Local Government Finance Bill (Fifth sitting)

Rob Marris Excerpts

Tuesday 7th February 2017 Public Bill Committees

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

On the question of debate and the lack of scrutiny of reliefs, is my hon. Friend aware—he has talked about the Government possibly introducing more reliefs—that a couple of years ago, the National Audit Office found that approximately 1,200 tax reliefs are in operation and that the Government keep track of the effectiveness of fewer than 300? Therefore, the debate sought by these amendments would be extremely helpful in respect of any reliefs relating to local government.

[Mr Thomas]

I was not aware of that work by the National Audit Office, or indeed that so many reliefs are not properly scrutinised. That merely underlines the case not only for the work the NAO does generally, but in particular for the work, perhaps by the NAO, relating to local government finance, as well as the more general case for at least maintaining the scope for effective scrutiny of local government finance.

Perhaps this is my last point on the case for scrutiny of the Department, before I seek to develop these arguments further. Given that an amendment to the principles of allocation statement can be laid at any time, albeit after consultation with local authorities, and given that it could have a significant impact on local government finances, surely there should be the opportunity to look at why those tariffs and top-ups have been amended and the impact on councils. Therefore, there are probably eight arguments for maintaining the level of scrutiny. I hope, Mr Gapes, with your permission, to develop the argument a little further to help Conservative Members, who are not always the quickest at getting the argument and the point I am seeking to make. They are a little slow, if I may say so, to react to the point.

Let us think of the series of ways in which local government finance is going to operate. We heard from the Minister last week that section 31 grants will still be able to be offered to local councils.

[Rob Marris]

Discretionary.

[Mr Thomas]

Entirely discretionary, as my hon. Friend says from a sedentary position. One thinks of a situation where perhaps there is a large influx of refugees. I can foresee, sadly, another situation of flooding—the Conservative party has failed to properly protect our country from the impact of climate change—or coastal erosion, which I know the hon. Member for Waveney is particularly interested in. There will potentially be scope for discretionary section 31 grants to local authorities. There will be an assessment of need. We have no idea yet what that assessment of need for each English local authority will look like. We do not even have any sense of when it will be published. All we know is, mañana—it will be published at some distant point in the future, when the Minister and his officials can get around to it. Bearing in mind that the Minister and his officials cannot get round even to publishing the 400 submissions to last year’s consultation on the Bill, we cannot have much confidence that that assessment of need will be brought forward any time soon.

We do know that the expectation is that, aside from business rates, local councils will have to depend even more not only on the fees and charges they can raise from different services they offer, but, crucially, on council tax. My hon. Friend the Member for Oldham West and Royton reminded the Committee of the Government’s own assessment that, over the lifetime of this Parliament, there will be a 25% increase in council tax. One wonders whether that is on the conservative side, bearing in mind what Surrey County Council has done with its planned referendum and the case that it is making for a 15% increase in council tax, such is the terrible state of social care funding for that authority. We have not yet heard from the Minister how he is going to recommend the citizens of Surrey and Members of Parliament who represent Surrey should vote in that referendum. I look forward to hearing from him on that subject.

We know from the way in which Conservative Chancellors have sought to meddle with local government finance that additional reliefs will probably be announced at different times. Local government will get its finance in a series of ways in the new system. Surely there should be an opportunity to debate the way in which those different sources of finance dovetail with each other, so that we can see how individual local authorities throughout England, our great nation, are able to provide—or are not able to provide, as I fear will be the case—the public services that the citizens of England expect.

Bear in mind that Opposition Members, over the last six years or so, have been able to highlight just how much funding local government has lost over the terrible years since 2010, when the Conservative party came to power. By 2020, many councils will have lost more than 60% of their income. Arguably, an annual debate—or at least a regular debate—on local government finance will be all the more important in the first years after the introduction of the system.

It would be helpful to hear from the Minister why he thinks the requirement for a local government finance settlement report should be axed now. Why should there not be a 2018 local government finance settlement report, given that the new system will not be in force? Why should there not be one in 2019? We will hopefully have a little more information than we have now. We hope that, by 2019, the Minister may finally have got around to publishing the 400 submissions that have been put in as a result of the 2016 consultation paper. I hope, perhaps, that the Select Committee on Communities and Local Government might have had the chance to wade through those reports to give us its considered take on the concerns, or not, about the future of local government finance. Specifically, it would be interesting to hear from the Minister not only why he thinks parliamentary scrutiny of local government finance should be reduced in the way that the Bill proposes, but why it should be reduced before the new system has been introduced in its entirety.

We are the most centralised country in the western world. Almost 90% of local government finance is delivered by central Government—all the more reason for scrutiny of local government finance in the way we at least have at the moment. I suggest that it should be enhanced, not reduced in the way the Minister envisages. Our political system is weighted overwhelmingly to the power of the Executive in Whitehall. Notwithstanding the excellent contribution that the judiciary occasionally make to keep the Government honest on issues such as exiting the European Union—at this point, one should surely pay tribute to Gina Miller and her advocacy for scrutiny by Parliament—

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[Mr Thomas]

My point was not about whether one opposes particular reliefs, but about the impact on local government finance. There is a consequential impact for local government, which we are debating today—a consequential impact on the finances of the hon. Gentleman’s local authority, my local authority and, indeed, the local authorities of all members of the Committee—and surely those consequential changes need to be considered. My point is that, under the Minister’s proposals, which I suspect the hon. Gentleman has been told he has to support, come what may—that is the reason he has the privilege of serving on the Committee and being mentored by Opposition Members—parliamentary scrutiny is being weakened in relation to local government finance. There may well be further justification for further reliefs to business, or for further public services to benefit from reliefs. We will seek to explore that later. However, there should be an ongoing opportunity to explore the consequential impacts of decisions that the Chancellor or other parts of the Executive might make on local councils’ finances.

