Lord Tope
Main Page: Lord Tope (Liberal Democrat - Life peer)Local Government Finance Bill
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Lord Tope
My Lords, as this is the first time that I am speaking on Report, I suppose that I, too, should declare my interest as a member of a London borough council and indeed as one who has had to deal, as leader of the council and leader of the opposition and before that, with budgets for probably even longer than the noble Lord, Lord Smith. He says that this year is probably the most difficult that he can remember; my only response to that is to say, “So far”. I am not sure that it is not going to get any better or easier.
I understand why the noble Lord, Lord McKenzie, has tabled this amendment; indeed, I am grateful to him for doing so. As he has rightly said, it follows on from the amendment moved by the noble Lord, Lord Smith, in Committee to seek a postponement. We on these Benches did not support that amendment and still do not. I think that we would all agree by now, whatever our views about this legislation and the position that we are in, that it is in no one’s interest at this stage to postpone. I therefore hope and believe that when the Minister comes to reply, she will be able to give us the reassurances that have been requested that, late though the process is—we all acknowledge that it is later than originally intended and certainly later than any of us would wish—we are as confident as one ever can be that it will run as smoothly as it can. If she is not in a position to answer today the very detailed questions that the noble Lord, Lord McKenzie, has put, I ask her to undertake to do so as soon as possible and, obviously, before Third Reading.
Baroness Hanham
My Lords, following on from what my noble friend Lord Tope said, the noble Lord, Lord McKenzie, has a happy style of producing a long list of questions that he peels off at a fast rate. It is not always possible to answer all of them at the same time. I readily agree with my noble friend Lord Tope that if we miss anything, we will write directly afterwards.
Like others, I am grateful to the noble Lord for explaining his amendment. It is probably worth saying that as a former leader of a London local authority, I understand the complications of late publication of the draft local government finance report and the implications it has for the budget process. However, as has been said, there is late and there is late and, while this may be slightly later than some, it is not that far out of kilter with the other announcements. I recognise that delay in the publication of the draft local government finance report would make it more difficult for local government regardless of whether the rate retention scheme did or did not exist. The existing formula grant and the new arrangements for rates retention both rely on our being able to determine how much funding local authorities are entitled to. Indeed, I think that the noble Lord said that. In the old world, the one we are passing at the moment, that means how much formula grant authorities are to receive, and in the new world, how much revenue support grant they will get and how much funding through the rates retention scheme. Under either system, the answer to the question depends on changes to formula, and potentially on decisions that might be made in the Autumn Statement, so authorities face the same delays and the same problems.
I do not pretend for a moment that any of this is ideal, but delaying the implementation of the rates retention scheme, which potentially could be the outcome of Amendment 4, although I know that the noble Lord has said that he does not want to hold anything up, would not provide authorities with any greater certainty about the funding they would receive. Whichever way we do this, either in the old way or in the new way, they still need the information. Also, it will not assist them greatly as they plan their budgets for 2013-14. So while I understand the concerns of local government and of noble Lords, we would be kidding ourselves if we thought that there would be any difference if we were still in the situation of the formula grant. As I have said, the noble Lord has put a string of questions, some of which will be answered when other amendments are moved; they will pick up on some of the issues. Perhaps I may come back to those later.
While we are not able to confirm funding levels for individual local authorities until the start of the consultation on the provisional local government finance settlement, the Government have actually provided a lot of detail and supportive information. It has been pouring out all summer. Discussions have taken place with local government representatives, including the Local Government Association, and we will publish very shortly an additional exemplification on overall funding to enable individual local authorities to develop their modelling for the budget processes. In mid November we will also start a consultation on the data that the Government propose to use when calculating the settlement. This is an integral part of the settlement process that will throw light on some of the points raised by the noble Lord. We will also be publishing in draft all the key regulations that authorities will need to take into account later this month or early next month, and indeed I think that the noble Lord has probably seen those that have been done already.
The noble Lord, Lord Smith of Leigh, returned to the attack on council tax support. Perhaps I may duck that for the moment because it is going to be very relevant to the next part of the Bill. We will be able to discuss the issues at length when we reach that point.
The noble Lord, Lord McKenzie, also asked about a timetable for responding to the consultation. The Government’s response to the consultation exercise will form part of the local government finance report. It will set out how we will set up the rates retention scheme and the detail of elements, including the tariffs and top-ups. While what we are talking about will be later than is ideal, the system stacking up behind it is that local government will have practically all the information it is going to need, just not the dots and crosses, by the time the settlement is announced. As I say, I do not take any exception to the fact that it has been drawn to our attention that the settlement will be late. It will be.
