Post Office Horizon IT Scandal: Compensation

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 18th July 2023 Commons Chamber

[Kevin Hollinrake]

I thank my hon. Friend for the points in his question, and we absolutely agree that we need to accelerate compensation payments. As I say, we have made significant progress on the HSS scheme. For the two other schemes—the GLO scheme and the overturned convictions scheme—we need to get those payments resolved as quickly as possible. There have been around £40 million of interim payments through those schemes, but the full and fair compensation—the final compensation—is where we need to get to. On holding people to account, he will have heard what I said earlier and I absolutely agree with him on that point.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

The report states that there are

“something like 230-250 late applications to be determined and that there may yet be significantly more”

late applications as well. Can the Minister confirm that those applications will be seriously considered and that those victims may be entitled to compensation? Can he provide an assessment as to whether the numbers I have quoted are accurate or are actually higher?

[Kevin Hollinrake]

The hon. Gentleman raises an interesting point, as does Sir Wyn Williams, and we are looking at that recommendation carefully. It is our intention that everybody who has been affected by this is fully and fairly compensated, and we will look at any further issues that might get in the way of that. We are keen to resolve those kinds of issues.

Oral Answers to Questions

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 17th January 2023 Commons Chamber

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Last year, a pay transparency came into law in Colorado. It requires employers to publish the salary range when they advertise for jobs, saving considerable amounts of time, and sometimes costs, for would-be employees. Would such a common-sense rule not be good for British job applicants and employers, too?

[Kevin Hollinrake]

That is an interesting point. We are looking at pay reporting, especially in larger companies. We want to minimise the burden of regulation on smaller companies, of course, but the hon. Gentleman raises an interesting point, and we will have a close look at it.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Debate between Gareth Thomas and Kevin Hollinrake

Report stage & 3rd reading
Wednesday 22nd September 2021 Commons Chamber

[Kevin Hollinrake]

That is very welcome.

The key point in the amendment is about oversight. I am concerned that the FCA is not as accountable as it could be to this House. With repatriation, a number of regulations and regulatory oversight of the FCA have now passed back to us domestically whereas before there was accountability through the EU institutions. I am concerned that we have proper oversight of what the FCA does. The hon. Member for Glenrothes and the hon. Member for Harrow West (Gareth Thomas) are quite right: the jury is still out on the FCA. It has made some bold claims that it is reforming and becoming more effective. I welcome the fact that only a couple of weeks ago it set out some clear targets for a reduction in the number of investors investing in high-risk investment and being subject to scams. There are some specific criteria that the House can now hold it to account for; I am just not clear how we do so. I can see how the Treasury does so, but it is important that the House can, too.

In the work that I have done on the all-party parliamentary group on fair business banking, we have seen numerous cases in which the FCA has not been proactive or used the mechanisms at its disposal to sanction the people responsible. That is simply unacceptable. The FCA must be a much more proactive organisation and, for it to be held account for such proactivity, we need a clear line of responsibility between it and the House and its Members. The amendment is a good attempt, but not one that I can support.

[Gareth Thomas]

I am sympathetic to the broad thrust of the amendment tabled by the hon. Member for Glenrothes (Peter Grant) and his concern, which I alluded to in my intervention, that the Government, and certainly the FCA, appear to be saying, “Don’t worry—we’ve had a change of leadership and everything is going to be all right now. You don’t need to worry about the quality of the regulation of investment firms going forward, or the implementation and enforcement of consumer financial regulation, whether in this case or more generally.” I have some sympathy with the point of the hon. Member for Thirsk and Malton (Kevin Hollinrake) that we should be sceptical about such a claim. It is good that Treasury Ministers will be having a more regular dialogue with the FCA, partly as a result of this scandal.

As the House knows, I have taken a particular interest in the demutualisation of Liverpool Victoria. That is very different from the case of LCF, so it would not be appropriate for me to go into the particular details, but there are parallels in the treatment of Liverpool Victoria consumers and those of LCF products. Some of those parallels relate to the culture that appears to exist within the FCA. The all-party parliamentary group for mutuals received a letter from the FCA and one from the PRA, and they reveal that there have been almost 60 meetings between the regulators and the board of Liverpool Victoria, but not one meeting with its consumer-owners on its demutualisation. I wonder whether there is not a frog in hot water-type problem here, with the FCA so close to the Liverpool Victoria board in this case—and potentially to other financial firms—that it fails, perhaps accidently, to do its job on behalf of consumers with sufficient robustness.

I welcome the Dame Elizabeth Gloster report, which was excoriating in its findings. To pick out some key concerns, it said that there were “unclear” policy documents for use by FCA staff, a

“flawed approach to the Perimeter”

and a “failure to consider” the behaviour of particular businesses holistically. It also said that there was insufficient training of staff and pointed to confusion between Her Majesty’s Revenue and Customs and the FCA—our regulators—over the handling of particular issues.

I appreciate that the FCA has not only had a change of personnel but brought forward proposals for a consumer duty to try to rebuild some confidence. However, my problem with the duty, which it consulted on until the end of July, is that there is no sense of understanding the difference between consumers who also own a business—a mutual in this case—and consumers per se, or a willingness to take additional actions for consumers who are also owners. I worry about whether that additional duty will be robust enough.

--- Later in debate ---

[Gareth Thomas]

I am not sure I need to respond other than to thank the hon. Member for his intervention.

[Kevin Hollinrake]

I am sure that many other people in the House often get frustrated, as I do, at unaccountable independent bodies or arm’s length bodies, and I might mention not least the FCA, possibly the Environment Agency and perhaps the NHS as well. Would it not be better for the FCA to have a direct line of accountability to those who are elected by the people of this country and for the body the hon. Member recommends to be made up of parliamentarians from either House?

Lloyds, HBOS and the Cranston Review

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 4th February 2020 Westminster Hall

[Kevin Hollinrake]

I absolutely agree with the hon. Lady. This is not just about Lloyds. A number of independent reviews have taken place, but they have been undertaken by the relevant banks. That simply cannot be right, in terms of justice for victims or their feeling that justice has been done. Justice being seen to be done is a basic principle that, it seems, the banking sector does not have to adhere to.

When the APPG was initially talking about future redress, it proposed a financial services tribunal, similar to an employment tribunal, where there would be no adverse costs, so a claim could be taken forward more easily. That would help to reduce the power imbalance between banks and businesses. A comment that came back from one of those commissioning the review on behalf of UK Finance, the banking representative organisation, was that the courts were not the right place for banking disputes to be settled. Well, they are the right place for the rest of us to settle disputes—that is what our system is built upon.

We need impartial, independent processes. I will talk about the right process for that moving forward, because there is an obvious new alternative approach we can take.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

I pay tribute to the hon. Gentleman for the way in which he has championed justice for those wronged by Lloyds. He is right to describe this case as one of the worst examples of corporate abuse that many of us in this House can remember. Would he be attracted by the consumer ombudsman model? In this case it was not consumers who were primarily affected, but consumer ombudsmen in other countries—crucially, those with class action powers—can bring actions against big businesses that are guilty of the type of behaviour that the hon. Gentleman describes, on behalf of both consumers and small businesses. Would that not be a powerful addition to the regulatory field and help to hold big banks to justice?

[Kevin Hollinrake]

The hon. Gentleman makes an interesting point, although that is not a model I am familiar with. Class actions are definitely opportunities that are not well exploited the UK because of our legal system. I would be keen to talk to him further about that approach.

Within our system we have the Financial Ombudsman Service, which does not necessarily have the best reputation, although I know the hon. Gentleman is talking about something different. It is a problem that whoever is overseeing cases has to be competent and have the right understanding, because there are complex cases that take into account issues around complicated banking products. We have to ensure that the calibre of arbitration or adjudication is at the right level—I will say more about that shortly. We certainly need reform. Moving forward, we think we have a good solution, but we need to continue to improve on that.

This is not just about Lloyds. There are a number of other redress schemes for banking malpractice and mistreatment that have already been conducted by relevant banks. Banks were the principal arbiters of deciding how much compensation people were allowed to have relating to the interest rate swaps schemes and interest rate hedging products, many of which had a devastating effect on businesses. The debates that we have had about the Royal Bank of Scotland, over the past months and years, have raised similar problems about the mistreatment of small businesses. There are problems with their review process and with others, as other hon. Members have said.

