Local Government Finance Bill

James Duddridge Excerpts

Wednesday 31st October 2012 Commons Chamber

[Robert Neill]

I must confess that my view on that has shifted somewhat. I was initially sceptical about cross-county boundary pooling, because of the potential administrative complexities involved. For example, we would have to consider how to deal with the tier split where two-tier areas were involved. It might be easier to achieve where only adjoining unitaries were involved. We should not rule it out totally, however. It is important to recognise that the proposal that we are debating fits into the broader localism agenda, in that it recognises that economic geography might not follow the purely administrative geography of an area. I am in favour of maximum flexibility, and my hon. Friend has raised a good example. In my area, Bromley would probably fall within the area of Greater London, but there are some local authorities on the edge of London, such as Thurrock, Slough and Watford, whose economic geography would make them as much a part of the London economic area as of the shire county of which they are a part. I hope that the Government will consider this as an option, provided that the technical issues can be resolved. Perhaps the Minister will deal in detail with the important point that my hon. Friend has just raised.

It is particularly useful to explore that point in the context of the pool providing an opportunity to raise funding for infrastructure investment. Earlier this week, in our debate on the Public Service Pensions Bill, we discussed raising the cap on the amount of local authority pension funds that could be put into infrastructure investment. I favour raising the cap, as the Bill proposes. The proposal before us today would provide yet another means of raising revenue streams that could be put together to enhance the amount of a local authority’s investment leverage.

It is worth bearing it in mind that that happens elsewhere in Europe. We see a degree of it in the Federal Republic of Germany, but the area that I know best is in France. The French have developed quite sophisticated models of co-operation, known as communautés urbaines. They are generally similar to a Greater Manchester-style joint authority, stretching across a conurbation. An example that I know well is that of greater Toulouse, which, thanks to the pooling of resources, has been able to procure, invest and deliver infrastructure jointly. This has led to the development of a metro system in Toulouse, a tramway going out to the suburbs and improved road links to Blagnac airport. Toulouse is an historic city with a considerable learning pool in the centre, but it is also inextricably linked to Aérospatiale and the avionics industries around Blagnac, which are outside the municipal boundary. I am reminded that such co-operation was the logic behind local enterprise partnerships.

[James Duddridge (Rochford and Southend East) (Con)]

My hon. Friend knows my constituency well. I see parallels between his examples and the expansion of Southend airport, which is owned by Southend unitary authority but located in the district of Rochford. How would the proposals impact on my constituents? It sounds as though they could present an exciting opportunity.

[Robert Neill]

I am quite well acquainted with my hon. Friend’s constituency, and I have visited Southend airport on a number of occasions. He has provided a classic example of how pooling could unlock significant opportunities. As he knows, Southend’s boundaries are tightly drawn around its urban area, but it is clearly part of a broader south Essex conurbation. Its development opportunities, of which the airport is an example, lie almost entirely outside its boundary, but people would think of them as being part of Southend because they form part of the economic area. It would cause all manner of upheaval if we were to resolve the problems through the top-down imposition of a unitary structure in south-east Essex, as we have seen happen elsewhere.

--- Later in debate ---

[Robert Neill]

I am grateful to you, Mr Speaker.

[James Duddridge]

Before my hon. Friend rushes on to his next point, may I slow him down a little and draw him back to the pooling of funds? He has spoken eloquently about my constituency of Rochford and Southend East, but does he think that areas involved in such pooling arrangements need to be contiguous? For example, there are many synergies between Thurrock, a unitary, and Southend, another unitary. The two are close, but they do not actually touch. Similarly, along the Thames Gateway line, we see places such as Margate and other seaside towns that could work well together even though they are not neighbours. Would they still be able to pool?

[Robert Neill]

That is taking the argument beyond what I was considering when I left office, which gave me more time to reflect on these matters. My hon. Friend and I both had a little time to reflect over the summer. Like me, he has been putting it to constructive use. I think there is merit in providing that option: why not? If the economic geography is such that the two areas hang together, why should we rule out such a possibility? In this day and age, investment decisions will be driven precisely by factors such as economic characteristics, infrastructure opportunities and the nature of the work force and the market, rather than by geographic contiguity alone.

I mentioned earlier, for example, that Slough has a great deal in common with the economy of west London, without being actually contiguous to the London borough of Hillingdon. As I recall, a little bit of the county of Berkshire is located between the two. If such arrangements were wanted, merit could be seen in allowing Slough to enter into a pool with Hillingdon, with some other west London authorities or with Watford. Equally, going in the other direction, Slough might want to involve Reading. There is an argument for saying that there is a natural economic geography that starts almost at the Hammersmith flyover and which goes out through Brentford and then through what is generally called silicon valley. Those opportunities are also important.

