Rob Marris
Main Page: Rob Marris (Labour - Wolverhampton South West)Local Government Finance Bill (Third sitting)
Rob Marris Excerpts(7 years, 3 months ago)
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Mr Thomas
It is a pleasure to serve under your chairmanship, Mr Gapes. We all appreciated your guidance, not only on coffee but on how to address other Committee members. My hon. Friend the Member for Lewisham, Deptford has been at pains to explain in detail what your guidance on both issues might mean in practice.
As Opposition Members committed to supporting the principles of the Bill, we are keen to undertake line-by-line scrutiny so that it might emerge back on to the Floor of the House in much better shape. As such, the occasional outburst of tough love may be directed at the Minister, but it will be with the purpose only of achieving a better Bill. We had a good debate on Second Reading, and one of the key points that emerged from that is germane to the amendments tabled in my name and the name of my hon. Friend the Member for Oldham West and Royton.
One of the most interesting moments in the Minister’s contribution on Second Reading was his description of this as a revolution in local government finance. An image of Che Guevara briefly surfaced across my mind, followed soon after by Corporal Jones of “Dad’s Army”. The Committee’s purpose is to adjudge whether what the Department offers us is more Che Guevara or more Corporal Jones. [Interruption.] At this time in the morning, yes, that is the best I can do.
Clause 1(2) amends the Local Government Finance Act 1988 by removing the provision for a proportion of non-domestic rate revenue to be paid to the Secretary of State. That effectively removes the mechanism by which the Government collect the central share under the current business rates retention scheme. Following the late Margaret Thatcher’s 1988 nationalisation of business rates—who ever thought we would hear “Margaret Thatcher” and “nationalisation” in the same sentence?—all business rates income collected by billing authorities was paid to central Government, with resources then distributed to local authorities up and down the country, according to need, by the revenue support grant.
Under the current scheme, introduced in 2013-14, local government collectively retains the local share, which is 50% of business rates revenue; the other 50%, the central share, goes to central Government. On the local share, there is a system of tariffs and top-ups, with those local authorities with relatively high business rates revenues paying a tariff and, conversely, those local authorities with relatively low business rates revenues receiving a top-up. The new system will see a proportion of business rates revenue paid into an account that will handle payments to and from authorities, including tariffs, top-ups and safety net payments.
Amendment 1 would delete subsection (2), thereby retaining the requirement for a billing authority to pay a proportion of non-domestic rating income to the Secretary of State. Amendment 23 follows on from that. It amends schedule 1 to enable a local and central share to be retained for designated authorities, with the Secretary of State required to publish the criteria for the use of such funds.
Opposition Members made clear our support for the principle of the devolution of 100% of business rates on Second Reading. We also made clear our concern about the almost complete absence of detail on how the measures the Bill paves the way for will work in practice. In the absence of that detail, many in local government and those who follow it closely are worried about the impact of this measure on the provision and quality of local services.
The first big issue with the measure as it currently stands is redistribution. Essentially, the key questions are as follows. How will the redistribution mechanisms associated with this measure work in practice? How will the Minister and his officials seek to amend the system of tariffs and top-ups? Given the importance of revenue support grant and other section 31 grants to helping to ensure spending power between areas is equalised, how will the new system compensate for the loss of revenue support grant and the promised addition of extra responsibilities to local authorities?
Rob Marris (Wolverhampton South West) (Lab)
Perhaps my hon. Friend, with his much superior knowledge, can explain this conundrum to me. How can one support 100% devolution of business rates, yet also argue for redistribution? It seems to me, prima facie, that those are contradictory.
Mr Thomas
My hon. Friend speaks to one of the tensions at the heart of the Bill. On Tuesday, we heard considerable concern about the impact of that tension from the witnesses in both the morning session and the afternoon session. I want to dwell on that tension in due course.
The other question associated with the concern about redistribution, and I hope the Minister will be willing to dwell on this in his response, is, what are the key principles that the fair funding formula will operate on? As I understand it, the fair funding review is currently working its way through his Department. We have no idea, sadly, when we can expect publication of that document. We are none the wiser about the rules by which the fair funding review is being conducted and the criteria that are being used.
