Local Government Finance

Debate between Kevin Hollinrake and James Heappey

Wednesday 22nd February 2017 Commons Chamber

[James Heappey (Wells) (Con)]

In Somerset, local government looks pretty small. In the 600 or so square miles of my constituency, there are six, gusting seven bus routes, one of which is under threat at the moment. There is one train station, and library opening hours and bin collections have been reduced. There is a limited number of small road improvement schemes and absolutely no major road improvement schemes. There have been cuts to drug advisory services and youth clubs and there is less funding to support the elderly in their homes and communities.

In return, there is a higher precept for flood protection and adult social care, and higher council taxes. I make no criticism of Somerset County Council, which froze council tax for six years when household incomes were tightest, helping families across the county. Furthermore, it was saddled with the reckless debts of the Lib Dem administration. None of that party’s Members can be bothered to turn up for a debate today on local government finance—presumably because they are too busy in the other place turning their backs on democracy instead of standing up here for the communities that they still pretend to represent. That administration racked up debts of £350 million when it was running Somerset County Council. That means that millions of pounds every year from the council’s budget is spent on the interest of those Lib Dem debts.

All that is happening while petrol prices are rising in rural areas—they are rising everywhere, but in rural areas the impact on the cost of living is felt more quickly. For my many constituents who live off the gas grid, heating oil prices have gone up. My constituents pay the same as those who live in cities for their mobile phone and broadband contracts, yet get a fraction of the functionality and connectivity. Their house prices and rents are well above the national average yet their wages are well below it. It seems so unfair that the solution the Government have come up with for reducing local government funding, widening the gap between urban and rural, is to increase the council tax burden on those living in rural areas when their cost of living is already, in so many cases, so much higher than elsewhere.

Last year, the already unfair gap in funding between urban and rural areas would have widened had it not been for the last-minute intervention of the then Secretary of State, who put in place an interim grant so that rural and urban funding, although being cut, would be cut by the same across the board. But that interim grant did nothing to correct the trajectories of those cuts, so that this year the gap between urban and rural widens by just as much as it was always intended to do. That brings with it no reflection of the cost of rurality or of an ageing demographic, and no reflection of our limited ability to grow our economy, given the lack of connectivity and the size of the working-age population as a proportion of the population as a whole.

Somerset County Council and the district councils in our area have now set their budgets for this year. Those painful decisions have been taken, so it is really all too late for this year. However, as my hon. Friend the Member for North Dorset (Simon Hoare), who is no longer in his place, said in this debate at this time last year, we have to accept that public services in rural areas have not just been cut to the bone; all the marrow has been sucked out as well.

The disadvantage for rural areas cannot continue, so I warmly welcome the announcement that the Secretary of State has made at the Dispatch Box today. The review to which he has committed is ambitious in scale and scope. This is not about claiming that rural areas should be at an advantage over urban ones; it is simply about making things fair, which requires a full understanding of the cost of delivering public services in rural areas and a formula that allocates funds accordingly. That review is urgent. I note that the Secretary of State said that it will be completed ahead of the introduction of the full retention of business rates for 2019-20, but we cannot leave it until this debate in two years’ time to be clear about the result of the review. Councils need to know the outcome of the review by this debate next year—in January 2018—so that they can know that the jam tomorrow that we have been promising throughout these difficult four years means that their retention of business rates will be baselined at x, and they can start to plan accordingly. Certainty is all they have left to ask for now that it is clear that there ain’t gonna be any more money in the near future.

So, too, must the Government set a mechanism for the ongoing review of the baselining of business rates when the business rates retention has been introduced. I am sure that the Secretary of State and his team will agree that the potential for economic development will vary from region to region, and from area to area. Considering that the economic development team—if, indeed, one is left—in many of the smaller and more hard-pressed county councils is one person, the opportunities to grow the economy are somewhat more limited. We must have an eye to the idea that once we have baselined in 2019-20, some areas, through their entrepreneurial guile, may be able to grow their economies and their rates bases more quickly than others. Therefore, there will be a requirement to reset from time to time so that the deal remains equitable. Or—I am equally happy with either solution—the Secretary of State could direct that the growth deals allocated better reflect the areas where skills, connectivity or workforce availability are most difficult.

The south-west lags behind the rest of the country on infrastructure spending, and we are well behind on connectivity and on our skills base, yet when the growth deals were announced recently, the deal for the Somerset and Devon local enterprise partnership was particularly poor. It would be great to see the growth deals reflecting the areas where the economic development challenge is greatest so that when it comes to this entrepreneurial idea of the full retention of business rates, which I wholly support, we will start with equality of opportunity because we will have the connectivity, skills and infrastructure in place.

[Kevin Hollinrake]

I am sure that my hon. Friend is aware that the industrial strategy White Paper refers to having regard to per capita spending throughout the country, rather than spending being concentrated in London and other regions that are getting the lion’s share at the moment.

