Jim McMahon
Main Page: Jim McMahon (Labour (Co-op) - Oldham West, Chadderton and Royton)Local Government Finance Bill (Fourth sitting)
Jim McMahon Excerpts(7 years, 10 months ago)
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Justin Tomlinson
One of the elements that I have picked up is the principle of pooling, whereby different local authorities and local enterprise partnerships can sit down and work together and share the benefits of this growth. The whole point is that the Government will incentivise and reward those areas that are going to support additional growth and, therefore, there is an opportunity. I will give more detail on that shortly.
I come back to the point that this will work only if really big warehouses are built. Obviously, the smallest businesses are exempt from business rates through the small business rate relief. That is a hugely important policy that I hope continues because it benefits so many of our micro and small businesses. I ran my own business for 10 years and, just before I became an MP, I benefited for a year from that. It did make a difference in what was at that time a difficult financial climate.
We must remember that there is a significant number of small to medium-sized businesses that could be in offices not much bigger than this room but are larger than would qualify under the small business rate. So it is not just about getting distribution warehouses. That is an easy opportunity for some areas, particularly for those with lots of additional land and good transport logistics. It is also about these small and medium-sized businesses. It is about working with the existing small and micro businesses to help them to make that step up. I have been involved in a number of debates where it has been said that it is a lot harder to go from four-plus employees than to start a business because there are all the additional matters to deal with. The Bill provides an incentive for local authorities to have supportive forums, engage with communities and look at how they can shape the direction of their policies to encourage growth. Again, the bonus is that not only will that generate additional business rate income, which we all recognise that local authorities need, but it will help to create that next generation of jobs.
That was a powerful point about Heathrow. It is probably the case with any national infrastructure project that the communities closer to it get the vast majority of the inconvenience, while local authorities much further away will get some of the benefits. Take Heathrow: my constituency would gain significantly from Heathrow, for the convenience of residents going on holiday and for the businesses. So my local authority has written to the Government to say, “Please proceed with Heathrow.”
If I were an MP directly under the flight path, I would have a very different postbag. Again, that is where pooling could come in. Perhaps those local communities with the most inconvenience could go to the others to say, “We would be less minded to object, to try to delay and frustrate, if you would share some of the benefits that you would get.”
The principle of pooling can be expanded much further. Innovative council leaders would use that to go to talk to other leaders to say, “Look, we can work together here. You help us so that we are inconvenienced less or rewarded slightly more for the inconvenience that we will suffer. You will get your growth; we will get some of that.” Those are discussions that can be had and we have some very talented council leaders who, I am sure, would take advantage of that.
Jim McMahon (Oldham West and Royton) (Lab)
Does the hon. Gentleman accept that councils have different roles and responsibilities? One is, of course, about economic development and growing the local tax base. The other is about being a voice of the community. A lot of the opposition to Heathrow and the flight path has been from local people who do not want their lives affected in that way.
Justin Tomlinson
Absolutely. I only focused on Heathrow because that was the one that was mentioned; there are lots of national infrastructure projects. The reality is that Heathrow will be expanded, so those residents are going to be inconvenienced.
At least this proposal would have allowed an opportunity for the respective and closest local authorities to do those deals and say, “We can see the inevitability, but we could speed up the process if we were to gain some more of the reward for the inconvenience of this national infrastructure project that happens to be sited in our area.” I would think that was a reasonable ask of my local area, if there was a demonstrable and tangible gain for that area.
Justin Tomlinson
That neatly ties into my conclusion, which is purely about blunting the maximum incentive potential. If we are to focus minds, we should say to those innovative, great local authority leaders, “We will give you the tools to generate income and growth, and create new jobs, and to be rewarded for the inconvenience of growth and development.” We have to give them every single opportunity. If we have redistribution, local authorities will keep knocking on the door repeatedly to plead with the Minister for their special cases.
I have never found an MP or local authority who does not feel that their area is hard done by in some way. We are all skilled in looking at the statistics and saying, “We have a unique, special case for additional funding.” We need to allow like-minded local authority leaders who work well together, who lead with the LGA and share best practice, to have those sensible conversations. Fundamentally, we are not a million miles apart; it is just that the Government side are probably a bit more confident and trusting of the abilities and enthusiasm of local authority leaders.
Jim McMahon
I am not sure whether there is as much difference as the hon. Gentleman has laid out. There is acceptance that if there is 100% business rate retention, we need a system of tariffs and top-ups and a safety net to catch those who have unexpected changes in their business rate base. That is different from a scheme for business rate growth, which would incentivise local authorities who are really pushing forward. I would not say that those ideas are contradictory. What we are trying to do—I hope he accepts this—is ensure that the baseline is robust.
Justin Tomlinson
As I said, I recognise that there is not a huge amount of difference between us, but my plea to the Minister is: stay strong. We were enthused by the reference to “Dad’s Army” earlier, my dad’s favourite programme. Despite the realities that we face, we need to stand firm and trust and encourage local authority leaders.
Justin Tomlinson
I am greatly encouraged. I had a gut feeling, based on what the witnesses said on Tuesday, that this was a great policy; I now feel even more certain. The quicker we can introduce this, the better.
