Local Government Finance Bill (Tenth sitting)

Rob Marris Excerpts

Tuesday 21st February 2017 Public Bill Committees

[Mr Thomas]

I am grateful to the Minister for confirming that the local government finance settlement debate will continue to take place. It is an opportunity for Members across the House to continue to scrutinise not only local government finance as it operates at the moment but, crucially, as we get more clarity, how business rates might end up working when 100% devolved—goodness only knows, we need that clarity.

We have no sense of how the so-called fair funding review will work for each individual local authority. We have no sense as yet of the consequences of the detail of the financial regulations to accompany the Bill. It will therefore be helpful for us to continue to have the opportunity to debate such matters on the Floor of the House and to explore what they mean for each of our local authorities and the public services that they provide to the people of England generally.

It would be helpful to hear a little more from the Minister about any further arrangements for consultation with business. It seems a little odd that before the Bill is commenced, in the light of the huge concern about the business rates revaluation that has hit the media of late, there will not be further detailed consultation with business through local enterprise partnerships. Here is a quote from the Treasury press release that accompanied the previous Chancellor—before he was sacked for incompetence by the current Prime Minister—which outlined how the infrastructure premium would operate:

“Directly elected mayors—once they have support of local business leaders through a majority vote of the business members of the Local Enterprise Partnership—will be able to add a premium to business rates”.

Yet there has been no mention by the Minister of local enterprise partnerships in any of his speeches to date. He might prefer me to have mentioned it earlier in the proceedings—perhaps his memory might have come back to him at that point about why he made the change and decided to cut out local enterprise partnerships from the Bill. It would be good to hear a little more from the Minister about how local enterprise partnerships will be involved in the coming months.

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

I am a little surprised, given that when we were talking this morning about timing and implementation of the various clauses in the Bill, the Minister prayed in aid clause 5, on indexation, and clause 7. When he talks this afternoon about developing policy in conjunction with local authorities and liaising—my verb, not his—it would be good if we had some evidence. He challenged my hon. Friend the Member for Harrow West on whether Labour supports clause 7, on rate relief for rural shops, and clause 5, on indexation, to which my hon. Friend gave a clear answer. The Minister relied on those clauses as examples of clarity and the way forward, but if they are so clear, why will their implementation be delayed?

[Mr Jones]

We have made it quite clear why those matters are to be implemented in that sequence. I made it clear earlier, in answer to the hon. Member for Harrow West, that we consulted widely with business groups, including local enterprise partnerships. This Government do listen. We have decided to bring forward a system in relation to business rate supplements that reflects the views of business, and when proposals are developed in local areas they will certainly need to take into account the views of the business community in that particular combined authority area.

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[Rob Marris]

I salute my hon. Friends the Members for Oldham West and Royton and for Redcar for their perseverance. As I said this morning, the Opposition have solicited evidence from the Government 33 times before today in Committee—and evidence came there none. As my hon. Friend the Member for Oldham West and Royton said a moment ago, he wants a strong evidence base, and so does my hon. Friend the Member for Redcar.

My hon. Friend the Member for Oldham West and Royton also said—I think I have got this right; it was a double negative—that he was not saying that local government does not trust central Government. I have to tell him that I am saying that. I do not trust central Government, and the reason is that they do not want the evidence, because it would lay bare the unfair nature of local government funding and, in particular, local government cuts over the last six years. I suspect that those cuts have taken their toll in communities such as Redcar and Oldham, just as they have in Wolverhampton. The Government keep hoping that people will not notice and, thus far, they have done not a bad job of keeping away from it. New clause 3(4) would solicit evidence on

“the resource need of each billing authority”.

Subsection (5) states:

“It shall be the duty of the Commission to assess the impact of any new requirement imposed upon a billing authority”.

Well, the Government do not want that evidence.

Using my own local authority in the west midlands as an example, the evidence is clear that over the last seven years almost, the cut in the central Government grant to Wolverhampton residents has been more than £200 a head, in one of the most deprived cities in England. Correspondingly, the alliterative Wokingham, in one of the most advantaged places in England—good luck to them—has seen a slight increase in funding per capita. I hope that the Minister is going to get up and astound me and say that he accepts these amendments, but I would be extremely surprised, because they would require evidence to be generated and the Government do not want such evidence.

[Mr Jones]

The distribution of resources and the assessment of the relative needs of local government is an essential feature of the local government finance system, but those elements do not require legislation to determine them. However, I thank Labour Members for providing me with the opportunity to outline the work we are doing in that area.

Before doing so, I would say that I have heard what has been said, particularly by the hon. Member for Oldham West and Royton. It was unclear whether the commission would be there to simply divide the money available at the time between local authorities, or whether there is a role for it to determine the total money available and national policy on council tax. Were it the latter, it is important to set out that those issues have been determined for many years by central Government. Successive Governments, including Conservative Governments, the coalition Government of Liberal Democrats and Conservatives, and Labour Governments, have held to those principles.

