Jim McMahon
Main Page: Jim McMahon (Labour (Co-op) - Oldham West and Royton)Local Government Finance Bill (Tenth sitting)
Jim McMahon Excerpts(7 years, 2 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Jim McMahon (Oldham West and Royton) (Lab)
I beg to move, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 3—Local Authority Needs Commission—
‘(1) There shall be a body called the Local Authority Needs Commission (“the Commission”).
(2) It shall be the duty of the Commission to carry out assessments of the matters specified in subsection (4) from time to time as it thinks fit, but no less than once every two calendar years.
(3) It shall be the duty of the Commission to carry out assessments of the matters specified in subsection (8) when requested to do so by the Secretary of State.
(4) The matters specified in this subsection are, in respect of each billing authority in England, all matters which the Commission considers are relevant to an understanding of the resource need of each billing authority, including, but not confined to—
(a) the extent of social deprivation in the area,
(b) the resident and day-time populations of the area,
(c) the condition of housing stock in the area,
(d) the economic profile of the area,
(e) the population density of the area,
(f) the ethnic composition of the population of the area,
(g) the extent to which the population of the area has a first language other than English.
(5) It shall be the duty of the Commission to assess the impact of any new requirement imposed upon a billing authority—
(a) by legislation, or
(b) by direction from the Secretary of State
as soon as is reasonably practicably after the introduction of the new requirement takes effect.
(6) An assessment under subsection (5) must include a needs assessment of the billing authority in relation to the new requirement, having regard to the matters specified in subsection (4), which must be made publicly available.
(7) It shall be the duty of the Secretary of State, before making a grant to billing authorities under—
(a) section 78 of the 1988 Act, or
(b) section 31 of the Local Government Act 2003
to inform the Commission of the billing authorities intended to receive a grant and request the Commission to undertake an assessment in accordance with subsection (3).
(8) The matters specified in this subsection are, in respect of each billing authority in England intended to receive a grant, all matters which the Commission considers are relevant to an understanding of the resource need of each such billing authority, including, but not confined to, the matters specified in paragraphs (a) to (g) of subsection (4).
(9) Any assessment made under subsection (2), (3) or (5) shall be laid before the House of Commons by the Secretary of State as soon as practicable after the final version of the assessment has been provided to the Secretary of State by the Commission.
(10) Schedule (Local Authority Needs Commission: further provision) makes further provision about the Commission.”
New schedule 1—Local Authority Needs Commission: further provision—
Membership, chair and deputy chair
1 (1) The member of the Commission are to be—
(a) a chair appointed by the Secretary of State, and
(b) at least four other member appointed by the Secretary of State.
(2) Before appointing members under sub-paragraph (1)(b), the Secretary of State must consult the chair.
(3) The Commission may appoint one of the members as the deputy chair.
(4) The Secretary of State must have regard to the desirability of securing that the Commission (taken as a whole) has experience in or knowledge of—
(a) the management of local government finances,
(b) research into matters relating to social and economic needs and their assessment.
Term of office
2 Members are to hold and vacate office in accordance with the terms of their appointment, subject to the following provisions.
3 Members must be appointed for a term of not more than 5 years.
4 A member may resign by giving notice in writing to the Secretary of State.
(a) resigns that office by giving notice in writing to the Secretary of State, or
(b) ceases to be a member.
6 A person who holds or has held office as the chair, or as the deputy chair or other member, may be reappointed, whether or not to the same office.
Staff and facilities
7 The Secretary of State may provide the Commission with—
(a) such staff,
(b) such accommodation, equipment and other facilities, and
(c) such sums,
as the Secretary of State may determine are required by the Commission in the exercise of its functions.
Research
8 (1) The Commission may at any time request the Secretary of State to carry out, or commission others to carry out, such research on behalf of the Commission for the purpose of the carrying out of the Commission’s functions as the Commission may specify in the request.
(2) If the Secretary of State decides not to comply with the request, the Secretary of State must notify the Commission of the reasons for the decision.
Payments to members
9 The Secretary of State may pay to or in respect of the members of the Commission such remuneration, allowances and expenses as the Secretary of State may determine.
Status
10 The Commission is not to be regarded—
(a) as the servant or agent of the Crown, or
(b) as enjoying any status, privilege or immunity of the Crown.
Sub-committees
11 The Commission may establish sub-committees.
Validity of proceedings
12 The Commission may regulate—
(a) its own procedure (including quorum), and
(b) the procedure of any sub-committee (including quorum).
13 The validity of anything done by the Commission or any sub-committee is not affected by—
(a) any vacancy in the membership of the Commission or subcommittee, or
(b) any defect in the appointment of any member of the Commission or sub-committee.
Discharge of functions
14 The Commission may authorise a sub-committee or member to exercise any of the Commission’s functions.
Public records
15 In Schedule 1 to the Public Records Act 1958 (definition of public records) in Part 2 of the Table at the end of paragraph 3 at the appropriate place insert—
“The Local Authority Needs Commission”
Parliamentary Commissioner
16 In Schedule 2 to the Parliamentary Commissioner Act 1967 (departments etc subject to investigation) at the appropriate place insert—
“The Local Authority Needs Commission”
Disqualification
17 (1) In Part 2 of Schedule 1 to the House of Commons Disqualification Act 1975 (bodies of which all members are disqualified) at the appropriate place insert—
“The Local Authority Needs Commission”
Freedom of information
18 In Part 6 of Schedule 1 to the Freedom of Information Act 2000 (other public bodies and offices: general) at the appropriate place insert—
“The Local Authority Needs Commission”
Jim McMahon
It is a pleasure to serve under your chairmanship, Sir David. We have had a lot of debates in this Committee about moving to a new system of self-sustaining local government. There have been great calls from central Government for a level of independence, and my hon. Friend the Member for Harrow West has challenged the Government on just how independent local government will be and what safeguards will be in place to ensure it is funded adequately so it can carry out its legal responsibilities. We are effectively being asked to agree the framework without knowing what the method of assessment will be. We are understandably nervous about that, as is local government, particularly given the kick-off with the business rate revaluation. We are not sure whether the Chancellor or the Secretary of State will grant concessions that mean that even less money is available to deliver local public services.
