Kevin Hollinrake
Main Page: Kevin Hollinrake (Conservative - Thirsk and Malton) Local Government Finance Bill
Kevin Hollinrake ExcerptsMonday 23rd January 2017
(7 years, 11 months ago)
Commons ChamberRead Full debate Local Government Finance Bill 2016-17 View all Local Government Finance Bill 2016-17 Debates Read Hansard Text
Mr Marcus Jones
Thank you, Madam Deputy Speaker. Jones is a very popular name, although Marcus is perhaps less so. It is good to have a fellow Marcus in the House, and I am delighted by the point that he has raised. I do indeed recall the Laffer curve, albeit many years ago during my days of A-level economics. The Bill will set out a framework for local authorities to reduce the multiplier on the business rate and therefore reduce the tax rate. As he implied, that might well lead to businesses being attracted to a particular area, thereby creating additional revenue there.
Local authorities have made it clear that they want more stability and, as I mentioned to the Chairman of the Select Committee, they do not get that from the current system of annual discussions on local government funding. Councils have told us that they want longer-term arrangements, and 97% of English councils have signed up to our multi-year deal. The Bill will deliver that much-needed stability and certainty, amending the current local government finance settlement process and the related approach to the setting of council tax referendum principles. We will continue to protect local authorities from the impact of sudden reductions in income, and the Bill will provide a framework that will help councils to manage risk and ensure that they have better protection from the impact of successful appeals, so that they can focus on delivering the services that their residents and businesses need.
Kevin Hollinrake (Thirsk and Malton) (Con)
My hon. Friend talks about protecting local authorities from changes. I welcome his commitment to a fairer funding formula, but is he aware that nine of the 10 authorities with the highest spending power in the country are in London, yet nine of the 10 lowest council tax authorities are also in London? Does he agree that a fairer funding formula needs to take into account the cost drivers behind need in local areas and to be for local people, rather than simply taking into account what has gone before? Rather than being about regression, this needs to be about need and the cost of delivering the services.
Mr Jones
My hon. Friend is certainly correct in saying that we need to take a significant look at how funding is provided across the system of local government. As I have pointed out on a recurring basis, the principles for the fair funding formula do not feature in the Bill, but they are an important consideration and we are certainly taking the issues that he has raised into account in the work that we are doing alongside the Bill. We are taking soundings from local government.
The Bill also includes a range of measures to cut business rates for small businesses and local amenities so that local communities can thrive. We will take a power, following the commitment in the Budget last year, for the Treasury to set the indexation rate for the business rate multiplier. This will allow us to change the multiplier from the current rate of RPI to the significantly lower CPI measure. We will change the rural rate relief to ensure that small businesses in rural areas receive the same level of business rate reliefs as those in urban areas. This is not only fairer; it will also make a real difference to many employers across the country.
We will provide a new relief for five years for the installation of new optical fibre, fulfilling an announcement made in last year’s autumn statement. To make central Government more responsive to changing business circumstances, the Bill streamlines the administrative process of including premises on the central rating list. We will also be introducing charitable and unoccupied property relief for premises on the central list, bringing them into line with those on local lists. Much to the amusement of hon. Members when the subject came up in Communities and Local Government questions last week, we are also providing a new discretionary relief for public toilets. Councils will be able to maintain these important facilities without having to spend quite so many pennies. This Government are committed to providing the right conditions for growth. A key function of the Bill is to provide local government with strengthened incentives for growing their business rates income and encouraging local businesses to set up and grow.
Melanie Onn (Great Grimsby) (Lab)
It is a pleasure to follow the hon. Member for Cannock Chase (Amanda Milling). This is an especially timely debate, because it comes just after the Prime Minister spoke to my local paper, the Grimsby Telegraph, about planned funding for North East Lincolnshire Council. When she was asked how the Government’s cuts to some of the least well-off areas of the country squared with her promise to help people who are “just about managing”, she suggested that North East Lincolnshire was receiving more than enough funding, and that taxpayers in the Yorkshire and Humber region had no reason to complain about their council tax going up.
The fact is that North East Lincolnshire Council has seen its budget cut by some £79 million since 2010—as good as chopped in half. On the ground, that has meant that recycling has been cut to a fortnightly collection, charges for bin collections have had to be introduced and have recently been increased, children’s centres have been closed and merged into new hubs, and public toilets are being closed.
