Local Government Finance

Neil Parish Excerpts

Wednesday 12th February 2014 Commons Chamber

[Andy Sawford]

Let me make a bit of progress. The Minister spoke for 38 minutes, and I know that many hon. Members wish to contribute.

It is to be welcomed that the Government are compensating local authorities for the cap on business rates, but I am told by SIGOMA that the compensation amounts appear to be less than the estimated reduction in total business rates. I hope that the Minister who responds to the debate will comment on that point. Holdbacks to fund the business rate safety net have also been top-sliced unfairly from councils. While Windsor and Maidenhead contribute to the £120 million holdback at a share of £2.27 per dwelling, Middlesbrough contributed £7.97 per dwelling. Why does the Minister think that is right?

I pay tribute to my colleagues, especially the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who led an important debate on this last year. There was a limited U-turn by the Government on holdbacks. But when the Minister replies today I hope that he can update the House on what recent assessment has been made on the business rate safety net.

[Neil Parish (Tiverton and Honiton) (Con)]

I see that the shadow Minister is carrying on the same creative accounting as the last Labour Government. They say that they will stick to the same budget as we will, but they will reduce business rates. I welcome that, but where will they get the money from? They will have to cut it from somewhere else.

[Andy Sawford]

The hon. Gentleman will have to do a bit better than that. The reduction in business rates is clearly costed by not going ahead with the cut in corporation tax for the largest businesses in the country. It is a clearly costed policy.

The new homes bonus is another top-slice from the formula grant, and the Government seem confused about its purpose. Their website describes it as:

“A grant paid by central government to local councils for increasing the number of homes and their use.”

But the Housing Minister told the House recently:

“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]

The National Audit Office report on the new homes bonus said it certainly is not about increasing the number of homes, stating:

“Overall we found little evidence that the Bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply…We found no association between individual local authorities’ planning application approval rates and the numbers of homes qualifying for the Bonus.”

As the new homes bonus is a top-slice without a purpose, I can understand why local authority leaders and members are frustrated by the fact that it compounds the problem of unfairness—because of course it comes from the grant.

London Councils has brought to my attention the Government’s recent decision to require London local government to transfer £70 million of its new homes bonus grant to the GLA. That is a centralising step by the Government in London. Those councils want to know why they are being treated differently from the rest of the country, and I hope that when the Minister responds later he will justify that.

Other changes are having an impact on councils. There is much concern about the localisation of welfare support. The funding has been passed from the Department for Work and Pensions to the Department for Communities and Local Government, and has already been cut in half in the process. There are no plans for any funding to be available after 2015. Do the Government recognise the impact that that will have on the ability of councils to help the most vulnerable people in our communities?

That leads me on to the Government’s new poll tax for the poorest people. The cuts to council tax support mean that many people on the lowest incomes will see their council tax bills jump. These people are carers, the disabled, single mums, war widows and veterans, and they will all have to pay more council tax and, in some cases, the bedroom tax, the impact of which my hon. Friend the Member for Wansbeck (Ian Lavery) powerfully denounced earlier. Today the Prime Minister has again chosen not to rule out another tax cut for millionaires, so we can see where the Government’s priorities lie.

When people face a cost of living crisis, it is right that local authorities do their best to keep council tax down. In recent weeks, the Secretary of State has briefed the press that he would reduce the council tax referendum trigger, but he seems to have been overruled at the last minute by the Home Secretary and the Deputy Prime Minister. The whole process has been a complete shambles. SIGOMA has said that the late announcement of the threshold was unacceptable. Councillor Caitlin Bisknell of Derbyshire county council contacted me on the day of the announcement to tell me that the council was in the middle of a meeting to set its budget for next year when it was informed by the Government of the referendum limit. While the Secretary of State has been posturing and dithering, councils have been trying to plan ahead. Local councils and communities are the ones who are left to pick up the pieces of the Government’s incompetence.

For all the talk of a council tax freeze, more than a third of local authorities put council tax up last year. According to a recent survey by The Daily Telegraph, more than half the local authorities preparing to increase council tax this year are Conservative councils, including Oxfordshire, the Prime Minister’s county council, which plans to raise its bill for a second year running.

--- Later in debate ---

[Neil Parish (Tiverton and Honiton) (Con)]

I am glad to be the last speaker in this debate and that my patience has paid off. I am very keen to talk about the one thing on which there has been consensus: the overall local government settlement. The argument is very much to what extent the cake is split. I accept that the coalition Government had to do something about public spending in general. Local government spending is some £22 billion, or 25% to 30% of total public expenditure. When some three and a half years ago we inherited, from the previous Government probably the biggest deficit since the second world war, it was absolutely essential that we did something about it.

I very much welcome the fact that the Prime Minister has been several times down to the west country. The Bellwin formula is being looked at so that we can repair the coastline and do something about the flooding, in order to put the west country, and Devon and Cornwall in particular, literally back on the map of the railway system. It is essential that that is done.

I say this to Ministers—[Interruption.] I see that the Minister has returned to the Chamber; I very much welcome him back. We have had some interesting meetings with him and with the Secretary of State, at which we have been treated very courteously. Some £11 million has been found to get a fairer share for rural authorities—the generosity overwhelms me—but we are asking for another £20 million a year for five years to reduce the anomaly. What is £20 million out of £22 billion? By my arithmetic, it is less than 10% of 1%, or 0.01%. That is all we need to recognise and address the fact that local authorities in rural areas are not treated fairly. We pay some £85 more in council tax on average and receive £145 less in grant from the Government. That needs to be settled.

I have said this before, but Devon has more roads than the whole of Belgium, which imposes a huge cost. In January, it was estimated that some 7,500 potholes needed to be filled in Devon alone. All this will add an enormous cost to the delivery of our services. Bus services in Devon and the concessionary scheme cost the county council some £10 million. This is a concession that the county council makes: it does not have to find that money, but it makes sure that the people of Devon can get those concessionary fares.

The schools in Devon are much smaller than many across the country and are very spread out, with rural school transport imposing another cost. All these things have a huge impact on Devon county council. Devon county council has reduced its staffing by some 3,000 people over the last few years. It is therefore a lean, mean council that is delivering good headline and front-line services, but we need that help—not only for Devon county council, but for East Devon district council and Mid Devon district council, which is probably one of the most rural in the country.

My colleagues have made the point that when people drive through Devon and Cornwall, they see many parts that look hugely prosperous, but among them are some of the poorest people and the lowest wages. We welcome many tourists down to Devon and Cornwall, and when they retire from these wonderful, affluent areas of London and the home counties, as they love to do, that drives up house prices. That means that the local people have to pay an awful lot more for their homes. Therefore, those on lower wages are paying higher council tax than they should be and we are having lower services delivered than we should.

I urge Ministers—[Interruption.] I see that the Secretary of State is now in the Chamber; I very much welcome his listening to us. I ask that one of these days we finally sit down and agree the figures for the anomaly. Dare I say it, but another Secretary of State talked about moving the goalposts, and I think sometimes the goalposts do get moved when we sit down and talk about local government finance. I think Ministers accept that, which is why we put in place a formula to review the costs of delivering rural services and why we started to move money across in 2013-14. However, we have now put a damper on that and stopped that money flowing across.

I suggest that we sit down to discuss this and turn on the tap again, so that the funds can start to flow and we can get a fair settlement, because we will not get a fair settlement from Labour Members, who spent all the money, borrowed and created huge debts. It is therefore up to this Government to sort out the anomaly. I look forward to working with the Secretary of State to ensure that that happens, because the people in rural areas of Devon and across the country deserve a better deal and they expect this Government to deliver it.