Lord True
My Lords, I take a similar position to that of my noble friend who has just spoken but I have a different perspective. I declare an interest as leader of a London local authority—the worst-funded local authority—which will be a tariff authority under the system put forward. One might therefore conclude that I would look forward to a review of these matters. In the unlikely and unfortunate event that the party opposite finds itself back in power, I take this amendment as a pledge that it will conduct a review.
I spoke at some length in Committee on the philosophy of these questions so I do not intend to detain your Lordships on the same issues now. My authority calculates on the basis of the information that has been provided so far. Through my noble friend the Minister I thank officials for their courtesy in contacting my officers. My authority currently expects to be about 17% adrift of our business rate target. We have absolutely no prospect whatever of growing business rates to get out of that hole, which is a continuation of a historic hole in which my authority has sat for a long time. That ought to lead me to say, “Yes, let’s have this review”, but, actually, that would be a rather mechanistic approach. I am not happy at all, as I made clear in Committee. Nor am I happy with the idea that there should be no reset before 2020. That position is absolutely unsustainable and there has to be a system whereby these matters are reviewed before then. I would like them to be looked at before 2013, as the amendment suggests. However, I thought that I heard my noble friend say in Committee that, although she would not be prepared to entertain an overall, general reconsideration of the system, there would be some kind of ongoing consideration of problems and issues as they arose, and there would not always be a flint-hearted, Treasury-style response, although there would be many such responses to questions that might arise.
I agree with the noble Lord, Lord McKenzie, that we need to know more, and I am grateful for the assurances from my noble friend that we will hear more. My feeling is that if we park this away and do not have a review until 2013, everyone will say, “Oh well, there will be a review one day”, and nothing will happen. We need an ongoing dialogue, and I shall listen carefully to what my noble friend says in response. I hope she will indicate that there will be flexibility and a continuing readiness to listen, not only before 2013 but after, and that she will agree that 2020 is not the date before which no move will be made.
Lord Tope
My Lords, my noble friend referred several times to a review in 2013. While I am sure that he would like to have a review in 2013—would not we all?—I suspect that he might have meant 2016, which is the intention of the amendment. A review in 2013 is not a practical possibility, even if it were desirable.
My noble friend also said—and I rather agree with him—that the amendment from the Labour Benches is possibly the first firm election pledge that we have heard from the party opposite. I must say that I took it in a slightly different way. Although we will certainly have a new Government, of whatever composition, by 2016, this amendment seems to be an expression of doubt that the party opposite will be in a position to have a review even if it wants one. I am not quite as confident as my noble friend Lord True regarding the Labour Party’s intentions here.
My noble friends on this side have made the point that a review may very well be desirable, and of course there are a lot of uncertainties in introducing something as far-reaching as this—of course there must be, they are unavoidable. The review would also come in uncertain times, to say the least. However, I very much doubt whether we need to have in the Bill a binding commitment to a review in 2016. As my noble friend said, it would introduce yet another uncertainty. People would say, “The review is going to come. What will it say? Shall we try and hang on for another year or two?”. A review may very well be desirable at some point. It may happen in 2016, before that or afterwards. If the Government of the day, whoever they are, were able to carry out a review at such a time, in such circumstances and with such terms of reference as they chose, I would caution against having it as a legislative requirement in an Act of Parliament, three years in advance.
Baroness Hanham
My Lords, I particularly thank my noble friend Lord Tope for his final comments. We do not believe that a set review, with a timetable in the Bill, is the right way to go about this. We all accept that there will be huge volatility in the system from now on, but I have to say that there would have been huge volatility whatever happened, because the whole economic situation is such that it is unavoidable that local government could escape any changes at all. Indeed, I well recall under Labour Governments and indeed under my own Government being outraged and upset as money swam away from us to other parts of the country. Therefore, the idea of local government money being different in different areas and changing from time to time is not new.
We do not think that the proposal to set the time for a review is sensible. As my noble friend Lord True said, this is something that will affect each local authority. They will have access, as they always have had, to the Government to make representations either individually or on behalf of themselves and others to discuss their needs and resources under the retention scheme. If they are significantly out of kilter, then of course the Government will listen to that, but I do not think that an independent review of the whole system is really going to achieve that. We will see how this goes and listen as and when any local authority wants to talk to us about it.
