Local Government Finance Bill

Helen Jones Excerpts

Tuesday 10th January 2012 Commons Chamber

[Helen Jones (Warrington North) (Lab)]

This has been an interesting debate, marked by a number of contributions from people with real expertise in local government finance and real concern—from those on the Opposition Benches—about what the Bill means for their communities. I do not have time to do justice to them all, but my right hon. Friends the Members for Wentworth and Dearne (John Healey) and for Greenwich and Woolwich (Mr Raynsford), both distinguished former Ministers, made some serious points, as did my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Communities and Local Government Committee, supported by my hon. Friends the Members for Stalybridge and Hyde (Jonathan Reynolds), for Plymouth, Moor View (Alison Seabeck), for Stoke-on-Trent Central (Tristram Hunt), for Lewisham East (Heidi Alexander), for Sefton Central (Bill Esterson), for North Durham (Mr Jones), and for Stockton North (Alex Cunningham). They were all united in their deep suspicion of the Government’s motives and they are right to be, because as usual the Government began with grandiose declarations about what they intended to do, but that ended in failure.

There has been a failure to look properly at local government finance as a whole, a failure to consider need and a real failure to accept the Government’s own role in promoting economic development. We have ended up with a deeply flawed Bill in which we are asked to write a blank cheque for the Secretary of State. He will decide the tariffs and top-ups, he will decide the amount of the levy and he will decide who gets a safety net payment. He is rapidly becoming the Del Boy of local government finance, selling us all dodgy schemes while he sits there, rubbing his hands and saying, “You know it makes sense.” We are not buying, and we are not buying because we know his record. We saw how in the so-called Localism Act 2011 he gave himself 100 more powers. We have seen him design a local government finance settlement to centralise power and devolve the blame. That is exactly what the Government are up to now, and it was clear from the moment of their consultation, when they said that

“local authorities can be reluctant to allow commercial development and promote economic growth”.

I ask the Government, as I have asked them before, to name one such local authority. I know of no local authority—certainly no Labour local authority—that is not desperate to attract jobs and growth. It is not local councils that have stalled the economy, but this Government, who inherited an economy that was growing faster than the EU average and faster than that of the United States, and who destroyed it with a slash-and-burn approach to public spending. Of course, the Secretary of State is a true believer in that. He began in 2010 with in-year cuts to specific grants, which by their very nature target the most deprived communities. He then designed a local Government finance settlement that we are asked to accept as the baseline for business rate redistribution and that is breathtaking in its unfairness.

One need only look at the heat maps to see where the cuts fall: the north-east, Yorkshire, the north-west, parts of inner London and parts of the midlands. As a result of the Secretary of State’s settlement, by 2012-13 Liverpool will have lost spending power of £235 per person, Hartlepool £183, Newcastle £144 and Wokingham—the Government’s favourite council—just £1. That is what we are asked to accept as the baseline—a baseline, moreover, that includes the new homes bonus and the 2011-12 council tax freeze grant. That all gives advantages to authorities with a high tax base over those with a low tax base. The system starts from inequality and it will go on to entrench it further.

There is nothing in the Bill about the infrastructure that many areas need to allow them to develop and there is nothing about the surplus capacity in many of our cities. Liverpool has empty office space that is already subject to rates, which could create 15,000 jobs if brought back into use, but hardly any extra income for the local authority. An area such as Halton has 22.3% of its business property with an empty rating assessment. Again, that could create more jobs but hardly any extra income for the local authority.

The big black hole in the Government’s Bill is any recognition of their own responsibility to promote growth and help weaker economies to grow. It is not surprising then that they have even failed to address where business rates are a proper measure of economic growth at all. Commercial and retail premises generate far more business rate than manufacturing and small businesses. Small business start-ups, internet businesses and sectors such as tourism are vital to our economy but generate little in business rate. Nationally, we need those businesses. We need the skills they bring, the innovation they develop and the exports they gain. It is typical of the Government’s muddled thinking that they claim to support manufacturing and small businesses but then design a scheme with a built-in incentive for retail. No wonder the Secretary of State has been told by the leaders of local authorities in manufacturing areas that the Bill gives preference to retail over manufacturing.

The Bill also gives preference to the rich over the poor. Under the scheme, the gap between rich and poor areas and between north and south will widen—even if top-ups and tariffs grow by the retail prices index. It will widen even if all local authorities generate the same increase in business rates and council tax, because another thing that the Government have failed to consider is the different tax base of local authorities, particularly the different council tax base, which is not in the Bill at all. They have nothing to say about areas such as the north-east, where 56% of properties are in band A and 86% are in bands A to C. They have nothing to say about the difference between those areas and Surrey, for example, where 75% of properties are in band D or above. They have nothing to say about it because they do not want to address the problem of inequality.

The same is also true of the Government’s suggestion about the localisation of council tax benefit, which we will need to discuss in much more detail in Committee. The scheme will ensure that the people who are hit hardest will be the working poor—the people who go out every week to earn their poverty—and this from the Government who say they want to make work pay.

