Draft Dorset (Structural Changes) (Modification Of The Local Government And Public Involvement In Health Act 2007) Regulations 2018 Draft Bournemouth, Dorset And Poole (Structural Changes) Order 2018

Jim McMahon Excerpts

Wednesday 16th May 2018 General Committees

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Sir Henry. We find ourselves in the middle of what seems to be a rift in the Conservative party. Luckily, we have been gently eased into that sort of thing during Brexit negotiations, so we are very much used to it.

[Simon Hoare]

rose—

[Jim McMahon]

I might start before I give way, if that is okay. The principle for any merger or reorganisation ought to be that it has the consent of local people, is in the spirit of democracy and will lead to good governance and good public services being delivered. As an observation, we know that a number of members of the Committee who have voting rights support the regulations; it does not sit well that the single Member from the area who does not support the plan is not allowed to sit on the Committee with voting rights. I understand that that is about managing the process and not wanting to create division on the Government Benches, but it is not quite in the spirit of having robust debate where there is clearly a difference of opinion.

[Simon Hoare]

This is an enormously important point. There are eight Members of Parliament—they happen to be Conservative Members—representing the county of Dorset, and none of us is a voting Member on this piece of legislation. We happen to be exercising our right, as any Member can, to turn up to a Delegated Legislation Committee and speak. However, when Sir Henry calls for votes, no Dorset hands will be able to go up or stay down.

[Jim McMahon]

I am grateful for that clarification.

[Sir Christopher Chope]

Will my hon. Friend—the hon. Gentleman give way?

[Jim McMahon]

In the interests of balance.

[Sir Christopher Chope]

The hon. Gentleman certainly is—I hope—a friend of mine, because he is listening and that is healthy. I inform him, if he does not know already, that in response to a point of order on 10 May on the business question, Mr Speaker said:

“Some people might think…that it is perhaps less than collegiate, kind or courteous on the part of the powers that be knowingly and deliberately to exclude the hon. Member for Christchurch from the Committee.”—[Official Report, 10 May 2018; Vol. 640, c. 925.]

[Jim McMahon]

That is noted. I was in the Chamber for that point of order and Mr Speaker’s response, so I was aware of it. There is clearly a difference of opinion, and Christchurch Council has been robust in its position. However people want to view that, the council went out to its local population and those who took part were clear that they were against reorganisation—84% were against the proposed merger. I am not saying that that in itself is reason alone to block any reorganisation or merger, but simply to put that to one side as if not important, or to try to decry such public involvement, is not the spirit in which to go about it.

[Sir Oliver Letwin (West Dorset) (Con)]

The hon. Gentleman makes an important point, which was in fact made earlier by one of his colleagues. I hope he appreciates that none of us—and, I think, none of the other councils—would have wished to force Christchurch into this position. From our point of view, it would be perfectly fine for Christchurch to be on its own, but unfortunately it is not a feasible operation. Christchurch is aware that it does not have the capacity to run all of its services, including county-level services. Therefore, the question is whether a small proportion of the population in Christchurch voting in the majority in a parish poll should be enough to derail the entire process for the whole of Dorset ex-Christchurch, including those residents of Christchurch who we believe will benefit.

[Jim McMahon]

I accept that point. The question is more about the spirit of the debate. We heard earlier that a third of councillors on Christchurch Council are in support, but of course two thirds are not. We need to be clear about what the regulations are and what they are not. The regulations contain a list of consenting authorities who are affected by the change. Christchurch is not in that list, but it is not made explicit that Christchurch has objected. It would helpful if that was made clear.

We want clarity about why a process of merger and reorganisation has started, and we want to be convinced about the consultations, evaluations and professional assessments that have taken place in terms of both the financial viability of local government and the role that local authorities have always had—to grow their local economies and be leaders of place rather than just leaders of councils—but are expected to do increasingly. If we get all of those lined up, even if there is dissent in some elements, and the case made is so overwhelmingly in the public interest, as lawmakers we must take that into account, because we are here to make good law, which does not always please everybody all of the time. I do understand that.

Some questions have been put to me, and I would be grateful for the Minister’s response. We have been asked to consider whether we ought to divide the Committee, and we are open-minded. Much will depend on the Government’s response as we try in a genuine way to get answers.

First, we want clarity about how the Government perceive the vote by residents in Christchurch. What weight does that carry and how can that position be reconciled in a future relationship? Many of us in metropolitan authorities have the scars of the 1974 reorganisation, which people still go on about in Oldham and still resent. It was seen as a takeover. Their local identities were cast to one side in favour of a new identity. It should have been there for administration, but incrementally tried to change the identity of a place and its people. A response on that would be helpful.

The point has been made a number of times that this secondary legislation is, in effect, retrospective. I would be grateful for a Government response on that. It would also be helpful for me to know what implications it might have for other potential mergers or reorganisations under discussion elsewhere.

We know that there are two primary routes. First, it can be initiated by invitation from the Secretary of State—we know that that process has happened in other places. The other route is local authorities coming together to apply to the Secretary of State for reorganisation and make the case for it. I would like reassurance that, when the Secretary of State initiates the consideration of reorganisation, we will not find ourselves in this situation—a local authority and local residents who do not support reorganisation are being forced to reorganise. Confirmation on those issues would be very helpful for the debate.

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[Sir Christopher Chope]

There was a meeting of officials from Dorset councils with the Department in June 2016, before the consultation papers were finalised. That meeting has been confirmed in answer to a parliamentary question that I tabled. I have been told that the minutes and notes of that meeting no longer exist, if they ever did. I have been told by the section 151 officer at Christchurch Borough Council, who was present at that meeting, that, in response to representations on the big council tax gap between Poole and Bournemouth, and Christchurch—more than £200 at band D—the officials said that the Government would agree to a 20-year harmonisation period. It was on the basis of that statement made by Government officials, presumably with the knowledge and support of Government Ministers, that the consultation document was drawn up, using figures based on a 20-year harmonisation period. As my hon. Friend knows, if there is a 20-year harmonisation period, that means that the figures look a lot more attractive than they do for a much shorter harmonisation period.

Indeed, I questioned council officers in Dorset about that at the time. They explained that although the shorter harmonisation period would benefit my constituents in Christchurch, it would drive a coach and horses through the financial prospectus that had been produced, because it would eliminate almost all the savings from the reorganisation. The reorganisation was presented in the consultation on the basis of net savings, but a lot of those savings were increased income from the people of Christchurch, to the benefit of those in Poole and Bournemouth. This is a long answer to my hon. Friend’s intervention, but the short answer is that the Government did know and encouraged this.

[Jim McMahon]

rose—

[Sir Christopher Chope]

I will finish the answer in a minute, but first I give way to the hon. Gentleman.

[Jim McMahon]

I would be interested to know whether the Government indicated any intention during that discussion to have a property revaluation for council tax purposes at any point in the transition period, because if it were taken to its 20-year extreme, the property prices would be 47 years out of date.

[Sir Christopher Chope]

Exactly. I obviously was not party to the conversation, but as I understand it, nothing about potential changes to council tax or business rate valuations was discussed.

Subsequently, last October the Government indicated to council officers across Dorset that they were no longer content with a 20-year harmonisation period, and that the period would be much shorter. That was confirmed to me by the chief official at the Department—he is in the room today—when I met him on 7 November at the behest of the Secretary of State. I was told then that the Government thought that the maximum period for harmonisation would be five years, but in practice it has never been more than two years in the past, and a maximum of two or three years is likely. A harmonisation period of two or three years would completely transform projections on savings, yet there has been no update from the councils to show what the impact would be in practice.

The issue of harmonisation is fraught. The Government invited all councils in Dorset to make submissions on harmonisation in time for the 8 January deadline. I know that Christchurch did that, but not whether other councils did. Unlike with the Government’s decision to go ahead with the two unitary authorities proposal, which they announced on 26 February, they have not yet said where they stand on the fraught issue of harmonisation. Their criteria for judging the issue are so broad and vague that it gives them absolute discretion over what answer they provide. As the issue has now been raised by my hon. Friend the Member for Bournemouth West, I hope that when the Minister responds he will say unequivocally what harmonisation and equalisation period the Government will set in the event of these orders going through.

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[Sir Christopher Chope]

I will go along with that, yes. My hon. Friend the Member for Shipley, who is a betting man, knows exactly how to bet on two-horse races.

Let me return to the issue of consent. Neither my hon. Friend the Minister nor others drew the Committee’s attention to the 26th report of the House of Lords Secondary Legislation Scrutiny Committee, which was published in April. That Committee drew specific attention to these instruments—particularly the draft modification regulations, which we are discussing at the moment—and to the local advisory poll in December 2017,

“in which 84% (numbering 17,676 votes) of those taking part voted ‘no’ to the changes.”

It reports in its conclusions at paragraph 11:

“MHCLG has told us that Ministers have made clear that they will apply the criteria for local government restructuring ‘in the round’ for the area subject to reorganisation, rather than considering whether the criteria would be met in relation to each individual council area.”

It goes on:

“However, given the scale of opposition to the proposal expressed both by Christchurch BC and by its residents, we consider that these instruments give rise to issues of public policy likely to be of interest to the House.”

I hope that, in looking at this issue, hon. Members will indeed have regard to what that Committee said and to the appendix to its report.

That draws attention to the outcome of the poll. My hon. Friend the Minister said that some councillors from Christchurch had written to the Government saying that they rather fancied the idea of being councillors in a new unitary authority and thought it would be in the best interests of Christchurch residents that that should happen. When that was debated and voted on at the Christchurch Borough Council meeting in January, not a single councillor raised his hand to vote against what was proposed—in contrast to what happened a year previously. The reason was that they knew that if they did so, the electors in their wards would have been completely at a loss to understand how they could be insulted by their elected members.

Remember that at the borough council elections in Christchurch in 2015 there was no talk whatsoever of any structural change. Indeed, at that time there were plaudits all round for the savings, extending to several million pounds each year, being achieved as a result of Christchurch and East Dorset working together in partnership with one chief executive, one set of chief officers and one headquarters premises. As a consequence of what is proposed today, that partnership will be broken, with all the dis-economies of scale that will flow from that. That joint working will be undermined, and one part of the partnership will be set against the other. The Government have not faced up to that, which is another reason to be concerned about the proposals.

I would also bring the Committee’s attention to this point, which the Minister anticipated I would make. The background is that, under section 2 of the 2007 Act, the Government have the power to invite proposals for local government reorganisation from two tier to single tier. That is indeed what the Government recently did in Northamptonshire. The 2007 Act also gave the then Government the power to insist that proposals be brought forward, but that power was time-limited and has expired.

