the distribution of funding between multiple tiers of local government and, particularly, the allocation of funding between counties and districts, one concern is that if districts’ funding share were to be reduced, they would be less reliant on top-ups but more exposed to the risk of a fall in business rate income. Clearly, counties face the reverse risk that, if Ministers decide to reduce the available top-ups, services offered by county authorities to residents will come under even more pressure.
A similar tension was noted earlier by my hon. Friend the Member for Wolverhampton South West. Ministers have talked about an incentive under the Bill for districts to capture business rate income by championing big businesses that want to build warehouses or other property, but would a lower share of income for districts reduce that incentive? The system of top-ups and tariffs critical to the extent and effectiveness of redistribution arrangements under the Bill is key to whether the incentives to promote new economic development that Ministers say the Bill will generate will work. Whether the incentives work in practice is intimately linked to the redistribution arrangements.
Amendment 1 would still require districts to pay a percentage of business rates to the Secretary of State, so that some of the funding could be directed onward to counties and beyond. This is an opportunity for Ministers to clarify their intentions as to redistribution between districts and counties. As I have suggested, one concern about the Bill is whether the huge incentives—the revolutionary incentives that the Minister talked about—for local economic development will materialise in practice. If they do not, the practicalities of redistribution become even more critical.
We have heard at some length about the type of economic development that could be created under the Bill. It is property-based growth. The only way in which local authorities will benefit from the purported incentives under the Bill will be by large businesses locating in their areas. It is easier to see how those incentives might exist for an authority with a large amount of land capable of development. However, quite a few authorities —you will not find it hard to imagine which ones they might be, Mr Gapes—face significant barriers to that type of development, and therefore to that type of local economic growth. That underlines the need to get the redistribution arrangements right.
Mr Thomas
My hon. Friend makes a good point, but if he will forgive me, it is apposite to the clause 1 stand part debate, when it will be worth dwelling on the revenue support grant in a little more detail.
I was focusing on authorities that might have concerns about how redistribution would work. Many urban authorities currently benefit from top-ups under the scheme—perhaps that top-up or income is not quite as much as they would want—but are nevertheless very concerned about redistribution. I am thinking of my own authority. The London Borough of Harrow has a very high density of housing, and although there is some scope for new business development, it is a very highly developed area, and obviously constituents and the council want to preserve the character of the area. The Minister may say that there are incentives in the Bill to promote economic development, but in practice there are significant barriers to growth, even in many urban areas. That is one reason why the amendments are critical.
Jim McMahon
An important consideration, as I hope my hon. Friend will agree, is that this is not just about square footage, but about the value of that square footage. Let us take an industrial space in Oldham. According to the valuation office website, the average value of that land is £22 a square meter, compared with £42 a square meter in Trafford, so even within the same city region there are massive variations in land values. Clearly, Greater Manchester is part of a pooling arrangement, but other authorities, such as Oldham, that are not currently part of pooling arrangements would not benefit. In future revaluations, they could be seriously damaged.
Mr Thomas
My hon. Friend underlines the point that I am making about the concern that urban authorities face significant barriers to the type of economic growth that the Minister says will now sweep the land as a result of the Bill. They are looking to the Minister for more detail about how the redistribution arrangements will work in practice.
In the context of amendment 23, I want to focus on one example of where redistribution as a result of economic growth is particularly interesting. This is a topical issue, because it relates to the third runway at Heathrow. Members of Parliament not so lucky as we are to be on the Local Government Finance Bill Committee have to content themselves with a discussion in the main Chamber about the consultation arrangements for the third runway. I invite the Committee to assume that the third runway at Heathrow will be built. It is something that I strongly support—I only wish Ministers had got on with it a long time ago, but we are where we are.
Jim McMahon
Of course. Does my hon. Friend agree that, under the current arrangements, that could be a barrier? If a council loses the business rates income from a hospital, will it take the mature decision that is in the wider interest?
Mr Thomas
My hon. Friend makes a good point. I think again of Allerdale Borough Council. In Keswick, there is a hospital that used to have an accident and emergency department, but that has been reduced to a walk-in centre and there is talk of it being closed. That is of considerable concern to the local community, but I suspect that it is also of concern to the treasurer of Allerdale Borough Council because of the potential lost business rates income. I hope that my hon. Friend will catch your eye, Mr Gapes, so that he can dwell on that point.
