George Howarth
Main Page: George Howarth (Labour - Knowsley) Local Government Finance Bill
George Howarth ExcerptsMonday 23rd January 2017
(7 years, 11 months ago)
Commons ChamberRead Full debate Local Government Finance Bill 2016-17 Read Hansard Text
Mr Jones
My hon. Friend is certainly correct in saying that we need to take a significant look at how funding is provided across the system of local government. As I have pointed out on a recurring basis, the principles for the fair funding formula do not feature in the Bill, but they are an important consideration and we are certainly taking the issues that he has raised into account in the work that we are doing alongside the Bill. We are taking soundings from local government.
The Bill also includes a range of measures to cut business rates for small businesses and local amenities so that local communities can thrive. We will take a power, following the commitment in the Budget last year, for the Treasury to set the indexation rate for the business rate multiplier. This will allow us to change the multiplier from the current rate of RPI to the significantly lower CPI measure. We will change the rural rate relief to ensure that small businesses in rural areas receive the same level of business rate reliefs as those in urban areas. This is not only fairer; it will also make a real difference to many employers across the country.
We will provide a new relief for five years for the installation of new optical fibre, fulfilling an announcement made in last year’s autumn statement. To make central Government more responsive to changing business circumstances, the Bill streamlines the administrative process of including premises on the central rating list. We will also be introducing charitable and unoccupied property relief for premises on the central list, bringing them into line with those on local lists. Much to the amusement of hon. Members when the subject came up in Communities and Local Government questions last week, we are also providing a new discretionary relief for public toilets. Councils will be able to maintain these important facilities without having to spend quite so many pennies. This Government are committed to providing the right conditions for growth. A key function of the Bill is to provide local government with strengthened incentives for growing their business rates income and encouraging local businesses to set up and grow.
Mr George Howarth (Knowsley) (Lab)
I wonder whether the Minister could clarify something for me. On the question of telecommunications infrastructure, the Bill states that the provisions will apply where
“the hereditament is wholly or mainly used for the purposes of facilitating the transmission of communications by any means involving the use of electrical or electromagnetic energy”.
My reading of that is that it confirms that the rate relief would be for the actual infrastructure used in telecommunications and that, for example, Virgin Media, which has a property in Kirkby in my constituency, would not be eligible for the rate relief under that provision. I hope I am wrong about that. Can the Minister advise me?
Mr Jones
I think that the right hon. Gentleman might be conflating the central list, and the hereditament or infrastructure, with the business rate relief, which is designed to incentivise providers to lay further networks of fibre-optic cables in the ground so that people can benefit from superfast fibre broadband across the country.
Under the current system, central Government put a levy on local growth. We have listened when councils have told us that this tax on success—this penalty for doing well—is a huge disincentive for local authorities. The Bill scraps the central Government levy for good. This means that local authorities will keep 100% of growth in business rate income between reset periods. That will be a real incentive to grow their local economies, and a great way to keep the proceeds of growth in their communities. We will also allow local authorities that set up pooling arrangements to designate specific areas where they want to boost growth. They will have the potential to keep all the growth and not lose it to the periodic reset and redistribution process.
Mr George Howarth (Knowsley) (Lab)
It is a pleasure to follow the hon. Member for South Dorset (Richard Drax), and I am sure his comments will be listened to with great interest by Ministers.
The reform of business rates is, as many others have said, welcome in principle. The Minister made very big claims in his opening speech about the benefits that would follow from it. For example, in response to my hon. Friend the Member for Coventry South (Mr Cunningham) he used the argument that the measure would be fiscally neutral, but we have had no convincing explanation of what the mechanics of making it fiscally neutral will actually be. Indeed, my hon. Friend the Member for Harrow West (Mr Thomas) made similar points, yet so far we do not seem to have had any clear answer to those queries. For me, the two tests are: first, will the Bill enable the resources to get to the areas in greatest need, a point that others have already mentioned; and, secondly, will it be fair to council tax payers, businesses and local authorities?