There was no power in that Act for councils to make their own proposals to the Government where there was not consent. That is where the regulations are problematic, because they say that the 2007 Act shall be changed retrospectively to operate in a way that allows councils to put submissions to the Secretary of State without their having invited such submissions. As the Minister said, the regulations being used to try to achieve that require the consent of at least one councillor in a particular category.

However, during the passage of the 2016 Act in December 2015, the Government said they would give a guarantee that powers to override the democratically expressed will of an individual council would not be used for that purpose. The background to that was a Back-Bench amendment to the Bill that was considered on Report, which is now reflected in section 15(5) to (8). I and my hon. Friend the Member for Gainsborough (Sir Edward Leigh), along with one or two others, expressed concern during the debate on that amendment that, if literally interpreted, the power it created could be used against a council against its will. I sought various undertakings in that debate, but the junior Minister was tied to his brief and unable to satisfy either me or my hon. Friend the Member for Gainsborough that the powers would not be used in the adverse way that we feared.

Then—this is relevant, because it is how this came about—my hon. Friend and I spoke to the then Secretary of State during another Division on Report and said that if he did not give a stronger undertaking on Third Reading, we would divide the House. The Secretary of State told us that he would give us the undertaking that we sought. It was on that basis that I asked the Secretary of State this specific question on Third Reading:

“Will my right hon. Friend give the House an assurance that amendment 56”—

the one that changed what is now section 15(5) to (8)—

“will not be used by the Government to force change on any local authority?”

The Secretary of State replied:

“I will indeed.”—[Official Report, 7 December 2015; Vol. 603, c. 822.]

My hon. Friend the Member for Gainsborough then pressed the point, citing his fear that the power would be used to impose changes in Lincolnshire that he and his people did not want. The Secretary of State went further and said that the powers were designed to bring councils together into discussion and not to impose the will of the Government on one council, as compared with another, against its consent.

I have since spoken to our former colleague, the junior Minister at the time, who told me of his horror when he heard what the Secretary of State said in response to the questions that I and my hon. Friend the Member for Gainsborough put to him on Third Reading. Our erstwhile hon. Friend, who sadly was defeated at the general election, took the view that what was being said was thoroughly misleading—that is what he says. What we have is a situation where I and my hon. Friend, and the House, were misled by the Government—I am not saying deliberately—and made to believe that the Government would not introduce changes against the will of elected councillors.

[Jim McMahon]

I, too, seek clarity on this matter, because there is a difference between the Secretary of State devising a scheme and then effectively forcing councils to accept it. That is not what is on the Order Paper today. During the discussions that took place, was there any conversation that would effectively give any component council a right of veto?

[Sir Christopher Chope]

If the hon. Gentleman looks at the whole context of this debate and the whole Hansard report, I think that he will reach the conclusion that a clear undertaking was given by the Government.

Perhaps I can pray in aid the written opinion—it was referred to earlier—from Nathalie Lieven QC at Blackstone Chambers in response to a request from Christchurch Borough Council. In it, she says:

“I was shown…various passages from the Hansard debates where the Minister appeared to assure Sir Christopher and another concerned MP, Edward Leigh, that the power would be used to persuade Councils to have a conversation about merger rather than to force them to merge against their will.”

Nathalie Lieven QC goes on to say:

“Debates in Parliament are only admissible”—

that is, in a court of law—

“where the meaning of the statute is unclear and ambiguous. In this case s.15 is perfectly clear on its face, so what the Minister said is not admissible to seek to prevent him from acting under s.15. The correct forum for holding the Minister to account, for arguably giving an assurance that he is now reneging on, is in Parliament itself. The courts will not enforce an assurance given to Parliament, and will be clear that this is a matter which should be raised in Parliament. On the face of it there does seem to be an inconsistency between what the junior Minister was telling Parliament”—

that was in November last year—

“and the decision of the SoS in this case, but this is a matter…to raise politically, rather than giving rise to a legal argument.”

So we have a situation where leading counsel takes the same view as I take, and took, and indeed relied upon during the consultation period in the autumn of 2016.

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[Jim McMahon]

The bulk of the assessment undertaken by the local authorities and PricewaterhouseCoopers, which underpins the argument for this reorganisation, is compelling. It points to local authorities that will be more financially sustainable, and mentions efficiencies that can be achieved. When budget reductions are placed on local authorities, it is incumbent on all local councils to consider where they can save money on administration and processes and so protect front-line services.

Let us be clear: this is a condition of the Government’s making. Some local authorities are having to think the unthinkable—we have heard some of the objections to this suggestion today—and in many local authorities the neighbourhood services they deliver are being completely undermined and diminished. There is increased demand for adult social care and children’s safeguarding, but no resources to follow through, meet that demand, and achieve the type of society to which we aspire. Those are the results of a political choice. There is not enough money in the local government system properly to fund local authorities in the future, and that is what underpins this reorganisation. This is not about community identity or a sense of belonging and place; it is about how we balance the books when the money is running out.

In 2010, the central Government grant made up 46% of the local government funding base, but by 2019, that will have fallen to 8%. Today, that grant is at its lowest level as a proportion of our GDP since 1979, and by 2020 it will be at its lowest level since 1948. By that time we will have a £5 billion funding gap, and we as a nation will not be able to afford to meet the demands of older people who are living longer and needing social care.

When we debate social care, we often think about old people who need care in their home, who are forced into hospital when they should not be there, or who are in hospital because they need to be there but are unable to go home at the appropriate time because of the lack of community services to support them. However, the bulk of social care spending in this country is not on people over the age of 65, but on people under 65; it is spending on mental health services, support for physical disabilities, and the range of support we give to our community. The Government are genuinely considering how we can fund public services in the future. There has been talk of some kind of new tax that might bridge the gap between social care and health, but if all that does is address social care for over-65s, but not the broader spectrum of social care that local authorities deliver, it will fall short of balancing many councils’ books and meeting local community demand.

We know that any reorganisation requires a lot of time, organisational discipline and skills such as project management and building new teams, even before addressing matters such as estates, computer systems, holding of data, and the myriad different arrangements and contracts that local authorities have in place, with systems that do not talk to each other. That is not funny. It is for the Members of Parliament for those areas, for Government, for the councillors and for the professional support in those local authorities to ensure that the transition is carried out, but even hon. Members who support these proposals because they see how money is being taken away and demand is going through the roof ought to recognise that, even with reorganisation, a multimillion-pound funding gap will remain.

The official Opposition have tried our best at every corner, in every debate and in every campaign to raise the profile of the financial pressure of adult social care and children’s safeguarding. I know that some people in government do understand this, but I do not believe the Treasury understands it at all—if it does, it certainly has not prioritised it. The Treasury has not come up with an answer to a system that is increasingly under strain and will break.

I make this plea to Conservative Members: the fundamental reason why we are here is to provide sustainable public services in the future, but even if we let the SI before us go through, we know the situation is just not sustainable. That case has to be taken to the Chancellor and to the Treasurer. It is incumbent on every Conservative Member to ensure that in the next Budget there is sufficient funding to address the chronic underfunding of local government.

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[Simon Hoare]

My hon. Friend is right, and I too pay tribute to Matt Prosser, and to the leaders of councils that cover my constituency—Councillor Graham Carr-Jones is the leader of North Dorset District Council, and Councillor Spencer Flower leads East Dorset District Council. Councillor Rebecca Knox is leader of the county council. They came together—this has been a salutary lesson for us all, and I firmly believe that that was one of the lead motivators for seven of the eight Members of Parliament representing constituencies in the county to support them. They have tried all those efficiency savings and had some signal success.

My right hon. Friend the Member for West Dorset is right. I have been in post for just three years, but in that time I have noticed—as has my caseworker, Diana Mogg, who served my predecessor for 18 years—an absolute peak in people contacting us, and coming to advice surgeries with questions about children’s services, special educational needs and statementing, rural transport, and the provision of adult services. There has been a spike, and the hon. Member for Oldham West and Royton was right to point out the indisputable fact that local government has shouldered a heavy burden as we try to get the national finances back to some semblance of normality. Colleagues, irrespective of where we stand on these proposals, have argued with previous Secretaries of State and with the Treasury to get a better funding settlement for our county.

[Jim McMahon]

Although austerity has bitten and every Department was expected to take some responsibility, the burden has fallen disproportionately on local government. As it stands, the local government workforce is at its lowest since comparable records began, and the central Government workforce is at its highest.

[Simon Hoare]

The hon. Gentleman is right, and in the seven years that I was cabinet member for resources on West Oxfordshire District Council, we faced such issues, just as he will have done as a former leader of Oldham Council. He is right to point out that the local government family has shouldered the largest burden.

It cannot be a coincidence that the proposals submitted to the Government command such comprehensive support. Colleagues speaking in support of the proposal have listed some of that support, and my checklist includes the local enterprise partnership, our town and parish council association, the clinical commissioning group, Dorset chamber of commerce, the Port of Poole, the two universities, the police, seven of the eight Members of Parliament, and eight of the nine councils.

Let me pause for a moment, because it is important to put on the record that until some months ago, six councils in Dorset supported the reorganisation and three did not—Purbeck and East Dorset District Councils have been on a journey. They have forensically examined the proposals, and after a period of time and reflection, they came to the clear perception that this is really the only song on the hymn sheet that will do the job that is needed. My hon. Friend the Member for Christchurch said that the proposal could mean “doomsday for a lot of Conservatives in Dorset.” He might be right—I believe that he will be wrong—but, in a way, it does not actually matter. It ill behoves us to suggest that the motivation of public service rests entirely on being tested against the balance of party political advantage. Public service should trump everything. As a number of colleagues have pointed out, it is not that we Members of Parliament are turkeys voting for Christmas; but that our councillors, having exhaustively explored and delivered savings over three, four or five years now, realise that this is the next inexorable step that has to be taken.

I say with as much respect as I can muster that although those of us supporting the proposals in the political arena were described by my hon. Friend the Member for Christchurch as ignorant and predators on these matters—allegations to which I take exception and that I would certainly refute; although perhaps we could be called those things, my right hon. Friend the Member for West Dorset could never be referred to as ignorant—we have come to the judgment that this is right for public service.