Mr Thomas
I do agree. One wonders what the rush is to get this Bill through now, before the fair funding review and the draft regulations associated with the Bill have been published to allow proper scrutiny. Perhaps Ministers’ minds are focusing on the provision later in the Bill to delete any annual consideration of the state of local government finance and the scrutiny thereof, and that is motivating them to rush the Bill through. That is something I want to come to later in the Committee’s proceedings, if I may.
Rob Marris
Does my hon. Friend, like me, detect a worrying trend here? The fair funding review consultation document has not been published and, yesterday, when we concluded two days of debate on Second Reading for arguably the most important Bill since the second world war, the White Paper had not been published.
Mr Thomas
There does seem to be a pattern of Ministers shying away from parliamentary scrutiny. I do not know why, because we always enjoy the Minister’s appearances, but it is a concern, as my hon. Friend the Member for Oldham West and Royton also made clear. Given that this measure is one leg of the triptych of elements that are associated with 100% business rates devolution—the paving Bill, which we are discussing here, the fair funding review and the detailed regulations—one would have thought it better to have seen all those together at one moment so that we could have assessed the benefits or not.
Mr Thomas
My hon. Friend has always been far more charming and conciliatory than me, but he is right: we support the principle of 100% business rates devolution and want it to work for local government, given the huge importance of the services that local authorities provide for the people of England. He is absolutely right that we should have had all three elements together at the same time, so that we could look in detail at the impact of the measure. It would certainly help if we could at least see the details of the responses from the whole series of councils and organisations that responded to the consultation last July. We are not in a perfect situation—he rightly says that the best possible arrangements for scrutiny would have been helpful—but it would help if we could at least see the consultation responses.
The last key question to which it would be helpful to get an answer is linked to redistribution. How will the poorest areas in England not lose out even more as a result of this measure than they have since 2010? I am pleased to say that redistribution engaged the minds of virtually all hon. Members who made speeches or interventions on Second Reading. Perhaps it is worth dwelling on some of their contributions. The hon. Member for Wells (James Heappey) raised the funding gap, which he thought was already too wide, between predominantly urban and predominantly rural authorities—redistribution was an essential point for him. The hon. Member for South Dorset (Richard Drax) worried that, for authorities such as his, which are
“surrounded by every environmental designation from here to God knows where…it is going to be far harder”
under the new arrangement
“to raise this additional money”.—[Official Report, 23 January 2017; Vol. 620, c. 70.]
He was clearly worried that his local authority would lose out, and redistribution was at the heart of his concerns.
The Chair of the Communities and Local Government Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), also raised concerns about redistribution and about how his authority and others might suffer if the redistribution arrangements are not right. The hon. Member for Totnes (Dr Wollaston) raised concerns with the Minister that the improved better care fund might not be maintained, given some of the current problems with the social care precept. Concern about redistribution was at the heart of her question.
Even the hon. Member for Thirsk and Malton, who, sadly, is not in his place, raised, amidst his regular attempt to bash London local authorities, a concern about his local authority, which I understand is a more rural one, and how its spending power might be affected in comparison with other authorities. Again, redistribution was at the heart of his concern. My hon. Friend the Member for Coventry South (Mr Cunningham) was worried about the impact of the measure on the services from which Coventry City Council and Coventry residents benefit. Similarly, interestingly and almost counter-intuitively, the right hon. Member for Cities of London and Westminster (Mark Field) noted the significance of the business rates income that Westminster Council receives and generates, and how it sees some of that income redistributed around the country. He made clear that the redistribution arrangements need to be got right.
My hon. Friend the Member for Manchester, Withington (Jeff Smith) expressed serious concerns about the redistribution arrangements on behalf of his local authority in Manchester. I will come on to Manchester, because it always figures highly in the index of multiple deprivation, which is the analysis of the poorest areas of our country. He was concerned about how the redistribution arrangements might work in practice.
There is surely a concern about the redistribution arrangements between tiers of local government. My amendments could have a significant impact on the sharing of business rates revenue between counties and districts. The arrangement in place involves the 50% retention of business rates. The Minister will know that districts get 40% of the increase in rates income and counties get up to 10%. That is because districts have more direct powers, with economic development planning being the obvious one. Counties, on the other hand, have much higher spending needs. They tend to be the authorities responsible for social care, for example. The system of top-ups and tariffs, as it affects the relationship between counties and districts going forward, will be particularly important.
