Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023

Lord Shipley Excerpts

Tuesday 23rd January 2024 Grand Committee

[Lord Jones (Lab)]

My Lords, I thank the Minister for her helpful and brisk exposition, and I will not delay for mischief or malice these regulations that come to the Committee. It is the settled view of the usual channels that it should be so—and rightly so. I rise briefly in the traditional manner to ask the Minister questions, simply and briefly, to hold the Executive to account. So often the Grand Committee considers regulations of great importance to citizens but debate is so brief.

Paragraph 2.2 of the Explanatory Memorandum is welcome. Can the Minister tell us the Government’s estimate of the numbers of small businesses in England and Wales? Does the department have any idea of how many there may be?

Paragraph 12.1 of the Explanatory Memorandum baldly states that this is a “tax cut”. Surely the Minister who comes to this Committee with a tax cut should be congratulated. For the Minister arriving with a tax cut, it raises confidence when next she gives her expert and brisk introductory remarks.

On paragraph 14 of the Explanatory Memorandum, who will carry out monitoring and review? Shall it be civil servants, independent consultants or simply the Minister’s section in her department?

Under the heading “Consultation outcome”, paragraph 10 mentions small businesses. Has the Federation of Small Businesses—or the chambers of trade, for example —been involved in this consultation? Details might be available from the Minister or her officials.

Lastly, local government tells of its great problems concerning finance. Does the Minister know that local government throughout the nation hopes that, in the imminent Budget, the Chancellor will offer more money to hard-pressed local authorities in a time of austerity?

[Lord Shipley (LD)]

My Lords, I thank the Minister for her introduction. I welcome strongly the decision to ensure, through this instrument, that charities and unoccupied properties will be eligible for the small business multiplier. It is also helpful that the Government have decided to extend the small business multiplier to central list properties below the £51,000 rateable value threshold.

Business rates are simply too high, particularly for small businesses. I recognise that there has been a freezing of the small business multiplier. At Third Reading of the Non-Domestic Rating Bill in October, I said that what is now the Act made some very welcome changes, particularly around more regular revaluations. However, business rates used to be around half the rental value of a property and they are now closer to 100%—they are almost equal. This financial burden is putting huge pressure on many businesses and impacting on our high streets, particularly our retail sector.

I want to ask the Minister this. We had assurances during the passage of the Non-Domestic Rating Bill that the legislation would be kept under review. Will the Government continue to keep under review the amount that small businesses have to pay? Even though there is a discount, at 49.9p in the pound, compared to other businesses, at 51.2p in the pound, small businesses need greater help today. I hope very much that the Minister will be able to say that the Government are well aware of the financial pressures that small businesses have and are alert to the need to ensure that those pressures, in the current economic context, do not get worse. Might the Government find ways to review the business rates system, which we debated at some length during the passing of the Non-Domestic Rating Bill, but also the level that is paid by many businesses which have been struggling?

[Lord Livermore (Lab)]

My Lords, I thank the Minister for introducing this statutory instrument. I would be grateful if she could provide further detail about the Government’s understanding of what constitutes an unoccupied property. The Government consulted on business rates avoidance and evasion in July last year, and in that consultation document they made it clear that they were concerned about the potential abuse of empty property relief by owners who use a brief period of apparent occupation to reset their properties’ eligibility for that relief. The consultation document stated:

“There is no statutory definition of what constitutes ‘occupation’ of a property, and minimal occupation possibly of no material benefit to the occupier, except as a method to avoid paying rates, may be sufficient to allow ratepayers access to a further rate-free period.”


As there is no statutory definition of what constitutes occupation of a property, I would be grateful if the Minister could set out what definition the Government are using in identifying unoccupied properties for the purpose of this SI. I would also be grateful if she could confirm when the Government are intending to set out their response to the business rates avoidance and evasion consultation, and when they will bring forward any actions they intend to take to combat avoidance and evasion within the business rates system.

Public Spending: Barnett Formula

Lord Shipley Excerpts

Wednesday 15th March 2023 Lords Chamber

Asked by

[Lord Shipley]

To ask His Majesty’s Government what assessment they have made of the relevance of the Barnett Formula in the distribution of public spending across the United Kingdom.

[Lord Shipley (LD)]

My Lords, I am very grateful for the opportunity to debate the relevance of the Barnett formula in the allocation of public funding in the UK. I am grateful to those colleagues who have put their names down to speak, and I am looking forward immensely to hearing the noble Lord, Lord Hendy of Richmond Hill, make his maiden speech. In passing, I thank the Library for the excellence of its briefing.

The formula was introduced by the late Lord Barnett, Chief Secretary to the Treasury, in 1978 to prevent annual funding arguments with Scotland, Wales and Northern Ireland. It was introduced in Scotland in 1978, into Northern Ireland in 1979, and into Wales in 1980. The formula was used for allocating public spending until 1999, when it became the mechanism for the allocation of block grant. The Barnett formula calculates the yearly change in the block grant to the devolved Administrations from the UK Government. It calculates not the size of the block grant but rather the annual change in per-person funding, and in that sense it is clearly related to population. The nations can decide how to reallocate spending to other services from that block grant, and of course the block grant applies only to devolved public services.

Lord Barnett and others believed that spending in each part of the UK would converge over time. This was because devolved nations had a higher base of public spending and, when a fixed cash sum increase per head was allocated annually across the UK, the percentage rise to the nations would be lower than in England. There would then be gradual convergence because standard cash increase per capita should lead to a lower percentage increase. However, since then, formula bypass has become a factor—that is, additional money for a range of purposes not directly connected with the Barnett formula. The formula calculation is based on the historical amount that is devolved, but population rather than need has been a key factor—and has proved too large a factor.