When we ask our constituents—often the most vulnerable in the county who are reliant on the locally provided public services—whether they think that it is right to reduce the number of councils and councillors and, in so doing, continue to provide quality public services, or simply to manage provision that is declining quantitatively and qualitatively while saying, “By golly, do not worry, we have preserved x officers, x buildings and x councillors”, I would say from my experience of 12 years as a district councillor, three years as a county councillor and two years as a parish councillor that most of our constituents are pretty normal people and they could not really give a toss, Sir Henry—

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[Simon Hoare]

My right hon. Friend, as always, has the pithy word that I sought in vain.

Our constituents really could not give a fig how the product is arrived at as long as there is a product for them to access and a service for them to use.

[Jim McMahon]

Will the hon. Gentleman give way?

[Simon Hoare]

I will.

[Jim McMahon]

Perhaps this will help the hon. Gentleman to regain his composure. Does he accept that although the public absolutely want to see more efficient public service, local identity is really important? No reorganisation should try to redesign local identity that people feel strongly about.

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[Simon Hoare]

My hon. Friend is absolutely right. I think that unanimity would be deeply worrying. It would almost suggest a “couldn’t care less” attitude, where something is done down the line of least resistance. As my hon. Friend the Member for Chippenham knows, not all constituent parts of Wiltshire wanted the change to happen. The intervention of my hon. Friend the Member for Mid Dorset and North Poole inexorably provides me with the key test. The logical step is to go and ask anyone, “Would you want to go back to having two-tier local government in Wiltshire? Would you want to go back to having two-tier local government in Shropshire? Would you want to go back to having two-tier local government in Cornwall?” I think the answer uniformly, and probably definitely, would be no.

The direction of travel is clear. What we are trying to do in Dorset is not eccentric or perverse; it is not in any way weird. It is a democratic response, underpinned by intellectual and academic argument to deliver on that principal propulsion of public service. That is what this is about. We can see the situation evolving in Northamptonshire, in Oxfordshire—[Interruption.] Look—people are fighting to come in. The bouncers are asking for ID. People are being asked to turn up with their grandparents and sometimes great-grandparents in order to get a seat in this marvellous Delegated Legislation Committee. As I was saying, it is happening in Northamptonshire. I understand that neighbours in Somerset are looking at it, and that Buckinghamshire and Oxfordshire have proposals that are either with the Secretary of State or shortly to come before him.

Two-tier local government will be a bizarre construct to the Opposition spokesman, having come from the metropolitan borough of Oldham, but he will know of the speedy and more efficient decisions that can be taken by single-tier government.

[Jim McMahon]

It is important to say that a lot of government is in constant evolution and change. Although local government appears to be a single unit, we have parish councils in some areas, town councils in others, and the emergence and growth of the combined authority.

[Simon Hoare]

That just goes to show how right it is that the proposal has not been in response to an impost, a diktat, or a Secretary of State’s fiat: “This is what is going to happen.” One size does not fit all. [Interruption.] Well done, sir—you have been able to get a ticket to come into this great event. You might have fought to come in, but you will be fighting to get out in a moment.

I have always thought that we in Dorset have been phenomenally lucky that we have been so readily and easily cleaved into two parts. I have always used the titles—working titles, I admit—“Dorset rural” and “Dorset urban” for new councils, able to respond to new initiatives, new endeavours and new demands reflecting specific local concerns and requirements. That is why, unlike some of my colleagues, I was never persuaded of the merits of having one unitary council covering the whole of the county of Dorset. My anxiety, as a rural Member, was that rural concerns and imperatives—the need to scope, sculpt and deliver services in a bespoke way in a rural community—may well have been trumped by the louder siren voices of Christchurch, Bournemouth and Poole.

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[Sir Christopher Chope]

Thank you, Sir Henry. We are not at the end, and the reason is that there is a legal challenge to all this. We have had the letter before action and I understand that another letter before action has been issued by a resident in my constituency against the Government. It is interesting that, with the full knowledge of the legal opinions that have been floating around and the correspondence between the council in Christchurch and the Government, very little attention has been paid to that this afternoon.

We are talking about a constructive solution. I hope that my hon. Friends will ensure that nothing is done that will make for a complete shambles if and when the courts decide that these orders are ultra vires and are quashed, if they are indeed passed by both Houses before then. I would like the Minister to comment on the practicalities of all that, and on how easy it will be for those decisions to be rowed back on, if that is the will of the courts.

I have looked at the Government’s response to the letter before action from Christchurch Borough Council, which is centred around the use of retrospective legislation, and the main arguments put forward seem to be that Christchurch is a bit late in the day in raising that point, despite the regulations being laid only on 29 March. The first two or three pages of the response centre around that point—“You missed your chance and it’s all too late.”

The second part says that the presumption against retrospectivity is not engaged. The argument is not that retrospectivity is not engaged—of course, Christchurch Borough Council believes it is—but that the presumption against it is not engaged. There seems to be a recognition that retrospectivity is engaged. In the light of that, and of quite a lot of the decided cases, it seems that there is every prospect that, far from this being resolved this afternoon, as some of my right hon. and hon. Friends think it will, this will continue—and quite right too. We are a rules-based democracy and at the heart of all this is local democracy and localism.

What is the point of introducing proposals to abolish Christchurch Borough Council and replicate it with a new parish council that will effectively be a new bureaucracy with fewer powers? In other parts of Dorset, there are already parish and town councils, but not in Christchurch.

I was encouraged by some of the comments made by my hon. Friend the Member for Bournemouth West, who seems to speak in a rather different way from the leader of his council. The leader of his council is on record as saying that he is against the creation of any town or parish councils within the new urban authority.

This afternoon, the leader of Christchurch Borough Council, the immediate past mayor of Christchurch Borough Council, the president of the Christchurch and East Dorset Conservative association, another Dorset county councillor and a prominent younger Conservative from Christchurch have sat and listened to this long debate. I do not think that they will have been impressed by the talk of wanting all this to have been sorted out, of local democracy being overridden, or of bottom-up processes.

Paragraph 8.7 of the Government’s explanatory memorandum says:

“During the period of representation”—

following the then Secretary of State’s “minded to” announcement in November—

“210 representations were received from members of the public, local councillors, businesses and community organisations. Submissions from members of the public”—

in other words, the real bottom-up submissions—

“were more likely to be opposed to the proposal”.

That is right across the whole of Dorset—we are not just talking about within Christchurch. Right across Dorset, more people were opposed to what the Government announced in November than were in support of it, yet some of my hon. Friends have the gall to suggest that that is not correct and that there is general support for all this.

I hope the Minister will tell us in his response how people in Christchurch, for example, can be protected against new borrowing being taken out by Bournemouth and Poole. I referred earlier to the £70 million of borrowing. Why should the people of Christchurch want to go along with that, when they have been prudent and run a debt-free council?

I do not know whether my hon. Friend the Member for North Dorset accepts the decision of the joint committee that there should be an immediate move, on the creation of the new rural unitary, to equalisation and harmonisation. Why should there not be a similar move within the urban area? Surely actions speak louder than words. What action could be stronger than for everybody to accept that from day one they should all pay the same council tax, rather than people in the most rundown part of Christchurch having to subsidise the people in Sandbanks?

[Jim McMahon]

I pay tribute to the hon. Gentleman’s passion and to the way he is representing the views of his constituency. I agree with him on the majority of the points he has raised, but there are elements I disagree with. His point about equalisation is very important. The statutory instrument says not that the councils will merge, but that the existing councils will be abolished and new councils will be created. At the point when new councils are created, surely it makes sense that all households in the new area are treated equally.

[Sir Christopher Chope]

Absolutely. I hope that the Minister will agree with the hon. Gentleman. What better way of setting up a new council, as my hon. Friend the Member for Bournemouth West was saying, than by having a new culture, a new agenda, new vision and all the rest of it? It is very difficult to achieve that if we do not start off with everybody paying the same council tax at band D. I hope the Government will come off the fence and declare their hand, because I think behind their hand is hidden a proposal to introduce a notional council tax system, which would presume that the council tax in Poole, for example, had been raised by more than the threshold that triggers a referendum. I think that that will happen over a period of time, rather than immediately. I share the hon. Gentleman’s vision that if there is to be a new unitary authority, everybody should pay the same.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Jim McMahon Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 15th May 2018 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I thank the Minister for the constructive and positive way he has approached the Bill, from the early conversations about the technicalities to his contributions in Committee, and I repeat his thanks to the Committees that have worked in the background on this. It is clear that a lot of work has been done to engage and to iron out the wrinkles in the Bill. I hope this reinforces the offer we made some time ago that, where measures are not controversial and have the support of the sector, we will work constructively to take them through Parliament. I hope this will be the first of a number that local government wants to see come forward.

I do not know whether it is in order to refer to a previous stage, Madam Deputy Speaker, but I thought the hon. Member for Perth and North Perthshire (Pete Wishart), who is not in his place, took something of a liberty in the Legislative Grand Committee in trying to hijack a debate that affected English parliamentarians and English constituencies for what is an age-old debate about English votes for English laws. It almost belittles the detailed work done in many Committee sittings, where the hard work of making law has been happening but in a more constructive and mature way. I would not want us to lose sight of that. People watching on television—if anyone was watching it—might have been left with the inaccurate impression that Parliament was not doing its job and that this is a superficial way to pass laws, which is not the case at all.

Turning to the Bill, we support the measures relating to the staircase tax and the Supreme Court ruling. We recognise that it was a quirk of the system when the matter went to court and that it was not the original intention of legislation, but there remains concern about the financial impact on local authorities. In private meetings and in Committee, we requested a breakdown of the implications for each local authority in the country, but we have not to date had that information and so have not been able to assess the impact of this financial change on each local authority.

The Government will say that that is because the Supreme Court ruling meant that some local authorities were, for a short period, financially better off than had the ruling not been given, but many councils set their budgets based on that financial information, so some will face a net loss when, because of this change, money they were expecting from business rates does not come in. For some, the loss might be very minor, but for others it could be significant, depending on the make-up of properties within their local authority area. It would therefore have been reassuring to see that list today.

The agreement between central and local government is that, where central Government makes a change to the financial settlement and rules and regulations that has a net effect on local government budgets, councils ought to be compensated. Local Government and the Local Government Association—I declare an interest as vice-president of the LGA—are concerned about what it means when the Government make changes that can materially affect the financial base of local authorities but then do not provide financial compensation. Notwithstanding that, we recognise that the Government have heard the calls from business and ratepayers and have taken action. That should be welcomed.

