John Healey
Main Page: John Healey (Labour - Rawmarsh and Conisbrough)Local Government Finance Bill
John Healey Excerpts(12 years, 9 months ago)
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Helen Jones
My hon. Friend makes an extremely good point, which I will come to in a moment.
If the Bill comes into force, one extremely complex system will be removed and replaced with another extremely complex system, without time for local authorities to prepare for it.
John Healey (Wentworth and Dearne) (Lab)
Before my hon. Friend moves on from the question of evidence, I do not want her to overlook the value of such evidence. Does she agree that democracy works better when a wide range of organisations has an opportunity to contribute effectively to our discussions? Evidence sessions in a Public Bill Committee give organisations that represent people with a wide range of interests the chance to assess, analyse and propose amendments to improve legislation. That stage will be sorely missed because of the way in which the Government are handling the Bill.
Helen Jones
I could not agree more with my right hon. Friend. Since I have entered this House, I have learned that the best way to improve legislation is to scrutinise it effectively and listen to those who will have to deal with it when it comes in. If the Government chose to take evidence, they would have ample opportunity to table amendments to the Bill in Committee or on Report.
Helen Jones
My hon. Friend, as usual, makes an interesting point, but he is tempting me to go beyond my remit and discuss the procedures of the House. Perhaps the Procedure Committee could look at that point.
John Healey
Before my hon. Friend moves off the question of procedure, does she agree that it is important that we do not lose sight of the fact that the introduction of evidence sessions as part of the Public Bill Committee process, as opposed to the Standing Committee process, was one of the good reforms of the previous Parliament? The hon. Member for Poole (Mr Syms) is right that there is useful expertise across the House from Members with a background in local government. However, unlike the previous consultation and the public statements of Ministers, evidence sessions would give members of the Committee and Members who are following the legislation time and help in getting to grips with the content of the Bill. It serves our purpose, as well as the wider purpose of better legislation, to have those evidence sessions and not to put them to one side, as the Government are doing in this case.
Helen Jones
My right hon. Friend is right. We do have a lot of expertise across the House, but we need up-to-date and informed expertise, which is what evidence sessions give us.
Mr Kevan Jones
The reason the Bill is being taken on the Floor of the House is that there is no business—the business is in a logjam up in the other place.
It is important that the Bill gets detailed scrutiny. As my hon. Friend the Member for Warrington North (Helen Jones) said, in a Public Bill Committee, we would have been allowed not only to scrutinise the Bill, but to take evidence from councils, professionals and others with such expertise. We will not have that opportunity. As one who sat on one of the very first pre-legislative scrutiny Committees back in 2001—it was on the Civil Contingencies Act 2004—I was converted and became a great fan of such pre-legislative scrutiny. That Committee was given the chance to look at the proposals in detail, and as my hon. Friend said earlier, the Bill will bring about a radical change in local government finance in this country.
We had just over three hours last week on Second Reading.
Mr Jones
As my right hon. Friend says, we had two hours on Second Reading for Back Benchers. What we will see with this Bill is what we have seen with a number of Bills. They fly through the House at the speed of light only to land in the other place to be picked apart slowly but surely because of their terrible drafting and the draconian implications they will have for many of our constituents. I can foresee exactly what will happen with this Bill. When we look at the next few weeks of business programmed for the House, we can see that we could have unlimited time to debate the Bill, but time will be limited, and the Government will push the Bill through with undue haste because they are determined to do so.
As has already been said, the time scale set out in the Bill leaves councils with a huge dilemma, which is why I support amendments 20 and 21 to 25. I said this on Second Reading, but I will say it again: the Bill is highly political in the sense that the Government are shifting blame from themselves to local councils under the guise of localism. A good example of that in the Bill is the administration of council tax benefit. The measure contains a poison pill. Local councils must defend their decisions on implementing a 10% cut locally. Clearly, the Minister and the Secretary of State will turn round and say, “It’s not us, Guv; it’s local councils.” That has been the Government’s approach to responsibility throughout. It is nothing to do with localism; it is a highly political and cynical attempt to deflect the blame from where it should lie—it should lie with the Government, not local councils.
