Local Government Finance Bill

Debate between Mike Hancock and Nick Raynsford

Tuesday 31st January 2012 Commons Chamber

[Mr Raynsford]

My hon. Friend makes a very good point. Frankly, I am very surprised indeed that Lib Dem members of the coalition are going along with this—[Interruption.] I am pleased to hear the hon. Member for Portsmouth South (Mr Hancock) say what he does; I hope he will demonstrate that in the Division Lobby later.

I am surprised that Conservative Members who have experience of local government, and who must be well aware of the pressures that the Government’s measures will impose on their local government colleagues, are prepared to support such a draconian and ill-thought-out package. Cutting 10% of the cost of council tax benefits at the outset is bad enough, but obliging councils to take the downside risk of a further rise in costs in-year, and imposing conditions that will inevitably force heavier cuts on some categories of recipient, adds insult to injury.

To cap it all, imposing an unreasonably tight implementation timetable without allowing adequate time for local authorities to prepare demonstrates a cavalier disregard for the interests of those authorities, which, not surprisingly, are demonstrating growing alarm. The Government should pause to think about why local authorities, which ought to be welcoming a measure whose intention is localist, are expressing such grave reservations about the implications of this scheme.

[Mr Mike Hancock (Portsmouth South) (LD)]

Let me first declare my interest as one who is still a member of a local authority.

Is the right hon. Gentleman, like me, aware that some authorities have expressed the fear that they will have to make cuts in this year’s expenditure to prepare the ground for the implementation of the measure? Once again, the Government are showing no semblance of care about what they are imposing on such authorities.

[Mr Raynsford]

The hon. Gentleman makes a very good point. Any prudent local authority treasurer who takes account of the element of risk that is being transferred will inevitably say that there must be cuts in addition to those required by the Government, to provide a cushion against possible circumstances that cannot yet be anticipated.

Amendment 79 requires local authorities, in planning their council tax rebate schemes, to start from the premise that, all other factors being equal, the overall cost of the new scheme should be no more and no less than the cost in the previous year. In other words, it requires a neutral baseline that avoids arbitrary cuts, but also protects Government against the risk that local largesse will increase their own costs. That arrangement is utterly fair, and will operate in just the same way as the arrangement that we all agreed was appropriate for the introduction of the localisation of the retention of business rates.

The system that I propose will not inhibit local authorities from making changes in the current rebate scheme to reflect their local circumstances or priorities. Provided that the overall effect is cost-neutral, they will be free to make as many changes as they wish. This is a truly localist approach, allowing local discretion without imposing unreasonable and arbitrary central diktats.

Amendment 80 refers to central Government support for local expenditure on council tax rebates. It requires the Secretary of State to ensure that local authorities receive no less subsidy than they would have expected under the previous scheme. Again there will be a neutral baseline: a starting point at which the Government will not be exposed to higher costs, but equally local authorities will not be exposed to the risks that are implicit in the Government’s proposals. Amendment 78 is designed to cover the risk of unforeseen increases in expenditure in-year if the number of claims increases by making it clear that authorities may apply for reimbursement of those costs.

Local Government Finance Bill

Debate between Mike Hancock and Nick Raynsford

Wednesday 18th January 2012 Commons Chamber

[Mr Mike Hancock]

Like many Members, I was disappointed by how the proposal has been handled. One reason why I voted against the Bill on Second Reading was that I felt it unfair that something as important and precious as local government should be treated in such a cavalier way. Rather than being dealt with on the Floor of the House, a Bill of such size warrants close scrutiny in Committee, including oral evidence sessions. I am delighted, Mr Amess, that you are prepared to take to the usual channels the important proposal that the evidence that has been submitted should be offered to all Members of the House.

During my 40 years’ experience of local authorities, every Government have used local government as an excuse. Time after time, they have talked about devolving power, but they have devolved nothing more than blame, and responsibility without resources. That has plagued local government for four decades. I regret that once again a matter as important as the future of local government finance is being bulldozed through the House in this way. It is unfair, and it will lead to great problems.

Ministers cannot begin to understand how difficult times are for local administrations that have to put together a budget for not one but three years. As we have heard, implementation will come when the third year of the round of cuts will bite deepest in many local authorities. Do Ministers truly believe that a local authority such as mine, Portsmouth, which daily challenges the market to bring inward investment to the city, is not doing all it can to make it clear that we are open for business and actively to support economic development projects? We would welcome anyone to come and see what the city has to offer. It is an insult to local government to suggest that such activity is not happening, and I resent being party to a coalition that is giving that impression. I am surprised, to say the least, at the comments from the Local Government Association, and disappointed that it is not being more forceful in defending the rights of local authorities and challenging this type of legislation.

I hope that there is still time for Ministers to think again. I chaired Committee proceedings on the Health and Social Care Bill, and was delighted at the end of those Committee proceedings, which were the longest since 1997, that the Government gave a commitment to the House and the Committee that they would take time to think again. The implications of much of this Bill leave too many unanswered questions. There is no detail about how the safety net will be implemented and how such judgments will be made. We are told that local authorities will be able to apply to be beneficiaries of the safety net procedures, but not when they have to make that application, how long a decision will take, or exactly when or how the money will materialise. Such questions would have been dealt with in Committee in greater detail. Ministers would have been able to give members of the Committee detailed responses to questions. However, three days’ consideration on the Floor of the House does not give experts in the Department enough time to brief Ministers properly to answer legitimate points raised by hon. Members. That cannot be the right way to deal with as important a matter as local government finance.

