Lord Beecham
Main Page: Lord Beecham (Labour - Life peer)Cities and Local Government Devolution Bill [HL]
Lord Beecham Excerpts
Lord Beecham
“( ) The Secretary of State may by order make provision for conferring powers on a combined authority to set multi-year finance settlements and retain business rates revenue in relation to its area.”
Lord Beecham (Lab)
My Lords, I find myself in the somewhat unusual position of agreeing with the Minister in her analysis of the impact of what the noble Baroness, Lady Janke, proposed in Amendment 43. As my noble friend Lord McKenzie pointed out and as the Minister implicitly confirmed, the impact of allowing the combined authorities to retain money on what is essentially a nationally based taxation would be formidable and difficult for the Wigans and Kirkleeses of this world as compared to the Westminsters and Kensington and Chelseas, and I was very glad to see her not adopting that position.
Having said that, I must say that there is a certain synergy between the amendments that we have just debated and the one that I am now moving, particularly in relation to multiyear finance agreements, which must be common sense, and to business rates growth. However, I am in another unusual position in having to confess that Amendment 44A as printed is actually in error, because it should have referred to the growth in business rates rather than the implicit retention of an entire business rate. In that way, we are agreeing again with only a part, but an important part, of the amendment that we have just debated. However, the critical factor here is that of the fairness or otherwise of the distribution of the funding. That is the subject of Amendment 44B. Of course, if we had suggested, as it appears on the Marshalled List, that the entire business rate would revert to individual councils, it would be disadvantageous. Even the 50% retention rate is inequitable, unless there are other measures to compensate those authorities in need.
The Independent Commission on Local Government Finance has illustrated this position by comparing Hillingdon, which currently collects £101 million of business rates, and Wigan—and my noble friend Lord Smith will be conscious of the fact that Wigan collects just one-third of that, at £34 million a year in business rates. If we had a more equitable system, and if it was based on need, that would result in Hillingdon receiving £42 million and Wigan £62.9 million. That was the finding of the independent commission. That is an illustration in respect of only that one area of financing, because action is desperately needed across the whole system of local government finance. Local authorities have suffered massive cuts as a result of government policy, which singled out the sector for the biggest cuts in public expenditure in the last five years, a process that is far from complete—and we may hear more next week about what is in store. In any event, even the cuts that are still inchoate and beginning to take place will lead to substantial further difficulties.
What is particularly galling is the unfairness of the way the burden has fallen on those areas with the greatest need. The 10 most deprived councils in the country, as defined by the department’s own measure, have suffered cuts 10 times greater than the 10 least deprived. Liverpool, the authority with the highest deprivation score of all—I repeat that these are on the department’s own measure—has suffered a loss just under 30 times greater than Hart District Council, the least deprived authority.
Interestingly, 14 councils were lucky enough to receive an increase in government funding over the past few years, and by sheer coincidence all but one of these have Conservative MPs, including Michael Gove, Chris Grayling, Philip Hammond and Jeremy Hunt. Some of us think that one or two of those have been lucky to have been in the Cabinet for these past few years, but certainly their constituents have been lucky to have received this benison from the Government.
If the Government’s ambitions for cities in the context of devolution are to be carried out and are not to suffer the same signal failure as their northern rail transport policy, as was revealed last week, or, in the light of last week’s belated disclosure of a three-year-old report, the fate that may be awaiting HS2, their philosophy about devolution must be accompanied by a needs-based funding formula and not rely on a continuation of the present system, which is so damaging to so much of the areas that could most benefit from the Government’s well-intentioned approach to devolution. That is why Amendment 44B calls, initially at any rate, for a report on the fairness of the distribution of funding, taking into account the cumulative cuts so far—and, indeed, those that are pending—in spending power and resources per household. I beg to move.
Baroness Hollis of Heigham
Will my noble friend read into the record, if he happens to have the information to hand, the 10 most rewarded local authorities and the 10 most deprived, in terms of grant, and their political complexion?
Lord Beecham
I am afraid that I am going to have to follow the usual ministerial procedure and say that I shall have to write to my noble friend. I do not have the information. I copied the report to my noble friend this morning and I think it runs to 163 pages. I do not have it immediately to hand, or anything big enough to contain it, but I will communicate with my noble friend.