In addition, if we constantly—and even three years is pretty constant in terms of the changes being made—review the funding arrangements within the rates retention system, looking at tariffs, top-ups, levies and baseline funding, we will completely undermine one of the principles of the scheme, which is that local authorities should invest and benefit from growth. The noble Lord, Lord Smith, said that the scheme will differ across the country and that some places will find it easier than others but, generally speaking, I do not think that a review in three years’ time is going to help us with that. For this growth to work at all, we have to understand that the rewards from investment need time to take effect and a longer-term view will be necessary for the investments to be worth while. By resetting the system too often, you simply move away from that situation.
The Government are satisfied that they are setting out the scheme until 2020—that is, with a reset after seven years. That will enable local authorities to understand what they are able to keep and the proceeds that they are going to be able to initiate to stir up and improve local businesses and to get the economy flowing in their area. I hope the House will understand that we do not think it is right to set a formal time limit for reviewing the system, but clearly with a new system of any sort the Government are not simply going to say, “Well, there you are. Thanks, that’s it. We have no more interest in this”. That is clearly not the situation, and certainly we will always be open to having discussions as the scheme develops. With that, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Tope
My Lords, I intended that my name should also be added to the amendments tabled by the noble Lord, Lord Jenkin. Due to some mishap, that did not happen, but the noble Lord knows that and that I support the amendments that he has moved so ably. He and my noble friend Lady Eaton and others have said much that needs to be said and, perhaps unusually in this Chamber, I do not intend to repeat it all.
I would like to add a little context to remind noble Lords of the situation here. Ever since the business rate was nationalised some 20 years ago, successive opposition parties pledged themselves to denationalise or localise it, and it has not happened. At last the coalition Government announced that they were going to localise business rates, and I think it is fair to say that that met with a general if cautious welcome across the whole of local government. It was something that all parties in local government had long wanted and argued for, and at last it was going to happen. As it became clearer and clearer exactly what was going to happen and what the intentions were, the wisdom of a cautious welcome became clearer and clearer. It was not quite as good as it was thought to be. And then the announcement came that, at least in the first year, the set-aside would be as much as 50%. For most that came as a shock rather than just an unwelcome surprise. That is the context in which we approach the amendments today.
Local government on all sides is understandably suspicious and doubtful not of the Government’s good intentions but of their fulfilment, and that the 50% rate may remain for ever. Therefore, the amendments that the noble Lord, Lord Jenkin, has proposed are a very good way, although it might not be perfect, to introduce some certainty into what I am sure is the Government’s intention: that it should not remain at 50% but should escalate so that one day we reach that dream world where 100% is retained by the local authority, when it will be a real incentive. I hope that the Government will consider very carefully the amendments and most particularly the intentions behind them.
I want to say a few words from personal experience in support of the amendment proposed by the noble Baroness, Lady Thornton. I was very interested to listen to the noble Lord, Lord Smith, talk about the Wigan Leisure and Culture Trust. In common with many local authorities, my own has considered, for perhaps a little too long, a similar sort of culture trust for the services for which I had executive responsibility right up to May. It is therefore no surprise that I am still involved with this area. We are a little way yet from a decision on it—there are inevitably many pros and cons with these things, and things to be considered—but one key aspect is the question of the NNDR. I could almost go so far as to say that that is a deal breaker or a deal maker. It makes a critical difference to the finances of this operation. Therefore, I support this amendment very strongly and what has been said by the noble Baroness, my noble friend Lord Shipley and the noble Lord, Lord Smith of Leigh. Indeed, I want to know more about the Wigan trust.
I hope that if what we have been discussing is an unintended consequence—I want to believe that it is—active consideration is being given to what to do about it. As I said, I have a personal interest in the sense that this issue is very live with my own local authority. I know that it is equally live with a lot of other local authorities. We need to know, particularly at this budget time, what the position will be by next April.
Lord True
My Lords, I wish to follow that point and add my support to the principle of the amendment put forward by the noble Baroness, which I am afraid I saw only when I came down to collect the relevant papers before coming to the Chamber. From what she has said I understand that there is continuing dialogue on the issue. I may be reading wrongly paragraph (b) of the noble Baroness’s amendment, which states, “arising between resets”, but it appears to generalise beyond the specific issue raised of mandatory and discretionary rate relief. I am not sure whether that is the case but it is something that we would have to discuss. However, I endorse everything that has been said by the noble Lords, Lord Smith and Lord Tope, and others. I discussed this issue with two other London council leaders only yesterday.
One of the principles of wishing to promote social enterprise and trust approaches is to support the principle of local involvement, localism and local understanding. If a perverse disincentive is being created quite by accident to offload institutions to far more remote bodies or else to keep the matter in-house, that would be a great pity. In the case of mandatory rate relief, I do not know how it will evolve, but if we are to have an increasing number of charitably run academies and other institutions, these are issues over which local authorities have no control whatever under existing legislation.
