Council Funding and Social Care

Debate between Jim McMahon and Marcus Jones

Wednesday 22nd February 2017 Westminster Hall

[Jim McMahon]

There is a world of difference between a cross-party delegation having an audience with the Prime Minister, who ignored what was said in that meeting, and a reach-out from the shadow Minister to the Minister in the Local Government Finance Bill Committee to say that we should work together.

There are two issues, one of which is public service delivery, responsibility for which sits with local authorities, social care providers and health providers. Fundamentally, however, it will come down to brass tacks—where is the money? In the Opposition, that question is the responsibility of the shadow Communities and Local Government team; and in the Government it is the responsibility of the DCLG. There has been an offer to work in a cross-party way to find a solution.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

indicated dissent.

[Jim McMahon]

The Minister shakes his head, but he should read Hansard or pay attention in sittings of the Local Government Finance Bill Committee, where I made that offer. The cost of doing nothing is delayed discharge and more than 1 million people not receiving the care they deserve, but also the Government letting down people who have worked all their lives and contributed to society, and who deserve better than the lot they are given.

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[Jim McMahon]

Will the Minister give way?

[Mr Jones]

No, I will make some more progress and deal with these points before I give way to the hon. Gentleman.

The right hon. Member for Kingston upon Hull West and Hessle also had concerns about the varying council tax bases across the country, which is an extremely pertinent point. That is why we have profiled the improved better care fund’s distribution—which is £105 million this year, £825 million the following year and £1.5 billion the year after that—based on an area’s ability to raise additional funding through council tax. I hope he is reassured by that. Taking into account his point about the short term, we have put in place the additional adult social care support grant of £240 million this year to give additional support to local authorities, bearing in mind that the improved better care fund is back-loaded, as the right hon. Gentleman said.

The right hon. Gentleman made another point about Hull and the implementation of 100% business rates retention. An assertion was made and, I think, a figure put on the amount that would be available to Hull under that system. At the moment, no allocations have been made and no baseline funding has been set. We have been clear throughout the process of setting 100% of business rates retention that we would take into account a local area’s ability to raise business rates. We certainly recognise that redistribution will need to be part of the new system, to ensure that just because one area does not raise as much in business rates as another it is not left behind.

The right hon. Gentleman also mentioned the difference in funding between Kingston upon Hull and Kingston upon Thames. I will deal with that issue head-on, because for 2017-18, putting together the potential 3% increase under the adult social care precept, the adult social care support grant and the improved better care fund, Kingston upon Hull will actually get £6.86 million from those sources, while Kingston upon Thames will get only £4.88 million from the same sources. I hope that deals with some of his concerns about how funding is being distributed.

My right hon. Friend the Member for East Devon (Sir Hugo Swire) almost said that my presence at this debate was an outdated model—I hope that Mrs Jones does not take the same view in due course—but I know he did not mean it personally. He made some important points, including about unpaid carers. The Department of Health is leading on the development of a new national carers strategy that focuses on raising awareness of caring and on helping carers to ensure that they have the right support. He also mentioned the business rates retention system and the additional £12.5 billion of business rates that will go to local authorities. We have been clear from the outset of that process that that will be fiscally neutral, with additional responsibilities therefore going to local government in that sense. We are in the process of determining what those additional responsibilities will be, and we are consulting on a number of things at the moment. However, we have ruled out devolving attendance allowance to local authorities.

The hon. Member for Kingston upon Hull North (Diana Johnson) mentioned skills in the care sector, which is an extremely important point. The Department for Health is doing a significant amount of work to try to improve skills in that regard, and I think the national living wage will also help. The hon. Lady also mentioned a particular incident in her constituency relating to the national living wage. We are absolutely clear that the national living wage should be paid to people working for whatever company on the basis of the hours that they work. If there is any abuse going on, I encourage the hon. Lady to contact Her Majesty’s Revenue and Customs.

The hon. Lady also mentioned the allocation of funding in relation to deprived areas. I hope it reassures her that the average spending power per dwelling for the 10 most deprived local authorities is around 21% more than for the 10 least deprived local authority areas this year.

Local Government Finance Bill (Tenth sitting)

Debate between Jim McMahon and Marcus Jones

Tuesday 21st February 2017 Public Bill Committees

[Mr Jones]

The distribution of resources and the assessment of the relative needs of local government is an essential feature of the local government finance system, but those elements do not require legislation to determine them. However, I thank Labour Members for providing me with the opportunity to outline the work we are doing in that area.

Before doing so, I would say that I have heard what has been said, particularly by the hon. Member for Oldham West and Royton. It was unclear whether the commission would be there to simply divide the money available at the time between local authorities, or whether there is a role for it to determine the total money available and national policy on council tax. Were it the latter, it is important to set out that those issues have been determined for many years by central Government. Successive Governments, including Conservative Governments, the coalition Government of Liberal Democrats and Conservatives, and Labour Governments, have held to those principles.

In regard to the work already under way, we announced the fair funding review last year, which was universally welcomed by the local government sector. The review is conducting a thorough examination of what a relative needs assessment formula should be in a world where local government spending is funded by local government resources and not central grant. The findings of that review will set the initial baseline for the 100% business rate retention system.

From the start, we have recognised the essential role that local government has to play in shaping those reforms. That is why we have been working collaboratively with the Local Government Association, which is responsible for representing a broad range of views held by different sections of local government and their member authorities. That effective working relationship has already seen the establishment of a steering group supported by a number of technical working groups, which my officials co-chair with colleagues from the Local Government Association. That gives local experts a unique opportunity to help shape the review, and all the work of those groups is available online, adding real transparency to the progress of the review.

The process for assessing the relative needs of local government is well precedented and was, of course, followed by the Opposition when Labour was in power. Our collaborative and transparent approach represents a significant improvement on that process. In the summer, we published a call for evidence that set out key questions that the review will address. The Secretary of State has confirmed that he will report back to the House on the progress of that review.

Creating a new commission to consider needs assessment and new burdens, as these new clauses would do, blurs accountability for that important work and would add another significant layer of unnecessary bureaucracy, over-complicating the process for assessing the relative needs of local government. It is important to point out that it would undoubtedly lead to a situation where it simply costs the taxpayer more money.

Our proposals offer a better guarantee of a transparent process, supported by the best available advice from local government and elsewhere. On that basis, I ask the Opposition not to press the new clause.

[Jim McMahon]

Thank you, Sir David, for the opportunity to respond to the Minister. I cannot understand why the Government are so reluctant to accept these measures. Of all the changes in the Bill, some are extremely minor and it would not require legislation for the Government just to get on and make them. Their argument is that they have put them in the Bill to give clarity and to ensure that there is a clearly understood framework in place. If they were to establish an independent body to look at a needs-based assessment, potentially with redistribution, it would be right for it to form part of the same transparent framework that has been proposed for far more minor changes.

[Jim McMahon]

I absolutely share that point. There are 12 sets of regulations and something like 56 new powers for the Secretary of State. We are not seeing a loosening of what binds the hands of local government; it is much more a tightening. I do not think that that will be well received.

The main thing is how we move forward. There is so much uncertainty now, not just with the amount of demand in the system for public services. We have seen the social care demand, but there will also be child safeguarding and educational attainment demands and mental health and disability support pressures very soon. That is notwithstanding all the other 700 services that local authorities deliver on a daily basis to support our residents.

We are seeing a genuine crisis in public services in many parts of our country. Some have been more protected than others and some have been more affected than others, but there will be an impact across almost every community in the country. Either the Government are lining up to continue to ignore the scale of that problem and what it means to individuals, families and communities—following a similar pattern of behaviour to that which we have seen under the coalition and the current Governments—or they genuinely want to get a grip and put in place a more sustainable system that would prevent such shocks to local public services. If local government is saying that, through an independently commissioned report that has been agreed by every party political party—including the Conservative party—on the Local Government Association, I cannot understand for the life of me why the Government do not just take that with both hands and run with it. At the moment, their defence seems to be, “That would cost money. It would cost money to have this independent system in place.”

Let us be clear about what the role of that independent body would be. It would be there to assess the need in each area against some objective criteria that would be agreed with central and local government. The Government have said they are going to do that anyway, so let us put that to one side; it will happen whether this body exists or not.

We then talk about redistribution. We know how much money will be required, because a thorough and in-depth review would have taken place. We then need to understand how much money we have and how much we distribute to meet the demand that has now been identified. What Government would not want the ability to say, “This is an independent recommendation”? It would be a gift. We know that they are fearful of scrutiny. We have seen that in the decision that the annual financial settlement will not come to Parliament in the future—they do not want that parliamentary debate. But this gives them a gift to say, “This is not the Government’s saying this; this is an independent body that has worked in consultation with local government.”

Where we are going and what the end looks like is extremely unclear. We have been promised an independent assessment of need. We do not know the criteria, the timescale, the membership or the status. We do not know whether it will be inside or outside the Government or completely independent. Will it sit within local government? We do not know the detail of any of that. We do not know what the new business rate devolution will be. We do not even know which different schemes have been negotiated in each of the pilot authorities, let alone the sweetheart deal that has been agreed with Surrey, which is the only single authority negotiated business rate retention pilot in the country—I am sure the Minister will say whether this is right or wrong. All the rest have been done through a devolution deal through their combined authority arrangements or the imposition of directly elected Mayors. Surrey is being treated in a very special way—a way that other local authorities are not. The Government cannot craft a special sweetheart deal for everybody. At some point, we have to accept that the quantum of money is a quantum of money and we have to teem and ladle.

[Mr Jones]

I think the hon. Gentleman knows in his own heart that I have been quite clear that we need a pilot in a two-tier area. Councils across that part of the local government sector will be invited to put their name forward to be part of that pilot. No decisions around that have been made.

Coming back to the quantum of funding that the hon. Gentleman has just mentioned: I am still unclear on this. Is he saying that the commission that he wants to set up would determine the overall quantum of funding and things such as council tax setting? While he alludes to that, he has not actually said that as yet.

[Jim McMahon]

I hope that the Minister does not mind too much. We have done our best to be helpful and constructive and to offer ideas. Ultimately, there is only one person in this room drawing a ministerial salary and being driven around by a chauffeur and it is not me, yet.

[Mr Jones]

Will the hon. Gentleman give way?

[Jim McMahon]

You have to earn the perks that come with the job. I am not going to give way. We need to make progress. I am happy to receive a letter from the Minister if he feels it is necessary to justify his position. What is most important is not to conflate a number of different points that have been made that are legitimate and stand on their own two feet—they are not one and the same thing. There is a world of difference between establishing an independent financial commission to understand the need in each area for public services and then to advise back to the Government what that assessed need should be. Government may well say as part of the remit of that review that there is a quantum of money that is limited and within the criteria that are set, they may well seek advice from the independent body on how to teem and ladle within that quantum. There has been no suggestion that the independent body would take away the right of the Treasury to determine how taxation is generated and spent in the country. It is very clear if the Minister reads the new clauses and the new schedule that the remit is to advise Government.

--- Later in debate ---

[Mr Jones]

I thank the hon. Gentleman for tabling the new clauses, which would require the Government to provide a range of additional reliefs from business rates. New clause 4 would require the Government to introduce a relief from business rates for non-domestic properties used for the provision of NHS secondary or tertiary care or the provision of education in maintained schools. New clause 8 would include a similar but wider requirement for relief to be provided to all properties used principally by public bodies.

