Richard Drax
Main Page: Richard Drax (Conservative - South Dorset) Local Government Finance Bill
Richard Drax ExcerptsMonday 23rd January 2017
(7 years, 10 months ago)
Commons ChamberRead Full debate Local Government Finance Bill 2016-17 Read Hansard Text
Mr Jones
As my hon. Friend says, we have spent many a happy hour debating the Homelessness Reduction Bill, which will return to the House for its Report stage on Friday. As one who is extremely savvy about these matters, as well as being a member of the Communities and Local Government Committee, he will know that the issue to which he has referred does not necessarily feature in this Bill, but does feature in the local government finance settlement, on which we have recently undertaken a consultation. We shall be responding to that consultation, and to points made by Members and local authorities throughout the country about the new homes bonus, one of which my hon. Friend has just managed to put on the record.
Richard Drax (South Dorset) (Con)
May I pick up on the point about the rural share? The 50% local share of additional business rates that are to be raised is fine in mainly urban areas, because there are more brownfield sites and areas to encourage businesses, but in seats like mine that are surrounded by every environmental designation from here to God knows where it is going to be far harder to raise this additional money, which of course local authorities desperately need.
Mr Christopher Chope (Christchurch) (Con)
I am sorry that the shadow Minister’s glass is half empty. He said that the Bill had the potential to create a much better situation, as I think it has, but also seemed to be emphasising that he thinks things are going to be far worse. I am glad he is at least not going to be voting against the Bill’s Second Reading.
My hon. Friend the Minister referred to a once in a generation reform; I can recall my involvement as a Minister during the passage of the Local Government Finance Act 1988, when I took forward the uniform business rate, among other matters. I am delighted that my hon. Friend has retained the principles of the uniform business rate, which was introduced to prevent Labour councils at the time—for example, in Liverpool—from so attacking their own businesses that they drove them out of town and, in so doing, drove the jobs away as well. I am glad we are not going to be allowing councils the freedom to destroy jobs which they had prior to introduction of the 1988 legislation.
I welcome the emphasis on certainty and predictability, in which context I ask my hon. Friend the Minister to set out a bit more clearly how the reforms that he says are going to be brought into effect in 2019, including the new funding formula, are going to interact with the four-year settlement, which, as I understand it, will still be there in 2019-20. For example, we have heard from the Government that councils can increase their adult social care precept by an extra amount in the next financial year and the year after, but in the third of those years, 2019-20, they will not be able to. How are those arrangements going to interact with my hon. Friend’s laudable objective of introducing all these reforms in 2019-20?
Clause 4 is very relevant to matters of local government reorganisation. The nine councils in Dorset are meeting this week and next to decide whether they wish to go down the road of a local government reorganisation. Two of those councils, Poole and Bournemouth, seem to be supporting the idea of creating a new unitary authority with Christchurch, in the belief that were the Secretary of State unwise enough to approve such a proposal and the unitary authority was set up, on day one the residents of Christchurch would be paying £200 more in council tax at band D than the people resident in Poole or Bournemouth.
Last week, my hon. Friend the Minister responded to my written question to confirm that it is not possible for an individual principal authority to levy council tax in one part of its area at a level different from that in another. That is an important principle. I hope that my interpretation of clause 4 is correct when I emphasise that were there to be a unitary authority covering Poole, Bournemouth and Christchurch, from day one the people of Poole, Bournemouth and Christchurch would all pay exactly the same level of council tax.
The idea of excessive levels of council tax has often been interpreted as being about excessive levels of increase, but, as the explanatory notes on clause 4 make clear, the clause will allow
“the Secretary of State to make a statement of principles for determining whether council tax is excessive covering a number of years, rather than just one.”
Am I correct in my assumption that were there to be a new unitary authority for Poole, Bournemouth and Christchurch, the Secretary of State could use the powers in clause 4 to say that there should be one set level of council tax for the authority, starting from day one? I ask because later this week, in both Poole and Bournemouth, councillors are going to be invited to support the proposal for a unitary authority in the mistaken belief that they will continue to be subsidised by the residents of Christchurch for 20 years, under an equalisation/harmonisation regime. If they were disabused of that and told that from day one they would be liable for an increase of up to £200, I think minds would be concentrated and there would not be quite so much enthusiasm on the part of councillors in Poole and Bournemouth for what is being proposed, which is hotly contested by councillors not only in Christchurch but in other parts of rural Dorset.