Empty properties are a big issue. There are around 200,000 empty properties in this country at a time of a housing crisis. We know that 120,000 children in this country are without a permanent home and living in temporary accommodation. So the housing crisis is very real. Part of the problem with the Bill is that it addresses some types of empty property but not others. About 20% of properties in parts of London are empty. They are owned by wealthy individuals and institutions that will not be put off by a 100% additional council tax payment requirement, because that is pennies in the scheme of the wealth they hold. It might affect small landlords and people renovating properties, but it will not necessarily affect the part of the UK that arguably has the biggest housing crisis, and that of course is London. If the Government come forward with new proposals to address the problem of foreign individuals owning properties they have no intention of ever living in or allowing others to live in, the shadow Housing team would be open to a discussion on that.

I am aware that there is a housing debate to follow and that a great many Members have applied to speak in it. I repeat my thanks to the Government for being constructive and for engaging in the process at an early stage. I also repeat the offer of what we know local authorities want: far more cross-party working on matters that affect local government as a whole.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Jim McMahon Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 1st May 2018 Public Bill Committees

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Mr Wilson. I thank all Committee members for being here promptly to discuss this technical but important Bill, which I hope will not detain us for too long.

Clause 1 delivers on the commitment made by the Chancellor at last year’s autumn Budget to address what became known as the staircase tax. The clause will restore the previous practice of the Valuation Office Agency from before the Supreme Court decision in respect of contiguous properties in the same occupation or ownership. We discussed on Second Reading the background to why the measure is necessary, and I have provided more detail about the measure in correspondence with the Select Committee on Housing, Communities and Local Government. I will not repeat that background, other than by saying that the clause is welcomed by the rating surveyor profession and supported by the Federation of Small Businesses.

The clause amends section 64 of the Local Government Finance Act 1988 to provide that, in a defined set of circumstances, two or more hereditaments shall be treated as one. Those circumstances, which are described in new subsections (3ZA) and (3ZB) of section 64, are: where the hereditaments are occupied by the same person or, if they are empty, owned by the same person; where the hereditaments are contiguous—that is defined later in the clause, and I will come to it shortly—and, in respect of occupied hereditaments, where none is used for a wholly different purpose. That will restore the rule that applied before the Supreme Court decision that contiguous hereditaments are assessed as one.

In preparing the clause, we had to ensure that we replicated previous practice in respect of the meaning of “contiguous”. The clause therefore introduces new subsection (3ZD), which defines what is contiguous for these purposes. New subsection (3ZD)(a) provides that

“two hereditaments are contiguous if…some or all of a wall, fence or other means of enclosure of one hereditament forms all or part of a wall, fence or other means of enclosure of the other hereditament”.

That ensures, for example, that two adjacent rooms on the same side of a common corridor separated by a wall are contiguous, but that two rooms on opposite sides of a common corridor are not. It also ensures that two buildings on the same side of a road that share a common party wall are contiguous, but that two buildings on opposite sides of a street or common access road are not. Importantly, that replicates the previous accepted practice of the VOA.

New subsection (3ZD)(b) provides that hereditaments on consecutive storeys of a building are contiguous if

“some or all of the floor of one hereditament lies directly above all or part of the ceiling of the other”.

That ensures that consecutive storeys of a building are contiguous but excludes non-consecutive storeys where the intervening storey is in a different occupation or ownership. Again, that replicates the previous practice of the VOA.

We believe that this approach ensures that hereditaments would still be contiguous, even if a wall or floor plate separating the hereditaments contained a space such as a service void occupied by the landlord. However, respondents to the consultation and the Select Committee were less certain on that point. We therefore decided to put that beyond doubt by adding the words at the end of subsection (3ZD) that make it clear that hereditaments

“are not prevented from being contiguous…merely because there is a space”

such as a service void between them in a different occupation or ownership.

Finally, new subsection (3ZC) ensures that chains of contiguous hereditaments in the same occupation or ownership will still meet the tests. For example, it will ensure that floors 3, 4 and 5 of a building in the same occupation are treated as contiguous and as one hereditament, even though floors 3 and 5 are not themselves contiguous.

The change in the VOA’s practice following the Supreme Court decision affected the 2010 rating list as well as the current 2017 list. That has led in some cases to sudden and dramatic backdated rate demands, which have been of particular concern to the estimated 1,000 small businesses that, as a result of the decision, have lost the generous small business rate relief they rely on. Clause 1(2) therefore ensures that the measure applies retrospectively to 1 April 2010 in support of affected ratepayers.

That is why it is so important that the Bill does not go beyond the objective of restoring the previous practice that applied. I am pleased to say that, by working with organisations such as the Rating Surveyors Association, we are confident that we have met that objective, which the Select Committee confirmed in its report on the Bill.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Wilson. I repeat my thanks to the Minister for making the effort to meet before the Committee to go through some of the technicalities of the Bill. That will save the Committee from a headache. However, there are still some questions outstanding, including about the loss of income to local authorities. The autumn Budget book said:

“Local government will be fully compensated for the loss of income as a result of these measures.”

That was stated by the Chancellor, but it is not what is being offered today. Local authorities are being told that they will not be compensated because in effect they are in no worse a position had the High Court ruling not been made. That point was raised by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Housing, Communities and Local Government Committee, and we know from his subsequent contributions that the Select Committee continues to have those concerns.

Nor do we know yet what the impact will be across different local authorities, because that information has yet to be provided. We have not been provided with data to understand the local authority-by-local authority impact, so we do not know, for instance, how many are caught in 100% rate retention schemes, where they will have to pay costs. Nor do we know whether there are particular concentrations of properties in local authorities or whether they are spread evenly throughout the country, where such an impact would be marginal. We should endeavour not just to make legislation that we believe to be in the public interest—of course, that is important—but to make good legislation, with a solid, tested evidence base and with any necessary questions asked at the appropriate time. I would say now is the appropriate time to ask such questions. Let us see the detail on the local authority-by-local authority impact, particularly as the Government do not seem to be honouring the commitment they made in the autumn Budget.

The other, broader point—I will be careful not to stray too far from the Bill—is that the Government have taken into account what the business community told them and the Bill reflects that. I welcome that. The Government have been flexible and considered the impact of unintended consequences, which is a measure of good government. It is not a measure of bad government that could be perceived as, for instance, a U-turn. I recognise that our politics sometimes supports that type of language. In that context, I find it difficult to understand why other concerns raised following the revaluation and technical fall-outs of the business rate system have not been taken into account, such as the impact on cash machines in convenience stores.

In my town of Royton, the last bank is due to close. It will be the sixth bank to close in the town centre. The convenience store stepped up and provided a cash machine, so that people in the town could access money to do their shopping and, of course, support the market on the precinct, which relies heavily on cash transactions. A cash machine in the town is very important, but the turnover of that cash machine now contributes to the rates liability of the premises. A convenience store that would previously have been under the small business rates relief threshold, and would probably not be paying business rates at all, will in some situations now pay business rates because the turnover of the cash machine takes it over the threshold.

Good government means taking into account the impact of that and recognising that if convenience stores are stepping up when the banks are pulling out of towns, they ought to be supported, not be at a financial disadvantage as a result. That is just one example, but there are others that have been raised by the business community, the Federation of Small Businesses and the Association of Convenience Stores. We ought to reflect on that.

I would welcome some detail on that, even if provided at a late stage, after Committee, and I know that the Chair of the Select Committee would too. Many of these issues are not politically contentious—that is the spirit in which we made our previous offer and in which we are working today. There is broad support for them in the community, and we ought to work together to try to see them through. There were a number of items in the Local Government Finance Bill, which fell when the election was called, that need to be progressed, because local government is asking for them to be progressed. We ought to get together, see which of those elements have cross-party support and take them forward sooner rather than later.

[Rishi Sunak]

Let me put on record my thanks to the hon. Gentleman for, as ever, the constructive way in which he approaches our discussions on this and other measures.

To turn to his first point on compensation for local authorities and what was said in the Budget document of last year, the reference to compensation in that document specifically related to the switch to the consumer prices index in business rates indexation and the extension of the pubs relief scheme. I fully appreciate that the document could have been clearer on that point. As a result, my Department issued a letter to all local authorities two days after the Budget to make it clear that local government would not be compensated for this specific tax measure. As we have previously reiterated, we consider those extra revenues to be a windfall that came as a result of a Supreme Court decision.

The new legislation will ensure that the position is restored to where we were beforehand, so there should be no net loss to local authorities. That said, the hon. Gentleman raised the issue of rates retention. We are aware of his point—that under the rates retention scheme, some local authorities may see a small impact on their overall retained business rates. That would potentially occur in pilot areas, where the percentage of rates retained locally is different in the year that the refund will be paid, compared with the year in which the authority first received the windfall from the Supreme Court decision. We have previously said that it is very hard, if not impossible, for us in the Department to quantify that impact, but officials believe that it is small. That said, we are considering the points made in the submission by London Councils and the Greater London Assembly on that issue.

On the broader support for businesses through the business rate scheme, I am delighted that hon. Gentleman welcomes our support of small business. This is one measure, but there are others. I point to the Budget last year and the year before that, where we doubled small business rate relief, which was widely welcomed by businesses, including the FSB. We took almost 600,000 smaller business out of rate relief. In addition, there was a £435 million package to target ratepayers who face the steepest bills as a result of the revaluation. That included something that was warmly welcomed in my constituency and I am sure many others: the £1,000 pub discount voucher, which has also been taken up.

Lastly, we brought forward by one year the indexation of business rates from the retail prices index to the consumer prices index, which is worth some £2.3 billion over five years. Hopefully, the hon. Gentleman will agree that that shows strong support for small business. Another measure that the FSB has welcomed, and which was part of the Local Government Finance Bill that fell at the last election, was business rates relief for plant nurseries—a measure that was also the result of a Supreme Court decision that changed settled practice and which had cross-party support. He will be aware that we recently laid a written ministerial statement recommitting the Government to legislate to reverse that decision. Indeed, that decision will be made retrospectively, so that plant nurseries will be exempt from business rates and treated as agricultural property. I look forward to working with him on that, and hopefully getting his support when the time comes.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Higher amount for long-term empty dwellings

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Jim McMahon]

The Labour party supports the Bill, but our manifesto suggested going further. Rather than a 200% premium, there would be a 300% premium and consideration of bringing the empty period to a year. There is a reason for that: the housing markets across the country are very different. The Bill will not address the problem of the concentration of empty homes in London. Figures provided by the House of Commons Library show that 20% of City of London properties are empty. In Westminster and in Kensington and Chelsea, one in 10 properties are empty.

Such properties are owned by people who think nothing of paying twice the amount of council tax that a usual resident does because they have the financial means to pay it without that having an impact on their pocket. I am not sure that this measure goes anywhere near where it needs to go to address the region of the country with the largest housing demand. We know about the housing pressures in London and that many of the properties are held by property investors, a number of which are foreign-based. The measure will not address that, and the Government have not made a determined effort to address it.