Although I appreciate the intention to provide support to important public services, I do not agree that exempting public bodies from the payment of business rates would necessarily be a helpful step. It may help if I remind hon. Members that buildings occupied by the vast majority of public services, including NHS hospitals and maintained schools, have been subject to non-domestic rates since they were introduced in 1990. That is part of delivering a fair and consistent system of non-domestic rates.

Given that long-established position, I am sure Opposition Members will appreciate that operational costs associated with property occupied by public bodies are taken into account in determining the overall funding level for the relevant public services. More importantly, I should highlight that granting an exemption of such a nature would ultimately reduce the income under the direct control of local authorities through 100% business rate retention. It could also have a disproportionate impact on those authorities that receive a greater proportion of their business rate income from public bodies.

[Jim McMahon]

I am not sure whether the spirit of the new clause has been understood. To clarify, my understanding is that my hon. Friend the Member for Harrow West is trying to achieve a reduction in what is effectively a paper transaction in the system. If the money were taken away from the council because a business rate was no longer payable, it would be taken away from the public body and given to the council in a different way. The money would still get to the council; the new clause would just stop the in-and-out transaction that takes place.

[Mr Jones]

I hear what the hon. Gentleman says. As I have said, the current system has been employed since 1990, and for 13 years of that period we had the misfortune of a Labour Government, who did not seek to change the system because they recognised that it was the fairest way of applying non-domestic rating to non-domestic property, including public sector buildings.

[Jim McMahon]

This is about fairness. I am interested in the Minister’s response to this. It makes no sense for a school that was a local authority school yesterday and is today an academy to be exempt today from paying business rates.

[Mr Jones]

I think I made it clear earlier that there is no disparity in the system in that example. Local authority-maintained schools are given a dedicated sum to pay their business rates. Academy schools do not get that sum because they are exempt from business rates. There is an implication, particularly in terms of when the new clause would come into force. The way in which the system currently operates is that at a spending review, when the spending decisions about need are determined in relation to a particular public service, the cost of the business rate is taken into account.

I am not absolutely certain of the hon. Gentleman’s intention in tabling the clause, but if, as is implied by what has been said today, the Opposition want to apply this more quickly than the next spending review, that would involve a cost for the Exchequer. That would have to be met either through increased borrowing or additional taxation. Of course, as we all know, the Labour party does not mind racking up a deficit or taxing the public for its spendthrift nature.

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[Mr Jones]

Thank you, Sir David. I was tempted to go down the route of mentioning the £150 billion deficit that was left over, but I entirely take your point.

I turn to new clause 9. I am grateful to hon. Members for raising the important issue of support to licensed markets. I am sure that the Committee will agree that markets are an important and valued part of our local economies. When I was Minister for high streets, which included responsibility for markets, I was a very keen supporter of our markets and supported the “love your local market” competition, towards which the Government contributed and supported.

While we should certainly be supporting our markets to survive and thrive, I do not agree that introducing a new relief targeted at market stalls through new clause 9 is necessary or justified. At Budget 2016, the Government announced a package of cuts to business rates worth over £6 billion over five years. That included the permanent doubling of small business rate relief and an increase in the relevant threshold for 100% relief from £6,000 to £12,000. That will be of significant benefit to stall holders in licensed markets, many of whom qualify for the relief. As a result of the change, more than 600,000 small businesses will pay no rates at all.

It will be for the valuation office to decide on the facts of whether individual market stalls are rateable. Typically, temporary and infrequent markets in the street are not rateable, whereas permanent markets in their own dedicated hall or site will pay rates. I hope Committee members agree that where market stalls are rateable, it is right that they are subject to the same rules as other non-domestic properties. Again, that ensures they are treated fairly in comparison with other properties, whether a small high street shop, a café, a fishmonger’s or a baker’s.

[Jim McMahon]

Does the Minister accept that there is a fundamental difference between a market site or a market operator and an individual market trader who operates from that site? A small business will most likely be under the threshold for attracting the relief. Because the business rate is paid by the operator of the market, a market trader will almost certainly be above that threshold and liable for business rates.

[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.

--- Later in debate ---

[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.

[Mr Jones]

I thank the hon. Gentleman for providing the opportunity to discuss the new clause, which aims to ensure that local authorities see no loss in funding following our withdrawal from the European Union. The Government will want to consider the future of all programmes that are currently EU funded once we have left the EU.

Over the coming months, we will consult closely with stakeholders to review all EU funding schemes in the round to ensure that any ongoing funding commitments best serve the UK’s national interest, while ensuring appropriate investor certainty. We will, of course, ensure that local government’s voice is heard in negotiations with the EU. I think that is what the hon. Gentleman was alluding to with some of his concerns. The Government have already announced that local authorities will be guaranteed EU funding for European structural and investment funds projects that provide good value for money and meet domestic priorities that are signed off before the UK’s departure from the EU, even when those projects continue after we have left the EU.

I hope the reassurance I have provided means that the hon. Gentleman will stick to his confession and decide not to put the new clause to a vote.

[Jim McMahon]

I thank the Minister for his comments. We have had a good debate but I do not think we have had clarity that the Government have committed to ensure that the EU funding will be in place over the life of the programme. The programme, of course, takes us only to 2020. Beyond that date, our regions have no idea how much money they will receive for research, development and skills investment. I do not accept the Government’s response as sufficient to give comfort to those areas. However, it was important to table the new clause in order at least to elicit that response. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 10

Non-domestic rating: exemption for nursery grounds

‘(1) Schedule 5 to the Local Government Finance Act 1988 (non-domestic rating: exemption) is amended as follows.

(2) In paragraph 3(b), after “market garden” on each occasion where it appears, insert “or nursery ground”.—(Steve Double.)

This new clause would provide that the definition of an agricultural building for the purposes of the exemption from non-domestic rating includes a building which is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground.—(Steve Double.)

Brought up, and read the First time.

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[Jim McMahon]

I beg to move, That the clause be read a Second time.

Again, like the best ideas, this one has been nicked. It was taken from the LGA, which has been consulting its members on how the business rate scheme has been abused by some landlords who have sought to avoid their liability to pay business rates. During the consultation, which was held in 2014, the LGA asked local authorities what types of tricks and techniques were used by companies and landlords who wanted to avoid paying business rates.

Some of the methods shared included repeated short-term periods of occupation; declaring that vacant properties are intended for future use by a charity; and fictitious occupation of properties by charities: for instance, certain window displays are used to decorate the building, but the activity carried out inside is quite different. Landlords also use insolvency to rack up high bills. When the moment comes for them to face court, the company is wound down, and people avoid paying them. Avoidance also results from properties not being on the rating list at all; people not reporting where properties have been split and should be subject to separate assessment for rating liability; the use of shell companies or offshore companies; and the use of vacant properties whose ownership is not known, although the owner might be local and using a fictitious address or name to avoid liability.

The new clause would ensure that when such techniques are discovered, safeguards are in place to ensure that the same occupier is not entitled to apply for a discount in future. They have effectively abused their chance to play the system fairly; the intention was to support those businesses and landlords who need it. I hope that the Government see that it is about fairness and balance. It is also about showing that where fault is discovered and people are proven to have been abusing the system, the Government have no truck with them and will hold them to account and restrict them from taking advantage again in future. If the Minister supports the new clause, he will win friends in local government and show that the Government have listened to what they have said.

[Mr Jones]

I thank the hon. Gentleman for giving us the opportunity to discuss the important matter of business rate avoidance, which the new clause seeks to address. New clause 11 would provide billing authorities with power to treat any hereditament to which section 43 of the Local Government Finance Act 1988 applies as if it were subject to section 47 of that Act where they have reasonable grounds to suspect that the occupier took inappropriate steps to reduce their business rates liability.

The effect would be to provide the billing authority with the discretion to grant or withhold any mandatory relief that the hereditament would otherwise be eligible to receive under section 43. That would include charitable relief, rural rate and small business rate relief; however, it would not extend that discretion to empty property rates relief.

The Government have been clear that we wish to retain the benefits that the system of mandatory reliefs brings. Mandatory reliefs provide businesses and charities with certainty and a consistent framework within which to operate and grow. For example, the small business rate relief scheme provides uniform support for all small businesses, applied evenly across the country. I have some sympathy with the hon. Gentleman’s intention to ensure that mandatory reliefs and exemptions are used appropriately, and I recognise some of the questionable methods used to avoid paying business rates; I have seen them in my own area. However, I do not agree that giving local authorities a power to decide whether to grant mandatory reliefs where they have reasonable grounds to suspect that steps are being taken to avoid business rates is the right approach. Nor would it follow due legal process to enable a local authority to withhold reliefs without evidence, solely on having reasonable grounds of suspicion. It would create inconsistencies in the application of reliefs and risk penalising legitimate charities and businesses that are rightly entitled to these important reliefs and penalise those whom the policy is designed to support.

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[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]

It was interesting to hear that response from the Minister. I am not sure that the spirit of where the new clause is trying to get to was fully appreciated. This is not about the appropriateness or not of council tax increases; it is about the balance of power in the relationship between local government and central Government. The fact is that the Secretary of State in this place wants to determine what goes on in every single community in the country. I do not think that that is in the spirit of localism. We have seen in Surrey, where the 15% proposed increase—

Local Government Finance Bill (Ninth sitting)

Debate between Jim McMahon and Marcus Jones

Tuesday 21st February 2017 Public Bill Committees

[Mr Jones]

There are no plans to do that at this stage, but I certainly hear what the hon. Gentleman says. I will take that point seriously and consider those comments, as I always do with points he raises. Obviously, as I said before, it is important in the context of what we are talking about that the ownership of property is clearly identified.

Coming back to my original point, a property owner levy cannot be introduced until proposals have been approved in a ballot by those who would be liable to pay it. For a ballot to be successful, it must pass a double-lock mechanism—by receiving a majority of votes cast, and with the total rateable value of the properties of those voting for being more than that of those voting against. Several other important checks and balances remain in the model. The billing authority may veto property owner proposals under prescribed circumstances, and those who voted on the proposals retain the right to appeal to the Secretary of State to overturn that veto. The Secretary of State will also have the power to declare a ballot void if there have been material irregularities in the ballot process.

The levy can be imposed for a maximum of five years, after which the BID body must write a new proposal and go back to the ballot. We have seen the success of occupied BIDs and property owner BIDs in London, which give local businesses the tools to undertake projects that improve their high streets and town centres. Overall, the schedule will give property owners across the whole of England the opportunity to improve their local environment and play a greater role in efforts to shape their local area.

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

It is a pleasure to serve under your chairmanship, Mr Gapes. I am a great fan of the schedule, but before I go any further I should perhaps declare my interest as the chair of the all-party parliamentary group on town centres. That group’s secretariat is the Association of Town and City Management, which supports a number of areas in developing their BIDs. As a former town centre manager, I fully understand the struggle that many of our town centres face and the real need through whatever means possible to try to have focused investment, not just in terms of cash, although that is important, but in terms of energy and co-ordination and making sure that all partners in the area—whether the private sector, the public sector or shoppers and visitors—have a shared vision for what that place can be. I see BIDs in their widest sense as being not just about building for additional income to create a pot of money to spend, but about bringing people together to develop that shared vision. So I am a fan of BIDs and I want to see more across the country.