I will describe cases that put that into perspective. The first person to write to me about a business banking dispute was Jon Welsby from Filey, when I first became a Member of Parliament. He showed me a huge file of evidence about his business, but the dispute came down to quite a simple problem. He had been sold a swap by Lloyds bank—they were sold by many different banks—that had had a devastating effect on the interest rates he had to pay. The amount he had to pay rose from about £5,000 a month to £17,000—perversely, as interest rates fell, as that was the way swaps worked. He was given direct losses, but he was not assessed as being due any consequential losses by the bank-led review. He was able to gather together the resources to take his claim to court. It was a £10 million claim, although I am not clear exactly how much he received, as he settled out of court. He was able to settle the claim, whereas most people cannot get the money together to take their claim to court. He had had his claim assessed by the bank and was not happy with it, but because he had the money to get to court, it was settled for a much higher figure. It cannot be right that the only people accessing justice are those with the wherewithal to get to court. Given that imbalance of power, people would need millions of pounds to take a bank to court. It is simply unfair.

The constituent of my hon. Friend the Member for Beckenham (Bob Stewart), Dean D’Eye, came to us about the RBS Global Restructuring Group scheme. He had a property development business and loans to the value of around 60%. He never missed a payment to RBS. He was sold a swap, which damaged his business, but the key moment came when money from a property sale he had made, to add cash flow to his current account, was taken away by the bank and used to reduce debt. According to Mr D’Eye, that broke the agreement and had a devastating impact on his business.

Local Government Finance

Debate between Gareth Thomas and Kevin Hollinrake

Wednesday 22nd February 2017 Commons Chamber

[Mr Thomas]

If the hon. Gentleman will not listen to me, perhaps he will listen to Izzi Seccombe, chair of the LGA’s health and wellbeing board and Conservative leader of Warwickshire Council. Earlier this week, she said:

“To continue, it is really looking like we are cutting into the bones of services that matter to people”.

According to the LGA’s analysis, 147 of England’s 151 social care authorities are considering or have had approved the introduction of the social care precept for next year, but it estimates that that will raise just over £540 million, which does not even cover the cost of the Government’s national living wage. It will not tackle either the growing crisis in services available to support the elderly or disabled or end the need for cuts to local services, including social care, such is the funding crisis.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The hon. Gentleman referred to the needs within different local authorities. Does he accept that some local authorities are under greater pressure than others? For example, 13 London boroughs were able to reduce or freeze council tax in 2016-17, while many others were not. Is he advocating a system based purely on cost drivers, need and the cost of delivery, rather than regression and the baked-in formulas of previous years?

[Mr Thomas]

The hon. Gentleman will remember that he and I had this discussion many times during our sittings on the Local Government Finance Bill. While the hon. Gentleman seeks to champion his constituency, which is a rural area, I gently suggest that he might like to talk to Ministers about why they intend to abolish the rural delivery services grant, which was specifically introduced to help provide additional funding to rural areas such as his.

--- Later in debate ---

[Kevin Hollinrake]

The hon. Gentleman knows very well that this is happening in a context of much more money coming into the system—an extra £12.5 billion into local government by 2020. That is the relevant context, rather than what he says about withdrawing funding from local authorities.

[Mr Thomas]

Given the scale of the funding crisis facing local government at the moment and the abolition of other funding streams such as the £3 billion going from the public health grant, I suggest that the hon. Gentleman should be a bit more of a champion for rural areas and try to defend his own area’s funding through the rural delivery services grant.

[Kevin Hollinrake]

rose—

[Dr Sarah Wollaston (Totnes) (Con)]

rose—

Local Government Finance Bill (Tenth sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 21st February 2017 Public Bill Committees

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The hon. Gentleman mentions GP surgeries, which of course are private businesses. Does he think that dispensation should also be given to private businesses?

[Mr Thomas]

Let us be clear: GP surgeries provide a public service. I will come on to some of the difficulties that GPs face. On the news just the other day there was a report by the BBC’s excellent health editor, Hugh Pym, on GP surgeries that had had to close because they could not make the finances add up. One wonders whether, had they faced the business rates hike that we are talking about now, that would not have exacerbated the problems.

--- Later in debate ---

[Mr Thomas]

I think it is a tad harsh to suggest that the hon. Member needs help, but perhaps we can offer a little guidance from time to time from this side.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[Mr Thomas]

I will in a second; I have one further point. Some trusts, including Peterborough City Hospital, will see rates rise from £2.5 million to £4.8 million by 2021, while the University Hospitals Birmingham NHS Foundation Trust’s bill is set to rise from £4.2 million to £7.6 million. A further example is the Royal London Hospital in east London, which according to the Gerald Eve consultancy will see its business rates bill rise by nearly 60% to £9.7 million. I will happily give way to the hon. Gentleman; presumably he is going to say how he thinks these bills should be dealt with by the hospitals concerned.

[Kevin Hollinrake]

I wonder whether the shadow Minister will comment on whether the hon. Member for Wolverhampton South West was paying attention to his own comments, or whether he switched off in the middle, on the basis that it was he who mentioned GP surgeries? I was responding to that point.

[Mr Thomas]

All I will say is that I have never known my hon. Friend the Member for Wolverhampton South West be anything other than switched on. I learned that to my cost in a statutory instrument Committee a long time ago.

When the NHS is under such huge budgetary pressures, the fact that hospitals face these new, potentially huge, business rate liabilities may result in pressure for further reductions—for instance, in staff. That must be profoundly worrying, not only to Opposition Members but to Government Members who represent hospitals facing similar business rate increases. When we consider that NHS trusts posted a deficit of £886 million at the end of the third quarter of this year alone—£300 million more than the target for the end of this financial year—we have some sense of the scale of the pressures on NHS hospitals. If Ministers were so minded, perhaps a little business rate relief now might help to ease some of the pressure on finance directors and chief executives in NHS hospitals who are trying to make hospital budgets balance.

You will know, Sir David, because you are very knowledgeable about these things, that the Secretary of State for Health, clearly as a result of the scale of the pressure that hospitals are under, has suggested that the four-hour A&E target might be downgraded and no longer apply to minor injuries. One wonders whether he would have gone to those lengths had there not been the scale of pressure on NHS hospitals that we are seeing at the moment, particularly financially. He might have been more willing to defend what is an essential management target and an indicator of the quality of healthcare in our communities. I gently suggest that abandoning the four-hour target is a total admission of failure by the Government. One can understand the context for that abandonment in the light of the financial pressures, which new clause 4 seeks to ease a little. One wonders whether the Secretary of State for Health would welcome ministerial support from the Department for Communities and Local Government in negotiations with the Treasury, perhaps through the easing of the business rates burden, to reduce some of the financial pressure on NHS hospitals.

--- Later in debate ---

[Mr Thomas]

Let me address the question of the funding formula, because that opens a whole can of worms in terms of the financial pressures facing many of our schools. Some immediate business rates relief, without the compensation to school budgets suggested by the Minister, might provide an additional increase in funding to schools at a time when they most need it.

It is important that we discuss new clause 4 and relief for schools in the context of the funding formula. Almost half of the schools in this country will lose funding. They are already being hit by the 8% real-terms cut that the NAO has identified, but almost half face further cuts in 2019-20 under Department for Education proposals that are on the table for consultation.

At the Public Accounts Committee recently, a number of headteachers laid bare the scale of the challenge facing their schools. Liam Collins from Uplands Community College told the Committee that his school had reduced staff numbers by nine teachers and five support staff over the past four years. He argued:

“We cannot afford to buy text books...We cannot afford to send staff on training.”

That is a dire financial situation. Perhaps a little bit of business rates relief, without a reduction in school budgets, would provide one way to help that particular school.

[Kevin Hollinrake]

I am struggling to understand the relevance of the hon. Gentleman’s argument, for two reasons. According to the Institute for Fiscal Studies, the Opposition’s manifesto pledges on education at the last election completely mirrored ours with regard to the funding pot. In addition, their manifesto did not specify or propose anything about business rates relief, including for schools. The hon. Gentleman is playing cheap party politics.

[The Chair]

Order. Before the hon. Member for Harrow West replies, this is revisiting old ground. I hope he will talk about his proposals for prospective funding.

Local Government Finance Bill (Ninth sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 21st February 2017 Public Bill Committees

[Kevin Hollinrake]

The hon. Gentleman makes some interesting points. Has he run these plans by any business organisations, such as the Federation of Small Businesses, the Institute of Directors, the CBI, or the chambers of commerce, to see whether they would be in favour?

