Local Government Finance Bill

Debate between Eric Ollerenshaw and Kevan Jones

Tuesday 10th January 2012 Commons Chamber

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

At this stage of the debate we always try not to double up on what others have said, but the hon. Member for Sefton Central (Bill Esterson) said it would be fine if the present local government finance scheme had actually dealt with the differences between authorities. Many Opposition Members have talked about perverse incentives and about a lot of history, but let me explain some history.

I spent 17 years as a Conservative member of Hackney council, which the shadow Secretary of State referred to as one of Britain’s poorest boroughs. When I joined the council as a Conservative—as Members can imagine, there were not many Conservatives on Hackney council—it used to proclaim itself Britain’s poorest borough for a reason. There was almost a perverse incentive for it to do so. I am not saying that Labour councillors did not want to see the council and its tenants better off, but it was in their interests, given the funding regime, to exaggerate how badly off Hackney was. It meant that they could get more from the rate support grant.

That perverse incentive has continued. I shall give another example from those days and my early learning experiences in local government in the 1980s. I used to sit on the housing committee, and once while discussing housing benefits I made what I thought was a stirring speech on behalf of Hackney’s tenants when the Labour party wanted to increase rents by 6.8%. I was complimented afterwards on the standard of my speech. Members might not believe it but I was a new young councillor then. But I was told, “Actually Eric, it doesn’t matter. They’re all on benefits so we can just put up the rents.”

We are not saying—although I understand that the Opposition have tried to say it—that the change proposed by my right hon. Friend the Secretary of State is a massive revolution along the lines of the community charge, but, as other Government Members have said, it will mean that we can begin to provide councillors with a way of raising extra money by entering a bargaining system with business. The main thing that counts when encouraging business growth is a person’s ability to put their own money on the table. At the moment, though, there is little in the system to give councillors that ability. I believe that these reforms are the first step along that road.

Members have mentioned the north-side divide. I represent a part of the north, and my district councils are looking forward to these reforms. For example, Lancaster council can now envisage finally being able to raise money off its own bat, go into partnership with local businesses and perhaps open that third bridge.

[Mr Kevan Jones]

Does the hon. Gentleman realise that his council will also have to take responsibility for council tax benefit, which will come with a 10% cut, so that although it could end up raising money locally it might have to use that to subsidise council tax benefits?

[Eric Ollerenshaw]

From what I hear from my councils, that is not the prospect that they are looking forward to. Lancaster council wants finally to build a third bridge, for which Lancaster has been waiting years. Wyre district council has been waiting years to open a railway line to Fleetwood, where a railway line currently exists, and by borrowing through some of these schemes it could open up new development plans to business. It is looking forward to being able to close the north-south divide.

My support for the reforms is based on the need to achieve growth. Like many Government and Opposition Members, week after week I meet businesses in the north-west, particularly in my constituency, that have the potential to grow but just want a little extra support. That might mean doing up the road on the industrial estate or providing a bit of extra shedding so that they can meet their orders. With these changes, councils will finally have an interest in encouraging that business. [Interruption.] Opposition Members might scoff, but as was pointed out, in particular by my hon. Friends the Members for Ipswich (Ben Gummer) and for Milton Keynes South (Iain Stewart), the problem is that local councils, for good or ill, have divorced themselves—or have been divorced by the system—from any real interest in encouraging and supporting economic growth.

The best councils have wanted to encourage growth. I take my hat off to those such as the hon. Member for Lewisham East (Heidi Alexander), whom I have met before in relation to this matter, for all the work that they have done to encourage that growth, but the fact is, as we all recognise, that some councils and council officers have seen little benefit in going out there to support and encourage business because it has not directly affected their income. These changes will at least start to address that situation.

I shall finish on a point that I have raised elsewhere. I think—I might be wrong—that under paragraph 37 of schedule 1 the Secretary of State could allow new types of enterprise zones. Why are we not encouraging university campuses to have their own enterprise zones? I know that that would cause problems with Treasury mandarins and their calculations, but we seem to have missed a trick, because we are talking about something that could be the very basis for creating and developing new businesses, albeit not on such a large scale. Once those businesses got that extra bit of employment, they would have to move off by definition, because of the nature of university campuses. That would mean getting the turnover that we want and would deal with the criticism of the old enterprise zones—that businesses moved in from other areas and stayed there.