We have seen the success of BIDs, because towns and cities have learned from other towns and cities where the process has been done well and have adopted the principle. Because they are now so well established, with 260 BIDs across the country, there is trust and confidence in the way that the money is generated and in the way in which businesses may be able to steer and navigate how the money is spent and are held to account. There is a great deal of confidence.

Also, of course, a lot of national and particularly regional retailers, with a reach right across the country and regions, support this. At times, supermarkets get a great deal of bad press. My experience in many BID areas is that supermarkets come to the table with a very positive approach. Because they are such a large ratepayer and because the voting mechanism is weighted towards rateable values as well as individual owner occupiers, they are a substantial voice in that process. When they come to the table and are supportive, it is a very important part of the process. We know that, through the BIDs, £75 million a year is generated to support greater activity.

I think about the improvements that have been made in my town of Oldham—to some people this can seem frivolous, but the annual planting that takes place when we enter the Britain in Bloom contest has become a source of pride for the town. People come to visit and local school children take part in planning the contest. It has gone beyond the town centre, with local schools planting allotments and community gardens. There are public displays beyond the town centre. Had it not been for the work of the BID and the town centre partnership in developing it, I do not believe that Oldham in Bloom would be on such a scale or that we would have won the biggest city contest. I will put that on the record. It is very important in creating a sense of place.

I mentioned in previous sittings that town centres are not just about creating retail space for retailers to sell goods to the public; they are the heart of the community. They are where people come together to socialise and mix. For people who live by themselves and have few visitors to their home, it is perhaps the one place they can go where they see familiar faces whom they can talk to and share experiences with. I strongly believe that our town and city centres are more than places to operate from.

However, I am concerned, and I hope that you will indulge me slightly, Mr Gapes, because there is absolutely a connection with the letter from the Secretary of State to Conservative MPs. Like my hon. Friend the Member for Harrow West, I feel slightly left out in not being included in the distribution of the letter. I like to receive letters. I read all the letters that come through. It would have been received well. However, this was nothing other than, “This is a contentious issue”. How you teem and ladle the liability for business rates is fundamentally important to the relationship between business and the Government. Business rates are contentious in themselves, but they are an important part of our system of taxation. We rely on property-raised taxes to fund local public services, but there is no doubt that a lot of businesses feel that, in the way council tax has been pushed to the edge, business rates have been pushed to the edge and do not reflect the way that industry and retail are changing very quickly with online retail and globalisation. It seems that we cannot make the transition effectively, from a taxation point of view, from a traditional property-based tax to recognising that companies are now multinational and can be very mobile in the way that they treat their tax affairs. I think businesses feel particularly hard done by.

--- Later in debate ---

[Mr Jones]

The hon. Gentleman is talking about businesses being very mobile. Is that not one of the challenges that we face? One cannot easily avoid paying a property-based tax. That is why generally Governments of all colours have stuck with a property-based tax, rather than moving to a different system, where multinational companies may seek to avoid that situation.

[Jim McMahon]

I agree. We can see where a property is and we know where to send the bill, and when people do not pay we know which door to knock on. But we can do the same for an online retailer; we know the IP address and where the computer is, and we know the delivery address when parcels are sent from an Amazon depot, for example. We know where transactions on goods happen and where money is being made.

The issue with business rates is more fundamental. They have a role—I support the principle of business rates and property-based taxes as part of a range of taxation—but they must be manageable for the people who are expected to pay them. The outcry that we have heard from some significant businesses has come after a significant outcry from small businesses, which have been saying for a long time that business rates are taking them over the edge and making their existence unaffordable.

In the review and revaluation there has been a shift towards larger retail and towards particular parts of the country, but those businesses are now saying that it has become too much for them to bear, and there will be an impact on their business model. It strikes me that if the quantum is still required, and all that can be done is move it around a diminishing tax base, there will always be a disproportionate effect on some elements of the retail property base, whereas the way people spend and make money is changing quickly.

[Mr Jones]

I am following the hon. Gentleman’s argument, but does not what he says make it all the more important for the Government to stick to their guns and not allow local authorities an arbitrary situation in which they can increase the multiplier, as has been advocated? [Interruption.]

[The Chair]

Order. I would be grateful if hon. Members did not make such interventions from a sedentary position. It is not helpful to the debate.

--- Later in debate ---

[Mr Jones]

I hear what the hon. Gentleman says. I am not sure he is talking much about property owner BIDs, but he is giving his theory on how the business rate revaluation has been conducted and what should have been done. If that is the case, why did he or his party not oppose the independent business rate review when it came through both Houses?

[Jim McMahon]

There is general consensus; I am not sure why this has become a matter of contention.

--- Later in debate ---

[Jim McMahon]

Thank you, Mr Gapes. I of course listen to every word you say and take your direction.

This issue is important, because the system that we end up with and the amount of money that individual businesses are expected to pay will be a fundamental factor, I believe, in whether they will be willing to enter into a BID arrangement. Until we see what the final package and settlement will be, it is difficult to understand what the take-up of new BIDs will be and what impact the new legislation will have in a real sense, on the ground, in towns and cities throughout the country.

[Mr Jones]

Does the hon. Gentleman not accept, however, that under the definition of a property owner BID, the actual BID amount will be paid for through a separate bill chargeable to the property owner, not the ratepayer? The ratepayer is obviously the person operating the business from the particular premises that the property owner owns. Will he not accept that the argument he is making is actually pretty flawed?

[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.

Local Government Finance Bill (Eighth sitting)

Debate between Jim McMahon and Marcus Jones

Thursday 9th February 2017 Public Bill Committees

[Mr Jones]

That is a very good question, which I will write to the hon. Gentleman and the rest of the Committee on. The overall cost, which the hon. Member for Harrow West asked about—he wanted me to go into what the cost was in each of the first five years, but I am not able to do that today so perhaps I can satisfy him in writing—is £60 million over that particular period.

To pick up the thread that I was on, the powers in the schedule will allow the Secretary of State to determine the level of relief to be awarded. As I said, the Government intend to allow telecom operators 100% rate relief, but only for new fibre. That new fibre will of course form part of existing telecoms networks with existing ratings assessments. Through the operation of this scheme, we intend to ensure that relief is only for new fibre, as I have clarified to the Committee. To achieve that, the powers in the schedule will allow us to set, by a formula contained in regulations, the correct level of relief for each property, reflecting the amount of the network that qualifies for the relief. That will be based on a certificate from the valuation office of the amount of rateable value attributable to the new fibre.

Hon. Members will recognise that this is a technical area, but one in which we need desperately to ensure that the provisions are correct. Therefore, my Department will shortly issue draft regulations for consultation on how to implement the relief for new fibre. On that basis, I hope that clause 8 and schedule 3 will stand part of the Bill.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Schedule 3

Relief for telecommunications infrastructure

Amendments made: 38, in schedule 3, page 48, line 16, at end insert—

“6A In section 67 (interpretation: other provisions), in subsection (7), for “43(6)” substitute “43(4B) (so far as relating to England), (4F) and (6), 45(4D)”.”

Section 67(7) of the Local Government Finance Act 1988 provides that certain provisions of that Act apply on a particular day if they apply immediately before the day ends. This amendment extends section 67(7) to cover section 43(4B) of that Act and the new sections 43(4F) and 45(4D) inserted by Schedule 3.

Amendment 39, in schedule 3, page 49, line 29, at end insert—

“10A In section 67 (interpretation: other provisions), in subsection (7), for “47(2)” substitute “54ZA”.”—(Mr Jones.)

Section 67(7) of the Local Government Finance Act 1988 provides that certain provisions of that Act apply on a particular day if they apply immediately before the day ends. This amendment extends section 67(7) to cover the new section 54ZA inserted by Schedule 3.

Schedule 3, as amended, agreed to.

Clause 9

Discretionary relief for public toilets

Question proposed, That the clause stand part of the Bill.

[Jim McMahon]

I get all the crap jobs. I have been told that I am not allowed to use foul language, so I am afraid most of the puns have been wiped out.

This is a straightforward clause, which hopefully addresses a long-standing request from a number of local authorities for the facility of public toilets to be recognised as important not just in areas with high levels of tourism but in urban settings. We need to look back on the history of public toilets—not too far; I will go back only to the Romans—and on the establishment of the need for public conveniences.

When people are away from their home setting and need to use a convenience, it makes sense that conveniences are provided in convenient places, which they can get to easily. The truth is, in recent years, we have seen the number of public conveniences reduce significantly. In real terms, in 2010, the spend on public toilets by local authorities was £85 million and, last year, it was only £54 million. We have seen a lot of money taken away from public conveniences, which has had a real impact, with more than 1,700 public toilets having closed down. We know what the impact of that is.

--- Later in debate ---

[Mr Jones]

Amendments 42 and 43 are minor and technical amendments that clarify the drafting of clause 12. Clause 12 enables the Government to require billing authorities to offer the option of electronic billing to all ratepayers. That provision covers both the electronic service of notices and the issuing of documents, to reflect the fact that under the relevant legislation, business rate bills can incorporate both demand notices and accompanying documents.

The amendments clarify the drafting of clause 12 by making it clear that, while notices are served on a ratepayer, any documents are issued to. These are very minor changes that simply improve the drafting of the provision and do not alter the effect or policy outcome of the clause.

[Jim McMahon]

I have a quick question on this measure. I recognise that these are, by and large, drafting amendments, but I want to briefly probe the clause. My point also talks in some way to clause 14. Is it the intention at some point to move on from simply electronic billing, which feels quite old-fashioned already—utility companies have been doing that for quite a long time—to online accounting, where companies can log on to an account that has all their property information contained in one place, regardless of local authority?

[Mr Jones]

Without moving ahead to debate clause 14, as the hon. Gentleman will know, that clause is a paving provision, which provides the scope for Her Majesty’s Revenue and Customs to develop a new system in that sense. What it does not do is allow that system to be implemented; it would probably need primary legislation to be implemented. I hope that I can therefore reassure the hon. Gentleman that there is no hidden agenda in relation to clause 12.

Amendment 42 agreed to.

Amendment made: 43, in clause 12, page 15, line 39, after ‘served’ insert ‘or issued’.—(Mr Jones.)

This amendment makes a minor drafting change.

Clause 12, as amended, ordered to stand part of the Bill.

Clause 13 ordered to stand part of the Bill.

Clause 14

Provision of digital etc services by HMRC: preparatory expenditure

Question proposed, That the clause stand part of the Bill.

[Jim McMahon]

May I ask the Minister a question about confidence in IT systems? Back when I was a council leader, we were implementing what we call My Account, the principle behind which was to bring together a range of different data held by the local authority in different datasets and different IT systems into one place so that residents could log on, see their interactions with the local authority, pay bills, raise issues and, we hoped, get a more tailored service. In a neighbourhood—Oldham, for instance, has brought together seven townships, so people have a very localised identity—a tailored service would bring out local libraries, community centres or events in that area. A similar IT system was implemented by Transport for Greater Manchester. As London has its Oyster card, the Get Me There card in Manchester was designed to be a single card that could be used on different modes of transport across different operators.

