Local Government Funding: Rural Areas

Andrew Murrison Excerpts

Monday 11th January 2016 Commons Chamber

[Graham Stuart]

My hon. Friend is absolutely right.

Our campaign has argued from the outset that our councils have to bear additional costs because they serve sparsely populated rural areas. Rural councils face higher transportation costs, for instance, when refuse is collected from sparsely populated villages or when children have to be transported into schools—costs that do not have to be faced in an urban setting. As my right hon. Friend the Member for East Yorkshire (Sir Greg Knight) mentioned, as we move increasingly towards the digitisation of services, we find that there are additional costs of ensuring fair access for rural residents who do not have superfast, let alone ultrafast, broadband on which they can rely.

The Government have made a welcome pledge to conduct a new needs assessment preceding the new retention of business rates regime that they are introducing. That is great to hear, but colleagues would be wise to temper their optimism about any changes that might arise. After all, in 2012, the Government carried out a needs assessment and a consultation process. Those involved in the campaign were delighted—hurrah—when proposals were made that recognised the additional costs of delivering services in a sparse area, yet the additional funding that the Government had agreed was necessary was, for the most part, “damped” away. Under the mechanism designed to minimise volatility in funding in local areas, 75% of the gains that the Government had said rural areas should receive were not delivered. This was not damping as in delay, but damping as in totally and utterly removed. That is why our campaign has been calling for the residual amount, which we have calculated to be worth £130 million a year, to be paid in full to rural authorities.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

My hon. Friend is doing a great job, if I may say so. Does he agree that the rural services delivery grant was a fine innovation by the Government, and does he share my fears that as we move towards 100% of local authority income being levied locally, provisions such as the rural services delivery grant might disappear—to the disadvantage of our rural constituents?

[Graham Stuart]

My hon. Friend is right to mention the rural services delivery grant, to which I shall return later in my speech.

The complexities of local government finance make it hard for us to get our heads around it. When we hear that there will be business rates retention, we might assume that we are somehow moving into a whole new world, in which taxes raised locally are kept locally, suggesting that we do not need to worry about the residual historical inequities that we are discussing today. But, no, that will not be the case. What is going to happen—it would be useful to hear from the Minister and have him put me right if I am getting it wrong—is that instead of the Government taking all business rates from councils and then giving out grants, they will look at where the business rates are retained and will effectively take the money away from anyone who is getting any more money than the current grant gives to others, while anyone who is getting less will be given more. Although we will have a “new system”, what we will get in effect is—unless the Minister tells us otherwise—precisely the same situation as we started with.

Whenever a Government bring in a new system, they try to minimise volatility, so business rates retention is likely to end up with everyone getting exactly the same money as they get today, which is why it is so important to push for a fair starting place. The danger is that business rates retention will bake in all the old inequities for ever more. There might be the dynamism of being able to retain the growth in business rates, but many of us fear that the ability of rural areas to grow their business rates base and thus make up for any historical inequities is going to be rather less than that of the likes of Westminster to grow its business rates base. I share that with colleagues, and I would be delighted if colleagues have any insights and want to put me right about it.