With these new clauses and the new schedule, we want to set out a positive alternative and show what we could do in a constructive, cross-party way to put local government funding on a fair and firm footing. These are not new ideas. I will be honest and admit that we copied and pasted them. Why reinvent the wheel? If somebody has gone to the trouble of doing the work, carrying out the investigation, understanding the evidence base and consulting with the industry, the sector and those affected, we ought to listen to what they have to say and consider it in the right way.
Members might be aware that the Local Government Association commissioned an independent review into local government finance and whether it is sustainable. The review recognised that we are in a period of austerity, but that demand for public services is increasing all the time. It also recognised that the world is changing, and that how people access and interact with public services is changing, too. How people work is changing, and the part of the workforce that works across different institutions is changing, too.
In the review, the Independent Commission on Local Government Finance highlighted a number of things and set out its vision of a self-financing system that promotes self-reliance and self-sufficiency in local government, encourages areas to be innovative, promotes local decision making on service delivery, ensures transparency in how it works and in the division of responsibilities between central and local government, and maintains support for the most vulnerable people in the community. It came out with a series of recommendations, which are directly relevant to these clauses and are worth talking about in some detail. If we can get agreement on this today, we will not only show the country that some things are above party politics—in my view, funding vital frontline services should be one of them—but show local government that the work it has undertaken in previous years to research and develop an alternative idea has paid off and been respected and adopted by the Government with the support of the Opposition. That is our intention, and I hope the Minister responds with the same degree of charity. Hopefully, we can make some progress.
Critical to the recommendations was the establishment of an independent body to advise the Government on funding needs in each local area and on the allocation of funding to local areas and sub-regional areas that have combined authority arrangements in place. The report talks a great deal about how local freedoms should be in place—in particular, the freedoms to set local discounts and to decide how much, if any, council tax should increase without the Secretary of State imposing a referendum cap. It also talks about a business rate retention scheme that could be introduced.
At times, reports come out of Parliament that say, “Local government just doesn’t get it right,” and reports come out of local government that say, “Parliament just doesn’t get it,” but what inspired me about this report is that it is not like that at all. It says, “The system isn’t working for any party, so we need to find a new model that works for all concerned.” The language used throughout the report is very much about working together. When it talks about an independent body being set up, it is not saying that local government does not trust national Government; it is saying that having an independent body to one side, to advise, would add to decision making and help Government. Government would still have the ability to hold the ring, but they would have the depth and quality of an independent body sat to one side. There is a great deal to be commended in that.
The report should be read, and read in the spirit in which it is intended. The commission’s membership is significant: it has the experience of former civil servants, people who have worked in the private sector, people who have worked for health authorities and accountancy firms, and entrepreneurs who have experience of creating value from the ground up and being successful in their industries. It includes people who have experience of working all over Europe and around the world who are, at their core, used to setting up complex financial systems and making them work in their practical application. That has been quite absent from the debates we have had.
We have talked about systems and processes, and we have talked about governance to a degree, but we have not really talked about the pounds and pence. That matters to the communities we are here to serve. When we have asked questions about that, we have been told an assessment will be made at some point that will take into account a range of criteria, all of which we have discussed over the course of the Committee’s sittings, but we are still none the wiser as to what that will mean in practice. What will it mean for a town like Oldham or a city like Oxford? The truth is that, today, we just do not know.
If we believe that the best public services are formed around communities and individuals rather than governments and institutions, maybe the answer will not derive from this building. Allowing freedom at a local level to co-produce and having an independent body that liaises and interacts at a local level, reporting and feeding back to Government, would add a lot of value to the work that Government are doing.
I am not the Secretary of State; I am not even a Minister, but I imagine that if I were in either of those positions, I would not relish the current annual responsibility to produce a financial statement to Parliament. There are two ways of dealing with that: we either do what the Government of the day propose, which is to delete that requirement altogether, or—this would be my preference—we have the assessment in place but ensure that we have the cover of a strong evidence base, that the assessment is tested and supported by rigorous criteria that can be objectively assessed and challenged by anybody interested, and that the process is one to which people can contribute if they are affected by the decision that will ultimately be taken. That would be a far more forward-thinking way of running Government post-Brexit.
When people went to the polling stations and voted to remain or leave, I do not believe for one second they were talking about repatriating powers from the EU to this building. I think they were saying, “I want more power and determination over my life. I’m sick of having things done to me. When my son, daughter, grandchildren or I need a new house, I want there to be a home to get. When the quality of the school isn’t good enough, I want it to improve and be the best it can be. When I want to get a better job, I want to know that the route to that is available to me and I won’t have barriers put in front of me.” The truth is that our communities are so diverse and different that we cannot design that here; it has to be designed within the community, and there has to be a funding model to support it.
We can talk as much as we want—warm words are great. We are all aware that Brexit means Brexit, but we do not know what the new world means, if we are honest. We do not know what a United Kingdom is and whether we will have one if we carry on. Even if we know the place of a further devolved Scotland, Wales and Northern Ireland, not many people can draw out where the Government intend to take a devolved England. The fragmentation of devolution we have seen so far, the absence of a framework and the complete lack of fair funding to support the delivery of local public services and economic growth are a major barrier to having a post-Brexit solution that works for our communities.
This is more important to the Government of the day than just a technical exercise to establish a body to report to the Government; it is about a fundamental reset of the relationship between local communities and their directly elected local authorities, which determine how much money is spent on local priorities, public services and inward investment.
I do not intend to detain the Committee for much longer, but we think that these new clauses are important. We tabled several amendments, having locked ourselves away in a room and thought, “This is going to be a good debating topic,” or, “I’m sure the Government haven’t done their work on this; we might expose one or two weaknesses.” That is the nature of opposition and, to be fair, those amendments worked quite well, but new clauses 2 and 3 and new schedule 1 were not tabled with that intention at all. We are trying to be the voice of local government in this place and to ensure that its interests are represented. As I said, I think the answer has been presented. If the Government of the day do not recognise that they have a gift, which has been adopted by local government on a cross-party basis, and do not take it, they will miss a trick and face further disquiet from their local government ranks.