John Healey
My hon. Friend makes an important point that counters the assertion of the hon. Member for Poole (Mr Syms). He said that Opposition Members argue that the Government are going too far too fast with the Bill because we do not know what to say about it. Does my hon. Friend agree, to the contrary, that the local authorities that must implement the Bill are worried about the rapid time scale? Authorities in Yorkshire and the Humber have told us that they are concerned about
“the rapid timetable for these reforms, given the huge levels of complexity involved and the radical implications they will have on councils’ ability to fund services to local communities”.
That is why my hon. Friend the Member for Warrington North (Helen Jones) was so right to table the amendments.
Mr Jones
I agree totally with my right hon. Friend. The Bill also has the backdrop of councils having to introduce draconian cuts—County Durham must take £125 million out of its budget over the next four years.
That is alongside the uncertainty in the Bill. Neither hon. Members nor councils know about the regulations, and they will not know exactly how the rebate system will work. When they are budgeting for future years, it is important that councils know what they can do. The time scale in the Bill means that they are walking into the new arrangements blind. They do not know what they must deduct, because we do not have the regulations before us.
Mr Ward
Let me just get through this.
The Bill is not too complex. One of the arguments against having witnesses—it would have been useful to do that—is that we will get the opinions of only those witnesses. The truth is that nobody knows what the outcome of this will be, because it is dependent on the growth in business rates, while the strategy of rebalancing the economy will have implications for different parts of the national economy.
John Healey
On a point of order, Mr Amess. Any written evidence submitted to a Public Bill Committee, and not just the oral evidence taken in its opening sittings, will be circulated to all members of that Committee. May we have your guidance, and then the reassurance of the Minister or the House as appropriate, that any written evidence submitted to this Committee of the whole House will be circulated to all Members, who may all have an interest in participating?
The Temporary Chair (Mr David Amess)
The Standing Order on written evidence does not apply to Committees of the whole House, so I am afraid that I shall have to disappoint the right hon. Gentleman.
The Temporary Chair
I hear what the hon. Gentleman has said, and I think that this is something that could be considered on another day. Perhaps it is something that we could put to the Procedure Committee.
John Healey
Further to that point of order, Mr Amess. As the Chairman of this Committee, you will have noticed that the programme order suggests that there will be at least two more part-days for our proceedings. Will you do your best to ensure that the suggestion made by the hon. Member for Portsmouth South (Mr Hancock) is put to the right authorities, so that, if agreed, a decision can be put in place for the final two of these three days in Committee of the whole House?
Heidi Alexander
I think it will be, and that very point was made last week. The Government claim to be localising but they are, in effect, centralising.
I thought one of the most telling points on Second Reading last week related to where the Government are coming from with this Bill and what they understand local authorities to be doing to promote economic development. The most telling point was when the shadow Secretary of State stood up to expose this Government’s inconsistencies on what local authorities are doing currently. He pointed out that one document published by the Government said:
“We know that local authorities are keen to grow their local economies”,
while another said:
“local authorities are generally reluctant to...promote economic growth”—[Official Report, 10 January 2012; Vol. 538, c. 91.]
The Government are speaking with a forked tongue on this issue, and if the rationale is not clear, why are we going through this process of rushing to get this measure on the statute book and forcing local authorities to implement a scheme that might not have the impact on local economic growth that the Government want?
I think the Government are unclear about what local authorities are doing now to promote economic development, and I think they are unclear about the impact of their own cuts on economic development services in councils, which, as we all know, are a non-statutory service. I know that difficult decisions are having to be taken. My local authority lost a town centre management team, which was a liaison point between the business community and the council. That happened precisely because the Government imposed unfair cuts on local authorities in Lewisham to the tune of £80 million over the next three years out of a £270 million revenue budget.
When the Secretary of State came before the Select Committee in September last year, I questioned him closely about what he anticipated local authorities would do differently from what they are doing now to encourage economic growth and development in their areas as a result of this proposal. I argued that these measures were being rushed through, that we need more time and that the Government need to be clearer about what they are doing. Let me share with the Committee what the Secretary of State said to me when I questioned him in the Select Committee. I had to question him three times. I was asking a specific question about what local authorities would do differently. The Secretary of State said:
“I think they would see the reward.”
