Local Government Finance Bill

Debate between Marcus Jones and John Redwood

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

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

I beg to move, That the Bill be now read a Second time.

This Government have made no secret of their ambition to build a growing, international economy that works for everyone. A global Britain, however, needs local foundations. It is not enough to have world-leading, FTSE 100 exporters; we need thriving high streets, strong independent retailers and local economies that match the exceptional growth that UK plc has experienced since 2010.

The people best placed to lead that drive for growth are, of course, our local councillors. They know their communities better than anyone; they know which strengths to build on and which challenges to address; and they hold many of the levers required to deliver change. Yet in my many meetings with councillors and council leaders, I am often told that local authorities lack meaningful incentives to grow their local economies. They tell me that the system is over-centralised, that residents see no connection between the level of local taxation and the level of services they receive and that the proceeds of local growth disappear into national coffers, forcing councils to go cap in hand to Whitehall asking for funding. That is not good enough. Local authorities, local businesses and local communities deserve a better deal, and this Bill will provide it.

The Bill delivers far-sighted, long overdue changes that radically reform the way we fund local government. It ends the main central Government grant altogether, and instead allows local authorities to retain locally raised taxes. It encourages local growth and it supports local businesses.

[John Redwood (Wokingham) (Con)]

Does the Minister agree that a council such as mine that actively promotes growth incurs huge bills for new roads, new schools, new surgeries and new other public facilities, which are not adequately reflected in the amount of money we are allowed to retain from the taxes we raise locally or in the support we get from the central Government?

[Mr Jones]

I absolutely understand that local government has been complaining for far too long that the incentive to create growth is not there, particularly because of things such as the levy, which was implemented in respect of the 50% business rate retention scheme. As my right hon. Friend will know, that levy is being scrapped by the Bill.

This is not a Bill that increases spending and puts a greater strain on local taxpayers. Rather, it offers a focused package of reform that will encourage and support local growth, while we continue to live within our means. I will start with the commitment made in October 2015 that by the end of the current Parliament local government would retain 100% of locally raised taxes. In implementing our reforms, we will move local authorities away from dependency on central Government grant and towards greater self-sufficiency. Let me take this opportunity to record my gratitude for the substantial contributions made by many in local government, and in businesses, to the development of the reforms. The Bill is a major milestone in the process, and establishes the legislative framework for the reformed system. It reflects the significant input that we have received to date, and our collaborative approach will continue as we determine the detail of the implementation of the new system.

A key part of the new system will be the introduction of stronger incentives for local authorities to increase their business rate income. That will build on the current system of 50% business rate retention. Under the reforms, which we aim to implement in 2019-20, local government will retain about an additional £12.5 billion in revenue. To ensure that the reforms are fiscally neutral, authorities’ grant will be replaced by locally raised taxes for existing responsibilities, or they will be given new responsibilities. Those matters will be subject to separate discussions, and will not be dealt with in the Bill. However, the Secretary of State announced last week that the devolution of attendance allowance funding was no longer being considered as part of the business rate reforms, and I am happy to confirm that today.