Local Government Finance Bill (Ninth sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
It is always a pleasure to see the hon. Member for Swindon North tempted to speak in this Committee. He gave an interesting southern example to complement the example given by my hon. Friend for Oldham West and Royton of the potential benefits of the clause.
We need to understand why we are having to discuss clause 37 and schedule 5. It appears to be because Ministers did not get it right when the Business Improvement Districts (Property Owners) (England) Regulations 2014 were made. That was an opportunity to solve the apparently odd situation whereby property owner-led business improvement districts could be established only where a business rate supplement was in place.
As the Minister hinted, the only place where a business rate supplement is in place at the moment is in London, where the Crossrail supplement is kicking in. The power of the success of the New West End Company, which has already raised £3.2 million just in its first year, is testimony to the potential strength of property owner-led BIDs. It is a sensible change, although it was brought on by Ministers having made a mistake with the 2014 regulations. Nevertheless, it does provide an opportunity to see whether we can do more to help property owners who want to establish a business improvement district.
I fear that one of the key constraints on property owners will be accessing the details of who owns other properties. Some property owners like to hide their ownership.
Mr Thomas
Perhaps offshore, through myriad trusts or in other ways.
I wonder whether it is time to require the beneficial owner of property or land to be registered and, therefore, accessible to the billing authority. That has got to be good for tax purposes in general but, in the context of clause 37, it surely has to be good for those property owners who, hearing of the success of what has happened in Swindon, Oldham or other business improvement districts, want to lead an effort in their area for such a district. Surely, we ought to make it as easy for them as possible to contact other property owners in their area.
Rob Marris
My hon. Friend will be acutely aware, as will the Minster, that compulsory registration of land title in England and Wales came in under the Law of Property Act 1925, which was effective from 1 January 1926, but was phased in throughout the country, and that phasing ended in the 1980s. Here we are, coming up to the 100th anniversary of that Act. Does my hon. Friend agree that it would be suitable, by that anniversary, to make registration compulsory whether there is a transfer of title or not?
Mr Thomas
I have always admired my hon. Friend’s prodigious research efforts before he attends a Bill Committee. He makes the fair point that legislation has been introduced to tackle this problem, but the less scrupulous and those who have something to hide have become more skilled and found new ways to hide their ownership.
I gently suggest to the Minister that if, for the best of reasons, we want to make it easy for business improvement districts to be established where appropriate, surely we need to help property owners by making it easier to access the details of who else owns property in their district. I gently encourage the Minister to reflect on that at length and perhaps to bring forward amendments or at least more information on how Ministers are going to make that easier. I look forward to the Minister’s reply.
Rob Marris
I have reservations about this clause, which will not surprise the Minister. Building on what I referred to when we discussed clause 37 and schedule 5, I understand that a business could face a business improvement district levy, a business rates supplement, a BRS bid, the combined authority levy in clause 38, as well as the infrastructure levy that we discussed in part 3 of the Bill in clauses 15 through 36.
As my hon. Friend the Member for Harrow West has said, there is a risk, which has been raised by me with the Federation of Small Businesses, of a cumulative effect of a proliferation of tax measures on businesses, including medium-sized ones, if there is a common floor of £50,000. That proliferation, without a cap that would prevent repeated additions, is unhelpful to the growth of businesses in our country. I urge the Minister to look again at the proposals and to provide cohesion so that there is no cumulative overspill with five different local measures.
When Professor Sir Michael Lyons was Mick Lyons and barely out of short trousers in the early 1980s, he was chief executive of Wolverhampton Metropolitan Borough Council, as it then was, and he was already well known and obviously going places. Clause 38 would further a system about which I and some colleagues—I do not know about my Front-Bench colleagues—are deeply uneasy.
There are two factors. The first is taxation by referendum, which has bedevilled places such as California where there can be opposing referendums. One referendum might say, “We want the Government to spend less money,” but another says, “We want the Government to spend more money on education.” Opposing referendums would not happen here, but it is a slippery slope if we introduce taxation by referendum.
The second factor marks a step change in the way in which we do things and I am surprised that this Government have proposed it. It was started under the previous Labour Government, but has been much furthered through this Bill, including in clause 38. Effectively, it is hypothecation. There is hypothecation with the business improvement district, the business rates supplement and the infrastructure levy under part 3 of the Bill. Now, under clause 38, there is also hypothecation with the combined authority levy. A taxation system that is based on referendums and hypothecation is a step too far and the Government ought to rethink rather than extend that approach.
Question put and agreed to.
Clause 38 accordingly ordered to stand part of the Bill.
Clause 39
Power to make consequential provision
Question proposed, That the clause stand part of the Bill.
Mr Thomas
Briefly, the clause raises the thorny question of the use of statutory instruments by the Executive and whether Ministers think they should be subject to affirmative procedure, requiring scrutiny in Committee, or allowed to slip through under negative procedure. Given the importance of business rates to our economy and the more general concern about them, we assert that if statutory instruments are used by Ministers further down the line to introduce regulations, they should be subject to the affirmative procedure and open for the public to see our debate in the House. The SIs should be introduced under the affirmative procedure. I look forward to the Minister confirming whether or not that will be the case.
Rob Marris
Clause 39 is a catch-all, and it is part of a Bill that allows the Secretary of State more than a dozen opportunities to make regulations. As if that is not enough red tape, clause 39 then states, “Oh, if we have forgotten anything, we can make a few regulations about that.” I do not think that that is good enough in a democracy. There needs to be much more clarity. Someone should have looked at the gaps in the clause and we should have had specificity, as we do in at least a dozen other places in the Bill, rather than a general catch-all and comments along the lines of, “Oh well, if we make mistakes, we’ll be all right, because we can rely on clause 39.” Frankly, that is not good enough in a parliamentary democracy.
Mr Thomas
I must gently say that not even we thought that the Government could get this so badly wrong. I want to come on to the question of resources for the Valuation Office Agency, which have been significantly cut and are leading to many delays in appeals by businesses that have genuine concerns about their revaluation, which has not helped either.
There is a more general point. As politicians, we cannot always predict what is going to happen, but we should be willing to react when circumstances change. There is such concern across the business community about the potential impact of the revaluation on small and medium-sized businesses that it is time that we listened to those concerns.
Rob Marris
My hon. Friend mentioned a situation I am in. I bear no candle for London, with due apologies, Mr Gapes, but I understand from the Federation of Small Businesses that the Government are really on the back foot. Small business rate relief will benefit 16% of businesses in London but 32% of businesses in the rest of England.
Mr Thomas
My hon. Friend makes his point and he may have the chance to expand on it. It is worth listening to the FSB. In a London context, it is calling for higher inner and outer London small business rate relief thresholds to reflect the specific problems faced by small businesses in the capital. In inner London, it argues that the threshold for 100% relief should be a £20,000 rateable value, tapering to £23,000. In outer London, where rateable values have fortunately increased by a slightly lower percentage, it believes that the threshold for 100% relief should be £15,000, tapering to £18,000. It suggests that Ministers might be tempted to look at a system of transitional relief. That has happened in previous revaluations. However, it wants small businesses to have certainty for the future. Although transitional relief would be helpful, its argument is that the system needs a fundamental look-at to reflect the problem properly.
Mr Thomas
Definitely not this clause, but it is important to be aware of that in the context of the need for a full review of business rates. I gently suggest to Ministers that they need to take their fingers out of their ears, listen to the concerns of business, the LGA and others and agree to support amendment 54.
Rob Marris
I shall focus on proposed subsection 2(a) as inserted by amendment 54, asking for a review into the future of business rates, and why I think the Government ought to support the amendment and accede to that request. I will make a few brief remarks as to why I think a wide-ranging review is necessary.
I referred earlier this morning to the fact that businesses could be faced with six different and overlapping rates: business rates, business rate supplements, business improvement districts, BRS-BIDs, the infrastructure levy and the combined authority supplement or levy. It is a very complex system, it is getting more complex, and it is overlapping.
Some proposals in the Bill would be delayed were a review brought in. The Opposition asked for evidence from the Government on the rationale for bringing in the changes and what they would in fact do. We asked whether there is evidence that the incentivisation—much heralded by the Government—will take place. In the course of the Committee’s consideration of the Bill thus far, I have made six direct requests of the Minister. My excellent researcher, Imogen Watson, has dug out the number of occasions on which the Government were asked for evidence for the measures that would introduced under clause 42 and their phasing, which would be delayed by amendment 53. The Government could have put forward evidence 33 times, and they singularly failed to do so on every occasion.
We read all over the press about the absolute mess with the evidence, which has been provided to one set of MPs—apparently it has been produced for Government MPs, but not, disrespectfully, for Opposition MPs. Certainly my four hon. Friends in the room have received no such evidence. Also, there is conflicting evidence. The Secretary of State—he is a west midlands MP, like me and the Minister—has put forward figures that seem to be contradictory.
There is light at the end of the tunnel, however. According to The Times this morning, an area that was going to be a winner under the system will, under the second round of figures released by the Government, now be a loser. That area is represented by my parliamentary neighbour and the Chief Whip, the right hon. Member for South Staffordshire (Gavin Williamson). When the Chief Whip represents a constituency that will now be a loser, some of the changes may be altered or delayed, and delay is what amendment 54 seeks.
I agree with the FSB and my hon. Friend the Member for Harrow West that the whole system of taxation on businesses at the local level needs to be revamped. Amendment 54 opens the way for that by asking for a review of the future of business rates. Contingent on that review would necessarily be a look at the broader picture. As the FSB’s letter suggested some time ago, we should be looking at a turnover tax, rather than the bricks and mortar taxes that are reinforced by the Bill’s provisions. They are old-fashioned, and we need a more wide-ranging approach.
Local Government Finance Bill (Tenth sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
I am grateful to the Minister for confirming that the local government finance settlement debate will continue to take place. It is an opportunity for Members across the House to continue to scrutinise not only local government finance as it operates at the moment but, crucially, as we get more clarity, how business rates might end up working when 100% devolved—goodness only knows, we need that clarity.
We have no sense of how the so-called fair funding review will work for each individual local authority. We have no sense as yet of the consequences of the detail of the financial regulations to accompany the Bill. It will therefore be helpful for us to continue to have the opportunity to debate such matters on the Floor of the House and to explore what they mean for each of our local authorities and the public services that they provide to the people of England generally.
It would be helpful to hear a little more from the Minister about any further arrangements for consultation with business. It seems a little odd that before the Bill is commenced, in the light of the huge concern about the business rates revaluation that has hit the media of late, there will not be further detailed consultation with business through local enterprise partnerships. Here is a quote from the Treasury press release that accompanied the previous Chancellor—before he was sacked for incompetence by the current Prime Minister—which outlined how the infrastructure premium would operate:
“Directly elected mayors—once they have support of local business leaders through a majority vote of the business members of the Local Enterprise Partnership—will be able to add a premium to business rates”.
Yet there has been no mention by the Minister of local enterprise partnerships in any of his speeches to date. He might prefer me to have mentioned it earlier in the proceedings—perhaps his memory might have come back to him at that point about why he made the change and decided to cut out local enterprise partnerships from the Bill. It would be good to hear a little more from the Minister about how local enterprise partnerships will be involved in the coming months.