[Rob Marris]

Does my hon. Friend agree that it is right, as the Bill provides, that before making a principles of allocation statement, the Secretary of State will have to consult representatives of local government? That is good, but the Secretary of State will not have to consult or be answerable or accountable to Members of Parliament on the principles of allocation statement, so one thing is being done right and the other is being done completely wrong. The amendments would rectify that imbalance.

[Mr Thomas]

My hon. Friend makes a very good point and one that I realise I have not dwelled on until now. Of course he is right to say that local government leaders and their councils should be properly consulted, but one suspects from the contributions that we sometimes see in private from Conservative-led local authorities that they sometimes look to the Opposition to make their case more vigorously in public than they feel they can make it to their own Ministers, and that opportunity will be reduced if there is not similarly a requirement to be answerable to Members of Parliament.

I will offer up to the Committee one further example of a very significant change to local government finance. If something like this were done in the future, we might not have the opportunity fully to explore the consequences. I am referring to the decision by the then Chancellor to switch the indicator, in terms of business rates going up or not, from the retail prices index to the consumer prices index. That is likely to have a significant impact on local government finance. In the 2016 Budget, Ministers suggested that it would reduce business rates income by £370 million in 2020-21. In 2020-21, under the Minister’s plans, there will not necessarily be an opportunity for a debate on the Floor of the House on the principles of allocation statement or the local government finance settlement report, to see what the consequences of that change are in that year for local government finance.

And that is just one year. Each year, that reduction in income generated by business rates for local authorities will continue. Over a decade, it is estimated that councils will lose over £3 billion. That is a £3 billion benefit to business, and there is a debate to be had outside this Committee on whether that is the right support to give to business. In the context of this debate, there must be an issue as to whether it is the right choice for local government finance and the public services such as social care that are being provided.

How will Nuneaton, Warwickshire, Waveney, Suffolk, Torbay or North Yorkshire be able to provide public services if they are seeing their authorities hit by their share of that £3 billion cut in capital funding? Sadly, there was no consultation with local authorities about that switch from RPI to CPI. I want to dwell on that issue a little more as part of the clause 5 stand part debate, which I hope we will get on to soon.

[Rob Marris]

Shortly.

[Mr Thomas]

Shortly. But it is another example of the way in which the Executive can make significant changes that may have substantial merit in their own right in terms of the support they give to business—one could think of other such examples—but which nevertheless have a significant impact on local government finance. Surely it is the responsibility of this House to think about local government finance in detail and about all the complexities that are envisaged, and to worry about what those might mean in future. Amendments 24, 25 and 26 stand in my name. Two of those are, I suspect, amendments that we will continue to regard as probing amendments, but the principle of scrutiny by the House of Commons is something that we on the Labour Benches take extremely seriously.

It was remiss of me not to provide members of the Committee with the opportunity to reflect a little further on one of my favourite areas of the country: Allerdale in the Lake district and the local authority there. After the post-tariff top-up was introduced, it benefited from just £3.64 million in 2013-14 under business rate retention. That went up slightly to £4.91 million in 2014-15. Then it went down to £4.63 million in 2015-16 and by 2016 it had gone up slightly again, to £4.7 million. That is not very much business rates income under the 50% scheme. One assumes that it will get a little more income under 100% business rates retention.

The council is surrounded by agricultural land, which is not rated in business rate terms, and has significant natural barriers to further economic growth—I am thinking of the wonderful lakes of Derwentwater, for example, and the wonderful mountains of Skiddaw. The council faces natural barriers to economic growth, with which the hon. Member for Waveney will sympathise. Surely we have a responsibility—even though we represent other authorities as individual Members of Parliament—to think about the impact on authorities such as Allerdale, whose financial means might otherwise be forgotten if there is not the ongoing opportunity for parliamentary scrutiny.

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[Mr Thomas]

Will the Minister give way?

[Rob Marris]

Will the Minister give way?

[Mr Jones]

I will. It is always best to hear Back Benchers first.

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[Rob Marris]

The Minister, who I believe is moving towards suggesting that the amendment should not be accepted, just prayed in aid the consultation with local government representatives. On page 33 of the Bill, proposed new sub-paragraph (2) in schedule 1(12)(4) says:

“Before making a principles of allocation statement, the Secretary of State must consult such representatives of local government as the Secretary of State thinks fit about the general nature of the principles of allocation.”

The Secretary of State could deem two local government representatives fit under that provision. Can the Minister say a little more about how wide the consultation would be? Would it be wider than my extreme example of two, which the Bill would allow?

[Mr Jones]

The hon. Gentleman’s example was rather extreme. I would envisage that we would properly consult local government in its entirety.