Lord Beamish
Main Page: Lord Beamish (Labour - Life peer)(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Robert Neill
We will talk later about what is described as the central share, which is the proportion that may, as necessary, be retained by central Government. That is to ensure that at all times the settlement fits into the envelope of the control totals, but even so we have indicated that anything allocated under the central share will be returned to local government through other grants. Just as at present local authorities receive grants that are outside the formula grant scheme, so too can money be recycled to local government in the same way.
Mr Kevan Jones (North Durham) (Lab)
If the answer to the question put by the hon. Member for Poole (Mr Syms) is that, yes, the Government will retain that money, are they not, by that mechanism, substituting for central Government funding by making sure that local government pays for all grants that go to local authorities? That is not the case at the moment.
Robert Neill
On the first part of the hon. Gentleman’s proposition, the Government have never made any secret of the fact that there will be a central share; we have always indicated that it would be necessary for the system to operate within the control totals of the spending review. On the second part, the central share can be set and adjusted from time to time. We have made it clear that we intend to look, as we go forward, at the macro-economic situation, which will be reflected in the control totals, and the ability to seek to align more closely the responsibilities of local authorities with funding availability through the business rates. Put it this way: it would be a bit previous to come to a conclusion at this moment about what precisely would happen to any individual grant stream.
Robert Neill
The danger in the hon. Gentleman’s formulation is in assuming that that would shift all funding in that way, and that is not correct. What we have said is that we will have the option to make an adjustment to keep the grant within the control totals, and to ensure that money raised by business rates is returned to local government, in a way that is consistent with the scheme in the Local Government Finance Act 1988. That is not different, because as the hon. Gentleman, with his experience, will know, quite a number of funding streams are paid to local authorities, outside formula grant. I do not accept that it follows that all of them have to be added in. What we have said is that we will seek to align more closely the grants with the responsibilities.
Helen Jones
Amendment 27 is a probing amendment designed to test the Government’s intentions with regard to the implementation of the scheme. The Bill states that the “Secretary of State may”—the phrase is repeated throughout the schedule—by regulations determine whether a local authority is required to make a levy payment and, if so, the amount of that payment. What we want to know from the Minister is why the Bill uses “may” in this case rather than “must”. It is clear from clause 1 that any regulations will be subject to the affirmative procedure, but it is not clear whether the Secretary of State intends to proceed by regulation in all cases. We are advised that the use of “may” rather than “must” or “shall” implies that he might proceed in some other way. I am not sure how, although it might be by ministerial diktat, by a written ministerial statement or by a finance report, but it is important to make the situation clear, because the Committee is dealing with an enabling Bill that gives huge power to the Secretary of State, without being clear about how it will be used.
We would therefore like to hear from the Minister exactly what the Government’s plans are, because the Bill is not consistent. In several other places, it uses “must” in relation to regulations, so what is the reason for the different wording in the case before us? The Minister must forgive me if I appear to be developing a suspicious nature; it comes from dealing with him for so long on this Bill. But we would welcome an assurance from him that the regulations on this point, and on the others that we have highlighted in this group of amendments, will be placed before the House and not simply introduced through a statement from the Department.
Mr Kevan Jones
Does my hon. Friend think that local government will feel confident that power is not being centralised if we are able to see the regulations now, as the Bill is going through Parliament, rather than being tagged on, as she suggests, once it has done so?
Helen Jones
My hon. Friend makes a valid point. I, like other Opposition Members, have mentioned the Government’s failure to produce any draft regulations, and the reason why is that they have proceeded so quickly with the Bill and did not want to take it into Committee upstairs. In turn, we all know the reason for that: they simply do not have enough business to go through on the Floor of the House, because their business is snarled up in the Lords.
Amendment 40 would add new sub-paragraph (1A) to paragraph 20 of the schedule and require the Secretary of State to specify in regulations exactly what he defines as “disproportionate growth” or—the term that is often used—“disproportionate benefit”. The amendment, like many that we have tabled, is an attempt to address what my hon. Friend has just highlighted: the alarming lack of clarity in the Bill and the consequent uncertainty for local authorities.
We know the mechanism that the Government intend to use to calculate the levy. After abandoning ideas for fixed-rate and banded levies, they intend to create a proportionate levy, which in effect is an individual rate for each local authority, but not only do we have no clarity about the percentage level, but it is still not entirely clear what will constitute a disproportionate benefit.
The Government, in their response to the consultation, say that the proportionate levy will create a system to allow a local authority to retain growth in a fixed proportion to its baseline level. The levy is intended to tackle the gearing effect, whereby authorities with a high tax base gain more from the same growth than those with a low tax base, but it does not do so. It mitigates the effect; it does not tackle it. The simple fact of basing a levy on growth above a baseline level, however, leaves many questions unanswered, and amendment 40 is an attempt to get some answers from the Government, because, unless there is some certainty about the definition, local authorities will find themselves in real difficulty when deciding on future projects.
