Local Government Finance Bill (Seventh sitting)

Justin Tomlinson Excerpts

Thursday 9th February 2017 Public Bill Committees

[Jim McMahon]

The point is about making sure that the powers that are being devolved to local billing authorities can be implemented. Critical to implementation is the affordability of the measures being taken. It is okay saying local authorities can take a hit on their tax base by reducing the multiplier, but that money must come from somewhere. We have seen time after time, and we have discussed time after time, the pressures in adult social care and frontline services when local councils just do not have the headroom required to fund the reduction.

The logical thing to do is to give all billing authorities the power to be able to teem and ladle within the business rate tax base, which is what the amendments are trying to get to. Many people would find it reasonable, as we heard in our evidence sessions, that large ratepayers—the big supermarkets and out-of-town warehouses—should probably pay more to fund the vitality of our local high streets and town centres. I think most members of the public would support that.

[Justin Tomlinson (North Swindon) (Con)]

I have every sympathy on the point about online trading. As the former chair of the all-party group on retail, I am familiar with the issue. I understand that the amendment is a probing one and not to be pressed to a vote, but I would urge a little caution. We must be careful about who is grouped with big business. The vast majority of retailers on the high street would be classed as big business, as they are not eligible for small business rate relief. The high street is struggling. When local authorities, as highlighted in the Portas review, were given discretion on car parking charges they continually hiked them and sped up retail’s rate of decline. I just urge caution.

[Jim McMahon]

I appreciate that intervention. I suppose my reflection on the Portas review is similar to the reason for the amendment. It is okay to say that councils can have the power to reduce car parking charges, but fees and charges are a significant part of local government income. At a time when revenue support grant has been snatched away and local authorities are being told they will be self-sufficient, going forward, it is difficult for them to find the headroom to reduce car parking charges. I pay tribute to the local authorities that have done so, particularly when they did it in a targeted way, to support local retail.

--- Later in debate ---

[Mr Thomas]

I think that this amendment will come to be known as the Mackintosh-Hollinrake amendment part 2. I again draw your attention, Sir David, to the excellent report by the Communities and Local Government Committee on what 100% business rates retention might mean. I can assure you that present when the report was agreed was the hon. Member for Northampton South. The report makes very clear his support for the recommendation that the power to raise the multiplier for business rates should be introduced. He wanted, as did the rest of the Select Committee, rises capped so that they were limited to the increase in the average council tax. I do not know whether at that point he foresaw Surrey County Council wanting to increase council tax by 15%. Clearly, a 15% hike in business rates would be completely unacceptable, but it is interesting that members of the Select Committee propose that local authorities should have the power to raise business rates as

“an effective lever to stimulate and foster local economic growth.”

The reason I supported our tabling these as probing amendments was that it is important, during the passage of the Bill, to consider the sources of revenue that local authorities will have to pay for the vital public services that the people of England get from their councils. Given the huge reduction in revenue support grant that we are all familiar with English local authorities having experienced, the two principal sources of income will be business rates and council tax.

The power does exist in law to increase council tax. If that goes beyond a certain threshold—well, Ministers are varying the threshold up and down at will at the moment. There is the power to increase council tax, however, and one can go higher than the threshold if one can get the consent of one’s local residents. There is no similar power for business rates.

In the new Jerusalem that we heard the hon. Member for North Swindon set out at an earlier sitting—I am sure that by now, Sir David, you have had the chance to read his speech—he foresaw business rates being reduced and, across every local authority area that did that, great big new warehouses, out-of-town shopping centres, large businesses moving in and business rates income rising as a result. Unfortunately, in the course of—

[Justin Tomlinson]

Will the hon. Gentleman give way?

[Mr Thomas]

Let me finish this point and then I will happily give way to the hon. Gentleman, whom I am delighted to see I have woken up. I hope that in the course of the consideration of the Bill to date, he and other members of the Committee have begun to understand that there is a whole series of barriers to economic growth taking place in particular local authority areas. Actually, an individual local authority may not have much scope, if any, to increase its business rates income.

[Justin Tomlinson]

I suspect that the hon. Gentleman drifted off during my speech, because the key point I made was about the growth of small businesses to medium-sized businesses. That not only generates business rates income and does not require big out-of-town warehouses, but crucially creates yet more jobs that are vital to local residents.

[Mr Thomas]

I was sufficiently shocked by the sight of a Government Back-Bench Member rising that I did pay attention, but it is possible that, as events have moved on, I cannot recollect every aspect of the hon. Gentleman’s contribution. As punishment, I will go back and re-read it. He makes a partially interesting intervention—if he will forgive me for saying so. He is right: the challenge across the country for future businesses and economic growth is to take the entrepreneurial spirit that leads to the establishment of small businesses in the first place and to turn those into medium-sized businesses and, ultimately, bigger businesses.

Increasingly, as my hon. Friend the Member for Oldham West and Royton made clear, we are seeing more of those small businesses that are successfully transitioning into medium-sized and bigger businesses not needing the size of property that would lead to the increase in business rates income in the way that this Bill implies will be the only way for councils to generate increased business rates income in the future. There is that constraint, plus those that the hon. Member for Waveney alluded to and the barriers that I set out when I took the Committee to Allerdale Borough Council in Cumbria, with the mountains and lakes of the Lake district being natural barriers to economic growth.

We are now privileged to have the hon. Member for Thirsk and Malton with us. He will be delighted that, in a spirit of tribute to him and the hon. Member for Northampton South, I am moving a probing amendment that grants—as he and other members of the Select Committee wanted—the power to raise business rates so that that is included in this legislation. I look forward to hearing the case for raising business rates from the hon. Gentlemen.

As my hon. Friend the Member for Oldham West and Royton alluded to, one can foresee the social care crisis being so severe, and the worry about individual families’ circumstances being so great, that council leaders and councillors up and down the country will not want to go beyond a 1%, 2% or even 0% increase in council tax. However, they might want to look at the big businesses based in their area and potentially increase business rates as a source of income to pay for vital public services.

In the evidence given to the Committee by the chairman of the Federation of Small Businesses, we heard of his desire to see local authorities properly funded, so that the range of discretionary services that councils can offer when they have the resources, and that help businesses, can be available. The Minister’s most recent intervention on car parking charges was interesting. The chairman of the FSB noted in his evidence to us that one reason local authorities raise parking charges is that they have few alternative ways of raising revenue.