Rob Marris (Wolverhampton South West) (Lab)
I am a little surprised, given that when we were talking this morning about timing and implementation of the various clauses in the Bill, the Minister prayed in aid clause 5, on indexation, and clause 7. When he talks this afternoon about developing policy in conjunction with local authorities and liaising—my verb, not his—it would be good if we had some evidence. He challenged my hon. Friend the Member for Harrow West on whether Labour supports clause 7, on rate relief for rural shops, and clause 5, on indexation, to which my hon. Friend gave a clear answer. The Minister relied on those clauses as examples of clarity and the way forward, but if they are so clear, why will their implementation be delayed?
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.
Rob Marris
My hon. Friend will be aware—as will the hon. Member for Thirsk and Malton, given that I am sure he has read the proposed new clause—that new clause 4 does not cover GP surgeries, because they are primary.
Rob Marris
Does my hon. Friend remember a single winter between 2001 and 2010 in which there was a so-called winter crisis in the NHS?
Mr Thomas
I am grateful to you, Sir David, for the offer of protection from that outrageous slur from the hon. Member for Thirsk and Malton. I suggest that Government Members might usefully remember the old maxim: when circumstances change, good politicians have to recognise that that has happened and try to adjust to the financial realities that, in this case, schools are facing. My amendment, in the context of the Bill, is simply one small effort to offer a bit of additional financial support to schools that have very serious financial problems, and Government Members should not make light of that.
Rob Marris
My hon. Friend will be aware that one circumstance that has changed—and that this measure would help address—is the apprenticeship levy, which will be paid by maintained schools but not by academies. That is a change of circumstance; hence the change of our position.
Rob Marris
I rise in support of the new clause. As the hon. Gentleman has said, the background is that for the past 20 years at least, food security in the United Kingdom has been much overlooked. We import an increasing proportion of our food and the strain on our food security may increase or decrease because of Brexit, depending on what we do. The measure proposed by new clause 10 is very helpful in that regard.
The Tunnel Tech case, as I understand it, related to the tunnels where mushrooms are produced, ready for market. Paragraph 2(1)(a) of schedule 5 to the Local Government Finance Act 1988 provides the definition of agricultural land, whereas paragraph 3 provides the definition of an agricultural building. The definition of agricultural land includes meadows, which are extremely important, whether they are in Cornwall or elsewhere. However, as I understand it—I am not an agriculturalist or a horticulturalist—meadows do not produce food that is directly ready for market. Even so, they are an important part of our landscape and can contribute to the food chain. Therefore we have an anomaly. Paragraph 9(1) of schedule 5 to the 1988 Act exempts fish farms, so the provision applies more widely than suggested by paragraph 2, which defines agricultural land as
“pure arable meadow or pasture ground”.
I am sorry that the hon. Gentleman does not intend to press his new clause to a vote, but I understand his reasons for that. In supporting his amendment, however, I advise him—he may have liaised with others on this— to consider whether a change needs to be made to paragraph 2, which provides the definition of agricultural land, as well as to paragraph 3, which provides the definition of agricultural buildings. He and I both want clarity so that the matter is not ventilated before the courts again, and I suspect that a tweak to the definition of agricultural land would also be helpful.
Mr Thomas
I am minded to press the new clause to a vote, such was the clarity of the argument of the hon. Member for St Austell and Newquay. My hon. Friend the Member for Wolverhampton South West has made a compelling case in support of it. The hon. Gentleman has reassured me that, having had conversations with the Treasury, there is no cost associated with it and he clearly has the support of the NFU. The Minister will have to make a pretty powerful speech to convince us not to press the new clause to a vote.
Mr Thomas
I beg to move, That the clause be read a Second time.
I understand that Ministers intend to charge £300 for large businesses and £150 for small businesses that want to make a business rate appeal. The new clause is a probing measure to explore how Ministers arrived at those figures. Given that there are likely to be substantially more appeals as a result of the current business rates revaluation, it would be good to understand what the thinking has been about the charges.
In the context of business rates bills being reduced on six out of nine warehouses of a very large business such as Amazon, one wonders whether £300 is not rather low. It costs £250 to submit a claim for unfair dismissal and £950 if the case goes to a tribunal. Funding has been cut from the Valuation Office Agency and I wonder whether a fee of £300 for a big business submitting a speculative revaluation claim is truly appropriate.
It would be good to hear what Ministers have to say and whether they will keep the matter under close review, with the potential for amending the charges as evidence begins to emerge.
Rob Marris
The charge for business rate appeals is understandable, given the regrettable trend of recent years, which started under a Labour Government, of charging for access to justice. However, we also need to see things in the context of something that was raised with me and the hon. Member for Thirsk and Malton—the margin of appreciation, as I think it would be called; the flexibility. A business pays a charge and there is an appeal. It wins, but is told that the difference between what it would have been charged and what it will be charged post-appeal is less than 15%. Then it has lost—even though it has won. That does not seem to me to be a good way to proceed.
Local Government Finance Bill (Seventh sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
I welcome the hon. Gentleman’s intervention, but what surprises me is that he did not explain why, having so enthusiastically backed the powers in amendments 48 and 49 when the Select Committee considered the report, he now seems hesitant about following that logic. I take his point that the best local authorities will want to consult each other, but amendment 30 is intended to deal with authorities that were not so respectful of their neighbouring areas, or the economic impact on the neighbouring areas’ residents. The amendment would lock such consultation into law.
It is interesting that apparently the hon. Members for Northampton South and for Thirsk and Malton, and other members of the Select Committee, did not come up on their own with the idea of an ability to vary the multiplier. They received substantial evidence from councils up and down the land about the power. The Local Government Association, the District Councils’ Network and the County Councils Network advocated it. Indeed, the Select Committee noted that its predecessor Committee recommended a similar provision.
On that basis, I suggest that my hon. Friend the Member for Oldham West and Royton was entirely right to table all three amendments. I understand, in the light of Surrey County Council’s decision, that there may not be enthusiasm for amendment 30, but I should be interested to hear why the Minister is rejecting the advice of the Select Committee on amendments 48 and 49.
Rob Marris (Wolverhampton South West) (Lab)
I shall confine my remarks to amendment 30, which would require consultation on multiplier discounts. I get the impression from the Minister’s demeanour that he is not minded to accept it. He can intervene and tell me whether I am wrong, but until I finish speaking, when I am sure he will have been persuaded, I shall proceed on that basis. It surprises me that he is not so minded, because this sort of provision is already in the Bill.
Schedule 2 to the Bill is to do with amending the Local Government Finance Act 1988, including schedule 7 to that Act. Page 45 of the Bill sets out proposed new paragraph 6C of schedule 7. At lines 13 to 20, there is a nice little table. The new paragraph states that, where a multiplier discount is to be introduced by a specified authority, the neighbouring authorities, or related authorities —perhaps to use a term that is not in the Bill—must be notified. I concede to the Minister that they do not have to be consulted—the verb used in the amendment—and that “notify” is different. To read from the table—it is not a long one—the first “Relevant authority” is:
“A district council for a district in a county for which there is a county council”.
It has to notify, “The county council”. Next:
“A county council for an area for which there is a district council”
has to notify
“The district council for each district in the county”.
“A London borough council” that wants to apply a multiplier discount has to notify “The Greater London Authority”, which, conversely, has to notify “Every London borough council”.
As I said, one verb is “notify” and the one in the amendment is “consult”. They are different—I accept that—but they are not a million miles apart. We already have the concept, or something close to it, in schedule 2 to the Bill in the form of proposed new paragraph 6C, so it seems reasonable to think that the Government ought to accept the amendment, which would simply push the concept out from notification to consultation.
Local Government Finance Bill (Eighth sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Rob Marris (Wolverhampton South West) (Lab)
My hon. Friends on the Labour Front Bench, whose amendments 45 and 46 would have enabled an increase in rates, will be happy to know that schedule 2 allows that. Paragraph 6 of schedule 2, which starts on line 32 of page 42 of the Bill, amends paragraph 3A of our old friend, schedule 7 of the Local Government Finance Act 1988. Paragraph 6 goes through aspects of multiplier discount and refers, in lines 1 and 2 of page 43, to taking
“the sum of those multiplier discounts.”
I cannot see that the Bill prevents a negative multiplier discount, though I stand to be corrected by the Minister. I look around the room at all the MPs on the Committee; they all studied mathematics far more recently than I did—I make no mention of you, Sir David—but my understanding is that if there is a negative multiplier discount, the result is a positive. That would produce the effect sought unsuccessfully by my hon. Friends through amendments 45 and 46.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
For the record, let me clarify that we were not seeking to change Labour party policy in this area, so my hon. Friend is wrong, unusually, to say that we were advocating an increase in business rates. We were merely seeking an opportunity to raise the suggestion made by the Select Committee on Communities and Local Government—and particularly the hon. Members for Thirsk and Malton, and for Northampton South—which advocated in its report a power for local authorities to increase business rates if they wanted to.
Rob Marris
I am grateful to my hon. Friend for that clarification. I apologise to the Committee if I mis-expressed myself. I was not advocating one course or the other, because I believe in local control and localism, but on my reading, the amendments made by schedule 2 would allow that increase.
The Minister adverted to new paragraph 6B, which is to be inserted into schedule 7 to the 1988 Act; it starts at line 27 of page 44 of the Bill. Under new paragraph 6B(3), the Secretary of State can, as the Minister said, set a maximum. The Secretary of State spoke this morning about incentivising and stimulating, and about local authorities working hard and being flexible to attract business. He referred to tools to incentivise local growth, without, of course, producing any evidence relating to the incentives, or their prospects of success, but we have already been around the block several times on the subject of the lack of evidence, so I shall leave that.
However, while we are talking about localism, sub-paragraph (3) is another instance of a power being reserved, if not grabbed, by central Government—the power for the Secretary of State to set a maximum for a multiplier discount. That does not seem to me to bolster localism. Broadly speaking, if we go along with what the Minister says—with the idea that 100% retention of business rates and so on will incentivise local authorities to be even more pro-business, whatever the colour of the authority—we should let local authorities act accordingly and make what outside observers and indeed some residents may see as mistakes. That is what localism is about: letting local authorities take decisions and bear the consequences.
Mr Thomas
In the interests of speed, I will take the opportunity to speak to the Government amendments now, rather than in a separate clause stand part debate.
If I understand correctly, a small business in a rural area might quality for 100% business rate relief under small business rate relief, but if it also qualifies for the 50% rural rate relief, it has to be given that 50% relief rather than the 100% relief, because of the hierarchy of rate reliefs that exists. As I understand it, the clause intends to deal with that loophole.
As the Minister hinted, a rural settlements list sets out the types of businesses that would benefit from small business rate relief. Those are a public house or petrol station that is the only such business in a rural settlement and has a rateable value of less than £12,500, a food store or general store that is the only one in the settlement, and post offices with a rateable value of less than £8,500. Local authorities have the discretion to top up the 50% rural rate relief to 100%, but not all do so, presumably because of the difficult financial situation that local authorities face at the moment, regardless of their political leadership, given the cuts to revenue support that the Government have been pushing through.