Anna Turley (Redcar) (Lab/Co-op)
It is a pleasure to serve under your chairmanship again, Sir David. I rise to speak to these new clauses because they are extremely important for the local government sector and would add huge value for the Government. Not only are we struggling to work our way through the Bill without the evidence that we need about the fair funding settlement and so on, as my hon. Friend the Member for Harrow West has said, but year after year, when we come to the local government funding settlement, the Government have to defend themselves against accusations of unfairness, pork barrel politics and so on, in the face of quite extreme evidence—particularly in the last few years as cuts have been applied—of unfairness in the way that local government funding is distributed. Opposition seats are often the hardest hit, and areas of need have seen the hardest cuts. I urge the Government to defend themselves to some extent against such accusations, and these new clauses would provide them with a positive way to do that.
There has been a total lack of clarity in the way that the funding formula is applied. In last year’s debate about local government funding, we even saw Conservative MPs stand up and say to the Minister, “I was going to vote against the local government funding settlement, but since our conversation and since I was given some transitional arrangements, I have decided to support it.” That is obviously extremely distressing to Opposition Members, who are trying to fight for our communities and have seen our constituencies ravaged by local government cuts. There seems to be a preference: people who can get in and advocate their case to the Minister will get funding. That lack of clarity exposes the Government to criticism, and we are offering them an opportunity to defend themselves and give the rest of the country, the local government sector and Opposition MPs some confidence in the way they distribute funding.
There is a second important issue: if we devolve business rates and give local authorities more power to decide on the future of funding, we could leave them in a difficult situation. During the evidence sessions, I asked one of the local government representatives whether she felt local government could co-operate and work in partnership or whether there would be competition, with local authorities essentially fighting each other for the biggest slice of the cake. I have to say that her answer did not fill me with confidence that there really was a united sense of partnership. In my view, having an independent commission and the evidence base on which to proceed would be extremely helpful to both the local government family and the Government themselves.
My biggest concern is that we hear from Government Members: “We have had enough of evidence.” We seem to live in a post-truth, post-evidence world. We are offering the Government the opportunity to have evidence about demand, need and how we can best serve our local communities through local government funding. This is an opportunity for the Government to respond fully and ensure that they are fair and above any accusations or criticism. This seems like an obvious one, and I cannot understand why the Government would object, so I urge them to accept these new clauses.
Mr Jones
The distribution of resources and the assessment of the relative needs of local government is an essential feature of the local government finance system, but those elements do not require legislation to determine them. However, I thank Labour Members for providing me with the opportunity to outline the work we are doing in that area.
Before doing so, I would say that I have heard what has been said, particularly by the hon. Member for Oldham West and Royton. It was unclear whether the commission would be there to simply divide the money available at the time between local authorities, or whether there is a role for it to determine the total money available and national policy on council tax. Were it the latter, it is important to set out that those issues have been determined for many years by central Government. Successive Governments, including Conservative Governments, the coalition Government of Liberal Democrats and Conservatives, and Labour Governments, have held to those principles.
In regard to the work already under way, we announced the fair funding review last year, which was universally welcomed by the local government sector. The review is conducting a thorough examination of what a relative needs assessment formula should be in a world where local government spending is funded by local government resources and not central grant. The findings of that review will set the initial baseline for the 100% business rate retention system.
From the start, we have recognised the essential role that local government has to play in shaping those reforms. That is why we have been working collaboratively with the Local Government Association, which is responsible for representing a broad range of views held by different sections of local government and their member authorities. That effective working relationship has already seen the establishment of a steering group supported by a number of technical working groups, which my officials co-chair with colleagues from the Local Government Association. That gives local experts a unique opportunity to help shape the review, and all the work of those groups is available online, adding real transparency to the progress of the review.
The process for assessing the relative needs of local government is well precedented and was, of course, followed by the Opposition when Labour was in power. Our collaborative and transparent approach represents a significant improvement on that process. In the summer, we published a call for evidence that set out key questions that the review will address. The Secretary of State has confirmed that he will report back to the House on the progress of that review.
Creating a new commission to consider needs assessment and new burdens, as these new clauses would do, blurs accountability for that important work and would add another significant layer of unnecessary bureaucracy, over-complicating the process for assessing the relative needs of local government. It is important to point out that it would undoubtedly lead to a situation where it simply costs the taxpayer more money.
Our proposals offer a better guarantee of a transparent process, supported by the best available advice from local government and elsewhere. On that basis, I ask the Opposition not to press the new clause.
Jim McMahon
Thank you, Sir David, for the opportunity to respond to the Minister. I cannot understand why the Government are so reluctant to accept these measures. Of all the changes in the Bill, some are extremely minor and it would not require legislation for the Government just to get on and make them. Their argument is that they have put them in the Bill to give clarity and to ensure that there is a clearly understood framework in place. If they were to establish an independent body to look at a needs-based assessment, potentially with redistribution, it would be right for it to form part of the same transparent framework that has been proposed for far more minor changes.
Rob Marris
Will my hon. Friend join me in congratulating the Minister on decrying the amendments with a straight face, claiming that they would add another layer of bureaucracy, when he has introduced a Bill that will bring in at least 12 sets of new regulations?
Jim McMahon
I absolutely share that point. There are 12 sets of regulations and something like 56 new powers for the Secretary of State. We are not seeing a loosening of what binds the hands of local government; it is much more a tightening. I do not think that that will be well received.
The main thing is how we move forward. There is so much uncertainty now, not just with the amount of demand in the system for public services. We have seen the social care demand, but there will also be child safeguarding and educational attainment demands and mental health and disability support pressures very soon. That is notwithstanding all the other 700 services that local authorities deliver on a daily basis to support our residents.