On that point, may I ask the Minister to expand on clause 9, which comes under the convenient heading of “Reliefs”? Will that relief come too late if the public toilets have already been shut? I raise that point because it is a significant concern to people not only in Great Grimsby but in my neighbouring constituency of Cleethorpes, which is a big tourist area. If the relief—I am sorry to keep using that appropriate term—comes too late, those facilities will not be there for people from outside the area to come and use. As has been mentioned, organisations such as Age UK and Crohn’s and Colitis UK are lobbying hard to ensure that public conveniences are not lost. That is particularly important for parents of disabled children and young children, and for older people.
On a visit to Ormiston South Parade Academy last Friday, I was asked by the schoolchildren whether I could make sure that there were more bins near shops, because they have noticed that litter is starting to pile up. Such things might not make the front pages, but they are noticed and they really matter. Another is the increase in fly-tipping, which is a blight on all our communities. As my hon. Friend the Member for Manchester, Withington (Jeff Smith) said, the cuts have taken their time to have an impact on local communities, but that impact is really starting to be felt across the piece. It is not about Labour councils versus Conservative councils—it is affecting communities across the country.
Perhaps the worst way in which the cuts to councils’ budgets have been felt has been in the care sector, and in the knock-on effect that is having on the NHS. Government cuts to my council’s budget have caused spending on adult social care in my constituency to fall by 20%. I have given examples in previous debates of how this is forcing people to live in unacceptable conditions. It has also become clear this winter that the Government’s downgrading of the social care system is having catastrophic effects on our NHS. So-called “bed blocking”—where patients are fit to return home or move to a care home but no places or in-home support are available—is sapping hospital resources and leading to waiting-times targets being missed by considerable distances. It also resulted in the outrageous circumstance at my local hospital of a 95-year-old woman being discharged from accident and emergency at 4 am because no beds were available.
People in north-east Lincolnshire are facing an almost 10% hike in their council tax bills over the next couple of years because of the Government’s policies, and there is no prospect that that will be enough money to fix these endemic problems. The autumn statement showed an increase in business rates income to the Treasury of £2.4 billion in 2017-18, but that remains unallocated. Why do the Secretary of State and the Minister not protect people from a massive rise in council tax bills by investing the money in social care and ending the precept? To Conservative Members who think that I am making a partisan attack on the Government, I would point out that my Conservative neighbour, the hon. Member for Cleethorpes (Martin Vickers), has also gone on the record to call for an end to local authority cuts, saying:
“Many of the things that make our lives that little bit better... are being cut to the bone”.
In the interview I mentioned earlier, the Prime Minister said that cuts to councils such as North East Lincolnshire were necessary to eliminate the deficit, but that goes no way to explaining why the lowest-income areas, which are generally unable to raise enough funds from local business rates, are facing the harshest cuts, while her local authority is one of the three least-suffering councils.
Kevin Hollinrake
The hon. Lady blames the Government for the funding plight in her local authority area, but the spending power of all of north Lincolnshire is £711 per head, whereas in the top-10 local authority areas in London it is £1,171 per head. Is it not the system that is at fault and the way money is distributed, rather than the Government? It is distributed according not to need but to what has happened previously.
Melanie Onn
I do not agree that it is just about the system following what has always been. I think there needs to be a reassessment of need. It is not just about following the previous system: the £79 million of cuts has nothing to do with what happened before; it is a result of decisions made over the past seven years. As my Labour colleagues have said, we are broadly supportive of the principles in the Bill, but none the less my constituents would want me to ask the Government to make sure that my local authority is no worse off in the future than it is now.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to follow my hon. Friend the Member for Torbay (Kevin Foster), who speaks with much knowledge on this subject. The business rates retention provisions in the Bill clearly have huge potential for our local authorities, which will be able to focus on economic growth in their area, and to grow their rates base and therefore their income. However, this is an incentive around growth rather than the whole redistribution of the current local authority funding system. Most of the revenue going into local authorities will be baked in and redistributed according to a formula whose details we do not yet know, but I am heartened to hear from the Minister that the fair funding review is being taken forward. A technical working group from the Local Government Association has now been charged with that responsibility.
The principle has to be that there is a fair funding formula wherever we live. There cannot be a postcode lottery. The previous and current Secretaries of State have been clear that that is a key part of the proposals. The Communities and Local Government Committee looked into the business rates retention policy, and our report considers the concerns and the opportunities. Overall, we were supportive of the principle of the Bill, but we recommended that an independent body should look at the funding review. I am sure that the LGA has some good people, but it is important that we have a fresh look at this, so it would be good to have someone truly independent who can sit back from where local government is today.