I said:
“No. What would they do?”
He then said:
“Please do not badger me like this; I am a sensitive man.”
[Interruption.] Well, the Minister says that it was a joke, but I can tell him that the Secretary of State’s following paragraph most certainly was a joke. To be honest, it was a complete load of nonsense. The Secretary of State could not answer my question, and he started to talk about sea shanties. I think this cuts to the heart—[Interruption.] I know, it was mad; I could not fathom it at all, to be honest.
My point is that Ministers are not clear about what they expect local authorities to change as a result of the new system of local government financing. They may have started with the best will in the world, but we have a hugely convoluted and complex system that, as I said earlier, contains a whole series of assumptions about baselines, about which authorities are tariff authorities and which are top-ups, about how much the set aside is going to be and for how long it will apply, about how much the levies will be, about who decides on what counts as disproportionate gain, and so forth. The position we are left in is vague, opaque and no clearer than under our current system.
John Healey
My hon. Friend is making a powerful case about the volatility, the unpredictability and the rogue factors that can throw out revenue from a business rate base. Is not the real argument for delaying the commencement of these provisions connected to that, combined with the fact that 2013-14, when this system is supposed to come into place, is also year three of local councils having to deal with the spending review settlement introduced by this Government? The finances are very tight, so predictability and certainty will be key to councils planning their way through that. Those are the really powerful arguments that my hon. Friend is making to justify putting back the commencement, as recommended by our Front-Bench team.
Heidi Alexander
My right hon. Friend expresses the case incredibly well; I agree with everything he said.
Have we not seen examples in this Parliament of the Government taking a pause—taking a break—and saying, “This is quite a complex piece of legislation”? I am referring to the Health and Social Care Bill. While this Bill might not be as sexy—I do not really think that the proposed changes to the NHS are in any way sexy; indeed, I think they are destructive and very controversial—these proposals are very controversial as well. I suggest that the Government pause and listen to what local authorities are saying.
John Healey
My hon. Friend amplifies her case. On Second Reading, she told the House something from which this Committee would benefit. I believe she pointed out that the ninth largest business in her borough was the local police station, while the biggest business rate payer was a business with a small office above a bowling alley, which happened to be the national headquarters of a national firm. That illustrated perfectly how contingent a local council’s business rate take is on accidents and other contingencies of business location and so forth. It showed how unpredictable and volatile the business rate stream can be.
Heidi Alexander
I was not going to repeat my comments on Second Reading, but my right hon. Friend tempts me into reiterating some of my remarks about the differing ability of different councils to promote and develop their local economies. Sometimes the business rate take will be dependent on a whole range of different things, not just on what a local authority is or is not doing. I suggest that Ministers go back to their geography lessons and learn what we all learned at school about why businesses locate in different parts of the country and how success can breed success so that areas with a large business rate are likely to grow much faster than those with a smaller rate. I know that the Government propose to check disproportionate growth and the effect of having a larger business base to start with, but it is undoubtedly the case that different parts of the country have different abilities to attract and grow businesses.
The Government’s policies are making those differences even more explicit. Last year saw the National Insurance Contributions Bill, which gives a national insurance holiday to small businesses that are starting up outside London and the south-east, so it is not really a level playing field for local authorities. A small business setting up in, say, Middlesbrough or Birmingham might be able to get a tax break, while a similar business setting up in Lewisham might be operating in exactly the same type of area, employing exactly the same number of people with the same turnover and the same profit margins, yet not get such a break. Is that company as likely to locate in an area where there is a tax break as in one where there is not, like London?
Robert Neill
That sort of belt-and-braces procedure is not at all uncommon. It is our firm intention to press ahead with implementation from 2013 so that local authorities and the national economy can benefit from the Bill. As my hon. Friend the Member for Mid Dorset and North Poole said, the desirability to move to a more transparent system away from the existing model was recognised by the Lyons inquiry, which was set up by the previous Government. It recommended a move towards a localisation of the business rate, and we are taking an important step in that direction.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Schedule 1
Local retention of non-domestic rates
John Healey
I beg to move amendment 46, page 11, line 31, leave out ‘may not exceed’ and insert ‘should equal’.
