Local Government Finance Bill

Baroness Primarolo Excerpts

Tuesday 10th January 2012 Commons Chamber

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Twenty-six Back Benchers have indicated that they wish to speak in the debate, which is due to end at 10 o’clock, with the wind-ups starting at 20 minutes to 10. We shall therefore start with a limit of five minutes on each Back-Bench speech, from now on. There is nothing else that I can do to give more Members an opportunity to contribute to the debate.

--- Later in debate ---

[Annette Brooke (Mid Dorset and North Poole) (LD)]

As is declared in the Register of Members’ Financial Interests, I am a part-owner of a very small business.

First, I welcome the general thrust of the Bill: to devolve greater financial powers and freedoms to councils, which is very important to me. On business rates, I believe the case for reform is overwhelming. The proposals in the Bill will move us away from a complex, non-transparent, centralised system, which offered no built-in incentives for councils to drive economic growth.

Of course, it is difficult and I think brave of the Secretary of State to propose such a radical overhaul of the existing system, and it is easy to focus on all the fears, which have to be addressed in our subsequent discussions. In utopia—if there are such things as taxes there—perhaps we could draw up a system where all decisions are taken locally, where all business rates are retained locally, where there are real incentives for local authorities to promote economic growth, where there is a perfectly fair outcome for all, and where there are not unpredictable changes in business activity or devastating impacts from structural changes in our economy. I rather doubt that, but it is clear that in the real world we have to take a pragmatic approach and achieve a balance between the objectives of localism, fairness and incentivisation, while providing a safety net and transparency. Incentivisation must be balanced with protection of appropriate resources for all areas, especially those with the greatest needs. This needs to be done equitably, effectively and transparently for all.

The Government have made the commitment that there will be a fair starting point, so that no council is worse off at the outset of the scheme. Tariffs and top-ups are proposed, but with provision for councils to benefit from growth in their business rates. Of course, the devil will be in the detail; we have a lot of scrutiny to do. There are safety net provisions, with a levy to tap into disproportionate gains. Personally, I would like to see local government playing a full role in operating these equalisation mechanisms, along with central Government.

There is a need to provide clear incentives for individual local authorities to gain from additional local development, but I do have some concerns about possible unintended consequences. We have heard mention of the incentives to promote large warehouse developments. They will yield the business rates, but perhaps not the same incentives to promote SMEs. SMEs may well be more job-creating, which is all important for the local area. We have a great deal of careful scrutiny to do there in order to avoid such distortions.

On set-aside, there is a degree of centralisation. It is a first step. In the longer run, I, as a Liberal Democrat, think there is a lot more scope for local decision making. Taking a purely localist view, the localisation of council tax benefit should be welcomed and I certainly welcome the theory, but I do have concerns about the practicalities. The 10% reduction in the overall budget and the centralised decision to retain existing benefits for pensioners, right as it may be, does put constraints on each council devising its own scheme. It also raises genuine concerns about whether it will be possible to protect all vulnerable groups of working age adequately.

In order to implement a local scheme, each local council will have to use different software, so there are many practicalities that need to be looked at.

On empty homes, there is a real opportunity to drive this agenda further than in the past. With 300,000 homes being vacant for more than six months, I am excited by the Bill’s proposal to go further than just giving more discretion to local authorities, and to introduce an empty home premium after a property has been empty for two years. One of my own local authorities is not very keen on this, arguing that an empty home cannot be defined. I am astonished by this response to the consultation—I thought we had gone beyond the days when we said what was furnished and what was not, and so on.

I want to touch briefly on council tax, which is dealt with mainly in the consultation and not in the Bill. I welcome the fact that we can perhaps have a higher tax on second homes. Some 7.29% of homes in part of Purbeck, which I represent, are second homes. This issue is important, and I would like to examine the case for a second home premium, similar to the empty homes premium. I would also be interested in considering allowing the billing authority to keep some of the extra revenue. If we can do that for the business rates, which I welcome—obviously, in a two-tier authority the district council will be the driving authority—why cannot—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I call Jonathan Reynolds.