Local Government Finance Bill

Lord Jenkin of Roding Excerpts

Tuesday 10th July 2012 Grand Committee

Moved by

[Lord Jenkin of Roding]

59: After Clause 4, insert the following new Clause—
“Changes to national business rate policy
The Secretary of State may not make any changes to national business rate policy which impact on local business rate yields without first consulting all interested parties.”

[Lord Jenkin of Roding]

My Lords, I am delighted that what we have come to call the enlarged coalition is supporting the amendment.

It addresses a simple point. Under the existing system whereby business rates are pooled and go to central government, a change in the system of relief from business rates is entirely a matter for central government and has no implications for local authorities. However, once the retained business rate scheme is working, then local authorities will of course have a direct interest in such changes. Indeed, there could be circumstances where a change in the way in which business rates and relief from them are assessed could give rise to some considerable difficulties for local authorities in their budgeting and managing their expenditure.

Of course, this is inherent in the change. The Government are indeed transferring some of the risk to local authorities because that seems to be an inevitable consequence. What we are asking for here—it is a simple point—is that the Government should consult local authorities and the local authority organisations before any such changes are made, so that they can at least have a say and perhaps do their best to persuade the Government when a particular change is not appropriate. Those local authorities and organisations will have an argument because the change may well affect their funding. The least we can therefore ask, and it is a modest request, is that the Government accept this new clause and accept that local authorities should be consulted before there are changes in the business rate. I beg to move.

[Lord McKenzie of Luton]

My Lords, I am happy to confirm that the broad alliance remains intact. We are very happy to support the amendment. The key points have been made. We are in a changed environment where what happens to business rates can have a direct impact on local government and this request is straightforward and honest, as the noble Lord described.

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[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, I thank the alliance for its comments on the amendment. In particular I thank my noble friend Lord Jenkin for his explanation of the proposed new clause. I do not suppose that any noble Lord will be surprised to hear me say that I do not consider that such a provision is appropriate or necessary.

I fully understand that in the current system, where business rates are not retained locally, changes to national business rates policy do not affect the level of funding that authorities receive. However, in future such changes could impact on the level of funding available to a local authority. I am sure that Members of the Committee will understand that the Government may need at some stage to make changes to the national business rates policy for a variety of reasons. In the majority of cases it is likely that any changes will have been consulted on, but this may not always be the case. Changes to reliefs are a matter for the Chancellor, and a deferral system that gave businesses the opportunity to defer payment of 60% of the increase in their 2012 business rate bills as a result of the RPI uprating was announced in the autumn Statement. If the Government had consulted on that, businesses would have had to wait at least two or three months longer to receive the benefit, which in some cases could have meant the difference between shutting or remaining open. I use that as an example.

I assure my noble friend that where the Government implement a change to national business rates policy that will involve a net additional cost to local government—a point that was raised by my noble friend Lord Tope—this will be picked up through the new burdens policy. It will be treated as a new burden in line with our commitment to keeping the downward pressure on council tax as far as possible. Given this clear commitment that provides an assurance to local government, I hope that my noble friend will feel able to withdraw his amendment.

[Lord Jenkin of Roding]

My Lords, I am grateful to my noble friend for that explanation. Of course I understand that the change may work both ways. If local authorities are going to benefit from the change, the argument not to have consultation but to get on and make the payments is much stronger. However, if there is a change that will increase the burdens on a local authority, my noble friend gave an undertaking that there would be consultation—so I cannot understand why this should not go in the Bill. It would be very reassuring to local authorities and would not place an undue burden on central government. If the Government were going to change the policy to the disadvantage of local government, there is no reason why a three-month delay should not be a perfectly satisfactory way of dealing with the statutory obligation to consult. Of course we do not vote in Grand Committee, but there is a stronger argument for this amendment than perhaps my noble friend acknowledged. Perhaps she might like to look at it again.

[Baroness Hanham]

My Lords, I made the point, which the noble Lord accepted, that there may need to be flexibility on this. I gave the example of changes in the autumn Statement that would have been delayed if there had been consultation. It was a perfectly reasonable point. Without exception, the Government will want to consult where appropriate and where time allows, but there will be occasions when it is not in anybody’s interests to do so for reasons of speed. The proposed new clause would just constrain their ability to do that. Putting it in the Bill would be less than helpful.

[Lord Jenkin of Roding]

My Lords, I hear what my noble friend says and we would wish to consult those advising us on that. I take the point that this is a wide-ranging amendment but, with different drafting to which we could return on Report, we might be able to write something in on this. Having said that, I beg leave to withdraw the amendment.

