Local Government Finance

Lord Beecham Excerpts

Monday 18th July 2011 Lords Chamber

[Baroness Hanham]

My Lords, I thank my noble friend Lord Tope for his kindly and warm welcome for this consultation document. I agree with him that local government will be content with this proposal; whether it is content with all the details will come out in the consultation. As long as I have been involved in local government, and since the rate began to be set centrally, local government has looked to having the business rate repatriated—in that it does not go out and come back in again but is contained within local authorities. The repatriation of the business rate is a good thing. The setting of the rate for the grant will continue to be set centrally, for the time being at least. As far as I know at the moment, that will continue to be the situation.

[Lord Beecham]

My Lords, to follow the pointed last question of the noble Lord, Lord Tope, does it not make rather a nonsense of the fine phrase about “freedom over finance” when all that is being restored is the right to retain business rates at a level decreed by the Government, with no capacity to vary it one way or the other at the local level? Is it not also the case that the vaunted reduction in ring-fencing, which in principle is to be welcomed, really amounts at present simply to more freedom to spend less and to incur the odium of taking the decisions over cuts in services that the Government are imposing on authorities through the significant, massive and unprecedented reduction in the government grant?

There is a sentence in the Statement that says:

“Beyond this spending review period, we will look to align more closely local authority functions and total business rate income”.

What does that mean? What are the implications of that sentence?

As for the fairness between authorities, is it not striking that the City of London stands to gain £545 million a year in increased business rate income and the entire authorities in the north-east of England stand to lose £544 million a year? For how long and to what extent will losses in authorities such as those in the north-east be compensated? There are many others; Birmingham, for example, will lose £300 million. Will the losses be fully met and, if so, for how long? Is the Minister aware that in a debate in Westminster Hall, Andrew Stunell, who is a Minister in the department, seemed to indicate that it would be for a year? Is that the position?

Finally, how will this compensation adjustment be made? Is there any detail in the consultation paper about how these huge imbalances are to be addressed, or is it another case of politics in the style of the late lamented Tommy Cooper, whereby things will happen “just like that”?

[Baroness Hanham]

The noble Lord said it so nicely, he will almost be able to go on the stage and do Tommy Cooper, but I am sure he does not really want to do that.

At the outset I remind the noble Lord that local government finance is at the level that it is because of the disastrous deficit that had to be met. Local government has had to take its share of that. The noble Lord knows that if a Labour Government had come into power, they too would have had to make very substantial reductions. Local government would have been left facing very similar problems and decisions to reflect those reductions.

The compensation system will be the tariffs and the top-ups. The expectation is that the control totals that are in place at the moment for the four-year spending review will stay in place. However, with the retention of the business rate, as the noble Lord has rightly said, some areas will have a far higher business rate than others and will be able to generate more. At the start, the tariff will be set at the level of those that have higher rates; the expectation is that, above that, money will be taken off and passed to those in the poorest areas. There will be a sort of balancing between them.

The noble Lord asked how there would be growth. The rate will encourage local government to talk to businesses and encourage the development of businesses, because they will be able to retain some of the extra rate that comes from that. I hope that that answers the noble Lord’s questions.