The Barnett formula is still with us 45 years later. It has not eroded historical differences in spending between the regions and nations, as was expected. I do not think that the word “formula” is justifiable today, when it was a short-term fix driven by short-term funding needs in the nations and can be bypassed in the way that it has been. As Lord Barnett said in 2014 in his last speech on the subject, the formula was drawn up on the back of an envelope, and was not based on need. He called it “a national embarrassment”. He believed in a UK-wide needs-based system for allocating public funding, and he regularly asked Governments to cease calling it the Barnett formula when it was not his formula. He was right to do so. It may be a simple and predictable process for the Treasury but, because it can be bypassed by extra funding streams, it is not as transparent as it should be.

In 2009, a Select Committee of this House agreed with Lord Barnett; it urged replacing the formula with a needs-based system. The Calman commission in 2009 urged an assessment of need as a factor in the formula and, since then, the Institute for Government and the Institute for Fiscal Studies have both urged reform of the Barnett formula. The Constitution Committee in this House has three times, in 2015, 2016 and 2022, said that the Barnett formula should be reformed to achieve a fairer allocation of funding among the four nations. The Independent Commission on the Constitutional Future of Wales, in its interim report, said that a needs-based system could be agreed and phased in.

We have ended up with a block grant system to the nations which can be flexibly used, but centralised control of the regions in England by the UK Government out of London. In today’s Budget, there seems to be some scope for further decentralisation through a block grant system into some mayoral combined authorities in England. I welcome that, but it should be on the same terms as the nations have. As it is today, government spending is higher per head in Northern Ireland, Scotland and Wales than in England. That may be justified, particularly when sparsity of population is considered, but we need to know the evidence, and a needs analysis is the way to find out. Indeed, the more the Government decentralise into England, as today’s Budget will demonstrate, the more challenge there will be for the Government to show that the allocations into England are fair.

The current figures, published by the Government in December 2022—their figures covering 2021-22—show that the lowest per capita public spending in the nations and regions is the East Midlands at £10,528 per head. In Northern Ireland, that figure compares to £14,062 per capita. In Scotland, it is £13,881 per capita; in Wales, it is £13,401 per capita; and London has £13,719 per capita. I want to ask the Minister why the share of UK public spending in the East Midlands is so comparatively low. I do not expect her to answer now, but I would appreciate something in writing which explains why there is such a profound difference in public spending in regions such as the East Midlands, compared to some others at the top of the list. As I said earlier, there may be reasons which are easy to understand and justify, but I would like to see what they are. I think—but do not know—that Treasury officials must know the answer to that question. In the context of today’s Budget, we are going to have to be much more open about it. If the Minister is able to write something down and supply it to all those taking part in this debate, that is the way to take a first step in understanding how it is justifiable that a region like the East Midlands has such a low figure.

Can we create a needs-based analysis? I am sort of waiting for the Minister to tell us that it is a complex task to undertake a needs analysis. Should that be the answer, I want to say in advance that, of course, it is not a complex task at all, and the reason is that the Government are already doing it as part of the Levelling-up and Regeneration Bill. In February 2022, the Government produced a document called Levelling Up the United Kingdom: Missions and Metrics Technical Annex, and, at the back of that, all the indices that the Government are working on to level up England—and many of those metrics relate to the United Kingdom—can be used to undertake a needs analysis across the United Kingdom. If any Members have not seen that set of metrics produced as part of the Bill, I strongly advise that it is worthwhile read.

I really hope that the Minister’s reply will show some flexibility. In the last couple of hours, we had a debate on the Levelling-up and Regeneration Bill about the need for constituent parts of England to have fiscal powers. It just will not do for Wales, Scotland and Northern Ireland to have substantial fiscal powers and for the constituent parts of England not to have those. We must have that debate, but I sincerely hope that the Minister will take seriously the point that I am trying to make tonight and that, in the context of what Lord Barnett established back in the late 1970s, there will be some better understanding of the need to move on from what is now an out-of-date formula.

--- Later in debate ---

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, I add my thanks to the noble Lord, Lord Shipley, for the timeliness of this debate and add words of welcome to the noble Lord, Lord Hendy. As we have heard, he brings a plethora of experience to this House, not least through his efforts to increase union connectivity, which, as the noble Lord noted, the Government are considering carefully. I look forward to working with him in the future.

As was reflected in my right honourable friend the Chancellor’s Budget today, the Government are committed to delivering growth and prosperity across all four nations of our United Kingdom and all regions within it. The Budget will rightly be debated in its own right by this House tomorrow, but I want to highlight that it is a Budget that delivers for the union, both through UK government support for all parts of the UK and through providing further additional funding to the devolved Administrations. The Spring Budget ensures that the benefits of economic growth are felt everywhere; promotes the conditions for enterprise to succeed; encourages the inactive back into employment; and continues to provide support with the cost of living to people across the United Kingdom.

As we heard earlier today, the spending review 2021 set the largest annual block grants, in real terms, of any spending review settlement since the devolution Acts. On top of this, the devolved Administrations received £3.4 billion of extra funding at the Autumn Statement and, as a result of decisions at the Spring Budget, are now receiving an extra £630 million in additional funding over the next two years through the Barnett formula, which we are here to discuss today.