It is bad enough that properties that have been in the community for some time are being bought up, but it is a scandal that brand-new properties—whole tower blocks in some cases—are built, but in the evening there are no lights on because not many people live there. They are built but held as investments with no intention of people living there. The Government need to think about what financial measures they can use to encourage owners of properties in that very particular market to bring them back into use. We build houses for people to live in, not for wealthy institutions to hold with no intention of anybody ever living in the property.

In some housing markets—we experience this in the north of England—empty homes are the result of a broken housing market. The Labour Government introduced the housing market renewal project to address a fundamentally broken housing market in which there was no latent demand from local people to buy the properties, and those who were able to buy a property did not want to live in the areas where properties were empty. When the housing market renewal scheme was cancelled in 2010, the Government turned their back on those areas.

Some areas have been brought back into use, and many local authorities are introducing innovative schemes. In Liverpool and Stoke, local authorities are selling empty properties for £1 as a way to encourage people to get on to the housing ladder. We know from reports that the people who have benefited respect the schemes. The properties would not have been on the housing market had it not been for those schemes, so it is a double win. The initiative enables empty properties to be brought back into use and gives somebody the chance to get on the housing ladder when in other circumstances they would not be able to afford to do so.

In other areas with similar housing characteristics, a number of properties were earmarked for demolition under housing market renewal—the properties were purchased and the windows boarded up—but the Government removed the money in 2010. The boards came off the windows and the properties were sold to private landlords. Taxpayers are paying through the housing benefit bill for what is generally substandard accommodation in areas with a broken housing market, and are doing so for properties that generally do not meet the decent homes standard. In Greater Manchester, 40% to 50% of the £350 million a year we pay in housing benefit to private landlords is for properties that do not meet a decent standard.

The country could use that money better to provide decent, safe properties with good solid tenures where people enjoy living, in areas where there is a high-quality environment and the roads are safe, and where play areas provide a safe place for children to play, not just terraced streets that were built to support mill workers. Now that the mills have closed, those houses are just not desirable for many people. The Government need to take a broader view of how empty homes affect different parts of the country, and they must bring forward more active proposals for London, given how wealthy investors are holding properties. We also need a plan for areas where the housing market is weak. These measures will go some way to addressing that problem, but they will not address the inherent weakness in the local housing market where the owner-occupier element is weak.

We need a genuinely joined-up plan. This is not about a sticking plaster to support local authorities that have had their budgets cut dramatically, or about raising tax; this is about bringing empty homes back into use. The Government’s response, particularly since the empty homes fund was deleted, seems to be: “Well, if local authorities bring homes back into use, they will be the beneficiaries because they will get a new homes bonus payment”. However, the new homes bonus payment is retrospective, and we would be expecting local authorities to find money from their base revenue budget to bring empty homes back into use at a time when many of them cannot afford to pay for social care and children’s safeguarding. The Government need to come forward with a plan and funding to support local authorities to bring empty homes back into use. Taxing people who own those properties is one element of that, but in some cases direct grant funding will be needed to bring accommodation back into use.

[Rishi Sunak]

I thank the hon. Gentleman as always for his thoughtful comments. The two substantive points he mentioned were whether the level of the premium is too low at 100%, and whether two years is too long as a measure for an empty property. On whether the premium is too low, we need to strike a careful balance between providing a strong incentive for bringing empty homes back into use, and not disproportionately penalising homeowners who may be struggling to sell or rent out a property or to complete any major renovations that might be required. We believe that doubling the premium cap strikes the right balance. Scotland and Wales also have a premium of 100%, but I understand the hon. Gentleman’s point.

On whether the qualifying period for an empty home should be less than two years, it is worth noting—I know this from the correspondence that the Department receives—that some owners of empty homes face circumstances that make it difficult for them to bring their empty homes back into use quickly. That could be a renovation or the time taken to put something on the market with a difficult set of conditions. There may also be delays as a result of the probate process, for example. Again, I think the two-year period strikes the right balance.

[Jim McMahon]

Any scheme, even with a 12-month qualifying period, can have exemptions that take into account individual circumstances. There is already a scheme to deal with properties that are under probate, which is clearly outside the control of the executors who are trying to dispose of it. That can be managed. However, a number of landlords own properties and have no intention of letting them out. They will simply flip them over into different names to avoid paying the tax, and a more concerted effort to deal with such issues is important. The truth is that it would be much more difficult for people to keep flipping the property if we had a 12-month period—they can currently do it every 24 months.

[Rishi Sunak]

The hon. Gentleman is right that there are exemptions. For example, there is a six-month council tax free period for probate, and then the clocks starts. The problem is trying to define ex ante the individual circumstances in which it might be fair to have a period of more than one year. That is why we believe two years is the right amount of time—it provides flexibility but also serves somewhat as an incentive to bring homes back into use—but I understand his point, and why people would take a different view on what the right period should be.

On the broader strategy for empty homes and local authorities, I agree with the hon. Gentleman that there are examples of individual local authorities coming up with good, innovative ways to tackle to problem of empty homes. He mentioned some, but I am aware of examples in Bolton and Kent where local authorities have come up with successful ideas, whether loans, discounts or other schemes, to bring empty homes back into use. That is why our approach is the right one. He might disagree with the quantum of funding but, at £7 billion, the new homes bonus is substantial and acts as an incentive to local authorities to come up with schemes to bring homes back into use. They will be financial rewarded—I appreciate that that will be after the fact, but that is as it should be—for success in bringing empty homes back into use. That serves as a carrot, which is the right approach. Rather than the Government telling each local authority exactly what to do, we provide a framework for rewarding good behaviour and let individual local authorities innovate. Hopefully, increasing the premium today will serve only to improve the situation.

The hon. Gentleman is right to point out that, in the long term, we should not rely on that as a source of funding. We would rather not have empty homes, and want to ensure that everybody who wants a home has one to live in. The fewer empty homes there are, the better.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Extent, interpretation and short title

Question proposed, That the clause stand part of the Bill.

Oral Answers to Questions

Jim McMahon Excerpts

Monday 30th April 2018 Commons Chamber

[Jake Berry]

We are already investing some £67 million in the Humber and the Greater Lincolnshire local enterprise partnership, and I note that £20 million of that is going into my hon. Friend’s constituency. He will be aware that we committed in the industrial strategy to work on a business case for a Grimsby and Cleethorpes town deal. I hope that, in demonstrating that success, we can put our northern power towns at the heart of the northern powerhouse.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

There is no surprise that the lived experience of people in Shields is of growth not happening, because when the northern powerhouse was launched in 2014, Government capital spending per person was £543 higher in London than in the north-east. London has seen its investment increase to £1,352 per person but, instead of the Government’s closing the gap, the north-east saw a cut in capital spending that increased the gap by 17% to £634 per person. How can the Government credibly claim to be the champions of the northern powerhouse when the evidence says that the money has not followed?

[Jake Berry]

I am certainly not going to take any lectures on the northern powerhouse from the hon. Gentleman, because after his election he described it as the “northern poorhouse”. Unlike Opposition Members, the Government are behind the north, not least by investing £13 billion in northern transport—more than any Government in history, including the Labour Government.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Jim McMahon Excerpts

2nd reading: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd April 2018 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

Happy St George’s day to you and to the rest of the House, Madam Deputy Speaker.

I thank the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), for meeting me last week to go through some of the Bill’s more technical aspects, which will save other Members the headache of hearing some of them today.

The Opposition broadly welcome both of the changes in the Bill. Clause 1 seeks to address the Supreme Court’s decision on the staircase tax, relating to how unconnected units occupied by the same business are treated. The measure will put businesses in no worse position than they would have been before the court ruling. Clause 2 will give local authorities the power to increase council tax on homes that are deemed to be long-term empty.

While the Opposition support clauses 1 and 2, we need assurances from the Government that they will not cause detriment to local authority finances. That is particularly the case with clause 1, which will reinstate features of business rates valuation practice that applied prior to the Supreme Court case. The Housing, Communities and Local Government Committee has been clear that the effects of the provision on individual local authorities ought to be quantified and supported. The Government have not been clear about how individual local authorities will be affected or about those that will be picking up the tab as a result of the reforms. It has therefore been difficult to give the measures adequate scrutiny at this stage, so we hope to explore some of them in Committee.

Some wider issues also need consideration. The Federation of Small Businesses has illustrated the problems facing smaller firms that necessarily operate in large premises but do not qualify for small business rate relief. For example, childcare providers require space by the nature of their activity, but that takes them above the small business rate relief threshold. Far more also needs to be done to protect the high street, and town and city centres. Business rates are a significant cost and can be the difference between surviving or failing. We recognise that a taxation system cannot sit in isolation and must support the Government’s broader policy objectives, and we have seen some of the largest corporations get away without paying their fair share of tax while premises—the property-based businesses that are the lifeblood or foundation of many of our communities and are essential for town centres to thrive—are taxed through business rates before they earn a single penny.

Turning to clause 2, we welcome the move to bring long-term empty properties back into use by incentivising the owners of such homes to act, but we are also keen to tackle the shortage of available housing in some areas. It has been Labour policy for some time now—the Government’s policy falls short of this—to see 300% council tax charged under the measures that are being put forward today. There are currently 200,000 empty properties in England, and we have seen homelessness increase steadily over the past eight years. As we speak, 120,000 children have nowhere to call home. They are staying with friends and family, and many of them do not have a bedroom of their own. Meanwhile, the evidence of rough sleeping and homelessness is plain to see in towns and cities up and down the land. Councils, particularly in London, which has the highest concentration of empty properties, are battling to meet their statutory obligations and housing duties due to increasing demand, rising unaffordability and the effects of eight years of Government cuts to local authority revenues. It is absolutely right that owners of empty properties pay a premium if their property is suitable to let but they fail to do so. However, any move must form part of a wider strategy to bring empty homes back into use, including positive, proactive support to get homes back on the market.

We welcome the Government’s acknowledgement of some of the faults in the system and their move towards adopting Labour’s policy on empty homes, but they could of course have gone further. Housing is one of the most pressing issues facing this country, and eight in 10 people think the Government ought to do more to address the housing crisis. We know that, which is why my right hon. Friend the Member for Wentworth and Dearne (John Healey) has launched a Green Paper on affordable housing—a framework to change the country’s approach to affordable housing—as part of a new national mission to solve the country’s housing crisis. From planning to funding right through to delivery, we need a comprehensive, joined-up strategy to tackle the housing crisis.