Lord Shipley
My Lords, I am grateful to the noble Lord, Lord Beecham, for clarifying the wording of Amendment 44A: that it is about the growth of business-rates revenue. I was slightly disappointed that these two amendments were degrouped from the two amendments moved a moment ago by my noble friend Lady Janke, because they are all in the same area. They all relate to the question of whether we are dealing with decentralisation or with devolution. I have heard the Minister say that this Bill is primarily to do with decentralisation, but there is an overall context that is to do with devolution. However, I do not think that fiscal powers are about decentralisation where they can be varied from a national norm, so we are talking here about fiscal devolution.
I agree with the noble Lord, Lord Beecham, that this is set in the context partly of multiyear financial settlements, which I think all parties would benefit from, but also, crucially, of fair funding. It is therefore in part about the level of cuts that have been imposed on poor authorities, but it is also about the absolute level of funding. The issue of needs-based allocation will not go away, however much fiscal devolution we have, because even with the powers that we have set out in Amendments 43 and 44, there would clearly need to be some needs-based reassessment of the total sums involved. That is why, of course, Amendments 43 and 44 use “may” rather than “shall” in relation to the powers of the Secretary of State, as clearly there would need to be significant flexibility in those powers.
Baroness Hollis of Heigham
My Lords, I support the comments made by my noble friend Lord Smith about the increasing frailty of the existing council tax structure to bear the responsibility we ask of it. I believe I am right in saying that, had the older rates system remained in place, the most expensive properties, compared to the median average, would be in a ratio of something like 20:1. In fact, the ratio of the top band to band D—the fulcrum point on the council tax scale—is only 3:1. That shows just how narrow the redistributive effect of council tax has become.
In the past, the Government have resisted looking at council tax revaluation, even though a full-scale revaluation went through fairly smoothly in Wales, without any great hiccups in the procedures. A few years ago, some of us did some work on this. It was clear that it would be desirable to revalue all properties—but at the very least, you could fish the top band. I was advised, by the Valuers’ Association and the Government’s valuation service that that would represent less than the valuations which happen now whenever a flat becomes a shop, a shop becomes a flat or a house is sold and is given a new valuation. So the amount of work required to allow local authorities to increase the bands above the current top band would be quite modest—I am assured of that by the district valuers who carry out this work, day in, day out, on other use changes and so on and so forth—and would allow us to stretch more fairly and produce more revenue in a way that was more reasonable.
Certainly the compression that has come from council tax bands compared to the old rate bands is probably, in my understanding, the narrowest in the OECD. In America, Australia and most of the countries in Europe, the property range of bands is far wider than we now have in the UK as a compression of council tax. As I said, we have only about three or four bands above the band D fulcrum compared to the 20:1 ratio that we used to have under the old rates system. So it is a perfectly serious proposition that this would be a fair and appropriate way to increase revenues to local authorities and to reflect local need and local ability to pay.
Lord Beecham
My Lords, perhaps my noble friend would agree with me that a major part of the problem is that the council tax embodies a significant element of the poll tax, and that that is what leads to such narrow banding.
Lord Liddle (Lab)
I agree with my noble friends on our side of the House who have spoken about these issues. Council tax is in urgent need of reform. As for anyone who defends its existing basis—it is indefensible. It needs reform, as my noble friends Lady Hollis and Lord Smith have suggested.
I applaud the Government’s commitment to devolution, as I have said before in this House. But the elephant in the room is how to devise a scheme of fiscal federalism within the United Kingdom and within England. That is a very tricky question. It is tricky politically because once we start to look at these issues we see that London and the south-east are transferring considerable amounts of money to the rest of England. The transfers within England are probably much greater than the much talked-about transfers under the Barnett formula to Scotland and Wales.
Some years ago, in my own area of Cumbria, a study was done of all government spending and the estimated tax contribution from all sources. It came to some pretty alarming conclusions. In terms of total government commitment to Cumbria, roughly twice as much money was being spent by the Government in one form or another—this includes the nuclear plant at Sellafield, not just local government—as we were paying in. This issue has to be honestly addressed.
It is also the reason why there is an absolutely compelling need for local authorities to have the powers to contribute to local economic regeneration. That is the way to start building a tax base, rather than living off this drip-feed from London and the south-east.
Some very big issues are being touched on here. It would be interesting to hear from the Minister whether there is any interest from the Government in launching a major study of these questions—royal commissions are rather out of fashion, but I suggest that this would be a suitable subject for one—or whether we will continue with the terribly unfortunate “ad-hockery” that we have. I am sure the Minister agrees with me about the unfairness of the current local government arrangements. I remember, in a meeting in Cumbria County Council when the last settlement came out, quoting that the authority that did best of all was Elmbridge in Kent.