I want to dwell a little further in the context of amendments 1 and 23 on redistribution between poorer and richer areas. As I pointed out in response to the hon. Member for Waveney, if one analyses local government reaction to the Conservative party’s enthusiasm for 100% business rates retention, one will see that there is real enthusiasm for it in wealthier areas, because councils can see the potential benefits of the extra business rates income that might come their way, particularly if they have lots of land for development. However, poorer areas that have already lost out in terms of the revenue support grant, as my hon. Friend the Member for Wolverhampton South West says, and where there is less scope for large-scale property development, are more worried about what this measure might mean.
Mr Thomas
I agree with the broad thrust of that; those in poorer areas, as evidenced by the index of multiple deprivation, are likely to be at most risk, in terms of social care. However, figures now available on social care funding suggest that the crisis is hitting areas beyond those that are poorer. There is clearly a national emergency, and I fear that it may get worse if the issues raised in amendment 2 are not addressed.
Jim McMahon
My hon. Friend rightly highlights the fact that money is being reused and recirculated. Does he agree that a fair assessment was not made of where money was taken from? There is deep concern in the 57 local authorities that are now worse off under the new homes bonus changes to adult social care. No accurate assessment has been made of the impact.
Mr Thomas
My hon. Friend makes a good point. I want to explore issues to do with current social care financing, because they are pertinent to the case for amendment 2. Local councils have had to deliver billions of pounds-worth of savings since 2010. Indeed, in the previous Parliament there was a 40% real-terms reduction in local government spending, which inevitably hit councils’ ability to provide social care.
The impact on social care spending has been severe. More than half of social care authorities reduced spending on social care between 2010-11 and 2016-17. The fear is that, if the Conservative party does not embrace amendment 2, authorities already hit by the current scheme’s redistribution elements will find that the same redistribution mechanisms, if they are used again, will mean even more severe social care cuts after 2020.
The cost of providing social care is of course not flat, so the spending cuts are an underestimate with respect to the actual reduction, and I have some pertinent examples, because 122 social care authorities have cut spending in real terms in the past seven years. Again, it is very sad that the hon. Member for Thirsk and Malton is not here, because his social care authority, North Yorkshire County Council, has been one of the lucky ones; it has been able to increase spending in absolute and in real terms. It is also sad that the hon. Member for Waveney has had to depart, perhaps to focus on coastal erosion outside the Chamber.
Jim McMahon
I share my hon. Friend’s view that the 2015 Labour manifesto was a beautifully crafted piece of work, although it is fair to say that unfortunately it was not much read by the public. Does he share my view that this is not necessarily about the total amount of money spent by the public sector, but about where that money goes? There is still a massive block between the money spent in the NHS and the money spent on adult social care. By bringing that together, which was the manifesto commitment, social care would be better off.
Mr Thomas
I have considerable sympathy with my hon. Friend’s point. The new Prime Minister has taken up so much of our manifesto that one hopes she might want to take up that commitment as well. Certainly, that might help to deliver one other part of the long-term solution to the social care crisis, which I think everyone apart from Communities and Local Government Ministers thinks is necessary.
Mr Thomas
My hon. Friend makes a good point. He and the rest of the Committee should look at the very particular situation facing Surrey County Council. We have heard that every councillor in Cornwall and in South Northamptonshire is an enthusiastic supporter of the current distribution of finance and of these proposals. As I hope Conservative Members recognise, however, not every Conservative-run council shares that enthusiasm for the way in which local government funding is managed. Many have serious concerns. It is important for us to consider the evidence from those councils as well as from the South Northamptonshires and Cornwalls, in the context of whether the social care crisis will continue beyond 2020 under the Bill.
Surrey County Council’s leader, David Hodge, an experienced figure in local government, has revealed that he will call for a referendum on a proposed 15% increase in council tax. My hon. Friend the Member for Oldham West and Royton, who has significant recent experience of local government, tells me that Mr Hodge is an extremely effective and astute leader and an imaginative figure in local government.
Jim McMahon
I concur, having worked with David on the Local Government Association. Councillor Hodge, however, is more than just leader of Surrey County Council; he is also group leader of the Conservative group on the LGA. That adds significant weight to his intervention.
