Local Government Finance Bill (Second sitting)

Justin Tomlinson Excerpts

Tuesday 31st January 2017 Public Bill Committees

[Jim McMahon]

Q Just to reflect some of the debate, is there a conflict in that there are different measurements of success when we talk about growth? There is net jobs and the number of people in employment; equality, or the amount of income people can get in different types of jobs; and there is square footage—building big sheds to generate large business rates, so why not? Is it not far better to have a more rounded system of taxation and incentives so that local areas can determine for themselves what type of rounded economy they need, without being driven down one particular route depending on the flavour of the Government of the day? What I hear form businesses is that they need a long-term plan, strong local leadership and long-term certainty. It strikes me that business has not had that for quite a long time.

Christian Spence: I would certainly agree with your last point. We have not tested specifically with the national membership exactly how local government taxation works, the different tools they may or may not have at their disposal in future, or any one of those other individual points. To lift it to a higher level, I agree broadly with what you say. Business is looking for a long-term stability in the system so that it can plan for its own success as well as the success of the wider community on which it is so dependent. It wants a long-term, fruitful and strategic relationship with government in its area, locally and nationally, about how to support its own growth and how to deliver skills. You talk about generating revenue through large RV sheds on the outskirts of towns. That is right, but there is often a natural tension between local government strategic plans and the draft Green Paper on industrial strategy about whether they are generating the jobs the country would like to generate.

We have no specific answer on the detail, but business is pragmatic enough to say: “If you can deliver a solution which works in our area, both for an individual business and the wider community, we will be open to those discussions.”

Sean Nolan: The skills agenda seems to be a great bridge between what a local authority can do and business needs. That plays into an opportunity in how new responsibilities are played out. On Mr Thomas’s question, the examples you quoted—RSG and public health—are relatively neutral because they are existing grants that will be funded from the quantum. I guess the real game is the new responsibilities that will be passed over with which local authorities can influence skills for the better. The skills agenda is definitely a bridge into the business agenda.

Jo Miller: The answer to the question about whether there is a more rounded way to incentivise growth and deliveries is undoubtedly yes. It seems to me that growth is a number of issues: growing your business, starting to grow the jobs in it, and having more and better jobs. It is also about the ability of people to participate in the economy. That could be through jobs or through not costing the state money by, for example, being a carer. The challenge—I tend to think of it as profit and loss rather than as just one way—is to have a taxation system that encourages growth but that helps people to cost less money. Looking at a place enables us to do that.

The challenge for us with business rates and with what is now, ultimately, a regressive system in council tax—the council tax raised per person in Doncaster is £300, whereas in Richmond upon Thames it is £900—is that there is a better way to fund what local people expect from services than through a combination of business rates and a system that relies on 26-year-old property values, particularly in the context of businesses changing in a digital economy that will not always be property based.

[Justin Tomlinson (North Swindon) (Con)]

Q This is a question for Mr Spence. In the briefing that you provided to us, you said:

“We also believe that there should be a maximum amount a billing authority can raise its multiplier, alongside the maximum reduction limit per year.”

Could you expand on that, please?

Christian Spence: Certainly. This is about the provision in the Bill whereby local authorities will have the power, within limits set by regulation of the Secretary of State, to lower the multiplier in their area. Again, for all the reasons we have already discussed, there are potential incentives to local authorities and businesses in doing so. Broadly, there is a challenge regarding how much that power would be used within the current fiscal conditions that local authorities see. However, although we see in the Bill that the power to raise rates at the national multiplier level will remain set by the Department and the Government centrally—the national multiplier will rise by its new indexation from 2010—local authorities appear, as the legislation now stands, to be able to lower their multiplier in any one year and do so again the following year.

If a local authority were, for example, to lower its multiplier to tuppence below the national multiplier in year one, over three or five years the national multiplier might continue to rise and we would have a position in which that local authority’s multiplier could be 10p different from the national one. As we see the Bill now, there is no reason why that local authority could not reclaim all of that 10p difference overnight in one fiscal year. If there are limits, capped nationally, by which the rate that the national multiplier can rise from one fiscal year to the next, it would seem perfectly reasonable that local authorities should also be capped regarding how much, when recovering from a previous rate, they can raise theirs from one year to the next.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

Q Mr Spence just made an interesting point regarding the way in which the multiplier may be increased at the point when a particular authority decides to change that policy of having a reduced multiplier. By definition, I take it you are, therefore, against local authorities having the ability to increase the multiplier, as has been suggested by some people.

Christian Spence: There is no real consensus across the entire chamber network about the rate and about how those work in individual local authorities. You can see examples in situations such as business improvement districts. There is potentially a very good example, if we can agree and move the Bill to a position where there is a ballot on mayoral infrastructure levies. Business might be happy to see increases in levy provided that the reasons given are clear, that it is a strategic scheme, that it is additional to that which has already been committed, and that businesses have been openly and genuinely engaged, consulted and balloted on whether that can take place.

The specific question for us is this: do we want a position where national Government are capping the national multiplier to CPI but local authorities retain an ability to raise their own multiplier by a rate greater if they have chosen to deviate from the national multiplier in earlier years?