The Temporary Chair (John Robertson)
With this it will be convenient to discuss the following: Government amendments 1 and 2.
Amendment 44, page 11, line 32, at end add—
‘(5) Such an amount should only be paid in place of other grants to local government if the Secretary of State is satisfied that the overall needs of local government will be met.’.
Amendment 45, page 11, line 32, at end add—
‘(5) The amount debited under subsection (3) must not be greater than any amount debited under subsection (3) for the previous financial year.’.
Amendment 19, page 12, line 20, at end insert—
(c) in determining the central share and the local share for any relevant authority, the Secretary of State must have regard to—
(i) the level of need in that authority,
(ii) the likely capacity of the authority to benefit from business rate growth, and
(iii) the council tax base of the authority.
Any assessment of the level of need in the authority shall include—
(iv) the ranking of the local authority in the Index of Multiple Deprivation,
(v) the level of unemployment within the authority’s area,
(vi) the proportion of adults with a limiting long-term illness within the authority’s area,
(vii) the number of adults in receipt of social care within the authority’s area,
(viii) the number of looked-after children within the authority, and
(ix) the level of child poverty within the authority’s area.’.
Amendment 37, page 12, line 20, at end insert—
(c) The Secretary of State must for each year, and for the subsequent two years in relation to each billing authority in England, determine an indicative share for the subsequent two years.’.
Amendment 38, page 12, line 20, at end insert—
(c) the percentages referred to in (a) and (b) above shall be determined following full consultation with local government.’.
Amendment 36, page 13, leave out lines 1 to 4.
Amendment 39, page 15, line 17, leave out from ‘must’ to end of line 19 and insert
‘prepare and publish an assessment of the level of need in each local authority, as defined in paragraph 4(c) above. The Secretary of State must—
(a) lay the report containing the assessment before the House at least 14 sitting days in advance of the publication of the Local Government Finance Report, and
(b) notify such representatives of local government as the Secretary of State thinks fit of the publication of the report on need and the detail of the basis of calculation in the Local Government Finance Report.’.
Amendment 26, page 17, line 37, at end insert—
‘(4A) The Secretary of State must also lay before the House of Commons his or her assessment of the impact which any such report will have on the level of service provision in any local authority to which it applies.
John Healey
It is a pleasure to serve on this Committee of the whole House under your chairmanship, Mr. Robertson, and that of your colleague, Mr. Amess.
Amendment 46 is a probing amendment in an important group of amendments that the Committee will discuss. I have a number of questions for the Minister, which I hope he will be able to answer when he replies, but if not, I hope that he will answer in writing, as would usually be the case. I notice that two of the amendments are among the 17 that the Government have already tabled at this very early stage to their own Bill. In this case they correct not just drafting errors, but quite serious errors in basic sums. The Minister can speak to those himself when he contributes to the debate.
Amendment 46 and the rest of the group reflect four consistent concerns about this part of the Bill on business rates. First, it will create a greater uncertainty for local government in its flow of funding and its ability to plan financially, and therefore its capacity to cope with the funding squeeze now and foreseeably in the next few years. It undermines an essential stability in funding for sensible longer-term planning and sensible long-term service reform and change.
Secondly, the amendments reflect the distrust of central Government with regard to the use of the business rates funding stream as a cash cow to help to cover the cost of failures in economic policy when revenue streams from other sources fall off, as we have seen during the last 12 months.
Mr Watts
If an area faces the wholesale closure of some of its industries, that obviously creates demand for the local authority’s services. Is it not a fact that such a local authority will lose money by the transfer to central Government and through the loss of business rates, and will therefore be less able to respond to the needs that are created by the wholesale closure of those industries, which we have seen in parts of the country?
John Healey
My hon. Friend, as a former leader of St Helens council, knows a great deal about the local government finance system and the pressures on local government. He may not have heard my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) in the last debate refer to what has just been described as a double whammy. In other words, there may be a loss of potential income at the same time as, and as a result of, the event that causes a greater need and demand for the services that have to be funded through that revenue stream. That is a concern.