The Government’s commitment to investing in our union should be in no doubt. However, it is helpful on Budget Day to reflect on the fiscal settlement that we have across all four nations and on how decisions such as those taken today flow through to the finances of the devolved Governments, including through the use of the Barnett formula.

As many noble Lords noted, the Barnett formula is long-standing, having been introduced in 1978—which is, as the noble Baroness, Lady Chapman, noted, before my time. It is transparent and open to scrutiny. It is consistent with the principles set out in the Statement of Funding Policy document, playing a key role in pooling and sharing resources so all parts of the United Kingdom receive a secure and stable level of funding for public services.

As noble Lords noted, the formula determines changes to devolved Administration funding in relation to changes in UK government funding and works by multiplying the change in UK government funding by two figures: a population share and a comparability factor, which measures the extent to which a UK government service is devolved.

The formula serves to ensure that any changes to funding are, per person, broadly the same across the United Kingdom. These changes are then added to devolved Administrations’ existing funding, which is much higher per person than equivalent UK Government spending, broadly reflecting that needs are higher in Scotland, Wales and Northern Ireland. The outcome is that the devolved Administrations receive more than 20% more per person than equivalent spending in the rest of the United Kingdom.

I understand that there are, on many occasions, calls to replace the Barnett formula. To answer those calls honestly, it is important to acknowledge that the formula is not perfect, but all allocation systems have strengths and weaknesses, and we do not need to replace the Barnett formula to make meaningful improvements in the way in which devolved Administrations are funded. Indeed, that picture has not remained static since the formula was introduced in the 1970s: significant changes have been made since then.

The devolved Administrations have agreed tax powers so they can increase their funding. They have control of local taxation, such as business rates and council tax. They also have agreed borrowing powers, as well as flexibility to move funding between years. The noble Lord, Lord Shipley, raised the question of needs-based funding—not just looking across the nations of the United Kingdom but across our regions as well and how funding is allocated within England. I am sure the noble Lord will know that many different formulas contribute to the distribution of funding within England. Many of them take needs factors into account. To answer him, as he gave me the option to do this, I think it would be best if I wrote out to those who have attended the debate today on the approach to needs-based funding in England.

As for needs-based funding and the Barnett formula, I recognise that it is not directly needs based in Scotland and Northern Ireland. However, the higher levels of funding they get reflect the greater needs in those areas. In Wales, raised specifically by the noble Lord, Lord Wigley, although we did not take forward all the recommendations of the Holtham commission, very importantly, we have introduced a needs-based floor into the Barnett formula to ensure that that is taken into account.

The latest fiscal framework agreed between the UK and the Welsh Government in 2016 added a needs-based factor into the Barnett formula to ensure that Wales receives fair funding. The Welsh Government receive at least 15% more funding per person than the equivalent United Kingdom spending in the rest of the UK, as recommended by the commission. A review of that fiscal framework is triggered when the Welsh Government premium falls below 15%. It is not below 15% at the moment; noble Lords will know that is it at 20%. This is about £1 billion more each year than the Holtham commission indicated, and the Welsh Government agreed, was fair to Wales.

There may be a question of how effectively the Welsh Government have spent their needs-based funding, and the noble Lord, Lord Wigley, raised that question about EU funding that the Welsh Government have received. The United Kingdom Government share the desire to ensure that money is spent effectively across all parts of the UK and that devolved Governments are held to account by their electorate for how effectively they spend their money. When it comes to introducing a needs-based element into the Barnett formula, the reforms we have undertaken since the Holtham commission’s report show that you do not need to abolish the Barnett formula to improve on its work.

My noble friend Lord Greenhalgh provided a different perspective on whether we should look at needs-based funding or opportunity-based funding. He raised an interesting point and I hope he has taken heart from some of the announcements in today’s Budget. Whether it is devolution or decentralisation, there were important announcements in today’s Budget that will give more power to those who are close to their communities and have a better idea of how money should be spent in those areas.

We have agreed, subject to ratification, trail-blazer devolution deals with the Greater Manchester Combined Authority and West Midlands Combined Authority. They will equip those authorities with deeper, additional policy levers to deliver on their priorities, including across local transport, skills, housing, innovation, net zero and employment. They are a big step towards what my noble friend spoke so passionately about: empowering the leaders of local areas and others to take forward the policies that will deliver for those local areas.

The Budget also provided hundreds of millions of pounds more for levelling up, including over £400 million of funding for the rollout of new levelling-up partnerships, bringing the collective power of government to provide bespoke place-based regeneration in 20 of England’s areas most in need of levelling up over 2023-24; and over £200 million for 16 local regeneration projects in places in need across England—from a skills and education campus in Blackburn, to the transformation of Ashington town centre. There have been significant moves in this Budget both to devolve power to local areas and to ensure that areas that need support from levelling-up funds get it.

It would be remiss of me to conclude this debate without addressing the point on High Speed 2. I do not think that what I will say to noble Lords is new information, but the reason why Wales does not receive a Barnett consequential on High Speed 2 spending, unlike Scotland and Northern Ireland, is that rail infrastructure in Wales is a reserved matter. It is based on the devolution settlement we have and the difference in the settlements between Wales, Scotland and Northern Ireland. That is consistent with the funding arrangements for all other policy areas that are reserved in Wales but devolved in Scotland and Northern Ireland, such as policing.

This has been an interesting debate. As we move to further devolution, it is interesting to think about what basis that, and the funding, should be on. I am sorry that I could not more fully answer the question from the noble Lord, Lord Shipley, about funding in England. I hope to write to him with a very full response after this debate.

