Local Government Finance Bill (Tenth sitting)

Debate between Jim McMahon and Kevin Hollinrake

Tuesday 21st February 2017 Public Bill Committees

[Jim McMahon]

I am absolutely delighted that Government Members are supporting the new clause on that basis because that is exactly what the new clause is there to do. It is not there to stick with the current assessment criteria outlined by the European Union; it is not even there to ensure that the programme activity is continued. The new clause is about maintaining the amount of money being provided to those regions at current levels.

[Kevin Hollinrake]

The hon. Gentleman makes a good point. I would like to pick up on an earlier point made by the hon. Member for Harrow West, who talked about the antipathy to London. Nothing could be further from the truth. I think London is a wonderful place. It is so successful economically, but that is because it has had more investment. That is the point that is being made.

Southend-on-Sea, for example, is very badly treated in terms of local government funding—it receives around £720 a year per head, when many rich London authorities get £1,200 a year per head. It is simply not fair. The position is similar with transport projects. This is not a metropolitan versus rural issue; it is a London versus the rest of the country issue.

[Jim McMahon]

The rebalancing discussion was more about making the point that there has to be a recognition that more public sector investment goes into London. There will be reasons for that. This is not about London not being entitled to the money it gets. However, there is a call from other regions, not to say, “We want London to get less,” but to say, “We want the same.” A conversation on that basis is far more productive than setting one part of the United Kingdom against another, which other parties might to seek to. No one in this room would want to do that.

On that basis, there would be an open door for retaining European funding to the regions and, absolutely, allowing flexibility on how that is spent, even tied to negotiation with Government. However, as it stands, there is no certainty that that money will continue when we leave the EU. More than that, there is concern that in order to pay the divorce bill—not just for the lawyers, but for the settlement in terms of pension costs and historical and ongoing liabilities—the nation may have to provide a lot of money up front, which could be used for regional funding in the way that has been discussed.

If the new clause is agreed today, at least we will be able to lock down the funding that is sent to the regions to ensure that they are not paying a price for that divorce. There is a world of difference between people saying, “I’m going to vote to leave because I want more determination by my nation of the future of my nation,” and “I voted to leave because I want less investment for my community.” We need to be careful. Our challenge to the Government is to prove that their flavour of Brexit is not going to leave our constituents poorer than they were before. The new clause would help to show that they will not necessarily be poorer and that the Government understand that our regions need to be supported.

I should perhaps confess that it is a probing new clause. However, if it is not supported by the Government, we run the risk of providing further evidence to our local authorities that those in this grand place simply do not get it.

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[Kevin Hollinrake]

Surely the point is that the power is not with local government or central Government. The power is with the people. All any local authority has to do is go to the people and ask them to endorse the proposed rises, and they can have whatever rise any local authority may propose.

[Jim McMahon]

The funding of the new elected mayors for our combined authority areas is being met by council tax payers in those areas, as an additional burden. There was no referendum about whether local people wanted that, so talking about seeking a referendum if local people are to be expected to spend more money does not, I am afraid, hold water.

We will not make progress on the point today, because I think there is a fundamental gap between the spirit of localism—which can be heard from the Opposition Benches and is about empowering local communities and giving them the tools and levers to effect change, and the resources to make change happen—and the centralising, command and control way in which the Government are seeing through their devolution of financial settlements.

Local Government Finance Bill (Ninth sitting)

Debate between Jim McMahon and Kevin Hollinrake

Tuesday 21st February 2017 Public Bill Committees

[Jim McMahon]

I do not accept the starting point that the Government are sticking to their guns. If they have guns, they have no ammunition. The guns are weak and meaningless, because ultimately those who are expected to pay will collectively determine whether the pressure applied is something they can bear.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The hon. Gentleman has made some good points about the current state of the business rates system, but is he looking to revise the whole business rates system in this Bill Committee? Various bodies have looked at this, and it is a difficult issue to resolve. I would support taking a cross-party view to consider how we tax business in future, but we are not going to solve it today. What is the hon. Gentleman’s point?

[Jim McMahon]

rose—

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[Jim McMahon]

There is a world of difference in having a property-based system of taxation where regular assessments are carried out to make sure that the valuations placed on properties are relevant to market conditions. We have seen with council tax the way that decision has been ducked for 26 years, and it is right that we make sure that it is kept up on. The principle of a revaluation ought to be supported because it has to reflect the market and property conditions at the most appropriate moment in time. However, the way that is done, its impact and the outcome will be matters for debate. That is the debate that not only I but Conservative Back Benchers are having, and that we read in the papers today. In fact, there is real concern about whether this will get support from the Conservative Benches when it comes before the House.

