Lord Stunell
Main Page: Lord Stunell (Liberal Democrat - Life peer)(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
The descriptions I have heard of myself today have varied enormously. The hon. Member for Birmingham, Erdington (Jack Dromey) described me this morning as a Leninist, and earlier in these debates the hon. Member for North Durham (Mr Jones) sought to name a street after me and suggested that I might be pickled. I want to respond to this debate using neither the extreme ideology of the left nor the extreme ideology of the right. I want simply to say that we have brought to the Committee a set of proposals to give local authorities control over their resources for the first time in 30 years, including not only their council tax but their business rates.
I can understand, and will respond to, the concerns that have been expressed about the precise details of the proposals. However, hon. Members will not be able to interpret correctly what we are doing if they make assumptions about an ideological direction, other than the ideology of localism, which involves getting decisions and money out of Westminster and Whitehall and returning them to town halls and local communities.
I cannot accept amendment 65, because it would place a requirement on the Secretary of State to undertake an unnecessary assessment of need, which could risk undermining our objectives to create long-term certainty for a strong growth incentive and to reduce local authorities’ dependence on central Government grants. Need is already incorporated as an important part of the system, and the different circumstances of authorities will be taken into account as the scheme is set up.
Graham Jones
Has the Minister made any assessment of the risk management carried out by local authorities, and of how much money they will have to put aside as a contingency to deal with any liabilities or deficits that they might incur as a result of the Bill? That could involve housing benefit, council tax and non-domestic rates. Has he assessed how much money councils will need to bank as a contingency measure?
Andrew Stunell
The hon. Gentleman’s point was raised in an earlier debate on the way in which local authorities will assess the risks that are inherent in any new proposals, and in these ones in particular. In my time, I have served on three different local authorities and with about eight different chief finance officers, and their approach to these matters was that although they might get a bonus if there was money in the bank at the end of the year, they would be likely to get the sack if there was none. The job of those who control local authorities—the democratically elected representatives—is to strike the correct balance between the risks calculated by a chief finance officer and the real risks in the real world. I hope that the hon. Gentleman will be a force for good in that regard, and that by the time I have finished speaking, he will see that some of his worst fears have been grotesquely exaggerated. I hope that he will understand that there are real opportunities for every local authority in England to benefit from the system that we are bringing in.
Graham Jones
My local authority, Hyndburn borough council, has put away almost £1 million as a contingency for the next three or four years, mostly in anticipation of the passage of this Bill. Will the Minister comment on that, because it refutes the suggestion he has just made?
Andrew Stunell
Actually, it confirms it absolutely. In another debate, the hon. Gentleman and I had an interesting discussion about whether he was receiving good advice from his council about housing policy and it transpired that he was getting very poor advice. If we were having another debate, I would ask him whether his local authority had now registered as a registered provider of housing, as it was failing to do so and was therefore losing out on opportunities for Government money. Given that fact, I would not necessarily accept that the decision it has taken to retain money in its accounts was based on the soundest available interpretation of its future financing.
Need is already incorporated as an important part of the system and the different circumstances of authorities are taken into account. I shall give some practical examples in a minute or two. Local authorities’ baseline funding levels will be set on the basis of the 2012-13 formula grant process. To pick up on the points made by the right hon. Member for Knowsley (Mr Howarth) about damping, floors, ceilings and so on, we consulted last year and asked consultees for their views on retaining damping. He will, perhaps, not be completely surprised to hear that the answers depended strongly on whether the writers were recipients of the benefit of damping. We have considered that carefully and we are minded to retain the current damping in the assessment of formula grants, so I hope that will provide some reassurance to him and to his local authority. I know, however, that there will be others in the House for whom it will be a major disappointment.
Andrew Stunell
I shall take an intervention, but perhaps the direction these interventions are coming from will give the right hon. Member for Knowsley a little comfort.