I intervene in this debate to ask the Minister a number of questions. Why does the rural rate relief scheme not cover a wider range of businesses? I ask that in the context of growing concern in the countryside that rural enterprises will be some of the biggest losers in the business rates revaluation that will come into force after April 2018. There have been real concerns that livery yards and riding schools, for example, will go to the wall because of the expected increase in business rates under the revaluation. There is concern that kennels and catteries, polo grounds, racecourses and racing stables will also be among the worst hit. That is of such concern that the hon. Member for Montgomeryshire (Glyn Davies) has raised concerns. Similarly, Sarah Phillips, the director of participation at the British Horse Society, worried aloud—understandably—through The Times that increases in business rates after April would have a devastating impact on livery yards and riding schools. She went on to point out that rural businesses, which typically occupy more space, were being put at an unfair disadvantage by a bricks-and-mortar tax based on premises, not profitability. That prompts a question of Ministers as to why more rural businesses will not be able to benefit from the changes.
Indeed, the many businesses that want to install solar panels are also asking why rural business rate relief will not similarly help them. They also stand to suffer considerably from the business rates revaluation that will come into force after the next revaluation in April 2017. The problem is that, going forward, solar panels will be judged separately from business premises, and it appears that they will not all qualify for small business rates, which is the other potential opportunity for assistance. Given the solar industry’s potential to create good new jobs, why are Ministers not taking advantage of the extension of rural rate relief, perhaps to help out a number of other businesses?
When we debated clause 5, we talked about whether the retail prices index or the consumer prices index should be used. I know that you read Hansard diligently, Sir David, so you will remember that £78 billion will potentially be gained by businesses and lost by local authorities over the next 20 years as a result of the change. Perhaps if Ministers were to take advantage of the flexibility in clause 5 over whether CPI is used, which my hon. Friend the Member for Wolverhampton South West noted, they might be able to find the resources to help more businesses in our countryside to survive.
Bricks-and-mortar businesses—in urban areas, too, but in this context particularly in rural areas—are under growing pressure from the rise in online businesses. One of the great successes of the previous Labour Government, and of Britain more generally, is that we are such a hub for online technology businesses, but those businesses tend to need less space and are therefore less likely to pay high business rates, whether they are in urban or rural areas. Many businesses are saying, “Hang on a second. We have to pay huge business rates every year, and these online businesses are not being taxed in the same way. Isn’t it time for a bit more equality between these two types of businesses?”
The challenges for businesses in rural areas are sometimes even more acute. In Threlkeld, a small village just outside Keswick in the Allerdale Borough Council area, which the hon. Member for North Swindon always likes to be reminded of, there is a new coffee shop run by the community—it is a social enterprise—and a pub. We know that the pub would qualify for 100% rural rate relief, but we do not know whether the coffee shop would. As the coffee shop is part of a community hall facility, it helps the community of Threlkeld to benefit from the existence of that premise, where lots of different community activities take place. Would it be eligible for 100% rural rate relief or not? It is not a post office, a pub or a petrol station. Perhaps Ministers might listen to the concerns of businesses in the countryside a little more and do more to help them.
Rob Marris
If that community centre were classified as a public toilet under clause 9, it might get some relief—as might its users.
Mr Thomas
The last time I visited that coffee shop, which has fantastic views of Blencathra and Skiddaw—two of the great English mountains—although there were toilets there, that was not what the bulk of the premises were being used for. It would be interesting to probe whether it has the potential to get at least some relief under clause 9, but let me not test Sir David’s patience by being diverted down that particular route.
I would like to ask Ministers why, in their view, rural rate relief is so limited and whether there might not be scope for providing more assistance to businesses in the countryside, more generally and also given the rise in online businesses, which do not require such large premises. In particular, it would be good to hear what the Government will do to help the nascent solar panel industry, particularly those businesses seeking to put up solar panels in rural areas.
Mr Thomas
Before I open my remarks on whether the clause should stand part of the Bill, having consulted with the registrar of standards, I need to declare that my partner works for a company that certainly manages and I believe installs mobile telecoms infrastructure.
I intend to explore the Minister’s thinking on the case for the clause. In the 2016 autumn statement, the Chancellor announced that the Government would provide 100% business rates relief for new full-fibre infrastructure over a five-year period from 1 April this year. In the context of the significant concern about BT and the way in which Openreach is working, and about the profits it and other bits of the industry have been able to generate, why is that particular provision needed? I ask it as a probing question.
Clearly, there is an opportunity cost to Ministers’ decision to offer full business rates relief for five years. All of us recognise the need to speed up access to the very best broadband telecoms not only in rural areas, in the context of the previous debate, but for businesses and households in my constituency, which complain about slow access to the newest broadband infrastructure. One wonders whether it is not the money, as full business rates relief for telecoms infrastructure will not offer up huge sums of money to those installing such infrastructure. However, there is clearly an opportunity cost in other areas.
Ministers do not appear to be cracking down enough on Ofcom or BT about the speed at which the broadband is being rolled out. How does the Minister see the clause making a real difference in the context of the considerable profits already being generated by the companies operating in this area?
Rob Marris
I hope the Minister can point to this, because I cannot find it, but my hon. Friend referred to the Chancellor’s announcement that mentioned a five-year period. I cannot find a reference to a five-year period in schedule 3. It may be there and I just cannot see it, or it is somewhere else and the Minister can point it out to me.
I see in schedule 3 more than four pages and five formulae. The ever-helpful Library brief cites on page 37 documentation from the autumn statement saying that this measure
“would reduce business rate revenue by £10 million”.
For a company such as BT, £10 million is not a huge amount of money, but for everyone in this room, it is. Nationally and relatively—I stress “relatively”—it is not a huge amount of money, but we get a four-page schedule and five formulae. That strikes me as completely over the top.
We see in schedule 3—on page 46, lines 30 and 31, page 47, lines 37 to 38, and page 48, coincidentally lines 30 and 31 again—the same wording:
“any conditions prescribed by the Secretary of State by regulations are satisfied on that day.”
So here we have the Secretary of State and more regulations. Then when I look at the power to make regulations in paragraph 12 on page 50 of the Bill, it says:
“any power to make regulations conferred by virtue of this Schedule”—
schedule 3—
“includes power to make provision having effect in relation to times before the coming into force of this Schedule”.
I would like the Minister to talk the Committee through that a bit. No doubt he will say something like this happens all the time, but I am a bit uneasy about what seems on the face of it to be a retrospective power in schedule 3, paragraph 12. That is a little worrying. Even though I appreciate it may be a power that would be used or is intended to be used to lessen the tax on a particular business or set of businesses, I still find the retrospection a little troubling.
Mr Jones
The Government intend to support the roll-out of a full-fibre telecommunications infrastructure for all. Full-fibre broadband will deliver a step change in the speed, service quality, security and reliability of broadband services. It will provide important support for a more productive economy and boost the prospects for economic growth.
In the 2016 autumn statement, to which the hon. Member for Harrow West referred, the Government announced £1 billion of new funding to boost the UK’s digital infrastructure. That includes investment of £400 million in a new digital infrastructure investment fund to boost commercial finance for emerging fibre broadband providers. Alongside that package, the Chancellor announced 100% rate relief for a new full-fibre infrastructure in England. Clause 8 and schedule 3 will introduce that relief, which will apply for five years, commencing on 1 April 2017. Hence this part of the Bill will have a retrospective effect. I hope that the hon. Member for Wolverhampton South West understands the principle behind the retrospection.
Steve Double
I am grateful for that intervention. I was going to say that I feel partly responsible for the clause. Along with my colleagues in Cornwall, I lobbied the former Prime Minister and Chancellor hard on this issue, because our experience in Cornwall was that this was a particular barrier for maintaining the provision of public toilets. From my point of view—I cannot speak for the Minister—there is not a one-size-fits-all solution across the country. In different areas, there are different challenges in maintaining public toilet provision. The discretion allows local authorities to set out whether it is a priority in their area.
Let me explain why the measure is so welcome. In Cornwall, which has a large unitary authority covering a very large geographical area, having all those toilets run and maintained by the unitary authority is not the most efficient way to do it. It is far better to devolve the provision and maintenance of those facilities down to local parish councils, town councils or other groups that are better placed to maintain them and keep them open at the hours that the community needs them—that may not be all year round, or all day. Those organisations will be better and more efficient at keeping the facilities clean and well maintained, because people can do it locally, rather than there being a centralised process like the one that Cornwall Council had, with people driving all over the county just to maintain the facilities. Devolving down the running of the facilities to local groups and councils is much more efficient and effective.
In my experience as a cabinet member, one of the biggest barriers to parish councils taking over the running of the facilities was business rates. Often, a fairly small parish council whose precept was only a few thousand pounds a year would consider taking on the cost of maintaining the public toilets, but they would find that the business rate alone on the toilets was more than their whole precept. Deciding whether it was feasible and affordable to take on the facilities was a significant challenge, even if the council recognised that taking them on would be very beneficial to the community. Putting discretion in the hands of the senior authority is sensible, because in the case of Cornwall Council, it can then decide that it sees the value of these facilities across the county. It may want to play its part in helping to maintain them and keep them open, but it may not want responsibility for their day-to-day maintenance and running. It can make the decision to grant that discretion. That would help parish councils with the cost of taking on these facilities, and perhaps enable them to afford to do so. This is a sensible and welcome move, and it has my full support.
Rob Marris
Certain houses of repute with cultural artefacts get a tax break for opening at certain times of the year to the public. My hon. Friend the Member for Oldham West and Royton did not have time to mention that the redoubtable Brian Dean, the gentleman with Parkinson’s, tried every shop in a row of shops, asking if he could use their toilet, and was refused, as is their right. Having desperately tried to avoid it, it was only at that point that he had to soil himself. That is a sad reflection on those shops, but I understand it. I would like the Minister to give some thought to whether it might be possible to structure a business rate relief for private premises, such as a coffee shop in Allerdale, that allow the public access to their toilets, in the way that we allow tax reliefs for certain houses with cultural artefacts. We put something in; there are certain things that they provide; and they get a tax break for providing that service.
As we all know, with our ageing population, it is statistically likely that there will be a rise of near incontinence and urgency. The need for access to toilet facilities among the population as a whole, and the need for those facilities to be fairly readily available, will increase. I say that as one of the patrons of Wolverhampton Mencap. Many adults with learning difficulties get a sense of urgency and need to get to a toilet very quickly. I would ask the Minister to look at a system in which private premises that were not “wholly or mainly” a public lavatory facility, as in the clause, but that had a toilet—perhaps a coffee shop—and made it available to the public for a specified number of hours or whatever got some business rate relief for providing that public service.
Mr Thomas
I rise to make two points. It was interesting to hear the contribution of the hon. Member for St Austell and Newquay on how he thought we got to this point. I commend him for his successful lobbying, but I wonder why Ministers could not have gone a bit further. There are already business rates exemptions for agricultural land, presumably because of its importance to rural communities and to the countryside that we all value. Given the growing concern about the long-term financing of public toilets, one wonders whether it is time to dwell on the question of whether public toilets should be given full business rates relief. I have to be honest; I have not looked into the issue in detail yet, but it is a question worth posing to Ministers.