Before I tackle directly some of the issues and how the Bill will work in relation to them, I need to say a few words about the wider context of local government funding and services. In Knowsley, between 2010 and 2020, the local authority’s budget was reduced by a staggering 46%—I repeat, 46%—which equates to £94.7 million in cash terms. In other words, Knowsley has already experienced the biggest cut in Government support, which is largely where those figures come from, of any local authority in the United Kingdom. It is therefore quite right for me to make known our concerns about the problem and try to relate those concerns to the Bill.
Such things do not of course happen without consequences. As the National Audit Office made clear in 2014, all local authorities in England had at that time already experienced a real-terms reduction in funding of 37% since 2010. In itself, that represented a 25% cut in councils’ incomes. We cannot sustain such cuts without their having consequences. In 2016, PricewaterhouseCoopers said in a report commissioned by Lancashire County Council that there was
“a significant risk that the cost of statutory services will exceed the financial resources of the Council.”
In other words, it predicted the real possibility that that particular local authority—I suspect this would apply to many others—might not be able to function in a legal and proper manner. Such cuts do have consequences. For example, in Knowsley, between 2015 and 2020, schools on average face a funding cut of £240 per pupil. Despite the Conservative party manifesto commitment to protect such funding, many schools in my constituency will be badly affected.
How does the Bill address those problems? Unfortunately, on the basis of what we have been told, the answer is that we do not know. The Minister talked about focus, but too many of the details are still too fuzzy for us to make a rational assessment of how it will work. We therefore need the measures to be stress-tested.
A briefing note I have received from the Liverpool city region says about the Liverpool city region pilot scheme:
“Despite submitting its formal proposals regarding the scope of Pilot Scheme to the Department for Communities and Local Government in October 2016, the City Region has still had no indication of what the Pilot Scheme will look like, or even when the details of the Pilot Scheme will be provided. This is now severely hampering our ability to plan effectively for the Pilot Scheme’s imminent commencement on 1 April 2017.”
The people who are expected to do the testing that will take place do not even know what the terms of the testing will be, and that, frankly, is a matter of great concern.
I want to move on to the question of additional funding for city regions such as the Liverpool city region. Today, I was at the launch of the campaign of my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) to be the first ever elected city region Mayor, and he made a very good fist of explaining how he wanted to use the funding. However, there is so much uncertainty about how the powers and the resources can be used, particularly in relation to infrastructure resources, that when he comes in, it will be almost impossible to say what measures and resources will be available to carry out some pretty critical infrastructure changes.
I will not say any more, but it seems to me that the two tests I set at the beginning—whether the Bill will get resources to the communities most in need, and will be fair to local government, business and communities—still have not been met, because we do not have enough detail to know how it will work in practice. I appeal to the Minister for Housing and Planning to give a commitment, when he winds up, to start talking to Liverpool city region, the council leaders who at present run the combined authority, the mayor of Liverpool and the candidates for the city region Mayor about how all this will work. At the moment, the complete lack of clarity has left people utterly bewildered, and I am sure the Minister would agree that that is not the position we want local government to be in. I hope that we can have more dialogue. As I said at the beginning, I am not opposed to the principle of the Bill, but we do need more detail, more clarity and more dialogue, and I do hope we will get that.
Jim McMahon
We have heard from Members on both sides of the House the deep concern that any review will mean that some areas are worse off than others. As I said, that is inevitable with such narrow tax bases, when we are looking at council tax income and business rate income and saying, “That’s it.” Given that the additional grants to local authorities are now in question, we are always going to be fighting for a scarce resource.
Devolution deals have included requests for retention of air passenger duty and the tourism tax. Okay, not every area might want that, but if we believe in devolution, local areas should be able to have some of these options. The retention of fuel duty or VAT at a local level has not even been discussed. If we want genuine fiscal devolution, we need to be more open to more taxes being raised locally and spent locally, with local people holding to account the people who make those decisions.