With both projects, there were two lessons. First, they showed that we should never believe what an IT salesman offers—usually salesmen will say what we want to hear, but the technology does not always follow. Secondly, they showed just how complicated it is to bolt together different IT systems. The patches needed to get the different systems to talk together can be very complicated, extremely time-consuming and, as a result, extremely costly. IT data coders are not the cheapest labour to employ. Given my own experience and reflections on IT systems, and given Government experience across political parties—no elected politician has wanted an IT system to fail, and we trust professionals to get on and do the job promised, although sometimes that works and often it does not—what confidence does the Minister have that we can genuinely move towards a system for HMRC that provides the type of functions proposed in the Bill?

[Mr Jones]

The hon. Gentleman raises a very important matter. There has been a catalogue of challenges with IT projects down the years, most notably the NHS supercomputer, which reportedly cost the Government of the day about £13 billion and never worked. We had IT challenges with regard to police and fire control centres—again, the system never worked and was finally aborted. We do have to be careful and cautious, as the hon. Gentleman points out. The measure in the Bill, however, will not lead to a full-blown programme, but will enable HMRC to carry out the early design work and engagement to develop proposals for how that particular principle of providing digital services can be developed. Given the spirit of my explanation, I hope the hon. Gentleman is reassured that this is about early design and engagement rather than entering into a full-blown IT project which, as he rightly pointed out, can often be challenging.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Power to impose infrastructure supplements

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[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.

[Mr Jones]

Is the hon. Gentleman advocating for the directly elected Mayor of Greater Manchester combined authority being able to levy an additional business rate supplement for infrastructure, while an individual authority in the Manchester city area could layer a supplement on top of that, without further safeguards for local businesses?

[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.

--- Later in debate ---

[Mr Jones]

I thank the hon. Member for Harrow West for his explanation of amendment 29, which would add all 326 billing authorities to the definition of a relevant authority in subsection (1), and would mean that an infrastructure supplement could be levied by billing authorities, and not just mayoral combined authorities and the Greater London Authority. Hon. Members will understand that we cannot support the amendment for several reasons. In preparing these measures, the Government’s view was, and continues to be, that the settlement should be made available in the areas in which it can have the greatest impact. Furthermore, major infrastructure investment needs to be considered at a city or a county-wide scale. The settlement should therefore be operated at a level that reflects the functional economic geography of the area.

[Jim McMahon]

The point is raised wherever we go around the country that that approach makes sense in urban areas, where the economy is centred on the city centre and moves outwards, but county areas, for instance, are completely different. They do not have central economies; they have very complex economies that do not respond in the same way, which is why we tabled the amendment. This measure would benefit more Conservative council leaders than Labour council leaders. We are not pleading for Labour authorities in isolation; we are pleading for common sense and logic.

[Mr Jones]

The hon. Gentleman takes a very benevolent view to Conservative local authorities, which is quite a departure from the view he sometimes takes, but I take his point on board. I will explain the situation relating to county areas, which the hon. Gentleman is speaking for, in a moment.

Mayoral combined authorities and the Greater London Authority have strategic oversight of their functional economic areas and their needs. Mayors of such authorities will therefore be best placed to engage with businesses to assess what type of infrastructure could help to grow their economies and deliver infrastructure at a significant scale. That can make a real difference. When someone exercises power over a large geographical area, we have to have someone whom the public throughout the entire region can hold accountable. No individual council leader, MP or anyone else has been elected across the scale of a whole combined authority area. That is why the elected Mayor is the best option, and the best way to deliver accountability.

[Jim McMahon]

I do not necessarily want to find holes in every element of the Minister’s argument, but there is a gaping hole in this element of it. There are some areas that sit outside combined authorities but are covered by a directly elected Mayor.

[Mr Jones]

There are, of course, non-constituent members of combined authorities that do not elect Mayors, but as the hon. Gentleman knows, they are not full members of a particular combined authority and would not therefore benefit automatically from things such as gain-share payments, which combined authorities have been provided with, and they would not generally be subject to the infrastructure levy and the business rates supplement, which can be provided for by a directly elected Mayor.

[Jim McMahon]

With all due respect, that is nonsense. Is the Minister saying that the Mayors of Doncaster, Hartlepool, Bristol and Salford, who are directly elected and cover the whole of their geography and the whole of the billing authority area, cannot have the same powers as a Mayor covering a wider area? The argument that has been put forward is about democratic accountability. Well, democratic accountability also applies to those areas, and some of them may choose to be part of a combined authority. Let us have fairness and a level playing field, and let us give the same powers to all directly elected Mayors, whether in a combined authority or a local authority. That would at least be a compromise position.

[Mr Jones]

I hear what the hon. Gentleman says, but I was talking about a combined authority area, not an individual authority area.

We must not lose sight of the other options available to councils for delivering additional benefits to and growth in their areas, though we seem to have done so to an extent in this debate. For example, business improvement districts may be established in every area of England. The Bill also includes provision for property-owner business improvement districts throughout England, not only in London. Going back to the point about elected Mayors in individual authorities, we already have provisions enabling the introduction of a business rates supplement to the levy for investing in projects that promote economic growth and development. Councils already work with businesses using existing resources to deliver a positive economic environment. The local growth fund is another mechanism used by local enterprise partnership areas and local authorities in that regard.

Having reflected on the points that I have made, I am not sure that I will completely convince the hon. Member for Oldham West and Royton, but I encourage the Opposition to withdraw the amendment.

--- Later in debate ---

[Mr Jones]

I thank the hon. Gentleman for his explanation of the amendment. I do not agree with all he said, particularly in relation to the White Paper and our record in recent years on building new council housing, bearing in mind that more council housing has been built in the past seven years than was built in the 13 years of the Labour Government. That said, the amendment would remove the reference to housing in the list of exclusions at clause 17(3), allowing funding raised for the infrastructure settlement to be spent on housing.

We are clear that the supplement should deliver direct benefits to local businesses and as such should be focused on delivering infrastructure that will create a better economic environment. The supplement expenditure should also be additional—that is, spent on infrastructure that otherwise would not get built. That will be crucial in engaging with businesses locally and securing their support for any such proposals.

Clause 15 makes clear that the supplement must be spent on infrastructure that will promote economic development. That will enable Mayors to invest in a wide variety of projects—for example transport, digital and broadband—that have the potential to make significant improvements across an area, and to support broader investment that will best serve the local business community.

The Mayor is directly elected, as we have discussed, by the local people and so has a mandate to decide what best serves the interests of the community. In many cases, we would expect the infrastructure delivered through the supplement to have a beneficial impact on housing delivery anyway. Crossrail, which was funded by a business rate supplement, as we have discussed, will enable an additional 57,000 new homes to be built and help create £5.5 billion of additional value to residential and commercial real estate along its route between now and 2021.

The hon. Gentleman may wish to note that the Government already support housing infrastructure in a range of ways, including the £3 billion home building fund, which provides loans to house builders of all sizes. We also give capacity funding to local authorities to support the delivery of large housing sites and housing zones, and we have recently announced a £2.3 billion housing infrastructure fund. This is grant funding for local authorities to support housing delivery on sites where viability is marginal and it has the potential to unlock up to 100,000 units in the areas of greatest housing need.

[Jim McMahon]

On that point, does it not go against the spirit of localism and devolution to expect local areas to come to the Government with a begging bowl for housing funding?

[Mr Jones]

All I can say is that we are damned if we do and damned if we do not. If we do not offer up significant funding streams to support projects for local areas, Opposition Members criticise the Government. When we do offer up significant funding—the £2.3 billion in the housing infrastructure fund is indeed significant—we are again criticised, so I am not sure what the Opposition want. I would encourage areas, as I hope the hon. Gentleman will encourage his area, to look to the fund to unlock new housing that is badly needed across the country.

Having reflected on the points that have been made, I am not convinced that amendment 44 is worth supporting. I therefore ask the hon. Member for Harrow West to withdraw the amendment.

--- Later in debate ---

[Jim McMahon]

The points raised by my hon. Friend the Member for Wolverhampton South West are absolutely key to the freedoms that Parliament says it is keen to give away to local government. Clause 17(3)(a) to (f) lists the items the money and infrastructure supplement cannot be used on. I would welcome an intervention from the Minister if he can provide clarity. This feels as if he is trying to tell local authorities that, however tight their budgets, they cannot use the supplement to fund council services that should be funded elsewhere, which is why it refers to social services, education services, services for children and health services as opposed to schools, health centres or day care centres.

Will the Minister clarify whether this is “services”—the revenue element of service provision in the public sector—or a restriction on building capital projects such as new schools and health centres?

[Mr Jones]

I pick up on the point also made by the hon. Member for Wolverhampton South West about the definition of infrastructure. The hon. Gentlemen are quite rise to raise that. First, we are leaving to the Mayor’s judgment what type of project might deliver appropriate infrastructure that promotes economic development. The term “economic development” is key.

As we have said, in making that economic development happen we have talked about transport infrastructure, digital networks and so on and so forth that will deliver those types of economic benefits and economic growth. To reiterate, we are leaving it to the Mayor’s judgment. We can safely say, in that context, that we would not expect the type of project the hon. Member for Oldham West and Royton is suggesting, such as a children’s centre, to be funded.

--- Later in debate ---

[Jim McMahon]

The way the Bill is worded will only make lawyers wealthy and councils frustrated, because subsection (3)(a) is very clear that the money cannot be used for housing—we know what a house is—but paragraphs (b) to (f) are less clear, including with regard to social services. There is a difference between facilities and service provision within those facilities. The restrictions on what the money can be used on in the Bill include social services, education services, services for children and health services, but not building schools, Sure Start centres, youth centres, day care centres or healthcare centres.

I sought clarification from the Minister about exactly what that means. The response was that it will be up to the Mayor; there will be local discretion. However, there is not local discretion—there is an explicit list excluding what the Mayor will not be able to spend the money on. Is there an in principle objection to using the supplement funds for revenue costs? There is a degree of logic to that; it is not the supplement’s intention. However, owing to the way the Bill is worded, I suspect that any council or Mayor could take the infrastructure supplement and go on a school building programme. I think many communities would welcome that. Many communities would probably not welcome the inability of that same Mayor to provide housing with that fund, or even, as part of a wider development, to potentially provide gap funding for a housing requirement as part of a mixed-use development.

For a Minister who has tried to promote economic growth to restrict Mayors in that way makes no sense whatever. I ask him to go back and speak to the civil servants, and to clarify before the next sitting—maybe even in writing—whether subsection (3)(a) to (f) is intended to restrict the revenue use of that infrastructure supplement, or the intention is that it is not to be used to build such facilities. Do the Government intend to come back with an amendment to clarify the wording?

[Mr Jones]

Elected Mayors of mayoral combined authorities will have a strategic overview of their areas, so will be well placed to deliver projects that have a significant effect on local economies. The infrastructure supplement provides a unique opportunity to deliver infrastructure investment at a significant scale to benefit local businesses and communities. As I said earlier, that will be infrastructure that would otherwise generally not be built. Clause 17 sets the parameters for how many ways can be used to help to ensure that that is achieved.