Let us imagine, for example, a rural authority that loses a large employer, one that pays a high proportion of local business rates. The authority’s business rate income goes down, and might do so before the baseline is set. It then attracts another employer to the area. When that employer starts up, the authority gets a big increase in business rates for one year; the increase tapers off after that. Is that a disproportionate gain, given that the local authority is simply replacing income that it had previously lost?
What about a town that redevelops its centre? The council would see a fall in business rates but when the redevelopment was complete, it would see an increase. Would that be treated as a disproportionate gain, given that the council might use the increase to fund the development in the first place? How would the levy then apply to a TIF 1 project—as opposed to a TIF 2 project, which would be outside the scheme?
Furthermore, the Secretary of State has given himself a Henry VIII power to reset the scheme. [Interruption.] The hon. Member for Rossendale and Darwen (Jake Berry) should learn that PPSs should be seen and not heard. How would the council get any certainty for future planning?
Helen Jones
Again, my right hon. Friend makes a telling point. The consultation document merely says that there will be a proportionate levy. The obvious question to put is this: “What is the proportion and how will it be decided for each authority?”
Mr Kevan Jones
Does my hon. Friend agree that the situation would vary from authority to authority? For example, Northumberland is losing Alcan, which is a large employer in the south-east of the county and therefore a large contributor to the local tax base. There is a big difference between Northumberland losing such an employer and, say, the closing down of a Westminster office block that will be replaced quite quickly.
Helen Jones
My hon. Friend reminds me of a good point that I was going to make earlier. I had Northumberland in mind because it is a place that I am very fond of and know well. If Northumberland has lost Alcan by the time the baseline is set, it will be set on the basis of lower business rates. If the authority replaces Alcan with another employer, will it be deemed to have made a disproportionate gain? The Minister must explain why an authority that is trying to do the right thing by bringing in new employment to replace what has been lost should be penalised for that.
An authority will need to be able to make representations when the amount of levy that it is going to be asked to pay is first published. As I said, we do not know whether the levy payments will be included in the local government finance report. That is because the Bill is so vague.
We think that it is only fair to specify that, if a local authority is required to make a levy payment, it should be notified and be allowed to make representations about the calculation before the final decision is made. It might be that an authority challenges the basis of the decision that it has made a disproportionate gain. That is unlikely, but it could happen. It might be simply that the calculation has not been done correctly. We have seen that many times. That is why we have amending local government finance reports. It has been known occasionally for Departments to get their calculations wrong. In such circumstances, councils should have a mechanism for making representations before the final decision. Local authorities are, after all, partners in this process. Neither the Secretary of State nor any other Minister would want to be a provincial governor figure handing down unchallengeable decisions.
Mr Kevan Jones
My hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said that the one thing that local authorities need is certainty. Having been in local government myself, I know that a council needs certainty about what its income will be each year. The previous Government made great strides by providing three-year budgets, which allowed councils to plan their expenditure over a period of time.
As we heard on Second Reading and last week in Committee, although the Bill has been trumpeted as being about devolving decision making to a local level, it will actually do completely the opposite. It will give the Secretary of State the power to determine, in his toga or otherwise—the idea of him in a toga should probably come with a health warning—what level of budget councils will get.
We need a definition of disproportionate change. We have heard some interesting examples, and we need to know whether the building of a major power station or the loss of a manufacturing site such as Alcan would be considered disproportionate. Would a council forgo business rates for a year while a site was being redeveloped, only to gain them back when occupancy took place? Without such definitions, councils will be left in a very difficult position in planning their budgets.
Another issue to consider is the time of year when a closure happens. My right hon. Friend the Member for Knowsley (Mr Howarth) has just told me that his local authority area has one large employer that provides 7% or 8% of the local business rates. Let us suppose that it closed just after the business rates had been set. Would the local authority get any compensation in the following year? It is not clear, because we do not know what the regulations are going to be. That could leave his local authority minus 7% of the income that the Government think it is getting, which would be totally unfair. It would help if we knew what the regulations were, what the circumstances were and what the Government consider a disproportionate gain.
Matters differ from local authority to local authority. Northumberland has just been mentioned, and one large employer, such as Alcan, leaving has a huge impact on business rate income. No doubt in more affluent areas, the position is different. For example, I am sure that the loss of an office block in Westminster would not have the same impact on Westminster city council’s overall tax take. I would also argue that it is much easier in Westminster to replace that income through attracting new jobs than it is to replace the income that Northumberland county council will lose. If we do not know what the regulations and the circumstances are, it will be difficult for local authorities to plan. I do not understand why the Government are reluctant to come forward with a definition of disproportionate, or with the regulations.
We are supposed to be scrutinising the Bill on the Floor of the House. My hon. Friend the Member for Warrington North (Helen Jones) said that the reason for that is to give us something to do while the legislative programme is in a logjam in the other place. There is therefore no shortage of time to discuss the details. I do not know whether, in their haste to push the Bill through this Chamber, the Government do not think that they have time to draw up those regulations and explain the way in which the levy will work. That is very interesting. If we were doing our job properly, we should have a chance to examine the regulations.