The Conservative-chaired Local Government Association —I declare an interest as one of its vice-presidents—agrees that there is more to be done. It would like the Government to go further and give councils greater power to borrow, to build and to deliver the homes that we need—not on a case-by-case basis, but by trusting local authorities to understand their areas and to get homes built quickly.

[Mr Jim Cunningham (Coventry South) (Lab)]

Like me, my hon. Friend has experience of local government, and he will know that if the Government are serious about dealing with this country’s housing crisis, they would free local government to build social housing on a major scale. That would determine the Government’s level of commitment. So far, however, they have not shown that commitment. There are families in my constituency in Coventry who cannot get accommodation, which is a terrible situation for people to find themselves in.

[Jim McMahon]

Absolutely. In some areas, the housing crisis was a significant factor in why people voted to leave the European Union. People do not feel confident about this country’s future, and housing is a vital part of that. If people do not have the security of a home or a secure tenure, they will rightly be nervous about what the future may bring, so the Government need to do much, much more. However, the idea that they can command and control from Whitehall and expect every community to benefit has been disproven time after time. As my hon. Friend pointed out, we should empower local government to get on. Councils know their areas. They have the local partnerships and know the sites. They have planning departments that need greater support. If they were given the resources, they could do far more, but this must be about giving them independence and freedom, not making them wait for the Government to offer crumbs from the table, which is how many councils feel.

[Justin Tomlinson]

I agree with much of that principle, but that is what local plans are for, and we have cross-party support in my patch of Swindon. This Government are empowering local communities to shape future development if they choose to engage with the opportunities.

[Jim McMahon]

I accept that point, but we also need to accept that local plans are limited in that, by and large—of course they do more than this—they are about land supply to support the number of housing units that will be built. They do not discuss the mixture of tenure or go into detail about the funding plan that will support the proposals. A local authority could identify, based on its population and demographics, that it needs a certain proportion of affordable or social housing, for example, but there will be no funding plan to deliver on that. A local plan could sit on a shelf for 10 years, but if the council’s ability to borrow is curtailed, it cannot lay the bricks to build social housing. Like the hon. Gentleman, I know my local area and the council knows the area too, but it is constantly under the cosh of funding cuts. It does not have the capacity and it needs it to be freed up.

[Mr Jim Cunningham]

My hon. Friend is generous in allowing me to intervene again. If the Government really believe in local democracy and want to encourage a property-owning democracy, they should do what used to be done. Local authorities used to give out mortgages and build houses for sale, and they used to build social housing. That is how to do it if the Government really mean to tackle the problem, and that is what they are not doing.

--- Later in debate ---

[Jim McMahon]

That is a fair point and, bringing it back to the Bill, we will see the rigour that local authorities apply to understanding what clause 1 means for their base funding requirements and what clause 2 means for how much money can be generated to support bringing more rental homes back into use. We know local government will deliver because, time after time, it has really stepped up and done what is asked of it.

Finally, the Bill feeds into the wider debate about the viability of local government finance. Issues such as the staircase tax have raised important points, but we need to move away from the uncertainty and the reliance on favourable Government decisions to fund local services. Any new responsibilities must be backed up with the resources to guarantee that councils can meet their statutory duties.

By the end of the decade, local government will be facing a funding gap of £5 billion which, time after time, the Chancellor seems to be wilfully ignoring. I understand that Ministers have been trying to get an audience with him, but they have failed. The consequence is that our councils often face financial uncertainty.

As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), my boss, says, you cannot empower local government if you impoverish it.

Local Government Funding

Jim McMahon Excerpts

Wednesday 28th March 2018 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I thank all Members who have participated in this debate. It is fair to say that local government finance is not always the thing that enthuses people, but what we have learned today is that finance is there for a purpose: to deliver essential public services—or, in the words of the Secretary of State, “vital services on which we all depend.” To be fair though, that is probably where the Secretary of State’s understanding ends. He gets the principle, but not the true impact of austerity.

The best preparation for this debate would have been completely wasted because it would have missed the gift that keeps on giving, which is that the Secretary of State’s testbed for local government seems to be the sinking of the Titanic—a vessel that went out 106 years ago not fit for the journey ahead, without enough life rafts for the people on it and completely misunderstanding that there was an iceberg ahead and the damage that it would cause. Now, Northamptonshire might be the tip of the iceberg in local government terms, but the truth is that many councils are really struggling beneath the surface.

We have heard from my hon. Friends the Members for Garston and Halewood (Maria Eagle), for Bradford West (Naz Shah), for Reading East (Matt Rodda), for Stockton North (Alex Cunningham), for Dulwich and West Norwood (Helen Hayes), for Bedford (Mohammad Yasin), for Glasgow North East (Mr Sweeney) and for Leeds North West (Alex Sobel). The thing that ran through all those contributions was the human and community cost of taking money from public services. We hear that 64% of the Government grant has been taken away in Liverpool. That is not just a number on a balance sheet. It was money for essential services that existed to support a community that needed support to grow, develop and prosper. But that rug has been completely pulled from under the people of Liverpool.

We heard from my hon. Friend the Member for Reading East that local councils have very little clarity about what is heading towards them beyond 2020. It is true that many came forward as part of the multi-year settlement, but it is also true that the fair funding settlement is sending shivers down the spine of many local councils because they know exactly what it means. We saw it with the deletion of the area-based grant in 2010, when money directed at areas of high deprivation was completely taken away. Over recent years, the introduction of the transition grant and the rural services delivery grant have targeted mainly Tory shires. We know what fair funding really means to the Government.

[Maria Caulfield]

I have to disagree. As I said in my speech, rural areas have had 45% less funding per head of population for decades. The rural services delivery grant goes some way, although not all the way, to redressing that balance.

[Jim McMahon]

Well, actually, it does not. I will give the hon. Lady an example. If a county area that had a strong council tax base was given £1 in central Government funding and 90p of that £1 was taken away, the area was treated favourably in the transition grant and the rural services delivery grant. If a metropolitan area had £100 and £50 was taken away, far more money that was delivering public services in that area has been taken away—£50 versus the 90p taken from the rural area—because the starting point is very different.

We cannot compare an area with a strong council tax base of high-value properties due to the way in which that area has developed historically—nothing to do with the local authority—with a post-industrial town where the council tax base is predicated on low house values. In my area, 87% of properties are in band A and band B, so there is a very low starting point. That is why far more is needed in council tax from those areas to generate the same amount of money.

[Maria Caulfield]

The hon. Gentleman is being extremely generous in giving way. Perhaps he should come to see the areas of deprivation in Newhaven in my constituency. There are no high-cost properties there. Perhaps he needs to look at rural areas in the round.

[Jim McMahon]

This ought not to be a fight between areas of high deprivation in our urban core and recognising that some services cost more to deliver in rural areas. Labour is calling for a genuinely fair funding settlement that would take into account deprivation, differential service delivery costs and the very particular circumstances of our coastal communities, which feel very much left behind. But we have no faith at all that that is where the Government are going. The Government are trying to redistribute a diminishing resource; we are seeing the redistribution of poverty under this Tory Government. The money just does not exist to fund public services where the demand is growing, which is in adult social care and children’s safeguarding.

We heard earlier that Basingstoke and Deane is a paradise of local government where residents have seen no impact of cuts whatever. That is unless, of course, they remember the 46% reduction of net expenditure on pest control, the 45% reduction on environmental protection, the 33% reduction on food safety, the 66% reduction on recreation and sport, the 27% reduction on open spaces or the 17% reduction on street cleaning.

[Mr Jayawardena]

The hon. Gentleman clearly loves my former council very much. Would he agree, then, that actually only 6% of the budget comes from council tax, while the rest comes through well-managed finances and excellent use of our resources? We have created thousands of jobs whereas his party in that council has backed the wrong policies, turned down the economy and chosen to back vested interests in the unions.

--- Later in debate ---

[Jim McMahon]

It is true that this district council has increased spending in some areas, but unfortunately that is because of homelessness. One of the few budget lines that has increased is homelessness spending, which has gone up by 21%. As a result, the neighbourhood services that most people in the community would believe they pay council tax for have seen huge reductions. That council, which has no responsibility for adult social care or children’s services because those are delivered by the county council, has had to take money away from neighbourhood services. Yet this is meant to be the council that we hold up as a paradise of public services under the new settlement.

[Mr Jayawardena]

I am not sure that the hon. Gentleman understands the difference between a county council, a district council and a county area. Would he then welcome the fact that Hampshire is now getting more money as its core spending power than it had in the past? Will he reflect on why the Labour party voted against that?

[Jim McMahon]

Most people who understand local government finance recognise that the budget lines in total net expenditure include huge sums of money that the local authority has almost no control over in its everyday spend. For instance, education services are included in controllable spend, but the local authority has no freedom or flexibility at all to direct where that money goes. Since the disbanding of primary care trusts, the public health transferred spend has been included as part of core spending power for local government, but there are new pressures and responsibilities that councils are expected to deliver on. The Government have tried to offset cuts to basic neighbourhood services and the lack of funding in children’s services and adult social care through the smoke and mirrors in their calculations.

Let us see what this means in practice. Across England, since 2010, there has been a 54% cash reduction—not even a real-terms reduction—in spend on support for public transport routes. These are the neighbourhood services that our communities rely on. Tory MPs who will not support this Opposition day motion should think about the community bus services in rural areas that have been cut because the money simply is not in the system to provide those routes. Recreation and sport, essential for a healthy and thriving population, have had a 44% cash reduction; open spaces have had a 23% reduction; and trading standards, which provide essential community security, have had a 34% reduction.

In the last reshuffle, the Tories were like rats fleeing the sinking ship, but who would guess that rats are being protected because pest control has been cut by 49%? Only rats are safe under a Tory Government, it seems—that is, if they are not in one of the areas that has had to hike up the charges. In areas of deprivation, low-income families who cannot afford to pay the charges to keep away vermin are absolutely excluded from living in a safe and clean environment.

[Mr Jayawardena]

rose—

[Jim McMahon]

I give way to the hon. Gentleman; he is very keen.

[Mr Jayawardena]

The hon. Gentleman is very generous. I have two points. First, pest control still supports those on income support who need help, and indeed some of the older people in our community. Secondly, does he welcome the fact that Basingstoke and Deane Borough Council spends over £600,000 on community transport and public transport schemes?