Mr Thomas
My hon. Friend underlines my point. Mr Hodge is a figure we cannot ignore in the context of this Committee’s work. Surrey County Council covers one of those otherwise great areas of the country that sadly lacks a Labour MP. [Interruption.] I did not expect to be heckled on that point. I can hear the objections from Government Members.
Local Government Finance Bill (Fourth sitting)
Debate between Jim McMahon and Gareth Thomas(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
Is there not a broader point here about the sustainability of support for council tax? The Prime Minister has made much of trying to help those who are “just about managing” with their family budgets. A 25% increase in council tax, introduced because Ministers in the Department for Communities and Local Government have no clout with the Treasury, will have a huge impact on the budgets of those whose finances are in the “just about managing” category. Does that not also play into the debate about the future of local government finance?
Jim McMahon
It is actually worse than that. If people thought, “Okay, the things that I rely on as a taxpayer are being taken away, but it will mean that my elderly relative or neighbour is being better looked after”, there might be a begrudging acceptance that that is the new settlement. The problem is that the additional council tax that is being collected will not even pay the additional national insurance contributions or living wage contributions that are expected. Even though people will be paying more in council tax, it will not mean more people receiving adult social care when they need it, because local authorities are struggling to keep their heads above water.
When local councils came to the Government to ask for support for adult social care, the Government did a three-card trick. They said that they would provide new money, but they took the money from the pot that already funds council services. They took £241 million from the new homes bonus, refreshed it and put it back in as an adult social care grant of exactly the same amount. Within the total amount of money in local government, there is no new money for adult social care.
The increase in precept that council tax payers are paying for this year will be a negative £6.7 million throughout the country, because all that money is going towards paying for the increase in national insurance and living wage contributions. It is not even enough funding to keep councils’ heads above water. Of the councils that have had new homes bonus money taken away, 57 receive less for adult social care under the new system than they did before. We asked for information on the criteria used to assess where that money went, but there were none. It was all completely fictitious—it was made up.
Let us be honest: the Local Government Association is a fantastic membership organisation, but it is often accused of going down to the lowest common denominator because it cannot quite get cross-party agreement. However, the one issue that has absolutely united the different parties on it is adult social care. The LGA highlights that there will be a £2.6 billion funding gap in social care by the end of the decade and notes that the Government’s settlement
“will…fall well short of what is needed to fully protect the care services for elderly and vulnerable people today and in the future”.
The LGA also states that
“increasing the precept raises different amounts of money for social care in different parts of the country unrelated to need and will add an extra financial burden on already struggling households…it is hugely disappointing that today’s settlement has failed to find any new money to tackle the growing crisis in social care.”
So a cross-party organisation chaired by a Conservative Member of the House of Lords, which at some point will consider amendments to the Bill, has come to a cross-party agreement to call this a crisis, yet in his evidence session the Minister completely denied that there was a crisis in adult social care. I am not sure what else we can call it, when a million people who need care are not receiving it and when the Government are putting the burden on council tax payers but not even covering the cost of keeping people’s heads above water. I am not sure how we can say that there is no crisis, when the new model does not at all take into account the pressures being put on people.
We hear that new money has been provided in the form of the improved better care fund. Let us bear in mind that the LGA identified a £2.6 billion funding gap. The better care fund provided £105 million. That is a drop in the ocean compared with the real adult social care pressures that we have. We still need to see the detail, but our expectation is that the £12.8 billion of additional business rates referred to in the evidence session will swallow up all the grants that are currently distributed to local authorities. The truth is that there will be no new money for social care as part of this. That is why amendment 2 is so very important.
Mr Thomas
I do not know whether my hon. Friend has seen the publicity about the statement that the Association of Directors of Adult Social Services made today on its submission to the Treasury ahead of the forthcoming Budget. It makes the case, similar to the Local Government Association, that there needs to be an injection of £1 billion now to prevent the social care system from going even further into crisis. Does that not also underline the case for amendment 2? If there are problems now and we do not sort them out, they will only be greater in 2020 when this new system comes in.
Jim McMahon
I absolutely agree with the professional response. The problem is we do not have proper checks and balances and we do not have a system of tariffs and top-ups and a proper safety net that catches people when they fall. We hear that that will come, but we have not seen the detail. We are being asked to agree a framework that allows this Bill to go through without actually knowing what impact it will have on individual local authorities across the country. It is a fundamental consideration when passing law that one understands the impact that law will have. We do not mind making bad decisions, but we should not be making bad decisions without all the information.