Following on from the point about town centre regeneration, let me say why this policy will make such a difference. The Mary Portas report, which looked into the decline of traditional high streets, highlighted the point that one of the biggest problems is that local authorities continually increase car parking charges because they generate significant revenue. Unsurprisingly, with increased car parking charges year on year, town centres started to wilt and business rate income fall away. Local authority leaders recognised that, but they needed short-term ways to access money. Maintaining 100% of growth would provide an incentive to cut car parking charges, which hon. Members will be delighted to know Swindon Borough Council did; it reduced charges to £2 for four hours. Anybody who has free time and wishes to spend money in Swindon is most welcome. Unsurprisingly, footfall went up, and we will start to see a boost and regeneration.
Jim McMahon
I do not want play car parking top trumps, but I have to highlight Oldham Council’s decision to offer two hours of free parking in the town centre.
Jim McMahon
I could not possibly shine a light on my own career. One of the proposals in the Bill that we will question later—I hope that the hon. Member for North Swindon will support us—concerns local authorities that are not part of a mayoral arrangement. They will have the ability only to lower business rates, and not to increase them elsewhere to make up the cost. A lot of areas with stunted growth would not be able to afford to do that at all.
Justin Tomlinson
We will explore that in great detail, I am sure. In conclusion, I hope that the Minister will be encouraged by the great enthusiasm for the potential that we will unleash. I am sure that there are local authority leaders poised by the phone to start striking those deals to benefit from economic growth, the delivery of new jobs and the additional income that we all recognise local authorities desperately need.
Jim McMahon
It is a pleasure to serve under your chairmanship, Mr Gapes. Congratulations on steering the debate so far. We have heard a lot in the debate about the complexities of the issues. At headline level, local authorities are crying out for more power and autonomy; they want to be able to crack on and get things done, but they also want a safety net. They want to know that if things beyond their control happen, the delivery of public services in their area can be maintained and will not be affected by a large employer pulling out, or something happening to the business rate base that is entirely out of their control.
A lot of the areas that would be most affected by the downside of this proposal are those that can least afford it. My local authority in Oldham has an historically low council tax base; the majority of properties—70%—are in bands A and B. To generate the same amount of council tax as a wealthier area, people in Oldham naturally have to pay more per property than somebody in the wealthier neighbouring areas of Stockport or Trafford. When we push further pressure on to the council tax payer to pay for the pressures on adult social care, we are expecting the poorest in society in those areas to pay proportionately more of their income to fund basic services that we all need and demand.
When the Minister reaches the age to need social care, I hope the system has been fixed. At the moment, there are 1 million people who need adult social care but do not receive it. Those same people would have got the care in 2010, but are not getting it today because eligibility has been pushed back so far. Many councils now have a two-tier system. People who were already in receipt of care are, by and large, receiving the care that they have received for a number of years. It is different for new entrants. Neighbours living on the same street, with the same health conditions, needing the same support are being told they cannot have care because they are new entrants into the social care system. That cannot be right. We talk about postcode lotteries and compare the wealthiest with the poorest local authorities as a way of highlighting that, but two people in the same area on the same street with the same conditions, but coming into the social care system at different times, are receiving very different levels of social care. That cannot be right in a just and fair world, and I worry about that.
I will extend my argument to council tax, because our discussion is about localisation and the self-sufficiency of local government finance. Let me highlight the table produced by the Department for Communities and Local Government that shows an additional £5.5 billion being generated, predominantly through council tax, to pay for adult social care. If any Government were to say to the public, “How about this for a proposal? We’re going to increase your council tax by 25%. What do you think about that?”, there would be uproar, yet that is exactly what the Department’s figures propose: a 25% increase in council tax over the Parliament. For a town such as Oldham, that will mean that a band E property will be charged £2,000 a year in council tax. Imagine public support for council tax at that point.
A lot of people think that council tax just gets the bins emptied, but universal services that people pay council tax for are being removed and reduced all the time to fund adult social care and safeguarding. Pretty soon, we will reach the point where people say, “What on earth am I paying my council tax for? I am paying more and more every year and receiving fewer and fewer services.”
Mr Thomas
Is there not a broader point here about the sustainability of support for council tax? The Prime Minister has made much of trying to help those who are “just about managing” with their family budgets. A 25% increase in council tax, introduced because Ministers in the Department for Communities and Local Government have no clout with the Treasury, will have a huge impact on the budgets of those whose finances are in the “just about managing” category. Does that not also play into the debate about the future of local government finance?
Jim McMahon
It is actually worse than that. If people thought, “Okay, the things that I rely on as a taxpayer are being taken away, but it will mean that my elderly relative or neighbour is being better looked after”, there might be a begrudging acceptance that that is the new settlement. The problem is that the additional council tax that is being collected will not even pay the additional national insurance contributions or living wage contributions that are expected. Even though people will be paying more in council tax, it will not mean more people receiving adult social care when they need it, because local authorities are struggling to keep their heads above water.
When local councils came to the Government to ask for support for adult social care, the Government did a three-card trick. They said that they would provide new money, but they took the money from the pot that already funds council services. They took £241 million from the new homes bonus, refreshed it and put it back in as an adult social care grant of exactly the same amount. Within the total amount of money in local government, there is no new money for adult social care.