[James Heappey]

I absolutely agree. There is something very empowering and very Conservative about giving councils the opportunity to be masters of their own financial destiny, and giving them the means by saying, “If you go out and attract business into your area, the rewards are yours to keep and spend on improved public services for your communities.” We just have to be aware that when we get that going, we need to have stacked the growth deals in favour of areas where the challenge is greatest so authorities really can take things into their own hands and grow their economies as keenly as the areas that already benefit from better connectivity, infrastructure and skills.

It is sad that the Chief Secretary to the Treasury and the Chancellor have already left their seats because I was going to make one other plea in order to alleviate Somerset’s problems in the short term. The Government have encouraged local authorities to do as they wish through mechanisms such as the new homes bonus and the community infrastructure levy. Not too long ago, there was an aggregates levy designed so that the minerals and aggregates that were extracted in certain areas would be taxed. Some 10% of that was supposed to stay locally in order to fund local betterment and mitigation, but it has drifted off into the centre and is no longer benefiting communities that suffer from hosting those industries. Why does that matter to us in Somerset? Well, in Somerset the Chancellor raises £24.7 million a year from the aggregates levy, and the 10% that we have lost is worth £2.47 million. That is an awful lot of bus routes, youth centres, community support for the elderly, library hours, recycling centres, bin collections, and everything else. As the Government offer the community infrastructure levy to communities that might find fracking appealing, and offer the new homes bonus as an incentive for communities who might want to host more housing, will the Chancellor let us have back the 10% of the aggregates levy that was supposed to have been the incentive for hosting quarrying?

In my constituency, we are doing an awful lot to facilitate national infrastructure projects. In Cheddar valley, the lorries going towards Hinkley Point now number more than 300 a day as it has gone on to 24-hours-a-day building. The pylons that National Grid will soon need to build to connect Hinkley into the national grid will roll through my constituency very shortly. All that building work means that all those quarry lorries are having an impact on our roads, causing potholes and congestion. Yet we are getting zero in mitigation while also getting a very poor deal on local government finance.

Public services in Somerset are being squeezed right down, but the adult social care requirements will continue to grow and grow. We should not see libraries, bus services, support groups and day centres as things that can simply be cut in order to divert money towards adult social care. That is a false economy. Those bus routes, day centres, community support groups and libraries allow people to lead independent lives, staying in their own homes independent of the adult social care system. It is only when we make them so isolated and so lonely that we end up needing to spend more and more on adult social care.

Let us move as quickly as we can to carry out the review that the Secretary of State has promised. It is very welcome announcement for which I and, I am sure, many colleagues are extremely grateful. I have every confidence that that review will make a huge difference to rural areas, perhaps in terms of the money that we get, but much more importantly, in terms of our constituents’ perception that the system is not stacked against them—that they get a fair cut of the Government’s cash. I know that the Secretary of State wants to be bold in the scope and scale of the review that he embarks on, but I also urge him get it done this year so that when we have this debate next year we can offer our councils much more certainty on what full business rate retention looks like and what the advantage to them will be.

Fourth Industrial Revolution

Debate between Kevin Hollinrake and James Heappey

Thursday 8th September 2016 Commons Chamber

[Kevin Hollinrake]

There are huge challenges ahead.

The situation is similar with Amazon, of course. Small businesses used to engage on the Amazon platform. A small business driver would pick up goods and take them to their destination; in future that will be done by autonomous vehicles and drones. Amazon will completely dominate the supply chain, so where is a small business opportunity there?

In previous industrial revolutions, opportunities were created for small businesses—people repaired the looms and sold clothes to the people who had new well-paid jobs. I must disagree with the hon. Member for Inverclyde (Ronnie Cowan), who said that people had not benefited from the industrial revolution. Clearly living standards today are much higher than before the industrial revolution. Nevertheless, future opportunities for small businesses are a concern.

[James Heappey]

My hon. Friend is making an excellent speech. Does he agree that both for private residents and for businesses, if one of the characteristics of this industrial revolution is the pursuit of a zero marginal cost for energy, communications and transport, the reduction of those costs could give small businesses, large businesses and private citizens alike a great opportunity to enter a marketplace without those barriers to entry?

[Kevin Hollinrake]

My hon. Friend makes a good case. In California, people are experimenting with something called a digital dividend. The money that is being made is paid back to people in the form of a dividend for which they do not have to work, but work is important. We want the opportunities; we want the work. We do not want to be redundant, sitting at home while machines do all the work for us. We must make sure that we make the most of the opportunities.

These advantages are locked in, as are tax advantages. The businesses that dominate these technologies are multinational companies that know how to work their way through the system. They circumvent corporation tax and also, arguably, circumvent employment laws. They also circumvent existing businesses and supply chains.

I am not King Canute trying to hold back the tide—this is an inevitability. We cannot resist this change, but the House must develop policies that create a level playing field and also opportunities. We must ensure that our tax system is fit for purpose for the challenges ahead and as we deal with multinational corporations. We must also support the growth of other industries that may spring up on the back of new opportunities that will inevitably be created. We must make sure that we use the opportunities available to us to keep opportunities open for small business.