It is right to challenge whether we should be redrawing the system of business rates within a Bill Committee. Of course we should not be doing that, but neither should we be redrawing it behind closed doors in secret.

[Kevin Hollinrake]

Rubbish.

[Jim McMahon]

We say it is rubbish, and I agree that it would be rubbish to do it in that way, but when we have a system where a letter goes out to Conservative MPs, incorrectly stating that many areas will not be affected when in fact they are, and when the truth is discovered, it is very clear that MPs come back—

Local Government Finance Bill (Sixth sitting)

Debate between Jim McMahon and Kevin Hollinrake

Tuesday 7th February 2017 Public Bill Committees

[Jim McMahon]

I agree with my hon. Friend that the evidence base was not provided in our evidence session. We have asked for written evidence, but it has not been forthcoming. It is difficult to scrutinise, given the throwaway comments that have been made.

[Kevin Hollinrake]

During the opportunities to challenge and ask questions of the witnesses, did any Opposition Member ask that question of them?

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[Jim McMahon]

The Minister is perhaps—

[Kevin Hollinrake]

Will the hon. Gentleman give way again?

[Jim McMahon]

Sir David, you have been very patient in this debate. To be fair, we had the exchange in our evidence session and we have had a protracted debate during our last couple of sittings. In some ways, we are going around in circles. We have repeatedly asked for the evidence base. We have asked what end we are working towards and what evidence base underpins that approach. Consistently, that has not been forthcoming. It is right, therefore, that Members continue to press the matter, but we need to make progress. We need to be slightly mindful of the time we have already taken and the number of amendments that we need to get through.

Even if the ambition is for 100% business rates retention and there is a view—the evidence base does not support this—that having any kind of clawback facility would inhibit growth, actually, the legislation provides for the levy account to remain in place and to be zeroed. If at some point it required a top-up, because there was not enough money in the levy account to provide the safety net payment, the Minister, without going through the rigmarole of Bill Committee sittings and all the other things we do here, would be able to change that through negotiation and consultation with local government. It strikes me as a complete dereliction. There is not just a lack of evidence—the provision is quite reckless.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Local Government Finance Bill (Fourth sitting)

Debate between Jim McMahon and Kevin Hollinrake

Thursday 2nd February 2017 Public Bill Committees

[Jim McMahon]

We have had a full and frank debate. We have just, only minutes ago, managed to glean more information—more in that second than we have had in hours of sitting or the evidence sessions about where the intention sits. Had the debate earlier been more honest and open, we could have dispensed with much of it today. Perhaps the Minister will be generous in the sharing of information, which he showed to be possible a few minutes ago.

Clearly, the reason the levy pool is not required is that the desire is for local government, not the Government, to administer the scheme. That would be in line with calls from local government, which has asked for an independent body to be established to look at redistribution formulas so as to ensure that is done in an independent way. That is something we are open to discussion about, provided there is a discussion to be had. I encourage the Minister in the spirit of openness to come forward with how that scheme will work in practice.

If there is an independent scheme, it would have potential and merit. We see that in the health service, where a separate and independent body is established to look at health funding and distribution. Something similar in local government potentially has merit, provided it has the freedoms. Whatever system is put in place also requires parliamentary scrutiny so that it can be held to account. A number of provisions in the Bill—the removal of the requirements to produce an annual statement of the funding formula and to bring forward the council tax increase cap—do not sit well with democrats because they reduce the possibility of proper parliamentary scrutiny.

The hon. Member for Thirsk and Malton referenced a review that is being undertaken by the Communities and Local Government Committee. I have a great deal of time for the hon. Gentleman. He puts a lot of time into ensuring that such reviews are carried out in the right way. I give credit to him and his Committee for doing so. I hope he does not mind me saying, however, that he has provided a half-truth of the review—[Interruption.] Okay, he was 100% truthful about the truth he provided, but silent about the remainder of the recommendations in the report.