The increase in precept that council tax payers are paying for this year will be a negative £6.7 million throughout the country, because all that money is going towards paying for the increase in national insurance and living wage contributions. It is not even enough funding to keep councils’ heads above water. Of the councils that have had new homes bonus money taken away, 57 receive less for adult social care under the new system than they did before. We asked for information on the criteria used to assess where that money went, but there were none. It was all completely fictitious—it was made up.
Let us be honest: the Local Government Association is a fantastic membership organisation, but it is often accused of going down to the lowest common denominator because it cannot quite get cross-party agreement. However, the one issue that has absolutely united the different parties on it is adult social care. The LGA highlights that there will be a £2.6 billion funding gap in social care by the end of the decade and notes that the Government’s settlement
“will…fall well short of what is needed to fully protect the care services for elderly and vulnerable people today and in the future”.
The LGA also states that
“increasing the precept raises different amounts of money for social care in different parts of the country unrelated to need and will add an extra financial burden on already struggling households…it is hugely disappointing that today’s settlement has failed to find any new money to tackle the growing crisis in social care.”
So a cross-party organisation chaired by a Conservative Member of the House of Lords, which at some point will consider amendments to the Bill, has come to a cross-party agreement to call this a crisis, yet in his evidence session the Minister completely denied that there was a crisis in adult social care. I am not sure what else we can call it, when a million people who need care are not receiving it and when the Government are putting the burden on council tax payers but not even covering the cost of keeping people’s heads above water. I am not sure how we can say that there is no crisis, when the new model does not at all take into account the pressures being put on people.
We hear that new money has been provided in the form of the improved better care fund. Let us bear in mind that the LGA identified a £2.6 billion funding gap. The better care fund provided £105 million. That is a drop in the ocean compared with the real adult social care pressures that we have. We still need to see the detail, but our expectation is that the £12.8 billion of additional business rates referred to in the evidence session will swallow up all the grants that are currently distributed to local authorities. The truth is that there will be no new money for social care as part of this. That is why amendment 2 is so very important.
Mr Thomas
I do not know whether my hon. Friend has seen the publicity about the statement that the Association of Directors of Adult Social Services made today on its submission to the Treasury ahead of the forthcoming Budget. It makes the case, similar to the Local Government Association, that there needs to be an injection of £1 billion now to prevent the social care system from going even further into crisis. Does that not also underline the case for amendment 2? If there are problems now and we do not sort them out, they will only be greater in 2020 when this new system comes in.
Jim McMahon
I absolutely agree with the professional response. The problem is we do not have proper checks and balances and we do not have a system of tariffs and top-ups and a proper safety net that catches people when they fall. We hear that that will come, but we have not seen the detail. We are being asked to agree a framework that allows this Bill to go through without actually knowing what impact it will have on individual local authorities across the country. It is a fundamental consideration when passing law that one understands the impact that law will have. We do not mind making bad decisions, but we should not be making bad decisions without all the information.
We are in a situation where spending on adult social care has declined by £65 per person in the most deprived areas of this country, but has increased by £28 per person in the least deprived areas. I would not resent that increase if it meant people got the care they need, but I do resent the fact that people who live in deprived communities are not getting the same access to social care that people in more affluent parts of the country are. We are meant to be one nation. We hear that all the time in the Brexit debate; when the Scottish National party kicks off about what is happening in Scotland we all say, “We are meant to be one nation. We take a collective responsibility for our nation.” Let us have a collective responsibility for adult social care and make sure that everybody gets the support they need.
Rob Marris
Does my hon. Friend agree that the social care precept construct will exacerbate those differences? Areas such as those that he and I represent will, in absolute and per capita terms, not raise as much money through the social care precept as advantaged areas will. I agree with him—good luck to advantaged areas—but we want those services for people who live in a wonderful place like Wolverhampton or a great place like Oldham.
Jim McMahon
That is the crux of the issue. Does this Bill really address a financial system that is under pressure and probably at breaking point—we all accept that it is time to renew local government finance and put it on a strong footing—or does it just reinforce historic inequalities across the country? Unfortunately, without the detail that we have requested a number of times we just cannot make that assessment. However, we are being expected to support this because we believe in devolution and have heard the calls from councils to have more responsibility and direction over their lives.
Let us be clear what the levers of change actually are. The Secretary of State will still prescribe what council tax increase can take place. By the way, they are saying that they are not going to report to Parliament on what that will be in the future—a minor point—and we are not going to get a local government finance settlement reported to Parliament in the future.
Not only is there no parliamentary scrutiny of this new world, but councils have not got the levers of control to reflect on the number of bands in their area. They cannot change the number of bands; they cannot introduce intermediary bands; they cannot have smoother transitions. They cannot even revalue properties—the last revaluation took place 26 years ago. Why is that? Central Government duck it year after year, time after time, because they do not want the backlash they would get at local level. Our councils are cross-party, by the way. This is about the Government not wanting to take the flak from the public for putting up council tax. That could be managed at a local level. There have been calls for areas to take that responsibility through some of the devolution deals.
Nor is there any ability to change the scheme of discounts. Fallowfield in Manchester, for example—where there is a strong student population living not in halls of residence but in terraced streets—is almost a whole ward occupied by students who pay absolutely nothing in council tax. Ask Manchester City Council if it would like the freedom to reflect that.
