Local Government Finance Bill

Amanda Milling Excerpts

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

[Amanda Milling (Cannock Chase) (Con)]

It is a great pleasure to follow the right hon. Member for Knowsley (Mr Howarth). I, too, wish the Minister for Housing and Planning a very happy birthday, and I hope he gets some time to enjoy it.

I am very grateful to have the opportunity to speak in this evening’s debate. I want to focus my contribution on part 1 of the Bill, which builds on the reforms of business rates undertaken in the last Parliament by extending business rate retention from 50% to 100%. I welcome these changes as a key part of the devolution of powers and budgets, and a move away from local authorities’ reliance on central Government grants. These reforms will give local authorities greater control, responsibility and accountability. I believe that this is a great way to provide councils with something they find very important—financial certainty.

I was a local councillor before entering this place, and I know how councils set their budgets and the challenges they face when doing so. Councils plan their budgets many years ahead, which requires a degree of certainty. Having a way of protecting a certain financial position for years ahead is very much in the interest of local government, allowing councils to plan projects and services for years to come. On the whole, local government is very efficient and has for many years shown all of Government how we can do more with less. Many local authorities that deserve to be congratulated on their budget in these difficult times have protected frontline services by sharing services with other councils, investing wisely, developing their local economy and taking many other actions to rise to their financial challenges.

Various aspects of the Bill will give local authorities more control, including the ability to set and reduce the business rate multiplier, creating incentives for them to grow their business rate income. Rightly, these reforms are fiscally neutral, so with the retention of business rates will come additional responsibilities. As a consequence of devolving these powers, there will inevitably be greater accountability. The powers that local authorities will have, and the decisions they will make, will directly influence outcomes for local residents and businesses. I also know that local government relishes new challenges. There are many services that it wants to get involved in for the betterment of local communities, and so that it can bring its passion, its drive for efficiency and—it offers this above all—its direct connection with voters.

However, business rates do not always offer councils certainty, and councils can face the problem of large ratepayers closing their operations. Therefore, although I wholly agree with the Government’s plans to extend business rates retention, I wish to address the issue of protection for local authorities that are faced with significant business rates losses.

Last June, Rugeley B power station ceased operations. It was incredibly disappointing news for the employees and contractors working at the site, and also for the local community, as the power station had become home to a large number of sports clubs and recreational groups. The closure has also hit the local council, Cannock Chase District Council, hard, as it saw it lose £1 million a year in business rates. Unfortunately, it is my constituents—my local residents, business and charities—that are paying the price for the failure of the Labour-run local authority to plan for that.

Anyone who has worked in business will be familiar with SWOT—strengths, weaknesses, opportunities and threats—analysis. Given the scale of the business rates losses and the impact on the local council’s financial stability, the threat of the power station closing should have been at the top of the council’s priority list of issues to prepare for. It will have been aware that there was always a risk that a 40-year-old coal-fired power station would close and that it was coming to the end of its life span. It should have had contingency plans in place. The consequence of its not doing that is that the Labour-run council is now having to make cuts to services which will adversely affect my constituents. It should have planned sooner for that eventuality and embarked sooner on further efficiency measures. It would have been in a far better position now, instead of having to default to an argument of blaming the Conservatives for its financial woes, especially given that it is better centrally funded than its three neighbouring Conservative district councils.

That said, the impact of the business rates losses should, hopefully, be a short-term issue. The gap will be filled to some extent with the Mill Green designer outlet village, which is going to be built in Cannock. In conjunction with the redevelopment of the power station site, that should lead to business rate growth for the council in the medium to long term. In fact, I believe that with ambitious, bold and visionary plans, we could create an incredibly bright future for Rugeley based on a new industrial landscape that would serve the local community for decades to come, with highly skilled jobs for future generations. But in the short term we have a shock to manage, and it is my constituents who are now having to deal with the Labour council’s failure to balance its books in the short term.

I urge the Minister to consider transitional funding to see the council through the next couple of years, as I, for one, do not want to see any obstacles put in place to the redevelopment of the power station site and the regeneration of Cannock Chase more broadly. Although I believe that the council should and could have done more to mitigate the business rates impact of the power station’s closure, the situation raises questions about how we support local authorities and protect them from significant shocks of such a nature, particularly as we move towards 100% business rate retention.

I would like to ask the Minister three questions. First, what measures are being taken to support local authorities and protect them from the impact of power station closures, or for that matter the closure of any business that is a significant business rates contributor? Secondly, what discussions has he had with his counterparts in the Department for Business, Energy and Industrial Strategy on managing such transitions and helping local authorities as we phase out coal-fired power stations? Finally, what support can the Government give local authorities to help the regeneration of large development sites, so that they can attract high-tech businesses, which will in turn create highly skilled jobs?

[Several hon. Members rose—]

--- Later in debate ---

[Gavin Barwell]

If my hon. Friend will allow me, I will make a bit of progress, because I have a lot of points to respond to.

The Chair of the Communities and Local Government Committee, the hon. Member for Sheffield South East, said that he would like authorities to be given the freedom not just to reduce the multiplier but to increase it. That would certainly be the easy way to raise more income, but Conservative Members believe that the way to raise more income is to grow the local economy, and we are trying to provide incentives for local authorities to do that.

The hon. Gentleman made the crucial point that if resetting were done too often, the incentive for growth would disappear, but if it were not done regularly enough, there would be a danger of authorities falling behind. I can confirm to him that we will look to adjust the needs baseline every time we reset—that is a crucial part of the reforms. We may also need to look at the mix of measures that have been devolved to make the package fiscally neutral, because as he said, demand for services may grow more quickly than the income from the tax base. Those issues will have to be looked at each time.

My right hon. Friend the Member for Cities of London and Westminster (Mark Field) spoke powerfully about the unique constituency that he represents, for which he is such a powerful advocate in the House. He talked about the huge potential for income there, but also the real challenges that his local authorities face.

My hon. Friend the Member for Northampton South (David Mackintosh) made a good point about ensuring that there is an incentive for local authorities to help small businesses, from which they might not get a business rates income. The Government’s hope, and I am sure that of his local authority, is that small businesses will grow to become medium-sized and larger businesses, so that the incentive will still be there in the longer term.

My hon. Friend the Member for South Dorset (Richard Drax) made an important point about the appeals system for business rates. At the moment, local government bears a significant part of the risk of appeals. One of the reforms in the Bill that the Local Government Association has welcomed deals with that issue, so that the risk does not sit with individual local authorities. Clearly, with 100% retention that risk would be significantly increased, so we have sought to address the issue that he is concerned about.

My hon. Friend the Member for Cannock Chase (Amanda Milling) raised the issue of the safety net and referred to an example in her constituency that I believe she has raised with Ministers a number of times. At the moment, in the 50% retention system, there is a safety net at 92.5% of assumed income. As part of developing these reforms, the Government will need to give thought to what the arrangement should be under 100% retention. She is absolutely right to flag up the importance of protecting authorities that face a sudden large loss in their income.

[Amanda Milling]

Given that the intention is to phase out coal-fired power stations between now and 2025, what will the Government do to work with local authorities that will face closures over the coming years?

[Gavin Barwell]

There are two issues here—making sure that the arrangements that we have in place cater for circumstances in which there is a significant loss in a local authority’s business rates income from one financial year to the next, and giving advance warning of the timing of closures so that local authorities have time to prepare appropriately. Perhaps my hon. Friend may wish to have discussions with the Under-Secretary of State, my hon. Friend the Member for Nuneaton, as the proposals go forward.