I come back to the example of the Threlkeld village hall coffee shop, which I spoke about before, and which my hon. Friend the Member for Wolverhampton South West tempted me to flag up on this issue. It has toilets that are used by members of the public, predominantly when they come in to use the coffee shop, but it is the only place in the community other than the pub where they might do so. The village hall is a social enterprise. Would business rates relief be on offer to that part of the premises that has toilets, if members of the public can use them?
Mr Thomas
I rise to make a contribution that is in the same spirit as those made by the hon. Members for Thirsk and Malton, and for Northampton South, in the Communities and Local Government Committee debate on 100% business rates retention. I will raise the issues that they might feel intimidated about raising, or be reluctant to raise. That Committee heard concerns about the central list and agreed that Government and local authorities could together consider whether properties on the central list should continue to be held by central Government, and how the revenue generated could be better used under 100% retention. It made the point that it had received representations from throughout the local authority world criticising the central list’s lack of transparency and urging that the revenue from the central list be distributed among authorities. A number of councils said that the accounting was opaque, and London Councils suggested that the basis for including properties on the central list was unclear.
That was perhaps most nicely summed up by David Magor of the Institute of Revenues Rating and Valuation:
“The central list is a mystery; no one knows what the central list is spent on. Is it the Chancellor’s central pot?”
Perhaps that is how Surrey is being sorted out. He continued:
“The central list should be distributed to local government because it is part of rate income. There is no logical reason why the central list should continue in its present form.”
The Minister will by now have gone through the Select Committee report and had time to reflect on the Committee’s concerns about the operation of the central list. I express those concerns, but recognise that clause 10 seeks to ensure that properties on the list can qualify in future for charitable, empty property and telecoms relief. What impact will that have on the approximately £1.5 billion raised in business rates annually, and on the central list? Presumably, were the £1.5 billion to be depleted significantly as a result of all those additional reliefs, there might be consequences for the redistribution of resources among councils. I will not go into the concerns about other impacts on the pool of money raised from business rates, or the scale of the cuts to the revenue support grant, but it would be helpful to hear what estimate Ministers have made of the impact of clause 10 on the £1.5 billion pot.
I have received representations from the Charity Retail Association, which is responsible for representing all charity shops in England. It suggests, instead of the 80% charitable relief to which the Minister referred in discussion on clause 9, 100% relief to ensure no postcode lottery. Some charity shops get 100% as a result of the additional 20%, which is discretionary, being given to them by their authority, but not all do. The association asks for 100%. What do Ministers think of that concern?
Rob Marris
Does my hon. Friend agree that 100% relief for charities would be consonant with what someone—I cannot remember who—called the big society?
Mr Thomas
I will not go down that particular route—you might get annoyed with me, Sir David, and I would not want that to happen—but my hon. Friend makes a good point.
It is worth remembering that the central list primarily focuses on utilities or property belonging to the formerly nationalised industries. One thinks about the privatisation of the water industry, for example, where in general water companies are mostly owned by private equity investors that have taken on billions of pounds of debt, often in the form of loans from shareholders, which the chair of Ofwat as recently as 2013 suggested was morally questionable, in order to avoid corporation tax costs. One wonders whether it is entirely appropriate for such companies to benefit from reliefs in the context of concern about water companies and other privately owned utilities not paying as much corporation tax as they might. It is in the spirit of inquiry that I ask those questions.
Mr Thomas
I beg to move amendment 29, in clause 16, page 17, line 5, at end insert”, or
(c) any other billing authority.”
This amendment would enable any billing authority to impose an infrastructure supplement on non-domestic ratepayers in its area.
Having made clear my support for the power to impose an infrastructure levy, I come to the question of who should be allowed to impose it. It appears that Ministers are determined that only authorities with a Mayor should be allowed to do so. That seems to us to be a grotesquely unfair act of discrimination against local authorities that need investment in infrastructure but have decided for their own local reasons that a Mayor is not a suitable way forward for them.
One thinks in particular of the authority of Cornwall, which the hon. Member for St Austell and Newquay will know has done a deal with the Government without needing to elect a Mayor. Cornwall Council made representations to the Select Committee on Communities and Local Government, on which the hon. Members for Northampton South and for Thirsk and Malton sat. Cornwall Council felt that it would be at a disadvantage if the provision were introduced and it was not allowed to benefit from it.
In addition, the Select Committee received evidence from the Chief Economic Development Officers’ Society. It is worth bringing attention to the significant bit of that evidence. CEDOS said:
“In the move to 100% business retention, it is essential for all areas, as far as possible, to have a level policy playing field on which to drive economic growth. In our view, the intention that only areas with elected city-wide mayors will be able to add a premium to business rates to pay for new infrastructure is fundamentally at odds with this. We believe this power should be available to all areas with the provision that a majority of all businesses should agree, which we think is a reasonable one.”
The Select Committee went on to urge the Government to consider with local authorities whether, by placing areas without a directly elected Mayor at a disadvantage, the proposal conflicts with the aim of 100% retention.
I can think of a number of areas—I return to the example of Allerdale Borough Council—that need significant investment in infrastructure from time to time and where the power to introduce an infrastructure levy could make a significant difference to economic growth in the area. Let us take the example of flooding. In the past, Allerdale Borough Council has had a number of significant floods in its area, and it has been fortunate to secure grants to help with flood prevention measures. However, given the pace of climate change, one could easily imagine a scenario in which funding for further work is required to prevent flooding and to allow businesses to operate effectively. Without the infrastructure investment, the local authority might become less attractive to businesses. It is not impossible to envisage a situation in which businesses wanted to move out of the area. Indeed, one area that was the victim of significant flooding in Allerdale is the area that most large businesses are attracted to as a base.
I offer that as an example—as far as I know, Allerdale Borough Council does not have a Mayor and has not done a devolution deal with the Government, but it will have infrastructure needs. Surely it should not be left at a disadvantage compared with authorities that have a Mayor.
Rob Marris
To give my hon. Friend another example, over in East Anglia, Waveney might suffer from coastal erosion.
Mr Thomas
My hon. Friend makes a good point; it is a shame that the hon. Member for Waveney is not here to help us to think about the impact on coastal areas. When we talk to businesses—as the Opposition do regularly—infrastructure investment is one of the areas that they continue to cite as crucial for future economic growth. We are all aware of the regional inequality in this country and the need to try to generate further economic growth at a faster pace outside London and the south-east.
I am not surprised that the Chancellor of the Exchequer would want to go to Manchester, which is one of the leading districts where Labour authorities are leading the charge to help businesses. However, one needs to recognise that the advantages that Manchester has pursued—rightly, in terms of a levy for the purposes of investment in infrastructure—would also benefit authorities elsewhere in the north, the north-west and the midlands, and no doubt in Cornwall, Northamptonshire and other areas. This is a question of fairness and equality and of investment in areas that do not have a Mayor. I look forward to the Minister’s attempts to justify why authorities that do not have a Mayor should be denied the opportunity to benefit from this type of infrastructure investment.
Mr Thomas
I have heard what the Minister has said. I have also heard the response of my right hon. Friend the Member for Wentworth and Dearne (John Healey), who speaks on housing for Her Majesty’s loyal Opposition, who described the housing White Paper, quite accurately, as less a White Paper and more a white flag. That encapsulates the reality of the Conservative party’s approach to housing. The Minister has missed an opportunity by rejecting amendment 44 out of hand, but I do not seek a Division on the amendment at this point, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Rob Marris
This is a somewhat confusing clause, because it is entitled “Use of money raised by infrastructure supplements”, but what it goes into, in subsection (3) for example, is what the money cannot be spent on. Now, I understand that. I listened to the Minister—as an aside, I have to say that I was not convinced by what he said about housing and I hope he will reflect on it, but I understood what he said. This is part of the forbidden list, which runs to six factors in subsections (3)(a) to (f). However, to come back from that a bit, we have a problem, in that clause 36—definitions and interpretations—does not tell us what infrastructure is. I hope the Minister can tell me, either now or later, where in the Bill the definition of infrastructure is, because I cannot see it—it might be there, but I cannot see it. At the moment, we seem to have a Bill that does not say what infrastructure is and says only what the money cannot be spent on.
I am aware that clause 33—we will get to it later, Sir David, but I have to refer to it now, as it is very germane—refers to the guidance that can be given by the Secretary of State on what money can be spent on. The Minister gave us a little indication a few moments ago, because he referred to infrastructure projects—the use of the money that would be permitted under clause 17—to create, to quote him, “a better economic environment”. He then said something that, again, I cannot see in the Bill—he may correct me; it might be there, and if it is not, it sounds as if the Secretary of State would be minded to have it in the guidance. The Minister said that the projects would have to be “additional”, and that the money would be spent, to quote him again, on something that would “not otherwise get built”.
The Minister, like me, is a Member of Parliament for the west midlands, although I am in the urban core of the west midlands, directly under the combined authority. Nuneaton is in Warwickshire, which is a bit hokey-cokey about the combined authority, with its local enterprise partnership and so on, but Wolverhampton is squarely in there. As a west midlands MP who is astute about what is going on, the Minister will be aware that a subject of political debate in the mayoral elections for the West Midlands Combined Authority is whether it should buy the M6 toll road.
Local Government Finance Bill (Fifth sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Rob Marris (Wolverhampton South West) (Lab)
On the question of debate and the lack of scrutiny of reliefs, is my hon. Friend aware—he has talked about the Government possibly introducing more reliefs—that a couple of years ago, the National Audit Office found that approximately 1,200 tax reliefs are in operation and that the Government keep track of the effectiveness of fewer than 300? Therefore, the debate sought by these amendments would be extremely helpful in respect of any reliefs relating to local government.
Mr Thomas
I was not aware of that work by the National Audit Office, or indeed that so many reliefs are not properly scrutinised. That merely underlines the case not only for the work the NAO does generally, but in particular for the work, perhaps by the NAO, relating to local government finance, as well as the more general case for at least maintaining the scope for effective scrutiny of local government finance.
Perhaps this is my last point on the case for scrutiny of the Department, before I seek to develop these arguments further. Given that an amendment to the principles of allocation statement can be laid at any time, albeit after consultation with local authorities, and given that it could have a significant impact on local government finances, surely there should be the opportunity to look at why those tariffs and top-ups have been amended and the impact on councils. Therefore, there are probably eight arguments for maintaining the level of scrutiny. I hope, Mr Gapes, with your permission, to develop the argument a little further to help Conservative Members, who are not always the quickest at getting the argument and the point I am seeking to make. They are a little slow, if I may say so, to react to the point.
Let us think of the series of ways in which local government finance is going to operate. We heard from the Minister last week that section 31 grants will still be able to be offered to local councils.
Mr Thomas
Entirely discretionary, as my hon. Friend says from a sedentary position. One thinks of a situation where perhaps there is a large influx of refugees. I can foresee, sadly, another situation of flooding—the Conservative party has failed to properly protect our country from the impact of climate change—or coastal erosion, which I know the hon. Member for Waveney is particularly interested in. There will potentially be scope for discretionary section 31 grants to local authorities. There will be an assessment of need. We have no idea yet what that assessment of need for each English local authority will look like. We do not even have any sense of when it will be published. All we know is, mañana—it will be published at some distant point in the future, when the Minister and his officials can get around to it. Bearing in mind that the Minister and his officials cannot get round even to publishing the 400 submissions to last year’s consultation on the Bill, we cannot have much confidence that that assessment of need will be brought forward any time soon.
