Local Government Finance

Debate between Andy Sawford and Neil Parish

Wednesday 12th February 2014 Commons Chamber

[Andy Sawford]

Let me make a bit of progress. The Minister spoke for 38 minutes, and I know that many hon. Members wish to contribute.

It is to be welcomed that the Government are compensating local authorities for the cap on business rates, but I am told by SIGOMA that the compensation amounts appear to be less than the estimated reduction in total business rates. I hope that the Minister who responds to the debate will comment on that point. Holdbacks to fund the business rate safety net have also been top-sliced unfairly from councils. While Windsor and Maidenhead contribute to the £120 million holdback at a share of £2.27 per dwelling, Middlesbrough contributed £7.97 per dwelling. Why does the Minister think that is right?

I pay tribute to my colleagues, especially the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who led an important debate on this last year. There was a limited U-turn by the Government on holdbacks. But when the Minister replies today I hope that he can update the House on what recent assessment has been made on the business rate safety net.

[Neil Parish (Tiverton and Honiton) (Con)]

I see that the shadow Minister is carrying on the same creative accounting as the last Labour Government. They say that they will stick to the same budget as we will, but they will reduce business rates. I welcome that, but where will they get the money from? They will have to cut it from somewhere else.

[Andy Sawford]

The hon. Gentleman will have to do a bit better than that. The reduction in business rates is clearly costed by not going ahead with the cut in corporation tax for the largest businesses in the country. It is a clearly costed policy.

The new homes bonus is another top-slice from the formula grant, and the Government seem confused about its purpose. Their website describes it as:

“A grant paid by central government to local councils for increasing the number of homes and their use.”

But the Housing Minister told the House recently:

“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]

The National Audit Office report on the new homes bonus said it certainly is not about increasing the number of homes, stating:

“Overall we found little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply…We found no association between individual local authorities’ planning application approval rates and the numbers of homes qualifying for the Bonus.”

As the new homes bonus is a top-slice without a purpose, I can understand why local authority leaders and members are frustrated by the fact that it compounds the problem of unfairness—because of course it comes from the grant.

London Councils has brought to my attention the Government’s recent decision to require London local government to transfer £70 million of its new homes bonus grant to the GLA. That is a centralising step by the Government in London. Those councils want to know why they are being treated differently from the rest of the country, and I hope that when the Minister responds later he will justify that.

Other changes are having an impact on councils. There is much concern about the localisation of welfare support. The funding has been passed from the Department for Work and Pensions to the Department for Communities and Local Government, and has already been cut in half in the process. There are no plans for any funding to be available after 2015. Do the Government recognise the impact that that will have on the ability of councils to help the most vulnerable people in our communities?

That leads me on to the Government’s new poll tax for the poorest people. The cuts to council tax support mean that many people on the lowest incomes will see their council tax bills jump. These people are carers, the disabled, single mums, war widows and veterans, and they will all have to pay more council tax and, in some cases, the bedroom tax, the impact of which my hon. Friend the Member for Wansbeck (Ian Lavery) powerfully denounced earlier. Today the Prime Minister has again chosen not to rule out another tax cut for millionaires, so we can see where the Government’s priorities lie.

When people face a cost of living crisis, it is right that local authorities do their best to keep council tax down. In recent weeks, the Secretary of State has briefed the press that he would reduce the council tax referendum trigger, but he seems to have been overruled at the last minute by the Home Secretary and the Deputy Prime Minister. The whole process has been a complete shambles. SIGOMA has said that the late announcement of the threshold was unacceptable. Councillor Caitlin Bisknell of Derbyshire county council contacted me on the day of the announcement to tell me that the council was in the middle of a meeting to set its budget for next year when it was informed by the Government of the referendum limit. While the Secretary of State has been posturing and dithering, councils have been trying to plan ahead. Local councils and communities are the ones who are left to pick up the pieces of the Government’s incompetence.

For all the talk of a council tax freeze, more than a third of local authorities put council tax up last year. According to a recent survey by The Daily Telegraph, more than half the local authorities preparing to increase council tax this year are Conservative councils, including Oxfordshire, the Prime Minister’s county council, which plans to raise its bill for a second year running.