Local Government Finance Bill (Fifth sitting)
Debate between Gareth Thomas and Peter Aldous(7 years, 9 months ago)
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Mr Thomas
Of course it needs to go hand in hand with the needs assessment. Not only that, it needs to go hand in hand with the fair funding review. It would be lovely to know what the needs assessment will be for each council and what the fair funding review will mean for each council, but the brutal truth is that we do not know. I suggest the hon. Gentleman looks at one of the last amendments on the amendment paper to be considered on Tuesday 21 February, which deals with commencement of the Bill. We should wait for the full picture before we allow the Bill to come into force.
We do not know what that needs assessment will be or what that fair funding review will look like for Waveney. We would know more if the Minister and his officials had got around to publishing the 400-plus responses to last year’s consultation document, which may include a contribution from Waveney District Council. However, he has not published the responses, so we do not know what the council thinks of it. All we know from the papers we have seen from Waveney District Council is that it is extremely concerned about the financial position it faces. In its report on the budget and council tax for 2016-17 on 24 February 2016—it was looking ahead—it said there is
“potential to create an extremely serious financial position for the Council, with genuine issues regarding the Council’s financial viability and ability to set a balanced budget”.
The council is worried about its very serious financial position, its financial viability and its ability to set a balanced budget as early as 2018-19. It said that reductions to revenue support grant
“are now much larger and faster than previously forecast”.
Revealingly, it added that
“the Council is not well placed to generate additional localised funding from council tax and business rates–there is very limited potential for growth in the medium term to offset these huge reductions”
in revenue support grant and new homes bonus.
In the new Jerusalem of the hon. Member for North Swindon, everything will be all right in his constituency, but we know from those at the sharp end in Waveney that the situation will be much tougher. The hon. Member for Waveney does a very good job fighting for his constituents—not that a Labour Member of Parliament would not do it ever better, but in the meantime he does a good job. I gently suggest that he might relish the ongoing opportunity to question Ministers on the Floor of the House, either on the fact that a local government finance settlement and report is still to be approved by the House of Commons, or that a principles of allocation statement—the device that Ministers want in the new world—is yet to be approved by the House. He can challenge the Minister or the Secretary of State to think about the problem facing his constituents.
Local Government Finance Bill (Third sitting)
Debate between Gareth Thomas and Peter Aldous(7 years, 9 months ago)
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Peter Aldous (Waveney) (Con)
I will just comment on what the hon. Member for Wolverhampton South West has said. The process he talked about has been going on for centuries—
Peter Aldous
I thank the hon. Gentleman for giving way again. Mr Gapes, I fully respect your views but I just could not resist making that point.
The hon. Gentleman is right to make his point about the importance of the areas that are disadvantaged by this change—I made the point myself on Second Reading. However, is he not aware that, for a very long time, local government has been crying out to keep all its business rates, which is why local government supports the Bill in its round form and is not supportive of his amendment?
Mr Thomas
The hon. Gentleman makes an interesting point, because it is certainly true that local government associations up and down the country support the principle of 100% business rates retention, as indeed do Labour Members. However, I say gently to him that, as the case of his local authority exemplifies, the devil is in the detail. Surely he recognises that the Bill is the opportunity to try to establish how Ministers will operate the detailed implementation of aspects of the measures that are pivotal to the success or otherwise of 100% business rates retention. Redistribution, which was pivotal to the contributions of so many hon. Members on Second Reading, is fundamental to the success or otherwise of the Bill. It would be a tragedy if the support, tentative as it is in some places, for 100% business rates retention were to disappear, and if many local authorities lose out, because the Government get the fair funding review wrong, or because the regulations that implement the Bill in practice do not have sufficient and effective scrutiny.
I say gently to the hon. Gentleman that he is right that the principle is supported, but it is supported more loudly by those authorities that have a high business rates income and that see the potential for economic development because they have access to land. Authorities such as Allerdale Borough Council that are trapped in terms of the space they have for economic development might be more worried about the detailed implementation of the Bill. Obviously, the hon. Gentleman will not dwell on coastal erosion, because he would just upset the Chairman, but I hope he will think more about the question of redistribution and use his substantial influence with Ministers to encourage them to think through it.
Local Government Finance Bill (Second sitting)
Debate between Gareth Thomas and Peter Aldous(7 years, 9 months ago)
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Mr Thomas
Q How would you change the Bill?
Dominic Williams: I do not think it is the Bill that needs changing. Beneath the Bill several technical working groups are going through the detail of what needs to be funded and how it should be funded. We are impressed by the way in which the Local Government Association and DCLG are working together on that. We think that it is being done in a grown-up manner and we hope that the outcome of it will be a sensible settlement that is workable.