[Mr Thomas]

The Federation of Small Businesses raised a particular concern with me about the potential for both business rate supplements and property owner levies in terms of BIDs to be covered. If the hon. Gentleman will forgive me, that issue probably works best as part of a clause 38 stand part debate. I want simply to equalise what Ministers are giving to mayoral combined authorities with those combined authorities that do not have a Mayor. It is called fairness. I appreciate that that is a concept that Conservative MPs sometimes struggle to come to terms with, but I hope that our efforts in the last two weeks have been helpful, particularly to the hon. Member for Thirsk and Malton.

--- Later in debate ---

[Mr Thomas]

My hon. Friend makes a good point. Now is the time to embrace the spirit of localism, which Ministers have previously professed to support, with investment in infrastructure and to trust local businesses. They will be able to smell perfectly easily whether a proposal for a business rate supplement is a sensible suggestion or not.

[Kevin Hollinrake]

I do not think the hon. Gentleman has addressed my earlier point. My point was simply that he is proposing a significant change to the legislation and he has not said whether he has consulted anybody about it—the Federation of Small Businesses, for example. Has he done that? Does he not think it is right that we have those conversations prior to introducing legislation in this House?

[Mr Thomas]

We have had consultations with a whole series of organisations which wanted reform to the Bill because of the poor way in which it has been drafted and brought forward by the Minister. I encourage the hon. Gentleman to have patience, as I hope to raise the question of double charging for investment under clause 38 stand part. He is not normally excitable, so I encourage him to be patient. I look forward with interest to hearing from the Minister why he thinks we should discriminate against those areas and people of England who do not have a Mayor.

Local Government Finance Bill (Fifth sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 7th February 2017 Public Bill Committees

[Mr Thomas]

I am always up for things that are radical and transformative, but I like to see the detail before I decide whether they are radical or transformative in a positive way. The hon. Member for Thirsk and Malton, of whom I am very fond—I am always keen to promote him to his Whips—made a series of interventions about the case for rural authorities in north Yorkshire. I gently suggest that his contributions were, sadly, slightly less impressive than those of the hon. Member for Waveney. The hon. Member for Thirsk and Malton sought to bash London at every opportunity, which I would gently suggest is par for the course for him.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Will the hon. Gentleman give way?

[Mr Thomas]

I will give way in just a second to the hon. Gentleman. In his contributions to date—he might be about to recover the situation—he failed to mention any assessment of need in London, or indeed in any authority outside the particular ones in north Yorkshire that I suspect he cares about.

[Kevin Hollinrake]

I am grateful for the hon. Gentleman’s kind comments, which of course are reciprocated.

The hon. Gentleman misquoted me. In my remarks to him, I talked about the differential between Harrow and North Yorkshire—it is £80 more spending per person, per year, despite the income and age demographics. He has a younger and richer population in Harrow. I am not saying that those are the only demographics and the only cost drivers that we need to look at, but the key is fairness. Would he support a system that is fairer and that truly reflects the cost drivers in Waveney, North Yorkshire and Harrow, even if that disadvantages his local area?

[Mr Thomas]

Of course I would support a fairer system. I think of the ways in which the system is not fair in relation Harrow council’s finances—£80 million plus of cuts in the last four years. I wonder how that is fair.

The exchange that the hon. Gentleman and I have had about fairness is an entirely reasonable debate. I simply think it should be had on the Floor of the House on an annual basis on the local government finance settlement.

--- Later in debate ---

[Mr Thomas]

I am grateful to you, Mr Gapes, for getting Conservative Members under control again.

I return to the essential point: there was no mandate for what the Minister and the Secretary of State propose. There was no mention of a shift to 100% business rate retention in the 2015 Conservative party manifesto. There has been no Green Paper and no White Paper about the changes. There has, of course, been a great session of the Select Committee on Communities and Local Government, of which the hon. Member for Thirsk and Malton is an excellent member, but the only commitment I could see in the manifesto was to a pilot scheme for allowing councils to keep a higher proportion of business rates in Cambridgeshire, Greater Manchester and Cheshire.

[Kevin Hollinrake]

Is the hon. Gentleman in favour of 100% business rates retention or not?

[Mr Thomas]

The hon. Gentleman is in danger of suffering from the same disease as the hon. Member for Torbay, and of repeating his question. Of course I am in favour of the principle of 100% business rate devolution. Indeed, we had it in our manifesto as part of a much bigger package of devolution than anything envisaged by the Conservative party. Perhaps the hon. Member for Thirsk and Malton, who has a reputation for hard work, would like to dig out a copy of the Labour party manifesto, where he can check the section on local government. I will happily pay for him to have a cup of tea with the hon. Member for Torbay so he can point out to him the passage about the increased spending power that councils would have had if Labour had been in charge.

--- Later in debate ---

[Mr Thomas]

I am struggling. I thought that I had helped the hon. Member for Torbay not to make that mistake. Hearing the Minister make the same mistake as a Back-Bench Member is too much. A £30 billion increase in revenue spending power for councils was the centrepiece of our manifesto for local authorities, together with an English devolution Bill.

[Kevin Hollinrake]

Page 13 of the Conservative party manifesto clearly states that

“we will pilot allowing local councils to retain 100 per cent of growth in business rates”.

Was not the direction of travel clearly expressed in the manifesto?

[Mr Thomas]

“We will pilot” is somewhat different from “we will introduce”. One might have thought that the hon. Gentleman’s party would follow up with a Green Paper and a White Paper. Where is the Green Paper? [Interruption.]

--- Later in debate ---

[Mr Thomas]

I am getting closer, Mr Gapes. I thought the Minister’s intervention did not do him justice. I fight for my local authority and I respect the contribution of the hon. Member for Harrow East, although I try to guide him to make better defences of the local authority. I hope that the Minister listened carefully and will act on what the finance officer from Harrow Council said.

Sadly, one thing we have not touched on thus far is bus services—a small issue in the context of the state of local government finance, but it matters—and there will be even less scope to debate it if our amendments are not accepted. You may not know this, Mr Gapes, as, like me, you are a London Member of Parliament—we are lucky to be north London Members of Parliament in particular—but around the country, local authorities that have direct responsibility for bus services say that those services face substantial cuts. That is a concern. There is obviously scope for that to be debated in part at Department for Transport questions, but given that those services are financed by local government, surely that should be part of the issues relating to local government finance considered by the House regularly.

The Campaign for Better Transport says that reductions in local authority funding have already resulted in thousands of bus services being reduced or cancelled in recent years. According to its research, people in Lincolnshire, Derbyshire, Leicestershire, Somerset, Dorset, West Berkshire, Wiltshire, Oxfordshire, Hertfordshire, North Yorkshire and Lancashire will be among the worst affected by the cuts in funding to local authorities—cuts that they will have to pass on to bus services. Surely that is an issue that Members of Parliament want to debate. Certainly, Opposition Members regularly seek to raise it through Adjournment debates or in questions, but it is surely part of the broader picture of local government finance and should be considered properly.

[Kevin Hollinrake]

The hon. Gentleman said earlier that I was trying to stand up for rural areas as against urban areas, but that is not the case. The biggest disparity is between London and the rest of the country. He talks about transport in London, but we need only walk outside to see buses, trains and trams galore. The top 10 authorities for spending power per head—including Camden, Kensington and Chelsea, Islington, Hackney, Tower Hamlets, Southwark, Hammersmith and Fulham, and Lambeth—all have about £400 more per person per year than North Yorkshire and many other places. The lowest-spending authority in the country is York, an urban area. The disparity is between London’s spending power and that of the rest of the country. That is what needs to be dealt with, and that will also be reflected in our ability to provide decent bus services in rural areas.

[Mr Thomas]

Over the course of our proceedings, I have been gently suggesting to the hon. Gentleman the need for a proper fair funding review—I strongly support that—but he is a little misguided in his assessment of the level of need in London. It is not an issue of rural and urban outside London against London—that would be a huge mistake to make—but an issue of the quantum of local government finance, and spending power being savagely reduced by the party of which he is a member, in the misguided belief that that will somehow lead to a substantial reduction in the national debt. We know how that played out: the previous Chancellor of the Exchequer got sacked.

I therefore gently suggest to the hon. Member for Thirsk and Malton that if he has been unable to support any amendment of mine up to now, and cannot be tempted—although I hope he will be—to put pressure on the Minister to give way on the issue of ongoing levels of parliamentary scrutiny, he might want to consider the matter of when the Bill should come into law. Should it do so when we know the details of the fair funding review and of the regulations, and when the Minister finally gets around to publishing the 400-plus responses to the consultation document? Should the Bill not take effect at that point, instead of in this financial year?