If the Bill is passed in its current form, local government will look forward to its future budgets with some uncertainty. Local authorities cannot just turn their services on and off. Local authorities’ long-term planning is done on an annual basis, but they need to consider not only how to make savings, if their budgets have to be reduced, but their investments. It is claimed that the Bill will encourage local authorities to incentivise business to grow in their areas, but if they do not know how much money they have to do that, it will be difficult for them to forward plan.
Andrew Gwynne
My hon. Friend makes a good point about uncertainty. If a local authority’s income mid-year falls below what is in the budget plans, that causes all sorts of problems. That happened just the other year, with the in-year cuts. Local authorities had prepared a budget on an assumed amount for that year and ended up with substantially less funding.
Mr Jones
They did. If local authorities have to lay people off mid-year and sever contracts, that costs local government more. In County Durham, when we had those in-year cuts, it cost the council more money to sever contracts than it would have cost to allow them to fulfil them. No money was saved, but things were made very difficult for local councils, not only to plan their budgets but to manage services.
Alex Cunningham
My hon. Friend mentioned Alcan—a major organisation—and the tragedy in Northumberland. Does he recall when Samsung walked out of the Wynyard Park estate on Teesside, devastating the business rates in that area and throwing many people on the dole? Does he agree that a local authority’s fortunes could rest on the whim of multinational corporations, which can move in and out at will? There is all the more need for a proper safety net for local authorities that face that sort of dilemma.
Mr Jones
My hon. Friend makes a good point and Samsung is a good example. Its inward investment provided jobs and income to the local authority. Such situations are more relevant in rural areas or constituencies such as his and mine in the north-east of England. When one single, large employer leaves, there is a disproportionate effect. I do not want to talk again about Westminster city council, but a single employer leaving that area does not have as devastating an effect on the employment base and on the local tax take.
Another thing that the Bill does not take into account is the increased demand on local government services when there are large closures such as the one to which my hon. Friend referred. There is bound to be more take-up of, for example, council tax benefit, even though the Bill cuts it by 10%. The Minister was on the letters page of The Journal in Newcastle trumpeting the Bill and saying how great it is, but he did not mention that it would come with a 10% cut in council tax benefit. He will be pleased to know that I have written to the paper to correct him and to ensure that readers of The Journal have the full facts about the Bill rather than the propaganda he is trying to put out.
Another concern is the centralisation of powers. The Bill gives power to the Secretary of State to decide the levy. In addition, as we have no definition of “disproportionate effect”, that is down to the Secretary of State’s whim. When we look at what the Secretary of State has used his powers for in the past 18 months, we see that he supports and rewards people who vote for his party—I take my hat off to him, because he is quite political. If we do not have a definition of “disproportionate”, what is to say that he will not use the Bill to assist regions that he wishes to assist for political reasons?
The Bill means that the current or a future Secretary of State could punish councils that he or she does not favour, or that do not support one of his or her central diktats—the current Secretary of State talks about decentralisation but intervenes quickly to decide what local councils should do. If we do not have a definition of, or explanation for, “disproportionate” in the Bill, a lot of council chief executives and treasurers will be in fear each year of not keeping in with the Secretary of State, because he or she will determine whether they will get the budgets that their councils need.
Mark Field
I am sure the hon. Member for North Durham (Mr Jones) will be glad to hear that I am not speaking just to protect the ratepayers and businesses in Westminster.
This has been a worthwhile debate. I appreciate that the amendments were tabled for probing purposes, and I hope the Minister will elucidate precisely what the context of the word “disproportionate” is. I suspect I agree with my hon. Friend the Member for Poole (Mr Syms) that the context will change over a number of years, and that this is not a one-off opportunity for ministerial diktat to determine that money should be taken away from a local authority when there is a big change in one particular year for the reasons that were given.
I wanted to make a much more fundamental point. I appreciate that the Bill will go to another place. I suspect much of the real scrutiny will take place there and I hope that, by that time, we will have details on precisely what regulations will apply to each and every local authority. It shames the House that so much legislation is skated through it. That is partly because of guillotines, which have been around for the 11 years that I have been a Member of this place. We can also see that so much important scrutiny of the Welfare Reform Bill is happening in another place because there is not quite the same pressure on time there.
I hope the Minister satisfies us when he responds to what has been said because some valid points have been made. I am fairly confident that we are looking in disproportionate terms at exceptional circumstances, and I think that the context will become clear over a longer period, but it would be useful to have that confirmed by the Minister. I hope he will also confirm that we will have at least draft regulations brought forward as soon as possible, because otherwise there will be the eternal suspicion—only a suspicion and nothing more—that the Department will utilise huge discretionary powers, when if localism means anything, it means a devolution down of powers. That underlines what the Bill is trying to achieve—to incentivise local authorities. That can happen only if there are regulations that will be met with confidence across the political divide within local government.
Mr Kevan Jones
In trying to answer the question from my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), the Minister has raised more questions. He mentioned Alcan, for example, and if he is not prepared to say now what he thinks is disproportionate, how can the Committee scrutinise his proposals? I accept that it is very important that he consults local government but, surely, as the Bill goes through, Members should have a chance to question it and to have some input into the regulations, but the Minister is not prepared to give us that chance.