In regard to the work already under way, we announced the fair funding review last year, which was universally welcomed by the local government sector. The review is conducting a thorough examination of what a relative needs assessment formula should be in a world where local government spending is funded by local government resources and not central grant. The findings of that review will set the initial baseline for the 100% business rate retention system.

From the start, we have recognised the essential role that local government has to play in shaping those reforms. That is why we have been working collaboratively with the Local Government Association, which is responsible for representing a broad range of views held by different sections of local government and their member authorities. That effective working relationship has already seen the establishment of a steering group supported by a number of technical working groups, which my officials co-chair with colleagues from the Local Government Association. That gives local experts a unique opportunity to help shape the review, and all the work of those groups is available online, adding real transparency to the progress of the review.

The process for assessing the relative needs of local government is well precedented and was, of course, followed by the Opposition when Labour was in power. Our collaborative and transparent approach represents a significant improvement on that process. In the summer, we published a call for evidence that set out key questions that the review will address. The Secretary of State has confirmed that he will report back to the House on the progress of that review.

Creating a new commission to consider needs assessment and new burdens, as these new clauses would do, blurs accountability for that important work and would add another significant layer of unnecessary bureaucracy, over-complicating the process for assessing the relative needs of local government. It is important to point out that it would undoubtedly lead to a situation where it simply costs the taxpayer more money.

Our proposals offer a better guarantee of a transparent process, supported by the best available advice from local government and elsewhere. On that basis, I ask the Opposition not to press the new clause.

[Jim McMahon]

Thank you, Sir David, for the opportunity to respond to the Minister. I cannot understand why the Government are so reluctant to accept these measures. Of all the changes in the Bill, some are extremely minor and it would not require legislation for the Government just to get on and make them. Their argument is that they have put them in the Bill to give clarity and to ensure that there is a clearly understood framework in place. If they were to establish an independent body to look at a needs-based assessment, potentially with redistribution, it would be right for it to form part of the same transparent framework that has been proposed for far more minor changes.

[Rob Marris]

Will my hon. Friend join me in congratulating the Minister on decrying the amendments with a straight face, claiming that they would add another layer of bureaucracy, when he has introduced a Bill that will bring in at least 12 sets of new regulations?

[Jim McMahon]

I absolutely share that point. There are 12 sets of regulations and something like 56 new powers for the Secretary of State. We are not seeing a loosening of what binds the hands of local government; it is much more a tightening. I do not think that that will be well received.

The main thing is how we move forward. There is so much uncertainty now, not just with the amount of demand in the system for public services. We have seen the social care demand, but there will also be child safeguarding and educational attainment demands and mental health and disability support pressures very soon. That is notwithstanding all the other 700 services that local authorities deliver on a daily basis to support our residents.

We are seeing a genuine crisis in public services in many parts of our country. Some have been more protected than others and some have been more affected than others, but there will be an impact across almost every community in the country. Either the Government are lining up to continue to ignore the scale of that problem and what it means to individuals, families and communities—following a similar pattern of behaviour to that which we have seen under the coalition and the current Governments—or they genuinely want to get a grip and put in place a more sustainable system that would prevent such shocks to local public services. If local government is saying that, through an independently commissioned report that has been agreed by every party political party—including the Conservative party—on the Local Government Association, I cannot understand for the life of me why the Government do not just take that with both hands and run with it. At the moment, their defence seems to be, “That would cost money. It would cost money to have this independent system in place.”

Let us be clear about what the role of that independent body would be. It would be there to assess the need in each area against some objective criteria that would be agreed with central and local government. The Government have said they are going to do that anyway, so let us put that to one side; it will happen whether this body exists or not.

We then talk about redistribution. We know how much money will be required, because a thorough and in-depth review would have taken place. We then need to understand how much money we have and how much we distribute to meet the demand that has now been identified. What Government would not want the ability to say, “This is an independent recommendation”? It would be a gift. We know that they are fearful of scrutiny. We have seen that in the decision that the annual financial settlement will not come to Parliament in the future—they do not want that parliamentary debate. But this gives them a gift to say, “This is not the Government’s saying this; this is an independent body that has worked in consultation with local government.”

Where we are going and what the end looks like is extremely unclear. We have been promised an independent assessment of need. We do not know the criteria, the timescale, the membership or the status. We do not know whether it will be inside or outside the Government or completely independent. Will it sit within local government? We do not know the detail of any of that. We do not know what the new business rate devolution will be. We do not even know which different schemes have been negotiated in each of the pilot authorities, let alone the sweetheart deal that has been agreed with Surrey, which is the only single authority negotiated business rate retention pilot in the country—I am sure the Minister will say whether this is right or wrong. All the rest have been done through a devolution deal through their combined authority arrangements or the imposition of directly elected Mayors. Surrey is being treated in a very special way—a way that other local authorities are not. The Government cannot craft a special sweetheart deal for everybody. At some point, we have to accept that the quantum of money is a quantum of money and we have to teem and ladle.