We do know that the expectation is that, aside from business rates, local councils will have to depend even more not only on the fees and charges they can raise from different services they offer, but, crucially, on council tax. My hon. Friend the Member for Oldham West and Royton reminded the Committee of the Government’s own assessment that, over the lifetime of this Parliament, there will be a 25% increase in council tax. One wonders whether that is on the conservative side, bearing in mind what Surrey County Council has done with its planned referendum and the case that it is making for a 15% increase in council tax, such is the terrible state of social care funding for that authority. We have not yet heard from the Minister how he is going to recommend the citizens of Surrey and Members of Parliament who represent Surrey should vote in that referendum. I look forward to hearing from him on that subject.
We know from the way in which Conservative Chancellors have sought to meddle with local government finance that additional reliefs will probably be announced at different times. Local government will get its finance in a series of ways in the new system. Surely there should be an opportunity to debate the way in which those different sources of finance dovetail with each other, so that we can see how individual local authorities throughout England, our great nation, are able to provide—or are not able to provide, as I fear will be the case—the public services that the citizens of England expect.
Bear in mind that Opposition Members, over the last six years or so, have been able to highlight just how much funding local government has lost over the terrible years since 2010, when the Conservative party came to power. By 2020, many councils will have lost more than 60% of their income. Arguably, an annual debate—or at least a regular debate—on local government finance will be all the more important in the first years after the introduction of the system.
It would be helpful to hear from the Minister why he thinks the requirement for a local government finance settlement report should be axed now. Why should there not be a 2018 local government finance settlement report, given that the new system will not be in force? Why should there not be one in 2019? We will hopefully have a little more information than we have now. We hope that, by 2019, the Minister may finally have got around to publishing the 400 submissions that have been put in as a result of the 2016 consultation paper. I hope, perhaps, that the Select Committee on Communities and Local Government might have had the chance to wade through those reports to give us its considered take on the concerns, or not, about the future of local government finance. Specifically, it would be interesting to hear from the Minister not only why he thinks parliamentary scrutiny of local government finance should be reduced in the way that the Bill proposes, but why it should be reduced before the new system has been introduced in its entirety.
We are the most centralised country in the western world. Almost 90% of local government finance is delivered by central Government—all the more reason for scrutiny of local government finance in the way we at least have at the moment. I suggest that it should be enhanced, not reduced in the way the Minister envisages. Our political system is weighted overwhelmingly to the power of the Executive in Whitehall. Notwithstanding the excellent contribution that the judiciary occasionally make to keep the Government honest on issues such as exiting the European Union—at this point, one should surely pay tribute to Gina Miller and her advocacy for scrutiny by Parliament—
Mr Thomas
My point was not about whether one opposes particular reliefs, but about the impact on local government finance. There is a consequential impact for local government, which we are debating today—a consequential impact on the finances of the hon. Gentleman’s local authority, my local authority and, indeed, the local authorities of all members of the Committee—and surely those consequential changes need to be considered. My point is that, under the Minister’s proposals, which I suspect the hon. Gentleman has been told he has to support, come what may—that is the reason he has the privilege of serving on the Committee and being mentored by Opposition Members—parliamentary scrutiny is being weakened in relation to local government finance. There may well be further justification for further reliefs to business, or for further public services to benefit from reliefs. We will seek to explore that later. However, there should be an ongoing opportunity to explore the consequential impacts of decisions that the Chancellor or other parts of the Executive might make on local councils’ finances.
Rob Marris
Does my hon. Friend agree that it is right, as the Bill provides, that before making a principles of allocation statement, the Secretary of State will have to consult representatives of local government? That is good, but the Secretary of State will not have to consult or be answerable or accountable to Members of Parliament on the principles of allocation statement, so one thing is being done right and the other is being done completely wrong. The amendments would rectify that imbalance.
Mr Thomas
My hon. Friend makes a very good point and one that I realise I have not dwelled on until now. Of course he is right to say that local government leaders and their councils should be properly consulted, but one suspects from the contributions that we sometimes see in private from Conservative-led local authorities that they sometimes look to the Opposition to make their case more vigorously in public than they feel they can make it to their own Ministers, and that opportunity will be reduced if there is not similarly a requirement to be answerable to Members of Parliament.
I will offer up to the Committee one further example of a very significant change to local government finance. If something like this were done in the future, we might not have the opportunity fully to explore the consequences. I am referring to the decision by the then Chancellor to switch the indicator, in terms of business rates going up or not, from the retail prices index to the consumer prices index. That is likely to have a significant impact on local government finance. In the 2016 Budget, Ministers suggested that it would reduce business rates income by £370 million in 2020-21. In 2020-21, under the Minister’s plans, there will not necessarily be an opportunity for a debate on the Floor of the House on the principles of allocation statement or the local government finance settlement report, to see what the consequences of that change are in that year for local government finance.
And that is just one year. Each year, that reduction in income generated by business rates for local authorities will continue. Over a decade, it is estimated that councils will lose over £3 billion. That is a £3 billion benefit to business, and there is a debate to be had outside this Committee on whether that is the right support to give to business. In the context of this debate, there must be an issue as to whether it is the right choice for local government finance and the public services such as social care that are being provided.
How will Nuneaton, Warwickshire, Waveney, Suffolk, Torbay or North Yorkshire be able to provide public services if they are seeing their authorities hit by their share of that £3 billion cut in capital funding? Sadly, there was no consultation with local authorities about that switch from RPI to CPI. I want to dwell on that issue a little more as part of the clause 5 stand part debate, which I hope we will get on to soon.
Mr Thomas
Shortly. But it is another example of the way in which the Executive can make significant changes that may have substantial merit in their own right in terms of the support they give to business—one could think of other such examples—but which nevertheless have a significant impact on local government finance. Surely it is the responsibility of this House to think about local government finance in detail and about all the complexities that are envisaged, and to worry about what those might mean in future. Amendments 24, 25 and 26 stand in my name. Two of those are, I suspect, amendments that we will continue to regard as probing amendments, but the principle of scrutiny by the House of Commons is something that we on the Labour Benches take extremely seriously.
It was remiss of me not to provide members of the Committee with the opportunity to reflect a little further on one of my favourite areas of the country: Allerdale in the Lake district and the local authority there. After the post-tariff top-up was introduced, it benefited from just £3.64 million in 2013-14 under business rate retention. That went up slightly to £4.91 million in 2014-15. Then it went down to £4.63 million in 2015-16 and by 2016 it had gone up slightly again, to £4.7 million. That is not very much business rates income under the 50% scheme. One assumes that it will get a little more income under 100% business rates retention.
The council is surrounded by agricultural land, which is not rated in business rate terms, and has significant natural barriers to further economic growth—I am thinking of the wonderful lakes of Derwentwater, for example, and the wonderful mountains of Skiddaw. The council faces natural barriers to economic growth, with which the hon. Member for Waveney will sympathise. Surely we have a responsibility—even though we represent other authorities as individual Members of Parliament—to think about the impact on authorities such as Allerdale, whose financial means might otherwise be forgotten if there is not the ongoing opportunity for parliamentary scrutiny.
Local Government Finance Bill (Sixth sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
To my great surprise, I am almost in agreement with the hon. Gentleman—there has clearly been a huge improvement as a result of our collective mentoring of him—but I add one reservation to my encouragement. What he suggests makes some sense going forward, but amendment 31 would be a useful addition that would give us the opportunity to understand whether Ministers have properly grasped the social care funding situation for each local authority, whether that is joint or not joint with others.
In making the case for amendment 31, let us move into an area that is particularly topical in the light of the housing White Paper: homelessness services. Clearly, those are key statutory services that local authorities offer. Local authorities have already faced a substantial number of legal challenges on their statutory duties to support the most vulnerable people who are at risk of homelessness. In September last year, 74,630 households were in temporary accommodation, including those in bed and breakfasts. That was the 21st consecutive quarter in which the number of homeless households in temporary accommodation increased. If we factor in the 40% increase over the past four years in the cost of providing temporary accommodation, the LGA—not a body to sound the alarm unnecessarily—estimates that the funding gap for homelessness services will be £192 million by 2020.
I was not able, because I was preparing for this debate, to be in the Chamber to hear the Secretary of State speak, but just from looking briefly at the social media reaction, I did not get the sense that he announced an additional £192 million for homelessness services by 2020. That is a further reason to encourage action after the new system comes in by accepting amendment 31.
Sunderland City Council has already announced that because of the very difficult financial situation it is in, it may have to cut its entire housing support budget, which is used to pay for vital services, such as hostel beds, refuges and supported housing. Services for those who are most at risk of homelessness, including ex-offenders, people with mental health conditions and those with learning difficulties, are also being cut. When we bear in mind that the life expectancy of those sleeping rough is just 47, according to charities in Birmingham, one fears that vulnerable people will die as a direct result of the proposed cuts to housing support services in Birmingham of some £10 million over the next two years. That is an indication of the financial crisis affecting another local authority.
The new duties to be introduced under the Homelessness Reduction Bill, which the Minister prayed in aid last week, are welcomed, but many of us remain sceptical that councils are being adequately funded to fulfil them. On Second Reading, as I recollect from glancing at the debate, quite a few of the interventions raised directly with the Minister concern about the availability of funding. Were amendment 31 on the statute book, Ministers would have less chance of inadvertently not understanding or not recognising financial needs in that area.
There is great concern about the insufficiency of the £48 million of funding that the Minister announced to expand necessary homelessness provision for single men and women. The Association of Housing Advice Services, which is a non-profit organisation, estimates that London’s 32 boroughs alone will face a combined bill of £161 million to implement the new duties.
The full scale of the housing crisis is clearly beyond the scope of the amendment, but I am sure that in our advice surgeries we have all come across incidences of families struggling to find affordable accommodation near their workplaces or children’s schools. It is clear that the funding for the vital role that local authorities play in protecting the most vulnerable and in finding that most basic need, a home, is under severe pressure.
Another key statutory service that should surely be recognised by inclusion of amendment 31 in the Bill is children’s services. Looking after children is one of the most important statutory duties of councils, with a total of £11.1 billion a year spent on un-ring-fenced funding on children’s social care and education services. Again there has been an increase—60% since 2008—in the number of children requiring children protection plans. That is at a time when, from 2010 in the previous Parliament, councils lost 40% of their funding from central Government. The LGA estimated a £1.9 billion funding gap for those vital services by 2020.
For many councils, the pressure on children’s services is even more acute than that on adult social care. Three hundred and seventy-seven Sure Start centres have closed since 2010, with only eight opening in that time. That is the result, I suggest, of a spending cut on the centres of 47% in real terms. Sure Start centres have been crucial in supporting children from disadvantaged backgrounds during the vital early years before they reach school age, but again service cuts are diminishing such children’s prospects. Were amendment 31 on the statute book, Ministers might feel a little more reluctant to push such savage cuts through.
In the context of education and education services, will the Minister explain why the Government still intend to go through with the planned cut to the education services grant? It is entirely appropriate to ask that question in the context of amendment 31—let me explain why. The Education Secretary was correct in deciding not to proceed with the forced academisation programme of her predecessor. Under the proposed education-for- all Bill that would have delivered that programme, it would seem sensible for councils to lose their funding for their school improvement responsibilities—given that all schools would become academies. Forced academisation having been scrapped, however, we are left with a situation in which councils keep their school improvement responsibilities, although the funding is still being cut.
