Local Government Finance Bill

David Mackintosh 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

[David Mackintosh (Northampton South) (Con)]

I support this Bill. I am pleased that the Government remain committed to devolution and continue to push for greater powers for local authorities so that decisions are made by local people who understand how best to help their local area. I agree that wherever possible more powers should be taken from Whitehall and given to the town hall.

As a former leader of a large district-level local authority, I understand how important it is for local councils and bodies to be provided with greater powers to manage their own finances more effectively. The ability to allow local authorities to retain 100% of business rates revenue is essential if councils are to fulfil the roles that we continue to devolve to them. It is a power that I wish I had been able to use while I was council leader. With councils expected to carry out greater duties on a day-to-day basis and also to address the key local issues, it is essential that they are able to retain this money and spend it where they think it may be necessary.

As I am sure all hon. Members agree, the business rates system is very complex. In its current form, there are very few, if any, incentives for local authorities to stimulate growth or their local economies. That is because they do not see the benefits of doing so, for only 50% of the money is ever retained locally. This new way of working will be a challenge, as we all need to acknowledge. Local authorities will have to adapt drastically to a new way of thinking and undergo a significant culture change for this implementation to be a success. I hope that this Bill will push local authorities towards greater self-sufficiency and further away from dependency on central Government.

[Andrew Bingham (High Peak) (Con)]

Does my hon. Friend agree that this means that a small business will work more in tune with its local authority because it can talk about the business rates, and both sides—the local authority and the business—can get a better understanding of how each other works? It also gives the local authority freedom to play around with business rates to encourage more business. We get a better dialogue, which in rural areas such as mine is really important for employment.

--- Later in debate ---

[David Mackintosh]

I am grateful to my hon. Friend for his intervention, and I agree.

With these changes in place, it will be a lot easier to show businesses and residents where and how local revenue is spent, and the direct impact of local decisions. As a council leader, it was always incredibly frustrating to try to explain the complex funding formula to businesses and to residents, and why our great efforts to regenerate Northampton and improve the local economy did not always result in the increased revenue being available to spend locally.

I am pleased that through the Bill the Government will ensure that local authorities that raise less than their competing areas do not necessarily lose out in their local areas, although this should never be an excuse not to fight for investment. As my fellow members of the Communities and Local Government Committee will remember, we recently held an inquiry into business rates where we noted that while we did not underestimate the significance of these reforms, they could lead to significant divergences in authorities’ spending power if not managed correctly. I understand that the Government are still working on the exact mechanism that will be put in place for this, but it is an essential safety net. On the other hand, I hope that councils that do receive a higher income through these proposals are encouraged to reinvest the money further to cultivate business rates revenue growth.

I agree with a point made by the Association of Convenience Stores, which noted that due to the small business rate relief, local authorities will gain little growth in business rates revenue from small businesses, meaning that local authorities are incentivised to focus on encouraging business rate growth from larger companies. Local authorities will naturally be looking to sign off on larger planning developments that will deliver higher business rate yields but which have the potential to undermine local high streets such as my very own award-winning St Giles Street in Northampton. I would be interested to hear how Ministers plan to ensure that 100% business rate retention will incentivise local authorities to encourage the growth of businesses of all sizes, not just larger developments.

This Bill continues the devolution that the Conservative party has been working towards in government. By giving local authorities this power, we are allowing them to focus on their own priorities, and to ensure that they have the facilities available to grow and cultivate their own business environment and that we continue to create a more efficient system of local government that works for everyone.