Naturally, the supplement can only be spent on the project for which it has been levied. The sums received can be used to pay off loans secured to pay for the project to which the supplement relates, which may well answer one of the questions asked by the hon. Member for Wolverhampton South West on the west midlands and the idea of some sort of involvement in the Birmingham northern relief road, which I think he was referring to.

--- Later in debate ---

[Mr Jones]

When I say Birmingham northern relief road, I mean the M6 toll. That was its previous name when the project was brought forward and delivered under the Margaret Thatcher Government during the late 1980s and subsequently built during the 1990s with private finance, as the hon. Gentleman will recall.

The point is about a Mayor of a particular combined authority area. I think most businesspeople in the west midlands will think that Andy Street is the right man to undertake that role, because of his extensive knowledge of the business world and how to get the west midlands economy moving. If he were elected Mayor, he would have to decide whether it was worth while to undertake projects such as opening that toll road to general traffic, which would have an economic benefit.

[Jim McMahon]

Will the Minister give way?

[Mr Jones]

No, I will make some progress. So I hope that clears that point up.

As we have said, the money raised cannot be used to provide existing council services, such as social care. The clause provides a list of areas of expenditure that are excluded from the infrastructure supplement, and it includes provision for the Secretary of State to amend that list through regulations. Any such regulations would of course be subject to the affirmative procedure. There are also provisions to enable the Mayor of London to channel funding through the Greater London Authority’s functional bodies, such as Transport for London. The rest of the clause recognises that projects may have other funding streams, including from lower-tier authorities.

The hon. Member for Wolverhampton South West insinuated—I think when we debated amendment 44—that I may not be interested in housing in terms of infrastructure. I reassure him that I am interested in housing, which is extremely important. That is why the Government have set out significant measures in our White Paper that we are looking to consult on. He mentioned reflecting on the debate about amendment 44. I reflect on all the clauses that we debate, but to be clear, the arguments that were put forward did not convince me that it was worth supporting that amendment. I clarify that so the Committee and the hordes of people who no doubt will read Hansard understand that the Government are absolutely committed to delivering new housing. On that basis, I ask the Committee to support clause 17.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Local Government Finance Bill (Seventh sitting)

Debate between Jim McMahon and Marcus Jones

Thursday 9th February 2017 Public Bill Committees

[Jim McMahon]

It is a pleasure to serve under your chairmanship, Sir David. The amendment would require a local authority to consult neighbouring authorities when it wished to change its business rate base. The principle behind that has to do with not only being a good neighbour, but ensuring that local authorities cannot be played off against each other. For example, an investor or developer might come to an area with a significant end user, and set one local authority off against another to get a preferential deal; preferential deals, done in the background, are all the rage at the moment.

[Mr Jones]

I hear the school of thought that the hon. Gentleman is adopting, but does he not accept that the Bill proposes reducing the multiplier across a local authority area, not in one particular place in the area, or for one particular industry? Is not the line he is pursuing therefore pretty flawed?

[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.

--- Later in debate ---

[Mr Jones]

I thank the hon. Members on the Labour Front Bench for their amendments, and for giving me the opportunity to address the issues and talk specifically about multiplier discounts. The hon. Gentlemen seem to have gone into things in some detail, which leads me to believe that today could be a very long day—I might need to ring Mrs Jones a little later to tell her that I will be home later than expected.

I hope that the Committee will agree that the measure on the multiplier discount is an important and positive one, which will give councils further levers to attract and incentivise local investment. The effect of amendment 30 would be to require any local authority considering the introduction of a discount to consult its neighbouring authorities before implementing a reduction. We do not believe that that is the right approach, nor do we believe that the amendment is necessary.

One of the main aims of the clause is to allow local authorities to show that they are willing to work hard and be flexible to attract business. However, local authorities already work closely together on many issues, including economic strategy. The amendment would create an unnecessary and complex additional burden on any local authority seeking to introduce a discount. That is precisely the sort of approach from which we are trying to move away.

The purpose of the power in the Bill is to provide local authorities with the tools to incentivise local growth. In exercising the power and in maximising its effect, we expect local authorities to take steps to publicise widely their intention to introduce a multiplier discount.

Clause 6 and schedule 2 already require that, in two-tier areas, the authority introducing the discount must inform the other authorities and the Secretary of State of its intention to specify a multiplier discount before 31 December in the preceding financial year—I hope that that answers the question of the hon. Member for Wolverhampton South West. Furthermore, in a two-tier area, the Local Government Finance Act 1988 as amended by the Bill and the regulations made under the Act will allow the Government to ensure that the income of a tiered authority will be protected from a discount introduced by another authority.

We consider that there is no need to make unnecessary provisions in the Bill, which is what the amendment would introduce. The Bill already strikes the right balance of providing information to those most directly affected without creating an additional formal burden.

On amendments 48 and 49, it may be helpful to the Committee for me to clarify that clause 6 and schedule 2 already allow an authority to specify a multiplier discount that would apply to all ratepayers in that local authority area. The effect of amendments 48 and 49 would be to allow an authority to apply the multiplier discount only to some properties, for example, on the basis of location, rate or value, or business type.

Although I understand the desire of hon. Members to give local authorities the flexibility to target any reductions in business rates, I do not agree that the amendments are necessary. Billing authorities already have wide-ranging powers to grant discretionary relief to ratepayers in their area. In practice, that already allows authorities to reduce business rate liabilities for a specific sector or area if they wish to do so.

Clause 6 and schedule 2 provide the ability to do something different and to reduce the overall tax rate across the area. I hope that, with the clarifications that I have provided, the Committee is reassured that the amendments are not necessary, that amendment 30 should be withdrawn and that amendments 48 and 49 should not be pressed.

[Jim McMahon]

I appreciate the Minister’s response, but there seems to be a conflict in the Government’s view of how local authorities should work together. The Localism Act 2011 includes a duty to co-operate, which provides that local authorities must actively engage and consult with neighbouring authorities when dealing with local plans that are going through in legislation. It seems slightly odd and contradictory that a local authority should not go ahead with a local plan that talks about the development of a place without that engagement, but that that is not a requirement when it is looking at the tax base of the same place, which could have an equal impact on the economy and development of a neighbouring authority. It seems very contradictory.

I am not sure whether the Government’s position has changed and they intend to come back to local plans and change the duty to co-operate with neighbouring authorities. Local government has been asking for consistency. What is the spirit in which local government has to maintain relationships and co-operate with their neighbouring authorities? Does that run through everything that the council does?

--- Later in debate ---

[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.

[Mr Jones]

It is interesting—it has been quite a theme throughout the Committee—that the hon. Gentleman keeps talking about this power grab. He will know that the vast majority of delegated powers within this just update existing powers and, where that is not the case, they are subject to the parliamentary process. Does he not accept that he is over-egging the pudding?

[Jim McMahon]

I do not accept that point at all, and the reason is that I do not take the headlines from the Minister; I take the wording of the legislation that is coming through, and that wording is crystal clear. We will come on to this later, but even when the infrastructure levy is being designed, central Government will prescribe the exact layout and content of the consultation document—where it should be placed, where it should be published, and how it should be published. In terms of being absolutely prescriptive and micromanaging what local authorities do, this is not central Government letting go and empowering local authorities at all, so let us have a bit of consistency on that.

[Mr Jones]

This is really interesting. The hon. Gentleman seems to be undergoing some sort of conversion. In my albeit short time in local government—I am sure that this was also his experience—it was micromanaged and controlled by a central Labour Government probably more than at any other time in history. Will he accept that he is now talking a completely different language from that which the Labour party talked while in government?

[Jim McMahon]

I am pleased that the Minister has made such a good and thoughtful intervention, taking us back to the glory days of councillors being able to operate under a forward-thinking, all-embracing Labour Government. Those were the days when we provided money for new schools and Sure Start centres, embraced culture and the arts, and opened up entry to our museums and galleries. Those glory days seem a long time ago.

[Mr Jones]

rose—

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[Mr Jones]

At what level does the hon. Gentleman think that that increased tax on businesses should be set? What percentage would he advocate?

[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.

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[Jim McMahon]

That is a fair point. The structure of high street retail—

[Mr Jones]

Will the hon. Gentleman give way?

[Jim McMahon]

Let me finish this point and then I will give way. The way in which the rateable value is calculated is generally based on the rental value of the property. For bars and restaurants it is obviously based on turnover, but for retail properties it is based on the rental value. Institutional investors in shopping centres and on high streets know that they have to pay a huge business rate liability when units are unoccupied, so they are establishing leases with a notional rental value—£70,000 to £80,000 a year—and an exhaustive rent-free period in line with that. When the valuation takes place, the headline rent might be £70,000 to £80,000 a year, but when the discounts provided in the lease are taken into account, the amount charged to occupy the space might be far less—possibly just £1. The business rates, however, are based on the headline value in the lease.

There are a number of examples of people investing their life savings into opening a high street shop and starting a business, but when they receive their business rate bill they are not able to hold their heads above water because they are just over the threshold and do not qualify for small business rate relief. That is even the case when they are given preferential rental options through the landlord. We need to look at the situation in a very different way, if we accept that high streets have a role to play in the vitality of our communities.

[Mr Jones]

The hon. Gentleman makes some important points about high streets and town centres, and I share his concern about how retail is shifting quickly. He has talked about consistency many times this morning, but how was it consistent for him to argue against changing the multiplier to a lower indexation rate, which will create lower bills for the town centre businesses that he is talking about? He says that he wants to help those businesses, so why was he against that?

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[Jim McMahon]

That would be delightful. Perhaps he could even say whether a Surrey index could be used. A clarification would be helpful.

[Mr Jones]

The hon. Member for Wolverhampton South West has been diligent on the Bill, but he is clearly off the mark. I am sure that the hon. Member for Oldham West and Royton will recall our debate on indexation and the multiplier, during which I clearly set out the Government’s intention to use the CPI measure of inflation, which is indeed lower than RPI and will save businesses more than £300 million overall in the first year.

[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.

--- Later in debate ---

[Jim McMahon]

I appreciate that intervention. I suppose my reflection on the Portas review is similar to the reason for the amendment. It is okay to say that councils can have the power to reduce car parking charges, but fees and charges are a significant part of local government income. At a time when revenue support grant has been snatched away and local authorities are being told they will be self-sufficient, going forward, it is difficult for them to find the headroom to reduce car parking charges. I pay tribute to the local authorities that have done so, particularly when they did it in a targeted way, to support local retail.

[Mr Jones]

Will the hon. Gentleman give way?

[Jim McMahon]

I will just finish this line of argument. At the moment the current rules would require consultation to take place in the area where a rates increase was wanted—even for areas that had the power, and notwithstanding that there were areas without it. It would be necessary, let us say, to draw a line around the retail park that the authority might want to look at for an increase in business rates, and then consult people who were affected by the business rate increase. If it wanted to use the money generated to fund another area of town, such as the high street or town centre, that would not involve the same consultees that were involved in the part of the area subject to the increase. I think that that is the issue.

Local authorities must reflect more broadly on their area, and not on a narrow defined area, which the Bill seems geared to. That flexibility would be welcomed by local authorities. As to being consistent, this is not a case of my arguing against myself—it is about providing a framework and allowing local areas to administer it appropriately for their locality.