Even if we do not introduce that measure as part of the revision of council tax, we could put the burden on to landlords. Rather than put it on council tax, we could quite easily make provision for that within the business rates Bill. One might say that landlords will just put it on the rent, but if they own a three-bedroom terraced house in Manchester they will probably get £110 a week. If they rent that house to students, however, they will probably get £60 per student per room, so they are already earning far more by renting to those students than by renting to a family. It is right that somebody pays for the headroom to provide the services to the local community.
This is not, however, about whether we prescribe at local level. My point is that we are putting a burden on council tax and on business rates. We say that we welcome leadership at a local level and local innovation, but we are not giving local authorities the levers to affect the council tax or business rate base in their areas in the way that they have asked for.
Justin Tomlinson
Rather than seeking to tax students, perhaps we could be more innovative. For example, Oxfordshire council is not keen on development, but Swindon council could take some, and we would then gain from the council tax, the new homes bonus and the growth in the business rates, while Oxfordshire would have avoided the inconvenience of the development. That is the innovative way to do this.
Jim McMahon
I am going to pay a visit to Swindon at some point—it feels like it is the hallowed land for development. I have visions of 20-storey tower blocks shadowing the town.
It is not accurate to say that we are proposing to tax students. Let us approach this issue in a mature and measured way and stop the cheap headlines. This is about making sure that there is a resilient and robust tax base in every area so that local authorities can generate the tax needed for public services in their own places.
We know the impact of not doing so. Adult social care complaints have gone up by 25%—people who are in receipt of services have increased the number of complaints they feel they have to make—and there has been a rise in 15-minute visits. This is not a cost-free exercise. Government seem to have a view that if we just turn a blind eye, say that it is not our problem and tell local authorities to find a solution—and if we just move money around without there being any extra money, which just helps us feel a bit better about ourselves—there is no problem. Well, speak to NHS England and ask what the problem is. The longer we ignore the pressures on adult social care, the more we push the burden on to the NHS. People who should be looked after in their homes are being forced into hospital to get the treatment that they need, and people in hospital cannot go back home and are having delayed discharges because the support they need is not ready for them to be able to go home. The cost of that is £820 million a year. There is a cost of doing nothing.
Mr Thomas
At the risk of injecting a partisan note into the proceedings, which you know I hate to do, Mr Gapes, I wonder if my hon. Friend has had the chance to look at the 20 councils responsible for the highest number of delayed discharges from hospital, which the Prime Minister has raised concerns about. The majority of those councils are Conservative authorities. I sympathise with those authorities because I do not think that they should be under attack from Ministers when there is a huge funding crisis in social care. I wonder whether my hon. Friend has seen those figures.
Jim McMahon
I have seen them and they tell a story. Instead of just reading out numbers—this is that kind of debate—I am trying to focus on how I would feel if I were in that position and one of my family members needed that type of care. I would feel bitter, not just about council tax but about the country. Our elderly relatives have given their lives to this country, worked hard and done what was asked of them. They have made a contribution. Many have served in the armed forces in order to provide the freedoms that we enjoy, but when they are at their most vulnerable and need us most, we turn our back and say, “It’s not our problem.” That is not the type of country I want to live in.
The Minister needs to accept at some point that this is a Government problem born out of Government indifference and deferral. It is high time that they stepped up. If they did so, we might not have the highest number of delayed discharges from hospital for elderly people since records began, or an 18% increase in A&E admissions for elderly people. Those are real challenges and real problems.
Mr Thomas
My hon. Friend said that he wanted to go to North Swindon and I know that he will travel back to Manchester. May I encourage him to reflect a little more on the current situation? When the right hon. Member for Cities of London and Westminster (Mark Field) spoke on Second Reading, he drew attention to the fact that Westminster City Council collects the most business rates; the figure is some £1.8 billion a year and he expects it to rise to £2 billion. Without amendments 1 and 23, is there not a risk that some of the redistribution from Westminster—I do not know whether Swindon benefits from that, but Manchester and Harrow certainly do—might be lost?
Jim McMahon
It would be ludicrous if the paper on distribution, which we are waiting to see, resulted in Westminster, which has had every advantage, keeping 100% of £2 billion. I would be amazed if any Government would be that stupid. I know that the Minister would not allow that to happen, because the kick-back from Conservative authorities would be as loud as that from Labour authorities. It strikes at the heart of fairness. It cannot be right that the seat of Government, with so many Departments involved in the payment of business rates into the system, has nothing to do with the actions of Westminster City Council. History shows that we have reached this point because that is how the UK Government have developed over time.
Kevin Foster
The hon. Gentleman was talking about examples of delayed discharges and particular councils. The new integrated care organisation in Torbay has produced some of the lowest levels—possibly the lowest level—of delayed discharges, despite the challenges posed by Torbay’s demographics. Does he think that that model could be extended elsewhere?
Jim McMahon
I absolutely believe that there is more to be done to bring together health and social care budgets into one pooled pot for the local area, with local government being given the responsibility for teeming and ladling and being held to account by the public for that. That is absolutely the right way to go. Only by doing that can we break down the institutional silos.
