Local Government Finance Bill

John Bercow Excerpts

Tuesday 24th January 2012 Commons Chamber

[Chris Williamson (Derby North) (Lab)]

I beg to move amendment 30, page 22, line 28, leave out ‘may’ and insert ‘must’.

[The Temporary Chair (John Robertson)]

With this it will be convenient to discuss the following:

Amendment 48, page 23, line 9, at end insert—

‘(5) The regulations must make provision for safety-net payments to be made to relevant authorities whose calculated funding is less than the relevant funding calculated in regard to the authority fulfilling its integrated risk management plan.’.

Amendment 31, page 24, line 28, leave out ‘may’ and insert ‘must’.

Amendment 32, page 24, line 37, leave out ‘may’ and insert ‘must’.

New clause 2—Major redevelopment schemes: non-domestic rate income—

‘(1) In any case where a relevant authority proposes a major redevelopment scheme resulting in a substantial loss of non-domestic rate income for a period exceeding one year, the authority may make an application to the Secretary of State for a safety-net payment to be made to the authority each year for the period of the scheme. The Secretary of State must determine whether to make such a payment having regard to—

(a) the proportion of non-domestic rate income which will be lost to the authority for the period of the scheme, and

(b) the future social and economic benefits of the scheme.

(2) The Secretary of State must notify the authority of his or her decision on whether or not to grant a safety-net payment and allow the authority 28 days to make representations about his or her decision before issuing a final determination.’.

[Chris Williamson]

It is a great pleasure to serve under your chairmanship, Mr Robertson.

Amendments 30, 31 and 32 were dealt with in some detail in the previous debate, so I shall not detain the Committee unduly by going over old ground. However, I shall speak in more detail about amendment 48, which would add a new protection in the Bill to ensure that fire authorities are enabled to fulfil their integrated risk management plans.

The plans enable fire and rescue services to develop a balanced approach to reducing risk within the communities they serve, and I hope that the Minister will look with some sympathy on the intentions behind the amendment. The plans combine prevention, protection and emergency response on a risk-assessed basis to improve the safety of local communities and to create a safer working environment for firefighters. They also include measures to help the community speedily recover from the aftermath of an emergency and to minimise the impact both to people and to the local economy. It is thus absolutely essential that funding for the fire service does not fall below the minimum amount required for it to carry out its vital duties. The amendment has the aim of ensuring that the obligation is on the face of the Bill. It would protect, through a safety net payment, authorities that might otherwise receive less funding than was required for them to fulfil their duties under the integrated risk management plans.

I understand that Ministers believe the financial risk will be mitigated by fire authorities receiving a percentage of the rates of the district authorities in their area, but what if they are wrong? They would be putting the safety of the general public at risk. If they are confident that their predictions are right, the safety net payment mechanism would never need to be evoked. Either way, I hope the Government will support the amendment.

In their response to the consultation on the changes, the Government said that if some fire authorities had their funding outside the business rate retention scheme, they would not be incentivised to make savings. We believe that is both unfair and untrue; fire authorities have all the incentive they need, which is to make their communities safer places by maximising their resources. The changes would also play fast and loose with the health and safety of the general public. The essential principle is that funding for fire services should be based on the risks and needs of the area, not solely on local economic circumstances.

Many local authorities engage in significant redevelopment schemes. I invite the Committee to look at how city centres have been revitalised in Derby, Leeds, Leicester, Manchester and many other cities, but some developments involve more than changing the shops or regenerating old buildings. They can involve a significant amount of demolition before a new project begins. New roads may be required, and some buildings may not be suitable for conversion, or they may not be worth saving.

That was the case when we regenerated the centre of my home city of Derby. Had that scheme gone ahead under the Government’s proposed new system, a significant amount of business rate income would have been lost to the local authority. Those situations can be addressed when the rates are pooled, but we fear that such projects might not go ahead under the new scheme because of the uncertainty it will create.

If shares of business rate income are to be decided year on year, an authority cannot plan effectively for a long-term project. They could use tax increment financing to fund the project itself, but that has two drawbacks. If they use a TIF 1-type scheme, there are problems if the scheme extends beyond 10 years because there may be a reset of the system by the Secretary of State. Such a time scale is possible for some major schemes, and we should like resets carried out before 10 years. A TIF 2 scheme has to be in an area designated by the Secretary of State and can only secure income to the authority when it is completed. The borrowing in such schemes is likely to be used to pay for the project; it is capital, not revenue.

New clause 2 is therefore intended to assist local authorities when they are undertaking such schemes. It would enable them to make an application in advance to the Secretary of State for a safety net payment to be made to them for the duration of the scheme. The Secretary of State would decide whether to make such a payment based on a consideration of the proportion of its income the authority would be losing and the future social and economic benefits of the scheme. That would allow a kind of cost-benefit analysis to be undertaken before a decision was made.

We have also sought to include social benefit in the calculation. The purpose of that is to ensure that issues such as the types of job to be created, rather than the number of jobs, could be looked at if there was an economic imbalance in the area. It would also enable other social benefits to be taken into account, such as improved transport access, community facilities, and access or provision for disabled people.

We have deliberately chosen not to limit any examination of social and economic benefits to the area covered by the local authority undertaking the scheme. That is because schemes may be on the border of another local authority, or may benefit those in a larger travel-to-work area. It is right that all the benefits to a wider area should be taken into account, especially when only one local council is bearing the loss of business rates.

If a scheme proposed by a local authority was deemed to have a social and economic benefit, the Secretary of State could agree that the authority would receive a safety net payment for the duration of the scheme. That would give the local authority certainty that its loss of business rates would be compensated for throughout the scheme, rather than it having to wait to see, each year, whether it had received a payment. That would encourage local authorities to go ahead with schemes that had real benefit, and would protect local services.

The new clause would also allow local authorities to make representations to the Secretary of State once he had notified them of his decision, and prior to a final determination being made.