Local Government Finance Bill

Lord McKenzie of Luton Excerpts

Wednesday 10th October 2012 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, in moving Amendment 31, I shall speak also to Amendments 14, 16, 17, 18, 28, 29, 30, 37, 38 and 50, which, taken together, ensure that the Bill provides for the appropriate assurance of calculations and information supplied under the business rate retention scheme.

Currently the Bill provides for the audit of calculations and information supplied under the scheme, and it should have referred to certification, so that the Government and the major precepting authorities have the assurance that they need about calculations and information supplied by the billing authorities and on which the payments to central government and precepting authorities will be based. This will then mirror what already happens under the current arrangements.

Amendment 50 removes an amendment to the Audit Commission Act 1998 that would have required the Audit Commission to have made the arrangements, if requested, for the certification of calculations and information supplied in respect of the new business rate retention scheme. However, with the proposed winding up of the Audit Commission as set out in the draft Audit Bill published in July, we need to provide for alternative certification arrangements. These amendments, along with the provisions in the Bill, will provide the necessary framework for the appropriate assurance of calculations and information for the new scheme.

With this explanation, I ask noble Lords to accept these amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for her explanation of the amendments, but could she say a little more about what is perceived as the difference between a process that leads to a certification and that which is subject to an audit? Is it the nature of the judgment that is different, or is it what is being given assurance on that is different? What are we actually changing here and what is its outcome? I am not making an issue of it, but it would be helpful to have a bit more information as to why this change is being undertaken.

[Baroness Hanham]

I think that an audit is carried out by an independent, external auditor and certification can be done by internal people just certifying that something is correct. I think that that is the difference. It is the difference between having something externally verified and signed off and having something done internally and signed off.

[Lord McKenzie of Luton]

That is helpful. If we are saying that it is the status of the person who is making the judgment that is being changed here, I can understand that. It is whether the judgment being undertaken is of a different nature, given that it is not an audit but a certification, that I was unsure about.

[Baroness Hanham]

It is not intended to be. That is why the amendments are quick and simple, slipping in the relevant words. I shall read the document that I have. I think that that will help the noble Lord enormously. We anticipate that the certification arrangements will be provided through a tripartite agreement. Under this approach the Secretary of State through regulations and directions will define the assurance requirements and produce certification instructions. At the end of the financial year the local authority will make the arrangements for the assurance to be provided, most likely by the auditor who audits the local authority’s accounts in line with the certification instructions. Therefore, I was half right and half wrong, if I am generous to myself.

[Lord McKenzie of Luton]

I thank the noble Baroness. I think that she has half helped me but we shall look at the record and come back in due course if necessary.

Amendment 31 agreed.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, Amendments 51 to 56 in this group are minor technical amendments to the provisions about safety net payments on account. A central feature of the rates retention scheme is that authorities will be eligible for safety net payments if their business rates income declines significantly. We have just finished consulting on the threshold below which the safety net should apply.

Equally important is the process by which authorities will be able to access safety net payments. In our discussions with local government through the working group established to look at the technical details of the scheme, it was established that as part of the process for setting their budgets, authorities will have to estimate their business rates income before the start of the financial year. On the basis of those estimates they will be able to calculate whether they will be likely to need a safety net payment. The strong view of the sector is that they should then be able to claim a safety net payment “on account”, as provided for in paragraph 26 of the schedule. The Government agree with this position.

However, the drafting of paragraph 26, which refers throughout to an “in-year calculation”, might be thought to preclude a calculation made “before the year”. It is to remove this possible ambiguity that we have tabled the amendments in this group. With this explanation, I ask noble Lords to accept them. I beg to move.

[Lord McKenzie of Luton]

My Lords, the amendments seem entirely straightforward. We are happy to support them.

Amendment 51 agreed.

--- Later in debate ---

[Baroness Hanham]

My Lords, this amendment removes the requirement for the Secretary of State to undertake consultation on pooling proposals before he may designate a pool or revoke such a designation. This will simplify the process for establishing and closing a pool without materially reducing the safeguards in place for pool authorities.

Amendments 32 and 33 remove the duty to consult those likely to be affected by a pooling designation or its revocation. In tabling these amendments, we are responding to the strongly held views of local government. Local authorities will warmly welcome this change. The rationale is that, in practice, the impact of a pool designation or its revocation is limited to the members of the pool and, because each local authority in the pool must have consented to be there, the removal of the consultation requirement will have no practical impact on the pool authorities. The amendments therefore simply remove a superfluous bureaucratic procedure.

Moreover, the Government also consider that the removal of the consultation requirement will not reduce transparency, since pooling designations will be identified in the draft local government finance report, on which we will consult widely. Other persons will therefore be notified of the pooling designations that are to have effect for the following financial year.

Amendments 34 and 35 concern the operation of the pool and the Government’s ability to alter any conditions they may have attached to a pooling designation. Apart from pool members, no other parties are likely to be affected by the addition, modification or deletion of a condition, so a duty to consult persons outside the membership of the pool is unnecessary. However, the Government will continue to be required to consult pool members themselves before varying any conditions, since pooling arrangements are intended to be voluntary and it is not right that we should vary conditions without first seeking the views of the members of the pool.

These arrangements tidy up the provisions around pooling arrangements and remove unnecessary and burdensome procedural requirements, and are widely welcomed by local government. With this explanation, I hope that noble Lords will accept these amendments.

[Lord McKenzie of Luton]

My Lords, can I confirm that we are dealing with Amendments 63, 64, 65 and 66? I thought I heard the Minister refer to Amendments 34, 35 and so on.