[Lord Shipley (LD)]

Can the Minister clarify that her letter will explain—in great detail, I hope—why, for example, the East Midlands has a lower per capita public funding settlement than the rest of the United Kingdom? We need such examples to dig out the reasons for the differences in per capita public funding by nation and region. I hope, secondly, that the letter will also confirm my view that the levelling-up metrics which are part of the Levelling-up and Regeneration Bill could be used as a basis for a needs analysis to allocate public spending in a new system that does not depend on the outdated Barnett formula.

[Baroness Penn (Con)]

My Lords, I will endeavour to provide as much detail as I can in my written response. I note the noble Lord’s desire that it address the specific points concerning the East Midlands.

When it comes to the levelling-up metrics, we will of course look at the idea put forward by the noble Lord. As someone experienced in looking at reforming funding formulas across a whole range of different public service areas, I can say that this can be extremely complicated. I know the noble Lord said that that was almost no excuse, but it is important to recognise that fact. Any such changes need to be carefully taken forward and thought through, but we will look carefully at his proposition.

Wales: Additional Financial Resources

Lord Shipley Excerpts

Wednesday 18th January 2023 Lords Chamber

[Baroness Penn (Con)]

I have to disagree with the noble Baroness on most of the points in her question. As I have set out to this House, Wales receives 20% more funding per head than the UK equivalent, and that is over its needs-based assessment as recommended by the independent Holtham commission. The spending review set out the largest annual settlement in real terms since the devolution Act and the Welsh Government also have their own tax and borrowing powers. It is important that the Welsh Government are well funded, and that is what the Government have done.

[Lord Shipley (LD)]

My Lords, are the Government going to keep their promise to Wales to match EU funding through the shared prosperity fund?

[Baroness Penn (Con)]

My Lords, the Government have set out their plans for the shared prosperity fund and how they intend to keep that commitment. Taking into account the tail of EU contributions and then the UK top-up, the levels of funding remain those we committed to in the election manifesto.

Autumn Statement 2022

Lord Shipley Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Shipley (LD)]

My Lords, I remind the House that I am a vice-president of the Local Government Association. I look forward shortly to hearing the maiden speech of the noble Baroness, Lady Lea of Lymm.

The disastrous mini-Budget in September, with its unfunded tax cuts, led to inflation at 11%—its highest since 1981—and high and rising interest rates. We face the worst fall in living standards since records started with a 7% drop in household incomes over the next two years, as forecast by the Office for Budget Responsibility. Homelessness is set to rise further because of the increasing unaffordability of housing. Council tax will rise by up to 5% in April. Yet again the Government are shifting the tax burden for social care to poorer people and areas, which collect lower revenues from their tax bands but face higher demands for social care. Council tax is a regressive tax. Why do the Government continue, year after year, to misuse it in this way?

I understand the need to restrict rises in business rates and I support the action the Government have taken. The introduction of the new valuations is the right decision. I welcome the fact that online distribution centres can face higher business rates in future, which should help retail centres. But could I ask the Minister about business rate increases for public buildings? What impact assessment has been done on the costs of those to the public sector? Will those increases, which may be significant, be reimbursed?

Chapter 2 of the Autumn Statement, on page 26, relates to “protecting vital public services”, but there is little reference to the housing crisis. There is a lot on health and education but no apparent understanding of the impact of poor housing on the costs of the National Health Service. I have spoken many times in this Chamber on the need to build more homes for social rent. In the last 10 years, house prices have risen by 50% but wages by only 20%. There is a serious shortage of new homes, as the Government fail to deliver their promise of building 300,000 a year.

There is now a huge drop in numbers of home owners under 35. Help to Buy led to increased demand without an increase in supply, and so to higher prices. We must increase supply. A way of finding more money is to share the land value increase more when a planning permission is granted between the owner and the local authority. I suggest to the Government that the time has come to look at that seriously.

Following the mini-Budget, interest rate rises in mortgage costs to 6% have made home ownership too expensive for many aspiring first-time buyers. This is making home ownership unaffordable for too many people who currently own their homes. In both cases, that leads to greater demand for rental properties, with rents inevitably rising, certainly in the private sector.

The rise in interest rates has impacted home owners right across the country, but is more acute in places such as London and the south-east where house prices are higher. Some households face increases in their monthly payments of several hundred pounds, which they have not planned for. Some will not be able to afford it. Some will lose their homes, unless government support is forthcoming. What plans do the Government have to help people in that situation?

There is now a worrying increase in private landlords seeking possession orders under Section 21 of the Housing Act 1988. The practice of no-fault evictions was banned during much of the pandemic, and lifting the ban has seen a big increase in threats of no-fault evictions. As an example, analysis by the Northern Agenda shows a 143% rise, compared with the same period a year ago, across the north of England. This is significantly higher than in London and the south-east. When will the renters’ reform Bill be considered? When the Government published the White Paper in June, it included a commitment to ban Section 21 evictions. Is that still their intention?

The Secretary of State for Levelling Up, Housing and Communities was in Rochdale last week, after the dreadful tragedy there, to see for himself the unhealthy state of some homes. I welcome his decision to amend the Social Housing (Regulation) Bill to set mandatory requirements for inspections and action. Official advice on removing mould seems to be to open windows to bring in cold air and keep spores from settling, and then to turn up the heating to kill off the spores that do. This is unaffordable when people have to reduce their energy use. It is unacceptable and it is not levelling up.