It is not local government that needs to change, or even the DCLG team, but the Treasury—it needs to let go. The reason air passenger duty cannot be devolved at the moment is that the Treasury has no idea how much fuel duty is generated at any of our airports, because it is paid by the airline at its head office. The Treasury has no idea how much is generated from fuel duty, because it is not attributed to every petrol station but paid at the refinery, and that does not account for how much is spent at a local level.
Mr George Howarth
My hon. Friend is making a powerful point that many of us tried to make earlier. Does he agree that on top of the fact that no redistributive mechanism is involved in this measure, there has not been sufficient testing of what the outcomes will be for us to be satisfied that it will work to the benefit of all local authorities?
The Minister for Housing and Planning (Gavin Barwell)
As several hon. Members have kindly mentioned during the debate, today is my 45th birthday. It is not a cause for celebration on my part, but what better way to numb the pain than to attend a debate on local government finance? For nearly 24 of my 45 years, I have been interested in housing and local government policy. In all that time, there has been a very strong call for local government to move away from its dependence on central Government grants.
The Chair of the Select Committee, the hon. Member for Sheffield South East (Mr Betts), for whom I have very great respect, asked whether the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton (Mr Jones), was justified in saying that this is a revolutionary measure. I think it is: it is a big step change in reducing the reliance of local government in this country on central Government. Will it solve all the problems? No, of course it will not. There will still be arguments about the overall level of resourcing and the distribution among local authorities. However, I remind all Members of the House to read the briefing we have received from the Local Government Association, which says that the central measure in the Bill has long been called for by local councils.
The hon. Member for Harrow West (Mr Thomas), who spoke on behalf of the Opposition, suffered a bit of amnesia on the Labour Government’s record in office on devolution. None the less, it was very good to hear that the Opposition Front Bench support the measures in the Bill in principle. He was right to say that the Bill is part of a wider package that is very important in terms of what will be devolved to achieve the fiscal neutrality of its measures, on which the Government are consulting at the moment, as well as the distribution of the funding that will ensure a fair settlement for all local authorities and the issue of providing a safety net in case any authority faces a sudden decline in its income.
I will just make a few points in that regard. The hon. Member for Manchester, Withington (Jeff Smith)—he is not in the same place as he was earlier—asked us to forgive him his scepticism. I certainly do forgive him. I think scepticism of all Governments over the years on these matters has probably been justified. However, we cannot legislate for fair funding. The relative needs of various parts of the country are going to change over time—the Chairman of the Select Committee made that point very powerfully—and we cannot legislate for that, but we are absolutely determined to get this right. At the moment, we have two approaches to taking forward the detail and making sure that we address the concerns that Members on both sides of the House have expressed. We will pilot the arrangements, and two hon. Members —my hon. Friend the Member for St Austell and Newquay (Steve Double) and the right hon. Member for Knowsley (Mr Howarth)—represent areas that are piloting reforms. We also have a very important steering group with the Local Government Association, and it is working with local government to try to get the details right.
Mr George Howarth
Although the pilots are welcome, I made the point earlier that the Liverpool city region—it is one of the pilot areas, as the Minister has said—has had no consultation whatsoever by the Government on how they want to proceed with the pilot. Does he not think that we could do with a bit more detail before we get to the Committee stage so that we can judge what the likely outcomes will be?
Gavin Barwell
The Secretary of State has just told me that he has discussed the pilot with leaders in the city region and my officials have told me that there have been some detailed discussions. It is certainly true that not all of the points have been dealt with yet, but I will happily write to the right hon. Gentleman to provide him with some reassurance.
I will deal with some of the points that colleagues have made. My hon. Friend the Member for Christchurch (Mr Chope) talked about local government reorganisation in Dorset and what the position might be there. I can tell him that it would be possible to set one level of council tax from day one, but in previous reorganisations a period has been allowed for council tax rates to equalise. He asked about the pooling arrangements set out in the Bill. We intend to consult local government about those arrangements, but the reason for the change is that the current arrangements have led to some local authorities being left out of what would have been logical arrangements, and we should not allow that to continue. He also made the point that we are looking to implement these reforms in the last year of the four-year settlement. That is true, and we made that clear at the outset when we set out the settlement.