Mr Andrew Turner
Will the Minister explain to me why floor authorities that get extra grant above that determined by the formula through damping will be protected whereas councils such as my own on the Isle of Wight will not? Secondly, will the costs of concessionary fares and rurality on the island be properly accounted for?
Andrew Stunell
I thank my hon. Friend for raising all those points. As I predicted, clearly a decision to retain damping benefits some local authorities and is to the disbenefit of others. The Government have announced their view and I am sure that my hon. Friend will find ways to express his disappointment at a later stage. On the other points, as my right hon. Friend the Secretary of State has made clear, the calculation of the formula grant figures will take account of new data, such as that from last year’s census, and will take a view on what might need to be done on concessionary fares and rurality. We have made that point, but nevertheless the foundation stone will be the formula grant figure for 2012-13, as amended by the measures in the points I have just made. The calculation of tariffs and top-ups will therefore be based strictly on that and will ensure that local authority funding at the outset of the scheme is in line with that assessment of relative needs and resources.
Annette Brooke
I thank the Minister for giving way, and this is a genuine question. Is it not true that the baseline funding will have taken on board the council tax base? Was that not reflected in previous formulae? An authority such as mine, for example, would naturally get less formula grant because of its council tax base.
Andrew Stunell
My hon. Friend is right and I will bring some of the facts and figures to the attention of the Committee in a moment or two. I hope that will reassure not just her but Opposition Members about the impact of the scheme.
Once the baseline is set—for shorthand, let us say that it is set at formula grant level—it remains fixed in place and in amount, in real terms, until there is a reset. We have already said that that figure will be uprated by RPI to effect that. In advance of any reset, protections will be built in for those authorities that are less able to respond to the growth incentive. For instance, there will be the safety net payments we have already discussed, which will apply to any local authority that sees its income drop by more than a set percentage below its baseline funding level.
Helen Jones
The Minister and his colleagues keep talking about the growth incentive, so will he now answer one simple question to which we cannot get an answer from any of his colleagues? What does he think local authorities will do differently under his scheme from what they do now? The point has been made again and again that most local authorities are constantly seeking to attract new jobs and new investment.
Andrew Stunell
Similar questions were asked about the Government’s decision to apply the new homes bonus to empty homes. We were asked what possible difference that could make, but it has reduced the number of empty homes by 21,000 this year and, as I go around the country, I find that local authorities are, for the first time, seized with the importance and necessity of tackling empty homes because that is an income stream for them. That will definitely be the case with local authorities in this situation. Indeed, the Opposition have given some illustrations that suggest that they rather fear that it might. There have been questions about whether the measure will prohibit the redevelopment of sites if authorities cannot keep the business rate income coming in. Opposition Members see that the perception about receiving a business rate income will be a significant consideration for local authorities of all kinds.
Steve Rotheram
It appears that the Minister is trying to advance the argument that that there are local authorities that are not interested in attracting inward investment. Can he name one?
Andrew Stunell
I am certainly not going to name an authority that is failing to get its inward investment, but I invite the hon. Gentleman to frame his remark and revisit it in four years’ time, when he will see the results of the change we are introducing.
One of the central criticisms of the Bill has been based on a misunderstanding of what happens at the moment and a deep pessimism about what it is possible to achieve in the future. Let us look at the area of the hon. Member for Liverpool, Walton (Steve Rotheram). In the four-year period from 2005-06 to 2009-10 the average annual increase in business rates in Liverpool was 8.2%. It absolutely is not the case that Liverpool loses out by getting business rates instead of formula grant. The hon. Gentleman might like to ask the treasurer at Liverpool what the annual average increase in formula grant was at that time, because that is what we are comparing—formula grant that is delivered to Liverpool and dictated by Whitehall against a business rate income that is in Liverpool’s hands. As I have said, the increase in those four years was 8.2% and I challenge the hon. Gentleman to say that the outgoing Labour Government were as generous as that. Let us not automatically assume that because an authority has difficult and challenging circumstances it is not possible for it to have increases in rates or that that is not happening.