I want to ensure that the Committee is clear that this is a fundamental shift in the basis of our funding calculations and in what local councils in England have to spend. The system will no longer work on the basis of need. It will not take account of the fact that there are three times as many looked-after children in South Tyneside as in Surrey or that there are five times as many children in poverty in Middlesbrough as in Wokingham. It will not take into account the capacity of a local area to raise resources, in particular through council tax. It will not take into account the fact that Bexley and Barnsley have a similar population, but that Bexley raises £37 million more in council tax each year. It will take no account of the fact that Brent has a similar population to Rotherham, but raises £22 million more each year in council tax.
Mr Kevan Jones
Is my right hon. Friend surprised that we are returning to having a Conservative Government who are quite clear that they will reward the areas that vote for them and write off whole swathes of the country, including the north-east?
John Healey
Like my hon. Friend, I am not surprised by that. I seriously question whether the scheme will work even on its own terms, but I support the principle of a system that provides some rewards and incentives to local authorities so that they better support growth in business, jobs and the economy. The cost of doing that in the Bill and under the new system is very great given that they take no account of need or resources, and do away with the decades-old principle of equalisation.
Mike Freer (Finchley and Golders Green) (Con)
The right hon. Gentleman knows the high regard in which I hold him from when he was in his former positions in the Treasury and the Department for Communities and Local Government. We had fruitful conversations when he was a Minister and I was leader of a large council. However, I must tell him that Bexley has to raise so much more money than Barnsley because when he was a Minister, he fiddled with the equalisation formula to force affluent southern councils to raise council tax to subsidise northern councils. That is why there is such inequality.
John Healey
The hon. Gentleman has a lot of experience of local government and was a distinguished leader of a council in north, not south London. However, no one could tell that from the comment that he has just made. As to my fiddling the figures in the local government formula, my goodness, many people say that Labour should have learned many more lessons more clearly from the extent to which the Tories did that before 1997.
Bob Blackman
Before the previous intervention, I think the right hon. Gentleman was comparing council tax raised in the London borough of Brent with that in the unitary authority of Barnsley. Has he got figures for looked-after children in those two boroughs? I assure him that the London borough of Brent includes some of the most deprived areas in the whole country and, sadly, huge numbers of looked-after children.
John Healey
The very point that I am making is that the current system, complex as it is, takes account of resources—an area’s capacity to raise revenue, especially through council tax—as well as the needs of the population in that area for the essential services that local authorities provide. The formula covers both and is based on the principle that I outlined.
Mr Watts
If the Government were truly serious about taking need and the ability to raise funds into account, they would have had an independent assessment, outside the political arena, to ensure that grants for local authorities in future reflected need. Comments from the Government Members are always about how much one local authority gets compared with another, and always ignore need. The reason for higher funding is that the need exists.
John Healey
Whatever side of the House we are on, we should endorse the principle that objective, sometimes independent, assessment is the basis for better decisions. I have never been one for saying that important decisions, which should be taken by politicians, who then are accountable for them, should necessarily be outsourced to independent experts who do not have the direct accountability that we and members of the Government have, but my hon. Friend makes an important point that is relevant to our discussions. It is impossible to make any sensible assessment, let alone a sound, independent assessment, of what the system will mean for the future. That makes our discussions and the decisions that we are required to make as members of the Committee difficult. We are making big decisions, largely in the dark, and we are being asked to give members of the Government significant regulation-making powers that will define the most important dimensions of the way in which the system works and what is available for people in different areas.
I want to underline the point that spending to meet increased need in future will have to be funded by the business rates increase. The council tax freeze and referendum start to remove that as a realistic alternative source of additional funds.
George Hollingbery
I am in the Committee as much to learn as to speak to the amendments and would welcome a refresher. The right hon. Gentleman makes the case that there is no accounting of need in the future funding system. My reading of the Bill is that there is. He can argue that the reset period is too long, but there is a reset period—of 10 years—and therefore, need will be reassessed. Likewise, there is a safety net, such that if the business rate increase in a certain area goes a certain amount below the retail prices index, the Government will intervene. Is that not the same as a needs assessment?