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[Jim McMahon]

You have to earn the perks that come with the job. I am not going to give way. We need to make progress. I am happy to receive a letter from the Minister if he feels it is necessary to justify his position. What is most important is not to conflate a number of different points that have been made that are legitimate and stand on their own two feet—they are not one and the same thing. There is a world of difference between establishing an independent financial commission to understand the need in each area for public services and then to advise back to the Government what that assessed need should be. Government may well say as part of the remit of that review that there is a quantum of money that is limited and within the criteria that are set, they may well seek advice from the independent body on how to teem and ladle within that quantum. There has been no suggestion that the independent body would take away the right of the Treasury to determine how taxation is generated and spent in the country. It is very clear if the Minister reads the new clauses and the new schedule that the remit is to advise Government.

[Rob Marris]

Does my hon. Friend agree that it would help the Minister, whether chauffeur-driven, well-paid or not, with all his officials, to do the Opposition the courtesy of reading new clause 3? If he reads new clause 3, it is entirely clear that the proposed commission would not usurp the power of the Secretary of State to decide on the grant.

[Jim McMahon]

That is absolutely right. I suppose that in some ways I took it for granted that the Minister would read the papers. Perhaps I should not have done that and I should have read it out line by line. What the new clause intends to do is very clear. I am a new Member so perhaps I am entitled to a degree of naivety— some other people do not have that excuse. We were so prescriptive because we did not want it to be conflated or confused, and we wanted it to be accepted as a constructive amendment on that basis. I hope that the Minister has read it. It is clear what it is intended to do and what it is not intended to do.

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[Mr Thomas]

Let us be clear: GP surgeries provide a public service. I will come on to some of the difficulties that GPs face. On the news just the other day there was a report by the BBC’s excellent health editor, Hugh Pym, on GP surgeries that had had to close because they could not make the finances add up. One wonders whether, had they faced the business rates hike that we are talking about now, that would not have exacerbated the problems.

[Rob Marris]

My hon. Friend will be aware—as will the hon. Member for Thirsk and Malton, given that I am sure he has read the proposed new clause—that new clause 4 does not cover GP surgeries, because they are primary.

[Mr Thomas]

My hon. Friend is always helpful to the hon. Member for Thirsk and Malton, as I try to be.

[Rob Marris]

He needs it.

[Mr Thomas]

I think it is a tad harsh to suggest that the hon. Member needs help, but perhaps we can offer a little guidance from time to time from this side.

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The new clause provides one way—one small way, granted—to ease some of the financial pressure on the NHS so that waiting times can be brought under control again. The protestations of the Conservative party that the NHS is safe in their hands—a notion that, as Labour has always known, is for the birds— might then at least look more convincing. The chief executive of the British Red Cross described the NHS as experiencing a “humanitarian crisis”. Why have we got to that point? Again, it is because of the scale of the financial pressure on the NHS, which our new clause might help to ease through business rates relief.

[Rob Marris]

Does my hon. Friend remember a single winter between 2001 and 2010 in which there was a so-called winter crisis in the NHS?

[Mr Thomas]

What I do remember is more recent comments of which I am sure my hon. Friend is also aware: people have talked about the NHS suffering a permanent winter crisis—

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[Mr Thomas]

I am grateful to you, Sir David, for the offer of protection from that outrageous slur from the hon. Member for Thirsk and Malton. I suggest that Government Members might usefully remember the old maxim: when circumstances change, good politicians have to recognise that that has happened and try to adjust to the financial realities that, in this case, schools are facing. My amendment, in the context of the Bill, is simply one small effort to offer a bit of additional financial support to schools that have very serious financial problems, and Government Members should not make light of that.

[Rob Marris]

My hon. Friend will be aware that one circumstance that has changed—and that this measure would help address—is the apprenticeship levy, which will be paid by maintained schools but not by academies. That is a change of circumstance; hence the change of our position.

[Mr Thomas]

My hon. Friend makes a very good point. A series of additional costs, some with the best of motives, are causing financial pressures on maintained schools. New clause 4 might be one way to provide additional financial support to deal with some of those costs and pressures.

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[Mr Jones]

That is a really good question and very pertinent in this context. It highlights one of the challenges we have with the Opposition. One party at the general election pledged significantly more money to the NHS than the other party. The Government are now putting an additional £10 billion into the NHS, while the Labour party committed to £1.5 billion extra for the NHS; that shows that the Labour party is raising a bit of a red herring, I think, to hide its embarrassment about not being willing to back the NHS as the Conservative Government have.