Rob Marris (Wolverhampton South West) (Lab)
May I caution my hon. Friend not to be too hard on the Minister because it is Ministers from the Department for Education who demonstrate time after time on the Floor of the House that they do not understand the difference between early years education and childcare? They constantly elide the two. It is not the Department for Communities and Local Government that makes that mistake, although it may, but the Department for Education and its ignorance is shocking.
Mr Thomas
I rise in support of amendment 27. It is worth touching on a couple of the ways in which the levy rate works. Tariff authorities may be subject to a further levy on growth in business rates income. Each such authority was set a levy rate of between 0% and 50% at the outset of the 50% business rates retention scheme in 2013-14. An authority with a 0% levy rate will keep all its growth in revenue. An authority with a positive rate—over 0%—must pay that percentage of its growth in revenue to the Government. The purpose of the levy is to ensure that authorities with very high business rates tax bases relative to their assessed needs do not benefit disproportionately from the system. As my hon. Friend so eloquently set out, the Bill will remove the Secretary of State’s power to set such a levy. Clearly, our amendment would retain that power.
I have already mentioned the example of Maidenhead’s council, the Royal Borough of Windsor and Maidenhead, which has a 50% rate—the highest rate that it can have. Presumably, this is because the council already benefits from its proximity to Heathrow, and from all the businesses that want to be close to Heathrow to export their goods to markets around the world. We commend Maidenhead on its good fortune, but surely as it benefits from a major piece of infrastructure—Britain’s most crucial hub airport—it has not had to do huge amounts to encourage that growth in business rates income, although I am sure that the council’s leader would point to one or two things it has done to encourage business. However, even Maidenhead would struggle to claim that it has not benefited from being so close to a major airport. I cannot see anyone in this room who is an opponent to a third runway at Heathrow.
Mr Thomas
I apologise to my hon. Friend. As ever, he helpfully corrects me, but the majority of Committee members support a third runway. With a third runway, Maidenhead’s council will presumably benefit from being even more attractive to businesses that want to get their goods out to export markets. It will have done nothing to put in place new conditions for economic growth; it will simply have benefited from a major strategic decision taken by this great House. The irony is that Maidenhead opposes a third runway at Heathrow.
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.
Rob Marris
Is my hon. Friend aware that under the system that the amendment seeks to retain but that the Bill will remove, over the past four years there have been 52 winners—if I may put it that way—and 119 losers, according to the Institute for Fiscal Studies? Surprise, surprise: most of the winners are district councils, and most of the losers are larger councils, including many metropolitan borough councils and unitary authorities.
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.
Mr Thomas
I beg to move amendment 20, in clause 4, page 6, line 41, at end insert—
“(c) must include conclusions from the assessment of needs that has been carried out in respect of the local authority area; and
(d) must include details of efficiency savings made by the local authority.”
This amendment would require the report published by the Secretary of State on the set of principles to include conclusions from an assessment of needs carried out for the local authority area and details of efficiency savings undertaken by the local authority.
It is a great pleasure to move this probing amendment. It is inspired in part by the example of Surrey County Council and, perhaps surprisingly, some words of wisdom from the previous Prime Minister, who famously described local government as
“officially the most efficient part of the public sector.”
That is one of the few things he said as leader of the Conservative party that I am tempted to agree with. The Conservative party has a tendency—Ministers have been doing it again today in the run-up to the housing White Paper—to blame all the ills of the world on local councils.
Amendment 20 is merely an attempt to make clear, not only to Ministers but to those who watch and read our proceedings, that there is a more complex picture about the scale of the challenges facing local government that should be taken into account, whereby those residents make an assessment as to whether the council tax ask they are expected to pay—if, indeed, it goes above the threshold—is excessive or not.
Surely there is a case for recognition of some assessment of need. Surely there is also for recognition of the scale of efficiency savings that councils have sought down the years—they ought to be taken into account. My council, Harrow, has led the way in seeking to become a commercial council. It has worked with organisations such as IBM on new social care apps that have dramatically improved the quality of the marketplace, to use the language of Conservative Members, for private social care providers at a local level. They are commercialising the app that they have developed and generating significant revenues for the local authority. The product they have offered is innovative, increases efficiency and leads to a better quality of service. Sadly, we do not hear enough examples like that. It is in that spirit that I move amendment 20. Much has been made of the £5.8 billion funding gap that the LGA says will be present by 2020. Again, that is a further demonstration of the need for and demand on local authority services. Surely that should be taken into account.
If there ever was a decision by a county council that was well-timed, it is surely the decision of Surrey County Council today not to go ahead with its 15% referendum. The council leader apparently reported to his fellow councillors that he has had lengthy conversations with the Government and has received various reassurances—he would not say what those were, funnily enough. As a result, he has recommended to his council that the referendum should not go ahead, which it has accepted. I suspect that the tireless campaigning of my friend Robert Evans, the one Labour councillor in Surrey, has intimidated the Conservative leader into backing down. If that is not the case, one has to praise the political skill of the leader of Surrey County Council—if the cheque is in the post to him, as it sounds as though it is—for his act of brinkmanship.
What Conservative councils will take from Surrey’s experience, if indeed the cheque does eventually arrive, is that all they need to do is threaten big council tax increases and the Government will bend to their will. If at some future point my friend Robert Evans were to become the leader of Surrey County Council—I suspect that prospect is not too far off—and propose a 15% council tax referendum, it would be seized on by the Minister, and various nonsense about the profligacy of Labour councils would be repeated ad infinitum on the Floor of the House and in Committees left, right and centre.
Surrey County Council has exposed the weakness of Ministers’ arguments around the threshold. Nevertheless, it will perhaps be interesting to hear the Minister take this opportunity to acknowledge the scale of the funding gap that the LGA has identified and praise local authorities such as Harrow Council for the work it has done to offer more efficient services.
Rob Marris
I wish my hon. Friend good luck with this amendment. Essentially, amendment 20 asks the Government to collate evidence and act upon it. Given what we have heard in the Committee so far, I will be suitably and happily astounded if the Government accept the amendment and the concept that evidence is important.
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.
Rob Marris
I echo my hon. Friend’s concerns. It is simplistic to suggest that business rates are merely a burden on business; they are also a benefit. They help. I say that as someone who has been a partner in a business that had 1,000 people in it. Not having potholes, and having street lighting, less litter and free wi-fi in town centres all help businesses, but they are paid for by local authorities, who will have less money.
Local Government Finance Bill (Fourth sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
We have had an interesting debate. The challenge set before the Minister in amendments 1 and 23 was to clarify the Government’s intent towards the redistribution concerns of local authorities. We have not yet had clear answers to my specific questions on redistribution.
I asked how redistribution would work in practice. We have not had an answer to that question. I asked whether there would be amendments to the system for tariffs and top-ups. I do not think that the Minister mentioned them at all in his response. I asked how, given the importance of revenue support and other grants to ensure that areas’ spending power is equalised, the new system would make such compensation. We have had only a partial answer to that—I will come back to it in the clause stand part debate. I asked for more clarity on the key principles on which the fairer funding formula will operate. It is true that I got that offer of some principles, but no clarity beyond those very basic, broadbrush principles; nor was there any clarity—or even, I am sad to say, any recognition—about the concerns facing the poorest areas in income and spending power, as opposed to wealthier areas such as Westminster, under the new system.
I am concerned that we are no further forward. It was interesting to hear the Minister talk about the need to get the Bill through in order to move ahead with the other elements of the package, but as I indicated in an intervention there was nothing to stop the Minister from submitting the proposals to prelegislative scrutiny. The obvious place to do that would have been in the Communities and Local Government Committee, as has happened in the past for similar pieces of legislation.
The only thing that would appear to be absolutely fundamental for Ministers in the Bill is the abolition of the local government finance settlement and the scope for a debate in the House of Commons on the state of local government finances. The only thing that Ministers will benefit from immediately seems to be the absence of that particular form of financing.
Rob Marris
On the issue of redistribution that the amendments cover, does my hon. Friend agree that we could look at it and say that the Government have put the cart before the horse? They have decided that there will be 100% devolution, but as the Minister said a moment ago, they have not yet decided which additional responsibilities they will devolve to local government. Almost invariably, additional responsibilities require additional expenditure. They are setting the finance out in the Bill, but they are not telling anyone what to spend it on until down the road.
Mr Thomas
As I said, the hon. Gentleman’s contribution was inspirational in terms of recalling great literature of the past and the tale of Don Quixote and Sancho Panza. The evidence from the FSB was revealing: the economic incentives will not be anything like as significant as Ministers hope and the measure will help to drive further reductions in spending power, it would appear, without any evidence from Ministers to the contrary.
Rob Marris
Does my hon. Friend agree that this demonstrates a triumph of hope over experience? If an apparent incentive is not working, we double it. Well, vitamin A is good for people, but after a certain point doubling the intake of vitamin A kills them.
Mr Thomas
It is interesting that the Minister chooses to talk about the levy and not the lack of evidence for economic growth having been generated by the 50% business rates devolution. One would have thought that there would have been some evidence to justify the assertions that were made in 2013-14 by his predecessor that a whole new wave of economic growth would be generated as a result of the measures. In the clause 1 stand part debate, I hope to suggest that factors other than local councils’ attitude to development might be holding back economic growth.
Sadly, we did not hear anything from either the Minister or the hon. Member for North Swindon that offered confidence to a council such as Allerdale Borough Council that its difficulties with the barriers to economic growth will be dealt with. The hon. Gentleman made a valiant try by suggesting that pooling might work. I do not know whether he knows Keswick in the Lake District, which is the central town in Allerdale.
Mr Thomas
It is not a coastal area, but it is surrounded by other local authorities that are part of the Lake District national park, which are similarly challenged in terms of constraints on the land they can use. One suspects that the natural pool of authorities that Allerdale council could work with would face similar challenges in terms of land being available for economic growth. That underlines the concern about redistribution.
Mr Thomas
With respect to the hon. Gentleman, that is precisely my point. In terms of business rates, the authorities that will benefit most from a third runway at Heathrow will be the local authorities in the immediate surrounding area. Without effective redistribution, there might be some additional business rates from businesses operating in Cornwall that are perhaps attracted to Britain as a result of a third runway, but primarily the main authorities that will benefit from the increase in business rates growth from that third runway will be the local authorities in the surrounding area.
Rob Marris
May I caution my hon. Friend on this line of argument? The local authorities adjacent to Heathrow will have to spend shedloads more money dealing with the health problems caused by a deterioration in air quality and will be spending more in social care.
Mr Thomas
I am very grateful, Mr Gapes, for your direction that we should not talk about the housing crisis in London. However, you will realise that the revenue support grant helps to provide finance to address some of the concerns about homelessness. Obviously, one of the reasons for wanting to retain, potentially, some revenue support grant within the current local government system is to make it easier for financially challenged local authorities to deal with homelessness and some of the other issues that we have mentioned.
My last point, Mr Gapes—
Mr Thomas
For now. My last point is to ask whether there is a whole series of other impediments to economic growth. The implicit assumption that Ministers always seem to make in relation to the Bill is that local government is responsible for a lack of economic growth. Ministers are careful not to say that in such specific and grand terms, but that is the implicit charge behind the Bill.