[Baroness Hanham]

The noble Lord is absolutely right. I apologise. I thought it sounded a bit funny when I said it.

[Baroness Hollis of Heigham]

It is the fireworks.

[Lord McKenzie of Luton]

Notwithstanding that, these amendments seem straightforward and we are content with them. We have not actually debated pooling much during our deliberations—it is a very important facility under this Bill, which we support—but we certainly accept the amendments on the basis on which the noble Baroness has moved them.

Amendment 63 agreed.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I start by congratulating the noble Lord, Lord Jenkin, on being able to quote from a letter by Oliver Letwin; I thought that most of his correspondence ended up in park bins.

As I understand it, the Government issued a statement of intent concerning the application of the business rate retention scheme and renewable energy projects in May 2012. In particular, the statement highlighted that the origin of the proposals was the coalition agreement. I am not sure whether these days that is honoured more in the breach than in the observance—it is not our job to encourage its retention—but the thrust of the proposals, which we support, is that business rates for new renewable energy projects would be retained in full by the relevant local authorities. The statement of intent set out what for these purposes would be considered as renewable energy projects and qualifying technologies.

The noble Lord’s amendment would extend the application of the provisions to low-carbon sources, including nuclear power. This would seem to take the provision beyond its original intent, and it would seem beyond the coalition agreement. But as I say, we are not guardians of the agreement and do not hold ourselves out to be. I discussed this matter briefly with colleagues who have responsibility in these areas and they were relaxed about us supporting this extension, if that is what it is.

I will make just a couple of points. Part of the process is to encourage local planning authorities to accommodate these arrangements. For the nuclear power plants we are talking about, it is more likely that they would take what used to be called the infrastructure planning commission route. However, that does not negate the point the noble Lord is seeking to press. I also wondered whether nuclear power projects would be on the central rating list rather than the local one, but it is right that they are on the local list and therefore fall within the ambit of the provisions and support that can be given.

The noble Lord has raised an appropriate point and we are happy to support the extension of this, if that is what it is, and he has quite properly asked the Government for their view.

[Baroness Hanham]

My Lords, let me start by confirming for my noble friend that this would come under the schedule he referred to. While I understand the concerns that prompted him to table this amendment, I hope that I will able to convince him that it is unnecessary, and that he can have confidence about the Government’s intentions in terms of the way the rates retention scheme will treat the business rates paid by new renewable energy projects and by nuclear power stations, so that he will be able to withdraw his amendment.

I should say initially that we do not believe that my noble friend’s amendment is needed. Paragraph 38 of the schedule is clear that the Secretary of State may, by regulation, designate classes of hereditaments by reference to such factors as the Secretary of State thinks fit. The regulations will in effect enable the authority to keep the business rates attributable to property falling within that particular class of hereditament. The business rates revenues from that development would be disregarded in the calculation of the levy or any reset of the system. The Bill quite rightly makes no attempt to specify or to restrict the possible classes that may or may not benefit from such provision. The Government have been very clear that authorities which host new renewable energy projects will be able to benefit from the full level of business rates paid on such projects. That particular commitment was set out, as noble Lords have said, in the coalition agreement and we will deliver it—not in the breach, but through regulations under paragraph 38. The Government set out in their statement of intent published on 17 May the technologies that would qualify as renewable energy projects for the purposes of that commitment.

With regard to rateable property which generates electricity from other forms of low carbon sources, including nuclear power stations, the Government’s proposals for business rates retention, as provided for in this Bill, already provide strong benefits to authorities which host such developments. For the new generation of nuclear power stations, the business rates are likely to be substantial, and there is therefore likely to be a significant financial boost to those authorities hosting one. In addition, the Government made clear in the national infrastructure plan that they would bring forward proposals for a community benefits package for nuclear power stations by 2012. We have been working closely across government to develop such a package. My honourable friend in the other place, the Minister of State for Environment and Climate Change, confirmed as recently as 18 September that the Government remain on track to deliver the package. We cannot yet reveal the details of the community benefits package for nuclear power stations or how such a scheme might work. However, I can assure him that, if it were decided to use the business rates retention scheme to provide even greater support to those authorities hosting new nuclear power stations, the Bill already has the flexibility to enable us to deliver such a mechanism. There is no need to include in the Bill specific types of development that may be designated under paragraph 38. I am sure that he will understand from what I have said that nuclear power stations would be included. I hope that, with that explanation, my noble friend will feel able to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, before the Minister sits down, will she clarify something for us? I think the thrust of her point was that there is going to be a community package for such provision in any event and therefore it is not planned that it will be provided under the business rates retention scheme proposals in the Bill. It is certainly not included in the list of qualifying technologies in the statement of intent. Is the Government’s point that it will accommodate requests to be included in those qualifying technologies or that nuclear power will have to be dealt with by a different route or a different package?

[Baroness Hanham]

The community benefit aspect of this will be constructed about the nuclear energy, which I think is the point the noble Lord is making. Local authorities—there is likely to be more than one—that host nuclear power stations will get to keep the revenue from the rates. I am not sure that I have convinced the noble Lord.

[Lord McKenzie of Luton]

I apologise. I do not want to prolong this as the clock is ticking, but I did not see that. Perhaps I am misunderstanding the qualifying technologies set down in the statement of intent. I assume the statement of intent is the Government’s starting position on what technologies are going to avail themselves of this support. I am happy for this to be dealt with in correspondence, if that would be helpful, but if the Government proceed on the basis of the statement, it does not seem to include nuclear power.

[Baroness Hanham]

I will write and confirm to the noble Lord. I am pretty well convinced that it does, but I will confirm it.