[Jim McMahon]

What I know is that in Greater Manchester we have lost 1.2 million miles of public transport routes because of central Government cuts to vital subsidised routes. That is the real impact. There is not a single Conservative Member, whatever they say, who can put their hand on their heart and say that the cuts have had no consequences for community life in their areas, because they absolutely have.

Earlier today, we had a debate on the review of the Manchester arena attack. For those of us who were affected by that within our communities, it was a very difficult moment. I ask the Government what assessment has been made of cuts to emergency planning budgets, because £21 million has been taken from those budgets since 2010—a 36% reduction.

Later, we will have a debate on the money that has been taken from our frontline policing. Councils also provide essential infrastructure to make sure that people can live in decent, safe and thriving communities. We have seen a 40% reduction in crime reduction spend by local authorities and a 66% reduction in community safety services—that is the people who go round parks and cemeteries to make sure they are safe and the CCTV operators who can capture evidence and hold criminals to account. That is where the money is being taken from. When we have the policing debate, we will hear about the absolute frontline impact of the cuts, but we also need to think about the council services that have been snatched away through austerity, because that has been the real impact.

[Mr Jayawardena]

Will the hon. Gentleman give way?

[Jim McMahon]

I cannot give way again. I will happily share a drink with the hon. Gentleman in the bar later and compare Basingstoke and Deane with Oldham, but that is as far as we need to go today.

If the Tory Government are determined to see Britain through Brexit, it has to be based on strong foundations. Essential to that are strong, high-performing public services. In many of our areas, not only have our economies been left behind but our public services have been completely fragmented and fractured as a result of Tory austerity.

What we say today is: enough is enough. Local government has taken the brunt of austerity, but it cannot carry on. We know the deficit, which has been identified by the LGA and the National Audit Office. All we ask for is that we see from this Secretary of State the same energy that the Defence Secretary showed when he went out and publicly demanded money for his Department and that the Health Secretary showed when he demanded money for the NHS.

Draft Non-Domestic Rating (Rates Retention and Levy and Safety Net) (Amendment) Regulations 2018

Jim McMahon Excerpts

Tuesday 20th March 2018 General Committees

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hosie. In line with the Local Government Association— the cross-party organisation representing local government —we are keen to see more progress being made on giving local authorities more sustainable forms of income. Where they play an active role in growing their local economic base, they should see the value in doing that. We have not yet seen a real assessment made of the implications of the 100% retention scheme through the initial pilots with the first wave of local authorities. We know that the Government hold limited data on what that means, and we know that there are significant capacity issues within the Department itself. Between 2011 and 2017, there has been a 39% reduction in full-time equivalent staff working on the 100% retention scheme, so we are not convinced that the Department has the proper capacity to see this through and to monitor, evaluate and importantly to ensure that any risks are mitigated in then allowing a new wave of applications to come forward.

Local authorities are also concerned that London was given the option of no detriment but the same offer was not made available to new authorities applying to the scheme. Authorities outside London will quite rightly ask why we have one rule in place for London, while authorities outside London are being asked to apply to a different scheme with different rules and safety nets in place. I would be grateful for clarification on that.

As to the scheme’s risks, we know that local authorities have had to prepare for the eventuality of ratings appeals. Businesses that do not agree with their ratings position make the appeal in the right way, but under this scheme the risk of that falls partly to the local authorities. In cash terms £2.8 billion has been put aside by local authorities as part of a first tranche of rate retention to prepare for the eventuality that those appeals might be successful. That is £2.8 billion that could be used for public services at a time when local government services are under significant pressure.

We have not yet seen evidence that the Government have had a thorough piece of research done to understand what this would mean if it were rolled out for the whole of England. We know that the Government have approached local authorities who would be in a net position, so they have taken away the equivalent grant that the local authorities are getting in cash terms for the rates that they are able to retain. However, we are unable to say what that means for the country. Cherry-picking a local authority that has no cash difference to the Treasury is okay, but some local authorities will always require more in grant funding than they can generate in business rates in the local authority area. We have not seen what the Government’s approach would be for that.

We have also not understood why we have pilots running on the one hand with a number of local authorities, while on the other hand we have the promise of a fair funding review to be carried out, but we have not had much detail on how the two will talk to each other. The Government need to be clearer on this. What lessons will be learned from the pilots that have been undertaken so far? What mechanisms will be put in place to ensure lessons are learned from the next wave of local authorities? How will that be hard-wired into the fair funding review to ensure the total amount of money that is available to local government to deliver local public services is sustainable in a 100% retention model? If the Government provide that information, we would be happy to sit down and scrutinise it.

What assessment have the Government made of the benefits and risks of the growth and decline of business rate bases at a local level? At the moment, the business rate bases that local authorities are in receipt of are generally historical. They have developed over many years—50 years, 100 years, and for some towns and cities many hundreds of years. The Government have provided very little evidence of how individual local authorities have by their own actions fundamentally changed the business rate bases in their areas. The Government are saying to local authorities, “If you are responsible for a geographical area and an economy that has done well historically, you will be able to capture that growth,” without any evidence that the local authority has actively contributed to the growth. The local authority of another town or city may be working hard to try to grow the local economy, but due to its historically low tax base and its weak economy at a local level, it may struggle to make ends meet and keep afloat. Some towns and cities have to work twice as hard to stay still, while others have accelerated growth just because of their local circumstances. It would be good to hear what the Government’s approach is to ensuring that a genuine rebalancing takes place across England as part of that strategy.

Draft Greater Manchester Combined Authority (Amendment) Order 2018

Jim McMahon Excerpts

Monday 19th March 2018 General Committees

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Davies.

I attended an event in Manchester on Friday, where the Minister was on a panel debate with the Mayor of Greater Manchester and a number of other Members, and we talked about the impact of High Speed 2 and investment in transport in Greater Manchester. During that debate, I noticed that the balance of power in the relationship between Greater Manchester and Government has changed. On the face of it, perhaps that change is subtle, but it is important.

I think back to when we were negotiating the first devolution deal and the establishment of a combined authority, and the relationship was one of subservience where Greater Manchester would ask Government for powers. It was anyone’s guess as to how certain powers and areas of investment were arrived at, but, by and large, the councils in Greater Manchester waited for Government to tell them what Government were willing to do. On Friday—I give credit where it is due—I noticed that the relationship is one of mutual respect—and also mutual challenge, which is important if devolution is to develop as our great cities need. It is important to recognise how things have moved on.

I found it interesting how different the remuneration discussions were for when the Mayor was brought in, compared to those for councillors. Most people recognise that Mayor of Greater Manchester is a significant role—in my view, it is on par with being a Minister in terms of power, responsibility and accountability to the electorate—and in that context there was a big discussion about how much that person should be paid, which was slightly odd to me, because at that time I was a council leader and Eric Pickles was telling us we were volunteers and boy scouts. The Government need to go back and look at the role of councillors in the new devolved settlement, because, just as Parliament can be disconnected from our towns and cities, I see that within a combined authority the Mayors or the chairs can become very much disconnected from the ward councillors representing their communities at a local level.

There is also an issue about retention and how we attract decent talent to local government to serve as local councillors. The decision to take away councillors’ pensions was a backward step—I acknowledge that the Minister was not in government at that point. That change was very popular with the public as they like taking pensions away from councillors because they are not always quite sure what councillors do.

My view is that councillors play a very important role. Many make sacrifices in respect of their careers and their families, and many give up promotions at work to spend additional time supporting the work of their local authority. Within this new devolved settlement, the requirement on those councillors will increase even further: they will have to contribute to the combined authority and to its sub-groups. Government ought to be proactive and look again at what we view the role of councillors to be in this new settlement. Are they volunteers? Are they there to be appreciated but not really taken too seriously? That was the tone when Sir Eric Pickles was in charge. Is it different now, because we recognise that power is being distributed further down? Will this new settlement reflect that?

On the housing investment fund, clearly any investment in housing is important, but the investment in that fund came at the same time that the housing market renewal scheme was cancelled in Greater Manchester. For those who do not know, the housing market renewal scheme was a programme of demolition, clearance and rebuilding of new, good-quality homes to replace substandard terraced housing that was built during the industrial revolution. In 2010, the housing market renewal scheme was cancelled completely. That meant that money that was due to go into that new housing stock was taken away overnight.

The money going in through the housing investment fund is a shadow of that for the housing market renewal scheme. I mention that in particular because although the housing investment fund has its role to play, we need to reflect the fact that it is about commercially viable sites for developers that are creditworthy and that are charged at a commercial interest rate. If the site is commercially viable, the developer is creditworthy and it will be a commercial interest rate, why does the developer not just go to a bank and borrow the money on the open market in the way that would be expected?

What is the role of Government in this new mix? It ought to be about addressing those sites where there is a commercial viability gap. For towns such as Oldham and many areas and communities in Greater Manchester, there is pressure to build on the green belt, through the Greater Manchester spatial framework, because we need units to be built, but the community wants the brownfield, old industrial sites that do not have value to local communities to be redeveloped. The cost of remediation and taking away contaminated material is so high that for developers it just does not stack up. I urge the Government to look at how they can do more to make sure that funding is provided for bridging the viability gap in those types of scheme.

Draft Non-Domestic Rating (Alteration of Lists and Appeals) (England)(Amendment) (Regulations) 2018

Jim McMahon Excerpts

Tuesday 13th March 2018 General Committees

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I congratulate the Minister on his 10-minute speech on what is, essentially, narrow legislation. Nevertheless, it is important that we make progress and resolve the business rates issue.

Rather than give a set speech, I want to try to probe some areas where the Government have not been clear about what capacity and resources have been provided to make sure that the appeal system can work effectively.

We know that the SI is about the financial penalty and that it is a split payment of £200 or £500 depending on the size of the applicant. First, what consideration was given to a different schedule for levying penalty fees? For instance, for a large business rate occupier such as a big supermarket, whose rating could be £1 million a year, will probably be paying £500 a day for their consultant to lodge the application. If that consultant is giving false or misleading information on their behalf , it seems slightly out of kilter for the penalty to be what is effectively their day rate. Compare that to a small business, which would pay the £200 penalty, and is trying to navigate the system alone. It could make a very genuine mistake but be found by the office to be perhaps misleading, and that would be a significant and disproportionate penalty.

The question is less about the principle of bringing in penalties, which is now very commonplace across Government Departments. However, an explanation of the rationale behind the split payment would be welcome. By that, I mean that we should move beyond referring back to the Enterprise Act 2016 as a reference point and make the case for why £500 is appropriate.