To be fair, the NHS has not reformed in the same way that local councils have had to reform. Joint working could benefit both parties, but we have to be honest about the transition required to do that, and accept that any pilot that has enough money and energy thrown at it can be made to work. We need to consider whether the pilot can be mainstreamed. Different people may approach everyday activities in different ways, so the two systems will have to run alongside each other for a certain period, with the inherent demand continuing as the new system kicks in.
Councils have to be able to see that change through. It could take a five to 10-year project to see through the cultural change to systems and processes, staffing terms and conditions, and everything else that would need to be looked at to ensure that it works. We are seeing that with troubled families. The Government do not have the long-term vision or appetite to see through genuine cultural change in how we deliver public services. If they do not see a saving after year one, two or three, the money is pulled and we start from scratch with another pilot. I absolutely believe in reform, but it has to be sustained reform over a period of time, and we have to be realistic about the amount of time it will take.
Mr Thomas
I highlight a small vignette of the crisis. It is odd that Ministers have not addressed the additional cost for social care providers as a result of the so-called national living wage. It is a good thing, in and of itself, but care providers need funding to compensate for the rise in costs, and nothing that Ministers have had to say, including on funding pots, has addressed that. Does not that need to be addressed before the new system is introduced?
Jim McMahon
That problem relates to my earlier comment about the need for a transition period when aligning staff terms and conditions and salaries. The truth is that staff employed by local authorities and private social care providers are on significantly worse terms and conditions than those of their NHS counterparts who have similar responsibilities to them in hospitals.
The Government do not have an answer as to the number of care providers that could go bust. Councils will have a limited amount of money that they can pay, and some providers will decide whether they can remain in the industry. We do not have a solution if a significant number of those providers give up and pass the responsibility on to social care in the local authority. We cannot afford what we are doing today, and if they took such action we certainly could not afford the increase.
There is almost a double whammy: we want the local authority provision to be a decent place to live and a decent employer—because that is the state, and we want it to set the bar for a decent place. Not only are we telling private providers to pay the national minimum wage; we are telling them to pay between visits. It is not good enough that people get paid only for a 15 or 20-minute slot, and not while they are travelling to the next appointment. We have been pushing—good local authorities have been policing it—for their staff to be paid for their hours working on the job, including travel time. However, for some providers that has increased the staffing bill significantly, on top of national insurance contributions and the national living wage.
I have talked enough about social care. If I am honest, the Minister probably still has not been brought to the point of changing his mind about whether there is a crisis. However, I am satisfied as to my own experience in local government, as a member of the community with family receiving council services, and of listening to what is being said by professional social workers, the LGA, NHS England and, to be fair, Conservative council leaders. It strikes me that everyone accepts that there is a crisis—except the Minister, when he gave evidence to the Committee. I invite him today to put the record straight, face his responsibilities, accept that there is a crisis and commit today to doing something about it.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)
It is a pleasure to serve under your chairmanship, Mr Gapes. I thank the hon. Member for Harrow West for tabling the three amendments about the current central share of business rates income, and welcome the opportunity to discuss the important matters they raise.
To begin with amendment 1, removing the central share is essential to enable local government to retain 100% of locally raised business rates and to move away from its dependence on central Government and towards a more self-sufficient future. On Second Reading, the hon. Gentleman was supportive of the principle of 100% business rates retention, but his amendment would let central Government take a share of locally raised business rates income.
We have been working closely with local government, including doing significant work with the sector on developing the policy and on how 100% of business rates can be retained in local government. Keeping the central share would cut across the joint endeavour that the Government and the local government sector have embarked on.
The hon. Gentleman raised the principles of the fair funding review, the consultation response and further consultation. We have made it clear that it is a fundamental review of the approach to setting a baseline for 100% business rate retention. It is guided by the principles of fairness, simplicity and transparency, and we have been working in collaboration with local government in that respect. As the hon. Gentleman knows, we shall consult shortly.
Mr Jones
The Government are committed to and have shown good faith in keeping to the agreement we made about the four-year settlement. Regarding the new homes bonus, which was not included in that settlement, we made it very clear at the time that there would be changes to it. In fact, this time last year we embarked on a consultation explaining that we wanted to sharpen the incentive in relation to the new homes bonus.
In addition, it was quite clear to local government at the spending review in 2015 that the new homes bonus would change, because the improved better care fund, which will total £1.5 billion by 2019-20, was intended to be funded by savings made from it. As such, changes to the new homes bonus have not necessarily been a shock to the sector.
Jim McMahon
I appreciate the Minister giving way, given the time that we have.
The Minister’s response would lead us to believe that the majority of councils are signed up to a four-year efficiency programme of budgets that can be balanced within the settlement that they have been offered, but I know from my own local authority that its four-year efficiency plan had a budget gap of £99 million between the cost of providing services to meet its statutory obligations and the income from grants, council tax and business rates. The Government have not come forward and said where the £99 million will come from; in fact, the changes being made through this Bill will potentially make that situation worse. Can we have a clear idea of how many of the efficiency plans submitted to the Government showed a gap of that nature?
Mr Jones
We did indeed ask for efficiency plans to be put forward and we did so on the basis of making the offer of the four-year settlement, and only 10 local authorities across the country did not accept that offer.