Andrew Stunell
I will give way to the hon. Lady in a moment, but I want to mention Knowsley first. The right hon. Member for Knowsley has done a very good job of illustrating the challenges faced by his council and his residents. He made the point that he has a number of large employers and he has understandable anxieties about the possibility of extreme volatility that that introduces. However, in the four-year period I have mentioned, Knowsley had an annual average growth of 8.7% in its business rates. Again, I invite him to talk to his chief finance officer and find out whether the formula grant increase for Knowsley under Labour was higher or lower than 8.7% per year. I hope that gives yet another illustration that it is not necessarily the most challenged or challenging authorities that face the losses he fears from the transfer of decision making and money from Whitehall to the town hall
Andrew Stunell
I shall give way to the right hon. Gentleman and then to the hon. Lady.
Mr Howarth
I need to make two points. First, when I spoke earlier I made the point that as far as I know there is no danger of the two companies I mentioned—Jaguar Land Rover and QVC—not surviving and prospering in future. I mentioned them merely as examples of the sort of investment Knowsley has been able to attract and I was not saying that the inherent volatility is likely to come about because either of them will close. Secondly, the Minister suggests that I should talk to the director of finance at Knowsley, but my speech was based largely on a discussion I have already had with the director of finance. Given the current circumstances, he does not think that the kind of investment we have been able to attract in the past can be guaranteed in future.
Andrew Stunell
On the right hon. Gentleman’s first point, I agree and I am sorry if any of my remarks conveyed a different impression. He is absolutely right that the issue is not about the future of particular companies in his constituency. On his second point, it is a good idea for me to tackle this issue of need head-on, as the amendment is about need.
Helen Jones
I am very grateful to the Minister for giving way, but I have to say that he is advancing an entirely specious argument. He is comparing growth at a time when the Labour Government were investing hugely in cities such as Liverpool and when the economy was growing with a time when that investment has been mostly withdrawn under this Government and the economy is flatlining. Anyone who seriously thinks we will get the same amount of growth in the next—
Helen Jones
No, the Minister quoted the actual growth in business rates. Anyone who thinks we are going to get the same amount of growth in the next few years is living in cloud cuckoo land.
Andrew Stunell
I invite the hon. Lady to check her diary carefully and see exactly when it was that we had to buy all the banks because they had gone bust.
I want to contrast Knowsley with another local authority. Knowsley gets £1,225 per resident in formula grant. I am sure the right hon. Member for Knowsley would say that is not enough, and I understand his point of view, but I want to draw his attention to Wokingham, which is often prayed in aid as one of those rich southern places that benefits from an unfair system. Wokingham had a 3.3% growth in its business rates in the period I have mentioned against Knowsley’s 8.7%, and whereas Knowsley got £1,225 in formula grant per person, Wokingham got £686. That is being built into the system.
The hon. Member for Hyndburn (Graham Jones) said he thought the Government were behaving grotesquely unfairly. He may think that, but I have hon. Friends who think that that outcome is grotesquely unfair for a different reason. We have a system that recognises need, albeit imperfectly and even though we have built in damping. That suits the right hon. Member for Knowsley but does not suit my hon. Friend the Member for Isle of Wight (Mr Turner). That is entrenched in the system and it is important that if the Opposition make criticisms—understandably, because that is their job—they should be based on a sense of reality.
We are introducing a scheme that provides an incentive for growth and localises decisions over the money that local authorities can spend. That growth and localisation is very much better than local authorities standing as beggars at the door of Whitehall, year after year, saying, “We want more money.” Surely it is right that those who have the money can decide how to spend it and those who can promote growth have opportunities not only to do it but to benefit from it.
What about Westminster which the right hon. Member for Knowsley prayed also in aid? Let us be clear: he should rejoice when Westminster gets loads of business rate. Why? Because the authority keeps only the baseline figure. It will keep only its formula grant figure. All the rest will go to help Knowsley, among other places—[Interruption.] The hon. Member for Warrington North (Helen Jones) says it is not true. I am not sure whether she is accusing me of deceiving the Committee.
