Local Government Finance

Debate between Lord Coaker and Sajid Javid

Wednesday 22nd February 2017 Commons Chamber

[Sajid Javid]

I know that my hon. Friend speaks with a great deal of experience when it comes to matters of local government. I am more than happy to meet the leader of Bromley Council, and I hope that my hon. Friend will join me in such a meeting.

We plan to undertake further pilots for the two-tier authorities, and I welcome applications from any council waiting to take part in this second trial. The nationwide roll-out of 100% business rates retention will take place across England in 2019-20. Earlier this month, my Department published a consultation seeking views on exactly how the system should look.

[Vernon Coaker (Gedling) (Lab)]

The explanation of why Surrey was not getting a sweetheart deal was that it was getting something that was perfectly normal and available to other authorities. Will the Secretary of State tell us where Surrey is in these pilots, because we cannot work it out?

[Sajid Javid]

Well, there is not much to work out. That ridiculous claim was demolished on the day that it was made.

--- Later in debate ---

[Sajid Javid]

My hon. Friend is correct. This is not about special treatment for one area versus another; it is about recognising the needs of each area. In more rural areas, there are some obvious differences. For example, sparsity can mean that the delivery of certain services is more expensive, while others might be cheaper. This is about having the right data and being more transparent, and then making sure that those needs are met. That is exactly my ambition in looking at this and making sure that we get it right.

[Vernon Coaker]

Will the Secretary of State give way?

[Sajid Javid]

I will give way once more on this point and then I will have to move on.

[Vernon Coaker]

I thank the Secretary of State for giving way. I do not agree with much of what he has said, but it is a refreshing change to have a Secretary of State who has given way as much as he has today, because that contributes very much to the debate. Whether he is talking about 100% retention of business rates or the fair funding review, there is a key question for local authorities. Gedling Borough Council has a 62% cash reduction—it is the eighth worst affected authority in the country. This is an opportunity to make sure that it can deliver the services that the Government require it to deliver, as so many local authorities across the country are struggling to do.

[Sajid Javid]

I thank the hon. Gentleman for his warm words. The review is about making sure that all areas of England and all local authorities, whether rural or urban, have the right settlement for the long term. Given that the formula has not been looked at properly for years and years now—it is out of date and requires a fresh look—I hope he agrees this is exactly the approach that is required.

Local government funding has to be fair not just to the area itself, but to the people who provide the funds in the first place, including the millions of hard-working business owners who pay business rates. Growing up above the family shop, I saw the impact that an increase in rates can have on small businesses. A rise in the cost lowered the mood of the whole family. Even as a child, I knew that it was not good when I found a stack of bright red final reminders hidden away at the back of a drawer. My dad was never shy about sharing what he thought of out-of-town retail parks and how they took customers away from his shop on the high street in Bedminster. If he were alive today, I am sure that he would be the first to phone and lobby me about the business rates revaluation. In particular, I can just imagine him telling me about how the treatment of large online retailers compares with that of more traditional shops on the high street.

My background helps to explain why I have always been passionate about supporting businesses. It is why as Business Secretary I championed the £6.7 billion relief package that means that some 600,000 small businesses will never have to pay rates again. That is a third of all businesses and the biggest cut in business rates in history.

The current rate revaluation is fiscally neutral. It is not being used to raise a single extra penny for the Treasury. In fact, to do so would be illegal. The amount that most businesses—three quarters of them, in fact— pay will go down or stay the same. As I have said, 600,000 small businesses are being lifted out of business rates altogether, permanently.

Although those three quarters of businesses will benefit or see no change, I am also acutely aware of the impact on the quarter that will see increases. If someone’s rates are going up, it is no consolation to hear that others will be going down. I have long recognised the need to provide support, and that is why we have put in place a £3.6 billion package of transitional relief to help more than 140,000 smaller businesses. However, as colleagues and the media have highlighted in recent days, some individual businesses will face particular difficulties. For example, businesses that are coming off rate relief can face an alarming cliff edge. Independent retailers in some high-value areas are also struggling.

I have always listened to businesses and this situation is no exception. It is clear to me that more needs to be done to level the playing field and to make the system fairer. I am working closely with my right hon. Friend the Chancellor to determine how best to provide further support to businesses facing the steepest increases. We expect to be in a position to make an announcement in the Budget in just two weeks’ time.