The review said, absolutely, that local government had been asking for freedoms and that there was broad support for 100% retention, but that some big and unanswered questions potentially undermined the success of the programme. That is what the report says. The interim report has been provided to the Government, and the response is being awaited. In particular the report talks about how volatile the situation could be if the system is brought forward, without proper scrutiny, while at the same time the revenue support grant is taken away. The Committee was clear at the time that removing the revenue support grant without the checks and balances in place carried inherent risk.

The report also made points about fairness, equality, distribution and what would be done for areas where the business rate base and take were low. The CLG Committee was, absolutely, in favour of retention, but a number of other truths were relevant to its recommendations and that context was needed to give a firmer view, so there is still a long way to go.

[Kevin Hollinrake]

I take exception to the phrase “half-truth”, but the hon. Gentleman is right that the Select Committee made a number of recommendations of modifications to the Bill, many of which have been taken up, such as dealing with appeals. He and the hon. Member for Harrow West ask for evidence, but the Select Committee took extensive evidence during its inquiry, and there was almost universal support for business rates retention. The overriding point in the Select Committee report is:

“We support 100 per cent retention of business rate revenue”.

[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.

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[Jim McMahon]

I thank the Minister for remembering that and sharing it with the Committee today. It has been very useful for the debate. This is an open offer from this side of the House: if we get this right, it will benefit every local authority, provided that the framework is robust, proper checks and balances are in place, and there is a genuine mechanism for redistribution to ensure that a basic level of service provision can be provided in every area of this country—not as a result of their historical council tax base or business rate base, but because we believe in decent public services reflecting the need in local areas. That is exactly the call that is being made.

That will be a complicated formula, which will take into account the rural and sparsity issues; urban needs and deprivation; and the physical costs and limitations of delivering public services. We know that, but we need to see the detail and work through what it means in practice. When we have that detail, we could have a really serious debate about the future funding of local government. This will be a continuous call; this is not just one debate about public services and local government funding. Local government is asking not just for the retention of business rates, and to be left with council tax to sink or swim, but for fiscal devolution. That will mean a broader suite of taxes and duties, raised and retained locally, to help grow local economies, get people into better-paid work and provide decent housing. That is what local government is asking for. If the framework is the start of that, we should welcome it, but there is a lot of detail to be provided.

[Kevin Hollinrake]

As the hon. Gentleman knows, I am fully supportive of a fairer funding formula. Quite understandably, if it is purely based on cost drivers, it will mean some local authorities losing out and some gaining. I would support that if it was a clear, transparent and understandable system. Would he also support it in that situation?

[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.

Local Government Finance Bill (Second sitting)

Debate between Jim McMahon and Kevin Hollinrake

Tuesday 31st January 2017 Public Bill Committees

[Jim McMahon]

Q Perhaps my question was too narrow. For instance, I might have expected some contributions to make a bid for the retention of other taxes and duties that are raised at a local level, such as stamp duty, fuel duties, air passenger duties, as a way of having a broader tax base from which to generate income for public services.

Jo Miller: Where local authorities, with businesses, can demonstrate that there is a win-win, they should have the power to do so. We are in the most centralised state in Europe. Let me give another example from my day job—forgive me if I talk in examples, but it is what works for me. We put together a road scheme that was initially heralded as costing the taxpayer £110 million, when we had to follow guidelines from the Department for Transport. In fact, we worked out that it could cost £56 million: £18 million came from Government, and the rest was raised through local taxation and through business. It unlocked 10,000 jobs, 10,000 houses and £1.7 billion of private sector investment, equating to 3% of GVA in the region. That is the type of thing that good local authorities can do, working hand in hand with business, so we should grab with both hands any opportunity to make that work on a greater level.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Q To touch on distribution, which has been referred to a couple of times, the key now is how this pot of extra money is distributed. There seem to be some real disparities in the system at the moment; unfairnesses, I would call them. I will give a few examples at random. Harrow, for example, gets £80 more per head in spending power than North Yorkshire, despite the fact that Harrow has a wealthier, younger population. There does not seem to be any correlation between the spending power of local authorities and the need in those local authority areas.

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[Jim McMahon]

Q Has any research been undertaken to assess what the impact might be? If there is limited growth in the tax base for business rates and council tax within the total, but the demand for services is outstripping that available resource, is there any assessment of what that gap could be?

Professor Tony Travers: Over time, the amount of growth in the business rate base is clearly unpredictable, both at an individual authority and in total—the total will depend to some extent on the strength of the UK economy. As for the amount produced, I cannot give you an answer, in the sense that the Government would have to decide, particularly at the point of resets, which were mentioned earlier, whether they were going to ensure that local government spending always fitted back to the number that central Government had first thought of.