I hope that the noble Baroness will not press the amendment at this stage, although I do not think that is her intention. I hope that my noble friend will listen to the points that have been raised, and to which I add my voice, as this Government have a proud record in supporting localism, social enterprise and charitable activity. I do not think that anyone, certainly not in my noble friend’s department and I would hope not in others, would wish unintentionally to cause any disadvantage. Therefore, from these Benches I add my voice in support of these amendments in principle.
Lord True
My Lords, I have made a general statement of principle about public finance. I do not think that anyone who has heard my contributions to debates on this or other Bills relating to localism would doubt that I am very strongly committed to it. I would like the direction of travel to be as my noble friend has indicated. I am simply saying that ring-fencing local authority provision for ever in this manner does not seem an appropriate way to tie the hands of any future Chancellor from whatever party.
Lord Tope
My Lords, that intervention reminds me that almost exactly a year ago we had quite a long debate in your Lordships’ House about what localism is. My noble friend Lord Greaves and I tried to set down, at some length, what we think localism means and it rapidly became clear that localism means what you want it to mean. In the ensuing 12 months, it has become increasingly clear that localism means what you want it to mean. Increasing pronouncements from central government—from my Government—demonstrate that point.
I am sure that there is no one involved with this Bill and no one in local government who does not agree with the view expressed in this amendment. In that, I include the Minister, who will speak for herself. I am sure she cannot say that but I am equally sure that she agrees with the views expressed. I even dare to go so far as to say that I suspect that the Secretary of State would agree with the view expressed. However, we all have to recognise the reality that no Minister in any Government will accept this amendment. The Treasury would simply never let them. That is a hard reality of life and one that I personally regret very much. Before today, the Minister has gone a considerable way, and I hope she will in a few minutes’ time, when she replies, make it very clear to us that the genuine intention of the Government is that it should not and will not go below 50%. I was not at the Local Government Association conference—I am one of the few people here who is not a vice-president—but I read that the Secretary of State, Mr Pickles, was urging delegates there to continue campaigning for a higher share than 50%. Perhaps that was just a populist appeal at the time but I like to think that that was the sentiment.
I think we all share the view expressed in the amendment. If we are honest, I think most of us realistically understand that no government Minister, of whatever party or coalition, would be able to accept that amendment. I am grateful to the noble Lord, Lord McKenzie, for moving the amendment and allowing us to press the point even further. I think the point is well and truly made and accepted. When the time comes, I hope that he will feel able to withdraw the amendment.
Baroness Hanham
My Lords, I thank my noble friends behind me for their contributions. In the middle of the previous amendment, I asked the noble Lord whether he was going to move this one but I am very happy, now that he has done so, to reiterate that the Government’s intention is to increase the 50% share of local authorities as soon as there is economic acceptance that we can do so.
As other noble Lords have said, I am not sure that the noble Lord, Lord McKenzie, who was in government and who knows all about the difficulties, would believe at this stage of the Bill that we would be able to restrict the future ability of a Government if the situation ever arose—I hope that it never will and that things will get better rather than worse. I do not think that we could tie the hands of future Governments or of this Government with any statement that the share would never go up. I hope that the noble Lord will accept that. I reiterate that, as and when we get to a situation in which we can see the economy going in the right direction, further consideration might be given to that. I hope that the noble Lord will be able to withdraw his amendment.
Lord McKenzie of Luton
Yes, my Lords. As my noble friend has advised me, that depends in large measure on how the Liberal Democrats use their votes in the other place. They are meant to be part of this Government and have some strength there. I think we have enough on the record. I am half tempted to press the matter to a vote, but I will accept what has been said and leave the matter there. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, we tabled Amendments 79 and 81 in this group. Amendment 79 revisits a debate we had in Committee concerning resetting—indeed, it revisits a debate we had earlier today. It requires arrangements whereby the Secretary of State must formally report on representations received from local government about resetting the system, and the outcome of the Secretary of State’s deliberations on such representations. As we have discovered, resetting is a contentious issue. The Government have made their position clear: not before 2020. However, the fear is that the system introduced will not remain robust over that period and that many councils will find themselves in difficulties.
As the Minister asserted in Committee, it is accepted that receiving and considering representations is a fundamental part of government work. The amendment seeks some transparency in the process. It seeks the formal detailing of representations so that the scale and scope of any concerns are clear. It also requires exposition of the Government’s position and reasoning in response to such representations. The Minister will doubtless say that such an amendment is unnecessary if there is an undertaking to deliver what we seek. Perhaps I would agree, but I will make it clear that we seek a process that spells out for Parliament the representations that have been received and the Government’s decisions thereon.