[Kevin Hollinrake]

The hon. Gentleman’s point about the distribution is absolutely right. I support a review of the funding formulae that will be introduced before the Bill takes effect in 2020. His point about quantum was interesting, but to increase quantum he has to do one of two things: take spending power from elsewhere in the economy, from other Departments; or raise taxes. Which one would it be? Will he specify which one of those two things he would do, or which Departments he would remove funding from?

[Mr Thomas]

The hon. Gentleman, in his usually charming way, is tempting me down a path that will get me into a lot of trouble with the shadow Chancellor. [Interruption.] “Be brave!” say Conservative Members, and I am, but nevertheless I will not use the Committee to announce future Labour party policy. It would feel like a missed opportunity if only a few party members were present to hear about the new direction that Labour will take when it returns to government.

Local Government Finance Bill (Sixth sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 7th February 2017 Public Bill Committees

[Mr Thomas]

Thank you, Sir David. Hillingdon has a 50% levy rate at the moment. The worry is that in future, it may not have to pay quite so much back into the national pool for redistribution to other local authorities, such as North Yorkshire. We have heard regular and understandable pleas for additional finance from the hon. Member for Thirsk and Malton. One would have thought that he would want Maidenhead’s council to benefit from a third runway, so that some of its growth in business rates revenue could be redistributed to North Yorkshire.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

rose—

[Mr Thomas]

I give way to the hon. Gentleman, as I have drawn him out on this question.

[Kevin Hollinrake]

It is a pleasure to serve under your chairmanship, Sir David. The hon. Gentleman makes a very good point, but some of that revenue will presumably be redistributed at reset periods, so North Yorkshire would benefit from increased business rates there. The principle behind the measure, and the scrapping of the levy, is to increase the incentive for local authorities to grow their business rates; levies decrease that incentive. Does he welcome the fact that there will be a greater economic imperative without the levies in the system?

[Mr Thomas]

At the heart of the debate is the question of whether there will be quite the economic imperative that the hon. Gentleman and the hon. Member for North Swindon suggest. I hope that there will be such an imperative, but the evidence from the witnesses was not hugely encouraging on that point, as I set out when I referred to the contribution of the chair of the Federation of Small Businesses.

The hon. Member for Thirsk and Malton made a point about resets, but we do not know how often they will take place. I gently suggest to him that it might be better to think about retaining the levy arrangement, so that his authority and mine can benefit from some of that income a little more quickly. Perhaps he does not know that North Yorkshire has a 0% levy, so it is one of the authorities that does not have to contribute to London authorities such as mine, Wolverhampton or anywhere else. I am sure he is pleased to hear that.

[Mr Thomas]

My hon. Friend is right. As he knows, I have expressed concern about the distribution between tiers of authorities and how redistribution mechanisms would work in practice without a levy, but we are none the wiser about redistribution in practice, because the Minister has not been able to tell us about it. Perhaps you, Sir David, can use your influence with him to elicit the summary that has been promised for some time in the future, we know not exactly when. We are told it will be soon-ish, but how long that is, we do not yet know. Perhaps some of the 400-plus responses to the consultation document that the Department produced last year will give us some sense of how the levy will work.

[Kevin Hollinrake]

The hon. Gentleman made a remark about North Yorkshire not contributing to his local authority, but that is quite right, because his local authority already has greater spending power, so why should it? He also made mention of my hon. Friend the Member for North Swindon and me; we are in concert on economic opportunity, but so is the Select Committee on Communities and Local Government, which heard from many witnesses and took much evidence. The Committee concluded that the business rates reforms

“are, nevertheless, transformative and create a real opportunity for local government; in retaining 100 per cent of business rate revenue, councils will have a direct and strong incentive to promote local growth and economic development.”

Does the hon. Gentleman not agree with the Select Committee and its Chair, his colleague the hon. Member for Sheffield South East (Mr Betts)?

[Mr Thomas]

I bow to no one in my admiration of the Chair of the Communities and Local Government Committee. I am glad that the hon. Member for Thirsk and Malton mentioned the Select Committee report, because it said some interesting things about the potential volatility of the business rates income and the need for an effective safety net. One wonders how that will work in practice without the levy arrangement that we are discussing. My hon. Friend the Member for Oldham West and Royton is itching to get into the debate on the safety net, and I will not stand in his way when we come to it, but I hope to catch your eye after he has spoken, Sir David, to explore the concerns of the Select Committee a little more.

To return briefly to the levy, Maidenhead pays 50% of its future business rates growth into the levy, but frankly does not have to do much to benefit from economic growth because of its location. If Maidenhead does not serve as a warning to Conservative Members, perhaps the London Borough of Hillingdon will. It, too, will benefit hugely from the construction of a third runway, and will not have to do much to promote economic growth—it will not need to, because of the strategic decision that we have taken. Hillingdon’s council has a levy rate of 50%.

The hon. Member for Thirsk and Malton has used almost all of his interventions in Committee so far to bash London authorities and demand that spending power be redistributed away from London to North Yorkshire. I do not get the sense that he cares about anybody else’s local authority—not even those of Members on his side. One would have thought that he might therefore be sympathetic to our concern that on the face of it, Hillingdon’s council will no longer have to make a significant contribution to the redistribution to others.

--- Later in debate ---

[Kevin Hollinrake]

The hon. Gentleman says that I do not care about other local authorities, yet earlier I quoted York, which has one of the lowest amounts of spending power per head. Windsor and Maidenhead has the lowest, and Trafford the third lowest. There is also Leicestershire, Staffordshire, Northampton, Kirklees, Swindon, Warrington and Medway. I speak on behalf of all these authorities that have approximately 50% of the spending power of the London councils I mentioned. Does he agree that that cannot be right?

[Mr Thomas]

As you can see, Sir David, the hon. Gentleman is a passionate advocate for redistribution away from London. We have tried to convince him to get underneath the detail of the scale of need in London, but clearly we have been unsuccessful today. A little progress is needed. I have made the point that I wanted to make. I look forward to the Minister’s answer, and the response of my hon. Friend the Member for Oldham West and Royton.

--- Later in debate ---

[Mr Thomas]

In passing, I thank the Minister for his praise for the campaigning efforts of Robert Evans, and his support for Mr Evans’s re-election campaign.

I do not intend to encourage the Committee to object to the clause standing part of the Bill, but I want to mention some of the unintended consequences of the former Chancellor’s suggestion that in 2021, the retail prices index be replaced by the consumer prices index when it comes to uprating business rates. As we have said in earlier debates, that will potentially cost local councils some £370 million in 2020-21 alone. Ministers have given no indication of the cost in future years, but those outside Whitehall and this place who know their local authority finances have calculated that over 10 years, as a result of the decision, there could be a £3.3 billion windfall for the business community and a £3.3 billion loss to the people of England who want good services to be provided.

[Kevin Hollinrake]

I refer the Committee to my entry in the Register of Members’ Financial Interests. Do not the people of England rely on the success of businesses to pay taxes and to fund local and central Government? Anything that can reduce the burden on business should be welcomed.

[Mr Thomas]

I am all for reducing the burden on business, but one does like to think that the benefit will be used for investment in future economic growth, not used to pay the rest of the tax bill or squirrelled away through some tax avoidance scheme. My purpose in speaking in the clause 5 stand part debate is to encourage the hon. Gentleman, among others, to consider the perhaps unintended consequence of the former Chancellor’s decision, which is the impact it would have on services for North Yorkshire residents and—since I appreciate that he cares a little for those in other areas—on public services throughout England.

As I said, £3.3 billion could be lost over 10 years. The hon. Members for Thirsk and Malton, and for Northampton South, will have paid much attention to the evidence that Guy Ware, director of finance at London Councils, gave to the Communities and Local Government Committee. He suggested that over 20 years, the cumulative loss to local government finance—in other words, the cumulative gain to businesses that pay business rates—would be £78 billion. The Library suggests a degree of caution about using such figures so far in advance, but the point is that while businesses will benefit, which is clearly a good thing, local authority finances will take a further hit. The effect of that on the provision of public services in Harrow, North Yorkshire, Oldham or Nuneaton is surely a concern that this great House should reflect on a little further.