Amendment 59 withdrawn.

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In this context, I and others reject localism for what it really is: dumping the cuts on local authorities to pass on to needy citizens without power. I think it is shameful. I really hope that no noble Lord will ever say that they welcome localism but do not like the cuts, because that is why we are having the localising of what should be a national benefit, with a shameful set of outcomes. I beg to move.

[Lord Jenkin of Roding]

My Lords, for some reason that I am not sure I understand, my Amendment 73A has found itself grouped with the amendment that has just been moved by the noble Baroness, Lady Hollis. I can assure the Committee that I will be a good deal briefer in speaking to this amendment because it has a rather narrow specific intent. It is more of an exploratory amendment, which attempts to link the question of the Government’s support for local authorities in the changing circumstances introduced by this Bill to the now well established new burdens doctrine published some years ago by the previous Government, which, in summary, states that the,

“additional cost of all new burdens placed on local authorities … by central Government must be assessed and fully and properly funded”.

My question to my noble friend is: what assurances can the Government give about the future shape of the arrangements under this Bill, and what are the Government’s intentions about the future funding levels? There is some anxiety on the part of the Local Government Association about the future—I declare my interest as a vice-president of the LGA, like everyone else; it is always good for a laugh, and I think that helps. Amendment 73A simply says that it should be assessed every year, which is intended to link the regular annual support for local authorities with the new burdens that have been imposed upon them as a result of the Bill. I do not know what my noble friend will be able to say about that but certainly the local authorities are seeking reassurance on it.

On the subject of the Local Government Association, it was suggested during the debate on the previous amendment that somehow it is not reflecting the views of its member councils and it should therefore rethink its stance. It has made it clear—and made it clear again to me this morning—that it remains in favour in principle of the localisation of support for council tax. That is the LGA’s view and it is sticking to it. Of course it is looking for assurances of the kind that I have given. There may be others that we will come to later. However, it does not come well from the party opposite to suggest that a thoroughly representative body, which represents virtually every council in the country, is somehow misdirecting itself and does not know what it is saying. I think it was the noble Lord, Lord Beecham, who made that suggestion. He knows a great deal about this—probably much more than I do. However, if I may defend the association, it has worked out its views and has made perfectly clear—to noble Lords on all sides of the Committee, I am sure—what it wants. It is in favour of the localisation of council tax support.

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[Lord Jenkin of Roding]

Perhaps I misheard the noble Lord. I understood that he was asking the LGA to reconsider its view. He is perfectly entitled to do so, but it is against the background that the association has considered its opinions on this extremely carefully and has made its decision. Of course it is not unanimous; no one is suggesting that it is. If there were unanimity, the millennium would have arrived. In matters of local authority finance, there are many different points of view. Perhaps we may leave it at that.

In speaking to this amendment, I am looking for some assurance from the Government on how they see the future of this structure. Local authorities are anxious that, after the next comprehensive spending review, they will find themselves bearing a significantly larger proportion of the total cost than is envisaged at the moment. If my noble friend could give any assurances on that, I know they will be very well received.

[Lord Tope]

My Lords, I am not a vice-president of the Local Government Association and I certainly do not claim to speak for it. I said in a debate on an earlier amendment that the views of local authorities within the Local Government Association, as most are, have differed on this issue, regardless of political control. There are certainly Labour-majority councils that have supported what they thought was the localisation of council tax. There are some in my own authority. However, as people have come to realise the implications of what we are debating today, that support has become more questioning. I shall put it no more strongly than that. The briefing that I imagine we have all had from the LGA today states:

“The LGA supports the principle of localising responsibility for decisions about the incidence of council tax”.

The question is whether that is what we are getting now but maybe that is for another debate.

I support my noble friend Lord Jenkin. My noble friend Lord Shipley and I have added our names to Amendment 73A, which the noble Lord, Lord Jenkin, explained very well. The concern that we address with this amendment is the expectation that, for a range of reasons, the cost of council tax support will increase. More people are likely to claim it because, sadly, they will fall into that category, perhaps because the change in wording from “benefit” to “support” will—wrongly, maybe—encourage more people to feel able to claim it. Therefore it is highly probable that the costs will increase in years to come. We seek from the Government an indication of how they intend to deal with that and, more particularly, an assurance that it will fit under the new burdens doctrine and that the increased costs, assessed annually by the Government, will be met in full in accordance with the doctrine. That is the purport of the amendment in my name and that of the noble Lord, Lord Jenkin. We seek reassurance from the Government.