--- Later in debate ---

[Richard Fuller (Bedford) (Con)]

rose—

[James Duddridge]

rose—

[Mr Iain Wright (Hartlepool) (Lab)]

rose—

--- Later in debate ---

[Robert Neill]

I note that the hon. Gentleman has both read them and counted them. Anyway, I cannot pretend to have read all of Lord Heseltine’s tour de force of a report, but the cursory reading that time allowed me while I was preparing my brief notes for the debate—[Laughter]—did give me a flavour of that helpful and valuable document. I think that it contains much that we, as a Government, would wish to take on board. As for the specific point raised by the hon. Gentleman in relation to recommendation 11, I do not agree with it, for reasons that I have already given. I believe that an imposed form of unitary restructuring is unnecessary, and that the devices and tools given to local authorities by the amendment reinforce the reasons for not following the route proposed by Lord Heseltine.

[James Duddridge]

My hon. Friend the Member for Bedford (Richard Fuller) described himself as a novice. I am less modest—I thought that I understood the amendment before I came into the Chamber—but, despite the eloquence of my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), I have become somewhat confused. Perhaps you will allow me a slightly lengthy intervention, Mr Deputy Speaker, in order to avoid a lengthy speech from me later in the debate.

The “Commentary on Lords amendments” in the explanatory notes refers to “billing authorities” and “precepting authorities”. My hon. Friend has already referred to planning authorities and highways authorities. In fact, the commentary uses the phrase “major precepting authorities”, but does not explain what “major” means in this context. Perhaps I am slightly sensitive about such terms because I represent a slightly smaller precepting authority, but is a distinction being made between parish and district councils, or between major and minor precepting authorities? My hon. Friend knows a great deal more about these matters than I do, but I was equally confused by the reference to billing authorities, given that police and fire authorities are effectively billing authorities. What do those terms actually mean?

[Robert Neill]

My hon. Friend makes a fair point. You will be familiar, Mr Deputy Speaker, with a joke that is well known in local government finance circles. It is said that the formula grant is like the Schleswig-Holstein question. Only three people have ever understood it; one is dead, one has gone mad, and the third has forgotten. The same is true of some of the complexities of local government finance. When I arrived at the Department for Communities and Local Government, I was not wholly convinced that that was a joke, but there were some very sound officials who put me right on all occasions.

The nomenclature to which my hon. Friend refers is slightly historic, but it is important. For practical purposes, the billing authority will be the unitary authority in the case of the Southend part of my his constituency, and the district council in the Rochford part. In most cases the major precepting authority is a county council. In Greater London, in my case, the London borough of Bromley is the billing authority, but the Mayor of London and the Greater London authority is the major preceptor. I think fire and police authorities also count as major precepting authorities. That is because of how they have developed and become separated from the county councils, although they were originally intended to be part of them.

[James Duddridge]

rose—

[Robert Neill]

Let me finish the point, and if I am not making it clear, perhaps I will need to repeat it.

The major preceptors have certain statutory rights in respect of consultation, and they do more or less what its says on the tin: they deliver a significant amount of services, especially in county councils, and in two-tier areas the county council precept will often be the largest part of the bill, rather than the district council element of the council tax, although they are, of course, itemised separately.

[James Duddridge]

My hon. Friend is endeavouring to explain the situation, but I am now less convinced that I support the amendment. The explanatory notes refer to passing a proportion of the amount to the major precepting authorities. Will that be in only one direction, so Southend could pass to Essex county council, but Essex could not pass to Southend even if it was in the wider county’s interest?

[Robert Neill]

That point is slightly different from the pooling point. I was talking about the provisions that deal with the tier splits. We are returning some of the moneys—the business rate—directly to local government. That was formerly taken by the Treasury and distributed by formula grant. Some of those moneys will be needed to fund district council functions in two-tier areas, and some will be needed to fund county council functions in two-tier areas.

That highlights why there has to be a passing of money. It is collected by the billing authority; that is the case at the moment. Southend borough council and Rochford district council collect all the business rates and then have to send the money to central Government as, I think, a monthly payment. It is then returned in the local government finance settlement each year, predominantly by way of the formula grant—although there are one or two other grants, as this is a slightly complex world. We are allowing authorities to keep some of that money at the beginning, but because it has to fund two types of authority—