We are seeing a genuine crisis in public services in many parts of our country. Some have been more protected than others and some have been more affected than others, but there will be an impact across almost every community in the country. Either the Government are lining up to continue to ignore the scale of that problem and what it means to individuals, families and communities—following a similar pattern of behaviour to that which we have seen under the coalition and the current Governments—or they genuinely want to get a grip and put in place a more sustainable system that would prevent such shocks to local public services. If local government is saying that, through an independently commissioned report that has been agreed by every party political party—including the Conservative party—on the Local Government Association, I cannot understand for the life of me why the Government do not just take that with both hands and run with it. At the moment, their defence seems to be, “That would cost money. It would cost money to have this independent system in place.”
Let us be clear about what the role of that independent body would be. It would be there to assess the need in each area against some objective criteria that would be agreed with central and local government. The Government have said they are going to do that anyway, so let us put that to one side; it will happen whether this body exists or not.
We then talk about redistribution. We know how much money will be required, because a thorough and in-depth review would have taken place. We then need to understand how much money we have and how much we distribute to meet the demand that has now been identified. What Government would not want the ability to say, “This is an independent recommendation”? It would be a gift. We know that they are fearful of scrutiny. We have seen that in the decision that the annual financial settlement will not come to Parliament in the future—they do not want that parliamentary debate. But this gives them a gift to say, “This is not the Government’s saying this; this is an independent body that has worked in consultation with local government.”
Where we are going and what the end looks like is extremely unclear. We have been promised an independent assessment of need. We do not know the criteria, the timescale, the membership or the status. We do not know whether it will be inside or outside the Government or completely independent. Will it sit within local government? We do not know the detail of any of that. We do not know what the new business rate devolution will be. We do not even know which different schemes have been negotiated in each of the pilot authorities, let alone the sweetheart deal that has been agreed with Surrey, which is the only single authority negotiated business rate retention pilot in the country—I am sure the Minister will say whether this is right or wrong. All the rest have been done through a devolution deal through their combined authority arrangements or the imposition of directly elected Mayors. Surrey is being treated in a very special way—a way that other local authorities are not. The Government cannot craft a special sweetheart deal for everybody. At some point, we have to accept that the quantum of money is a quantum of money and we have to teem and ladle.
Mr Jones
I think the hon. Gentleman knows in his own heart that I have been quite clear that we need a pilot in a two-tier area. Councils across that part of the local government sector will be invited to put their name forward to be part of that pilot. No decisions around that have been made.
Coming back to the quantum of funding that the hon. Gentleman has just mentioned: I am still unclear on this. Is he saying that the commission that he wants to set up would determine the overall quantum of funding and things such as council tax setting? While he alludes to that, he has not actually said that as yet.
Jim McMahon
I hope that the Minister does not mind too much. We have done our best to be helpful and constructive and to offer ideas. Ultimately, there is only one person in this room drawing a ministerial salary and being driven around by a chauffeur and it is not me, yet.
Jim McMahon
You have to earn the perks that come with the job. I am not going to give way. We need to make progress. I am happy to receive a letter from the Minister if he feels it is necessary to justify his position. What is most important is not to conflate a number of different points that have been made that are legitimate and stand on their own two feet—they are not one and the same thing. There is a world of difference between establishing an independent financial commission to understand the need in each area for public services and then to advise back to the Government what that assessed need should be. Government may well say as part of the remit of that review that there is a quantum of money that is limited and within the criteria that are set, they may well seek advice from the independent body on how to teem and ladle within that quantum. There has been no suggestion that the independent body would take away the right of the Treasury to determine how taxation is generated and spent in the country. It is very clear if the Minister reads the new clauses and the new schedule that the remit is to advise Government.
Rob Marris
Does my hon. Friend agree that it would help the Minister, whether chauffeur-driven, well-paid or not, with all his officials, to do the Opposition the courtesy of reading new clause 3? If he reads new clause 3, it is entirely clear that the proposed commission would not usurp the power of the Secretary of State to decide on the grant.
Jim McMahon
That is absolutely right. I suppose that in some ways I took it for granted that the Minister would read the papers. Perhaps I should not have done that and I should have read it out line by line. What the new clause intends to do is very clear. I am a new Member so perhaps I am entitled to a degree of naivety— some other people do not have that excuse. We were so prescriptive because we did not want it to be conflated or confused, and we wanted it to be accepted as a constructive amendment on that basis. I hope that the Minister has read it. It is clear what it is intended to do and what it is not intended to do.
Mr Jones
I thank the hon. Gentleman for tabling the new clauses, which would require the Government to provide a range of additional reliefs from business rates. New clause 4 would require the Government to introduce a relief from business rates for non-domestic properties used for the provision of NHS secondary or tertiary care or the provision of education in maintained schools. New clause 8 would include a similar but wider requirement for relief to be provided to all properties used principally by public bodies.
Although I appreciate the intention to provide support to important public services, I do not agree that exempting public bodies from the payment of business rates would necessarily be a helpful step. It may help if I remind hon. Members that buildings occupied by the vast majority of public services, including NHS hospitals and maintained schools, have been subject to non-domestic rates since they were introduced in 1990. That is part of delivering a fair and consistent system of non-domestic rates.
Given that long-established position, I am sure Opposition Members will appreciate that operational costs associated with property occupied by public bodies are taken into account in determining the overall funding level for the relevant public services. More importantly, I should highlight that granting an exemption of such a nature would ultimately reduce the income under the direct control of local authorities through 100% business rate retention. It could also have a disproportionate impact on those authorities that receive a greater proportion of their business rate income from public bodies.
Jim McMahon
I am not sure whether the spirit of the new clause has been understood. To clarify, my understanding is that my hon. Friend the Member for Harrow West is trying to achieve a reduction in what is effectively a paper transaction in the system. If the money were taken away from the council because a business rate was no longer payable, it would be taken away from the public body and given to the council in a different way. The money would still get to the council; the new clause would just stop the in-and-out transaction that takes place.
Mr Jones
I hear what the hon. Gentleman says. As I have said, the current system has been employed since 1990, and for 13 years of that period we had the misfortune of a Labour Government, who did not seek to change the system because they recognised that it was the fairest way of applying non-domestic rating to non-domestic property, including public sector buildings.