In addition to the Committee’s initial witness sessions, we had about an hour and a half in the House of Commons Library with some experts from the Scrutiny Unit during which they tried to explain the current system to us, but we left none the wiser. I understand that 159 measures are currently in use, so the current system and the way in which the measures combine is very complex. With so many measures, one would think that the current system would be fair, but it is absolutely not.
I am grateful to Leicestershire County Council for its detailed work—it is available on its website—on authorities’ core spending power. As many will know, core spending power involves all an authority’s revenue, taking into account the revenue support grant, council tax, business rates, the new homes bonus—everything. Opposition Members might say that this is a political argument involving the shires against metropolitan areas, but the council’s evidence did not suggest that at all. Many mets are not getting a fair deal, but many shire counties, such as the one that I represent, are not getting a fair deal either. The fairest deals seem be those of many London authorities. Nine out of 10 authorities with the highest spending power are in London, yet nine out of 10 authorities with the lowest council tax are also in London. Over the past five years, a typical council tax bill outside London has increased by £100 whereas the average bill in London has decreased. Something about how overall funding is being allocated under the current system is not quite right.
To put those figures in context, the spending per head of the local authority with the highest spending power—obviously a London authority—is £1,170. That figure falls to £770 in North Yorkshire and to £615 in York. There are many other examples, such as Kirklees, Leeds, Wigan, Bury and Wakefield, of authorities getting a raw deal. One might put that down to certain other factors, such as a correlation with deprivation, income or another demographic, but that is not the case. Areas with high income deprivation, such as Leeds or Kirklees, or with a high proportion of elderly people, such as the East Riding of Yorkshire or Dorset, often have a low amount to spend per head. The system just is not working. The 1988 centralisation of the system, under which money was to be redistributed around local authorities, was supposed to make the system fair by ensuring the equal funding of services on the basis of need, but that clearly has not worked and we have been left with a postcode lottery.
I am not picking on London, because some London local authority areas, including that of the Minister for Housing and Planning, whose birthday it is today, are not particularly well funded, but the pattern persists. To put the situation into context again, Hammersmith and Fulham is not increasing its council tax this year. It is not applying the adult social care precept, but it is providing free home care to residents and has cut the price of meals on wheels. Hardly any of those facilities are now available in my area. It is simply not fair that people in different parts of the country with the same needs are getting different levels of service.
Of course there is an impact on the provision of other services in my local area of North Yorkshire. Libraries are closing or are being moved over to community libraries. Bus services will no longer be subsidised, so some services will no longer operate. Obviously there is an effect on children’s services and, crucially, on adult social care—we have a more elderly population in North Yorkshire.
This is not an easy situation to resolve. Moving from one system to another is a zero-sum game. If the system is to be made fair today, somebody will lose out. We have to move away from a system that is clearly unfair. I understand that the system is as it is because of something called regression. Past inaccuracies and unfairness have been built one on top of one another, and it is difficult to reverse those changes.
Of course more money is coming into the system—£12.5 billion, according to the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton (Mr Jones). Some extra services will clearly be required for that money, but there is an opportunity to make the system fair. Yes, there will be more services and greater responsibilities, but some areas are getting a better deal today.
Simon Hoare (North Dorset) (Con)
Does my hon. Friend agree that, in order to ensure that the problems that he highlights are not replicated in the new system, we need to find an agreed and sensible way of measuring rural deprivation? That is often incredibly hard to measure compared with deprivation in urban areas because of the scarcity and sparsity of the population.
Kevin Hollinrake
My hon. Friend makes a strong point about simplifying the system, which I was about to address. There cannot be 159 different indicators. We know that that does not work. Leicestershire has suggested nine simple indicators, including children’s services, adult social care, highways, fire, area costs, sparsity and density. That is a simple formula that people can understand and penetrate, and it would make sure that the allocations cater for the extra responsibilities we are getting through the system. We should use those nine simple cost drivers instead of this regression, which is a model based on something that clearly does not work. We need a progressive move away from that regression towards a simple, standard, penetrable formula based not on where we live, but on a fair system with fair resources and a fair assessment of the cost drivers wherever we live.
Jim McMahon (Oldham West and Royton) (Lab)
May I join many Members on the Government side in wishing my counterpart a very happy birthday? I am sure this does not quite constitute a birthday bash, and for many it is not quite the icing on the cake either, but we wait with bated breath for the Committee stage to really get under the skin of what the Bill means. I hope we will work together then, because I think there is a shared desire to promote devolution, to see more power shift from this place down to our communities, and to really empower local areas to determine what is right for them. But the devil, of course, will be in the detail.