If the hon. Gentleman wants me to elaborate, I would not say to him that things are easy for local authorities—far from it. Local authorities have done an extremely good job in many ways over the last six years or so in doing their part in deficit reduction, which was so necessary after the shambles of a deficit that was left behind by the Labour party. I say they have done a good job because overall satisfaction with services has been maintained, and local authorities have again taken up the baton, particularly in relation to this four-year deal, and they have run with it.
Jim McMahon
I thank the Minister for that point. Let us be clear and honest with each other on this issue. The choice that local authorities had was not the choice of financial stability and security. The gap in provision is still the gap in provision. The choice put forward by the Government is basically a certain cut or an uncertain cut.
Mr Jones
The point was that local government knew there was a challenge to be met and they knew they were not immune to the reductions in public spending. Coming back to the point, what local government had asked for for many years, above a lot of other things, was certainty. With the four-year deal we have given a significant level of certainty to local authorities that hitherto had always been hanging on the word of Government come December as to what their position would be when they set their budget for the following financial year, which would start at the end of March and take them through to early April. Generally, local government have welcomed that. As to whether they would want a quantum of money within the settlement, I am sure many local authorities would, but at least the deal has allowed local authorities to plan and to use other resources. For example, in many cases it has allowed them to use reserves to bring forward transformation plans that enable them to meet the challenges that they face.
Let me respond to the point that was made about two-tier authority areas by the hon. Member for Harrow West and the way in which the splits would be made in terms of income between the different tiers of local government. The amendment to retain the central share does not achieve that aim. How business rating can be shared between the tiers will be set out in regulations under part 4 of schedule 7B to the Local Government Finance Act 1988. We do not need to retain a central share to distribute business rates income between tiers of Government. As has been the running theme through this and I think will be a running theme in Committee, we are working with local government to work out how the split should work under 100% business rate retention.
Mr Thomas
It is not a coastal area, but it is surrounded by other local authorities that are part of the Lake District national park, which are similarly challenged in terms of constraints on the land they can use. One suspects that the natural pool of authorities that Allerdale council could work with would face similar challenges in terms of land being available for economic growth. That underlines the concern about redistribution.
Jim McMahon
Does my hon. Friend agree that one solution for Allerdale would be to have a broad tax base on which they could draw to fund public services? It strikes me that in such an area a significant amount of money must be generated through stamp duty income from the sale of high-value homes in the district.
Mr Thomas
My hon. Friend tempts me now into very difficult territory. The shadow Chancellor has long eyes and if I were to rush to pronounce on a whole series of new measures on fiscal devolution without having first spoken to him, I would get into very serious trouble. Nevertheless, my hon. Friend makes a very interesting point.
Rob Marris
With his brain like quicksilver, my hon. Friend was quicker than I was to pick up that. I cannot take credit for wheedling that out of the Minister—it was entirely serendipitous, in as much as it happened. It is, however, interesting that we have a little more clarity, I certainly agree there. I urge the Government to think again about subsection (3).
Jim McMahon
We have had a full and frank debate. We have just, only minutes ago, managed to glean more information—more in that second than we have had in hours of sitting or the evidence sessions about where the intention sits. Had the debate earlier been more honest and open, we could have dispensed with much of it today. Perhaps the Minister will be generous in the sharing of information, which he showed to be possible a few minutes ago.
Clearly, the reason the levy pool is not required is that the desire is for local government, not the Government, to administer the scheme. That would be in line with calls from local government, which has asked for an independent body to be established to look at redistribution formulas so as to ensure that is done in an independent way. That is something we are open to discussion about, provided there is a discussion to be had. I encourage the Minister in the spirit of openness to come forward with how that scheme will work in practice.
If there is an independent scheme, it would have potential and merit. We see that in the health service, where a separate and independent body is established to look at health funding and distribution. Something similar in local government potentially has merit, provided it has the freedoms. Whatever system is put in place also requires parliamentary scrutiny so that it can be held to account. A number of provisions in the Bill—the removal of the requirements to produce an annual statement of the funding formula and to bring forward the council tax increase cap—do not sit well with democrats because they reduce the possibility of proper parliamentary scrutiny.
The hon. Member for Thirsk and Malton referenced a review that is being undertaken by the Communities and Local Government Committee. I have a great deal of time for the hon. Gentleman. He puts a lot of time into ensuring that such reviews are carried out in the right way. I give credit to him and his Committee for doing so. I hope he does not mind me saying, however, that he has provided a half-truth of the review—[Interruption.] Okay, he was 100% truthful about the truth he provided, but silent about the remainder of the recommendations in the report.
The review said, absolutely, that local government had been asking for freedoms and that there was broad support for 100% retention, but that some big and unanswered questions potentially undermined the success of the programme. That is what the report says. The interim report has been provided to the Government, and the response is being awaited. In particular the report talks about how volatile the situation could be if the system is brought forward, without proper scrutiny, while at the same time the revenue support grant is taken away. The Committee was clear at the time that removing the revenue support grant without the checks and balances in place carried inherent risk.
The report also made points about fairness, equality, distribution and what would be done for areas where the business rate base and take were low. The CLG Committee was, absolutely, in favour of retention, but a number of other truths were relevant to its recommendations and that context was needed to give a firmer view, so there is still a long way to go.