We are in a situation where spending on adult social care has declined by £65 per person in the most deprived areas of this country, but has increased by £28 per person in the least deprived areas. I would not resent that increase if it meant people got the care they need, but I do resent the fact that people who live in deprived communities are not getting the same access to social care that people in more affluent parts of the country are. We are meant to be one nation. We hear that all the time in the Brexit debate; when the Scottish National party kicks off about what is happening in Scotland we all say, “We are meant to be one nation. We take a collective responsibility for our nation.” Let us have a collective responsibility for adult social care and make sure that everybody gets the support they need.
Jim McMahon
I am going to pay a visit to Swindon at some point—it feels like it is the hallowed land for development. I have visions of 20-storey tower blocks shadowing the town.
It is not accurate to say that we are proposing to tax students. Let us approach this issue in a mature and measured way and stop the cheap headlines. This is about making sure that there is a resilient and robust tax base in every area so that local authorities can generate the tax needed for public services in their own places.
We know the impact of not doing so. Adult social care complaints have gone up by 25%—people who are in receipt of services have increased the number of complaints they feel they have to make—and there has been a rise in 15-minute visits. This is not a cost-free exercise. Government seem to have a view that if we just turn a blind eye, say that it is not our problem and tell local authorities to find a solution—and if we just move money around without there being any extra money, which just helps us feel a bit better about ourselves—there is no problem. Well, speak to NHS England and ask what the problem is. The longer we ignore the pressures on adult social care, the more we push the burden on to the NHS. People who should be looked after in their homes are being forced into hospital to get the treatment that they need, and people in hospital cannot go back home and are having delayed discharges because the support they need is not ready for them to be able to go home. The cost of that is £820 million a year. There is a cost of doing nothing.
Mr Thomas
At the risk of injecting a partisan note into the proceedings, which you know I hate to do, Mr Gapes, I wonder if my hon. Friend has had the chance to look at the 20 councils responsible for the highest number of delayed discharges from hospital, which the Prime Minister has raised concerns about. The majority of those councils are Conservative authorities. I sympathise with those authorities because I do not think that they should be under attack from Ministers when there is a huge funding crisis in social care. I wonder whether my hon. Friend has seen those figures.
Jim McMahon
I have seen them and they tell a story. Instead of just reading out numbers—this is that kind of debate—I am trying to focus on how I would feel if I were in that position and one of my family members needed that type of care. I would feel bitter, not just about council tax but about the country. Our elderly relatives have given their lives to this country, worked hard and done what was asked of them. They have made a contribution. Many have served in the armed forces in order to provide the freedoms that we enjoy, but when they are at their most vulnerable and need us most, we turn our back and say, “It’s not our problem.” That is not the type of country I want to live in.
The Minister needs to accept at some point that this is a Government problem born out of Government indifference and deferral. It is high time that they stepped up. If they did so, we might not have the highest number of delayed discharges from hospital for elderly people since records began, or an 18% increase in A&E admissions for elderly people. Those are real challenges and real problems.
Mr Thomas
My hon. Friend said that he wanted to go to North Swindon and I know that he will travel back to Manchester. May I encourage him to reflect a little more on the current situation? When the right hon. Member for Cities of London and Westminster (Mark Field) spoke on Second Reading, he drew attention to the fact that Westminster City Council collects the most business rates; the figure is some £1.8 billion a year and he expects it to rise to £2 billion. Without amendments 1 and 23, is there not a risk that some of the redistribution from Westminster—I do not know whether Swindon benefits from that, but Manchester and Harrow certainly do—might be lost?
Jim McMahon
It would be ludicrous if the paper on distribution, which we are waiting to see, resulted in Westminster, which has had every advantage, keeping 100% of £2 billion. I would be amazed if any Government would be that stupid. I know that the Minister would not allow that to happen, because the kick-back from Conservative authorities would be as loud as that from Labour authorities. It strikes at the heart of fairness. It cannot be right that the seat of Government, with so many Departments involved in the payment of business rates into the system, has nothing to do with the actions of Westminster City Council. History shows that we have reached this point because that is how the UK Government have developed over time.
