Local Government Finance

Marcus Jones Excerpts

Wednesday 22nd February 2017 Commons Chamber

[Mr Thomas]

I am sorry that the right hon. Gentleman was not successful in his efforts to get on to the Local Government Finance Bill Committee, but if he will bear with me, I will to come on to Wokingham and social care.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

The hon. Gentleman now seems very concerned about the burden of business rates on business. Why then, during the Local Government Finance Bill Committee, did he and his colleagues advocate allowing local authorities to increase the multiplier in an arbitrary fashion, thereby putting tax rates up for businesses?

[Mr Thomas]

I am glad the Minister got to his feet, because I was coming on to his performance yesterday in Committee. Given the deep and profound concerns about the business rates revaluation, it was a little surprising for the Secretary of State to send out his Minister to reject the idea that any change to business rates was necessary. His spokesperson was still being quoted yesterday as claiming that business concerns were just scaremongering.

In 2005, PricewaterhouseCoopers tracked the tax liabilities of Britain’s biggest companies and found that half of the total came from corporation tax, while just 11% came from business rates. Today, corporation tax has fallen to 19.7% of tax paid by the top 100 group of companies, while the figure for business rates is 21%. Moving away from taxing revenue and profits, and increasing the tax share on businesses more reliant on bricks and mortar is surely going in the wrong direction given the rise of the digital economy.

I welcome the Secretary of State’s decision to have a review of the support for small businesses hit hardest by the business rates revaluation. I look forward to him being able to instruct his Minister, and encourage his hon. Friends, to support the amendment we have tabled to the Local Government Finance Bill on Report, requiring a full review of business rates and their impact on local government finance before the Bill comes into effect.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

I thank hon. Members for their contributions to this debate, which it is my pleasure to close. The settlement comes at an important time of reform for local government finance. It provides a sustainable path to the reforms that will be introduced by the end of this Parliament, through which 100% of business rates will be devolved to local government, giving councils control of an additional £12.5 billion to spend on local services.

The reforms are being made through the Local Government Finance Bill, which was introduced to the House last month. The Bill will enshrine in law our commitment to provide funding certainty by establishing a legal framework for multi-year settlements, which is a key feature of this settlement and something that has been called for by local government for decades. By putting the framework in place now, we can continue to work with local government over the coming months on the detail of the reforms, much of which will be set out in secondary legislation. Many local authorities welcome that approach.

Thanks to this Government’s action, 600,000 businesses are being lifted out of business rates altogether. A revaluation is overdue, and most businesses—three quarters of them, in fact—will end up paying either the same or reduced rates. Although three quarters of businesses will benefit or see no change, I am all too aware of the impact on the quarter that will see their bills rise. We are looking closely at what can be done to help the hardest hit.

[Mark Pawsey (Rugby) (Con)]

Does the Minister agree that, if we are to have a system of taxation based on property valuation, it is important that we arrange for regular revaluation?

[Mr Jones]

As ever, my hon. Friend makes an important point, which is generally due to his experience of running a business. The Government have made it clear that we want to move to a system of more regular revaluation.

As my right hon. Friend the Secretary of State announced earlier, he is working closely with the Chancellor to determine how best to provide further support to businesses that are facing the steepest increases as a result of the revaluation. We expect to be in a position to make an announcement at the time of the Budget, just two weeks from now.

One hundred per cent. business rate retention is being piloted from next year. It will mean that participating authorities will be able to keep more of the growth in their business rates income, with no impact on the rest of local government. As we have said, in 2018-19 we plan to undertake further pilots in areas without devolution deals, including two-tier council areas. The nationwide roll-out of 100% business rate retention will take place throughout England in 2019-20. Earlier this month, my Department published a consultation to seek views on exactly how the system should look. I look forward to discussing the matter further with colleagues from both sides of the House in the coming weeks.

While we rightly look forward to the longer-term reform that will make local authorities financially self-sufficient and provide greater incentives for growth, the settlement we will vote on today reaffirms our commitment to funding certainty for local government. The 2015 spending review delivered a £200 billion flat cash settlement for local government, and last year we delivered four-year funding allocations, which provide the financial certainty required for councils to be bold and ambitious. The settlement is the second year of a four-year offer that was debated in this House a year ago and that has been accepted by 97% of local authorities.

The settlement before us delivers on our promise and provides councils with the resources required to deliver world-class public services in the year ahead while continuing to play their part in bearing down on the deficit. We have consulted carefully, and I am grateful to hon. Members for bringing their constituents’ views to us during the consultation.

