Local Government Finance Bill

Alison Seabeck Excerpts

Wednesday 18th January 2012 Commons Chamber

[Helen Jones]

My hon. Friend makes a powerful point. As the Bill progresses, we will table amendments to attempt to clarify some of those matters. However, at the moment, local authorities are in the dark about what they will deal with next year, if the Bill is passed.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

As with so much legislation under this Government, whether in Committee or on the Floor of the House, we are being asked to consider the Bill blind. We are not given the background information that we need—for example, the national planning policy framework in the case of the Localism Bill. Does my hon. Friend agree that the Bill, like so much current legislation, is therefore likely to form part of the logjam in the other place at some point further down the line? The amendment makes enormous sense, because the last thing we want is legislation stuck in the other place, and, in this instance, for the timetable to be missed.

[Helen Jones]

My hon. Friend makes an important point about our not seeing the draft regulations. It is difficult to debate the Bill properly without them and it also makes matters difficult for local authorities. Moreover, the measure is a carry-over Bill. The Government have got themselves into such a mess with their legislation backing up in the Lords that they cannot, even with the extended Session, guarantee that the Bill will get through before the Queen’s Speech.

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[Alison Seabeck]

There are only three, possibly four companies in the UK that are capable of producing the sort of software that local authorities might require. Clearly, they will have a capacity problem if they are faced with hundreds of local authorities wanting individual systems. That is concerning.

[Helen Jones]

My hon. Friend is right—there will be a capacity problem. Again, it would have been useful to hear witnesses from the relevant companies and consider the time scale they need.

Councils will also have to cope with changes to their revenue. It is likely that some people who receive a cut in their council tax benefit will not be able to pay, and collection rates will fall. That will affect some local authorities far more than others. The change also brings with it the possibility of more claims, because we are moving from perceiving something as a benefit to its appearing as a reduction in the council tax bill. All those with expertise in benefits say that it is likely that more pensioners will claim. That is a good thing, but local authorities need time to adjust their budgets because they face a 10% reduction in the amount of money available, coupled with protection for pensioners, and the possibility of more claims.

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[Heidi Alexander]

I was not going to repeat my comments on Second Reading, but my right hon. Friend tempts me into reiterating some of my remarks about the differing ability of different councils to promote and develop their local economies. Sometimes the business rate take will be dependent on a whole range of different things, not just on what a local authority is or is not doing. I suggest that Ministers go back to their geography lessons and learn what we all learned at school about why businesses locate in different parts of the country and how success can breed success so that areas with a large business rate are likely to grow much faster than those with a smaller rate. I know that the Government propose to check disproportionate growth and the effect of having a larger business base to start with, but it is undoubtedly the case that different parts of the country have different abilities to attract and grow businesses.

The Government’s policies are making those differences even more explicit. Last year saw the National Insurance Contributions Bill, which gives a national insurance holiday to small businesses that are starting up outside London and the south-east, so it is not really a level playing field for local authorities. A small business setting up in, say, Middlesbrough or Birmingham might be able to get a tax break, while a similar business setting up in Lewisham might be operating in exactly the same type of area, employing exactly the same number of people with the same turnover and the same profit margins, yet not get such a break. Is that company as likely to locate in an area where there is a tax break as in one where there is not, like London?

[Alison Seabeck]

My hon. Friend makes her point well. The Government’s left hand does not know what their right hand is doing. Let us consider transport policy and the potential impact of transport infrastructure investment in benefiting one area over another. No high-speed rail link is proposed for Plymouth, for example. Even though Plymouth is struggling and needs good transport interconnections, the money is not going there. Such issues are hugely important in businesses’ decisions about where to locate or expand.

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[Mr Raynsford]

There are certainly no details about how the compensation arrangements and the safety net procedure will work. Nor is there any indication that central Government are prepared to accept that they are putting local authorities in an impossible position by proposing that they should take all the downside risk of a serious increase in demand for council tax benefit in any one year which they cannot themselves have anticipated.

What will happen to a local authority if a local business closes? What will happen if there is a serious rise in unemployment in the district, and as a consequence a large number of additional claims for council tax benefit are received? The authority will have no safety net. All that the Government propose is the possibility of some sharing or pooling arrangement with neighbourhood authorities to offset the risk. That is not compensating local government; it is local government having to help itself out in order to cope with the risk that is being transferred to it by central Government.

[Alison Seabeck]

I must first draw Members’ attention to my indirect interest in the interest declared by my right hon. Friend. I should have done that earlier, but I did not get around to it.

Might not a pooling arrangement lead to different problems popping up in different authorities at different times during the year? Exactly when and how will the safety net begin to operate in all those individual instances, and will authorities really want to share such a degree of risk?

[Mr Raynsford]

There are two different elements. One is the safety net system, which the Government have outlined without giving us the details, and which is designed to cope with circumstances in which there is a serious reduction in non-domestic rate revenue because of changes beyond a local authority’s control. That safety net exists, at least in principle. There might also be changes in benefit demand. Indeed, both of those elements might arise, as there might be a reduction in business rates because of the closure of a business and an increase in benefit claims because the people employed by that business are now out of work and therefore require help with their council tax. There could therefore be a double whammy. There is no safety net from Government to help local authorities with the second element. Instead, there is only the suggestion that there might be some pooling of risk, which is an unacceptable response to a very serious problem.