[Rob Marris]

May I caution the Minister about praying history in aid and going back to 1990? He referred to 13 years of a Labour Government. Under 13 years of a Labour Government, the real-terms increase in funding for Wolverhampton City Council was 40%; under a Conservative Government, the real-terms cut has been 40%. Under a Labour Government for 13 years, the national debt fell; under a Conservative Government, it has gone up by 70%.

[The Chair]

Order. Before the Minister responds, I should say that I get the sense that the Committee is becoming demob happy. I ask the Minister and the Committee to deal specifically with the response to new clause 4 and not to become partisan and drawn by what has gone on in the past.

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[Rob Marris]

I rise in support of the new clause. As the hon. Gentleman has said, the background is that for the past 20 years at least, food security in the United Kingdom has been much overlooked. We import an increasing proportion of our food and the strain on our food security may increase or decrease because of Brexit, depending on what we do. The measure proposed by new clause 10 is very helpful in that regard.

The Tunnel Tech case, as I understand it, related to the tunnels where mushrooms are produced, ready for market. Paragraph 2(1)(a) of schedule 5 to the Local Government Finance Act 1988 provides the definition of agricultural land, whereas paragraph 3 provides the definition of an agricultural building. The definition of agricultural land includes meadows, which are extremely important, whether they are in Cornwall or elsewhere. However, as I understand it—I am not an agriculturalist or a horticulturalist—meadows do not produce food that is directly ready for market. Even so, they are an important part of our landscape and can contribute to the food chain. Therefore we have an anomaly. Paragraph 9(1) of schedule 5 to the 1988 Act exempts fish farms, so the provision applies more widely than suggested by paragraph 2, which defines agricultural land as

“pure arable meadow or pasture ground”.

I am sorry that the hon. Gentleman does not intend to press his new clause to a vote, but I understand his reasons for that. In supporting his amendment, however, I advise him—he may have liaised with others on this— to consider whether a change needs to be made to paragraph 2, which provides the definition of agricultural land, as well as to paragraph 3, which provides the definition of agricultural buildings. He and I both want clarity so that the matter is not ventilated before the courts again, and I suspect that a tweak to the definition of agricultural land would also be helpful.

[Mr Thomas]

I am minded to press the new clause to a vote, such was the clarity of the argument of the hon. Member for St Austell and Newquay. My hon. Friend the Member for Wolverhampton South West has made a compelling case in support of it. The hon. Gentleman has reassured me that, having had conversations with the Treasury, there is no cost associated with it and he clearly has the support of the NFU. The Minister will have to make a pretty powerful speech to convince us not to press the new clause to a vote.

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[Mr Thomas]

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

I understand that Ministers intend to charge £300 for large businesses and £150 for small businesses that want to make a business rate appeal. The new clause is a probing measure to explore how Ministers arrived at those figures. Given that there are likely to be substantially more appeals as a result of the current business rates revaluation, it would be good to understand what the thinking has been about the charges.

In the context of business rates bills being reduced on six out of nine warehouses of a very large business such as Amazon, one wonders whether £300 is not rather low. It costs £250 to submit a claim for unfair dismissal and £950 if the case goes to a tribunal. Funding has been cut from the Valuation Office Agency and I wonder whether a fee of £300 for a big business submitting a speculative revaluation claim is truly appropriate.

It would be good to hear what Ministers have to say and whether they will keep the matter under close review, with the potential for amending the charges as evidence begins to emerge.

[Rob Marris]

The charge for business rate appeals is understandable, given the regrettable trend of recent years, which started under a Labour Government, of charging for access to justice. However, we also need to see things in the context of something that was raised with me and the hon. Member for Thirsk and Malton—the margin of appreciation, as I think it would be called; the flexibility. A business pays a charge and there is an appeal. It wins, but is told that the difference between what it would have been charged and what it will be charged post-appeal is less than 15%. Then it has lost—even though it has won. That does not seem to me to be a good way to proceed.

[Mr Jones]

I am grateful to the hon. Member for Harrow West for tabling the new clause as it gives me a further opportunity to remind the Committee of the work that we are doing to improve the business rate appeal system.

The system has always suffered from too many speculative applications clogging it up, causing delays and uncertainty for those ratepayers with genuine cases. It has for far too long been too easy for rating agents to lodge speculative appeals with little or no supporting evidence.

More than 1 million appeals have been made against the 2010 rating list, using the system that was put in place on 1 April 2010. Of those that have been resolved, only 29% resulted in a change to the rating list. With the introduction of a new rating list on 1 April 2017, we have a fresh opportunity to reform the system. Our check, challenge, appeal system will introduce a new three-stage process. We will put the emphasis on early engagement and resolution by all parties to ensure that, where ratepayers and rating agents decide to make a formal challenge, they must bring forward proper evidence cases. In turn, it will support local government, giving it greater certainty over its rates income.