I hope I can get some clear answers to those questions. The essence of the provision in the Bill is that if councils impose excessive levels of council tax on their citizens, there should be the safeguard of a referendum, but what is proposed in the name of local government reform in Christchurch, Poole and Bournemouth is that people in Christchurch should be expected to pay extra council tax but will not have the chance of a local referendum to decide whether or not they wish their council to be abolished and absorbed into a new one. If we can have referendums on the levels of council tax, why can we not have referendums on whether a council is to be abolished? It seems that something is rather out of sync.
In responding to this debate, will my hon. Friend the Minister be a little bit clearer about the pooling arrangements? Why are the Government taking the power to introduce mandatory pooling arrangements, and how will they work? Can all nine local authorities in Dorset be regarded as a pool for the purposes of business rate income and distribution? I do not see any problem with that. In fact, it might be quite desirable, but why must it be imposed by the Government, rather than agreed to locally?
My next point came out in the response of the shadow Minister. I am concerned that, as a result of the powers being given in this Bill, some businesses may find they are in a minority in an area and subject to significant extra supplements on their business rates. How will we ensure that a minority of businesses are not oppressed by the majority? In east Dorset, there is a business improvement district centred on a Ferndown industrial estate. When it was set up, there was concern among some businesses that they might end up paying extra for things that were of no use to them. Can my hon. Friend spell out the safeguards that will be in place to ensure that significant increases in supplements or additional business rates are not imposed on hard-pressed businesses?
I turn now to clause 9 on public conveniences. Christchurch Borough Council has been privileged to win the Loo of the Year award on many occasions, and it has a really good selection of public conveniences, as befits its age profile and its reputation as a very important tourist destination. Meanwhile, much to the consternation of the local people in Poole, Poole Borough Council has decided to close half its public conveniences. Some councils are now thinking outside the box and saying, “Why can’t we enter into joint arrangements so that public buildings can be made available for the provision of public conveniences?” [Interruption.] My hon. Friend the Minister is acknowledging that. On reading clause 9, it seems that there will be no relief from council tax or business rates for a building that partially consists of a public lavatory but that offers other facilities as well. It is difficult to speak to clause 9 without puns, but I hope that the gist of my point has come across. Why would we wish artificially to restrict a relief such as this and say that it will be available only on a free-standing, dedicated public lavatory?
Richard Drax
The matter of public conveniences of course raises some humour, but let me make this point. When I attended an Age UK event some years ago, I was told that there are 2 million people in this country who can be no more than 10 minutes away from a loo. If there is not one available, they cannot leave their house. This is a serious issue, and money is needed to provide this vital service.
Richard Drax (South Dorset) (Con)
It is a pleasure to take part in this debate and to follow the hon. Member for Manchester, Withington (Jeff Smith).
The Bill’s timing is unfortunate. Certainly in South Dorset, this shake-up of local government finance is regarded as part of a perfect storm. Everyone’s minds appear to be concentrated on the ongoing local authority reorganisation, but in addition we now have the question of funding, and how it will be done fairly and devolved properly. However, I entirely endorse the general thrust, as the Government are heading in the right way. Before I forget, on this great day, may I also wish a happy birthday to the Minister for Housing and Planning? I am sure that he would rather be somewhere else instead of listening to me this evening.
I endorse devolution. Local people should have more power to make local decisions—there is no division across the House on that point—but with devolution comes a responsibility, if I can put it like that, for the Government to ensure that there is fair play, whether it be in the difference between urban and rural, or in the difference between the poorer and wealthier parts of our country. As I said in an intervention, moving to the system that the Government propose for business rates raises the question of whether rural areas and the poorer parts of the country will get the funding that they deserve.
Before I move on to talk about five brief points, let me set out my other concern: as pressures on finance grow, the perception from many councillors in my constituency is that the Government are putting more of the tax-raising powers into councillors’ hands, but they are not so keen on that if they do not have the resources to ensure that everything is dished out properly and fairly. I just raise that as a concern, but overall I welcome the path that the Government are taking.
I asked around, as is my duty as an MP, to find out what officers and councillors thought of the Bill. As an MP, I must act without fear or favour, so it is my duty to mention five brief points that have been raised: the new homes bonus; adult social care; the business rates appeal; second homes; and underfunding in general. I will touch briefly on all five, starting with the new homes bonus. The significant funding change set out in February 2016 has seen the reduction of six years’ funding to five years in ’17-’18 and four years from ’18-’19 onwards. Worryingly, the inbuilt so-called deadweight of 0.25% set out in the consultation was suddenly changed to 0.4% in December 2016, nine months after the consultation closed. I ask colleagues’ forgiveness for the dryness of my words but, let us face it, this subject is fairly dry and can get rather detailed.