We need to build more decent social homes. There is now a very serious problem emerging where a household is not earning enough to meet a private sector rent increase but is earning too much to qualify for social housing. Such households end up having nowhere to live, other than temporary accommodation. That, too, is unacceptable.

Finally, over a million households are already on social housing waiting lists. Those lists will grow as people are forced out of the private rented sector. We have to build more. As the Secretary of State said in Rochdale in an interview with the i newspaper last week,

“we do need to make sure that we do have more homes built, and more social and affordable homes built along the way”.

That does not quite amount to a policy, but it does at least sound like a step in the right direction. It is just a matter of regret that the Autumn Statement does not mention housing at all.

Budget Statement

Lord Shipley Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Shipley (LD)]

My Lords, I am pleased to follow the noble Lord, Lord Livermore, largely because I agree with virtually everything that he said. In a few years’ time this spring Budget will be seen as a watershed because it is the last spring Budget and because serious structural problems in taxation and spending policy have been revealed by the debate about the self-employed, who now represent one in seven of our workforce.

Employment is at an all-time high—that has to be conceded—at 31.8 million. But a lot of that growth in recent years has been in low-paid jobs and jobs that have low productivity rates. I found the Budget surprising in the sense that it was overshadowed by the massive Brexit black hole at the heart of the Treasury’s forecasts. You cannot have a strong economy and a hard Brexit. It was surprising that in his hour-long Budget speech the Chancellor failed not only to talk about housing and its contribution to growth and social inclusion, but crucially to discuss the implications to the economy of leaving the EU single market and the customs union. The Chancellor is supposed to assess our economic prospects in the Budget, but with only two short references in his speech to EU matters, he signally failed to do so.

The Minister has talked about getting the deficit down. The Government have been trying for seven years to get the annual deficit down. In fact, in the last seven years the total debt has risen to £1.7 trillion, which, according to the Government’s own press release, amounts to £62,000 on average per household. This year the deficit will be £52 billion. Of course, it was forecast a year ago to be £38 billion between 2017 and 2020, with the final two financial years producing a surplus. What has actually happened a year later is that the projected increase in the deficit over that period has risen by £100 billion.

When she replies to the debate, will the Minister be in a position to tell the House what modelling the Treasury has undertaken on the impact of higher interest rates over the next few years on the level of debt? She mentioned the annual interest payments of just over £50 billion, but that is at historically low interest rates. It would be helpful to know what modelling has been done by the Treasury for what happens if a range of scenarios might occur.

The Minister referred in her speech to higher growth. There has been some higher growth, but most of that has been fuelled by credit. There is now a case for changes in the tax system. We have seen problems in a whole range of spheres beyond national insurance for the self-employed—business rates is another. There are now issues around the extent to which we tax income rather than wealth. Quite recently we had the issue of whether council tax, which is a local property tax, should be required to fund the increased demands for adult social care. We will have to have a debate about wealth and income, business rates, the role of council tax and the declining level of corporation tax, which is now at 17%. Given the global economy it is of course increasingly difficult for Governments to track what international companies do. That debate will have to be had.

I draw the attention of the Minister to real income growth. The Institute for Fiscal Studies has said that, by 2022, incomes will be no higher than in 2007. Outside London and the south-east, no part of the United Kingdom has recovered from pre-crash levels. As this debate is about the economy, I remind the Minister that there are different levels of the economy. Neighbourhood economies face great difficulty caused by the freezes and cuts taking place in the benefits system. In the Government’s drive to get the deficit down, the impact on some neighbourhood areas is sometimes forgotten. I hope that the Minister might look at that.

This is not all negative. I welcome the £500 million investment in technical education, which is hugely beneficial. The extra PhD places and loans for part-time and doctoral students are welcome; the industrial strategy fund is welcome, as are new approaches to lifelong learning. However, there is an issue about employers investing. UK employers invest half as much as other employers in the EU in workplace training for employees. We should adopt the model that many other countries have of a single body to co-ordinate state-led business support and provide a forum for shared learning across the public, private and third sectors.

Perhaps I may ask the Minister about the British Business Bank. It seems to be doing good work; it is collaborating with local enterprise partnerships and certainly to my knowledge, across the north of England, is seeking to increase regional economic development. I understand that it will operate with a slightly wider risk appetite than high-street banks, which is welcome, but I seek the Minister’s assurance that the British Business Bank is Britain-wide and will not just go for the easy wins.

I welcome the apprenticeship levy. While it is not directly part of this Budget, it is very important. There have, however, been problems behind the need to increase apprenticeships. The report, Apprenticeships for Northern Growth, launched three weeks ago at the northern powerhouse conference, makes it clear that the north of England,

“faces a shortfall in productivity compared to other areas, with a skills gap emerging before individuals leave school”.

That is very important. I want also to refer to a press release issued by the Baker Dearing Educational Trust approximately 10 days ago. It states that the trust undertook a survey of 1,000 young STEM workers and found that,

“three out of five (60%) of those surveyed didn’t believe teachers had a sufficient understanding of the labour market and a similar number … felt that schools didn’t understand the skills employers needed”.

To what extent is the Minister confident that Ofsted is inspecting adequately what is happening in careers advice in schools?

The Chancellor made great play of the fact that the proportion of young people not in work or education is now the lowest since records began. It sounds a great achievement. Actually, we still have 850,000 16 to 24 year-olds who are not in education, employment or training. I am looking for measures that demonstrate that the Government understand that and will do something concrete about it.