I asked the Local Government Association what local authority services £370 million might buy. The association suggested that I look at the universal infant free schools meals grant to local authorities, which is some £334 million. Councils are planning to spend some £550 million on Sure Start children’s centres, and they are spending £376 million on mental health support for over-65s. That gives some indication of the public services funding that may be lost as a result of what I suspect are the unintended, un-thought-through consequences of the former Chancellor’s decision. I say gently that it makes even more of a case for some sort of regular opportunity to scrutinise local government finance on the Floor of the House, so that measures that may be good for one part of the country do not have serious unintended consequences for other parts. It is in that spirit that I took this opportunity to raise concerns about clause 5.

Local Government Finance Bill (Fourth sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Thursday 2nd February 2017 Public Bill Committees

[Mr Thomas]

I take my hon. Friend’s analogy—50% versus 100% is interesting. Given that 50% business rates devolution was championed as an economic incentive in promoting growth, and the business community does not think it has worked, it is not clear what evidence there is to justify the so-called economic incentives still being in place and arguably being greater when there is 100% business rates devolution.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Is the hon. Gentleman supportive of the principles of business rates retention or not? His colleague, the hon. Member for Sheffield South East (Mr Betts), chairs the Select Committee on Communities and Local Government, where we undertook a detailed inquiry looking at this policy and he stated that

“this is an important policy and we want it to work.”

Does the hon. Member for Harrow West not agree with his own colleague?

[Mr Thomas]

The hon. Gentleman was unfortunately not here at 11.30 am when I made clear our support for the principle of 100% business rates retention. Clearly, we want the system to work. However, I suggest to him that the purpose of this Committee is surely to probe what evidence there is for the case that the Government are making. He is slightly more considered than the usual Conservative MP one gets to sit opposite on these Committees, so I ask him where the evidence is, for instance in an impact assessment, to suggest that there will be a significant increase in economic growth as a result of the Bill? If the 50% business rates devolution did not offer that evidence, as one would have expected it might, where is the evidence that 100% business rates devolution will produce that?

Let me make it clear: I do support the principle of 100% business rates devolution, but the job of the Opposition is to expose where there is a lack of evidence, to challenge Ministers to provide that evidence and to ask for the detail of how the system is going to work. In the absence of that, one is entitled to have a little scepticism.

Local Government Finance Bill (Third sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Thursday 2nd February 2017 Public Bill Committees

[Mr Thomas]

A long and fascinating speech—I think you missed out some words, Mr Gapes. Returning to Mr Hodge, 11 Conservative MPs represent Surrey, including the Chancellor, the Health Secretary, the Transport Secretary and the former Justice Secretary, the right hon. Member for Surrey Heath (Michael Gove).

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Will the hon. Gentleman give way?

[Mr Thomas]

I have missed the hon. Gentleman, so I will of course give way.

[Kevin Hollinrake]

The hon. Gentleman has expressed valid concerns about long-term funding needs, particularly of adult social care. Do such concerns not underpin the need for a fair funding review? How can it be right that Harrow’s overall spending power per person is £80 more than that of North Yorkshire when its population is, by and large, wealthier and younger?

[Mr Thomas]

Perhaps I foresaw the hon. Gentleman’s first intervention in this Committee. I took the liberty of quoting him earlier and paid tribute—sort of—to him for raising the issue of redistribution, which is central to the debate on this group of amendments. The one thing missing from his intervention today and his interventions on Second Reading was any recognition of needs; those in North Yorkshire are clearly different from those in Harrow, but perhaps that is a debate to be had elsewhere.

Coming back to Surrey County Council, Mr Hodge explained why he was moving to a referendum. He believes that he has a duty to local people. He said:

“We cut £450m already”

from the county council budget, and

“squeezed every efficiency and we can do no more. I am sick and tired of politicians not telling the truth. Surrey people have the right to know and I’m not going to lie.”

He says he will spell out what the options are ahead of the referendum and, if he does not get permission from Surrey residents for a council tax rise, what that extra £60 million forgone will mean. He says he will have to take an axe to services unless people vote for the 15% rise.

Mr Hodge is not the sort to raise the alarm unnecessarily. He has seen active service, having been in the Army for a long time. One respects his contribution, both before he became leader of Surrey and now. He has taken the arguably sensible measure of getting in the Chartered Institute of Public Finance and Accountancy to verify the figures. It stated:

“We confirm that due to severe problems in social care, Surrey’s figures are exactly as their finance officers say.”

Social care costs are rising by £24 million year.

One MP in Surrey will support the 15% rise, but not all Surrey MPs share that one MP’s view. It would be good to hear the Minister’s advice to Surrey County Council and the people of Surrey on whether to vote for the increase. The fact that the council’s leader, who has considerable experience and is from the Government’s party, is underlining the scale of the social care crisis ought to make the Committee think very carefully about the case for amendment 2 and for supporting using some business rates income exclusively for social care as part of the long-term solution to social care funding.

Sadly, there are other examples that highlight the scale of the problem. The hon. Member for Thurrock was not willing to allow the right hon. Member for Wokingham (John Redwood) to sit on this Committee, which is a tragedy because he might have been able to comment on the terrible case in January in which an elderly woman with communication difficulties was left severely malnourished in a care home that Wokingham Borough Council had put her in. A local charity, Independent Age, which commented on the case, recognised that the council faced significant problems with social care because of a lack of money and staff. That further example underlines the case for amendment 2. I hope that the Committee accepts the amendment.

Ordered, That the debate be now adjourned.—(Jackie Doyle-Price.)

Local Government Finance Bill (First sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 31st January 2017 Public Bill Committees

[Mr Thomas]

Q To follow on from that, there are clearly some in Whitehall who think that social care is now being properly funded and there is a package in place that will meet all the social care needs that have been identified. How would your two organisations respond to the idea that there is now a settled funding stream in place?

Councillor Nick Forbes: I do not know a single person in DCLG and I have not spoken to a single person in Whitehall who thinks that what we have for social care is anything other than a short-term temporary fix, which gets us through a few difficult months over this particular winter. There is clear acknowledgement—even the Secretary of State acknowledged this in the settlement—that there needs to be a longer-term solution for funding for social care. The LGA’s assessment is that there is a £2.6 billion shortfall in funding: £1.3 billion is required to stabilise the current system as it is at the moment and a further £1.3 billion is required by the end of the Parliament to deal with the cost pressures and demographic pressures that the system faces. It is very clear from the whole of local government—this is a cross-party view from within the LGA—that funding the social care problem is our top priority. So far, what we have had is something that gets us a few months further ahead but does not solve the problem into the long term.

Councillor Jon Collins: From the Core Cities’ point of view, every core city would take the view that funding for social care is very much in crisis and that the current arrangements just scratch the surface. If I may, I will just give you Nottingham as an example. Out of a net budget of about £260-odd million, something like £90 million is adult care. We have £11.2 million-worth of cost pressures, and that is wages, demography, additional inflation and charges from providers. The potential increase to council tax of 3% and the extra care funding we are to receive is about £5.8 million. So £5.6 million is unfunded pressures, which we will have to accommodate by making savings elsewhere in our budget, at a time when we are also seeing our revenue support grant going down from £56 million to £44 million. As you can see, the overall picture for an authority such as Nottingham—we are very typical of the core cities—is that this year’s approach helps a little bit, but that there is still massive pressure that is unfunded, and we expect the same next year. That is with an assumption that we will be increasing council tax by 5% overall.

[Kevin Hollinrake]

Q You have both mentioned that distribution, and assessment of need, are the keys to this. Your spending power for both your authorities is around 30% lower than some of the highest spending authorities in London, for example. Is the current system anywhere near fair?

Councillor Jon Collins: In a word, no. Spending power is an interesting way of looking at these things, but our spending power now, as a core city with major challenges in terms of deprivation, is lower than that of Rutland, which is another local authority in the east Midlands and largely covers a lake, a few sheep and a few large houses. It is a very unfair way of making judgments about relative impact of spending. Even for the next financial year, we are seeing a reduction in spending power of 1.5%, and Rutland is seeing a reduction of 0.6%. So there are major disparities—that is, if one assumes that spending power is a fair reflection of the spending needs of local authorities.

Four years ago, our revenue support grant was £126 million; next year it will be £44 million. That is the scale of funding reduction we are being faced with. We have had to make significant reductions in services in some areas. We have done other things, as most core cities have, to boost income, reconfigure services and work closely with others to make sure that we are commissioning in the most cost-effective and efficient way, which is a positive. Fundamentally, however, there has been a significant and dramatic effect on services.