Amendment 81 is more specific and requires a reset every three years, to coincide with each spending review. This will entail an assessment of relative resources and of the needs of local authorities. The exclusion of the specific issues that need to be assessed—deprivation, unemployment, child poverty, the number of looked-after children, adult social care and so on—emphasises not only the important role that local government can play, but what is at stake under these proposals. I offer that amendment in particular for noble Lords who expressed themselves in favour of resetting but did not feel able to sign up to a formal review process. It might be more palatable to some noble Lords; I will be interested to know whether it is.
We thoroughly support Amendment 18, moved by my noble friend Lord Smith. We have added our names to Amendments 57 and 58, and support the noble Lord, Lord Jenkin, in tabling them.
Amendment 73, tabled by my noble friend Lord Smith, calls for the Secretary of State to compile each year and for each authority in England a raft of information about resources, including estimates for subsequent years. As ever, it seems an entirely reasonable proposition. We also support Amendment 78, to which we added our names. This is about changes to national business rate policy that impact on local business rate yields, and the requirement for consultation. It is absolutely essential that it takes place because the ground has shifted on this. Local authorities are at risk; they are not just collectors of the business rate now. They are at risk from the consequences of how much is collected, how the system operates, and any policy changes that central government may feel inclined to make. That is a particularly important issue.
Lord Tope
My Lords, I will say briefly that the mishap to which I referred earlier has occurred again with these amendments. My name should have been on the amendments of the noble Lord, Lord Jenkin. It did not happen, but my support is there. Again, I will not repeat what he said. He made the case very well, and we are all keen to hear what the Minister has to say in response. My noble friend Lord Jenkin again confessed to being the man who nationalised the business rate. I think that we have all long since forgiven him for the errors and misdeeds of his youth. He has more than compensated for them in the years since.
Baroness Hanham
My Lords, I will start with Amendments 73, 79 and 81. I realise that that may seem slightly perverse given how they are laid out in the list, but it makes reasonable sense. Amendment 73 requires the publication of a raft of information that is already published by my department and is part of statistical releases that are all published as well—and will be in future. To say explicitly in the Bill that they must be published and laid out would be a quite unnecessary duplication. All the information will be set out in each year’s local government finance report, and so will be available to all those who want it.
Amendments 79 and 81 seek to ensure that needs are explicitly taken into account after the system is up and running, by providing for authorities to be able to make representations calling for a reset, and for the Secretary of State to make a reassessment of the system every three years. We discussed much of that and I will not again go through the arguments I made. I just need to say that to enable an effective incentive for economic growth, we need to give local authorities certainty about the length of time they will keep the rewards from generating local economic growth. That is the answer I gave earlier and that is what I say again. Frequent resets on the system would undermine this, to the detriment of the national economy and of local authorities. I hope that in due course noble Lords will not press those amendments.
Amendment 18 seeks to ensure that the local government finance report must be laid before the other place by 30 November each year. The amendment is both impractical and unhelpful. When discussing the previous group of amendments, I explained that the local government finance report cannot be laid this year until after the Autumn Statement. The Chancellor recently announced that this would take place on 5 December. I also recognise the complications of this for local government budget setting, regardless of whether the rate retention scheme is introduced. I will not go back over the arguments presented to the House a moment ago, and I hope that the noble Lord, Lord Smith, will withdraw Amendment 18 on the basis that we have already discussed the issue.
Amendments 57 and 58 were tabled by my noble friend Lord Jenkin, as well as by the noble Lords, Lord McKenzie and Lord Beecham—and by my noble friend Lord Tope in absentia. They seek to reverse the changes made in the other place to the way in which the Government will distribute surplus levy income. I sympathise with the intentions of the noble Lords who tabled the amendments. The Government’s intentions were very similar when we introduced the Bill in the other place at the beginning of the year. However, after further consideration we recognised that specifying the basis for distributing the surplus levy in the local government finance report, as opposed to in regulations, was not advantageous for local government. Therefore, in responding to the amendments, I shall go through in some detail the advantages of the Government’s approach. I hope that my explanation will address the concerns of noble Lords and underline why I will not be able to support their proposed approach.
I remind the House that the levy on disproportionate gain is a key part of the business rates retention scheme, the safety net in particular. The money collected will be used for one purpose only: to fund safety net payments to local authorities that see significant reductions in their retained business rates incomes. The Government have always made it clear that, if any levy collected is not required to fund the safety net, it will be completely redistributed to local government. We are committed to this principle and we will not hold on to larger and larger surpluses.