Local Government Finance

Henry Smith Excerpts

Tuesday 5th February 2019 Commons Chamber

[James Brokenshire]

I need to make some progress due to the time available for this debate.

To do more, it is crucial that we listen and respond to what local authorities are telling us, not just on the NHS and social care, but on all issues. It is in that spirit that we are increasing the rural services delivery grant by £16 million in 2019-20 to maintain it at last year’s level. In addition, after consulting widely, we have decided directly to eliminate negative revenue support grant—where changes in revenue support grant have led to a downward adjustment of some local authorities’ business rates top-up or tariff—in 2019-20. I recognise the strength of feeling about that, and I believe this is the most straight- forward and cost-effective approach for the next year.

We also want to continue rewarding councils for delivering the homes we need. I therefore confirm that the new homes bonus baseline threshold will be maintained, at a cost of £18 million. The message about councils wanting certainty to help them plan also came across loud and clear in the consultation. To that end I can confirm that, in 2019-20, local authorities, with the exception of police and crime commissioners, will retain the same package of council tax referendum limits as in 2018-19. This will protect local taxpayers from excessive increases, in line with our manifesto commitment.

Every council has the freedom to set higher council taxes if it wishes, provided it gains the consent of local people in a referendum. I am also providing an additional 2% council tax flexibility to Northamptonshire County Council to assist with improvements to council governance and services after its serious issues.

With the end of the current multi-year deal in sight, it is clear that we need to take a longer view on how we fund councils as we move to a stronger, sustainable, smarter system of local government. Preparations this year for increased business rates retention, a new approach to distributing funding between local authorities and the upcoming spending review will be pivotal to this, as will the important work under way with local authorities and the wider sector to better understand service costs and pressures. Again, we are listening and responding.

For years, councils have asked for more control of the money they raise, and we are giving it to them through our plans to increase business rates retention to 75% from 2020, in the process providing local authorities with powerful incentives to grow their economies. Local authorities estimate they will retain around £2.4 billion in business rates growth in 2018-19 under the current system, a significant revenue stream, on top of the core settlement funding I am outlining today.

The pilots testing increased business rates retention have, unsurprisingly, proved very popular, and I am delighted there will be 15 new pilots for 2019-20 covering 122 local authorities. We will also be piloting 75% business rate retention in London and continuing our existing pilots in devolution deal areas.

[Henry Smith (Crawley) (Con)]

I thank the Secretary of State for including West Sussex in the business rates retention scheme and for the 4.2% increase the county council is getting. Crawley Borough Council has reserves of over £21 million. What more can be done to make sure that councils use such large reserves more efficiently?

[James Brokenshire]

I congratulate my hon. Friend on the way in which he has championed his local area. As a former local government leader, he has shown what can be delivered through local authorities, and I commend him for that.

My hon. Friend highlights the increased spend that West Sussex will gain as a consequence of the settlement before the House, but obviously it is for local authorities to work smartly and thoughtfully in relation to their retained reserves. There is a clear need for reserves, which he will understand, but he rightly underlines the need to use those funds sustainably, appropriately and effectively.