Local Government Finance Bill

Debate between Lord Jenkin of Roding and Lord Smith of Leigh

Wednesday 10th October 2012 Lords Chamber

[Lord Smith of Leigh]

My Lords, the local government finance report will be a really important document when it comes out. My two amendments in this group apply to that. In Amendment 18 we come back to this magic date of 30 November, but some date needs to be suggested. It is fundamentally important to local authorities that we should understand what is in this document within a reasonable time so that we can make budgets for future years. I recognise that it is a challenge for the department and the Secretary of State to agree to a particular date. Nevertheless, this is something that the department should aim for. We want reassurances that, due to the nature of this report, we will not be deferred even further down the line, and that we will be able to make a judgment on what each local authority’s needs will be and what the budget will be for the following year.

I do not intend to go through the detail of Amendment 73, but with this probing amendment I am trying to tease out from the Minister a good indication of what is contained within the finance report. I presume that most of these things would be in there, but I would be very grateful if she could confirm that.

[Lord Jenkin of Roding]

My Lords, I have three amendments in this group and I can put them swiftly to the House. Amendments 57 and 58 deal with what is to happen if there is a surplus, or what the Bill calls “the remaining balance”, left over after the tariffs and levies have been made. The Bill, as it stands, says:

“The Secretary of State may by regulations make provision about the basis (‘the basis of distribution’) on which an amount … is to be distributed”.

It seems to me that it should be a matter not for the Secretary of State but for the local authority. Therefore, Amendment 57 sets out a slightly longer procedure which involves a consultation with the local authority about what is to happen to that remaining balance—whether it should be retained or distributed—and the basis on which it should be distributed.

Secondly, it requires that to be dealt with through the local government finance report. That is what gives Parliament a say on this. Essentially, this seeks to provide, first, an opportunity for local authorities to express their views through consultation and then for Parliament to have the final say. It is not the end of the world, but I think that this is going in the direction in which we would want to move. If you are to have these elaborate procedures, it seems to me that parliamentary control is important.

Amendment 78 proposes a new clause, which again requires consultation. The clause states:

“The Secretary of State may not make any changes to national business rate policy which impact on local business rate yields without first consulting with all interested parties”.

For the life of me, I cannot foresee circumstances in which a Government would want to do this without consulting. It seems that this is a perfectly sensible procedure to put in. If you are going to change the basis on which business rates are collected, it should be a matter for consultation.

We had a brief discussion when debating the previous amendment in which the noble Lord, Lord McKenzie, referred to the nationalisation of the business rates. I was responsible for that policy. When they were going to denationalise and decentralise, the main point was that businesses were charged rates by local authorities and had no vote. Therefore, business rates have been set nationally ever since. However, if the national rate is to be changed, there should be a process of consultation. I hope that the Government will be able to accept that.

Local Government Finance Bill

Debate between Lord Jenkin of Roding and Lord Smith of Leigh

Tuesday 3rd July 2012 Grand Committee

[Lord Smith of Leigh]

My Lords, I will speak to the amendment in my name. I am glad to follow my noble friend Lord McKenzie and support the arguments that he used. Before I come to the detail, I declare my interest in this matter. I am leader of Wigan Council, chair of the Greater Manchester Combined Authority, vice-chair of SIGOMA and vice-president of the LGA. I can see that I am not alone in that.

Looking in detail at the Bill, Clause 1(7) clearly gives the Secretary of State some flexibility to defer introducing the Bill. Therefore, I tabled my amendments for two purposes. One was simply to try to understand—and I hope that the Minister can help me in her response—under what circumstances and when the Secretary of State may use the power under this clause. More importantly—again, I want to follow up the points raised by my noble friend—if local authorities want to change the funding system, they want to do it well. However, we have to accept that if we do not let them know what the new system of funding is by a certain point during this year, it will be difficult or impossible for them to implement it by 1 April next year.

I have chosen 30 November as the cut-off date as that gives local authorities four months in which to plan and make sure that computer programmes and so on are able to cope with the technical aspects of the Bill. Those are not yet in place and cannot be until all the details and statutory instruments are available. If we leave it much later than that, we will be getting towards the end of December, although as far as government is concerned the middle of December will probably be the latest date because Christmas will intervene and not much will be done then. If we respect the fact that local authorities will have work to do on this part of the Bill, and probably more informally on some of the later parts of the Bill, then we need to be honest, say that we cannot achieve what this House needs to achieve by a certain date and not go forward.