Baroness Williams of Trafford
My Lords, I do not rejoice and I did not intend to be contentious. I was simply illustrating the effect of the council tax freeze and the money the Government have given to that. In difficult times, council tax payers will have been glad of lower council tax.
Lord Beecham
My Lords, while individual council tax payers might well feel a little more comfortable, of course the impact on services for their communities has been very marked, particularly in adult care and children’s services, as we are increasingly seeing. In any event, most of the £5 billion has been top-sliced from moneys that would have gone in the local government finance settlement in any event. It is a bit much for the Government to claim credit for the freeze. It is more than a freeze for some services because it is actually inflicting a cut.
That brings us to the central question about the impact of these devolution proposals between different areas. One of the objectives of the amendment, although perhaps we will need to look again at the wording, is to ensure that in the process of devolving functions and resources to the combined authorities, both of which would be welcome, fairness in respect of other areas and between the combined authorities themselves is a cardinal objective and is something that the Government will address. It is that which we want to see in terms of the report that Amendment 44B seeks to advance. Looking at it again and listening to the Minister, perhaps the objective was not made sufficiently clear in the amendment, so it is something to which we may have to return on Report.
Unless we have a fairer funding system for local government services and the people who depend on them across the piece, including those in combined authority areas, then, in our submission, the talk about devolution will prove to be more of process than of outcome, and that would be unfortunate. Let us credit the Government, and particularly the present Secretary of State, with good intentions in this respect, but unless this is accompanied by a much more rigorous examination and the necessary change in the funding of local government, including the combined authorities, those objections will not be met. Having said that, I beg leave to withdraw the amendment.
Lord Beecham
Lord Beecham
My Lords, Members of your Lordships’ House will have observed that I am short. I intended this speech to be equally short, but I will give it a minute or two, in order to allow this debate to be kept to five minutes or thereabouts. Then we can proceed with the very important Statement which is to follow. Between us, the noble Baroness and I will no doubt get the clock to 4.30 pm.
It would be anomalous if the existing general power of competence which applies to local government in its manifestation across the country was not to be matched with a similar power for the combined authorities. The whole point of the combined authorities is to give them a wider range of functions than local government generally enjoys and for them to take on a wider role across the provision of a range of public services. Therefore, a general power of competence would facilitate the implementation of the Government’s objectives, which are shared by Members on all sides of your Lordships’ House. I hope that the Minister will concur with that view at some little length. I beg to move.
Baroness Williams of Trafford
My Lords, the Localism Act 2011 provides that local authorities have the general power of competence. This is the same power to act that an individual generally has. All principal councils and eligible town and parish councils have this power. The provision in this Bill is designed to give the Secretary of State the discretion to decide whether or not to confer this same general power of competence to a particular combined authority. This is likely to go hand in hand with an arrangement in which the combined authority is to take on wider powers and functions, thus supporting the case for a general power of competence.
Flexibility, however, must remain in conferring this general power of competence to combined authorities, as it may not be appropriate to give the full power to act that an individual has to all combined authorities. For example, for combined authorities with relatively limited specific powers, it may not be appropriate to grant them a wide general power of competence. This is so given that Section 113A of the 2009 Act already gives them a power to do anything they consider appropriate for the carrying out of the specific functions that have been conferred on them.
This amendment is a further example of moving away from the enabling character of the Bill. It is an example of another centralised requirement which an area may not want, recognising that in its circumstances this would not be appropriate. So I ask the noble Lord to withdraw the amendment.
Lord Beecham
My Lords, if the noble Baroness is right, the general power of competence would seem to be more limited than, on the face of it, it appears to be. Certainly it might inhibit a kind of development across a combined authority area that might be thought to be most appropriate. For example, in another area in which I have an interest, the justice arena, a combined authority might be in a good position to develop schemes for assisting the rehabilitation of offenders. That is not a duty of local authorities at the moment but, particularly given the area involved in a combined authority, they might well have something to offer which they should be able to carry out. Their potential partners in the Prison Service or the probation service might want to join them in such an effort. I am a little puzzled as to why the noble Baroness should be reticent about extending a power in that sort of area.
Baroness Williams of Trafford
My Lords, I do not think that it is reticence; it is about flexibility and what might be appropriate in different circumstances. I hope that the noble Lord does not take it as reticence.