[Baroness Vere of Norbiton (Con)]

I respectfully remind your Lordships’ House that we have an advisory speaking limit of six minutes. There is another debate after this one and I am sure that those taking part in it would appreciate noble Lords not exceeding that limit.

Brexit: Economic Impact on North-East England

Lord Shipley Excerpts

Tuesday 10th January 2017 Lords Chamber

[Baroness Neville-Rolfe]

I recognise the special strengths and differences of the north-east, and I am glad we have this debate about them because I believe in the strengths of Newcastle, Teesside, Northumberland, and so on. The sort of investment we have made in the north-east recently shows how determined we are to try to help. The local growth fund awards have been significant. There is the further £556 million for northern local enterprise partnerships in the Autumn Statement, on top of the existing north-east funding. We are creating enterprise zones; I really welcome those in Teesside and in Newcastle. We are investing in transport, because you cannot improve an area of the country without improving that. Changes to the A1 and so on are absolutely crucial. We need to get on with those and to improve skills in the area. We are doing all that, and I am as determined as the noble Baroness.

[Lord Shipley (LD)]

My Lords, the Minister has referred to a number of organisations which are relocating to the United Kingdom. How many of those are relocating to London, and how many are relocating elsewhere in the United Kingdom? I draw her attention to the fact that figures produced by her department in the past year show that one-third of all new jobs created by foreign direct investment went to London.

The Minister said in her initial answer that her department is undertaking a range of analyses about the implications of Brexit. Will she consider creating Brexit resilience committees for each of the nations and regions of the UK, so we have real information rather than a London-based analysis?

[Baroness Neville-Rolfe]

I am surprised that the noble Lord talks about a London focus because I think this Government have actually changed. We have had the northern powerhouse document, which I hope he has read, which we published at the time of the Autumn Statement. We are undertaking an industrial strategy which I look forward to discussing in this House. The importance of place will come through strongly in that strategy. I note the other points that he has made.

Queen’s Speech

Lord Shipley Excerpts

Wednesday 25th May 2016 Lords Chamber

[Lord Shipley (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord McFall, and to be reminded of the importance of banking supervision and regulation. I join in the congratulations of the right reverend Prelate the Bishop of Newcastle on her maiden speech. As a fellow Novocastrian, I share her pride in the north-east, its successes and potential. I hope the Minister noted her concern about the need for adequate funding and that the Government should make the commitments in the gracious Speech real in everyday life.

The gracious Speech has been described as lacking ambition. I am not sure that is true, because some of the legislation proposed is very important, particularly the Bus Services Bill and the local growth and jobs Bill. With caveats, both are to be welcomed, because they could make a huge impact. Where the gracious Speech lacks ambition is in its failure to address issues of inequality: income inequalities, housing inequalities, social exclusion, and child poverty. That is a matter of regret, because in all these areas the gap is widening between those who have and those who do not.

Of course, there is ambition in the modern transport Bill. We have heard a lot in the media about flights into space, but would the Minister agree that before the Government propel tourists into space they should complete the dualling of the A1 between Newcastle and Edinburgh, as well as attending to all the other road improvements urgently needed across the north of England? I draw his attention to east-west roads, notably the A66 and A69, which cry out for capacity increases, dualling and improved road safety.

This is the second year of this Parliament, which continues the trend towards greater decentralisation in England. We are now at a critical stage in that process, because it is one thing to pass the legislation but another actually to make it work on the ground. The National Audit Office said in April that the Government’s plans are risky. I agree with that analysis. The plans are piecemeal, but that is what you get with an approach that encourages local authorities to choose what responsibilities they want to take on and what investment-sharing, risk-sharing and business rate sharing they are prepared to pool with others. To be clear, this was the right thing to do to get devolution actually happening, but we now need a clearer, menu-based approach that everybody understands.

For example, the Government need to explain better why elected mayors are essential in some places and not others. As an example, the Bus Services Bill will devolve powers to directly elected mayors in England over local bus services. Such powers may yet go to places without a directly elected mayor, but there is no certainty of this since it will be for the Secretary of State to decide. Things need to be clearer, because the buses Bill has the potential to be a good one in that it will set standards and fares.

There is then the local growth and jobs Bill, which also needs clearer explanations. It will allow local authorities to retain business rates and to reduce the tax rate. Yet the Bill gives combined authority mayors the power to levy a supplement on business rate bills to fund new infrastructure projects, provided they have the support of their local enterprise partnership. I suggest that the Government should go further to enable similar powers to lie with non-mayoral authorities.

However, 100% business rate retention will not finance devolution. The mechanics of 100% retention need to be debated and agreed. Prior to 1990, when business rates were localised, and prior to the nationalisation of business rates, there was an element of equalisation in the grant. I know that the Government are well aware of the potential problem, but simply allowing well-off councils to become even better off while poorer councils cannot get better off will simply widen inequalities. As the Joseph Rowntree Trust showed a few weeks ago, many towns in the north do not have the capacity for high levels of growth. Ten of the 12 most struggling cities are in the north.

It is said that the Government want a smaller state. That would be wrong. We cannot have a smaller state if we are to rebalance the economy. If the northern powerhouse is to have a chance of succeeding, the state must play a leading role. Recently, an ONS and KPMG report gave us some very worrying figures about the brain drain to London. I think Ministers are well aware of that. I read in the newspapers of some possible schemes that might help to address this outflow from the north. It is important that Ministers continue to confirm that the northern powerhouse is not simply about the M62. That needs to be restated continuously, and it needs to be demonstrated through real activities and real investment right across the north of England.

