Local Government Finance Bill

Henry Smith Excerpts

Tuesday 10th January 2012 Commons Chamber

[Henry Smith (Crawley) (Con)]

It was a great privilege to speak in last year’s Second Reading of what is now the Localism Act 2011 and to serve on the Bill Committee, but I always considered that legislation to be only a part of the overall programme of localisation that this Government are, happily, determined to introduce. In the financing of any system, the old truism still holds that he who holds the purse strings controls the power. The way in which local government is funded is an important aspect of localism. That is why I am pleased that we are completing early in this Parliament the process of radically shifting the balance of power in this country from central Government towards local government, local communities and individuals. The Localism Act was a significant contribution to that move, and this Bill completes it.

For seven years I was a county council leader operating under the system we are seeking to remove. My right hon. Friend the Secretary of State rightly noted that, as the OECD has said, it is incredibly complex and completely lacks transparency. Worst of all, it is incredibly subjective. Ministers have therefore been able to use this complex system to fund parts of the country that they favour politically. I witnessed that several years ago when I was a council leader. The funding formula produced for West Sussex county council—an authority that covers more than 750,000 people and 770 square miles, and with a capital and revenue budget of about £1 billion—was an increase of just £6,000. At the same time under that formula, Birmingham city council received an increase of £12 million. West Sussex county council tried to find out how the funding formula was calculated, but there was a complete lack of transparency. The central Government Department did not want to tell the authority how it was worked out. We then invoked the Freedom of Information Act, and an obscure measure from 1947—the Statistics of Trade Act 1947—was used to explain why we could not be told what the funding formula was. The system desperately needs reform, therefore.

I welcome the retention of the business rates scheme, which will localise business rates. Most people are perplexed about why business rates currently go straight to Whitehall in an inefficient way and are then inefficiently redistributed around the country.

Gatwick airport lies within my constituency. It is a massive economic driver. It would be nice if we could keep all the business rates. If so, I do not know whether we could quite pave the streets with gold, but we could probably fill in a few potholes with gold. It is right to have a system whereby central Government can redistribute in order to support less economically buoyant areas around the country, but it is also right that we localise a large proportion of business rates and thereby allow local authorities to be much more responsive and to encourage economic growth. That is good not only for localism, but for economic growth in each local area—and therefore for the economic growth of the country as a whole and for our deficit reduction programme, which is so important to the well-being of the country.

I wholeheartedly support the Bill. It is good for our local communities and for council tax payers. Finally, I thank the Secretary of State for working with our local authorities to freeze council tax for another year; it rose by 128% in Crawley between 1997 and 2010.