Local Government Finance Bill

Kevin Foster Excerpts

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

[Mr Jones]

I will give way to another person who is well versed in local government—and the city of Coventry.

[Kevin Foster (Torbay) (Con)]

The Minister will remember the time when we shared neighbouring councils. Does he agree that the biggest savings for the Treasury will be created by freeing and incentivising local authorities to create jobs and drive developments forward? This will allow local authorities to get people off benefits, into work and paying taxes. That will be the biggest financial benefit for the Government.

[Mr Jones]

As is often the case, my hon. Friend has hit the nail on the head. This is about raising local taxes that can be spent locally, but it is also about driving growth. The biggest win—and one of the most satisfying things for any of us in this House—is to see people moving into employment who were not previously working. What comes from this Bill will be a real driver for local growth.

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[Mr Thomas]

I admire the Minister’s wishful thinking in coming up with that fact. I gently suggest that he looks at his Department’s spending record on local council services. This year, councils will spend some £10 billion less than they spent in 2010-11. By 2020, according to the Local Government Association, councils will face a £5.8 billion gap just to fund statutory services. Since 2010, powers have been passed to councils without the necessary funding to go with them, so it is hardly surprising that sceptics wonder whether the Government are really interested in meaningful devolution, or just in devolving responsibility for cuts.

Every local authority has a list of lost services. The doors have shut on libraries, day centres and museums. Leisure centres, swimming pools and playing grounds have closed. Rural bus services, fire safety checks and youth services have been reduced, abandoned or shut. Legal advice services have been axed and women’s refuges have been lost. Investment in parks and street cleaning has been limited. All those services are treasured by local communities and represent vital lifelines for vulnerable residents.

[Kevin Foster]

It is interesting to hear the shadow Minister’s list. Can he remind me exactly how much extra funding the then shadow Chancellor, Ed Balls, promised as part of Labour’s plans for government in 2015?

[Mr Thomas]

If the hon. Gentleman looks at our manifesto, he will see that we committed to devolving £30 billion of additional spending from Whitehall to local government.

The Government like to pretend that it is simply ineffective management that stops councils providing key basic services, and that those local councils that are not making cuts to such services are managing their resources effectively. The former Prime Minister David Cameron, perhaps inadvertently, exposed the delusion best when he wrote to the Conservative leader of Oxfordshire County Council in 2015:

“I was disappointed at the long list of suggestions…to make significant cuts to frontline services—from elderly day centres, to libraries, to museums. This is in addition to the unwelcome and counter-productive proposals to close children’s centres across the county. I would have hoped that Oxfordshire would instead be…making back-office savings and protecting the frontline.”

That lack of understanding of the consequences of his own Government’s actions received the response it rightly deserved from the council leader, who wrote back to explain that some 2,800 council employees had already lost their jobs, that the remainder had experienced pay freezes or below-inflation pay increases for a number of years, and that assets had been sold off to fund revenue costs.

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[Kevin Foster (Torbay) (Con)]

It is a pleasure to follow the hon. Member for Dulwich and West Norwood (Helen Hayes). The only observation I would make is that, as in many other speeches from the Opposition Benches, we heard a list of local authority funding and what happened in the last Parliament between 2010 and 2015, but I am drawn back to my earlier intervention on the shadow Minister. After nearly five years of complaints from the official Opposition about local authority funding, the then shadow Chancellor, now a “Strictly Come Dancing” star, was challenged about how much extra he would be putting in, with the plans until 2017 having been published, and the answer was nothing. It has therefore been interesting to hear some of what we have heard again tonight.

I came to this debate with high hopes, because, having read clause 9, I knew this would certainly not be a bog standard Second Reading debate.

[Mr Gareth Thomas]

Will the hon. Gentleman give way?

[Kevin Foster]

I am happy to give way—certainly on that point.

[Mr Thomas]

I have a copy of our 2015 election manifesto. It makes clear that we would have transferred £30 billion of funding to the city and county regions, so I hope that the hon. Gentleman will withdraw his remark.

[Kevin Foster]

The shadow Minister talks about transferring funding, but his party would have transferred responsibilities. When in January and February 2015 there was a direct challenge to the former Member for Morley and Outwood—it is interesting that he is the former Member—on how much extra Labour was going to put in, the answer was nothing. While there would have been a transfer, there certainly was not going to be anything extra after five long years of complaints. Perhaps that was also one reason why people did not have much confidence in the Labour party having a real programme for government and duly dealt it the electoral blow that surely had to follow, and that I suspect will soon follow again.