We welcome the move towards devolution, and so will many of our councillors, but genuine devolution means actual power, not just limited decisions being made at a local level within a framework that is tightly defined by a very centralising Government; it means areas having genuine freedoms and genuine power, and working with communities to co-produce the future they want. That is devolution, and power and the ability to effect change are what we all came into politics for. None of us wants things in our areas to be predetermined by a Government—hundreds of miles away in many cases —who do not know the ins and outs of our communities, and who really do not know local circumstances in the way we do.
It is important that we develop a plan that works for the whole country. I think many people in England look at devolution being discussed in Scotland, Wales and Northern Ireland and say, “What about England?” Now, even within England, we are seeing towns, cities and counties being pitched against each other, with large parts of England still completely without any devolution deals. The challenge for the Government is that this is about letting go as much as it is about giving a little away to local areas. It is also about doing that in a meaningful way, and we should have the confidence to give the same powers we are proposing for our mayoral combined authorities to our counties and metropolitan areas. That is real confidence and real letting-go. If the Opposition can help in Committee to table some amendments on that, which will hopefully be received in a positive way, we will, I hope, have a fair settlement for England.
But let us be honest: some of this comes down to cash as well as power. We can have ambition and a desire to make our area the best it can be, but we need funding to make that happen. We need capital to invest in growth. I do not just mean areas doing deals with the Government—providing they have access to the Government, because those that do not will not get that capital funding. I am also talking about having revenue to make sure that the skills providers, the schools system, the health system and the Department for Work and Pensions all work together to make sure we see genuine reform and genuine growth.
A lot of people say, “If you want modernisation, to see where real innovation has taken place and proven itself to be efficient, look to local government.” A lot of people in the Department for Work and Pensions, Her Majesty’s Revenue and Customs and the Treasury should look at themselves in shame because of the way they have allowed frontline services to be cut to the bone while they themselves have failed to reform from the inside.
I worry that we still see a very narrow base being discussed when we talk about fiscal devolution and local autonomy. Let us be honest: we are still talking about council services being based not on need and on people’s genuine need for support and services but on house values in 1991. We have not had the courage to bite the bullet and take forward revaluations. We have not allowed local freedoms to look at exemptions and discounts in the way that areas have asked for through the devolution deals that have taken place.
On top of that, we are still talking about a very narrow business rate base. Many of the areas that have a low tax base for residential properties have the same issue with their business rate base: lower values and lower demand have an effect on the tax base and on the amount of tax that can be generated. It is a real shame that when we talk about fiscal devolution and autonomy, we are still taking the easy option. We are using property tax because it is easy: we know how to collect it and we know how to generate it. That then creates the pot of money that local government has to use to sink or swim. Well, that is okay for an area that has a strong tax base, but for an area that does not, the alternative to swimming is to sink, and that is not good enough if we believe in fairness and a decent society.
So we will see amendments being tabled in Committee that really reflect the idea of funding based on need. It is not good enough to set one area against another. If there are instances in rural areas that should be taken into account, a fair funding model should accommodate that. Equally, a fair funding formula should take into account areas with high levels of children who need safeguarding support or people who need social care. There should not be the constant imbalance whereby areas fight with each other to get scarce resources to deliver the public services that our communities need.
Kevin Hollinrake
The hon. Gentleman makes a good point about looking at this again as a blank canvas. Does he therefore accept that if that new funding formula meant that a local authority was worse off based on such objective need, he would support legislating on that basis?
Jim McMahon
We have heard from Members on both sides of the House the deep concern that any review will mean that some areas are worse off than others. As I said, that is inevitable with such narrow tax bases, when we are looking at council tax income and business rate income and saying, “That’s it.” Given that the additional grants to local authorities are now in question, we are always going to be fighting for a scarce resource.
Devolution deals have included requests for retention of air passenger duty and the tourism tax. Okay, not every area might want that, but if we believe in devolution, local areas should be able to have some of these options. The retention of fuel duty or VAT at a local level has not even been discussed. If we want genuine fiscal devolution, we need to be more open to more taxes being raised locally and spent locally, with local people holding to account the people who make those decisions.
It is not local government that needs to change, or even the DCLG team, but the Treasury—it needs to let go. The reason air passenger duty cannot be devolved at the moment is that the Treasury has no idea how much fuel duty is generated at any of our airports, because it is paid by the airline at its head office. The Treasury has no idea how much is generated from fuel duty, because it is not attributed to every petrol station but paid at the refinery, and that does not account for how much is spent at a local level.