Interestingly, the Institute for Fiscal Studies argued that a growth in the business rates tax base might mean that counties are likely to lose out over time, and that districts gain. Redistribution between tiers of local government, where multi-tier arrangements are in place, is of huge importance. I hope the Minister will dwell on that point.
Rob Marris
My hon. Friend cited the Institute for Fiscal Studies. Does he share my concern that the Bill might be yet another attempt to slash funding for local government? The IFS found in 2015 that grants from central Government to local government had fallen by 38.7% a person between 2009-10 and 2014-15.
Mr Thomas
My hon. Friend makes a very interesting point. On Second Reading, I mentioned some Institute for Fiscal Studies analysis that bears repeating. When the IFS considered what would have happened between 2013-14 and now if 100% of business rates income were retained at that point rather than having the 50% business rates retention scheme, it found that 16 councils would have seen their funding increase by 20% or more, whereas only one council saw its funding go up by 20% or more under the current scheme. Conversely, on the basis of the IFS analysis, 122 councils would have seen their funding fall under 100% business rates retention between 2013-14 and now, with 12 of those councils losing more than 2% of their income. No council has lost that much under the 50% scheme.
Therefore, the concern put by my hon. Friend in his usual forceful manner—it was about whether there might be further serious cuts in the spending power of local authorities and, crucially, how they would be distributed—was a point well made. That is a genuine concern, which the Minister needs to address.
Rob Marris
Does my hon. Friend agree that there are certain parts of the east of England—this may cover Waveney—where land availability is shrinking because the land is collapsing into the sea?
The Chair
Order. Can I ask Members please not to take us away from the scope of the Bill? And I think—
Mr Thomas
The hon. Gentleman makes an interesting point, because it is certainly true that local government associations up and down the country support the principle of 100% business rates retention, as indeed do Labour Members. However, I say gently to him that, as the case of his local authority exemplifies, the devil is in the detail. Surely he recognises that the Bill is the opportunity to try to establish how Ministers will operate the detailed implementation of aspects of the measures that are pivotal to the success or otherwise of 100% business rates retention. Redistribution, which was pivotal to the contributions of so many hon. Members on Second Reading, is fundamental to the success or otherwise of the Bill. It would be a tragedy if the support, tentative as it is in some places, for 100% business rates retention were to disappear, and if many local authorities lose out, because the Government get the fair funding review wrong, or because the regulations that implement the Bill in practice do not have sufficient and effective scrutiny.
I say gently to the hon. Gentleman that he is right that the principle is supported, but it is supported more loudly by those authorities that have a high business rates income and that see the potential for economic development because they have access to land. Authorities such as Allerdale Borough Council that are trapped in terms of the space they have for economic development might be more worried about the detailed implementation of the Bill. Obviously, the hon. Gentleman will not dwell on coastal erosion, because he would just upset the Chairman, but I hope he will think more about the question of redistribution and use his substantial influence with Ministers to encourage them to think through it.
Rob Marris
On redistribution, does my hon. Friend agree that one way to square the circle of 100% devolution while ensuring that we do not exacerbate unfairness would be to have a system whereby we had 100% devolution of business rates incomes to incentivise to promote development—as the Minister, without any evidence thus far, keeps telling us it would—but also retention of an equivalent to a revenue support grant to redistribute to less advantaged areas such as Wolverhampton and Oldham?
Mr Thomas
My hon. Friend makes a good point, but if he will forgive me, it is apposite to the clause 1 stand part debate, when it will be worth dwelling on the revenue support grant in a little more detail.
I was focusing on authorities that might have concerns about how redistribution would work. Many urban authorities currently benefit from top-ups under the scheme—perhaps that top-up or income is not quite as much as they would want—but are nevertheless very concerned about redistribution. I am thinking of my own authority. The London Borough of Harrow has a very high density of housing, and although there is some scope for new business development, it is a very highly developed area, and obviously constituents and the council want to preserve the character of the area. The Minister may say that there are incentives in the Bill to promote economic development, but in practice there are significant barriers to growth, even in many urban areas. That is one reason why the amendments are critical.