John Healey
The hon. Gentleman is right—there will be resets—but we do not know after what period or on what basis, so there is no guarantee that the accounting of need in the current system, which will be frozen at the point when the new system starts, will be reflected in a formula for, assessment of, or decisions on resetting. He might want to pursue that point with his hon. Friend the Minister.
Andrew Gwynne
My right hon. Friend makes an excellent point, but does he share my concern that, if, as is suggested, the reset period is set at 10 years, the gap between the poorest and the most affluent authorities will widen and the disparities will worsen in that period? Does that not reinforce his argument that need must be a fundamental part of the overall formula, as does the capacity to raise additional income using the council tax and the council tax base?
John Healey
My hon. Friend is right—I am about to make a similar point on relatively affluent areas becoming relatively more affluent under the proposed system.
The Government’s declared intention is for a 10-year gap between resets. I have my doubts about whether a reset after that period will be capable of restoring a proper reflection of need or a proper fairness in the system. We will speak later to amendments that would create much shorter reset periods, but they would not change fundamentally how the system will work to build in an advantage for already affluent areas with a higher business base. That advantage will just get bigger over the period between resets.
Mr Clive Betts (Sheffield South East) (Lab)
It is very easy to talk about resets here and now as an academic exercise, but when the time comes to do something that fundamentally alters the tax take of different authorities up and down the country, Governments of any persuasion might think twice. We should perhaps think of the history of council tax revaluations. They are not easy, but they have an impact on individual councils, and they are sometimes dismissed.
John Healey
My hon. Friend is really saying that we have not had a council tax revaluation. The problem he describes is a problem for any Government, but Governments will experience a similar problem with business rates as a result of the Bill.
Andrew Gwynne
My right hon. Friend rightly talks of the unfairness of the possible reset in 10 years’ time exacerbating the problems for local authorities, particularly those such as mine, which need the ability to raise income locally and for acute local needs, such as those in Tameside and the Reddish part of Stockport, to be reflected.
In fact, is it not worse than that for such areas? There is almost a double whammy. For those authorities, we must not only get the reset procedure right, but set the initial baseline correctly. All of that is based on the unfair funding settlements and cuts to local authorities such as Tameside and Stockport, but if we get the procedure and the baseline wrong, 10 years down the line, the real unfairness will set in.
John Healey
My hon. Friend makes a powerful point. It is certainly clear from how the cuts to local government have fallen in this Government’s first two years that certain areas, including his and mine, have borne a much greater burden than others.
The other part of the double whammy, to use my hon. Friend’s expression, is designed into the system, and it should give the Committee cause for concern. It is that the local distribution of the business rates is very uneven. For instance, Kensington and Chelsea has a much smaller population than Rotherham or Barnsley—I represent part of both those boroughs—but raises five times as much in business rates as Barnsley and three and a half times as much as Rotherham.
The opportunities to grow the business base are also uneven. I have looked back at the latest gross value added statistics published by the Office for National Statistics just before Christmas. Last year’s figures showed a difference of more than 3% between growth in London and that in Lincolnshire, Cornwall or Merseyside. In other words, it is clear that from year one the gap between affluent and less affluent areas will grow. The business rates base, and therefore income for councils, will grow faster in some areas than others, as it has in the past.
Even if there were the same rate of growth in all areas, the relative size of the business base income, which is higher for some councils than others, would mean a greater actual cash income for some councils. The top-up and tariff system that the Government are designing will reduce, but not remove, that disparity. If it did remove it, it would remove the incentive element that they want to build into the system.
Having been a local government Minister for two years, introduced the first ever three-year settlement for local government and altered the formula to better reflect needs and resources, I know that there are always winners and losers from any change. The whole House knows that. However, the councils that have a big business rates base, a strong council tax take and high levels of growth will be win-win-win councils, and those that do not will find that they are lose-lose-lose councils. That is the unfairness that is built into the design of the new system. It will increase divisions and tensions in our country.
