Local Government Finance Bill (First sitting)

Rob Marris Excerpts

Tuesday 31st January 2017 Public Bill Committees

[Justin Tomlinson]

Q Great. My final question is this. Potential changes in business rates may incentivise businesses to push for a revaluation. Is consideration being given to the capacity of the revaluation officers? Presumably, there would be a spike if there were changes, as people look to review their costs.

Mr Jones: You make another very good point, Mr Tomlinson. The number of business rate appeals, particularly regarding the way the system has failed to cope with the sheer volume of appeals, is very important and does challenge local government.

We are looking at bringing forward additional changes to the way that business rate appeals are dealt with. We want to make it easier, particularly for smaller businesses, to make business rate appeals. We also want to drive out some of the worst practice within some of the more unscrupulous business rating agencies, which lead some small business people down a path of great hope that they might get a significant reduction in the business rates, when that is an unrealistic proposition. We hope our check, challenge, appeal reform to the system will reduce that situation significantly and free up the system for legitimate business rate appeals that need to be looked at carefully and expeditiously.

[Rob Marris (Wolverhampton South West) (Lab)]

Q In the policy background in the explanatory notes it says,

“The reformed system will also provide local authorities with strengthened incentives for growing their business rates income.”

In fact, the Government like that so much that they mention it twice in the explanatory notes, as did the Minister in his opening remarks. I note that under an Act that is now seven and a half years old, the Business Rate Supplements Act 2009, the only business rate supplement currently in force is that levied by the Mayor of London in relation to Crossrail. What evidence does the Minister have that the proposed changes will encourage local authorities to do what the Minister by implication thinks they are not doing— that is, trying to expand their local economies and build their local businesses?

Mr Jones: There are a number of different elements to the Bill to do with expanding the business rate base, Mr Marris, and you have chosen the issue of levying the business rate supplement to provide infrastructure. That provision will be available for combined authorities and the Greater London Authority, so it will be available for authorities such as the West Midlands combined authority, of which Wolverhampton is a constituent member. In that sense, it is different from the current business rate supplement regime because it allows for consultation with business prior to the implementation of a levy on the business rate. Currently, the business rate supplement is dealt with by way of balloting businesses in the area. There is a clear distinction between the powers that exist and the powers offered in the Bill.

[Rob Marris]

Q But what evidence is there that those powers are likely to work, given, as I understand it—correct me if I am wrong—that neither of the consultations your Department has done has reported yet? There is a consultation on key issues across the reforms and one on the fair funding review; has either of them reported? If not, how can the Committee weigh the evidence on a key plank of the Bill, which is to do with incentivising local authorities? Where is the evidence?

Mr Jones: We will provide a response to those consultations shortly.

[Rob Marris]

Q But we will be discussing the Bill in Committee very shortly. Your answer is not encouraging, Minister. Will we receive the responses before the end of our sittings on the Bill?

Mr Jones: I can assure you that my intention is to bring those forward before the end of the Bill sittings.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Q On redistribution, I accept that the Bill gives local authorities the incentive to grow business rates, but the vast majority of income that will go to councils will be through a redistribution of the 100%, and that will be distributed according to need. The Local Government Finance Act 1988 stated that local authority funding for people should be fair, regardless of where they live. In London, local authorities have around 40% more spending power. If you add up all the local authorities of whatever tier divided by the number of people, the residents pay a lot less in council tax. Out of the total funding—business rates, revenue support grant or council tax—they have 40% more spending power, yet they contribute less in council tax. There does not seem to be any correlation in terms of need in those local authorities. That cannot be fair.

Mr Jones: I know this is a subject that you care about deeply, Mr Hollinrake. Quite rightly, at every opportunity available, you raise it with me and other Ministers in the Department. I understand that. The response to the call for evidence on the fair funding review conducted in the middle of last year will be released shortly. We will then look to introduce further consultation on fair funding. As you know, it will be complex. The way in which the needs assessment was put together more than 10 years ago means that there is significant complexity and we will have to look at the system very carefully, but we are alive to the fact that we need to bring that together with the fair funding review and the issues of redistribution by the time we get to implementing the outcome of the legislation in 2019-20. We are mindful of the fact that local authorities across the country have legitimately questioned whether the assessment of need is right, given the changes in demographic pressures and suchlike.

--- Later in debate ---

[The Chair]

Thank you. I know you wanted to ask another question, but in order that we can get everybody in in our limited time, can we please have short questions and shorter answers? You do not both need to answer if one agrees with the other.

[Rob Marris]

Q The Government, and indeed the Minister, have been very clear that one reason for the Bill is to strengthen incentives for councils to grow their business rates income. The Minster also said that while we all wish to encourage business growth, that is not happening everywhere. He said that this morning about the actions of councils. Is the Local Government Association aware of any council in England that is not trying hard to encourage business growth, and with it business rates growth, or is not trying hard to encourage business overall?

Councillor Nick Forbes: The short answer is no; local government knows that by 2020, when this new system comes into effect, we will be entirely reliant on two property taxes—council tax and business rates—for the totality of our income other than that which we generate commercially, so every authority understands that it is in their best interests to grow both of those tax bases as quickly as possible. I am certainly not aware, and I do not believe the LGA is aware, of any authority that does not see that as an important priority.

[Rob Marris]

Q Just to be clear, the Minister has not actually produced any evidence for those assertions. He may do so later, but he did not get any such evidence from the LGA because you are not aware of any such evidence.

Councillor Nick Forbes: I am not aware of any, no.

[Rob Marris]

Thank you.

[Justin Tomlinson]

Q Following on from that, the whole point of the Bill is to unlock potential, to incentivise and encourage you. You have identified where those potential streams will come from, but ultimately it will only be as good as your capacity to deliver it. Are you confident that councillors have the sufficient skills base to be able to maximise it? You have just said that you do not think that any local authority is not encouraging growth, but—this is a good example—many local authorities have still not signed off their plan for the new homes bonus or are still fighting development. That is often for good reasons, but they are fighting it. Are you confident that councillors in all local authorities have sufficient capacity to take advantage of these potentially much larger budgets and incentives, which need to be chased down?

Councillor Nick Forbes: Actually, it strengthens the concept of accountability if you have a direct link between taxes raised locally and how those taxes are determined in terms of their spend at a local level. I would argue a slight counter-view to yours, which is that by doing this it is very clear where the incentives are within the system and it is then incumbent on anybody occupying elected office at a local government level to make sure that they have those finances and plans in place, because otherwise they will see a direct link between that and a reduction in funding for their area. So I think it acts as an incentive for that. As for capacity for handling it, I think that local government is, on the whole, very confident that it can handle this. Upper-tier authorities handle funding of more than this magnitude already.