The gracious Speech refers to the northern powerhouse, stating:

“To spread economic prosperity, my Government will continue to support the development of a Northern Powerhouse”.

The first paragraph of the briefing document supporting the gracious Speech states:

“The Northern Powerhouse is the government’s vision for the North of England. It is built on the solid economic theory that while the individual cities and towns of the North are strong, if they are enabled to pool their strengths, they could be stronger than the sum of their parts”.

I agree entirely with that sentiment. However, does the Minister share my regret that Gateshead decided recently to opt out of membership of the north-east combined authority? I do not think this helps either Gateshead or the north-east. I hope that the Government will do all they can to persuade Gateshead to look again at its decision. It would be to everyone’s advantage if it did.

Autumn Statement

Lord Shipley Excerpts

Thursday 3rd December 2015 Lords Chamber

[Lord Shipley (LD)]

My Lords, I thank the noble Lord, Lord Carrington of Fulham, for enabling us to discuss the economy in the light of the Autumn Statement. I am grateful, too, to the Local Government Association, of which I am a vice-president, for its briefing earlier this week on the impact of the spending review on local government, not least its ability to expand its work in promoting growth. I hope there will be further opportunities to debate those cuts when we receive details of the local government settlement, but there is one overriding principle that I want to emphasise at the outset.

No Government should attempt to balance the books on the backs of the poor. I am glad the Government now recognise that their approach has been out of balance, through trying to get too much from cuts and too little from tax, and with growth too restricted by fiscal tightening, as the OBR itself has indicated.

In the March Budget, there were to be real spending cuts of 14.8% in departmental budgets over the three years from 2016 to 2018. Those spending cuts are now 2.3%, which is welcome. But have the Government got a long-term economic plan? I understand they have a long-term economic ambition, but I am not convinced it is a plan; nor is it adequately explained why the state has to be reduced in size by quite so much, particularly when infrastructure spending remains low. Taking the northern powerhouse as an example, I see that £400 million has gone into a northern powerhouse investment fund, but why that sum of money as opposed to another sum? Is there a plan for what investment will take place and where? For example, how much will go to support Teesside?

As the noble Lord, Lord Carrington, said, we have growth, but we have unbalanced growth. Most of it is in services, not in manufacturing, which is slowly declining due to lowering demand from the rest of the world as well as the strong pound. Last year, we had a trade deficit of £35 billion—we have to export more. A few days ago, I read a ResPublica report which says that the Government must distinguish between productive investment which generates jobs across the country and unproductive investment such as foreign investment in the London property market. Manufacturing provides 30% of the jobs in sectors producing goods for export, and the ResPublica proposal on export hubs seems a good one.

Growth is partly derived from greater productivity and investment in areas such as training, research and development, and infrastructure. The apprenticeship levy is welcome, but further education is suffering a real-terms cut over the next four years. The chief executive of the Association of Colleges has stated:

“If post-19 education starts to vanish so do the future prospects of the millions of people who may need to retrain as they continue to work beyond retirement age, as well as unemployed people who need support to train for a new role”.

As for energy, decarbonisation is going to be a big market worldwide, and we need to be able to compete in it. It is a mistake to axe the £1 billion support for carbon capture and storage and it is a mistake to cut so much from renewable energy projects. I wonder what the Government’s reaction has been to the attack on their policies by so many of our blue chip companies, which say the scale of the budget-support cuts for renewable energy is risking UK businesses.

Having announced plans for 400,000 affordable homes from 2018-19, could the Government explain how those figures will be achieved given the lack of construction industry workers and skills? In addition, there is the 1% rent reduction for social housing each year for four years, which will restrict housing association borrowing. Would it not be a good idea to look again at a housing investment bank to get further growth in housebuilding?

Finally, why is it that we cannot build our own nuclear power stations and our own high-speed rail infrastructure rather than relying on the nationalised industries of China and France to help us? That seems to me to say a lot about our failures to invest adequately in infrastructure.

Spending Review and Autumn Statement

Lord Shipley Excerpts

Wednesday 25th November 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, if I understand the noble Baroness’s questions correctly and specifically—I am not entirely sure that I do—it has been made clear in the Chancellor’s speech that there will be a series of measures over the term of the Parliament and the period covered by the spending review and Autumn Statement. By the end of the Parliament we will have achieved the £12 billion of savings that was set out, and the migration to universal credit will play the role that it was intended to play.

[Lord Shipley (LD)]

My Lords, the Chancellor announced a big package of new powers and also new responsibilities for local councils. He also said that by the end of this Parliament local government would be spending the same in cash terms as it does today, so it will not be spending the same in real terms. First, will the Minister confirm that there will be no cost shunting from central to local government without the necessary funding following it? Secondly, can he confirm that over the next few years of this Parliament any new demands made of local government by central government will be properly funded?

[Lord O’Neill of Gatley]

Again, I had a slight problem hearing the specific words of the question. However, if I understand the broad gist of it, I point out that, given the new revenue-raising powers that all our local authorities will have available to them, their ability to have control over their plans will, of course, be considerably greater than is implied by the numbers that I think the noble Lord was referring to. That is particularly true of the big urban areas that have undertaken devolved responsibilities. In terms of where that destiny will be, as will be seen more clearly in the detailed documents to be released later, if not already, Greater Manchester, the first place that had devolved responsibility, has now had its third negotiated settlement. There will be more for others, as I have personally been very eager to discuss as part of our initial agreements with many of them.