Mark Field (Cities of London and Westminster) (Con)
Does the right hon. Gentleman not recognise that the current system also has a whole lot of disincentives for local authorities built into it? Over years gone by, it has disincentivised many local authorities. It is perhaps all too easy to make comparisons between relatively affluent central London authorities and those in relatively long-term impoverished areas of the north of England, but the scheme that is being put in place is intended to challenge those disincentives. Although I accept that elements of it will not provide as much transparency as many of us would like, it is at least a step in the right direction.
John Healey
The extent to which it is a step in the right direction remains to be seen. There is an element of its direction that is right, which is the desire to see greater incentives for local councils to support the growth of their business base, and greater rewards for doing so. How those incentives will work is weak and potentially perverse, but the principle is nevertheless in the right direction. The potential practical problems that we are beginning to tease out are part of the debate that we need to have.
Andrew Gwynne
My right hon. Friend is being incredibly generous in giving way. Is there not another problem that has not been properly addressed in the legislation? It takes no account of the complexities of sub-regional economies. For example, many of my constituents in Tameside and Stockport work in the city of Manchester or other local authorities. The scope for economic development in Greater Manchester is concentrated in the city centre, around Manchester airport, Trafford park, the Trafford centre, the media city and Salford quays, and not necessarily in Tameside or Stockport to the same extent. Although there are facilities for pooling business rates where local authorities agree, if they do not agree, will not authorities such as mine be disadvantaged?
John Healey
They will indeed. As my hon. Friend states, there is a double disadvantage to areas such as his. He paints that picture and concern very vividly.
Graham Jones
My right hon. Friend is being generous with his time. I want to add a third whammy and take up the point made by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne). Large parts of the country will have no incentive at all because they are in shire and district areas, where the district authorities will probably be the planning authorities that will make the business decisions, yet the shire authorities deliver 85% of services, including fire and police services, and might have little say in how much they take from business rates in terms of business growth. It will be difficult for them to increase their base if district authorities act unproductively or do not co-operate.
John Healey
My hon. Friend is right, and I suspect that it will be one of the Minister’s biggest headaches in the system. I doubt whether he will come to the conclusion—although perhaps he should—that the real answer is unitary authorities across the country. [Interruption.] But I sense that I may be tempted into territory that falls well beyond my amendment and the whole group of amendments.
Heidi Alexander
My right hon. Friend was talking about the principles and practicalities at the heart of the Bill. Does he agree that the real problem is that because the proposed system is so complicated—with central and local shares, top-ups, tariffs, set-asides, safety nets and levies—the incentive for a local authority to do anything differently could be marginal? Even if we accept that the incentive is there, it is so complicated that councils will not be sure whether it will be worth doing something differently anyway. Is that not the real problem?
John Healey
My hon. Friend is right. She made that point powerfully last week in her Second Reading speech, which was one of the best that the House heard. Whether for children or councils, incentives need to be simple, and the rewards and rules need to be clear, but the system that the Bill will introduce falls far short of those basic objectives for any system of rewards and incentives.
Mr Watts
Is there not another issue here for the local authorities with the lowest business rates take? The Government have indicated that they believe that those local authorities have low business rates take because they are not interested in developing businesses and do not do all that they can to attract businesses to their areas. Does my right hon. Friend consider that perverse, given the problems in areas such as St Helens and many others, including his own? The major concern of local authorities in those areas is to bring in as many jobs as possible, but because of their location, the skills base and other things, it is extremely difficult. It is insulting for the Government to pretend that it is because of a lack of effort by local authorities.
John Healey
A number of colleagues have made that point, about local government in general and their local authorities in particular. It is hard to point the finger at any council and say that it has not bust a gut in recent years to see its economy grow and jobs created, because that is to the benefit of their local area and the local people they serve, and that would also be the view of most Members. I still think there is a case for trying to design a system that rewards local people, via their local councils, where they are successful in that. Under the last Government, we attempted to do that through the local authority business growth incentive scheme. The system that we are now discussing is clearly a new way of doing that, but its fundamental flaw is that it tries to fix the whole funding system for local government at the same time as using the same, single tax stream to create that incentive. The new system is trying to do too much with that one funding system, creating contradictions and tensions, which lead to the sort of complexities that the Minister is trying to counter in the design of the system.