Jim McMahon
I absolutely believe that there is more to be done to bring together health and social care budgets into one pooled pot for the local area, with local government being given the responsibility for teeming and ladling and being held to account by the public for that. That is absolutely the right way to go. Only by doing that can we break down the institutional silos.
To be fair, the NHS has not reformed in the same way that local councils have had to reform. Joint working could benefit both parties, but we have to be honest about the transition required to do that, and accept that any pilot that has enough money and energy thrown at it can be made to work. We need to consider whether the pilot can be mainstreamed. Different people may approach everyday activities in different ways, so the two systems will have to run alongside each other for a certain period, with the inherent demand continuing as the new system kicks in.
Councils have to be able to see that change through. It could take a five to 10-year project to see through the cultural change to systems and processes, staffing terms and conditions, and everything else that would need to be looked at to ensure that it works. We are seeing that with troubled families. The Government do not have the long-term vision or appetite to see through genuine cultural change in how we deliver public services. If they do not see a saving after year one, two or three, the money is pulled and we start from scratch with another pilot. I absolutely believe in reform, but it has to be sustained reform over a period of time, and we have to be realistic about the amount of time it will take.
Mr Thomas
I highlight a small vignette of the crisis. It is odd that Ministers have not addressed the additional cost for social care providers as a result of the so-called national living wage. It is a good thing, in and of itself, but care providers need funding to compensate for the rise in costs, and nothing that Ministers have had to say, including on funding pots, has addressed that. Does not that need to be addressed before the new system is introduced?
Jim McMahon
That problem relates to my earlier comment about the need for a transition period when aligning staff terms and conditions and salaries. The truth is that staff employed by local authorities and private social care providers are on significantly worse terms and conditions than those of their NHS counterparts who have similar responsibilities to them in hospitals.
The Government do not have an answer as to the number of care providers that could go bust. Councils will have a limited amount of money that they can pay, and some providers will decide whether they can remain in the industry. We do not have a solution if a significant number of those providers give up and pass the responsibility on to social care in the local authority. We cannot afford what we are doing today, and if they took such action we certainly could not afford the increase.
There is almost a double whammy: we want the local authority provision to be a decent place to live and a decent employer—because that is the state, and we want it to set the bar for a decent place. Not only are we telling private providers to pay the national minimum wage; we are telling them to pay between visits. It is not good enough that people get paid only for a 15 or 20-minute slot, and not while they are travelling to the next appointment. We have been pushing—good local authorities have been policing it—for their staff to be paid for their hours working on the job, including travel time. However, for some providers that has increased the staffing bill significantly, on top of national insurance contributions and the national living wage.
I have talked enough about social care. If I am honest, the Minister probably still has not been brought to the point of changing his mind about whether there is a crisis. However, I am satisfied as to my own experience in local government, as a member of the community with family receiving council services, and of listening to what is being said by professional social workers, the LGA, NHS England and, to be fair, Conservative council leaders. It strikes me that everyone accepts that there is a crisis—except the Minister, when he gave evidence to the Committee. I invite him today to put the record straight, face his responsibilities, accept that there is a crisis and commit today to doing something about it.
Mr Thomas
It is not a coastal area, but it is surrounded by other local authorities that are part of the Lake District national park, which are similarly challenged in terms of constraints on the land they can use. One suspects that the natural pool of authorities that Allerdale council could work with would face similar challenges in terms of land being available for economic growth. That underlines the concern about redistribution.
Jim McMahon
Does my hon. Friend agree that one solution for Allerdale would be to have a broad tax base on which they could draw to fund public services? It strikes me that in such an area a significant amount of money must be generated through stamp duty income from the sale of high-value homes in the district.
Mr Thomas
My hon. Friend tempts me now into very difficult territory. The shadow Chancellor has long eyes and if I were to rush to pronounce on a whole series of new measures on fiscal devolution without having first spoken to him, I would get into very serious trouble. Nevertheless, my hon. Friend makes a very interesting point.
Jim McMahon
That is absolutely correct. The Select Committee went on to say that it
“calls on the Government to specify how it will protect councils which rely on redistributed business rates and are worried that they will lose out under the new system.”
Let us have full, rounded contributions.