One thinks of the difficulties in gaining access to finance that many small businesses experience as just one example of an impediment to growth. Therefore, local authorities deserve more recognition from Ministers, and not only those run by Conservative council leaders but others—such as Manchester and Oldham, and some in London, such as Hackney or Haringey—where there is a championing of the business community at local level and a real desire to see economic growth.
Surely, keeping the provision in the Bill for a little bit of revenue support grant might be, in the long run, one way of dealing with some of the issues on local government finance. That is worth thinking about by Ministers.
Rob Marris
It is, as ever, a pleasure to appear before you, Mr Gapes.
I am intrigued that my hon. Friend the Member for Harrow West is leaving as soon as I have started talking. [Laughter.] He has probably heard what I am going to say and agrees with it; I hope so.
I will focus on clause 1(3), which deals with the abolition of the revenue support grant, and to the surprise of some, I will actually be brief, Mr Gapes. I am concerned about that measure. We have heard talk of incentives but no evidence of that. I am concerned about the inequalities that the abolition of the revenue support grant may lock in.
Mr Thomas
Is my hon. Friend aware of figures I have seen from the House of Commons Library that suggest two thirds of businesses do not pay any business rates at all? If the point about economic incentives is right, authorities have to get particular types of businesses. If they cannot, they are in trouble—all the more reason, surely, to retain provision for revenue support grant to be offered, to help authorities that cannot attract that type of big business.
Rob Marris
My hon. Friend is quite right. We touched on the issue this morning, so I will not rehearse it again, but the whole thrust of the Bill is that councils need the big hitters because, as he points out, small businesses—understandably, to encourage the growth of small and medium-sized enterprises—will not be paying business rates. If they get a big hitter, there is a problem if that big hitter moves away and there is no revenue support grant to make up for it.
There is a real problem for disadvantaged authorities such as mine and those up in the north-west, such as the constituency my hon. Friend the Member for Oldham West and Royton represents, where there will be a crisis in local government funding. The underpinning support within our society in terms of social cohesion and solidarity provided by the revenue support grant will, under clause 1(3) be withdrawn. I urge the Government to look at that again, because otherwise they will run into the same problems they have run into with the so-called fair funding formula for schools, which is causing uproar around the country, including on the Conservative Back Benches.
Mr Thomas
Can my hon. Friend see a case for the retention of at least some revenue support grant in a situation where an authority with a low business rate base receiving a top-up decides to reduce the business rate multiplier? There is a risk that other local authorities paying a tariff will be effectively subsidising the reduction in business rate multiplier in that area, hence the need for the revenue support grant as an alternative.
Rob Marris
I agree—there is a risk of a beggar-my-neighbour downwards. The Government really ought to think again, in the absence of evidence that this will produce the change we all want in terms of business growth and growth of the tax base.
Rob Marris
I will not make the same mistake twice and get tempted off-piste by that, because we will discuss the multiplier later in the Bill.
Mr Thomas
I hope I can tempt my hon. Friend a little more on the Minister’s intervention. That is probably the first bit of clarity we have had on how the system might work in practice. The Minister appears to have said that if an authority reduces the business rate multiplier, no top-up will be available to it, even if it has a low business rates base, making it even less likely that authorities will choose that option. Keeping revenue support grants, surely, is potentially a better alternative for a local authority worried about its long-term financial position.
Rob Marris
With his brain like quicksilver, my hon. Friend was quicker than I was to pick up that. I cannot take credit for wheedling that out of the Minister—it was entirely serendipitous, in as much as it happened. It is, however, interesting that we have a little more clarity, I certainly agree there. I urge the Government to think again about subsection (3).
Local Government Finance Bill (Third sitting)
Debate between Gareth Thomas and Rob Marris(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Mr Thomas
It is a pleasure to serve under your chairmanship, Mr Gapes. We all appreciated your guidance, not only on coffee but on how to address other Committee members. My hon. Friend the Member for Lewisham, Deptford has been at pains to explain in detail what your guidance on both issues might mean in practice.
As Opposition Members committed to supporting the principles of the Bill, we are keen to undertake line-by-line scrutiny so that it might emerge back on to the Floor of the House in much better shape. As such, the occasional outburst of tough love may be directed at the Minister, but it will be with the purpose only of achieving a better Bill. We had a good debate on Second Reading, and one of the key points that emerged from that is germane to the amendments tabled in my name and the name of my hon. Friend the Member for Oldham West and Royton.
One of the most interesting moments in the Minister’s contribution on Second Reading was his description of this as a revolution in local government finance. An image of Che Guevara briefly surfaced across my mind, followed soon after by Corporal Jones of “Dad’s Army”. The Committee’s purpose is to adjudge whether what the Department offers us is more Che Guevara or more Corporal Jones. [Interruption.] At this time in the morning, yes, that is the best I can do.
Clause 1(2) amends the Local Government Finance Act 1988 by removing the provision for a proportion of non-domestic rate revenue to be paid to the Secretary of State. That effectively removes the mechanism by which the Government collect the central share under the current business rates retention scheme. Following the late Margaret Thatcher’s 1988 nationalisation of business rates—who ever thought we would hear “Margaret Thatcher” and “nationalisation” in the same sentence?—all business rates income collected by billing authorities was paid to central Government, with resources then distributed to local authorities up and down the country, according to need, by the revenue support grant.
Under the current scheme, introduced in 2013-14, local government collectively retains the local share, which is 50% of business rates revenue; the other 50%, the central share, goes to central Government. On the local share, there is a system of tariffs and top-ups, with those local authorities with relatively high business rates revenues paying a tariff and, conversely, those local authorities with relatively low business rates revenues receiving a top-up. The new system will see a proportion of business rates revenue paid into an account that will handle payments to and from authorities, including tariffs, top-ups and safety net payments.
Amendment 1 would delete subsection (2), thereby retaining the requirement for a billing authority to pay a proportion of non-domestic rating income to the Secretary of State. Amendment 23 follows on from that. It amends schedule 1 to enable a local and central share to be retained for designated authorities, with the Secretary of State required to publish the criteria for the use of such funds.
Opposition Members made clear our support for the principle of the devolution of 100% of business rates on Second Reading. We also made clear our concern about the almost complete absence of detail on how the measures the Bill paves the way for will work in practice. In the absence of that detail, many in local government and those who follow it closely are worried about the impact of this measure on the provision and quality of local services.
The first big issue with the measure as it currently stands is redistribution. Essentially, the key questions are as follows. How will the redistribution mechanisms associated with this measure work in practice? How will the Minister and his officials seek to amend the system of tariffs and top-ups? Given the importance of revenue support grant and other section 31 grants to helping to ensure spending power between areas is equalised, how will the new system compensate for the loss of revenue support grant and the promised addition of extra responsibilities to local authorities?
Rob Marris (Wolverhampton South West) (Lab)
Perhaps my hon. Friend, with his much superior knowledge, can explain this conundrum to me. How can one support 100% devolution of business rates, yet also argue for redistribution? It seems to me, prima facie, that those are contradictory.
Mr Thomas
My hon. Friend speaks to one of the tensions at the heart of the Bill. On Tuesday, we heard considerable concern about the impact of that tension from the witnesses in both the morning session and the afternoon session. I want to dwell on that tension in due course.
The other question associated with the concern about redistribution, and I hope the Minister will be willing to dwell on this in his response, is, what are the key principles that the fair funding formula will operate on? As I understand it, the fair funding review is currently working its way through his Department. We have no idea, sadly, when we can expect publication of that document. We are none the wiser about the rules by which the fair funding review is being conducted and the criteria that are being used.
Mr Thomas
I do agree. One wonders what the rush is to get this Bill through now, before the fair funding review and the draft regulations associated with the Bill have been published to allow proper scrutiny. Perhaps Ministers’ minds are focusing on the provision later in the Bill to delete any annual consideration of the state of local government finance and the scrutiny thereof, and that is motivating them to rush the Bill through. That is something I want to come to later in the Committee’s proceedings, if I may.
Rob Marris
Does my hon. Friend, like me, detect a worrying trend here? The fair funding review consultation document has not been published and, yesterday, when we concluded two days of debate on Second Reading for arguably the most important Bill since the second world war, the White Paper had not been published.
Mr Thomas
There does seem to be a pattern of Ministers shying away from parliamentary scrutiny. I do not know why, because we always enjoy the Minister’s appearances, but it is a concern, as my hon. Friend the Member for Oldham West and Royton also made clear. Given that this measure is one leg of the triptych of elements that are associated with 100% business rates devolution—the paving Bill, which we are discussing here, the fair funding review and the detailed regulations—one would have thought it better to have seen all those together at one moment so that we could have assessed the benefits or not.
Mr Thomas
My hon. Friend has always been far more charming and conciliatory than me, but he is right: we support the principle of 100% business rates devolution and want it to work for local government, given the huge importance of the services that local authorities provide for the people of England. He is absolutely right that we should have had all three elements together at the same time, so that we could look in detail at the impact of the measure. It would certainly help if we could at least see the details of the responses from the whole series of councils and organisations that responded to the consultation last July. We are not in a perfect situation—he rightly says that the best possible arrangements for scrutiny would have been helpful—but it would help if we could at least see the consultation responses.
The last key question to which it would be helpful to get an answer is linked to redistribution. How will the poorest areas in England not lose out even more as a result of this measure than they have since 2010? I am pleased to say that redistribution engaged the minds of virtually all hon. Members who made speeches or interventions on Second Reading. Perhaps it is worth dwelling on some of their contributions. The hon. Member for Wells (James Heappey) raised the funding gap, which he thought was already too wide, between predominantly urban and predominantly rural authorities—redistribution was an essential point for him. The hon. Member for South Dorset (Richard Drax) worried that, for authorities such as his, which are
“surrounded by every environmental designation from here to God knows where…it is going to be far harder”
under the new arrangement
“to raise this additional money”.—[Official Report, 23 January 2017; Vol. 620, c. 70.]
He was clearly worried that his local authority would lose out, and redistribution was at the heart of his concerns.
The Chair of the Communities and Local Government Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), also raised concerns about redistribution and about how his authority and others might suffer if the redistribution arrangements are not right. The hon. Member for Totnes (Dr Wollaston) raised concerns with the Minister that the improved better care fund might not be maintained, given some of the current problems with the social care precept. Concern about redistribution was at the heart of her question.
Even the hon. Member for Thirsk and Malton, who, sadly, is not in his place, raised, amidst his regular attempt to bash London local authorities, a concern about his local authority, which I understand is a more rural one, and how its spending power might be affected in comparison with other authorities. Again, redistribution was at the heart of his concern. My hon. Friend the Member for Coventry South (Mr Cunningham) was worried about the impact of the measure on the services from which Coventry City Council and Coventry residents benefit. Similarly, interestingly and almost counter-intuitively, the right hon. Member for Cities of London and Westminster (Mark Field) noted the significance of the business rates income that Westminster Council receives and generates, and how it sees some of that income redistributed around the country. He made clear that the redistribution arrangements need to be got right.