Budget Statement

Lord Shipley Excerpts

Wednesday 25th March 2015 Lords Chamber

[Lord Shipley (LD)]

My Lords, I should like to address three matters: first, the achievements of this Government in dealing with the state of the economy which they inherited in 2010; secondly, rebalancing the economy in terms of growth outside London and the south-east, particularly in the north-east of England; and, thirdly, the current level of debt and the cost of servicing it, the need to get the deficit down and the timescale for doing that.

The noble Lord, Lord Deighton, defended a number of the Government’s achievements, but they are important. We have the highest growth in the G7 in the last year and a record number of people in work. Almost 2 million extra jobs have been created since 2010; 80% of those are full-time, and 80% are in skilled occupations. Employment is growing fast in the north and the Midlands. Apprenticeships have nearly doubled to 2 million since 2010. We have the lowest inflation on record, which helps household finances. The number of university students from disadvantaged backgrounds is higher than ever. Unemployment is down from 8.5% at its peak to 5.7%. Of the 28 countries of the EU, only Germany and Austria have lower unemployment. Low interest rates are helping households too, which is important given that we still have high levels of personal debt. We should applaud this success, particularly that of my own party, which has led the policy of the increase in the personal allowance in income tax to £11,000. It was only £6,500 under Labour in 2010.

The job is not done. There are a number of things that we still must do and there are two very big strategic issues that I agree are very important. Both have already been mentioned in the debate. The first is low pay. It simply must get higher. I do not understand why we have the minimum wage when a living wage is higher. I understand the constraints, but surely we have to have as a policy objective that low pay should be higher. We also need to increase our productivity, although there are some signs of this beginning to happen.

I think we have learnt that most growth under the previous Government was fuelled by consumption. We should recognise that the much higher level of growth now results from investment in infrastructure, plant and equipment, rather than real estate. When I look at the rebalance of the economy, the north is now growing faster than the south, taking a number of measures. This Government have done more to devolve power and responsibilities than any predecessor. There is now a new confidence and a greater understanding that devolution can drive growth. We have heard of the northern powerhouse and the plan for northern transport. City deals and the local growth initiatives, in which I have had an advisory role, have all made a welcome contribution.

The north-east of England has an impressive story to tell. Looking at the north-east LEP area—the figures I will quote are the LEP’s—it is clear that the north-east is closing the gap with the rest of the United Kingdom. We have record output and strong growth across many sectors. We have the highest employment rate on record, with 33,000 more people employed in the north-east LEP area since the Adonis review two years ago. Government and European funding have helped a lot, of course, which are worth well over £1 billion into the north-east LEP area. That funding is being committed locally by local people. The north-east has the lowest level of unemployment since 2008 at 7.8%. Exports in the north-east rose by 7.2% in the last year, despite a national fall of 3.9%. The north-east is the only English region still to have a positive balance of trade, amounting to £4.45 billion.

On productivity, GVA growth per head is growing at a faster rate than in most LEP areas, being the fourth highest in 2013. I contend that this would not be happening had the Government not got control of the public finances in 2010 and had my party failed to form a coalition Government to work in the national interest. The north-east is doing a remarkable job in getting out of the recession and everyone there should be congratulated for it, as should central government. There is a long way to go, but the north-east is headed in the right direction.

The trend in government finances seems to be headed in the right direction, too, for it is essential to maintain fiscal discipline. We are borrowing £90 billion this year to add to our debt, which will have almost doubled under this Government. There are understandable reasons for that, but interest payments have risen to the equivalent of £1,841 per household simply to service the debt. I doubt most households in the UK realise the amount the Government are spending in interest charges on their behalf when they could be spending it on the NHS or, say, on adult social care.

There is a difference between the two parties in the coalition in that the Chancellor’s overall aim, which is agreed, is to achieve £30 billion of further annual savings by 2017-18. I understand the need for that, but we need to be a bit clearer about where we come from. When I talk about annual savings, I am talking about cutting the annual deficit by 2017-18. I doubt the deliverability or desirability of cutting a further £13 billion from undefined Whitehall departments, £12 billion from welfare payments, but only £5 billion from reducing tax evasion, tax avoidance and aggressive tax planning. I prefer the Chief Secretary’s approach, which wants £6 billion more from tax dodging, and £6 billion from additional tax rises from the better off, those with high-value property assets, and the banking sector. That approach means that cuts in welfare and adult social care could be far, far lower. The deficit reductions should be achieved on a 50:50 basis: 50% budget reductions and 50% from extra taxation. That would enable further modest investment in the NHS to take place and it would also protect education spending.

I should declare my vice-presidency of the Local Government Association. I think it very difficult to protect the NHS, pensions and schools and at the same time effect the reductions in spending that the Chancellor seems to want. The impact on local government services, in particular on adult social care, could be very serious. I hope that the next Government will think very carefully about that.

I have one last point, which is an issue that impacts on the north-east and Cumbria, relating to the announcement on Northern Rock. The Chancellor announced that the Government are to sell off the mortgage assets of Northern Rock. It has been reported that the Government might make a profit on its staged sale. If they do, will they consider the strong moral case for donating 5% of the profit that it makes to the Northern Rock Foundation or to a successor body? My point is this: the foundation had been receiving 5% of pre-tax profits since Northern Rock became a bank. If the Government make a profit on the sale, it seems fair that a donation representing 5% of that profit should be passed to the foundation. I hope that the next Government will be willing to address that issue, because it is of great importance to those who have been receiving the additional charitable support from the Northern Rock Foundation in the north-east and Cumbria.