Robert Neill
First, it will depend on whether it was in a top-up or tariff scenario. Secondly, precisely because we are looking at two things, the normal arrangement will be that the calculation and the report are made annually. However, in the detail of the regulations there is provision, which we may not need to use, to consider in-year payment if something were to create some catastrophic loss that could not be made up. I am sure the hon. Lady will concede that these are precisely the details that we ought to be talking to local authority professionals about—particularly how best to achieve what we want.
Mr Kevan Jones
May I pick up on what the hon. Member for Mid Dorset and North Poole (Annette Brooke) said? In terms of an employer leaving an area—let me take the example that my right hon. Friend the Member for Knowsley (Mr Howarth) used and suppose that an employer left after the determination—will there be a mechanism by which the Secretary of State could compensate the authority for that loss in-year? If not, it will be very difficult for local authorities to set a legal budget.
Robert Neill
As I recall, when we get to paragraph 26 we are looking at that ability, but let me double-check the exact paragraph. One has to look both at this part and at the part that deals with the safety net. In paragraph 26 of the schedule, there are regulations that can be made about payments on account. We envisage circumstances in which the Secretary of State may make an in-year calculation in response to a request, and regulations can be drawn up to deal with that eventuality, which is a fair one. I hope that puts the hon. Gentleman’s mind at rest.
Mr Kevan Jones
Clearly councils will be compensated if they have significant losses, but the hon. Member for Bradford East (Mr Ward) made the good point—although it is a rare occurrence—that in one year there could be a big draw-down of the central fund. What level of central contingency will have to be kept back to address any significant changes year on year?
Robert Neill
That is a degree of hypothesis that it is not realistic to deal with at this stage. If the hon. Gentleman looks at the detail of the regulations, he will see that the very fact that we are creating the ability to carry over year to year makes provision to deal with the point he makes.
Helen Jones
It is a pleasure to serve under your chairmanship, Mr Robertson.
With these amendments, we return to our discussion about ensuring that any local government finance scheme takes account of the varying level of need in our communities, a problem that the Government seem determined to ignore. Interestingly, the Bill does not lay down the basis on which the Secretary of State must distribute the whole or a part of the remaining balance on a levy account at the end of the year, if he decides to do so. That is the problem with the Bill: too much of it is left opaque; too much is unspecified. Even Ministers have difficulty explaining it properly.
I cannot remember whether it was the Secretary of State or the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), but on Second Reading a Minister was reduced to reading out the explanatory notes when asked to explain the Bill in plain English, but we do know that embedded in the Bill is a blind refusal to address need. It is there in the use of the current financial settlement as the baseline, which, as the Yorkshire and Humberside councils said, means that baselines may not reflect the actual funding that councils need to deliver services to their local communities from April 2013. It is there also in the Government’s refusal to put anything in the Bill about need being taken into account when determining central and local shares; and it is there in the Government voting against our amendments to ensure that need was debated alongside local government finance reports.
It is all very well for the Prime Minister to talk about caring capitalism, but as we debate this Bill we do not see much care for the needs of the elderly, for children, for the working poor or for any of those who rely on local government services. Tory Members ignore it; Liberal Democrat Members weep crocodile tears and then troop into the Lobby after their Tory masters, anyway.
We see the same mindset operating when we consider the distribution of the levy balance. It is open to the Secretary of State not to distribute it at all, and we accept that there may be times when the levy needs to build up from year to year in order to fund safety net payments. If he does decide to distribute it, and it is nice to see the Secretary of State in his place, we will be back to the “all-power-to-Pickles” scenario. There is nothing in the Bill to stop him doing as he likes. What will his decision be based on—on whether he once had a nice day out somewhere, or the fact that an open space was named “Pickles park” in his honour? I cannot see many local authorities represented by Opposition Members getting money on that basis.
In Warrington, we have an Attlee avenue and a Bevin avenue. When the noble Baroness Thatcher was in power, the council even named one of its buildings “Poll Tax house”, to remind people of how the payments that they made had been imposed on them. That is a salutary reminder of how the last time they were in government, the Tories got it so wrong on local government finance. I cannot see us having a Pickles avenue, a Neill nook or anything else that might get us money on that basis.
Mr Kevan Jones
My hon. Friend’s constituency is rather moderate; I have Marx, Engels and Lenin terraces in my constituency. It is clear what the Secretary of State will do—exactly what he did last year in the local government settlement. He will reward councils in the south-east of England that vote Conservative.
Helen Jones
That is interesting; I suppose that my hon. Friend could think about a change of name to get money for his local authority, although I doubt that that would serve him.
The fundamental problem with the Bill is that too much discretion is given to the Secretary of State and there is no consideration of need. Without the concept of needs-related payment in the Bill, the Government cannot pretend that they want to protect the most vulnerable. Clearly, they do not. The amendment is yet another that tries to address that huge omission.