Councillor Nick Forbes: One of the challenges is the currency that you use to describe the nature of the problem. It is easy to say that we have an unfair system if you look simply at a per capita rating—and that is one of the ways in which people compare different types of authorities. Spending power is another currency, and so is needs requirement. What there is not, across the system, is a settled view about which of those is the most appropriate to use. Inevitably, that gets you into the realm of which one is better for which political outcome. That is one of the reasons why there is concern about the way in which the business rates system works at the moment.

--- Later in debate ---

[Kevin Hollinrake]

You have also got nine of the 10 authorities with the highest spending power in the country.

[Mr Thomas]

indicated dissent.

[Kevin Hollinrake]

Q This is evidence. And nine of the 10 lowest council tax charges in the country. I am not saying every local council in London—

Guy Ware: We also have nine of the 10 areas with the greatest multiple deprivation. The point that we need to get to is that there is a history behind that, as one of the previous questions suggested. The differences between neighbouring London boroughs can be as great in terms of spending power and tax as between some London boroughs and some authorities in other areas of the country.

One of the previous questions this morning was about the Independent Commission on Local Government Finance. One of the commission’s key recommendations was that the variations between authorities were at least as great within regions as they were between regions. As a result, it concluded and recommended that it would be possible and sensible to devise an approach that looked at regional funding needs, which would allow authorities within a region to deal with the distribution within that region.

Local Government Finance Bill (Second sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 31st January 2017 Public Bill Committees

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Q To touch on distribution, which has been referred to a couple of times, the key now is how this pot of extra money is distributed. There seem to be some real disparities in the system at the moment; unfairnesses, I would call them. I will give a few examples at random. Harrow, for example, gets £80 more per head in spending power than North Yorkshire, despite the fact that Harrow has a wealthier, younger population. There does not seem to be any correlation between the spending power of local authorities and the need in those local authority areas.

[Mr Thomas]

Perhaps it is the quality of representation, Sir David.

[Kevin Hollinrake]

I would go for a different explanation, but what is your feeling?

Sean Nolan: Underneath the detail is a commitment by the Government to undertake what they are calling a fair funding review. That is implicit in this kind of development. In fact, interestingly, we talk about 100% retention from day one, but actually it will be preceded on day zero, so to speak—the day before—by a redistribution, in theory, of resources around the country and between councils, because the Government have committed to doing a fair funding review of need. In a sense, I cannot comment particularly on the rights and wrongs of an historical position; all I can say is that where we are now is a reflection of judgments made in the past about the right kind of formula and what is meant by need. It has been frozen for a number of years, but that is its history.

The Government—and, I suppose, Parliament—have an opportunity to eventually look at what will be, in their timetable, a complete review of needs. You have picked up on a crucial point, if I may say so, Mr Hollinrake, because that will be happening, effectively, the day before a new scheme and it will move money around. Their argument, and it is one we would clearly like to support, although the devil will be in the detail, will be that that will set a fairer base. In my experience, fairness is in the eye of the beholder, but that will be their argument.

--- Later in debate ---

[Kevin Hollinrake]

Q Mr Lowman, how comfortable are your members with things like business rate supplements and infrastructure supplements?

James Lowman: There is concern. Half our members’ trade comes from within a quarter of a mile of their store—they are the local shop. Our reach into communities is pretty much unparalleled in any business sector. One thing that concerns them from that perspective is that large infrastructure projects may not be that relevant to them. New motorway links, new transport or major new developments will be less relevant to their particular trading position.

They are concerned about mechanisms for increasing their overall business rates bill. They broadly support the business improvement district model and the opportunity to have a very specific programme and proposal on which they can vote, and which needs an endorsement of business rates value from the majority of premises. That seems like a good double lock on ensuring that things that come through in business improvement districts are relevant to them.

We would encourage a similar sort of level of consultation without being very specific about what is being proposed. We are concerned about consultation. It is perhaps damning our own sector, but it is not routinely engaged with local authorities, local chambers of commerce or other local bodies. Perhaps they should be, but it is a fact that they generally are not engaged day to day. We are concerned about reaching those businesses in order to consult them. The relevance, the location and the mechanism of consultation is a concern, but it has been taken on in some of the checks and balances in the Bill.

[Mr Thomas]

Q Let us imagine that you are the ruthless, hard-nosed treasurer of a council that sees this Bill coming into force. Presumably, you are going to want to try to negotiate a very low top-up, assuming that you are a reasonably well-off area in terms of finance and land. Presumably, you are not going to look at small businesses. You are going to rush, as much as you can, to encourage the Amazon-style warehouse or JD Sports kind of warehouse. Surely that is the only incentive that is wise in the Bill in terms of business rates growth. You might actually put to one side the engine of future economies or businesses because they are not going to bring you any reward.

James Lowman: Unfortunately, Amazon warehouses do not pay that much in business rates, which is one of the challenges here. This is why we need a long reset period. There is a benefit in the intention of the Bill, and we fully support it. The benefit is that, if a council can make itself a more attractive area for businesses to invest in and to set up there and to stay in business when they are already there, they will benefit from that overall. We do support that as a principle, but as I said in answer to an earlier question there is a danger that they will be tempted by and attracted to big hits of business rates coming in with big developments. So that is a very active concern.

Professor Tony Travers: Small business has lobbied for a number of years for relief, which hundreds of thousands now have. If you move from a system where a substantial number of small businesses receive a relief, to a system where local authorities are given an incentive to build up the tax base, you must accidentally create an incentive to give planning permissions for those that are more likely to pay the business rate. It is not intended to work like that, but it must inevitably produce an incentive to give planning permission for businesses that do pay the rate rather than those that get exemption. Of course, the reliefs are partly, I suspect, built in to the base on which all of this starts, but I doubt over time that that would be uprated in line with overall growth. There is inevitably an incentive—not intended—for local authorities to give planning permissions for and to build up businesses that pay business rates compared with those that get relief, I would have thought.

--- Later in debate ---

[Kevin Hollinrake]

Q Therefore, is it not all the more important that the future formula is based on those cost drivers? There will be some new cost drivers as a result of the additional responsibilities at that point.

Professor Tony Travers: It is true. Public health is one of the grants that is up there as a possible new responsibility. There is currently a ring-fenced grant, but it could in future be funded purely by local government. Clearly, the needs formula would need to reflect that if that were distributed differently from if it were all transport, further education and skills, which might be thought to be more linked, by the way, to building the local economy. That is a separate issue. So there is no question but that the responsibilities that are handed to local government as part of the reform will affect the need for the needs distribution arrangements; they will have to reflect them.

[Mr Thomas]

Q In the debate about how to even out changes in the tax base, let us take the example of Heathrow. The third runway is coming. One would have thought that that would inevitably make the area around Heathrow attractive to a number of businesses. Councils such as Maidenhead, perhaps, and Hillingdon will be hoping that their treasuries will benefit from substantial business rate income down the line. How do you think that sort of major structural change at local level should be dealt with under the system?

Professor Tony Travers: I will offer a personal view. I was always surprised that the potential impact of the decision about where the additional runway in the south-east was to be located did not take into account, as far as I could see, the knock-on consequences for the local authorities in the area, given the business rate retention scheme that we are discussing. Any additional runway capacity, be it in the south-east, Manchester, the west Midlands or wherever, must have significant knock-on impacts. You are right.

In principle, when properties are revalued that uplift will be captured. Then the issue, which has always been an element of challenge to even the 50% business rate retention, is whether councils keep only the uplift on new business, or the uplift for the existing properties paying higher rates. As the Bill goes through Parliament, how much of the uplift as a result of a major national change of this kind is retained locally, and how much goes back to the Exchequer through its tax mechanisms, is a very interesting question.

Housing and Planning Bill (Tenth sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 1st December 2015 Public Bill Committees

[Mr Thomas]

The hon. Gentleman begins to make my point for me. If he observes a little patience but continues to listen with the enthusiasm he has shown thus far, I will come to exactly that point.

I should allude to some of the difficulty that the Opposition, the hon. Gentleman and some of his friends, and those listening and watching our proceedings, are facing in being able to scrutinise the terms of right to buy. In response to the points of order I raised last week about the lack of information about right to buy, the Minister referred us to the offer details on the National Housing Federation website. When I had the chance to read that information, it made clear that the Government and the National Housing Federation and its members would work together on the implementation of an agreement and an operational document would be published. To date I can find no evidence of that operational document having been published. I look forward to the Minister giving clarity on that. It is particularly important in the context of the pilot schemes that have been launched. We simply do not know the terms on which those housing associations are piloting the offer of the right to buy.