Mr Thomas
I hope that my hon. Friend will have noticed and will address the fact that, if I may say so, the hon. Member for Thirsk and Malton slightly distorts what I asked the Minister. I asked: where is the economic evidence that 100% business rates retention will work? Presumably, 50% business rates retention has been successful in encouraging the sort of development that the hon. Member for North Swindon thinks will be part of the new Jerusalem under 100% business rates retention. If the Minister can point me to that piece of economic evidence, I will sleep even easier at night than I do already.
Jim McMahon
I feel slightly like I am in the middle of a different debate, but my hon. Friend’s point about the new Jerusalem is quite apt. When I think about the new Jerusalem, I think of the dark satanic mills that bound the skyline of Oldham and by and large are still there. They create an inherent unfairness in the business rates base of a town such as Oldham.
The devil will always be in the detail, which we have not seen or discussed. There is aggressive provision in the Bill for pooling arrangements. Local authorities will come together as pools, which will have lead authorities that take responsibility for deals. In some ways, that provision continues that inherent unfairness, because it allows negotiations about distribution to take place within areas. There seems to be a view that creating a pool will allow areas to teem and ladle, less affluent areas will benefit from more prosperous areas and, by and large, there will be an overall benefit. But because more prosperous areas have the upper hand since they have the lion’s share of the business rates take, they can negotiate preferential retention arrangements that other areas in the same city region or neighbouring authorities cannot.
For example, in Greater Manchester, the business rates pool expands beyond the city region, in recognition of the fact that the travel to work area goes into Cheshire, so the pool includes the 10 Greater Manchester authorities, Cheshire West and Chester. The two Cheshire councils have negotiated 50% retention before any money goes into the pool to be redistributed across the conurbation. They might argue that they are not part of the Greater Manchester combined authority or the devolution deal that has been struck with the Government, and they add value to the pot but do not really take away investment. There is some sense in that, but Stockport and Trafford, the two most prosperous areas of Greater Manchester, have negotiated arrangements under which they will retain a third of business rates growth before it goes into the pool, because that was the only way of getting them to the table. Even within a pool there is not equity or the type of redistribution that the Government have promoted.
A town such as Oldham is caught between a rock and a hard place. What should it do? Should it leave itself vulnerable to central Government changing the rules or go into a pool even though it will effectively be treated as a second-class local authority in that relationship? That is a fundamental challenge to where the Government want to go. Either we are bringing local authorities together to work in partnership and act as first among equals, or we are saying that the wealthiest local authorities in an area will always have the upper hand. I do not think that is fair or just, and I do not think it can continue if a national scheme is rolled out, because it will eventually start to breed resentment. People will look over the border and say, “That’s just not fair. Why are we in this situation where Trafford, Stockport and Cheshire get to retain the lion’s share when we’re meant to be part of the same city region and the same business rates pool?”
Jim McMahon
I need to give my response the caveat that I do not believe that enough money is being provided to local government services. If this is about redistributing a very scarce resource, it will lead to some very severely affected losers. I would like a single place budget, so that we looked at an area’s public sector spend from the Department for Work and Pensions, the health service, the Ministry of Justice and so on and allowed local authorities more power and control over that money, knowing that they could administer it better, teem and ladle and, hopefully, modernise public services. If we could do that, we might be able to see the future of local government financing, but that is not where we are today; today we are saying that the money we have is the money we have, and we will try to teem and ladle it in a slightly fairer way.
I have to say that towns such as Oldham have 700 asylum seekers, while the Prime Minister’s constituency has not a single one, yet no account is taken in any funding formula of ways to give the local authority the resources to support those people in the way they need. We need to ensure that any funding delivered has the right criteria, not just the sort of selective criteria that we saw being used for the rural services delivery grant.
Mr Thomas
My hon. Friend makes an important point about support for authorities in areas in which there is an increase in refugees being housed. Surely keeping the provision for revenue support grant would give the Government an easier mechanism for helping local authorities and their citizens to handle some of the additional issues that will arise. Retaining the revenue support grant in legislation would also enable Ministers to get money more easily to areas that are hit hard by flooding. When the hon. Member for North Swindon visits Keswick Town Council and Allerdale Borough Council, he will understand the significance of my point about flooding.
Jim McMahon
My hon. Friend hits the nail on the head. We have established the Allerdale question as a measure of whether—