Local Government Finance Bill (Fourth sitting)
Debate between Rob Marris and Justin Tomlinson(7 years, 10 months ago)
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Justin Tomlinson
First, to be absolutely clear, I do not need any encouragement by the Whips to engage. I was elected in my own right. That intervention actually strengthens my point. Whoever is in government, difficult decisions have to be taken about public spending, and elected representatives are mindful of the people they are accountable to. It is often easier to focus decisions on some of the services—perhaps those that will directly affect businesses, since they will not necessarily queue up at the ballot boxes. However, under the proposed new system, protecting business income through business rates will become a greater priority for local authorities. We have rightly focused on new opportunities, but the change will also protect existing businesses and give them a greater ability to get an audience with decision makers and say, “By working together, we can not only grow but protect existing jobs.”
Rob Marris (Wolverhampton South West) (Lab)
The hon. Gentleman said that his local council does its best to encourage growth, and I am pleased to hear that. At the moment, his local council, on which I think he served, does not have the powers that the Bill will confer if it is passed. Is he saying that his local council would have tried harder to encourage growth and business if it had had those powers when he was a councillor?
Justin Tomlinson
The hon. Gentleman pre-empts some of the things I am coming to. I made it clear that I am very lucky to be the MP for an area with a local authority that is proactive in this respect, but that is not a given across the rest of the country. I do not disparage other councils, because all councils have to decide their own priorities. I represent a high-growth area where, for those who are interested, 8,100 jobs have been created since 2010. I know it is hard to believe, but that is greater than the average gate at the County ground. That is because the council recognises that it should be proactive. Could we have done that faster? Yes. We are landlocked by several local authorities that are less keen on additional development and growth. They have their reasons for that, and I respect those.
We will deal later with the pooling of some decisions and the sharing of some benefits. I was particularly taken by the point about Heathrow, which I will come back to, because I see further potential in that area.
Justin Tomlinson
May I ask the shadow Minister to be ever so slightly patient? I am being tempted to fly in various directions. I will finish this point, then turn to that one.
Why does this matter? We all talk about new income opportunities and providing incentives, and trusting local authorities as the best vehicles to deliver those. That is incredibly important, but we seem to be missing the emphasis on creating jobs. As I said, 8,100 new jobs have been created in my constituency and unemployment has fallen by 60%, in part because new regeneration and development projects have attracted businesses from other local authority areas that have not supported the business community so proactively. Those things matter to the people on the ground, because they benefit directly. As I said, the 60% fall in unemployment is making a genuine difference to people. We have to protect the maximum potential of the incentives on offer.
Rob Marris
The hon. Gentleman said that some, not all, of the council areas surrounding his council were not as keen—I think that was the adjective he used—as his own council. What evidence is there that the changes in the Bill would make those surrounding councils, which he thinks are less keen, keener?
Justin Tomlinson
One of the elements that I have picked up is the principle of pooling, whereby different local authorities and local enterprise partnerships can sit down and work together and share the benefits of this growth. The whole point is that the Government will incentivise and reward those areas that are going to support additional growth and, therefore, there is an opportunity. I will give more detail on that shortly.
I come back to the point that this will work only if really big warehouses are built. Obviously, the smallest businesses are exempt from business rates through the small business rate relief. That is a hugely important policy that I hope continues because it benefits so many of our micro and small businesses. I ran my own business for 10 years and, just before I became an MP, I benefited for a year from that. It did make a difference in what was at that time a difficult financial climate.
We must remember that there is a significant number of small to medium-sized businesses that could be in offices not much bigger than this room but are larger than would qualify under the small business rate. So it is not just about getting distribution warehouses. That is an easy opportunity for some areas, particularly for those with lots of additional land and good transport logistics. It is also about these small and medium-sized businesses. It is about working with the existing small and micro businesses to help them to make that step up. I have been involved in a number of debates where it has been said that it is a lot harder to go from four-plus employees than to start a business because there are all the additional matters to deal with. The Bill provides an incentive for local authorities to have supportive forums, engage with communities and look at how they can shape the direction of their policies to encourage growth. Again, the bonus is that not only will that generate additional business rate income, which we all recognise that local authorities need, but it will help to create that next generation of jobs.
That was a powerful point about Heathrow. It is probably the case with any national infrastructure project that the communities closer to it get the vast majority of the inconvenience, while local authorities much further away will get some of the benefits. Take Heathrow: my constituency would gain significantly from Heathrow, for the convenience of residents going on holiday and for the businesses. So my local authority has written to the Government to say, “Please proceed with Heathrow.”
If I were an MP directly under the flight path, I would have a very different postbag. Again, that is where pooling could come in. Perhaps those local communities with the most inconvenience could go to the others to say, “We would be less minded to object, to try to delay and frustrate, if you would share some of the benefits that you would get.”
The principle of pooling can be expanded much further. Innovative council leaders would use that to go to talk to other leaders to say, “Look, we can work together here. You help us so that we are inconvenienced less or rewarded slightly more for the inconvenience that we will suffer. You will get your growth; we will get some of that.” Those are discussions that can be had and we have some very talented council leaders who, I am sure, would take advantage of that.
Justin Tomlinson
As I said, I recognise that there is not a huge amount of difference between us, but my plea to the Minister is: stay strong. We were enthused by the reference to “Dad’s Army” earlier, my dad’s favourite programme. Despite the realities that we face, we need to stand firm and trust and encourage local authority leaders.
Rob Marris
I salute the hon. Gentleman’s generosity in volunteering a transfer from the people of Swindon and Wiltshire down the road to, say, Hounslow or Heathrow. May I caution him that while his area has done well, which is great, he might come to regret some of these measures? For example, he might represent an area that has a major car manufacturing plant, which, faced with the United Kingdom leaving the European Union, might decide to close down. The business rate scenario in that area—hypothetically, wherever it might be—might then look very different, and its representative might therefore look differently on redistribution.
Justin Tomlinson
That is a very interesting intervention. By pure coincidence, I happen to have the Honda factory in my constituency. Another MP raised that point on the Floor of the House during the Brexit debate. I gently remind the hon. Gentleman that Honda operations, which used to supply 100% of its cars to Europe three years ago, was ahead of the Government and public opinion and switched to global exporting of the cars: 80% of the cars now go globally. The impact of the referendum does not cause any issue at all, now or in the future, to the major employer in my constituency.
We could look at this hypothetically. There will always be issues beyond local authority control, because the world changes. Industries and technologies will change. That is why there are protections in the Bill. There would also be an incentive for local authorities to start planning and looking ahead. Local authorities and MPs get lobbied regularly by employers telling us either that things are going great and they are looking to expand, or that things are potentially going wrong. When we are told that things are going wrong, there will now be an extra incentive to engage with them to find a way forward.
I remember when Honda was struggling during the financial downturn. It was still producing all those cars but could not sell them. The local authority—this is a good example—found the company significant amounts of land to store those cars on. Again, I was lucky that we had a forward-thinking, proactive local authority. Every local authority is different and they have competing priorities; this is about ensuring that that priority is absolutely at the top.
Local Government Finance Bill (First sitting)
Debate between Rob Marris and Justin Tomlinson(7 years, 10 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
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.
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.