Jim McMahon
This is about fairness. I am interested in the Minister’s response to this. It makes no sense for a school that was a local authority school yesterday and is today an academy to be exempt today from paying business rates.
Mr Jones
I think I made it clear earlier that there is no disparity in the system in that example. Local authority-maintained schools are given a dedicated sum to pay their business rates. Academy schools do not get that sum because they are exempt from business rates. There is an implication, particularly in terms of when the new clause would come into force. The way in which the system currently operates is that at a spending review, when the spending decisions about need are determined in relation to a particular public service, the cost of the business rate is taken into account.
I am not absolutely certain of the hon. Gentleman’s intention in tabling the clause, but if, as is implied by what has been said today, the Opposition want to apply this more quickly than the next spending review, that would involve a cost for the Exchequer. That would have to be met either through increased borrowing or additional taxation. Of course, as we all know, the Labour party does not mind racking up a deficit or taxing the public for its spendthrift nature.
Mr Jones
Thank you, Sir David. I was tempted to go down the route of mentioning the £150 billion deficit that was left over, but I entirely take your point.
I turn to new clause 9. I am grateful to hon. Members for raising the important issue of support to licensed markets. I am sure that the Committee will agree that markets are an important and valued part of our local economies. When I was Minister for high streets, which included responsibility for markets, I was a very keen supporter of our markets and supported the “love your local market” competition, towards which the Government contributed and supported.
While we should certainly be supporting our markets to survive and thrive, I do not agree that introducing a new relief targeted at market stalls through new clause 9 is necessary or justified. At Budget 2016, the Government announced a package of cuts to business rates worth over £6 billion over five years. That included the permanent doubling of small business rate relief and an increase in the relevant threshold for 100% relief from £6,000 to £12,000. That will be of significant benefit to stall holders in licensed markets, many of whom qualify for the relief. As a result of the change, more than 600,000 small businesses will pay no rates at all.
It will be for the valuation office to decide on the facts of whether individual market stalls are rateable. Typically, temporary and infrequent markets in the street are not rateable, whereas permanent markets in their own dedicated hall or site will pay rates. I hope Committee members agree that where market stalls are rateable, it is right that they are subject to the same rules as other non-domestic properties. Again, that ensures they are treated fairly in comparison with other properties, whether a small high street shop, a café, a fishmonger’s or a baker’s.
Jim McMahon
Does the Minister accept that there is a fundamental difference between a market site or a market operator and an individual market trader who operates from that site? A small business will most likely be under the threshold for attracting the relief. Because the business rate is paid by the operator of the market, a market trader will almost certainly be above that threshold and liable for business rates.
Mr Jones
I have been clear that the liability for rates will operate differently in relation to different types of market. I have also been clear that the same type of regime should apply to non-domestic property, which is certainly the case in this sense. It is for the valuation office to decide on the facts whether an individual market stall is rateable or not.
To conclude, I hope the Committee is reassured that the new clauses are not necessary and would not further our collective aims to support an independent and self-sufficient local government sector. I ask the hon. Member for Harrow West to withdraw the new clause.
Mr Thomas
I am grateful for the opportunity to sum up our debate on new clauses 4, 8 and 9. New clauses 8 and 9 were very much tabled as probing amendments. Although I am not 100% satisfied by the Minister’s response—something that I have had to get used to—I do not intend to divide the Committee on the new clauses.
New clause 4 was also a probing amendment, to find out the extent to which the Minister and his colleagues have really grasped the scale of the financial crisis facing both schools and hospitals. What we have had back from the Minister and from some Government Members in interventions suggests a profoundly worrying complacency about the financial situation in schools and hospitals. One has to hope that the Chancellor of the Exchequer sees things slightly differently, but we are where we are. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
Duty to ensure no loss of funding following withdrawal from the European Union
‘(1) This section applies where any funding is provided to a billing authority or Combined Authority by the Secretary of State in consequence of funds made available by EU institutions in the financial years beginning on 1 April 2017, 2018 and 2019.
(2) Where this section applies, it shall be the duty of the Secretary of State to ensure that, in the five year period beginning with the date on which the United Kingdom leaves the European Union, the funding made available to a billing authority in question is not reduced in respect of any funds that were made available by EU institutions in the period specified in subsection (1).’—(Jim McMahon.)
This new clause would ensure that funding available from EU institutions is replaced by funding from the Secretary of State for the five years after exit.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
I do not intend to spend a great deal of time on the new clause, which does what it says on the tin: it would secure the money that is currently provided to local areas through European funding post exit from the European Union. For many of our areas, that money is integral to their local economic development plans, to their education and training plans and, in many cases, to their devolution submissions. In a number of our areas, particularly those with combined authority arrangements in place, the local authority is the accountable body for EU funding in its area.
There is one thing that Members may not appreciate about European money. We always discuss whether it is being spent in the best possible way, although that is usually determined by the local community and not by the European Union. It is the communities themselves, through their councils, that make the applications, not the European Union. We talk about the north-south divide, but it is really London and the south-east that has a significantly different financial settlement from everywhere else in England. European funding and the way it is allocated by region provides an element of rebalancing.
I remind Members of the transport investment figures that have come out just this week, which highlighted that London gets £1,940 per head compared with £220 per head for those in the north-east, £680 per head for those in the north-west—although quite a lot of that is temporary funding; it is time limited—and just £190 per head for those living in Yorkshire and the Humber.
London gets £93 per head in European structural funds, compared with £285 in the north-east, £161 in the north-west and £150 in Yorkshire and the Humber. Therefore, there is a strong argument to say that European Union funding is being used partly to counterbalance a centralising Government in Westminster who advantage the London boroughs.
Jim McMahon
I will join the hon. Gentleman in congratulating the residents of Swindon on that investment. I have no idea what it has got to do with the new clause though.