In the context of the amendment, we do not know whether sheltered and specialist housing are excluded, or whether in the context of amendment 146 other forms of housing will be excluded in line with the original offer document. We do not know how long the pilots will run before other housing associations are required to join in. We do not know how the deal will be financed, given that it will take some time for vacant high-value council homes to be sold off to provide the finance to compensate housing associations.

As I indicated, we do not know whether the five pilots are operating exactly in line with the headlines that were agreed between the National Housing Federation and the Government. We do not know whether the five housing associations will be committing to replace like for like rented homes for sale with other homes for rent.

In particular, in the context of my amendment, we do not know whether the five housing associations will specifically replace any sheltered or specialist housing that is sold in a like-for-like way. In the National Housing Federation offer, which was published on its website, housing associations expected the Government to work with them to put in place measures to limit fraudulent activity. That is surely particularly important in the context of vulnerable adults who, in some cases, will be in sheltered or specialist housing provided by housing associations.

It would have been helpful for the Minister to have published the operational document to which he, presumably, and the National Housing Federation remain committed. Presumably, within that document, there would have been information on how action to stop such fraudulent activity might have taken place. One of the concerns raised in evidence to the Communities and Local Government Committee by one of the housing associations was the worry that family members or friends might try to persuade someone to buy their sheltered housing property when, in fact, they may not really want to do that. It is presumably that type of activity that the Government might want to stop. It would have been helpful to have the detail of the types of measures that they were going to put in place to stop that.

The offer document also anticipates the Government putting in place arrangements to manage the financial costs of the right to buy, to ensure that the cost of sales does not exceed the value of the receipts received, which could include an annual cap on the cost of right-to-buy discounts. Does the Minister remain committed to that in general, as part of the offer and in the context of sheltered and specialised housing? Will it apply in the context of the five pilot housing associations? It would be helpful to hear a little more detail.

The National Housing Federation offer specifically suggested seven categories where housing associations might exercise discretion over sales. Again, it would be helpful to hear from the Minister on whether, as part of the deal that he has agreed with the housing associations that are piloting this deal—the London & Quadrant Housing Trust, or L&Q, Riverside, Saffron, Sovereign and Thames Valley—the seven categories will remain the same, not least because, in the context of the amendment, one of the specific categories mentioned includes “supported housing”, as defined by part 5 of one of the previous Housing Acts. Other categories that are potentially directly related to the discussion on amendments 89 and 146 relate to properties in rural locations being excluded, properties where there are restricted covenants being excluded, and properties held in a community land trust being excluded. Again, it would be helpful to hear from the Minister whether the five piloting housing associations will continue to offer exclusions in those areas.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

No doubt the hon. Gentleman has read the briefing from the National Housing Federation, which said, in answer to the question of how certain types of affordable home will be protected, that the agreement allows housing associations to protect the affordable homes they own that would be difficult to replace, for example, specialist housing or homes in rural areas. Does that not satisfy his concerns?

[Mr Thomas]

Not completely, I have to say. Although it was helpful to receive the NHF document, it would have been helpful to have received the full operational document from the Government. Why does it not satisfy my concerns? I give the example of the Greenoak Housing Association, which operates in Woking. Its chief executive gave evidence to the Communities and Local Government Committee on 4 November and noted the fact that Greenoak is a particular specialist in the supply of sheltered housing. She said:

“Around one-third of our housing is sheltered with support. We could obviously exclude them ourselves, but the difficulty would be in re-providing.”

The hon. Gentleman will be aware that, as part of the deal with the Government, the National Housing Federation committed that, where a property was excluded from a sale but a tenant wanted to buy it, housing associations would have to offer an alternative property for sale. The chief executive of Greenoak said:

“We do not see why we should be giving a portable discount for people who are in the most suitable housing for them at the current time with the support that they need.”

It would be helpful to hear from the Minister what future the Government see for housing associations that are specialists in sheltered, supported and other specialist housing. How will those housing associations deal with the issue of portable discounts and the potential requirement they face under the deal to offer another property for sale? There is a risk of that making those housing associations not financially sustainable, which I am sure the hon. Gentleman, and indeed all hon. Members, would not want to happen.

What happens when all properties owned by a housing association in one area are specialist or sheltered housing? How would the right to buy be exercised in that situation? One could understand a tenant approaching the housing association and saying, “I want to stay within Harrow because it is so well represented in Parliament,” and no doubt for other reasons. The housing association will want to do the right thing by its tenant, but it is only offering sheltered housing in that area and wants to maintain that stock. How would that situation be dealt with by the Government and housing associations?

Age UK, in its written evidence, specifically laments the failure to build more sheltered and retirement housing and to offer older people more housing options in later life. It argues:

“Based on demographic trends, specialist housing will need to increase by between 35 per cent and 75 per cent just to keep pace with demand.”

Age UK is concerned about the decline in the availability of sheltered and other forms of specialist housing for older people on low incomes.

Although I welcome the extra capital funding announced as part of the spending review for specialist housing, which I assume includes sheltered housing, the Bill must be clear about the need to exclude sheltered and other specialist housing from the right to buy in order to ensure there is not inadvertently a further decline in the provision of sheltered housing as a result of the Bill.

I support amendment 146, tabled by my hon. Friends, not least because there is increasing concern in Harrow and, indeed, other parts of London about the provision of housing that key workers are able to afford. Of course, those key workers will no doubt have the aspiration I alluded to earlier to buy a home in due course, but if that is some way off, their immediate priority will be to find a property that is affordable to rent. One thinks of careworkers, of nurses, of teaching assistants, of the cleaner for the Minister’s office and of policemen, on occasion. One wants surely to ensure that there continues to be a reasonable supply of affordable accommodation within reasonable distance of those people’s place of work.

I welcome also the National Housing Federation decision to insist that co-op housing is not included in any right to buy, but there should be additional protection on the face of the Bill. Indeed, the Housing Act 1985 approached the issue of exclusions from the right to buy by putting those exclusions on the face of the Bill. Schedule 5 to that Act lists a series of exceptions to right to buy, including—this is a particular interest of mine—

“if the landlord is a co-operative housing association.”

The amendment would replicate that provision. Surely it would be sensible to put that on the face of the Bill. In that spirit, I look forward to the Minister’s reply to the various questions I have asked and hope that the hon. Member for South Norfolk is convinced of the sensibleness of my amendment.

--- Later in debate ---

[Kevin Hollinrake]

There is no doubt that, in my constituency alone, we have seen a 100% increase in the amount of building in 2015 versus 2014. If the hon. Gentleman looks at his figures, I am sure he will see a similar increase in his constituency. Has he looked at his figures? There is no doubt that the data on the direction of travel in my constituency and many others like it are very clear—there is a 56% increase. Planning consents are increasing, too, but there is more to be done. The Bill is about releasing more land, particularly brownfield land, and expediting the whole planning process to ensure that local authorities properly staff their planning departments. The Bill allows planning in principle, giving developers more certainty about the land they are acquiring so that they can build properties on that land.

The other key thing that we need to address in the housing market is affordability, and of course those challenges are about lack of supply, which we also hope to address with some of the measures in the Bill. Owner-occupation has fallen in recent years, largely due to the recession, and it is something that we desperately want to address. I was lucky enough to buy a home in my early 20s, and I imagine that most people in this room own their own home. Why should we lock people out of that opportunity to own their own home? The Bill contains provisions on starter homes and, as in this clause, on voluntary agreement on right to buy. It is absolutely right to use our public assets more efficiently and effectively, and to release them to allow more building. Opposition Members have asked several times whether the affected homes will be replaced, and time and again we have seen evidence showing that the answer is yes.

[Mr Thomas]

The hon. Gentleman needs to look more widely for his figures on the question of like-for-like replacement. Shelter has made it clear that only one in nine homes sold since 2012 under the refreshed right to buy has been replaced.

[Kevin Hollinrake]

The hon. Gentleman will be aware that Shelter is not a housing association or a housing provider. I am not sure what Shelter is most of the time, but several housing associations gave evidence to our Committee. I am not sure whether he was in attendance to hear their evidence, but when my hon. Friend the Member for Croydon South asked whether the measures would result in increased housing provision, they all said that it would. The measures in the Bill will clearly increase supply and will increase the number of affordable homes to buy.