[Mr Jones]

The way the hon. Gentleman is applying his logic is to say that the more taxes are hiked up, the more revenue is received; but we must be careful with that. A good example from my constituency was when the Labour council hiked up the car parking charges and lost £350,000 in income. Does he think that that is a good example of what he is suggesting? Is that why we should not look to increase taxes in the way he advocates?

[Jim McMahon]

I congratulate the Minister on living in a Labour council area. There are 22 million other people in the country living with Labour in control locally, and they get to experience at first hand the benefits of Labour being in government. The Minister should reflect on his fortunate circumstances. Let us hope that other parts of the country benefit from the same thing soon.

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[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.

[Jim McMahon]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Local Government Finance Bill (Sixth sitting)

Debate between Jim McMahon and Marcus Jones

Tuesday 7th February 2017 Public Bill Committees

[Mr Jones]

Certainly. There is good practice happening in local authorities, and I would always recommend the hon. Gentleman’s local authority taking a leaf out of the book of a good Conservative authority that is doing the right thing on growth.

The levy works as a tax on growth, taking up to 50% of any benefit that authorities may have seen. This certainly acts as a disincentive and, for that reason, we have said clearly that we want to remove the Government’s ability to set a levy. Nor do we believe that that the levy is necessary as a way of funding the safety net. To come back to the comments of the hon. Member for Oldham West and Royton, there are other, fairer ways of dealing with the safety net, the most obvious being to take a top-slice at the point at which we set up the scheme and use that to fund any safety net payments needed.

If there is no need for the levy, there is no need for the levy account. Indeed, if such an account was prepared, there would be nothing to report in it. In that sense, this matter is quite simple: we will abolish the levy, and therefore there is no need for the levy account. I hope that the hon. Gentleman will withdraw his amendment.

[Jim McMahon]

I thank Members who have contributed to the debate. I am left slightly worried that the Minister does not understand the levy mechanism and the function of local government group accounting.

The Department is required to produce group accounts for local government that show the balance of transfers between local authorities and the Department. Whatever mechanism is in place to provide payments to and fro requires an account to be set up, because if an account does not exist, it will not be included in the group accounts and will be off the books, which makes no sense. We could call it a different name, but the function of an account is that it sits somewhere and annually feeds into the group accounts, which give the Chancellor an overview of departmental spend, and that is fundamental to how we account for public money. We could call it a levy account or even the Jones account, for all local authorities care, provided there is an account to be drawn upon.

At the moment, the top-slice is funded by revenue support grant. It was £120 million; it went down to £50 million in 2015-16. The Minister did not say this, but I take it that if the money does not come from a top-slice of revenue support grant, it will come from the £12.5 billion of additional money through 100% business rates retention.

[Mr Jones]

The Government have been clear that through the implementation of this system, local government will not be worse off, and that we will not expect local government to bear the burden of the safety net in the system. Does the hon. Gentleman not accept that?

[Jim McMahon]

I find that contradictory. Either the burden will be on central Government, which means there will be a requirement to find the money from elsewhere in Government, or the money will come from existing budgets within local government, which means local government will take the burden.

--- Later in debate ---

[Mr Jones]

At the moment, the majority of funding for the safety net comes from the business rates that are not going to local authorities.

[Jim McMahon]

I accept the point, but the Minister must accept that over the past two financial years, £170 million has been taken from revenue support grant top-slice. That money will need to be provided from somewhere, because at the moment there is a deficit in the levy account of something like £14 million. That shows more money is being drawn down from the account than is being added on top through revenue support grant top-slice or business rate levies from authorities that are exceeding their profiled business rates increases.

The Government cannot have it both ways. The money is either already within local government and is just being re-profiled, or it is coming from elsewhere within Government, in which case it will be a burden on other departmental budgets. We will come on to safety net payments later; this is simply the mechanism by which we make those payments. Either way, we will need group accounts. We have to account for the transfer of funds from one departmental account to local government. I do not intend to press the amendment to a vote; it was a probing one.

--- Later in debate ---

[Jim McMahon]

It does underline the concern. In the last financial year £112 million was drawn down from the scheme. That was in the context of local authorities still receiving revenue support grant on top of their council tax and business rate income. As we move towards the brave new world—there is a fine line between bravery and stupidity, but let us call it brave for now—whereby councils will be funded solely by council tax and the business rate base that they can generate, councils are even more vulnerable to shocks in the system where business leave and they are forced to deal with the consequences of that loss of income. Without the safety net system in place—

[Mr Jones]

The whole thrust of the hon. Gentleman’s argument is that the Government are going to get rid of safety net payments. Where has he got that idea from? Does he not think that the business rate retention pilots that are taking place in a number of areas are a good thing for the Government to work out that they have struck a balance to ensure that, when we roll out the full system, it is as right as it can be?

[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.

[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?

[Mr Jones]

It is a pleasure to follow the hon. Gentleman, who is giving me something of an education, or thinks he is giving me something of an education, on this issue, such a placid fellow that he is. I thank him for tabling this amendment and for giving me the opportunity to set out the Government’s approach to the safety net. He seemed to ignore most of the information that had come forward and was almost saying that the Government were not going to put in place a safety net. I agree with him that a safety net is an important element of the system and will certainly become more so—again, agreeing with his analysis—once we are relying on business rates for a larger proportion of councils’ income. Where I must disagree with him is that these amendments are the best way of ensuring that we have the most appropriate safety net in place for the new 100% system. These amendments would hardwire the current arrangements into the system by requiring the safety net to be measured against baseline funding levels. However, that is only one way in which we could construct the safety net under the legislation as drafted. There are others—using different baselines, for example, or providing for different percentage losses for different types of property. Until we have finished our work with the local government sector and put in place all the scheme’s design elements, it is too early to say what form the safety net should take.

--- Later in debate ---

[Mr Jones]

As I said, there are places where a view has been taken that certain local authorities are too risky to be included in a business rate pool and, therefore, have been excluded. Returning to the theme the Labour party has used—

[Jim McMahon]

Will the Minister give way on that point?

[Mr Jones]

I will in a moment.

Throughout our deliberations on the Bill, it is apparent that local authorities have asked for fairness within the system. The challenge is whether that fairness is apparent if a local authority is excluded from a pooling arrangement because surrounding local authorities do not want to include it. Clause 3, which the Committee will consider later, provides an additional tool to strengthen the role of pools to help secure economic growth, with rewards being shared across the pool.

Amendment 28 aims to ensure that Parliament has a role in revoking a business rates pool—paragraph 26 of schedule 1 enables the Secretary of State to revoke the designation of a business rates pool. Revoking a business rates pool is a technical matter, working with the authorities involved to consider how each one operates independently. The Government are concerned that requiring every decision about revocation of the business rates pool be taken through each House and made subject to consultation with the Communities and Local Government Committee would take up valuable parliamentary time. The current process for revoking a business rate pool does not require parliamentary approval or consultation with the Select Committee. The Government do not believe that change is needed.

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[Mr Jones]

My hon. Friend makes the exact point I am trying to make—local authorities require certainty. The measures we have put in place over the last year or two on having a longer-term view of council budgets has helped. Within this system, we want multi-year arrangements for local authorities so they know where they are heading. In having more settled business rate pools that make sense in terms of functioning economic areas, we will seek to deliver that certainty and security for local authorities. By definition of what the hon. Member for Oldham West and Royton has said, local authorities need more security and certainty in the new system. Local authorities take on a greater risk challenge if funding is distributed by central Government to them, rather basing local government on locally collected taxes.

Overall, the changes to pooling arrangements will ensure effective business rate pools, with other tools to help drive economic growth. I therefore ask the hon. Member for Oldham West and Royton to withdraw his amendments and commend paragraphs 25 to 31 of schedule 1.

[Jim McMahon]

As I said earlier, we feel strongly about amendment 47. The Bill would fundamentally change the relationship between local government and the Secretary of State, which we do not believe is in the interests of democracy or localism.

I have the Minister’s response. There is some merit in having a system in place that provides a degree of certainty, but that could be provided, for instance, by a longer notice period—local authorities wishing to leave a pool could give two years’ notice rather than 12 months’ notice if required—which would at least give the degree of planning certainty required. It could well be tied to economic deals done through negotiations with the Government. For instance, if an economic deal lasted five or 10 years, there would be some sense in saying that, during that period, it should be tied to the business rate pool.

However, that is not on offer. What is on offer is: “Take or leave it. The Secretary of State knows best.” Areas will be forced to join the pool. The example given is of a local authority that wants to join a pool but is told that it cannot for whatever reason. I suspect that the number of such examples is very low. It is more likely that, when a local authority does not want to join for whatever reason is right for its community, the Secretary of State will force it to do so to make a wider pool balance out without having a requirement for central Government funds. I suspect that that is more what the measure is about. I am concerned that the balance of power is changing between national level and local level. Further powers are being given to the Secretary of State, and further mandating can be required, but there is less parliamentary scrutiny.

There is also an unhealthy rebalancing of relationships in some local areas. We talk about the Greater Manchester business rate pool as being one to look at, as a pilot—we are doing so very carefully. However, it would allow the Cheshire authorities to obtain 50% of growth before they returned to the pool. As I have said before, there might be an argument for that, given that it sits outside the city deal that has been agreed as part of the devolution deal, but it beggars belief that two authorities within Greater Manchester—Trafford and Stockport—have negotiated as part of that business rate pooling an agreement to keep a third of growth to themselves before it goes into the pool.

We believe that at a national level, we should agree a way of redistributing that it is the same for everybody, but instead there are deals within deals. Those who write the cheques always have the upper hand, and not those who are potentially the receivers. I do not believe that that is in the interests of the communities we are here to serve. I certainly do not believe that it is in the interests of an equal, balanced relationship at a local level. Although amendment 47 is not quite in the spirit of previous amendments we have voted on, I ask the Minister to support amendment 47 to maintain the balance of a healthy relationship.

Question put, That the amendment be made.

--- Later in debate ---

[Jim McMahon]

I will be quite brief on these amendments, because we have discussed these matters. Even for a local government geek such as myself, it has got to the point where it is a slight endurance trial.

However, we need to reiterate points about the balance of power and control, the relationship between central and local government, and the direction of travel from this Government. I will use this opportunity not to express my own views but to reflect back the views that were shared in our evidence sessions and that were expressed through evidence submitted later.

The London Councils group of local authorities has expressed concerned about the level of control the Secretary of State will have to revoke designations by removing the requirement that all local authorities in the pool agree to the revocation. The chief executive of the District Councils’ Network gave evidence. In its written submission, it said that it believes, as we do, that business rates pools should be determined locally and not by central Government.

This is not just about the Opposition making a point and taking a stand. We are doing that, of course, and we have had that conversation. We have had a vote on that basis. This is really to appeal to the Minister to listen to the concerns of London Councils, the LGA, the District Councils’ Network and many, many local authorities across the country that have expressed concern about the centralising nature of that designation provision and asked that it be reviewed.

[Mr Jones]

I am grateful for the opportunity to discuss the Government’s proposals to allow for local growth zones. The Government support the introduction of clause 3, which would insert into part 9 of schedule 7B to the Local Government Finance Act 1988 a power for the Secretary of State to allow local authorities within pools to designate an area or areas. Within these areas, local authorities will be able to retain a proportion of business rates income outside the rates retention system for a specified number of years.