I want to go into the details of the Bill and explain why overall it is welcome. When I became the cabinet member for city development in Coventry—I had some quite constructive dealings with the hon. Member for Coventry South (Mr Cunningham) at that time—as part of the training scheme we were briefed on what was called the Birmingham dilemma. Previously, councillors in Birmingham had chosen to spend money on regenerating the city, but of course to do that they had had to take money out of the services they were responsible for. While the regeneration had created new jobs and brought new business rates in, they took the blame for the cut in the services that they had had to make to fund it, and they did not get the reward when a significant amount of extra revenue was generated for the national Exchequer. We were briefed on that, and on how we could balance the fact that if we wanted to start regeneration or push forward a project as a local councillor, we did not get any of the reward for doing that financially; we only got the esoteric reward of being able to point to lower unemployment figures in our area or point out that the town centre was looking a bit better following the regeneration scheme. The incentives in terms of day-to-day profit and loss, or, rather, the revenue budget, were just not there. That is why the change to give local authorities more ability to retain the business rates growth they receive and remove that dilemma from local councils is welcome.

It is particularly good that we are now moving to 100% of that growth being retained. Of course in scrutinising this Bill in detail there will need to be some mechanism for when there is a sudden windfall; to be fair, that was touched on by the shadow Minister. Through a stroke of luck, a piece of national infrastructure might be dropped off in a district council area, but that might not necessarily be a sign of taking radical decisions for growth. Likewise, however, if a community is getting a piece of national infrastructure dropped off in its area, it is not unreasonable for it to want to get a direct reward from the business rates concerned.

[James Heappey]

It is not always the case, of course, when a significant piece of national infrastructure is dropped into a community’s lap that the local authority keeps the business rates. It would be great if a nuclear power station did mean that, but at the moment it does not.

[Kevin Foster]

I am sure that some of the residents living around Hinkley Point would be very pleased if their district council got those business rates. In some areas where very large developments go ahead, that would probably involve a dividend being declared rather than a council tax being set. However, it is right that our system has balance. Certain circumstances could not possibly be affected by a local authority’s decision—a steel plant closing down, for example—so we would have to look at a situation like that from the other way round. These are the details that we need to go into, but it is absolutely right that local councils should be able to take decisions to innovate and get an actual hard cash reward for doing so, which they can then use to benefit the residents who have been prepared to support them in taking those decisions.

In looking at how we fund local government, I am pleased that we are not considering measures such as a tourist tax, which have been suggested in the past. That would be completely counterproductive in an area such as Torbay. The last thing we need to do is create additional costs for people visiting and staying in the UK, and I am pleased that those kinds of ideas have not come anywhere near the Bill.

There is an issue with social care. We have heard a lot of talk today about this in relation to urban and rural areas, but there is also a real issue in coastal areas. A lot of coastal authorities in county areas, as well as stand-alone unitaries, can find themselves taking a hit at both ends of the spectrum. For example, my local authority has a ward in which 9% of the people are aged over 85, which presents its own challenges, and at the other end of the spectrum, I have a higher than average number of children in care and one of the highest rates of teenage pregnancy. That can present unique challenges for coastal communities, regardless of whether they are unitary authorities or part of a county or two-tier structure. Perhaps we need to have a debate about how we can reflect those different challenges in relation to funding opportunities.

I also welcome the fact that the infrastructure supplements are being brought forward, particularly for combined authorities. There has been some talk about why these powers have been given instantly to directly elected mayors. I expect it is because they are directly accountable and it is they who take the decision to implement these measures. Again, I think it is right that we should look at that question over a wider area. In many cases, a local urban area that might experience business rate growth could be dependent on infrastructure coming through nearby rural areas. For example, one of the biggest boosts for Torbay’s infrastructure—the south Devon link road—is 99% in Teignbridge District Council’s area, but the road clearly has a huge benefit for Torbay. In the future, could such development projects be dealt with through this kind of arrangement, rather than having to wait decades for a decision at national level?

Overall, the Bill is welcome. This is its Second Reading, so there is clearly time for far more detailed consideration in Committee and when it returns to the House on Report. From my perspective, and from my experience in local government and seeing what is happening in places such as Torbay, I believe that the Bill sets the framework for a debate about how we can deliver a real incentive to local authorities and a clear reward for those communities that innovate and grow, but without penalising any other community.

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[Gavin Barwell]

The hon. Gentleman tempts me on to my pet subject. If his argument is that we need to build more homes in this country, I absolutely agree with him, and so does the Secretary of State. There will be a White Paper shortly with a package of measures to encourage all sectors to build more homes, but I point him to the announcement that the Chancellor made in the autumn statement of a further £1.4 billion for the building of affordable housing. The commitment of the Secretary of State and myself on that issue is clear.

The hon. Member for Great Grimsby (Melanie Onn) and my hon. Friend the Member for St Austell and Newquay referred to the measures on rate relief for public toilets. Indeed, there was quite a lot of toilet humour during the debate. Because I am not at home for my birthday, my children are watching, so I will keep it clean. I simply point out one thing to the hon. Lady. She asked whether, if public toilets were closed, the relief would still apply—whether they would still be liable for rates. The answer is quite complicated: they might still be rateable—so there is a potential for a charge—but unoccupied properties with a rateable value below £2,000 do not pay business rates, so they might fall below that threshold. If they are above it, the powers in the Bill would be applicable. I hope that that gives her the detail she was looking for.