Mr Thomas
It is commendable that Cornwall has offered to be one of the pilot areas. As the hon. Gentleman will have heard me say, it would be lovely to know how the pilot scheme will work for Cornwall, and indeed for Liverpool and London. The Minister and his Department have not yet got round to publishing more detail about that. The hon. Gentleman may have the advantage of knowing how the scheme will work in Cornwall, and I hope that he catches your eye, Mr Gapes, so that he can tell us. That would certainly give the Committee more information than I suspect most of us have. I would not be at all surprised if the Minister was not even sure how the scheme was going to work in Cornwall, so I am sure that the hon. Gentleman will be extremely helpful in that regard.
The hon. Gentleman makes an interesting point. When one thinks of Cornwall, which is a very attractive county, one does not immediately think of huge tracts of land being available for out-of-town shopping centres—the one area of economic growth that might lead to substantial business rates income for local authorities. Cornwall is surrounded by sea, which is a natural barrier to economic growth. It also has huge amounts of farmland, which is essential to retaining the county’s character and is also a natural barrier to economic growth. Of course, Cornwall Council will want to be one of the first pilot authorities, so that it can see how the redistribution arrangements might work. Although it may not yet have seen the detail of the amendments that I have tabled, I expect that it is concerned about how the redistribution arrangements will work in practice in the long term. The hon. Gentleman will be able to play back that at least the Opposition are fighting Cornwall’s corner, even if he is perhaps not quite so enthusiastic on that point.
I come back to the issue of poorer areas versus richer areas and the redistribution arrangements between them. A helpful analysis from the House of Commons Library compares the spending power of councils that have a high index of multiple deprivation rating—in other words, the poorer areas of the country—with that of authorities that have a low index of multiple deprivation rating, which one might describe as the richer areas of the country.
The analysis shows some stark realities, which are particularly pertinent to this debate about redistribution. Let me give a couple of examples. Blackpool, which ranks as the highest in terms of multiple deprivation, had an actual revenue spending power in 2011 of £165.51 million. By 2019, it is projected to have a revenue spending power of only £126.2 million—a loss of £39.31 million in revenue spending power, or a percentage loss of 31%. Compare that with Hart in Hampshire, which is the local authority that ranks lowest in terms of the level of multiple deprivation. In 2011, it had a revenue spending power of £9.35 million. It is projected to see that drop to £8.91 million by 2019, which is a change of £440,000, or just under 5%. So Blackpool is projected to lose 31% of its spending power by 2019. Hart in Hampshire is expected to lose just under 5%. That is a huge gap. In the context of that huge gap, Blackpool Council could be forgiven for being very nervous about what 100% business rates retention might mean, without more detail on whether it will benefit from the Minister’s changes to the redistribution arrangements.
Perhaps a couple of other examples will bear witness to the truth of that potential concern. Hull had £266 million of actual revenue spending power in 2011, which is projected to fall to just over £202 million by 2019—a loss of some £63 million, or a 31% loss in its spending power. Compare that with the Chilterns, the third least deprived authority in England according to the index for multiple deprivation rating. It had an income in 2011, in terms of actual revenue spending power—let me use the right phraseology—of £11 million. According to the analysis, that will drop to £9.86 million by 2019, which is a change in actual revenue spending power of just over £1 million. That is a drop of 11%—that is still a significant drop in its spending power, but is nothing like the scale of the drop that one is going to see in Hull. So the Chilterns local councillors might be forgiven for being quite enthusiastic about 100% business rates retention. They might think that, if the Government continue to operate the redistribution formula in the way that they have, although the council might lose, it might not lose much in relative terms.
One suspects that councillors in Hull, particularly those with responsibility for finance, will be extremely concerned that, if the current system of redistribution continues, given how much they have already lost in spending power and are projected to lose by 2019, they will risk losing even more capacity for spending power when 100% business rate devolution comes in.