The effect of local growth zones will be similar to that of enterprise zones, providing local areas with an additional tool that can be used to help to drive local growth. The difference here is that regulations made under new paragraph 38A, which will be inserted into the 1988 Act by clause 3, gives the responsibility to local authorities to set up and define the local growth zone, within the parameters agreed with the Secretary of State. The Government consider that pools of authorities are best placed to use the power by taking a shared view across a larger functional economic area about the best way to achieve growth for the benefit of all the authorities in the pool.

--- Later in debate ---

[Mr Jones]

I thank the hon. Member for Harrow West for his explanation of the intention and effect of amendment 20, which would require a referendum principles report made by the Secretary of State to include conclusions from an assessment of needs as well as details of efficiency savings for local authority areas.

I appreciate the intention behind the amendment, but I do not agree that it would be appropriate to include the suggested information in a principles report. Council tax referendum principles exist for a very specific purpose: to protect council tax payers by defining an excessive increase, so that they can make a final direct decision. It is open to authorities to set large increases and put them to a local referendum if they feel they are necessary to support local services.

[Jim McMahon]

I wonder whether, in the spirit of an equal, balanced relationship, the Secretary of State would be inclined to grant a national referendum on the projected 25% council tax increase.

[Mr Jones]

As I have said many times in this Committee, in real terms council tax is currently 9% lower than it was in 2010. I do not intend to take any lectures from the hon. Gentleman, bearing in mind that council tax doubled between 1997 and 2010 when his party were in power. I am not too sure that I will be blown off course by that advice.

The referendum principles report is not intended to provide an analysis of local authority need, its success in achieving efficiencies or an account of any other matter. It is a technical instrument to set the parameters by which a referendum might be triggered. As Members will be aware, the Bill creates a new requirement to consult representatives of local government before principles are set. That will allow the sector to make representations about their circumstances and needs before the Secretary of State makes his or her final decisions, whatever the future holds. That will be more useful to local authorities than prescribing the content of a referendum principles report.

Local Government Finance Bill (Fifth sitting)

Debate between Jim McMahon and Marcus Jones

Tuesday 7th February 2017 Public Bill Committees

[Mr Jones]

The hon. Gentleman raises an interesting issue. If the country had the misfortune of another Labour Government—perhaps a discredited Labour Government, such as the one in the 1970s that went with a begging bowl to the International Monetary Fund—and inflation was soaring beyond belief, the Secretary of State might need to make some sort of amending statement to deal with the inflation and allow local authorities additional funding to deal with the mess that the Labour Government had again made. However, we are speculating, because I suspect it may be a little while before the Labour party is once again in a position to form the next Government.

[Jim McMahon]

Perhaps we can give the Minister a few seconds to capture his thoughts and reflect on the question. Does he envisage, then, that this power would be used only every 30 to 40 years?

[Mr Jones]

It is not for me to speculate on how often there will be a Labour Government. I do not think that I want to get into that this morning; I want to come back to the amendments and the Bill.

The amendments shift the focus back to Whitehall and Parliament by introducing a need for a resolution in the House of Commons, thereby jeopardising the move to more local accountability. The Government will be required to consult with local government on the principles for allocating funding over a period of years, and we envisage that whenever there is a reset of the business rates system, further consideration will be given to the allocation principles, in consultation with local government. Above all, it is important to provide as much certainty through this consultation as possible.

I am confused about the proposals, because on several occasions the hon. Member for Harrow West on the Opposition Front Bench has talked about a system of an annual vote, and about a vote at the start of the process to set the principles. He cannot have both things, but he seems to want to have his cake and eat it. I am worried that he is trying to undermine the principles of what the Government are trying to achieve.

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[Mr Jones]

The hon. Gentleman mentions from a sedentary position tough love. With regard to his proposals, his version of tough love seems to be very confused. The point I am making, and the reason I urge him not to press the amendments, is that there needs to be far more clarity about what he is looking to achieve. What he suggests at the moment, particularly on having an annual vote—or not, as the case may be—seems to very much undermine the principles behind the amendments, so I ask him not to press them.

[Jim McMahon]

It is a pleasure to serve under your chairmanship, Mr Gapes. I will be quite brief, as I recognise that we are pushed for time in the morning sitting and that a vote will take place.

My hon. Friend the shadow Minister will want to reply to that very brief response from the Minister, which I struggled with. My hon. Friend explained at length the concerns we have and probed in great detail about where we are trying to get to, but the Minister could do nothing more than read out a pre-prepared statement from his folder in response. That really lacks respect for this Committee and for the amount of work and dedication that has gone into probing these provisions. I ask the Minister to reflect, before this afternoon, on whether he is happy with his performance this morning and to think about the great deal of weight and responsibility that his post carries.

It is not good enough just to dismiss the legitimate concerns raised here and bat them away as if they are not important. We are talking about the future financing of vital public services that our communities rely on. The amendments have not been tabled for the sake of it or to cause trouble and make waves; they are here because we are seeking certainty about the future sustainability of public services. For the Minister’s response to be five minutes—certainly less than 10 minutes—is quite disrespectful, and not only to us. He can be disrespectful to the Opposition—that is part of the Punch and Judy of politics—but to be disrespectful to the millions of people who live in this country and rely on those services is quite unforgiveable.

I would like a bit more clarity on what this provision means. We heard from the Minister in the evidence session that an additional £12.5 billion will be provided through business rates to local authority services, but no detail was provided on what grants would be taken away in lieu of that or what additional responsibilities will be pushed down. We still do not have clarity on whether mandatory relief and small business rate relief will be net of that figure. The Minister was at best confused and vague in his evidence.

Let me run through the numbers to clarify how big the gap could be depending on the financial review that is carried out. We know from the evidence session and the paper that the fantastic team at the Library have produced that the Government will release £12.5 billion, but they have not said whether the revenue support grant, the rural services delivery grant, the public health grant, the improved better care fund, the independent living fund or the early years grant will be included. They have excluded the Greater London Authority transport grant from those numbers. If we were to roll up those grants and expect them to be covered by the £4.5 million, we would have a gap, because their total cost is £14.7 billion. Can we have clarity on whether the £12.5 billion is new money? Is money going to be taken away that is provided to local authorities through grant support at the moment?

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[Jim McMahon]

Okay. My contribution is about parliamentary scrutiny and the role of MPs, both Opposition and Conservative Back Benchers, representing their local areas in Parliament. The reason the annual statement has to come to Parliament is so that we can ask these probing questions. However, before we get there, a decision will be made on which of these grants will or will not be included. As far as I can see, there is potential for there to be a very significant funding gap. More than that, we know that the adult social care gap is £3.5 billion. We also know that, despite a 25% increase profiled for council tax, that will generate only £1.8 billion.

There is concern about the grants that have been provided and whether the £12.5 billion will be enough. There is also concern about the £3.5 billion social care funding gap and the £1.8 billion profiled council tax increase. Those questions, which I accept are detailed, are critical and the reason these amendments are so important. For a Back Bencher, this is their only opportunity to have the debate and, more important, to have a vote on the day. The vote says to their constituents that they have represented their interests in Parliament. If the amendment is not accepted, that ability will be taken away from MPs.

[Mr Jones]

Again, the hon. Gentleman is seeking an annual vote of the House. Does he not think that an annual vote would completely undermine the principles of what we are trying to achieve here, which is certainty for local government over a longer period? This is something that local government itself has wanted for some time and something that 97% of local authorities have signed up to during this spending review period.

[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.

Local Government Finance Bill (Fourth sitting)

Debate between Jim McMahon and Marcus Jones

Thursday 2nd February 2017 Public Bill Committees

[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.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

It is a pleasure to serve under your chairmanship, Mr Gapes. I thank the hon. Member for Harrow West for tabling the three amendments about the current central share of business rates income, and welcome the opportunity to discuss the important matters they raise.

To begin with amendment 1, removing the central share is essential to enable local government to retain 100% of locally raised business rates and to move away from its dependence on central Government and towards a more self-sufficient future. On Second Reading, the hon. Gentleman was supportive of the principle of 100% business rates retention, but his amendment would let central Government take a share of locally raised business rates income.

We have been working closely with local government, including doing significant work with the sector on developing the policy and on how 100% of business rates can be retained in local government. Keeping the central share would cut across the joint endeavour that the Government and the local government sector have embarked on.

The hon. Gentleman raised the principles of the fair funding review, the consultation response and further consultation. We have made it clear that it is a fundamental review of the approach to setting a baseline for 100% business rate retention. It is guided by the principles of fairness, simplicity and transparency, and we have been working in collaboration with local government in that respect. As the hon. Gentleman knows, we shall consult shortly.

--- Later in debate ---

[Mr Jones]

The Government are committed to and have shown good faith in keeping to the agreement we made about the four-year settlement. Regarding the new homes bonus, which was not included in that settlement, we made it very clear at the time that there would be changes to it. In fact, this time last year we embarked on a consultation explaining that we wanted to sharpen the incentive in relation to the new homes bonus.

In addition, it was quite clear to local government at the spending review in 2015 that the new homes bonus would change, because the improved better care fund, which will total £1.5 billion by 2019-20, was intended to be funded by savings made from it. As such, changes to the new homes bonus have not necessarily been a shock to the sector.

[Jim McMahon]

Will the Minister give way on that point?

[Mr Jones]

I will, and then I will move on.

[Jim McMahon]

I appreciate the Minister giving way, given the time that we have.

The Minister’s response would lead us to believe that the majority of councils are signed up to a four-year efficiency programme of budgets that can be balanced within the settlement that they have been offered, but I know from my own local authority that its four-year efficiency plan had a budget gap of £99 million between the cost of providing services to meet its statutory obligations and the income from grants, council tax and business rates. The Government have not come forward and said where the £99 million will come from; in fact, the changes being made through this Bill will potentially make that situation worse. Can we have a clear idea of how many of the efficiency plans submitted to the Government showed a gap of that nature?

--- Later in debate ---

[Mr Jones]

We did indeed ask for efficiency plans to be put forward and we did so on the basis of making the offer of the four-year settlement, and only 10 local authorities across the country did not accept that offer.

If the hon. Gentleman wants me to elaborate, I would not say to him that things are easy for local authorities—far from it. Local authorities have done an extremely good job in many ways over the last six years or so in doing their part in deficit reduction, which was so necessary after the shambles of a deficit that was left behind by the Labour party. I say they have done a good job because overall satisfaction with services has been maintained, and local authorities have again taken up the baton, particularly in relation to this four-year deal, and they have run with it.

[Jim McMahon]

Will the Minister give way?

[Mr Jones]

I will not give way again, because I want to move on to a further—[Interruption.] Okay, go on; I will give way.

[Jim McMahon]

I thank the Minister for that point. Let us be clear and honest with each other on this issue. The choice that local authorities had was not the choice of financial stability and security. The gap in provision is still the gap in provision. The choice put forward by the Government is basically a certain cut or an uncertain cut.

[Mr Jones]

The point was that local government knew there was a challenge to be met and they knew they were not immune to the reductions in public spending. Coming back to the point, what local government had asked for for many years, above a lot of other things, was certainty. With the four-year deal we have given a significant level of certainty to local authorities that hitherto had always been hanging on the word of Government come December as to what their position would be when they set their budget for the following financial year, which would start at the end of March and take them through to early April. Generally, local government have welcomed that. As to whether they would want a quantum of money within the settlement, I am sure many local authorities would, but at least the deal has allowed local authorities to plan and to use other resources. For example, in many cases it has allowed them to use reserves to bring forward transformation plans that enable them to meet the challenges that they face.