On Second Reading, the right hon. Member for Leeds Central (Hilary Benn) spoke about the Layfield report. I remember hearing Frank Layfield express his views on local government finance. At the time of his report, we all thought that it would be the turning point, that there would be proper transparency about local government financing, and that all local authorities, irrespective of where they were in the country, would be able to say, “We get a fair deal from Government.” It was said that everyone would know the formula for the funding of local government, but here we are, nearly 40 years on, and it is still hidden in mystique. The Bill perpetuates that situation although the formula should not be anything other than transparent, and council and business rate payers demand that transparency. I am at a loss to understand why the Government, whom I support, are not prepared to give local government the trust that it deserves, and reveal how they are calculating the formula.

I do not want to see the disparity that was referred to by the hon. Member for North Durham (Mr Jones) between his city and the city of Portsmouth, because I believe that the problems of poor people in my city and those who are striving to keep their businesses alive are the same as those faced by his constituents. We need an equal share of the resources that are available to local government, but they must be decided on the basis of a formula that is readily available for examination. Such a formula does not exist at present, and unfortunately the Bill does not make me feel at all enthusiastic about the possibility that it will exist in the future. For that reason, I have grave reservations about my ability to support it at any stage.

[Mr Raynsford]

Let me first draw attention to my interests as declared in the Register of Members’ Financial Interests, and specifically to my role as a columnist for the Municipal Journal—the MJ.

I hope and believe that when the Minister sums up, he will have to reflect on the fact that every Member who has spoken—with the sole exception of the hon. Member for Poole (Mr Syms), to whose contribution I shall return in a moment—has expressed real reservations about the timetable that is being adopted, in the context of both parliamentary consideration of the Bill and implementation of the measures contained in it. That is fairly remarkable, given that it was supposed to be a flagship Bill granting local government more freedom, and a measure that local government should welcome. Indeed, the hon. Member for Poole, whom I have known for many years and for whom I have a great deal of respect, made that the key point of his argument. He seemed to be saying, “This is a step in the right direction: let us get on with it, because it gives more discretion to local government.” The hon. Gentleman must wonder—as, indeed, I hope Ministers will wonder—why, if the Bill is of such benefit to local government, local government is so apprehensive about it. He must wonder why Members on his own side of the House, albeit on the Liberal Democrat Benches, have been so critical of the timetable. Let us think about that.

It is not just the organisation representing London councils, which happens to be Labour controlled at present, that has been highly critical of the timetable and has urged delay. I must remind the hon. Member for Tamworth (Christopher Pincher), who suggested that the Local Government Association was wholly in favour of rapid action, that in its evidence it specifically supported an amendment that would delay implementation of the benefit changes until 2014. Even the LGA, a Conservative-controlled body, has expressed strong reservations about the timetable, while local government experts from whom we would normally expect to hear in evidence sessions are amazingly critical.

A week ago there was a very good article in Public Finance by Sarah Philips, who was an adviser to the Lyons inquiry and knows the issues thoroughly and deeply. She made some telling comments, such as these:

“The government’s repeated use of the term ‘local’ in relation to the planned changes hasn’t been enough to persuade councils that these will be an improvement. Current local government funding is incomprehensible, but these proposals taken together are even more complex and opaque. They have been criticised by councils, commentators and the communities and local government select committee—on most of the criteria the government set for itself and others… ‘Rich’ councils were looking forward to keeping most of their business rates and being free of central control. ‘Poorer’ councils were hoping for some continuation of equalisation, to recognise the huge range of needs and council tax revenues and their limited scope to increase business rates.”

Many of my hon. Friends have made the same points during the debate. Sarah Philips continues:

“The proposed tariff and top-ups and central levy limit incentives for growth, yet do not give much hope that services in ‘poorer’ areas can continue undiminished—or that it will be possible to prevent a two-tier system.

The proposals acknowledge only implicitly the risks of localised funding. In Europe and Australia, many smaller authorities and those in poorer areas have struggled to provide quality services and many have gone bankrupt or merged. The plans threaten the technical and financial viability of small district councils. Losing Housing Benefit will remove an economy of scale with processing the council tax support—limiting the ability to maintain a corporate centre.”

Those are just some of the comments that have been made by a real expert on local government finance—an officer who is clearly extremely anxious about the implications of the Bill. I hope that Government Members who have suggested that we should get on with it will pause to think about the serious risks attached to such action.

The hon. Member for Meon Valley (George Hollingbery) said in an intervention that local authorities had had to cope with annual changes in settlements in the past. As was pointed out by my hon. Friend the Member for North Durham (Mr Jones), our Government changed that and adopted a three-year cycle, but in any event there is a fundamental difference between an annual change in the settlement—which affects the actual amount of grant that an authority will receive for that year—and a complete change in the administrative system. The separation between council tax benefit and universal credit will require the establishment of a whole new administration and an entirely different system for the making and processing of applications, along with different computer programmes to determine eligibility and provide for the granting of discounts.