Steve Double (St Austell and Newquay) (Con)
I note with interest that the hon. Gentleman did not include any figures for the south-west or Cornwall. Historically, Cornwall has received just about the lowest level of investment in its transport infrastructure, yet it receives the highest level of EU funding. Despite that, Cornwall voted 62% to leave because we recognise that the EU programme is so prescriptive we cannot spend the funding on the things we actually want and need to spend it on to improve our local economy. I believe we will be far better off running our own programme. I am not worried about it being pound-for-pound matched, but I do want it to be fit for purpose for our local needs.
Jim McMahon
I am absolutely delighted that Government Members are supporting the new clause on that basis because that is exactly what the new clause is there to do. It is not there to stick with the current assessment criteria outlined by the European Union; it is not even there to ensure that the programme activity is continued. The new clause is about maintaining the amount of money being provided to those regions at current levels.
Kevin Hollinrake
The hon. Gentleman makes a good point. I would like to pick up on an earlier point made by the hon. Member for Harrow West, who talked about the antipathy to London. Nothing could be further from the truth. I think London is a wonderful place. It is so successful economically, but that is because it has had more investment. That is the point that is being made.
Southend-on-Sea, for example, is very badly treated in terms of local government funding—it receives around £720 a year per head, when many rich London authorities get £1,200 a year per head. It is simply not fair. The position is similar with transport projects. This is not a metropolitan versus rural issue; it is a London versus the rest of the country issue.
Jim McMahon
The rebalancing discussion was more about making the point that there has to be a recognition that more public sector investment goes into London. There will be reasons for that. This is not about London not being entitled to the money it gets. However, there is a call from other regions, not to say, “We want London to get less,” but to say, “We want the same.” A conversation on that basis is far more productive than setting one part of the United Kingdom against another, which other parties might to seek to. No one in this room would want to do that.
On that basis, there would be an open door for retaining European funding to the regions and, absolutely, allowing flexibility on how that is spent, even tied to negotiation with Government. However, as it stands, there is no certainty that that money will continue when we leave the EU. More than that, there is concern that in order to pay the divorce bill—not just for the lawyers, but for the settlement in terms of pension costs and historical and ongoing liabilities—the nation may have to provide a lot of money up front, which could be used for regional funding in the way that has been discussed.
If the new clause is agreed today, at least we will be able to lock down the funding that is sent to the regions to ensure that they are not paying a price for that divorce. There is a world of difference between people saying, “I’m going to vote to leave because I want more determination by my nation of the future of my nation,” and “I voted to leave because I want less investment for my community.” We need to be careful. Our challenge to the Government is to prove that their flavour of Brexit is not going to leave our constituents poorer than they were before. The new clause would help to show that they will not necessarily be poorer and that the Government understand that our regions need to be supported.
I should perhaps confess that it is a probing new clause. However, if it is not supported by the Government, we run the risk of providing further evidence to our local authorities that those in this grand place simply do not get it.
Mr Jones
I thank the hon. Gentleman for providing the opportunity to discuss the new clause, which aims to ensure that local authorities see no loss in funding following our withdrawal from the European Union. The Government will want to consider the future of all programmes that are currently EU funded once we have left the EU.
Over the coming months, we will consult closely with stakeholders to review all EU funding schemes in the round to ensure that any ongoing funding commitments best serve the UK’s national interest, while ensuring appropriate investor certainty. We will, of course, ensure that local government’s voice is heard in negotiations with the EU. I think that is what the hon. Gentleman was alluding to with some of his concerns. The Government have already announced that local authorities will be guaranteed EU funding for European structural and investment funds projects that provide good value for money and meet domestic priorities that are signed off before the UK’s departure from the EU, even when those projects continue after we have left the EU.
I hope the reassurance I have provided means that the hon. Gentleman will stick to his confession and decide not to put the new clause to a vote.
Jim McMahon
I thank the Minister for his comments. We have had a good debate but I do not think we have had clarity that the Government have committed to ensure that the EU funding will be in place over the life of the programme. The programme, of course, takes us only to 2020. Beyond that date, our regions have no idea how much money they will receive for research, development and skills investment. I do not accept the Government’s response as sufficient to give comfort to those areas. However, it was important to table the new clause in order at least to elicit that response. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 10
Non-domestic rating: exemption for nursery grounds
‘(1) Schedule 5 to the Local Government Finance Act 1988 (non-domestic rating: exemption) is amended as follows.
(2) In paragraph 3(b), after “market garden” on each occasion where it appears, insert “or nursery ground”.—(Steve Double.)
This new clause would provide that the definition of an agricultural building for the purposes of the exemption from non-domestic rating includes a building which is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground.—(Steve Double.)
Brought up, and read the First time.
Steve Double
I beg to move, That the clause be read a Second time.
With the new clause, I seek clarification of the legislation and confirmation of my belief of the original intention of the Local Government Finance Act 1988 regarding the agricultural exemption from non-domestic rates for nurseries and market gardens. This has been prompted by a court case brought by the Valuation Office Agency in 2015 against Tunnel Tech Limited, mushroom growers who grow their product under polythene or glass.
For more than a century, legislation has dictated that agricultural land and, latterly, buildings have been exempt from rating liability. The principle of an agricultural exemption is well established. The Court of Appeal, however, interpreted the legislation as not to include nursery grounds consisting wholly of greenhouses, polythene tunnels or buildings with the exemption.
The horticultural industry in the UK has undergone significant changes in recent years in order to increase our home food production, something I am sure we all support. That has included more and more crop-growing operations taking place under the cover of polythene tunnels and other buildings. It has also led to more sophisticated growing techniques being explored.
There is no longer a distinction between enterprises that would have been classified as a “market garden” and those classified as a “nursery ground”, as per the legislation. They are instead simply “food growers”. Many growers are a combination of both “nursery ground” and “market garden”, operating from the same premises with no distinction of areas. The Valuation Office Agency argument in the case centred around the fact that Tunnel Tech did not produce mushrooms that were ready for market.