Rob Marris
Does my hon. Friend agree that, unless amendment 23 is agreed, that unfairness could continue? The national figures from 2010-11 to 2016-17 show an overall 17% reduction, but the proportion of expenditure financed by centrally distributed income fell from 75.9% in 2010-11 to 57.4% in 2016-17, according to page 30 of the Library briefing. Does he agree that that is a shocking drop and that we need acceptance of amendment 23 to counterbalance that trend?
Mr Thomas
My hon. Friend makes a good point. I hope that the Minister is beginning slowly to get the concern of hon. Members, reflecting the concerns of local council leaders and councillors, about how the redistribution arrangements will work in practice.
I will end this point with one last example, which may be particularly interesting to one member of the Committee. That is the comparison between the 10th most deprived council, Tower Hamlets, and South Northamptonshire Council, the 10th least deprived.
Rob Marris
As ever, my hon. Friend is making a powerful argument, which is of course backed up by evidence. Does he agree that unless amendment 2 is passed, the trend is likely to continue and, as with the main thrust of the Bill, there will be winners and losers? Given social trends, the losers are likely to be deprived areas where residents tend to have worse health, greater needs and lower levels of financial self-sufficiency. Therefore the redistribution mechanism foreshadowed in amendment 2 is much needed.
Mr Thomas
I agree with the broad thrust of that; those in poorer areas, as evidenced by the index of multiple deprivation, are likely to be at most risk, in terms of social care. However, figures now available on social care funding suggest that the crisis is hitting areas beyond those that are poorer. There is clearly a national emergency, and I fear that it may get worse if the issues raised in amendment 2 are not addressed.
Mr Thomas
As always, Mr Gapes, I am grateful for your guidance, and particularly for the thought of what might happen at 1 o’clock, if I am lucky.
Sadly, the hon. Member for Waveney, is not here, but Suffolk County Council, his local social care authority, has increased social care funding by 8.4% in absolute terms. My hon. Friend the Member for Wolverhampton South West may or may not be reassured to hear that that still represents a real-terms cut of 0.6% in social care funding. The Minister seems to have looked after his own social care authority, Warwickshire County Council, which has cut spending by just 1% in real terms. However, Cornwall Council, the local social care authority of the hon. Member for St Austell and Newquay, does not fare quite so well. Although it has increased social care funding by 5.6% in absolute terms, that is a real-terms cut of 3.2%.
Mr Thomas
Let us not go down that route. As I understand it, the hon. Members for Taunton Deane and for Somerton and Frome share a local care authority, Somerset County Council, which has cut social care spending by 6.2% in real terms. Northamptonshire County Council, which I believe the hon. Member for Northampton South knows well, has cut social care spending by 10.3% in real terms. Thurrock unitary authority, which serves the hon. Member for Thurrock and her constituents, has cut social care spending by 5.8%—a real-terms cut of 13.6%.
Of course, I do not want to leave out the hon. Member for Torbay. I understand that Torbay unitary authority plans to spend some £37.5 million on social care in this financial year, compared with £45.9 million in 2010-11—an 18.2% cut, or 25% in real terms.
Rob Marris
As I hope my hon. Friend agrees, amendment 2 would help redress a greater imbalance to which he has not yet referred. The social care precept will raise proportionately far more money in well-to-do areas than in disadvantaged areas such as Wolverhampton, thereby increasing the disparity in provision that amendment 2 seeks to redress.
Mr Thomas
My hon. Friend makes a good point. He and the rest of the Committee should look at the very particular situation facing Surrey County Council. We have heard that every councillor in Cornwall and in South Northamptonshire is an enthusiastic supporter of the current distribution of finance and of these proposals. As I hope Conservative Members recognise, however, not every Conservative-run council shares that enthusiasm for the way in which local government funding is managed. Many have serious concerns. It is important for us to consider the evidence from those councils as well as from the South Northamptonshires and Cornwalls, in the context of whether the social care crisis will continue beyond 2020 under the Bill.
Surrey County Council’s leader, David Hodge, an experienced figure in local government, has revealed that he will call for a referendum on a proposed 15% increase in council tax. My hon. Friend the Member for Oldham West and Royton, who has significant recent experience of local government, tells me that Mr Hodge is an extremely effective and astute leader and an imaginative figure in local government.