Let me respond to the point that was made about two-tier authority areas by the hon. Member for Harrow West and the way in which the splits would be made in terms of income between the different tiers of local government. The amendment to retain the central share does not achieve that aim. How business rating can be shared between the tiers will be set out in regulations under part 4 of schedule 7B to the Local Government Finance Act 1988. We do not need to retain a central share to distribute business rates income between tiers of Government. As has been the running theme through this and I think will be a running theme in Committee, we are working with local government to work out how the split should work under 100% business rate retention.

--- Later in debate ---

[Mr Jones]

The hon. Gentleman mentioned the iron fist of Government as it once was. Back in 2010, 80% of the money that went to local government was distributed from central Government, with the Government deciding exactly where that money went. Did that give much of an incentive for areas to grow their business rate base?

[Jim McMahon]

I thank the Minister for gently leading me into the scandal that was 2010, when the coalition Government rocked into office, holding hands in the rose garden and making promises of a brighter future. Oldham did not have that experience. Some £24 million was taken from its area-based grant; money put in place for urban renewal following the 2001 riots was snatched overnight at the cost of the town’s regeneration. In the same year, the housing market renewal programme, which was meant to reform the council tax and business rate bases in the area, was snatched. It left terraced streets, with boarded-up properties that had been bought for demolition, to stagnate. The Government have never come back to the table with an answer on what to do for urban renewal in towns like Oldham. Some in the room may look back on 2010 with fondness; I look back and think it was the year the Government turned their back on towns like Oldham.

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[Jim McMahon]

Thank you for connecting us back to the Bill, Mr Gapes. My point connects exactly back to it, because the Minister’s challenge was whether we would prefer a centralised approach, or whether we want local areas to be given the freedom to crack on; that was what I took to be the essence of his contribution. He perhaps clouded that slightly with a reference to those horrible years in 2010, but nevertheless the spirit of it was related to the Bill. My response is this: there will always be a need for elements of redistribution, because we are not starting from a clean slate. We recognise that some areas will require more to bring them forward to the point at which they become self-sustaining and self-financing in the way that Government envisage. For a town such as Oldham, reframing the business rate base and the council tax base was critical. The funding streams from central Government that I referred to were absolutely relevant to that town’s success.

Let us leave the past in the past, and look towards the future and what the Bill provides as a way forward. There is no doubt that we need to move to a less centralising state, and that local authorities have been crying out for more freedoms, power and independence from central Government. This measure does potentially provide some of that freedom. However, power is nothing without the resources to get things done. We need to make sure that we are not effectively repeating inequalities of the past, or even deferring blame and responsibility for cuts and reductions down further to local government, when it has had it up to its eyes because of what it has had to deal with through austerity.

The framework of redistribution is about how we will collect money from local authorities that have a very strong base and where growth has taken place at an accelerated rate, sometimes through no action of the local authority. How do we capture that growth to make sure that it can be used to benefit the whole UK? That detail has not actually been brought forward. From the Bill we know what has been taken away, but we have no idea what is being put in its place. We know, because we have been told today, that central Government want to let go and allow local government to administer its own scheme, but we do not know what that scheme is, because the programme has not been brought forward; it would provide for a more meaningful debate if it had been. If the Minister were to intervene and give a bit more detail on that, it would be extremely helpful to the debate.

[Mr Jones]

The hon. Gentleman refers to the question asked about the multiplier, which I answered. The information that he says I divulged today and brought to the world after keeping it to myself for so long was actually in our summer consultation in July last year, so there is nothing hidden in that sense.

[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.

--- Later in debate ---

[Mr Jones]

Will the hon. Gentleman give way?

[Jim McMahon]

No, I will conclude. I know that Mr Gapes is being very patient, but I can see a yearning in his eyes to go on Twitter and put the world to rights—and so have I, because it has been a busy few days.

We do not live in a world in which there is going to be a comprehensive review of local government finance—that is not what the Bill is about, and we need to be honest about it. But the Bill will have consequences that we need to take on board, and we can do that only if we have information that we can assess in a detailed way. As soon as that information is provided, we can bring more value to the system and, I hope, ensure that even with very limited resources, it is the best and fairest system that it can be.

[Mr Jones]

The Government support clause 1, which will enable the introduction of 100% business rates retention for local government. It covers a number of different decisions, including the changes in schedule 1, which I will come to later.

We discussed the scrapping of the central share extensively when we debated the Opposition amendments—

Local Government Finance Bill (Second sitting)

Debate between Jim McMahon and Marcus Jones

Tuesday 31st January 2017 Public Bill Committees

[Justin Tomlinson (North Swindon) (Con)]

Q This is a question for Mr Spence. In the briefing that you provided to us, you said:

“We also believe that there should be a maximum amount a billing authority can raise its multiplier, alongside the maximum reduction limit per year.”

Could you expand on that, please?

Christian Spence: Certainly. This is about the provision in the Bill whereby local authorities will have the power, within limits set by regulation of the Secretary of State, to lower the multiplier in their area. Again, for all the reasons we have already discussed, there are potential incentives to local authorities and businesses in doing so. Broadly, there is a challenge regarding how much that power would be used within the current fiscal conditions that local authorities see. However, although we see in the Bill that the power to raise rates at the national multiplier level will remain set by the Department and the Government centrally—the national multiplier will rise by its new indexation from 2010—local authorities appear, as the legislation now stands, to be able to lower their multiplier in any one year and do so again the following year.

If a local authority were, for example, to lower its multiplier to tuppence below the national multiplier in year one, over three or five years the national multiplier might continue to rise and we would have a position in which that local authority’s multiplier could be 10p different from the national one. As we see the Bill now, there is no reason why that local authority could not reclaim all of that 10p difference overnight in one fiscal year. If there are limits, capped nationally, by which the rate that the national multiplier can rise from one fiscal year to the next, it would seem perfectly reasonable that local authorities should also be capped regarding how much, when recovering from a previous rate, they can raise theirs from one year to the next.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

Q Mr Spence just made an interesting point regarding the way in which the multiplier may be increased at the point when a particular authority decides to change that policy of having a reduced multiplier. By definition, I take it you are, therefore, against local authorities having the ability to increase the multiplier, as has been suggested by some people.

Christian Spence: There is no real consensus across the entire chamber network about the rate and about how those work in individual local authorities. You can see examples in situations such as business improvement districts. There is potentially a very good example, if we can agree and move the Bill to a position where there is a ballot on mayoral infrastructure levies. Business might be happy to see increases in levy provided that the reasons given are clear, that it is a strategic scheme, that it is additional to that which has already been committed, and that businesses have been openly and genuinely engaged, consulted and balloted on whether that can take place.

The specific question for us is this: do we want a position where national Government are capping the national multiplier to CPI but local authorities retain an ability to raise their own multiplier by a rate greater if they have chosen to deviate from the national multiplier in earlier years?

[Jim McMahon]

Q Is there not a slight tension with that approach? Areas with historically low tax bases have to charge more council tax per property just to generate the same total. We could find ourselves in the same situation with a business rate base—local areas could be forced to increase it dramatically just to keep their heads above water. Although I am not always in favour of a national cap, I think there might be a call for it, so that the gap does not widen and so that there are proper top-ups and tariffs in place. Do you not accept that businesses can thrive only if local areas thrive? Businesses do not sit in isolation.

Christian Spence: I absolutely agree with that point. A fundamental principle is that business can never exist in its own cocoon—it is dependent and co-dependent within its wider community. The challenge for us is a very narrow point in the Bill. If a local authority chooses to lower its rate, that is its decision, and it must fund that gap on its own. I would hope we could develop a system in which a local authority is not subsidised for deciding to lower its multiplier by any redistribution. That would essentially pull at a natural tension and create perverse incentives. If a local authority does not need more money and has chosen to cut, the understanding should be that the onus is on the local authority. Yes, that may need to rise, and our fear is how we control that rise. The fear is that, in an extreme situation, we might see a 10p rise in one year.

Local Audit (Public Access to Documents) Bill

Debate between Jim McMahon and Marcus Jones

2nd reading: House of Commons
Friday 25th November 2016 Commons Chamber

[Mr Jones]

I thank my hon. Friend. The overarching objective here is to enable a journalist who might not be an elector in a particular area to uncover that sort of information and bring it to the public’s attention, so that the public can then question the auditor. There are a number of examples of where that has happened to positive effect, with changes having to be made by a local authority as a result.

The overarching objective of external public audit must be the proper use of public money, and if an elector objects and it results in investigations by the auditor, he is doing his job and any resulting delay in completion of the audit or additional cost to the body must be seen as a secondary consideration.

[Jim McMahon]

Will the Minister give way?

[Mr Jones]

I apologise, but I will not because I want to make sufficient progress so that the Bill receives its Second Reading.

It might be helpful here to illustrate the difference between this provision and the powers provided by the Freedom of Information Act 2000, which my hon. Friend the Member for Dover (Charlie Elphicke) mentioned. The ability to inspect and make copies of the most recent accounting information from a local authority during a specific period could provide compelling and timely evidence of poor spending decisions in the last accounting period that would enable a journalist to bring them to the attention of local electors by publishing the evidence uncovered. That would provide electors with the opportunity to ask the auditor about the issue or raise an objection so that the auditor can investigate the matter further, and it would potentially enable action to be taken to investigate poor spending, potential fraud or maladministration within a local public body. FOI requests, while being subject to timing constraints in terms of providing a response, do not have the same capability for potentially engendering swift action that could have the effect of stopping illegal activity.

As we heard from my hon. Friend the Member for Aldridge-Brownhills, the smallest parish councils—those with an annual turnover of £25,000 or less—will not be subject to the Bill, because they are subject to separate provisions under the 2014 Act. They must follow a different transparency code, which we believe works for them.

I know that some stakeholders have expressed reservations about the value of the Bill, and about whether the potential costs will outweigh the benefits, but I firmly believe that enabling journalists to inspect the accounting records of a range of local authorities could uncover more poor spending decisions by councils, which in turn would lead to more potential objections from electors. Although the existing rights are not often exercised, this kind of transparency has, in the past, enabled illegal activity and poor governance in local authorities to be uncovered. My hon. Friend the Member for Dover gave a good example involving failings on the part of a local authority, but there are other examples. In the event of poor decision making and maladministration in councils, it is entirely reasonable for local electors to be able to obtain information and shine a light on what is going on. They may not be financial experts, but the Bill will add another tool to the box, and enable them to hold their local authorities to account.

I stress that the timescale for action would be limited, and that the window of opportunity, and thus the additional cost that Members have mentioned, would be restricted to the 30-day period in which the previous year’s accounts would be available and the inspection rights could be exercised. Any questions or objections would also have to be received within that period to enable an investigation to take place.

The measures in the Bill are proportionate and they could help to uncover poor practice so that people could hold their local councils to account. I am delighted to be able to support the Bill, and I am grateful to my hon. Friend the Member for Aldridge-Brownhills for introducing it.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).