Bill Esterson
My right hon. Friend makes the point about the new system trying to do too much, which goes back to what my hon. Friend the Member for St Helens North (Mr Watts) said. The evidence is that the potential economic impact of local councils in trying to develop business locally is perhaps only 20% of the total impact, with far more of the impact coming from the private sector. The new system is putting an awful lot of responsibility on to local government for generating new business, therefore putting a huge responsibility for the generation of business rates on to local authorities, when there is relatively little that they can do, particularly in areas such as St Helens or Sefton, or my right hon. Friend’s area.
John Healey
My hon. Friend is right. One of the strengths of this debate, as shown by contributions from all parts of the Committee, is exemplified by what he has just said. He has served as a councillor in north Kent and brings that experience and perspective to this debate. He now serves as the Member for Sefton Central, in the north-west of England, and also brings that perspective, reinforcing his point.
I want to draw the Minister’s attention to the future position of fire and rescue services. Can he provide me and other Members who are interested with details about his modelling and assessment of future revenue streams? Can he say how many and which fire authorities will be top-up authorities in future, and how many and which will be tariff authorities? There is concern among senior fire staff that if the incentive that this system is designed to deliver works as the Government say it will, the top priority for councils in the future will be those functions for which they are responsible that help to build business growth. However, those who serve in our fire and rescue services—services that do not directly contribute to economic and business growth—are concerned that a consequence of that will be that in future they will not get the priority for funding that the proper protection of their area may deserve because they do not contribute to business growth. Let me quote a chief fire officer who fears that that may—but not necessarily will—happen. He says:
“I am concerned that the proposed funding model could foster an antagonistic relationship between the fire authority and the local authorities if they begin to see us as a service which takes money from the business rates but does not actively participate in the business growth agenda.”
There is a strong case for fire and rescue services to be funded in future on the same basis as the police, with a very clear, consistent and comprehensive assessment of risk, need and resources built into the allocation of funding for fire services in England. What we start to see with the fire and rescue services, in common with the rest of local government, is concern about the uncertainty—what it means, what the funding is likely to be and how hard it makes it to plan sensibly for the future, particularly the ability to plan and manage within diminishing resources, which by and large is accepted. As another senior fire officer told me, stability is the most important factor. The Minister could do the Committee and many in local government a favour by giving a clear and strong reassurance this afternoon about the stability and predictability of the system in future.
I am conscious that there are a number of other amendments in the group and that other right hon. and hon. Members want to speak to them, so let me return to my starting-point of amendment 46. It is a probing amendment, but it contains a proposal that all revenue raised from what is a tax on businesses designed to pay for local services should provide funds for local government—not for national priorities or services around which the cloak of local government can be loosely thrown at their funding streams and categorised as local government. Post-2015, this will build in a real localising ratchet. Post-2015, when the business rates take is projected to be bigger than the sums distributed to local councils, it will mean that where central Government want to use funds to cover non-council services, they will have to transfer the responsibility and devolve the power and control for those services to local government in order to use the business rates revenue to help fund them. Thus my proposal will mean Ministers truly putting their money where their mouths are. It will mean putting into reverse the post-war centralisation of government that this country has seen, and it will mean making the localist rhetoric a reality.
Mark Field
I am not entirely convinced that we are debating quite as revolutionary a change in local government finance as the right hon. Member for Wentworth and Dearne (John Healey) would have us believe. As he rightly says, there has been periodic centralisation of local government finance in the post-war period; this Bill is a step, but only a relatively small step, in a different direction.
I am concerned that some provisions will not provide the overall transparency that all of us desire for local government finance. The worry, as we all know, is that council leaders across the country who get and understand the system will then work it to the benefit of their own local authorities, while neighbouring authorities with similar sets of needs will not reap the same benefits. I believe that has been the case since time immemorial, and I suspect it is a problem that exists in any political system. However much we try, it is difficult to discount the articulacy of those who understand and work a system. As I say, I am not as convinced or as concerned as the right hon. Member for Wentworth and Dearne. I hope he will forgive me if I focus my comments on issues that have come from the lobbying of one of the two local authorities in my constituency, and in so far as we work here, we all have a vested interest in this authority—Westminster city council.