Another big thing that is missing from the Bill is any assessment of need. This Government with a Cabinet stuffed full of millionaires do not care about those who need local services. I know the Secretary of State is going to tell me that he is not a millionaire, but he hardly represents the squeezed middle, does he? The Government have nothing to say about areas such as Liverpool, which has seen a 73% increase in special guardianship orders since 2009, or Durham, where nearly 2.5 times as many people require home care as in Surrey. They have nothing to say about areas such as Halton, where 24% of the population have a limiting long-term illness. In future, those services cannot be safeguarded if business rates fall because the Bill introduces a postcode lottery in services and benefits. No longer will a person’s entitlement depend on their situation; it will depend on where they live.

It is for that reason that we oppose the Bill. It will increase the disparity between rich and poor; it will hit the poorest areas most; and it will in the end ensure, as my hon. Friend the Member for North Durham said, a two-tier, two-speed economy in Britain. For that reason, I urge my hon. Friends to oppose the Bill in the Lobby tonight.

--- Later in debate ---

[Robert Neill]

There has been little time, and I intend to make a few points, if I may.

Secondly, and particularly regrettably, there was the simplistic analysis and the misleading attempt in the debate to create a false north-south divide—particularly disgraceful, it might be thought, when one has only to look at the facts and observe that over the last five-year revaluation period, when the average business rate growth in England was 5%, the following authorities had business rate growth above the average, and therefore would have benefited more than average had our proposed system been in place: Doncaster, Durham, Greenwich, Hull, Liverpool, Manchester, North Tyneside, South Tyneside, Sunderland, Sefton, Stockton, Middlesbrough—[Interruption.] No, I am not prepared to take any lectures from Labour Members when they cannot get the facts right. I will give way once, briefly.

[Helen Jones]

Would the hon. Gentleman like to tell us how much was invested in those regions by the Labour Government to promote that growth—investment which has now been cut under his Government?

[Robert Neill]

That confirms my view that there is an illusion that the racking up of debt is somehow beneficial to this economy, and that is the reason why, I am afraid, in one aspect of the Bill, it is necessary for us to deal with the required deficit reduction in relation to council tax benefit—precisely because the only way in which we will get sustainable long-term growth in any parts of this country is by reducing the deficit that we inherited.

In tackling that important issue, the Bill seeks to meet the concerns of local government that the reform of the benefits system into universal benefit might have meant that there was no longer direct payment of those moneys to local authorities. Our Bill makes that point, but also gives local authorities the ability to design those savings in a way that reflects their needs and their priorities—which, as we all heard from the debate, vary from locality to locality. The unwillingness of Opposition Members to face that simple reality speaks volumes about the shoddiness of their analysis.

It is remarkable that, with one or two honourable exceptions, no attempt was made to pursue some of the important measures which have been put in place to safeguard the underpinning of the business rate retention system. Not only will there be a baseline to ensure that no local authority loses out at the start, but the system of tariffs and top-ups will be uprated according to the retail prices index so that the vast bulk of local authorities’ income will be protected, and at the same time, local authorities that are incentivised to encourage growth will always see some benefit coming through. Similarly, the hon. Lady referred to infrastructure, but she poured scorn upon the introduction of tax increment financing, which is exactly the means of unlocking some of that infrastructure—a model called for by all dispassionate observers, and for many years by Members of all parties, but consistently ignored by the Opposition. They seem to be stuck in—

[Helen Jones]

rose—

[Robert Neill]

I have given way once and I shall not give way again. I am sure the hon. Lady will have plenty of opportunity to raise these matters when we debate the Bill in Committee on the Floor of the House. I find it amazing that the shadow Secretary of State complained about that. It says it all that the first comment that the shadow Secretary of State could make was a debating point that it was objectionable that we should take such business on the Floor of the House, where every Member can participate, since every one of their local authorities is affected by the proposal. That suggests that the Opposition had very few other arguments to deploy. It is a little like the consistent trotting out of the inaccuracy in the growth figures across the UK. When we are reduced to a sort of political re-run of “Z Cars”, we know we have won the argument because the Opposition have nothing else to put into the equation.

The reality is that for the first time the Government have taken steps to redress the balance in a system that is recognised across the world as not working. There is not an adequate linkage with local authorities. I believe there are local authorities of all parties that want to do the best by their community, but they lack the tools and the mechanisms to create that by encouraging growth in their areas. We are replacing a flawed system with one which gives them the scope for growth. I had hoped that Members in all parts of the House would applaud that. However, we get a degree of churlishness and carping, indicating that because the Opposition did not come up with the plan, they regard it as unworkable.

We will talk through the details of the Bill as we examine it in Committee, but it is worth noting that very many of the independent responses to the consultation favoured this reform. It is worth bearing in mind the fact that in 2008-09 the Communities and Local Government Committee said that relocalisation would give local government an additional tool to pursue local recession-proofing policies, and it is worth recognising that the new local government network, not normally associated with the coalition side of the House, said that it recognised the potential that the growth incentive presents to create new private sector jobs and prosperity.

Hon. Members ought to wake up to reality and recognise that what is being put forward is an important and valuable reform. I hoped that rather than voting against it, they would have endorsed it and worked with us to make sure that we have a lasting system of finance for the future.

Question put, That the Bill be now read a Second time.