It is not unique: moving forward, this is the way the system operates now. So in a sense we are not truly moving forward here to a system where local government is free to determine the overall total of its income, partly because of all the new responsibilities transferred to it in the short term. In the long term, we must assume that tariffs and top-ups, which were discussed earlier, will be adjusted to the point that local government spending over time cannot significantly exceed the total first thought of so that it fits within total managed expenditure and therefore public spending planning purposes.

[Kevin Hollinrake]

Q Mr Lowman, how comfortable are your members with things like business rate supplements and infrastructure supplements?

James Lowman: There is concern. Half our members’ trade comes from within a quarter of a mile of their store—they are the local shop. Our reach into communities is pretty much unparalleled in any business sector. One thing that concerns them from that perspective is that large infrastructure projects may not be that relevant to them. New motorway links, new transport or major new developments will be less relevant to their particular trading position.

They are concerned about mechanisms for increasing their overall business rates bill. They broadly support the business improvement district model and the opportunity to have a very specific programme and proposal on which they can vote, and which needs an endorsement of business rates value from the majority of premises. That seems like a good double lock on ensuring that things that come through in business improvement districts are relevant to them.

We would encourage a similar sort of level of consultation without being very specific about what is being proposed. We are concerned about consultation. It is perhaps damning our own sector, but it is not routinely engaged with local authorities, local chambers of commerce or other local bodies. Perhaps they should be, but it is a fact that they generally are not engaged day to day. We are concerned about reaching those businesses in order to consult them. The relevance, the location and the mechanism of consultation is a concern, but it has been taken on in some of the checks and balances in the Bill.

Local Government Finance Bill

Debate between Jim McMahon and Kevin Hollinrake

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab)]

May I join many Members on the Government side in wishing my counterpart a very happy birthday? I am sure this does not quite constitute a birthday bash, and for many it is not quite the icing on the cake either, but we wait with bated breath for the Committee stage to really get under the skin of what the Bill means. I hope we will work together then, because I think there is a shared desire to promote devolution, to see more power shift from this place down to our communities, and to really empower local areas to determine what is right for them. But the devil, of course, will be in the detail.

We welcome the move towards devolution, and so will many of our councillors, but genuine devolution means actual power, not just limited decisions being made at a local level within a framework that is tightly defined by a very centralising Government; it means areas having genuine freedoms and genuine power, and working with communities to co-produce the future they want. That is devolution, and power and the ability to effect change are what we all came into politics for. None of us wants things in our areas to be predetermined by a Government—hundreds of miles away in many cases —who do not know the ins and outs of our communities, and who really do not know local circumstances in the way we do.

It is important that we develop a plan that works for the whole country. I think many people in England look at devolution being discussed in Scotland, Wales and Northern Ireland and say, “What about England?” Now, even within England, we are seeing towns, cities and counties being pitched against each other, with large parts of England still completely without any devolution deals. The challenge for the Government is that this is about letting go as much as it is about giving a little away to local areas. It is also about doing that in a meaningful way, and we should have the confidence to give the same powers we are proposing for our mayoral combined authorities to our counties and metropolitan areas. That is real confidence and real letting-go. If the Opposition can help in Committee to table some amendments on that, which will hopefully be received in a positive way, we will, I hope, have a fair settlement for England.

But let us be honest: some of this comes down to cash as well as power. We can have ambition and a desire to make our area the best it can be, but we need funding to make that happen. We need capital to invest in growth. I do not just mean areas doing deals with the Government—providing they have access to the Government, because those that do not will not get that capital funding. I am also talking about having revenue to make sure that the skills providers, the schools system, the health system and the Department for Work and Pensions all work together to make sure we see genuine reform and genuine growth.

A lot of people say, “If you want modernisation, to see where real innovation has taken place and proven itself to be efficient, look to local government.” A lot of people in the Department for Work and Pensions, Her Majesty’s Revenue and Customs and the Treasury should look at themselves in shame because of the way they have allowed frontline services to be cut to the bone while they themselves have failed to reform from the inside.