The National Housing Federation told us that the agreement allows housing associations to protect affordable homes, specialist homes and rural homes. Again, that is the question raised by the amendment. Many of the housing associations I have met outside the Committee have said that they will be selling more homes and building more homes as a result of these provisions. Riverside Housing expects a fourfold increase in the number of homes that it will sell as a result of the extension of right to buy. I absolutely support the provisions of the Bill and the clauses that the amendments seek to change.

Housing and Planning Bill (Second sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 10th November 2015 Public Bill Committees

[Kevin Hollinrake]

Q 216 What further provisions, on top of this, would you like to see in terms of control over the quality of both lettings agents and landlords?

David Cox: This comes back to what we put in our manifesto earlier in the year for the general election. We argued that this Government should take a two-pronged attack. First, we would like to see much greater regulation and much more appropriate regulation of the lettings and management industry, something akin to the London Mayor’s London rental standard. Boris has created an appropriate model of regulation of the sector, which utilises the existing skills and infrastructure set up by the professional bodies and therefore will not cost the public purse huge sums of money to create a regulator. In fact, the London rental standard is very similar to the way that the Bar is regulated and has been regulated for many hundreds of years.

We would argue that that is an appropriate form of regulation going forward, and would very strongly urge that that sort of regulation goes into the sector, particularly around qualifications for agents and client money protection. If the Committee takes nothing further from this, I would strongly advocate—I think everyone would—for all letting agents to have client money protection. We hear far too often of agents running away with millions of pounds of other people’s money. Client money protection would offer landlords and tenants the ability to get their money back.

The other side is enforcement, which is very much contained within the Bill. We very much welcome the requirements of the Bill. Enforcement has been derisory over the past few years. The number of prosecutions is low and the actual awards made are awful and effectively nothing more than a cost of doing business for a lot of these criminal agents.

We want to see local authorities being adequately resourced. At this time, that money cannot come from the central Government fund, which is why I agree entirely with Carolyn that local authorities need to be able to keep the fines, rather than them going back to the Consolidated Fund. Local authorities, particularly trading standards and environmental health, are departments that are revenue drains on local authority resources. If they get to keep the fines and the fines are ring-fenced for further housing enforcement activity, that will start making the environmental health and trading standards departments revenue generators for local authorities, instead of revenue drains.

Just to give you one example, if I may, one of my members in the east of England went down their high street when the Consumer Rights Act 2015 came into force with the fees elements. Of 23 agents, 19 were not displaying the necessary fees. At a £5,000 fixed penalty notice, that is £195,000 in on-the-spot fines that could be levied with very little work by a trading standards officer. If they had not got the fees on their website, which they probably had not, that was another £195,000. If local authorities were enforcing that, they could make hundreds of thousands of pounds for their department and start ridding the industry of the people we do not want in it.

[Mr Thomas]

Q 217 I draw the Committee’s attention to my declaration in the Register of Members’ Financial Interests. I want to pick up on the question that Mr Hollinrake was asking about client money protection. Mr Cox, can you flesh out the detail and the type of amendment that you would want to see that would offer that? Similarly, Mr Cox and Ms Uphill, do you agree with Mr Smith on the potential benefit of three-year tenancies and on a provision for that being included within the Bill?

David Cox: If I can deal with the client money protection issue first, client money protection is at the moment primarily provided by the professional bodies. All our licensed ARLA members must have client money protection, so that in the event that any one of them goes bust or misappropriates the funds—it has happened 12 times in our 34 years—we will cover the moneys up to certain caps.

There are providers out there that offer client money protection for agencies through the open market, but client money protection means two things. First, it is an insurance premium, so that in the event of an agency going bust or misappropriating funds, clients—both landlords and tenants—get their money back. Secondly, and more importantly for us, it means that agencies have to have their client accounts audited, so that you know whether something is going wrong. We audit every single one of our member firms’ client accounts, and we require that in order for them to join the professional body.

In terms of an amendment, I am afraid I do not have the specific wording here today, but I can provide the Committee with a set of words. We provided a set of words for the Consumer Rights Bill last year, and that was supported by more than 20 organisations, including landlord associations, letting bodies, consumer groups and Shelter, Generation Rent and Crisis. It is an issue that has unanimous support among everyone involved in the housing sector. The Consumer Rights Bill started moving us in the right direction, with firms having to display whether they have client money protection, but we estimate that on average on any given day—my members alone account for about 60% of the market—firms will hold just under £3 billion of other people’s money. That is protected for our members, but what about the other 40% that is not protected?

On the three-year tenancy question, three-year tenancies can work. I do not think they should be mandated because there are a lot of situations where people do not want a three-year tenancy. In my previous answer I talked about somebody who may be coming to London or one of the other big cities on a short-term contract. The other prime example is a student. When they have been in halls for one year and have only two years left of their undergraduate course, do they want to sign a three-year tenancy when they do not know what they will be doing at the end of their third year? So we would suggest that the current tenancy regime works.

According to our latest survey of our members, the average tenancy is now 20 months, and we have to remember that, according to the Government’s statistics—I think it was the last survey of English housing—well over 90% of tenancies actually end at the request of the tenant, not the landlord, so removing that element of flexibility could do more to harm those that probably want it than actually help.

Carolyn Uphill: As the clients, when we are talking about client money protection by our landlord members, we would of course support client money protection because it is only right that the money should be ring-fenced within agencies. I am sure David will supply you with a suitable form of words.

As for three-year tenancies, the English housing survey of 2013-14 evidenced that the average tenancy was three and a half years, so tenancies are not as short as some people imagine. Many, many landlords are more than happy for tenants to either be given as long a tenancy as the mortgage provider allows or roll on to a longer tenancy, because what landlords want is good long-term reliable tenants without the costs associated with churn. But if that were to be imposed as a minimum, it would seriously damage the availability of accommodation for those who need it on a much more flexible basis.

David mentioned students. I am a student landlord. It would tie me in knots when my students decide to stay on in Manchester as young professionals and say, “Can we stay on for a year because we don’t know where our career is taking us?” so I end up with a mixed house. Any imposition of a period beyond the 12 months that, in that particular case, suits the academic year would cause me as a landlord to consider, “Can I stay in this business?” There are lots of other landlords who are letting because they are away for 12 months and various other factors. There really should be flexibility in the market. There are tenants who want flexibility and there are plenty of landlords willing and happy to give longer tenancies to those who want them.

So we support the principle of longer-term tenancies being available if the mortgage provisions can stop that being constrained, but not as an imposed three-year or any other fixed minimum.

David Smith: I was not in any way suggesting that three-year tenancies should be mandated. All I am talking about doing is removing barriers. I should also say that the statistics are very difficult to interpret, because longer tenancies are more common outside London and the south-east. As soon as you drive into London and the south-east, it is not so much that tenants do not stay for two or three years, but they are forced to sign a series of 12-month tenancies. There are a range of reasons for that. At the risk of incurring David’s wrath, I will point out that one of the reasons for that in London is that letting agents encourage a series of 12-month tenancies to secure their fee structure. That also, in our experience, is one of the things that most actively drives rent increases, particularly in the capital, and we feel that if tenants were able to sign two-year tenancies, and those barriers to two-year tenancies were removed at the front end, the pressure to drive that rent up during the course of the tenancy on each renewal would be reduced.

Housing and Planning Bill (First sitting)

Debate between Gareth Thomas and Kevin Hollinrake

Tuesday 10th November 2015 Public Bill Committees

[Mr Thomas]

Q 79 Do you think that the rest of the Bill will help to increase the supply of co-operative housing, or will it just leave it as a tiny fraction of the housing stock?

David Orr: I think it is likely to be relatively marginal.

[Kevin Hollinrake]

Q 80 Ms Butters, I think you referred to the provisions under clause 74 on high-income social tenants as a blunt instrument, yet you conceded that there is provision to charge a proportion of market rent—I think you made some cursory reference to the taper. Is that not proof that the clause is not a blunt instrument?

Sinéad Butters: For us it is about the freedom and flexibility to set our own rents—decisions for our local areas, made by our boards, working with our communities and our local authority partners. I can understand that the taper has been set to mitigate some of the negative impact of applying that blunt instrument, in terms of an immediate move to market rents from social or affordable rents; however, that would not be my answer. My recommendation would be locally set rents, determined by local areas, with boards and local authority partners. We would still see the potential for those choices about higher-income tenants, but they would be based on real evidence and real income data and analysis, not on a judgment about what level is set nationally.