Kevin Hollinrake
I take exception to the phrase “half-truth”, but the hon. Gentleman is right that the Select Committee made a number of recommendations of modifications to the Bill, many of which have been taken up, such as dealing with appeals. He and the hon. Member for Harrow West ask for evidence, but the Select Committee took extensive evidence during its inquiry, and there was almost universal support for business rates retention. The overriding point in the Select Committee report is:
“We support 100 per cent retention of business rate revenue”.
Jim McMahon
That is absolutely correct. The Select Committee went on to say that it
“calls on the Government to specify how it will protect councils which rely on redistributed business rates and are worried that they will lose out under the new system.”
Let us have full, rounded contributions.
Mr Thomas
I hope that my hon. Friend will have noticed and will address the fact that, if I may say so, the hon. Member for Thirsk and Malton slightly distorts what I asked the Minister. I asked: where is the economic evidence that 100% business rates retention will work? Presumably, 50% business rates retention has been successful in encouraging the sort of development that the hon. Member for North Swindon thinks will be part of the new Jerusalem under 100% business rates retention. If the Minister can point me to that piece of economic evidence, I will sleep even easier at night than I do already.
Jim McMahon
I feel slightly like I am in the middle of a different debate, but my hon. Friend’s point about the new Jerusalem is quite apt. When I think about the new Jerusalem, I think of the dark satanic mills that bound the skyline of Oldham and by and large are still there. They create an inherent unfairness in the business rates base of a town such as Oldham.
The devil will always be in the detail, which we have not seen or discussed. There is aggressive provision in the Bill for pooling arrangements. Local authorities will come together as pools, which will have lead authorities that take responsibility for deals. In some ways, that provision continues that inherent unfairness, because it allows negotiations about distribution to take place within areas. There seems to be a view that creating a pool will allow areas to teem and ladle, less affluent areas will benefit from more prosperous areas and, by and large, there will be an overall benefit. But because more prosperous areas have the upper hand since they have the lion’s share of the business rates take, they can negotiate preferential retention arrangements that other areas in the same city region or neighbouring authorities cannot.
For example, in Greater Manchester, the business rates pool expands beyond the city region, in recognition of the fact that the travel to work area goes into Cheshire, so the pool includes the 10 Greater Manchester authorities, Cheshire West and Chester. The two Cheshire councils have negotiated 50% retention before any money goes into the pool to be redistributed across the conurbation. They might argue that they are not part of the Greater Manchester combined authority or the devolution deal that has been struck with the Government, and they add value to the pot but do not really take away investment. There is some sense in that, but Stockport and Trafford, the two most prosperous areas of Greater Manchester, have negotiated arrangements under which they will retain a third of business rates growth before it goes into the pool, because that was the only way of getting them to the table. Even within a pool there is not equity or the type of redistribution that the Government have promoted.
A town such as Oldham is caught between a rock and a hard place. What should it do? Should it leave itself vulnerable to central Government changing the rules or go into a pool even though it will effectively be treated as a second-class local authority in that relationship? That is a fundamental challenge to where the Government want to go. Either we are bringing local authorities together to work in partnership and act as first among equals, or we are saying that the wealthiest local authorities in an area will always have the upper hand. I do not think that is fair or just, and I do not think it can continue if a national scheme is rolled out, because it will eventually start to breed resentment. People will look over the border and say, “That’s just not fair. Why are we in this situation where Trafford, Stockport and Cheshire get to retain the lion’s share when we’re meant to be part of the same city region and the same business rates pool?”
Mr Jones
The hon. Gentleman mentioned the iron fist of Government as it once was. Back in 2010, 80% of the money that went to local government was distributed from central Government, with the Government deciding exactly where that money went. Did that give much of an incentive for areas to grow their business rate base?
Jim McMahon
I thank the Minister for gently leading me into the scandal that was 2010, when the coalition Government rocked into office, holding hands in the rose garden and making promises of a brighter future. Oldham did not have that experience. Some £24 million was taken from its area-based grant; money put in place for urban renewal following the 2001 riots was snatched overnight at the cost of the town’s regeneration. In the same year, the housing market renewal programme, which was meant to reform the council tax and business rate bases in the area, was snatched. It left terraced streets, with boarded-up properties that had been bought for demolition, to stagnate. The Government have never come back to the table with an answer on what to do for urban renewal in towns like Oldham. Some in the room may look back on 2010 with fondness; I look back and think it was the year the Government turned their back on towns like Oldham.
The Chair
Order. We are in danger of moving away from debating clause 1. If possible, can we try to focus on clause stand part, however interesting it is to talk about what happened in the rose garden in 2010?
The Chair
I am not saying whose fault it is. I ask all of you to please focus on the Bill and clause 1.
Jim McMahon
Thank you for connecting us back to the Bill, Mr Gapes. My point connects exactly back to it, because the Minister’s challenge was whether we would prefer a centralised approach, or whether we want local areas to be given the freedom to crack on; that was what I took to be the essence of his contribution. He perhaps clouded that slightly with a reference to those horrible years in 2010, but nevertheless the spirit of it was related to the Bill. My response is this: there will always be a need for elements of redistribution, because we are not starting from a clean slate. We recognise that some areas will require more to bring them forward to the point at which they become self-sustaining and self-financing in the way that Government envisage. For a town such as Oldham, reframing the business rate base and the council tax base was critical. The funding streams from central Government that I referred to were absolutely relevant to that town’s success.