My hon. Friend the Member for Torbay (Kevin Foster) spoke powerfully about the pressures on coastal communities and made a plea that, as we look at the fair funding review, we make sure that those particular pressures are taken into account. I know that other hon. Members will share his concern, and I thought he made his points very forcefully.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) spoke incredibly powerfully and showed a real understanding of the detail of local government finance. I have heard it said that when Einstein published his general theory of relativity, for a number of years only two or three people around the world understood it. I think the local government finance system is similar in that regard, but it sounds like my hon. Friend is one of the two or three. He talked about regression—the fact that the formula is not based purely on an assessment of need but takes past spending patterns as a proxy for what is needed—which means that to some degree the political decisions of different authorities have an impact. I think he was arguing that we move away from that, which is absolutely something we can look at as part of the fair funding review.

My hon. Friend the Member for Somerton and Frome (David Warburton) spoke powerfully about the importance of the measures on a rural rate relief. He is a great champion for rural communities, and we are pleased to include this measure; it will ensure that rural small businesses get the same treatment as small businesses in other parts of the country.

My hon. Friend the Member for Wells (James Heappey) spoke powerfully not just for his own constituents but for rural communities across the country in trying to ensure they get a fair deal from the fair funding review. The House considered this issue last year, and I know that he and the Secretary of State feel strongly about it, but we need to get the detail right and ensure that the formula takes account of the needs of all communities, whether inner-city areas, suburban areas such as the one I represent or rural communities, and ensure that they all get a fair deal out of the system for determining finance.

The final Back-Bench speech was from my hon. Friend the Member for Waveney (Peter Aldous). He made several points but one in particular bears repeating: about the importance of implementing the fair funding review at the same time as we extend business rates retention to 100%. It is clearly essential in those circumstances to ensure an equitable distribution of the income that local government as a whole raises through that tax. That was an important point.

The hon. Member for Oldham West and Royton (Jim McMahon), who wound up for the Opposition, made two points that are worth my picking up on briefly. He spoke rightly about making sure that the system prevents those communities from sinking that, for whatever reason, cannot raise additional funding from growth and might therefore find themselves deprived of income, which could become a self-replicating cycle. The Government want to address that in several ways. For one, we want to make sure that we get the system for local government funding right, but it will not have escaped the House’s attention that earlier we heard about an industrial strategy from a Government determined that all parts of our country benefit from the economic growth we are delivering. It is again worth looking back at the record of the Labour Government and their failure to do that. We do not intend to repeat that mistake.

The hon. Gentleman made one final point about local government finance. I want to make it absolutely clear to him that nobody on the Government Benches thinks that every single community in the country should have the same level of funding per head. We absolutely recognise that funding should be based on need. Let me give him a statistic: his own local authority has a spending power, per dwelling, of just under £1,900. In the Prime Minister’s community, that figure is just over £1,300, so his constituents are getting a spending power that is nearly 50% more to reflect the fact—quite rightly—that there are extra needs in his community. I want to make it absolutely clear on behalf of the Government that we are committed to a fair system that reflects need.

It is probably worth putting on the record some of the other things that the Bill does that have not received the same attention in the debate. The pooling arrangements and the possibility for groups of local authorities essentially to replicate enterprise zone policy is a really important measure. Some mention has been made of the powers in the legislation for the Greater London Authority and for mayoral combined authorities to levy a 2% supplement on business rates, if local business has been consulted, to fund new infrastructure. Again, this tempts me into my role as the Minister for Housing and Planning, but the Secretary of State and I are both convinced that if we want to see not just economic growth, but the housing that we desperately need, putting in place the right infrastructure is absolutely critical.

As constituency MPs, I suspect we have all quite often experienced how the resistance to building new housing in our communities is driven by a perception that over the years new housing has not been accompanied by the necessary infrastructure, so people have found it harder to get an appointment with their GP or to get their children into the local school, and found that their local trains are overcrowded or their roads are more congested. It is vital for the Government to tackle this problem, and make sure that we get infrastructure in place that will not only fuel economic growth, but help to deliver the housing that we so desperately need.

[Kevin Foster]

I appreciate the explanation that the Minister is giving. When people first hear about the idea of infrastructure, they instantly think of roads and railways. Will my hon. Friend confirm that it will be slightly wider than that, including, for example, a good provision of superfast broadband services?

[Gavin Barwell]

Absolutely. We want the definition of infrastructure to include looking widely at all the different things that can help to drive economic growth. In the industrial strategy Green Paper published today, getting the right digital infrastructure in place is a key part of trying to ensure that we get the broad-based economic growth that the country needs. Again, we should aim for the best connections not just in core urban areas, but right across the country, so that all communities can benefit from that technology.