Wherever we look, we see evidence of the real disparities between different areas. Many examples have been cited in this Committee, but it is always possible to find more. In Knowsley, for example, 58,000 people—more than a third—live in areas that are among the top 5% most deprived in the country. There has been a 47% increase in social services referrals, which the council has had to deal with following the baby P case. In Sunderland, 50,000 people live in areas that are in the top 10% of the most deprived in the country. In such areas, councils face enormous problems in attracting new jobs and meeting service needs—despite their constant efforts to do so, which have often been denigrated by Government Members during this debate.
Helen Jones
That is an important point that we have not considered so far. I believe that local authority finance officers, because of the risks and uncertainties inherent in the Bill, will advise their authorities to build up bigger reserves. Authorities have been criticised by the Government for holding too much money in reserve, but the Bill almost incentivises a prudent authority to do that.
Mr Kevan Jones
If an authority did that—it would be prudent financial management—it would be named and shamed, a tool that the Secretary of State uses on many occasions. It would be said that somehow the authority could redistribute that money and keep down council tax.
Helen Jones
That is an important point. Whatever happens, some local authorities cannot win.
Helen Jones
My hon. Friend is entirely right. Time and again we find in the Bill a lack of clarity and lack of certainty for local authorities.
How on earth can this be the right way to deal with local services? Local authorities need to be able to plan and to have a degree of certainty in their finances, yet here we have a recipe for uncertainty. Our simple amendment would require the Secretary of State, if he decided to make a payment, to hand over the money within the following financial year. Such a provision would give ample time for him to do the calculations, or at least get someone else to do them, to determine the amount to be paid and to hand it over. Local authorities would then be certain about what they were receiving and when, and, importantly, they would be given more certainty about how the scheme would operate.
I will be interested to hear the Minister’s arguments against the amendments. Does he believe that if local authorities know they are going to get a payment and when, they will blow it all on riotous living—that they will decorate their town halls with bunting and order large shipments of chocolate cake—or does he believe, as we do, that they will use it to improve services? His arguments can mean only two things: that he expects local authorities to behave irresponsibly, which is like saying to children, “You can’t have your pocket money all at once because you might spend it all on sweets”, or—I think this is the real reason—that the Treasury wants to hang on to the money.
Local councillors deserve better than that. They are our partners in delivering services. They should be given as much certainty as possible and trusted to act responsibly. The amendments would achieve that, and I commend them to the Committee. It might be helpful, Mr Robertson, to let you know that we will seek to divide the Committee on amendment 33.
Mr Kevan Jones
It is a pleasure to serve under your chairmanship again, Mr Robertson.
My hon. Friend the Member for Warrington North (Helen Jones) used a good analogy when she said that this measure is intended to centralise power but decentralise blame. Local councils will be given options over, for example, a 10% cut in council tax benefit. They will face some difficult decisions about how that is to be distributed. When the Minister wrote to Newcastle’s The Journal last year, he did not even mention that in his supportive letter on the letters page. We need to be clear to local people that this is not about decentralisation but about putting power back into the hands of the Secretary of State and, ultimately, those of the Treasury.
We had an interesting discussion on the previous group of amendments about whether there would be any money left to distribute at the end of the year. The hon. Member for Bradford East (Mr Ward) asked the Minister what would then happen, but he did not answer. I suspect that this mechanism is being used so that the Government can use local government-raised finance to offset central Government expenditure. It might be given back to local authorities, but only as a substitute for other types of grant. It is all about centralisation.
In the settlement of the accounts in the first few months of the coalition Government, the Secretary of State was the first Minister to run to the Treasury saying, “I’ve got my plans and I’ll give up my savings to meet the Chancellor’s targets.” If he again finds himself with a large pot of money left at the centre, no doubt he will offer it up to get himself some credence in the Treasury and in the eyes of the Prime Minister as the Secretary of State who is doing best in financially managing his Department, even though the pain of that is being borne on the shoulders of local businesses and local people.
Graham Jones
My hon. Friend makes a good point about offsetting Government expenditure and local expenditure through raising the levy and taking local taxes. Could Jobcentre Plus be an example of where the Government might look to spend local money on what is now essentially a national service given the changes in the delivery of housing benefit?
Mr Kevan Jones
I think that this Secretary of State will be very creative. He will no doubt put out a press release saying that he is giving money to local councils and various initiatives, without telling them that it is their own money. The difference is that he will now have control over how the money is spent, rather than the local councils.
My hon. Friend the Member for Warrington North asked on what basis money will be redistributed. The Government’s track record shows that they do not recognise need as an element in the redistribution of capital. We need only look at last year’s local government settlement to see that.
As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the baseline will be set for the next 10 years, so councils will not only lose out in the first year but will continue to lose out over the next 10 years. County Durham’s revenue spending power for 2011-12 is £498.2 million, which is a reduction of £35.9 million or 6.73% of its budget. It will see a further reduction of £10.94 million in its spending over 2011-12 and 2012-13, which is a further loss of 4.5%. That will be used as the baseline. This will continue, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, for ever more.
Which councils did the Government reward in the settlement? They rewarded southern councils with far lower demands on local government services than councils such as Durham county council. I do not think that that was done by accident.