Peter Aldous (Waveney) (Con)
Q Mr Thomas has asked the question that I was going to ask. None of you, to a larger or lesser extent, have given the Bill the glowing endorsement that perhaps the Government and Minister were hoping for. What other provisions would you look to put in the Bill to address those concerns? Mr Nolan said that not everywhere is silicon valley. What are we going to do to help those areas that are not silicon valley?
Sean Nolan: I genuinely think this is very challenging. Points were made earlier about economic growth. Actually, some of that growth is not necessarily what you would see in a rates valuation. Some of the micro-industries and broadband developments—that kind of thing—do not reflect well in a technical exercise called retention of business rates. That is my first point. Secondly, and I am deliberate with my language, I do think it is a long-term opportunity, but the inherent tensions I have described are real—whether you have or have not, the management of risk and the management of incentives—and this system has to somehow incorporate that.
On the opportunity side, and I say this as CIPFA—I endorse what has been said about how well the LGA and DCLG have worked together—no one wanted too much absolutely nailed down in the Bill, to give a chance for additional scrutiny—
Mr Thomas
Development.
Sean Nolan: Development, sorry. However, looking at the opportunities, a lot depends on how the additional quantum is divvied up and how that transfer of responsibilities comes through. I think that is the opportunity set, to be honest. It deals with two bits. One is about unfunded pressures. Government have a choice there, do they not? They can look at the additional quantum to the extent that it can be part of that solution. Okay, there is a question—the Treasury will never be interested—but they have a choice. The second bit is, within that transfer of responsibilities, what is the opportunity for genuinely giving every part of the country access to agendas that they can better influence—work and skills—rather than it just becoming a technical accountancy exercise of swapping over other existing grants for the quantum? I am trying to deal with the positives, but we all need to recognise that this will end up funding local government and not just economic development, so it has to manage those inherent tensions in a grown-up way.
Local Government Finance Bill (First sitting)
Debate between Gareth Thomas and Peter Aldous(7 years, 9 months ago)
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Mr Thomas
Q The Minister painted a picture of 100% business rates retention leading to a new dawn of councils rushing out to encourage huge amounts of new economic growth. I wonder if that is a picture that you recognise. If not, what barriers to that economic growth can you think of? I ask that in the context of a rural area where the space for the type of warehouse facilities that you could imagine generating significant business rates will be much more limited.
Guy Ware: I think that “new dawn” is an interesting phrase. There are clearly incentives built into this. In our submissions to the consultation at the end of September, we identified a number of issues that prevent those incentives working clearly.
One of those, as we heard about a moment ago, is the appeals impact. Another is simply the frequency with which the system will take away the growth that is delivered by any activity in a given area. There is no straightforward answer to that. The new system has to address both the needs issues that my colleagues have mentioned and also, because it is the explicit intention of the Bill, a way of retaining a significant financial incentive while recognising those needs issues.
What are the barriers to growth? That is a very big question that it is perhaps beyond the scope of the Bill to resolve. From a London perspective, we have been very clear what we need. We think the greater local powers over these issues would enable the capital to respond better to the threats that we currently face, particularly the uncertainty arising from Brexit and also, less topically, the threat to the sustainability of growth within the capital, which to some extent is a victim of its own success.
The ability to house and transport people to keep working in London is a huge challenge. There are specific clauses in the Bill that we think would help that—for example the infrastructure supplement and designated areas—but there are others where we think it is unhelpful. For example, on the use of the infrastructure supplements, there is a broad definition of what they can be spent on, which is anything that will promote economic development, but unfortunately, two clauses later, there are specific exclusions, the first of which is housing. If you ask businesses in London, as we have repeatedly, what the biggest barrier is to continued and sustainable growth in London, they will say the lack of housing. So we want to see the Bill go further to free up local government to use some of the products of business rates in ways that are more suitable to their particular economies.
Councillor David Borrow: Given that the County Councils Network represents large rural areas and small towns, the issue around elected Mayors causes a lot of problems because elected Mayors are a prerequisite for being able to have greater control over business rates, including increased business rates to put infrastructure in. That is a real problem in shire counties. Conservative Members here know the debates they have had on that issue. The County Councils Network wants that power to be given to combined authorities without it requiring an elected mayor.
Secondly, if the Government are looking to give further responsibilities as a result of transferring 100% business rates, the LGA has clearly identified lots of areas currently delivered by Government that promote economic growth, and it seems logical and sensible for those responsibilities to be transferred to local government where they fit in with the policy of developing economic growth at the local level.
Thirdly, in many rural areas a lot of businesses are exempt from business rates as a result of the systems to promote business, and the mechanism affects the income that the council gets. You can promote small businesses, but it is different in rural areas and in more urban areas.
Graham Soulsby: The last answer I gave was about making sure we get the needs-based assessment right. The other side of that is making sure we get the incentive side of it right. Those are the two key things in terms of how the Bill might operate. The incentive side will be key in whether the changes actually promote more economic growth at local government level. From an incentive perspective, if local authorities and their communities can keep more of the additional money that comes from business growth, there is probably more of an incentive to promote economic growth.
