Local Government Finance Bill (First sitting)

Kevin Foster Excerpts

Tuesday 31st January 2017 Public Bill Committees

[Peter Aldous]

Q Minister, you said at the beginning that incentivising growth is at the centre of this Bill. As I said on Second Reading, I am concerned that there may be local authorities that wish to incentivise growth but, for reasons of location, the geographical make-up of their area or issues such as site contamination, may not be in a position to do that. Can you outline how you are going to support those authorities?

Mr Jones: You make a good point, Mr Aldous. We have been clear from the outset that, in developing and introducing this new system, there will need to be a form of redistribution across local authorities to make sure that we do not leave behind those that start off with a far lower business rate. The new system will also include incentives for local authorities to invest in things such as land remediation to bring forward new developments that will expand their business rate base. Local authorities will also be offered the opportunity to have local growth zones, which will be very powerful in terms of giving an area the opportunity to retain more of the additional business rate, and to have that part protected when we get to resets of the system.

[Kevin Foster (Torbay) (Con)]

Q My question is similar to that asked by Mr Aldous. On Second Reading, there seemed to be a negative undertone in relation to the prospects of some areas and councils to be able to incentivise growth and actually deliver the increased business rates that we hope the Bill will bring. As the Minister, how do you see the provisions helping to defeat some of those arguments? What monitoring will the DCLG be able to do to ensure that councils are actually going ahead with it, rather than adopting that negative, anti-business attitude and then using the area’s position as an excuse?

Mr Jones: The Bill will be transformational, changing attitudes in many places. In the main, local government has a good approach to local business and trying to make it thrive. We all know, though, that that does not happen everywhere. I think that the Bill will put areas to the sword. They will have to look far more carefully at how they incentivise growth in their local areas and at their attitude to business. That is not necessarily a bad thing. It might include providing a reduction in the multiplier and other provisions. That also applies to dealing with planning applications and to the general approach and demeanour towards business, which will be transformed by this. We will monitor the effect of this policy and when we get to the point of doing resets of the system, we will be able to analyse where there has been a great deal of success in increasing business rate revenues, and where that may not have happened. At that point we will have to make a judgment on how the system will be reset. We want councils to be very ambitious in bringing forward local growth.

[Kevin Foster]

Q I have a second, quick question. What difference do you think the average council tax payer and council resident is going to notice if this Bill is passed?

Mr Jones: Once the system comes into full effect, the incentives that councils have will mean that many more areas will have a more business-friendly environment, where more businesses are nurtured and more jobs created. The positive knock-on effect is that councils that take to that and do the right thing will be able to grow their income to provide local services. Residents across our local authority areas want high-quality public services, and this will help to do that.

[Clive Efford]

Q How much of the local government grant comes from the business rate collected by the Government and redistributed to local authorities?

Mr Jones: All of the business rate, bar the £12.5 billion —or £12.8 billion, to be more exact—that has been mentioned, currently goes to local authorities, with the exception of the amount raised from the central list. That list relates to the business rate that comes from infrastructure, for example, and that money does not go directly to local government. The quantum of the funding is set out in the document.

--- Later in debate ---

[Jim McMahon]

Q Finally, the Minister does not believe that there is a crisis in adult social care. Do the LGA and Core Cities agree with that view?

Councillor Nick Forbes: The LGA position, as a cross-party organisation, is very clear that there is a crisis in adult social care. The changes made in the settlement, with the adult social care grant and the ability to raise additional money through the council tax precept, are a sticking-plaster approach. There is cross-party agreement that this is the biggest single challenge that we face as a sector. We are collectively asking the Government to use the Budget on 8 March as a way to find a longer-term solution to the problem.

Councillor Jon Collins: My answer earlier was clear that we believe that there is a crisis.

[Kevin Foster]

Q I have listened to the answers so far and will not go back over old ground. However, I am interested to hear more about the difference the Bill will make. There is no point in legislating for the fun of it. What actual difference will it make? Apart from the obvious use of the provision for discretionary relief for public toilets, what aspect of the Bill do you see your councils looking to use for the benefit of local residents?

Councillor Nick Forbes: Local government is asking for a number of things. One is the need to increase accountability and visibility with regard to the general principle of connecting taxes raised with money spent in a local area. More specifically, local government is asking for flexibility on the use of business rates. At the moment, the multiplier can only be determined at an authority-wide level and there is no way of targeting growth to allow us to discount specific businesses or industries. Giving us those discretions would allow us to consolidate where we have sectoral strengths in how the enterprise zone system works, but currently at a very small scale.

You could see local authorities using this to drive growth, create jobs and deal with areas where you might have a neighbourhood shopping centre that is difficult to let because of the rates. At the moment, we have no ability to discount rates. That is the kind of thing we could make a real difference around. For me, the big prize is the flexibility that the system would give to allow us to be much more responsive to local need.

Councillor Jon Collins: It has the potential to provide real incentives to local authorities to focus attention on building business rate growth. I will caveat that by saying that, ultimately, whether it is effective will depend on the distribution formula and whether there is an assumption that any headroom generated by 100% collection and use of business rates is simply centrally earmarked against some additional expenditure or there is a little flexibility so that we can invest for that business growth.

Ultimately, local authorities, certainly Core Cities, are very clear about the importance of working closely with business and promoting development as a way of generating additional business rate growth. Obviously, in doing that we are enhancing and developing our cities in the way that we know our population wants to be developed.

[The Chair]

We have time for one more question.