Andrew Gwynne
My hon. Friend is making an interesting point. I commend to him a study that produced a heat map showing the areas that face the largest cuts in local government funding. If that is superimposed on to a map showing the most deprived areas and the areas of greatest need according to socio-economic data, the two maps marry up quite well.
Mr Jones
My hon. Friend makes a good point. One of the very deprived local authorities that the Government were determined to help last year was Wokingham in Berkshire, which saw its budget increase by 0.2%, meaning that every person there has had an additional 30p spent on them.
We must take need into account. There are services that County Durham and northern cities need. For example, County Durham has a growing population of elderly people, who are high users of services. Added to that, we have the Government’s reduction of the public sector and deficit reduction strategy, which are affecting the economic viability of regions such as the north-east of England. More individuals will therefore use local councils’ services. More people will certainly become eligible for council tax benefit as unemployment rises. Need has to be an important element in redistributing this money.
We are leaving it up to the Secretary of State to decide how the money will be distributed. In the last debate, the Minister failed to define “significant”. He used the word on several occasions and was pressed by Members on both sides of the Committee to define what it meant, but he could not come up with an answer. We are again being asked in the Bill to trust the Secretary of State. It will not come as a great surprise to hon. Members that I do not trust the Secretary of State. He is a very political individual who is clear in his philosophy: he will help people who support the Conservative party at the expense of northern councils. He does not care whether those councils thrive or not.
Although need is not part of the assessment, let us look at some of the figures. In County Durham, 31% of people live in the 20% most deprived areas of the UK, and 22,805 children, or 21.8% of children, live in households that are defined as living in poverty. In Wokingham, it is just 7% of children. Between January 2011 and January 2012, unemployment in the north-east rose by 19%. It now stands at nearly 12% across the region. As I said earlier, as unemployment rises, the demand on local government services increases, just when the ability for councils such as Durham county council to raise finance is being constricted.
Mr Kevan Jones
Yes, that has quite a ring to it. The council might have to do that to keep in with the Secretary of State.
Mr Howarth
I wonder whether my hon. Friend is aware of the fact that there was a residents group in Liverpool that had a battle with the city council over the right to name the local streets. They lived in an area called Weller streets. They won the battle, and in homage to the city engineer who had said that they could not rename the streets, they named one Weller way.
Mr Jones
I obviously do not want to draw your wrath, Mr Robertson, for going off the subject, but time and time again the Secretary of State talks about devolution and giving local government powers, and then he produces this centralising Bill and gives councils diktats week after week about what they should and should not be doing—whether they should have pot plants, or whether they should have weekly bin collections. The public will start to see through it. He cannot have it both ways. He cannot have a Bill that will centralise power and centralise the finance that local councils raise and at the same time tell councils what they can and cannot do, but that is his method. If the Government do not accept the amendment and accept need as the basis for payments, people will come to the conclusion that many of us have already come to—that they do not actually care about need.
Robert Neill
I will endeavour to confine myself to matters that are germane to the amendments, so I will be fairly brief despite the temptation to inquire what happened to Trotsky and Bakunin drives. I imagine they were probably airbrushed off the map in Durham at some point.
I am not sure whether hon. Members have quite followed how paragraph 28, relating to the distribution of any remaining balance in the levy account, will actually work. As I hope they will be aware, provision is made in the Bill for some or all of the remaining balance in the levy account to be returned to local authorities. It provides flexibility over the amount to be distributed and the basis of distribution, and we believe that it is wise and sensible to keep it that way. It will enable the distribution of the remaining balance to be carried out as is appropriate at a particular time. For example, it might be appropriate to distribute it to authorities on the basis of need, or if we assess that there is no such need, we might wish to return it to some of the levy authorities to make up for the taking of levy moneys that were not needed for disbursement. It would be wrong to preclude that possibility, which is provided for in the Bill.
Robert Neill
No, with respect, because first, there is flexibility to distribute all or part of the balance on that basis. Secondly, that flexibility is not unchecked, because the procedures in sub-paragraphs (2) and (3) require the Secretary of State to include both the amount to be distributed and the basis on which it is to happen in a local government finance report, which will be subject to the scrutiny of the House. Such a report is laid before the House and can be debated.
Finally, paragraph 18 tightly defines the debits that may be made from the levy account. The effect of that paragraph, taken together with the rest of the schedule, is that any money in the levy account can be used only to make safety net payments or to be returned to local authorities as part of the distribution of the remaining balance for the year. The idea that the Treasury can somehow snaffle it and keep it back from local government is simply not correct.
Mr Kevan Jones
But the Bill does not state the criterion by which the remaining balance will be distributed. The Secretary of State could therefore quite easily decide that he wished to distribute it in such a way as to save the Treasury money by substituting it for central Government spending. The Minister cannot get away from the fact that the Secretary of State will decide how the money is spent. It will be his decision alone.
Robert Neill
The distribution will be subject to scrutiny by the House in a local government finance report. It is correct that it will not be defined in primary legislation, just as the basis of the distribution of formula grant is not. That is decided by the Secretary of State, so in fact we are being utterly consistent with the system that was operated under the previous Government. We are being consistent, and the hon. Gentleman is being wholly inconsistent, not for the first time.