There is an issue that we have tried to flag up through the various working groups that we have been sitting on, which have been very good, through the Department for Communities and Local Government. If a reset comes up in a five-year period, we have argued that we need to be really careful about how that works, because there could be a disincentive to economic growth as you move towards that reset. If you did it in year four of the five-year period, you would not keep much of the additional income that comes through because it would all get redistributed. We have tried to argue that for that to work properly, there needs to be some retention of incentive in the medium term so that if you want to use some of the additional business rate income, you can go out to the market and perhaps get infrastructure funding to promote some bigger schemes, but you would have to pay it back over a longer period of time. There needs to be flexibility in how much incentive there is and in how much business rate increase you can keep for a longer period to get real economic growth.
Peter Aldous
Q For the record, I am chairman of the county all-party group, for which the County Councils Network provides the secretariat. Mr Soulsby and Councillor Borrow, you very much emphasised the importance of the needs-based review of the fair funding formula being synchronised with the implementation of the provisions in the Bill. Do you think there is a case for including that in the Bill?
Councillor David Borrow: It is unusual that the two things have been separated. The timing of both parts of this change needs to be as close as possible. If they have to be done in two separate pieces, they need to be co-ordinated. Clearly, until we have sorted out the funding formula, we cannot really move ahead with 100% business rates, and getting that right is fundamentally important.
Graham Soulsby: It will be okay if the co-ordination is done properly, given that this is more of a framework. One of the things that the working groups at DCLG are working with local government on is the much longer gestation of the needs-based side of it. We have been trying to argue that the timescale needs to be brought back a bit and it needs to be done more quickly. That definitely needs to happen. Whether it needs to be part of the Bill, I am not sure, to be honest.
Peter Aldous
Q As part of the whole devolution process, in order to facilitate the new business rate retention process, at present various responsibilities are being transferred from central to local government so as to ensure fiscal neutrality. I would welcome your views on that. From your perspective of taking on those responsibilities, are there any unexploded bombs that you might think are being passed to you unfairly?
Graham Soulsby: That is a really good question, but one that is quite hard to answer at this moment in time. The issue of new responsibilities, as you can see from the drafting of the Bill, is not in there. We have had discussions in the DCLG working groups about different ideas of what those new responsibilities might be, but the big point that all representatives of local government have made is that, obviously, we are open to the discussion. We do not want to take on responsibilities that have that ticking time bomb element where they are fiscally neutral at day one, but by year five a huge deficit is eating into our business rate income. As a principle, we have been trying to argue that with DCLG officials. They understand the debate, but we have not yet got to the detail in terms of thrashing it out.
Councillor David Borrow: I would go along with that. From our perspective, there is a real risk. The point that the County Councils Network would make—this may be shared by other people in local government—is that there is a first call to be made on any business rates before additional responsibilities are transferred, which is to ensure that the existing funding gap is met. Particularly in terms of adult social care and looking forward over the next few years as the revenue support grant disappears, the figures show a gap. In my own authority, we are looking at a gap of £150 million between income and expenditure in 2020-21. That sort of figure is not particularly unusual among upper-tier authorities.
Guy Ware: The equivalent figure in London, collectively, is about £2 billion, plus the GLA.
I echo what my colleagues have said. To be perhaps more positive than I have been about some other issues, one ticking time bomb has already been defused in the non-transfer of attendance allowance. I give credit and pay tribute to the joint working groups that Graham mentioned earlier and that the DCLG has been leading with the LGA. That is evidence of some listening and some progress in the joint assessment of problems.
Mr Thomas
Q Just to follow up the ticking time bomb analogy, if the £3 billion public health grant were to be abolished, would public health become a ticking time bomb for local government?
Guy Ware: I think public health is a ticking time bomb for the country as a whole. One of the comments that Graham made earlier, about the desire to shift spending into prevention and away from expensive interventions, applies fundamentally to this issue. If the grant were abolished and public health became a local authority responsibility like any others funded from council tax and business rates, the incentive to ensure that we were fulfilling the kinds of policy objectives that underpin public health would become all the stronger. There is risk involved in that, obviously—namely, that we cannot cope with the consequences—but certainly there would be benefits in aligning the responsibility and accountability for managing those services with those who are raising the resources.
Councillor David Borrow: This raises a bigger issue: local government, in terms of adult social care authorities, needs to find a way of working properly with the NHS. At the moment, there are disincentives around adult social care and the NHS. Clearly that is the direction of travel that the Government want to move in, but they need to look at what they need to do to ensure that the right partnerships between local government and the NHS can exist. With something like public health, if the funding for it is reduced, that would put more pressure on adult social care and on the NHS in the longer term, however useful that may be in reducing budgets in the short term.