My hon. Friend the Member for Manchester, Withington (Jeff Smith) expressed serious concerns about the redistribution arrangements on behalf of his local authority in Manchester. I will come on to Manchester, because it always figures highly in the index of multiple deprivation, which is the analysis of the poorest areas of our country. He was concerned about how the redistribution arrangements might work in practice.
There is surely a concern about the redistribution arrangements between tiers of local government. My amendments could have a significant impact on the sharing of business rates revenue between counties and districts. The arrangement in place involves the 50% retention of business rates. The Minister will know that districts get 40% of the increase in rates income and counties get up to 10%. That is because districts have more direct powers, with economic development planning being the obvious one. Counties, on the other hand, have much higher spending needs. They tend to be the authorities responsible for social care, for example. The system of top-ups and tariffs, as it affects the relationship between counties and districts going forward, will be particularly important.
Interestingly, the Institute for Fiscal Studies argued that a growth in the business rates tax base might mean that counties are likely to lose out over time, and that districts gain. Redistribution between tiers of local government, where multi-tier arrangements are in place, is of huge importance. I hope the Minister will dwell on that point.
Rob Marris
My hon. Friend cited the Institute for Fiscal Studies. Does he share my concern that the Bill might be yet another attempt to slash funding for local government? The IFS found in 2015 that grants from central Government to local government had fallen by 38.7% a person between 2009-10 and 2014-15.
Mr Thomas
My hon. Friend makes a very interesting point. On Second Reading, I mentioned some Institute for Fiscal Studies analysis that bears repeating. When the IFS considered what would have happened between 2013-14 and now if 100% of business rates income were retained at that point rather than having the 50% business rates retention scheme, it found that 16 councils would have seen their funding increase by 20% or more, whereas only one council saw its funding go up by 20% or more under the current scheme. Conversely, on the basis of the IFS analysis, 122 councils would have seen their funding fall under 100% business rates retention between 2013-14 and now, with 12 of those councils losing more than 2% of their income. No council has lost that much under the 50% scheme.
Therefore, the concern put by my hon. Friend in his usual forceful manner—it was about whether there might be further serious cuts in the spending power of local authorities and, crucially, how they would be distributed—was a point well made. That is a genuine concern, which the Minister needs to address.
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.
Rob Marris
On redistribution, does my hon. Friend agree that one way to square the circle of 100% devolution while ensuring that we do not exacerbate unfairness would be to have a system whereby we had 100% devolution of business rates incomes to incentivise to promote development—as the Minister, without any evidence thus far, keeps telling us it would—but also retention of an equivalent to a revenue support grant to redistribute to less advantaged areas such as Wolverhampton and Oldham?
Mr Thomas
My hon. Friend makes a good point, but if he will forgive me, it is apposite to the clause 1 stand part debate, when it will be worth dwelling on the revenue support grant in a little more detail.
I was focusing on authorities that might have concerns about how redistribution would work. Many urban authorities currently benefit from top-ups under the scheme—perhaps that top-up or income is not quite as much as they would want—but are nevertheless very concerned about redistribution. I am thinking of my own authority. The London Borough of Harrow has a very high density of housing, and although there is some scope for new business development, it is a very highly developed area, and obviously constituents and the council want to preserve the character of the area. The Minister may say that there are incentives in the Bill to promote economic development, but in practice there are significant barriers to growth, even in many urban areas. That is one reason why the amendments are critical.
Mr Thomas
It is commendable that Cornwall has offered to be one of the pilot areas. As the hon. Gentleman will have heard me say, it would be lovely to know how the pilot scheme will work for Cornwall, and indeed for Liverpool and London. The Minister and his Department have not yet got round to publishing more detail about that. The hon. Gentleman may have the advantage of knowing how the scheme will work in Cornwall, and I hope that he catches your eye, Mr Gapes, so that he can tell us. That would certainly give the Committee more information than I suspect most of us have. I would not be at all surprised if the Minister was not even sure how the scheme was going to work in Cornwall, so I am sure that the hon. Gentleman will be extremely helpful in that regard.
The hon. Gentleman makes an interesting point. When one thinks of Cornwall, which is a very attractive county, one does not immediately think of huge tracts of land being available for out-of-town shopping centres—the one area of economic growth that might lead to substantial business rates income for local authorities. Cornwall is surrounded by sea, which is a natural barrier to economic growth. It also has huge amounts of farmland, which is essential to retaining the county’s character and is also a natural barrier to economic growth. Of course, Cornwall Council will want to be one of the first pilot authorities, so that it can see how the redistribution arrangements might work. Although it may not yet have seen the detail of the amendments that I have tabled, I expect that it is concerned about how the redistribution arrangements will work in practice in the long term. The hon. Gentleman will be able to play back that at least the Opposition are fighting Cornwall’s corner, even if he is perhaps not quite so enthusiastic on that point.
I come back to the issue of poorer areas versus richer areas and the redistribution arrangements between them. A helpful analysis from the House of Commons Library compares the spending power of councils that have a high index of multiple deprivation rating—in other words, the poorer areas of the country—with that of authorities that have a low index of multiple deprivation rating, which one might describe as the richer areas of the country.
The analysis shows some stark realities, which are particularly pertinent to this debate about redistribution. Let me give a couple of examples. Blackpool, which ranks as the highest in terms of multiple deprivation, had an actual revenue spending power in 2011 of £165.51 million. By 2019, it is projected to have a revenue spending power of only £126.2 million—a loss of £39.31 million in revenue spending power, or a percentage loss of 31%. Compare that with Hart in Hampshire, which is the local authority that ranks lowest in terms of the level of multiple deprivation. In 2011, it had a revenue spending power of £9.35 million. It is projected to see that drop to £8.91 million by 2019, which is a change of £440,000, or just under 5%. So Blackpool is projected to lose 31% of its spending power by 2019. Hart in Hampshire is expected to lose just under 5%. That is a huge gap. In the context of that huge gap, Blackpool Council could be forgiven for being very nervous about what 100% business rates retention might mean, without more detail on whether it will benefit from the Minister’s changes to the redistribution arrangements.
Perhaps a couple of other examples will bear witness to the truth of that potential concern. Hull had £266 million of actual revenue spending power in 2011, which is projected to fall to just over £202 million by 2019—a loss of some £63 million, or a 31% loss in its spending power. Compare that with the Chilterns, the third least deprived authority in England according to the index for multiple deprivation rating. It had an income in 2011, in terms of actual revenue spending power—let me use the right phraseology—of £11 million. According to the analysis, that will drop to £9.86 million by 2019, which is a change in actual revenue spending power of just over £1 million. That is a drop of 11%—that is still a significant drop in its spending power, but is nothing like the scale of the drop that one is going to see in Hull. So the Chilterns local councillors might be forgiven for being quite enthusiastic about 100% business rates retention. They might think that, if the Government continue to operate the redistribution formula in the way that they have, although the council might lose, it might not lose much in relative terms.
One suspects that councillors in Hull, particularly those with responsibility for finance, will be extremely concerned that, if the current system of redistribution continues, given how much they have already lost in spending power and are projected to lose by 2019, they will risk losing even more capacity for spending power when 100% business rate devolution comes in.
Rob Marris
Does my hon. Friend agree that, unless amendment 23 is agreed, that unfairness could continue? The national figures from 2010-11 to 2016-17 show an overall 17% reduction, but the proportion of expenditure financed by centrally distributed income fell from 75.9% in 2010-11 to 57.4% in 2016-17, according to page 30 of the Library briefing. Does he agree that that is a shocking drop and that we need acceptance of amendment 23 to counterbalance that trend?
Mr Thomas
My hon. Friend makes a good point. I hope that the Minister is beginning slowly to get the concern of hon. Members, reflecting the concerns of local council leaders and councillors, about how the redistribution arrangements will work in practice.
I will end this point with one last example, which may be particularly interesting to one member of the Committee. That is the comparison between the 10th most deprived council, Tower Hamlets, and South Northamptonshire Council, the 10th least deprived.
Rob Marris
As ever, my hon. Friend is making a powerful argument, which is of course backed up by evidence. Does he agree that unless amendment 2 is passed, the trend is likely to continue and, as with the main thrust of the Bill, there will be winners and losers? Given social trends, the losers are likely to be deprived areas where residents tend to have worse health, greater needs and lower levels of financial self-sufficiency. Therefore the redistribution mechanism foreshadowed in amendment 2 is much needed.
Mr Thomas
I agree with the broad thrust of that; those in poorer areas, as evidenced by the index of multiple deprivation, are likely to be at most risk, in terms of social care. However, figures now available on social care funding suggest that the crisis is hitting areas beyond those that are poorer. There is clearly a national emergency, and I fear that it may get worse if the issues raised in amendment 2 are not addressed.
Mr Thomas
As always, Mr Gapes, I am grateful for your guidance, and particularly for the thought of what might happen at 1 o’clock, if I am lucky.
Sadly, the hon. Member for Waveney, is not here, but Suffolk County Council, his local social care authority, has increased social care funding by 8.4% in absolute terms. My hon. Friend the Member for Wolverhampton South West may or may not be reassured to hear that that still represents a real-terms cut of 0.6% in social care funding. The Minister seems to have looked after his own social care authority, Warwickshire County Council, which has cut spending by just 1% in real terms. However, Cornwall Council, the local social care authority of the hon. Member for St Austell and Newquay, does not fare quite so well. Although it has increased social care funding by 5.6% in absolute terms, that is a real-terms cut of 3.2%.
Mr Thomas
Let us not go down that route. As I understand it, the hon. Members for Taunton Deane and for Somerton and Frome share a local care authority, Somerset County Council, which has cut social care spending by 6.2% in real terms. Northamptonshire County Council, which I believe the hon. Member for Northampton South knows well, has cut social care spending by 10.3% in real terms. Thurrock unitary authority, which serves the hon. Member for Thurrock and her constituents, has cut social care spending by 5.8%—a real-terms cut of 13.6%.
Of course, I do not want to leave out the hon. Member for Torbay. I understand that Torbay unitary authority plans to spend some £37.5 million on social care in this financial year, compared with £45.9 million in 2010-11—an 18.2% cut, or 25% in real terms.
Rob Marris
As I hope my hon. Friend agrees, amendment 2 would help redress a greater imbalance to which he has not yet referred. The social care precept will raise proportionately far more money in well-to-do areas than in disadvantaged areas such as Wolverhampton, thereby increasing the disparity in provision that amendment 2 seeks to redress.
Mr Thomas
My hon. Friend makes a good point. He and the rest of the Committee should look at the very particular situation facing Surrey County Council. We have heard that every councillor in Cornwall and in South Northamptonshire is an enthusiastic supporter of the current distribution of finance and of these proposals. As I hope Conservative Members recognise, however, not every Conservative-run council shares that enthusiasm for the way in which local government funding is managed. Many have serious concerns. It is important for us to consider the evidence from those councils as well as from the South Northamptonshires and Cornwalls, in the context of whether the social care crisis will continue beyond 2020 under the Bill.
Surrey County Council’s leader, David Hodge, an experienced figure in local government, has revealed that he will call for a referendum on a proposed 15% increase in council tax. My hon. Friend the Member for Oldham West and Royton, who has significant recent experience of local government, tells me that Mr Hodge is an extremely effective and astute leader and an imaginative figure in local government.