In order to become more productive and cost-effective, the industry has become increasingly segmented in its approach to production. There has been a move towards businesses specialising in niche production. Growers may now only produce one stage in the development of an end product, such as plug plants for vegetable production. That is more economical for the industry, allowing it to be more competitive in the global marketplace. Significant increases can be made in production, where each stage can be carried out at individual premises designed solely for each specific stage of production. Dealing with all production stages on the same premises has substantial limitations.
With more and more agricultural land being taken up with housing provision for our expanding population, there is a need to be able to produce food for the country over smaller areas more efficiently and more reliably. That can, to an extent, be addressed by growing more product under cover.
The Tunnel Tech case has highlighted how outdated or ambiguous the current legislation is in that regard. It makes a defined distinction between “market gardens” and “nursery grounds” and treats them differently for exemption purposes, whereas enterprises today are, in reality, simply growers.
It is unlikely that, in drafting the legislation, it was Parliament’s intention to limit UK horticultural production, as will be the case potentially should the legislation stand as it is. A significant ratings bill in addition to other rising costs will prevent investment in growing businesses. It will prevent growers from exploring new techniques requiring under-cover operations. It may also have a reverse effect on operations that already do grow under cover, forcing them to abandon these growing methods. I have tabled the new clause simply to clarify the relevant legislation, which is the Local Government Finance Act 1988, and to ensure that the agricultural exemption from ratings liability is protected as the industry evolves and modernises. I do not believe that there will be any significant fiscal impact to the Treasury from this change, as it is not revenue that the Treasury has historically been receiving.
Steve Double
I thank the Minister for his response and I am grateful for the support of Opposition Members. I am happy to take the Minister at his word at this stage and hope that they will, too. I have put down a clear marker and believe that the Minister takes the matter seriously, but I will be watching closely to ensure that it is addressed in the near future. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 11
Power to remove or reduce mandatory reliefs in cases of business rates avoidance
(1) Part 3 of the Local Government Finance Act 1988 (non-domestic rating) is amended as follows.
(2) In section 43 (occupied hereditaments liability) after subsection (8C) insert—
“(9) For any hereditament for any charging day to which this section applies, if the relevant billing authority has reasonable grounds to suspect that the occupier is taking inappropriate steps to reduce liability for business rates, the billing authority may treat that hereditament instead as if section 47 (discretionary relief) applied to it.”—(Jim McMahon.)
This would enable billing authorities to have powers to treat mandatory reliefs (which are specified in section 43 of the Local Government Finance Act) as discretionary reliefs, which are dealt with in section 47 of the same Act, if they had reasonable grounds to suspect that liability was being reduced through business rates avoidance.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
Again, like the best ideas, this one has been nicked. It was taken from the LGA, which has been consulting its members on how the business rate scheme has been abused by some landlords who have sought to avoid their liability to pay business rates. During the consultation, which was held in 2014, the LGA asked local authorities what types of tricks and techniques were used by companies and landlords who wanted to avoid paying business rates.
Some of the methods shared included repeated short-term periods of occupation; declaring that vacant properties are intended for future use by a charity; and fictitious occupation of properties by charities: for instance, certain window displays are used to decorate the building, but the activity carried out inside is quite different. Landlords also use insolvency to rack up high bills. When the moment comes for them to face court, the company is wound down, and people avoid paying them. Avoidance also results from properties not being on the rating list at all; people not reporting where properties have been split and should be subject to separate assessment for rating liability; the use of shell companies or offshore companies; and the use of vacant properties whose ownership is not known, although the owner might be local and using a fictitious address or name to avoid liability.
The new clause would ensure that when such techniques are discovered, safeguards are in place to ensure that the same occupier is not entitled to apply for a discount in future. They have effectively abused their chance to play the system fairly; the intention was to support those businesses and landlords who need it. I hope that the Government see that it is about fairness and balance. It is also about showing that where fault is discovered and people are proven to have been abusing the system, the Government have no truck with them and will hold them to account and restrict them from taking advantage again in future. If the Minister supports the new clause, he will win friends in local government and show that the Government have listened to what they have said.
Mr Jones
I thank the hon. Gentleman for giving us the opportunity to discuss the important matter of business rate avoidance, which the new clause seeks to address. New clause 11 would provide billing authorities with power to treat any hereditament to which section 43 of the Local Government Finance Act 1988 applies as if it were subject to section 47 of that Act where they have reasonable grounds to suspect that the occupier took inappropriate steps to reduce their business rates liability.
The effect would be to provide the billing authority with the discretion to grant or withhold any mandatory relief that the hereditament would otherwise be eligible to receive under section 43. That would include charitable relief, rural rate and small business rate relief; however, it would not extend that discretion to empty property rates relief.
The Government have been clear that we wish to retain the benefits that the system of mandatory reliefs brings. Mandatory reliefs provide businesses and charities with certainty and a consistent framework within which to operate and grow. For example, the small business rate relief scheme provides uniform support for all small businesses, applied evenly across the country. I have some sympathy with the hon. Gentleman’s intention to ensure that mandatory reliefs and exemptions are used appropriately, and I recognise some of the questionable methods used to avoid paying business rates; I have seen them in my own area. However, I do not agree that giving local authorities a power to decide whether to grant mandatory reliefs where they have reasonable grounds to suspect that steps are being taken to avoid business rates is the right approach. Nor would it follow due legal process to enable a local authority to withhold reliefs without evidence, solely on having reasonable grounds of suspicion. It would create inconsistencies in the application of reliefs and risk penalising legitimate charities and businesses that are rightly entitled to these important reliefs and penalise those whom the policy is designed to support.
Jim McMahon
We had intended to press the new clause to a vote. We are committed to it and are convinced we had the support of local government, but equally we appreciate the Minister’s constructive response. We will watch with interest how those conversations with the LGA develop. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 12
Removal of provision for referendums relating to council tax increase in England
(1) Part 1 of the Local Government Finance Act 1992 (council tax: England and Wales) is amended as follows.
(2) Omit Chapter 4ZA (referendums relating to council tax increases in England).—(Jim McMahon.)