As we have heard, adult social care, which is an issue close to all our hearts, transcends party politics. I take seriously the representations made today, and I take seriously the need to ensure greater respect, dignity and independence for people who receive care. In the spending review, we put in place up to £3.5 billion of additional funding for adult social care by 2019-20, but we recognise that the coming year is the most difficult in the settlement period for many councils.

There are immediate challenges in the provision of care that must be met now, before the substantial additional resources become available, which is why we have created a new £240 million adult social care support grant and are allowing councils to raise the adult social care precept by 3% next year and the year after. Together, the measures make available almost £900 million of additional funding for adult social care over the next two years, so the total dedicated funding available for adult social care over the four-year settlement period is £7.6 billion.

As we look to the future, local government spending will be based on local resources, not central grant, so we are devising a new funding formula for local government that is fit for purpose. Earlier, the Secretary of State acknowledged the many representations that have been made, including by many colleagues here today, about how demographic pressures, such as the growth in the elderly population, have directly affected different areas in different ways as the cost of providing services has grown. We are undertaking a fair funding review to consider thoroughly how to introduce a more up-to-date, more transparent and fairer needs assessment formula. We have been working closely with local government to make sure that it works for both local government and local people, and we will make changes on the fastest possible parliamentary timescale.

I wish to deal with a few of the issues that were mentioned during the debate. First, the hon. Member for Harrow West (Mr Thomas) is never backwards in coming forwards. It was interesting that, although many of his arguments were reasonably inconsistent, he was consistent on not coming up with a single idea for how we might solve the complex challenges faced by this country or by local government. I was also interested to hear the comments made by the hon. Member for Oldham West and Royton (Jim McMahon). He said, “Where is the money?” Well, it might be a good idea for him to take some advice from the right hon. Member for Birmingham, Hodge Hill (Liam Byrne); I am sure he could tell his colleague where the money went.

My right hon. Friend the Member for Broxtowe (Anna Soubry) made some very pertinent points, particularly about unitary authorities. We are certainly willing to listen to proposals, but those proposals must be driven from a local level, and be bottom up. If her area is willing to do that, we would be more than happy to listen to its views. She also mentioned local authorities’ funding challenge. We are providing a four-year settlement, so that councils, which have additional reserves and resources, can use them to bridge their funding gap, because they will know what their situation will look like in the third and fourth year of the settlement.

It was good to hear the comments of the hon. Member for Sheffield South East (Mr Betts). He welcomed the principle of the four-year settlement, to which 97% of councils have signed up. He advocated that any additional funding from 100% business rates retention should go directly to help local government to fund services that are currently provided. Although that may sound tempting, may I remind him that we have been very clear that the situation would be fiscally neutral? New responsibilities would come with the additional £12.5 billion that we expect to go to local government.

It was good to hear from my hon. Friend the Member for Wells (James Heappey), who is a strong champion for his constituency. I was pleased to hear his support for the fair funding review, but I did hear his concerns as well. A similar sentiment was expressed by my hon. Friends the Members for St Austell and Newquay (Steve Double) and for Thirsk and Malton (Kevin Hollinrake), and I take their comments on board. My hon. Friend the Member for Wells also mentioned the business rates baseline and the principle of resetting the system, which is an important part of the whole system. Finally, I know that he has spoken to the Secretary of State about the aggregate levy, and I will certainly look into the further points that he made today.

I certainly take on board the important points that my hon. Friend the Member for St Ives (Derek Thomas) made about the uniqueness of the Scilly Isles. My hon. Friend the Member for Bromley and Chislehurst (Robert Neill) has vast experience in local government and as a local government Minister. I was pleased that he welcomed the idea of not including the attendance allowance in business rates retention. He was right that more needs to be done on the integration of health and social care. He was also right to advocate that the business rates multiplier uprating should be changed from the retail prices index to the consumer prices index, which the Government fully intend to do.

In conclusion, this local government finance settlement honours our commitment to four-year funding certainty for councils that are committed to reform. It recognises the cost of delivering adult social care and makes resources available sooner, and it puts councillors in the driving seat with a commitment to support them with a fairer funding formula. It will give Government the resources they need to govern and I commend it to the House.

Question put.

The House proceeded to a Division.

[Mr Speaker]

I remind the House that the motion is subject to double-majority voting: the whole House and those representing constituencies in England.