I worry that we still see a very narrow base being discussed when we talk about fiscal devolution and local autonomy. Let us be honest: we are still talking about council services being based not on need and on people’s genuine need for support and services but on house values in 1991. We have not had the courage to bite the bullet and take forward revaluations. We have not allowed local freedoms to look at exemptions and discounts in the way that areas have asked for through the devolution deals that have taken place.

On top of that, we are still talking about a very narrow business rate base. Many of the areas that have a low tax base for residential properties have the same issue with their business rate base: lower values and lower demand have an effect on the tax base and on the amount of tax that can be generated. It is a real shame that when we talk about fiscal devolution and autonomy, we are still taking the easy option. We are using property tax because it is easy: we know how to collect it and we know how to generate it. That then creates the pot of money that local government has to use to sink or swim. Well, that is okay for an area that has a strong tax base, but for an area that does not, the alternative to swimming is to sink, and that is not good enough if we believe in fairness and a decent society.

So we will see amendments being tabled in Committee that really reflect the idea of funding based on need. It is not good enough to set one area against another. If there are instances in rural areas that should be taken into account, a fair funding model should accommodate that. Equally, a fair funding formula should take into account areas with high levels of children who need safeguarding support or people who need social care. There should not be the constant imbalance whereby areas fight with each other to get scarce resources to deliver the public services that our communities need.

[Kevin Hollinrake]

The hon. Gentleman makes a good point about looking at this again as a blank canvas. Does he therefore accept that if that new funding formula meant that a local authority was worse off based on such objective need, he would support legislating on that basis?

[Jim McMahon]

We have heard from Members on both sides of the House the deep concern that any review will mean that some areas are worse off than others. As I said, that is inevitable with such narrow tax bases, when we are looking at council tax income and business rate income and saying, “That’s it.” Given that the additional grants to local authorities are now in question, we are always going to be fighting for a scarce resource.

Devolution deals have included requests for retention of air passenger duty and the tourism tax. Okay, not every area might want that, but if we believe in devolution, local areas should be able to have some of these options. The retention of fuel duty or VAT at a local level has not even been discussed. If we want genuine fiscal devolution, we need to be more open to more taxes being raised locally and spent locally, with local people holding to account the people who make those decisions.

It is not local government that needs to change, or even the DCLG team, but the Treasury—it needs to let go. The reason air passenger duty cannot be devolved at the moment is that the Treasury has no idea how much fuel duty is generated at any of our airports, because it is paid by the airline at its head office. The Treasury has no idea how much is generated from fuel duty, because it is not attributed to every petrol station but paid at the refinery, and that does not account for how much is spent at a local level.

Neighbourhood Planning Bill (Eighth sitting)

Debate between Jim McMahon and Kevin Hollinrake

Committee Debate: 8th sitting: House of Commons
Thursday 27th October 2016 Public Bill Committees

[Kevin Hollinrake]

I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests, which I should have done earlier.

Is the hon. Gentleman implying that every single development that is commercial to residential is not done well? In my life prior to entering politics, I dealt with many schemes that developers brought forward because of permitted development rights. They resulted in excellent developments that met market demand, which is key. I do not deny that there will be problems on some occasions, but is he trying to argue that every single development is an inappropriate home not built to the right standards?

[Jim McMahon]

I suppose the hon. Gentleman could listen to me, or he could listen to the architect who said of the Housing and Planning Bill:

“This new Bill only addresses speed of delivery: short-sighted political gain at the cost of long-term quality.”

The professionals are saying that quality is an issue. I can point to conversions in Greater Manchester, which I know well. Some have used the extended permitted development rights to produce a quality development. That will almost certainly be true, but we can all point to one and try to hold it up as an example of many, when of course that is rarely the case. However, as we are seeing, the Government just do not know. It is okay to shine a light on the evidence provided by professionals, but the Government do not know the answer. If a more regulated planning system were brought back in, council planning departments would definitely be able to get a grip on quality and see it through.

That is all we are asking for. It is not about passing judgment on whether premises should or should not be converted from commercial to residential; it is about ensuring quality, affordability and long-term sustainability and starting to plan communities and neighbourhoods, instead of letting developers get away without paying their fair share. I cannot see why anybody would argue against that. It would highlight the best developers who contribute to community and society. Fair play—they make a profit doing so, and there is nothing wrong with that, but there are some people who do not play the game fairly and who extract as much cash from it as possible, with absolutely no interest in quality or community. Bringing measures back in to take firmer control of that has got to be in the long-term interests of this country and of our towns and cities.