[Lord Jenkin of Roding]

My Lords, before my noble friend replies to the debate, I should like to add a word. The noble Lord, Lord McKenzie, quoted a passage from London Councils’ briefing, which we have all received. I and my noble friends have tabled a number of amendments—to which we will come later and to some of which the noble Lord has added his name—which recommend a marked change in the structure of this division of the business rate. London Councils—I should declare an interest as one of its presidents—has indicated to me that on balance, with regard to this part of the Bill dealing with the business rate retention scheme, it would be a little upset if the date were postponed.

A lot of work is being done on this by London Councils and there has been a good deal of discussion about the pooling arrangements that may be appropriate. Although it is not put as a very firm and immutable point of policy, its view is that 2013 for this part of the Bill is right, and I think it would regret it if the date were changed. I draw a very clear distinction between this and the later part of the Bill dealing with the council tax, where there is still an enormous amount of anxiety that councils will simply not be ready with their own local schemes. However, we shall come to that later. I think that I should let the Committee and my noble friend on the Front Bench know that on balance London Councils would regret a postponement of Part 1.

--- Later in debate ---

[Lord Smith of Leigh]

My Lords, I shall also speak to Amendment 17, which is in this group. In tabling Amendment 9, I was intrigued by the language being used in the schedule. We obviously understand what “may not exceed” means but the implication is that it may on occasions be less than that figure. I am intrigued to know on what occasions it might be less and why. What did the Government have in mind in drafting this? If they did not mean it ever to be less then presumably they would have used the words that I use—“shall equal”. This is a probing amendment and I do not want to speak further to it.

Amendment 17 is more substantial. One thing that I think local government has welcomed over recent years is that we no longer do quite the procedure that the Minister outlined, and that in announcing a settlement for a year, Governments have given indications of what the settlements are likely to be in two subsequent years. The benefit of that to local authorities in terms of future planning and what they need to do is very important. In my own authority, under the current arrangements we now have a four-year plan and have to reduce expenditure by £66 million, which is 28% of our budget. It is not easy and we are trying to make sure that it happens. However, we could not take out the expected sum on an annual basis unless we knew what was intended for subsequent years. We have to plan to remove £20 million-odd this year and £18 million next year, so it is really important.

In keeping with the tradition that has grown up in local government, I am asking in this case that when a particular year’s settlement is announced we will be given indicative figures for future years, or at least for the next two years. That would enable us to plan the system much better than if we were simply told on an annual basis. As I say, this has been a real improvement which I think has been welcomed by all sides in local government, and I hope that the Government will maintain it.

[Lord Jenkin of Roding]

My Lords, the noble Lord, Lord Smith of Leigh, has made a point but I am sure he would agree that it is a fairly narrow one, whereas some of the other amendments in this group raise wider issues. Perhaps I may step back for a moment to remind the Committee of what the problem is that we are talking about. There can be no doubt whatever that when the Government published their position paper, Business Rates Retention Scheme: The Central and Local Shares of Business Rates, there was very substantial disappointment on the local government side at the figure of 50% as the split between the local and central shares of the business rates. The arguments were well rehearsed at Second Reading but I will remind the Committee of the two main arguments.

First, it is recognised that the higher the local share, the stronger is the incentive to encourage development and therefore growth and jobs. Indeed, the Government’s document more or less admits that, and the tables they have produced show that that is the case. One is talking here about a broad feature of national economic policy. The second argument is more specific, and is directed at the consequence of the division. As was said by a number of noble Lords at Second Reading, the result is that priorities are still being substantially determined centrally rather than locally. It has increasingly been the declared policy of the Government to achieve more local decision-making and more local control over their affairs and finances. At Second Reading, I warned my noble friend that she might hear some of the same arguments with which she was assailed during debates on the then Localism Bill. We were able to make a certain amount of progress on that. There were a number of quite significant amendments which strengthened the localist case for more local decision-making. I hope that we might perhaps have a similar result here.

There has been a good deal of discussion within the local authority world of how one could change the position to give the authorities the prospect of an increased share in future. A number of proposals were put up, some of which have found their way into other amendments. When discussing this with the Local Government Association—I ought to have declared a long time ago that I am a vice-president of that—