The scheme was designed to reward councils for building new homes, but with the deadweight, there is a risk that the incentive is removed. For example, in Weymouth and Portland, the deadweight is 108 homes, so Weymouth and Portland built 234 homes in 2016-17, but received the new homes bonus for only 126 homes. The incentive has been removed and there are no transitional measures to limit the impact. The calculations are based on band D, which disadvantages councils such Weymouth and Portland where the average property is band B. Even if the authority sees a substantial growth in the number of homes, it will not benefit from the new homes bonus to the extent that the Government might like. It is predicted that Weymouth and Portland will lose just shy of £1 million in new homes bonus between now and 2020.
The Society of District Council Treasurers has made several points about the Government’s plans, saying that they are “severe” and that they
“come so late in the budget planning process that many authorities will have little option at this stage apart from reducing reserves.”
The society adds that imposing a baseline of 0.4% is “far more drastic” than the 0.25% mentioned in the consultation. Emerging local plans that include a substantial number of new homes often face fierce opposition—nowhere is that more true than in my seat—but the plans are often made more tempting by the promise of funding from the new homes bonus. However, the reward has now been reduced in cash terms, so resistance to new homes is even greater.
I move on to adult social care, about which I have no doubt that all Members have very serious concerns. I do not like to use the word “crisis” because I think that it describes something considerably more serious than our current situation. In the view of those I have spoken to, business rates retention “does nothing” to address urgent needs. Across the country, the £240 million achieved in savings from the new homes bonus reform is going to social care as a one-off grant. This means that while social care gets one year’s resuscitation, councils of course lose out.
Taking funding from district councils in such a way forces them to review discretionary services, such as low-level support for older people and other vulnerable groups. We have talked about public conveniences and the interesting fact—I had no idea about this until I listened to a debate by Age UK—that there are 2 million people who cannot be more than 10 minutes from a public convenience. If they are further away, obviously there is a disaster, so many elderly people do not leave their homes. In effect, we are forcing them to stay in their homes and that cannot be right.
In addition, unitary authorities get all the money and two-tier councils, such as those in parts of South Dorset, have to split their revenue, so the district council loses and the county council gains. Social care is delivered through a grant that favours the northern metropolitan areas and takes away from councils such as ours. South Dorset has an increasing elderly population, which is only going to get bigger, so the pressure on adult social care is only going to increase.
Business rates appeals are increasing, and they are costly. Under the new 50% retention rate rules, local government must pay 40% of appeals and settlements against business rates. This year, a company called Perenco, which runs the Wytch Farm onshore oil platform, won a £5 million appeal, and the Ministry of Defence won two £2.5 million appeals for its two Army camps. Both organisations had appealed against Purbeck District Council. Forty per cent. of £7.5 million is £3 million, payable by Purbeck District Council directly. It tries to keep £1 million a year as a safety net, so that is three years of safety net wiped out.
On second homes, the view is that they put up house prices and reduce the number of local people living in the area. That is, again, of concern across the House. So long as a second home is available to rent for 140 days a year—if it is registered as a holiday let and liable for business rates—it avoids council tax. The system lowers the cost of home ownership for those who least need it—they live tax-free in a second home—instead of being a tax relief for a small business, as was the intention. Business rates relief on second homes makes very little difference to the district, but a huge difference to the county council and the Chancellor. At least 200 newly registered second homes in Purbeck over the last couple of years will mean a loss of £500,000 a year in revenue. At the moment, Purbeck District Council needs to assess how many homes to build, and it automatically adds 10% simply to counteract the effect of second homes.
Finally, in the view of those I have spoken to, the chronic underfunding of district councils is not addressed by the safety net. It is not addressed by the transition grant payments, which only increase uncertainty for budgets if they are recalculated every two years. It is not addressed by paying £65 million to the upper quartile of “super sparsity” local authorities. Their view is that rural services should be separately funded. Finally, it is not addressed by the top-slicing of the new homes bonus. The new homes bonus should be separately funded as well.
With those points I shall conclude. As I said to the Minister of State—again, a very happy birthday to him —I support the direction of travel, but I am a little bit concerned about much of the detail.