The second point refers to capacity in the valuation office. We know that there have been IT problems and gremlins in the system, but we cannot get away from the fact that the office has had significant staffing reduction since 2010. In terms of head count, the number of people working for the valuation office now is 546 lower than in 2010, when they are expected to implement a brand new system. We all know that the introduction of a new system requires a double run—existing creaky old systems need to be run, and the capacity is also needed to bring in a new system and implement it. I am not sure that the Government have provided the adequate resource to do that when 500 fewer people are working for the valuation office today than in 2010.

I also wonder whether the Government have reflected on other Government Departments making appeals against their rating valuation. For instance, up to 100 NHS hospital trusts are appealing their ratings liability to their local authorities. At the moment, they are being supported by a company called Bilfinger GVA, which is being paid a percentage fee of whatever is saved in that potential successful appeal. At the moment, councils have had to put £1.6 billion to one side in the likelihood that those appeals are successful, and face an ongoing pressure of £250 million a year. So, £1.6 billion a year is potentially needed for back-dated payments over six years and £250 million every year going forward if they are successful. On the back of that, a company that will be taking a percentage fee from the potential saving.

We know that Government money is Government money. Wherever it is placed within different Departments, it is still public money that will be used for public good. When the Treasury give the NHS money to pay its business rate bills and it is transferred to the local authority, that is still Treasury money that is being funnelled through to fund public services at a local level. If a private company is taking a percentage fee of 5%, 10% or even 20%, that is a net reduction in the money that is available to fund public services in an area, whether it is at local government level or within the NHS.

Have the Government given any thought to having a different approach for Government Departments that make ratings appeals to the valuations office? How can it be right that we are having a net reduction in the money that will be available for public services because money is going out to consultants? Surely a better way of doing that would be either to have a restriction on the ability to use external consultants charging a percentage fee on any potential savings, or to have some kind of mediation service within Government to resolve these issues between different Departments. That would, for me, feel like a potential way forward.

Have the Government considered that? When I first raised the question in November 2016, although I had a holding reply quite soon after that, it took six months for the Government to come back with their substantive reply, which said only that they were looking into it. I am still no clearer about what action they are taking, and whether they consider this to be a significant issue, both in terms of the principle behind it and the particular issue of NHS trusts making appeals. If the Government believe that it is an issue, will they support the Local Government Association and its campaign to make sure that the issue is addressed? I should declare an interest as vice-president of the LGA.

Finally, we know that the gremlins in the system are still there. I respect the Minister for acknowledging some of the technical issues that have occurred, but I come back to the capacity issue. If the Government really want this to work, they need to present an invest-to-save model. If they are going to put a new system in place, which they believe will be fundamentally more efficient and deliver a better service, they ought to be able to provide the upfront capacity to deliver that on the ground, and ensure that it comes in in a smooth and managed way. At the moment, the evidence does not support that.

--- Later in debate ---

[Rishi Sunak]

I would be delighted to write to you, Mr Rosindell, and to other members of the Committee on that point. Before I confirm that, however, in the short term, I urge hon. Members to ensure that riding stables in their constituencies appeal to their local authorities for discretionary relief, as I have encouraged my auction marts and riding stables to do. The Chancellor announced a £325 million fund to deal with cases that were not captured by the other reliefs put in place around the time of the revaluation.

[Jim McMahon]

On the unintended consequences of the revaluation, the Association of Convenience Stores has raised the matter of the introduction of cash machines in convenience stores. When high street banks close in a precinct, village or town centre, so there is no cash machine, and a convenience store steps up to provide one, the turnover of that cash machine goes towards its rateable value. Will the Government look at that as part of their review?

[Rishi Sunak]

I do not have the full details on that issue, but I would be happy to look into it. As the hon. Gentleman will know, the VOA makes decisions independently of Government, according to its guidelines, so it would be inappropriate for a Minister to interfere on an individual case. On his broader point, however, if the system is not picking something up properly, I would be happy to look at that.

My hon. Friend the Member for Amber Valley talked about the appeals process and how exactly it will work. In the old system, everything automatically turned into an appeal. In the new system, there will be two stages before an appeal—check and challenge—which anybody can avail themselves of. First, the appellant will ensure that the basic details of their business rates valuation are correct. Secondly, they will engage with the VOA to discuss that. Those two stages will hopefully mean that there is less reason to go to a formal appeal—although the appellant will still have the right to do that—which should reduce the incidence of spurious appeals.

I hope that I have covered all the points made by hon. Members and that I have assured the Committee that the Government are providing appropriate safeguards to ensure the fair operation of penalties, particularly through the right of appeal. It is clearly in everyone’s interest to ensure that the appeals system is underpinned by accurate information. I commend the regulations to the Committee.

Question put and agreed to.

Draft Non-Domestic Rating (Alteration of Lists and Appeals) (England)(Amendment) Regulations 2018

Jim McMahon Excerpts

Tuesday 13th March 2018 General Committees

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I congratulate the Minister on his 10-minute speech on what is, essentially, narrow legislation. Nevertheless, it is important that we make progress and resolve the business rates issue.

Rather than give a set speech, I want to try to probe some areas where the Government have not been clear about what capacity and resources have been provided to make sure that the appeal system can work effectively.

We know that the statutory instrument is about the financial penalty and that it is a split payment of £200 or £500 depending on the size of the applicant. First, what consideration was given to a different schedule for levying penalty fees? For instance, a large business rate occupier such as a big supermarket, whose rating could be £1 million a year, will probably be paying £500 a day for their consultant to lodge the application. If that consultant is giving false or misleading information on their behalf, it seems slightly out of kilter for the penalty to be what is effectively their day rate. Compare that to a small business, which would pay the £200 penalty, and is trying to navigate the system alone. It could make a very genuine mistake but be found by the office to be perhaps misleading, and that would be a significant and disproportionate penalty.

The question is less about the principle of bringing in penalties, which is now very commonplace across Departments. However, an explanation of the rationale behind the split payment would be welcome. By that, I mean that we should move beyond referring back to the Enterprise Act 2016 as a reference point and make the case for why £500 is appropriate.

The second point refers to capacity in the valuation office. We know that there have been IT problems and gremlins in the system, but we cannot get away from the fact that the office has had significant staffing reduction since 2010. In terms of head count, the number of people working for the valuation office now is 546 lower than in 2010, when they are expected to implement a brand new system. We all know that the introduction of a new system requires a double run—existing creaky old systems need to be run, and the capacity is also needed to bring in a new system and implement it. I am not sure that the Government have provided the adequate resource to do that when 500 fewer people are working for the valuation office today than in 2010.

I also wonder whether the Government have reflected on other Departments making appeals against their rating valuation. For instance, up to 100 NHS hospital trusts are appealing their ratings liability to their local authorities. At the moment, they are being supported by a company called Bilfinger GVA, which is being paid a percentage fee of whatever is saved in that potential successful appeal. Councils have had to put £1.6 billion to one side in the likelihood that those appeals are successful, and face an ongoing pressure of £250 million a year. So, £1.6 billion a year is potentially needed for back-dated payments over six years and £250 million every year going forward if they are successful. On the back of that, a company will be taking a percentage fee from the potential saving.

We know that Government money is Government money. Wherever it is placed within different Departments, it is still public money that will be used for public good. When the Treasury gives the NHS money to pay its business rate bills and it is transferred to the local authority, that is still Treasury money that is being funnelled through to fund public services at a local level. If a private company is taking a percentage fee of 5%, 10% or even 20%, that is a net reduction in the money that is available to fund public services in an area, whether it is at local government level or within the NHS.

Have the Government given any thought to having a different approach for Departments that make ratings appeals to the valuations office? How can it be right that we are having a net reduction in the money that will be available for public services because money is going out to consultants? Surely a better way of doing that would be either to have a restriction on the ability to use external consultants charging a percentage fee on any potential savings, or to have some kind of mediation service within Government to resolve these issues between different Departments. That would, for me, feel like a potential way forward.

Have the Government considered that? When I first raised the question in November 2016, although I had a holding reply quite soon after that, it took six months for the Government to come back with their substantive reply, which said only that they were looking into it. I am still no clearer about what action they are taking, and whether they consider this to be a significant issue, both in terms of the principle behind it and the particular issue of NHS trusts making appeals. If the Government believe that it is an issue, will they support the Local Government Association campaign to make sure that the issue is addressed? I should declare an interest as vice-president of the LGA.

Finally, we know that the gremlins in the system are still there. I respect the Minister for acknowledging some of the technical issues that have occurred, but I come back to the capacity issue. If the Government really want this to work, they need to present an invest-to-save model. If they are going to put a new system in place, which they believe will be fundamentally more efficient and deliver a better service, they ought to be able to provide the up-front capacity to deliver that on the ground, and ensure that it comes in in a smooth and managed way. At the moment, the evidence does not support that.

--- Later in debate ---

[Rishi Sunak]

I would be delighted to write to you, Mr Rosindell, and to other members of the Committee on that point. Before I confirm that, however, in the short term, I urge hon. Members to ensure that riding stables in their constituencies appeal to their local authorities for discretionary relief, as I have encouraged my auction marts and riding stables to do. The Chancellor announced a £325 million fund to deal with cases that were not captured by the other reliefs put in place around the time of the revaluation.

[Jim McMahon]

On the unintended consequences of the revaluation, the Association of Convenience Stores has raised the matter of the introduction of cash machines in convenience stores. When high street banks close in a precinct, village or town centre, so there is no cash machine, and a convenience store steps up to provide one, the turnover of that cash machine goes towards its rateable value. Will the Government look at that as part of their review?

[Rishi Sunak]

I do not have the full details on that issue, but I would be happy to look into it. As the hon. Gentleman will know, the VOA makes decisions independently of Government, according to its guidelines, so it would be inappropriate for a Minister to interfere on an individual case. On his broader point, however, if the system is not picking something up properly, I would be happy to look at that.

My hon. Friend the Member for Amber Valley talked about the appeals process and how exactly it will work. In the old system, everything automatically turned into an appeal. In the new system, there will be two stages before an appeal—check and challenge—which anybody can avail themselves of. First, the appellant will ensure that the basic details of their business rates valuation are correct. Secondly, they will engage with the VOA to discuss that. Those two stages will hopefully mean that there is less reason to go to a formal appeal—although the appellant will still have the right to do that—which should reduce the incidence of spurious appeals.

I hope that I have covered all the points made by hon. Members and that I have assured the Committee that the Government are providing appropriate safeguards to ensure the fair operation of penalties, particularly through the right of appeal. It is clearly in everyone’s interest to ensure that the appeals system is underpinned by accurate information. I commend the regulations to the Committee.

Question put and agreed to.