Let us leave the past in the past, and look towards the future and what the Bill provides as a way forward. There is no doubt that we need to move to a less centralising state, and that local authorities have been crying out for more freedoms, power and independence from central Government. This measure does potentially provide some of that freedom. However, power is nothing without the resources to get things done. We need to make sure that we are not effectively repeating inequalities of the past, or even deferring blame and responsibility for cuts and reductions down further to local government, when it has had it up to its eyes because of what it has had to deal with through austerity.
The framework of redistribution is about how we will collect money from local authorities that have a very strong base and where growth has taken place at an accelerated rate, sometimes through no action of the local authority. How do we capture that growth to make sure that it can be used to benefit the whole UK? That detail has not actually been brought forward. From the Bill we know what has been taken away, but we have no idea what is being put in its place. We know, because we have been told today, that central Government want to let go and allow local government to administer its own scheme, but we do not know what that scheme is, because the programme has not been brought forward; it would provide for a more meaningful debate if it had been. If the Minister were to intervene and give a bit more detail on that, it would be extremely helpful to the debate.
Mr Jones
The hon. Gentleman refers to the question asked about the multiplier, which I answered. The information that he says I divulged today and brought to the world after keeping it to myself for so long was actually in our summer consultation in July last year, so there is nothing hidden in that sense.
Jim McMahon
I thank the Minister for remembering that and sharing it with the Committee today. It has been very useful for the debate. This is an open offer from this side of the House: if we get this right, it will benefit every local authority, provided that the framework is robust, proper checks and balances are in place, and there is a genuine mechanism for redistribution to ensure that a basic level of service provision can be provided in every area of this country—not as a result of their historical council tax base or business rate base, but because we believe in decent public services reflecting the need in local areas. That is exactly the call that is being made.
That will be a complicated formula, which will take into account the rural and sparsity issues; urban needs and deprivation; and the physical costs and limitations of delivering public services. We know that, but we need to see the detail and work through what it means in practice. When we have that detail, we could have a really serious debate about the future funding of local government. This will be a continuous call; this is not just one debate about public services and local government funding. Local government is asking not just for the retention of business rates, and to be left with council tax to sink or swim, but for fiscal devolution. That will mean a broader suite of taxes and duties, raised and retained locally, to help grow local economies, get people into better-paid work and provide decent housing. That is what local government is asking for. If the framework is the start of that, we should welcome it, but there is a lot of detail to be provided.
Kevin Hollinrake
As the hon. Gentleman knows, I am fully supportive of a fairer funding formula. Quite understandably, if it is purely based on cost drivers, it will mean some local authorities losing out and some gaining. I would support that if it was a clear, transparent and understandable system. Would he also support it in that situation?
Jim McMahon
I need to give my response the caveat that I do not believe that enough money is being provided to local government services. If this is about redistributing a very scarce resource, it will lead to some very severely affected losers. I would like a single place budget, so that we looked at an area’s public sector spend from the Department for Work and Pensions, the health service, the Ministry of Justice and so on and allowed local authorities more power and control over that money, knowing that they could administer it better, teem and ladle and, hopefully, modernise public services. If we could do that, we might be able to see the future of local government financing, but that is not where we are today; today we are saying that the money we have is the money we have, and we will try to teem and ladle it in a slightly fairer way.
I have to say that towns such as Oldham have 700 asylum seekers, while the Prime Minister’s constituency has not a single one, yet no account is taken in any funding formula of ways to give the local authority the resources to support those people in the way they need. We need to ensure that any funding delivered has the right criteria, not just the sort of selective criteria that we saw being used for the rural services delivery grant.
Mr Thomas
My hon. Friend makes an important point about support for authorities in areas in which there is an increase in refugees being housed. Surely keeping the provision for revenue support grant would give the Government an easier mechanism for helping local authorities and their citizens to handle some of the additional issues that will arise. Retaining the revenue support grant in legislation would also enable Ministers to get money more easily to areas that are hit hard by flooding. When the hon. Member for North Swindon visits Keswick Town Council and Allerdale Borough Council, he will understand the significance of my point about flooding.
Jim McMahon
My hon. Friend hits the nail on the head. We have established the Allerdale question as a measure of whether—
Jim McMahon
No, I will conclude. I know that Mr Gapes is being very patient, but I can see a yearning in his eyes to go on Twitter and put the world to rights—and so have I, because it has been a busy few days.
We do not live in a world in which there is going to be a comprehensive review of local government finance—that is not what the Bill is about, and we need to be honest about it. But the Bill will have consequences that we need to take on board, and we can do that only if we have information that we can assess in a detailed way. As soon as that information is provided, we can bring more value to the system and, I hope, ensure that even with very limited resources, it is the best and fairest system that it can be.
Mr Jones
The Government support clause 1, which will enable the introduction of 100% business rates retention for local government. It covers a number of different decisions, including the changes in schedule 1, which I will come to later.
We discussed the scrapping of the central share extensively when we debated the Opposition amendments—