Local Government Finance Bill (Second sitting)

Anna Turley Excerpts

Tuesday 31st January 2017 Public Bill Committees

[Kevin Hollinrake]

Q Would you accept that, despite the fact that it might take time to get to a final position—there will be a transitory period—the formula should be based on cost drivers, not on what has gone before?

Jo Miller: Yes.

[Anna Turley (Redcar) (Lab/Co-op)]

Q Staying on the point about fairness and distribution, can you elaborate on what you think could be the characteristics of potential losers? Ms Miller, you mentioned structural deficit. As we work through the next couple of years on the detail of this, what are the demographic and economic characteristics you think we should be looking out for, as we try to balance some of the challenges to be faced? Do you think there is a commitment within the local government family to work collectively and collaboratively on this, or do you think we will see tension around competition and people wanting to put their local authority before the greater good, perhaps?

Sean Nolan: You start off.

Jo Miller: We are going to do a double act, if that is okay. First, I think you asked us what the characteristics of good look like. For me, that starts with: what is the essence of our contract with the British people? What do they have a right to expect from the state and what can the state expect from them? I believe we live in a something for something society, in that sense; therefore, what does that mean about the state of the state? How do we recognise, for example, that in the part of the world where I work, people live less long than in some other places, but in their last 10 years they live in very poor health? Yet we have a public health grant that is currently based on how long people live, not the essence of their health. How can we use these systems to take away some of the things at the moment that do not recognise that kind of fairness and equality, which need to be built in? I am pleased that we can incentivise growth, but the challenge is to make sure that we can incentivise all sorts of growth, not just those that relate to property or particular industries. That is a challenge that I cannot see being met by the Bill at the moment.

I suppose there has to be a baseline for everybody. We should encourage and incentivise growth and we should take business with us. In terms of that, will we collaborate? I do not know whether devolution has showed us in our best light in that regard. From a skills point of view, I can guarantee that the country can spend the money it is spending better, and get better outcomes. I do not think it is a good use of people’s time to be having the conversation about what good looks like 15 or 24 times over, when we could have it far less than that. It is a challenge to the sector and the Government should hold us to it, because if we start just with “I’m all right, Jack”, we will have more of the extreme events that we are having at the moment visited upon us.

Sean Nolan: If I can interpret the question about the formula review and needs, it is very difficult to look ahead and describe what the characteristics will be. Professionally and personally, I think this is an opportunity to look at cost drivers and a different way of viewing the formula. In an open way, what are the cost drivers? An important point is that, because this is a zero-sum game, because it is looking, on day zero, at how you re-divide the current cake, you are talking about winners and losers. More importantly, though, you are talking about relative need, so it is not an absolute statement. It is important to have real openness about what those indicators are and a real opportunity for the whole country to engage in whether it is the right set of indicators, so there is a sense of building consensus about what is meant by “fair”. This is just about the formula itself. On your second point, because it is a zero-sum game with winners and losers, you will inevitably have split personalities all the time. It may sound a bit foolish to say, but in my experience, people can contribute an argument to the greater good, but the following day, they live in a metropolitan, county, district or London situation, and they are thinking, “How does this work for London?”

Ultimately, I think the sector and the system will just have to recognise that when it gets to the moment when all the formulae have been churned, all the exercise of consultation has been done and it comes out with a result, that will shift money significantly, even with transition. It does not matter how good the consultation will be; you will get lots of cries of “Foul”; that is inevitable. You just need to cope with that, look back and think, “How well have we actually conducted the consultation? Can we actually defend our thought processes?”

[The Chair]

We are halfway through the time allotted for this session.

--- Later in debate ---

[The Chair]

We are just over half way through the session.

[Anna Turley]

Q My question is particularly to Professor Travers. How do you build resilience into the process? I am thinking particularly about an area such as mine, Redcar, where the loss of one company—the liquidation of SSI—resulted in the loss of £10 million in business rates overnight to our local authority. If we are going down the route of more devolution and moving potentially to more and more being retained within a local authority, how can you mitigate that over-reliance on a large company within that process?

Professor Tony Travers: Clearly, England has an economy that is heavily interdependent. Geographically, it is quite a small country; it feels big, but it is quite small compared with a number of American states, for example. We are now moving away from the system in which local authorities were largely protected; in fact, so long as the national non-domestic rate involved 100% retention, they were completely protected from any of the vagaries in the local business rate base. However, as we move back towards a system—this is a back to the future reform; we had local business rates up to 1990. We have moved away from the national non-domestic rate, which was introduced in that year. From 2011 onwards, there was more risk of the kind of change you described—and with the introduction of 100% retention, even more still.

I have always been in favour of greater local autonomy, but it begs the question whether there is a need, in a relatively small and relatively homogeneous country such as England—that would be true for Scotland and Wales, too—for central Government to retain, as they did in Corby, when the business rate yield fell there after the Corby plant shut, the capacity to intervene in the short term when something like that happens. It is an anti-localist measure, but I think it is the way most councils and MPs in Britain would expect central Government to behave when there is a one-off hit to the system. I think you would have to retain some form of capacity for national Government to help when some massive change takes place in the short term. When there is a huge new plant or some other big growth in the business rate occurs that is not on the central list, that is a different question—would you take account of that the other way round?

[Kevin Hollinrake]

Q In your introductory remarks, Professor Travers, you said you would prefer to move to a totally locally-funded situation, but your remarks just then seemed to step away from that. How are those two things consistent?

Professor Tony Travers: It is an inconsistency. I am trying to say that, so far as possible, most local authorities in England could easily operate on the basis of council tax, business rates and some mild redistribution most of the time. However, there will be cases, particularly when there is a radical change in the local tax base or some unexpected need, in which the Government may need to intervene.

Personally, I like to separate out the occasional need to intervene from trying to use the underlying local government finance system year to year to take account of all of the changes that go on in a complex economy such as ours. I am a localist, but I concede that there is always going to be a role for central Government in a country such as England—or Wales or Scotland—to intervene to smooth out the big changes that inevitably and randomly occur.