Helen Jones
I am going to make a bit of progress, because we have to get through this.
The way to avoid those problems is to have a reset at regular intervals. Some have suggested three years, and some five. We have opted for three years in our new clause 7, because we believe that local authorities have become used to three-year financial settlements and that they have operated very well. That option is also in line with the responses to the consultation, where only 23% of respondents felt that 10-year resets were appropriate. So much for the Government taking note of the consultation.
In new clause 5, we have also suggested that local authorities should have a right to be consulted each year about whether a reset is required before the Secretary of State publishes the local government finance report. We have done that because we think that local government is the best judge of what is happening on the ground. It should be treated as a partner in the process and allowed a say. Councils would be able to make such representations if they felt that unforeseen problems had been discovered, if major changes had occurred or simply if the system was not working as the ever-optimistic ministerial team assures us it will. Such a mechanism would recognise the key role that councils play in representing communities. That right is fundamental, if we in this House believe that councils have a democratic mandate of their own—as I think we all do—and should be able to participate in the process. The Secretary of State would have to consider representations received, and publish his decision and the reasons for it.
Annette Brooke
It is a pleasure to serve under your chairmanship, Mr Amess. I wish to make a few brief comments.
It is important that a local government body of councils should have a position on all the decision making, be it on the tariffs, the top-up or the levy or in relation to resetting. I do not know how formal that arrangement needs to be, but it is important to recognise that the information needs to come from a cross-section of local councils. Of course, we already have the Local Government Association, which is in a position to take such an overall viewpoint.
We have had some useful discussions about the length of the set-up period. It is fairly clear that no one here knows what the ideal period would be. I feel instinctively that 10 years is rather too long, but I recognise that we need a period of stability in order to make other measures work and to create incentives. I therefore hope that the Minister will assure us that a great deal of work will be done on this before we get to the regulations. I have a preference for a period of about five years, but I would also like an assurance that the Minister would have the power to reset, having listened to the LGA and other bodies, should something obviously have gone dramatically wrong. We have heard a great deal about uncertainty and, yes, there is bound to be uncertainty involved in a change of this magnitude, but the main thing for me is that we ensure that there is a safety net in place for ourselves, as decision makers.
Mr Kevan Jones
It is a pleasure to serve under your chairmanship, Mr Amess.
The hon. Member for Mid Dorset and North Poole (Annette Brooke) has just said that she hopes the Minister is listening. The ministerial team might well be listening but not actually taking notice. It has already been stated in the consultation with local government that the majority of councils came out against the 10-year reset time limit. I do not think that that bodes well for the future; I do not think that the leopard will suddenly change its spots, or that the Government will suddenly start to listen to local government.
I support the new clauses. The Bill will lock in for the next 10 years the inequality and unfairness that have become apparent this year. That unfairness will affect councils such as mine in Durham and other northern Labour-controlled councils. It is part of the Secretary of State’s plan to lock in that inequality of support that favours his friends in the south-east. I shall give the Committee some examples of how that inequality has already become apparent this year, and how it will become locked in under the new mechanism.
As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) mentioned, the baseline figure in the 2010-11 spending round was the starting point. For example, County Durham’s budget for 2011-12 was reduced by £10.9 million. South Tyneside council’s budget was reduced by 5.6%—some £33.70 for each resident of that borough. Let us contrast that with Wokingham in Berkshire, whose budget was increased by 0.2%, meaning that each of its residents got an extra 30p.
Mr Jones
I do. In regions such as that represented by my right hon. Friend, there will be regional disparities between councils. We are told that this Bill is about giving local government the powers to grow business rates, for example, but it will lead to an increased cycle of deprivation in those constituencies and make it harder for councils to attract businesses and grow their council tax base.
Andrew Gwynne
Is the situation not worse than that, because the plans do not just lock in the funding from one period of time? Instead, on top of those real cuts in local government finance we will also have a huge increase in demand for statutory services in those areas of deprivation.
Mr Jones
Exactly. Hidden in the Bill is the localisation of council tax benefit, which the Minister does not like to talk about and which comes with a 10% cut. As unemployment is rising in the north-east under this Government, more people will qualify for that benefit. Where will the money come from if it is locked into this system? The only other option for local government would be to increase the domestic rates, but there is an inbuilt problem in doing so. For example, in the north-east, 50% of properties are in band A, so the amount that can be generated is limited. In Surrey, only 2% of houses are in band A, so it is easier for some of the wealthier areas to generate that cash if they wish to do so. An increase of 1% in council tax in Durham, for example, gives a lot less in the long-run than the same increase would in Surrey.
Steve Rotheram
Is my hon. Friend aware of the heat map that has been produced that illustrates precisely what he is underlining? Those areas of highest deprivation that have been hit the hardest just happen to be areas that have Labour Members of Parliament.