This new clause would remove Chapter 4ZA of the Local Government Finance Act 1992, inserted by Schedule 5 to the Localism Act 2011, which provides for council tax referendums.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
You will be pleased to hear that this will be a quick speech, Sir David. It should not be for anybody in this building to determine the relationship between local authorities and the council tax payers in their area. It is for local people to hold decision makers to account through the ballot box, as they do with central Government. When people go to vote in a general election, they take a view on the decisions of the Government during their period in office and whether their fiscal decisions have been good or bad for them and their families. Local people should have the same ability to do that with local government. It should not be for the Secretary of State to impose an arbitrary referendum limit. The LGA, a cross-party organisation, supports that view, too.
I would appreciate a response from the Minister. I am sure he appreciates the growing calls from local government to tell the Secretary of State to mind his own business, and I hope the Minister will look at the new clause and take that message back.
Mr Thomas
This is, if you like, Sir David, the David Hodge memorial clause. Surrey County Council has blown out of the water the rationale that the Government once used for referendums. There is a deep irony in the situation this year, where the one council that is likely to impose a 0% council tax rise will be a Labour council and the one council that proposed the single biggest increase in council tax this year is a Conservative council. We have to admire the chutzpah of Mr Hodge. He has managed to get himself a sweetheart deal by completely blowing away the rationale Ministers once had for referendums. It is in that spirit that we move this probing new clause.
Mr Jones
I thank the hon. Member for Oldham West and Royton for his explanation of new clause 12. It was a slightly more constructive effort than that of the hon. Member for Harrow West, who seems to be preoccupied with sweethearts. Perhaps that would have been best placed last week, when the House was in recess and it was Valentine’s day. He seems to persist with a misplaced line of questioning.
The new clause would remove chapter 4ZA from the Local Government Finance Act 1992 and thereby abolish the system of council tax referendums. That would allow local authorities to set whatever increases they choose, without having to seek the approval of local voters.
Arguments in favour of abolishing council tax referendums, or for not setting any referendum principles are certainly familiar to the Government. However, they are not arguments that the Government accept. Government defining an excessive increase has been part of the council tax system for decades. Council tax is currently 9% lower in real terms than it was in 2010-11. It will still be lower in real terms in 2019-20, but only if the Government continue to work with local authorities and maintain a referendum threshold, as promised in their manifesto.
The referendum threshold is not a cap. Councils can set any council tax increase that they like, provided that they have obtained the consent of their local electorate in a referendum. That is direct democracy in action. Local people have the right to choose whether they wish to pay extra council tax for additional spending and councils have the right to make the case to them.
In setting the referendum threshold, the Government listen to the views of local authorities, but clause 4 will formalise that by requiring the Secretary of State to consult their representatives. I believe that that flexible and constructive approach to setting excessiveness thresholds is crucial in striking the correct balance between funding for local services and protection of council tax payers.
Council tax is 9% lower than it was in 2010. That makes a significant case—unlike the 13 years before then, when council tax actually doubled during the Labour Government. I hope that, having reflected on the points I have made, the hon. Member for Oldham West and Royton will consider the challenge that this proposal would present to many council tax payers and withdraw his new clause.
Jim McMahon
It was interesting to hear that response from the Minister. I am not sure that the spirit of where the new clause is trying to get to was fully appreciated. This is not about the appropriateness or not of council tax increases; it is about the balance of power in the relationship between local government and central Government. The fact is that the Secretary of State in this place wants to determine what goes on in every single community in the country. I do not think that that is in the spirit of localism. We have seen in Surrey, where the 15% proposed increase—
Kevin Hollinrake
Surely the point is that the power is not with local government or central Government. The power is with the people. All any local authority has to do is go to the people and ask them to endorse the proposed rises, and they can have whatever rise any local authority may propose.
Jim McMahon
The funding of the new elected mayors for our combined authority areas is being met by council tax payers in those areas, as an additional burden. There was no referendum about whether local people wanted that, so talking about seeking a referendum if local people are to be expected to spend more money does not, I am afraid, hold water.
We will not make progress on the point today, because I think there is a fundamental gap between the spirit of localism—which can be heard from the Opposition Benches and is about empowering local communities and giving them the tools and levers to effect change, and the resources to make change happen—and the centralising, command and control way in which the Government are seeing through their devolution of financial settlements.
Jim McMahon
I am about to wind up. Local government will say that the issue is beyond party politics, but when they look to this place they will see that the party speaking for local government devolution is the Labour party. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 13
Power to impose a charge for business rate appeals
‘(1) A billing authority or major precepting authority may charge a ratepayer a fee in connection with activities undertaken as a result of an appeal by that ratepayer to alter the authority’s local non-domestic rating list under section 55 of the Local Government Finance Act 1988.
(2) The amount of fee payable must be calculated by reference to costs incurred by the authority when undertaking activities relating to that ratepayer’s appeal and the amount of fee payable must not be calculated by reference to costs incurred by the authority in the undertaking of any other activities.
(3) The Secretary of State may, by regulations, make provision about the circumstances in which those fees are to be refunded.’ —(Mr Thomas.)
This new clause would enable billing authorities or major precepting authorities to charge fees on a cost recovery basis to ratepayers in connection with business rates appeals.
Brought up, and read the First time.
Mr Thomas
I beg to move, That the clause be read a Second time.
I understand that Ministers intend to charge £300 for large businesses and £150 for small businesses that want to make a business rate appeal. The new clause is a probing measure to explore how Ministers arrived at those figures. Given that there are likely to be substantially more appeals as a result of the current business rates revaluation, it would be good to understand what the thinking has been about the charges.
In the context of business rates bills being reduced on six out of nine warehouses of a very large business such as Amazon, one wonders whether £300 is not rather low. It costs £250 to submit a claim for unfair dismissal and £950 if the case goes to a tribunal. Funding has been cut from the Valuation Office Agency and I wonder whether a fee of £300 for a big business submitting a speculative revaluation claim is truly appropriate.
It would be good to hear what Ministers have to say and whether they will keep the matter under close review, with the potential for amending the charges as evidence begins to emerge.