Westminster gets its formula grant and the rest goes back into the pot. When Westminster has growth, it will be able to keep some of it. If it has disproportionate growth, it will be taken away in the levy. Two things will affect Westminster: it will get only the equivalent of its formula grant in its baseline, and when growth comes, any disproportionate growth will be taken away to fund the right hon. Gentleman’s safety net.
Mr George Howarth
Let me make it clear. I am not arguing that Westminster, Wokingham or even the Isle of Wight should be penalised in any way. That is not my point. By making invidious comparisons, the Minister makes the case for the amendment. We are saying not that everybody should get the same, but that what they get should be based on rigorous analysis of the needs of individual areas.
Andrew Stunell
The right hon. Gentleman should be careful about making that argument; I might be tempted to take away his damping. That would be the unchallengeable fact in what he said.
John Healey
The Minister may have meant it lightly, but he has just said a serious thing. It suggests that Ministers in this Government make arbitrary and personal decisions about the funding going to local councils, that are not based on any fair, open or objective formula.
Andrew Stunell
That is of course wilfully misunderstanding the point I made. The damping mechanism means that Knowsley does not get what the Labour Government decided it should get if the formula of need was applied correctly. The damping formula is protecting Knowsley from full implementation of the needs formula that the Labour Government introduced, and the right hon. Member for Knowsley wants me to keep it. Let us be quite clear. I am sorry if my lightly enunciated remark was taken as meaning anything other than that the right hon. Gentleman advanced a contradictory argument to the one he was making a few minutes ago.
Mr George Howarth
I suggest that in the morning, when the Minister has a quiet moment—I am sure that he has them in his life—he reads the Hansard for this debate; he can then decide which of us is being contradictory. For the purposes of absolute clarity, and following the point that my right hon. Friend the Member for Wentworth and Dearne (John Healey) made, will the Minister make it absolutely clear that his was a light-hearted debating remark, and that he does not intend to penalise Knowsley in the way that he described?
Andrew Stunell
I am disappointed with that, I have to say. I said very clearly that the Government have reached a settled view about including damping in the formula grant system; I hope that that is very clearly on the record.
Let me turn to the part of the amendment that relates to what should happen to revenue support grant. We are talking about funding outside the local share of the rates retention scheme. We could only use the revenue support grant for other matters. For instance, in the financial year 2013-14, the most likely recipient will be Local Government Improvement and Development. Perhaps the scale of these things needs to be understood: £27.8 billion is being distributed through formula grant—the amount that will, in future, come through the business rates retention scheme. Local government receives funding from outside that, from departmental budgets. For instance, under the provisional settlement for the coming year, the learning disability and health reform grant will be £1.36 billion; that comes from the Department of Health. The local sustainable transport fund will be a much smaller figure—£100 million—and comes from the Department for Transport. The preventing homelessness grant will be £90 million, and comes from the Department for Communities and Local Government. In the great majority of cases, it would be completely inappropriate to do what is suggested in amendment 65 and run those through a needs assessment.
Helen Jones
I am sorry, but most of the grants that the hon. Gentleman mentioned could not be run through needs assessments, because they are paid by other Departments, not by DCLG. The amendment relates to DCLG.
Andrew Stunell
I think that the hon. Lady is asking a question about revenue support grant, and that is the answer that I am giving her.
The Government have strongly endorsed the previous Government’s policy that new burdens imposed on local authorities should be funded directly by central Government. We would therefore want a more tailored assessment of how those new burdens fall, rather than a needs assessment process.
The amendment misses the mark entirely. The speakers in this debate have started from a position of understandable oppositional attack on the proposals that we have introduced, and have entirely missed the point of what we are doing in returning power and opportunities to local authorities. Their fears for their individual authorities are misplaced. With that explanation and assurance, I hope that the hon. Lady will choose to withdraw the amendment.