Local Government Finance Bill

Jonathan Reynolds Excerpts

Tuesday 10th January 2012 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

The Government’s promise today is that the measures contained in the Bill will encourage local economic growth, and in these times there cannot be a Member on either side of the House who would not back legislation that would do that. Over Christmas, many of my constituents told me that it already feels like the bad old days of the 1980s are back—and not just at the cinema. They want us, as a Parliament, to do something about it.

Encouraging enterprise and enabling local councils to promote growth are good policies that I support in principle. I have always believed, particularly during my time as a councillor, that local authorities should have more tools at their disposal to tailor policies to their area. However, I am not convinced that the measures in this Bill will deliver these aims.

At the heart of the Bill are plans to localise both council tax and business rates, but as time is limited I will concentrate on the collection and distribution of business rates. As we have heard, under these proposals councils will retain the business rates they collect, which will then be subject to a top-up or a tariff. Clearly, the Government intend that those authorities where the economy is booming in excess of expectation will benefit financially through the increased collection of business rates. As a result, residents in those areas may find their streets a little cleaner, the flowerbeds in the parks better stocked and their libraries open longer; but underneath those plans the cost of the better services in the booming areas will be met by areas where economic growth has faltered. In these areas, where deprivation and unemployment are increasing, councils will not benefit from the additional funding, no matter how desperately it is needed. It is these residents who will suffer the loss of vital council services as a result.

The measures in the Bill are likely to lead to a growing divide between “winners” and “losers”, risking some areas spiralling into decline while others continue to grow. Already the Government’s own figures have shown that their spending cuts have disproportionately impacted on areas such as Greater Manchester. The unfairness was so pronounced that last year the Manchester Evening News began a campaign against it. The Government should have taken more notice of that campaign and campaigns like it.

I understand that the changes in the Bill will use the already announced spending allocations from 2012-13 as a starting point for the new scheme, but in doing so they will build a system on unfair foundations. What the Government propose will exacerbate that unfairness. It is the job of the Government to mitigate the impacts of the recession, not compound them by leaving those in trouble to fend for themselves. I appreciate that the Bill does mention top-ups, tariffs and safety nets in order to prevent this, but there is no indication that these measures will be robust enough. In fact, there are no estimates as yet of the impact the changes will have on individual local authorities. I do not believe the Bill should be allowed to progress until there are stringent mechanisms in place to ensure equity in resource allocation.

The Bill also fails to recognise that the actions taken by a council are not the sole determinant of economic growth in an area, no matter how effective it is. I am intensely proud of Tameside council, my local council, which has always played an activist role in the local economy. It has always been forward-thinking and willing to use the private sector or anyone else to try to make services better. Tameside is of course one of the 10 Greater Manchester councils that have worked together to develop one of the most successful systems of city region governance in the country: first, through the Association of Greater Manchester Authorities, and now the Greater Manchester Combined Authority. The Government should recognise that this successful collaboration, which includes councils under the political leadership of all the main parties, stems from an acknowledgement that the authorities in a city region must have strategies that are complementary, not competitive.

Successful business growth in the centre of Manchester is good for my area, because the people who work in those businesses may move out to Stalybridge or Hyde, where they will get a bigger house and more open countryside for their money. However, if we localise the business rate in the wrong way, that collaboration is broken, to the detriment of everyone concerned.

Greater Manchester’s councils are among the most innovative in promoting business and growth on a local and regional basis, but successful as they are, they are not the sole determining factor of economic growth in an area. Indeed, official figures from SIGOMA, reported in the Financial Times last week, suggest that 80% of the factors relating to promoting business growth in a given area are nothing to do with local government. Particularly in this era of economic difficulty, there are factors that impact on local economic growth that are way beyond the control of local councils. Implementing a system that would penalise hard-working and innovative councils when external factors come into play would be wrong. The Government may feel they are justified in recognising economic growth in this way, but if they are rewarding areas for circumstances beyond their control, this is no more than a lottery.

We have very little time to discuss this important Bill today. Those who are not involved in local government finance may consider it an unimportant technicality; however, it will have a serious impact on our local authorities, and I will vote against it today.