Mr Jones
They are. My hon. Friend mentioned that map earlier and it only has to be seen—it screams inequality and exposes what the Conservative element of this coalition is about. It does not care about areas such as Liverpool and so on but about rewarding areas in the south-east, where its voters are. That is blatantly political. I am surprised that the Liberal Democrats are going along with it, but I presume that they have written off most of their northern MPs and councils for the next election in exchange for the Deputy Prime Minister’s post. Certainly, that inequality will be there when one looks at some northern councils and I do not understand why the Liberal Democrats are going along with this given the blatant unfairness that it will lock into the system. The hon. Member for Mid Dorset and North Poole (Annette Brooke) said that she would like a review of this issue, but there is no sign that the Government want to look at or take on board anything that has been said in the House or by local Government regarding the Bill.
Mr Jones
That is right. This issue is highly political. All credit to the Secretary of State—he knows exactly what he is doing. As my hon. Friend the Member for Warrington North (Helen Jones) has said from the Front Bench, the measure will end up pushing on to local councils some of the tough decisions on spending that will have to be taken. There are two ways of dealing with this—increasing local rates or cutting services—but that will be happening at a time when demand for local government services in deprived areas such as some of those my hon. Friend the Member for St Helens North (Mr Watts) represents is going up. One has only to look at some of the statistics we have heard on Second Reading and in our debates in Committee. Demand for adult services and other services in County Durham, south Tyneside and Liverpool, for example, will be a lot higher than in Surrey and the south-east.
I do not know what the Government have to fear from the reset being on a five-yearly or three-yearly basis. They think they can lock that unfairness into the system, and it is clear that when local people realise that not only are their services going to be cut but they face council tax increases as well, the Secretary of State will say, “Oh, well, it’s your profligate local council that’s doing this.” But in fact, the problem is the system of local government finance being introduced that will directly cause that. We need to keep repeating that point. It is quite clear that the Local Government Association and even some Conservative councils are working on the basis that what the Secretary of State says is not always true. For example, he can offer money for the freeze in council tax, but only for three years. If people take that, they have to realise that there is no guarantee about what they will get just before the next general election.
The measures build in unfairness and we need to make sure that the Minister explains why the period will be 10 years. That figure seems to have been plucked out of thin air—there is no justification for it and local governments do not support it—so what is the rationale behind it? The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill) said earlier that there could be in-year adjustments for councils that fall on hard times in terms of their business rate income going down, and that is mentioned in the Bill, but we have not seen exactly how that will be distributed. There is no guarantee that a council faced with large redundancies and the closure of a big provider of local business rate will get any benefit at all, because it will be down to the Secretary of State’s determination. On present form, it seems quite clear what the Secretary of State will be doing—looking after Conservative councils.
Andrew Gwynne
We spoke earlier about the need for local government to have certainty and the fact that the Bill does not provide adequate certainty for local government, particularly for council treasurers, in planning their budgets. Is it not ironic that although the 10-year reset provides a degree of certainty, the certainty for councils such as Tameside and Durham is that we will have pretty poor settlements for the whole decade?
Mr Jones
Indeed. I know that the Secretary of State will say, “We are giving you these local responsibilities”, but how are authorities going to plug the gap? It will be either by cutting services even more or by increasing domestic rates.
Another point on which we need clarification is the “exceptional circumstances” mentioned in the Bill. I should like to know what “exceptional circumstances” are. In what circumstances would the Secretary of State look at a reset during the 10-year period?
Local government needs certainty, and not just in providing services. For example, three-year budgets allowed councils to take decisions that led to efficiencies. If councils are not sure how much money there will be each year, that uncertainty will prevent them from making strategic decisions, savings and investments. That flexibility will be lost. The argument is that this is a localism Bill giving local councils a say, but as we have explained clearly, it actually gives more powers to the Secretary of State and Ministers to decide the future of local government. I should like to know from the Minister why 10 years was chosen for the reset.
Earlier, there were some comments about revaluation. When the Secretary of State was in opposition he argued vigorously against the revaluation of domestic rates. It is time to look at domestic rates, because in all our constituencies we see disparities between different properties. The revaluation process was rushed, which led to a record number of appeals. The Bill will give rise to a situation where the inequality set in domestic rates in the 1990s will be set in the business rate assessment too.
Robert Neill
I can tell my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) that of course we shall consult fully before we finally set, through regulations, the figure for the reset. It is important to bear in mind that a key point of the legislation is to give a proper incentive for growth, and the longer the period between resets, the greater the incentive for growth for local authorities. The shorter the period between resets, the more the growth incentive is minimised.
I am sorry that the Opposition, having claimed to be in favour of localisation, seek to introduce amendments that would significantly undermine the growth incentive for local authorities. It is even more unfortunate that when they make their case, having accused us in rather patronising tones of not doing our homework, they clearly get their homework very wrong, as I shall shortly demonstrate.
New clause 5 would implement a system that triggered an annual reset. That would destroy any incentive in the process whatever, and negate the whole growth incentive. The Opposition say we should listen to the interests of local government. In the consultation responses that the hon. Member for Warrington North (Helen Jones) cited, 78% of respondents favoured fixed resets, so their amendment ignores that 78%. It is a pity they did not do their homework properly on that one.