Local Government Finance Bill

Steve Double Excerpts

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

[Jeff Smith (Manchester, Withington) (Lab)]

It is a pleasure to follow the hon. Member for Northampton South (David Mackintosh) who, like me, brings experience of local government to the debate.

I do not intend to speak for long, but I want to echo concerns that have been raised about the Bill. Like others, I welcome it in principle. I welcome more flexibility for councils to make spending decisions closer to home. We have certainly argued for that in Manchester for a long time. My fear, however, is that the Bill will do nothing to solve the crisis in local government funding. As such, it is a missed opportunity to support local government properly.

No other part of the public sector has been hit harder by austerity than local government. I was executive member for finance on Manchester City Council during the middle years of the coalition Government, so I experienced at first hand the consequences of unfair cuts to local government spending. They are the result of the Government effectively outsourcing the most difficult decisions to local authorities, thereby putting the blame on local councils rather than taking it themselves. I therefore have a natural suspicion of this Government’s intentions when it comes to local government funding. I will not forget the role of the Liberal Democrats, either. They are not represented in the Chamber at the moment, but without their collaboration with the Tories, local government would not be in such a parlous state.

Every year Manchester faces impossible decisions about which services to close as a result of the huge funding cuts imposed on us. Since 2010, the council has had to take out more than £300 million from Manchester’s budget year on year. Between 2011-12 and 2019-20, there will have been a £600 per household cut in funding. The city council has had to reduce its staff numbers from 10,400 to 6,400. How are councils supposed to continue to deliver services properly with that level of reduction?

I warned when I was making some of these difficult decisions that their full effect would not be seen for some time. I said that it would take time for cuts to feed through the system, and I think that we are seeing that now. For example, in Manchester since 2010, there has been a reduction of £77 million in spending on adult social care, on top of an £11 million reduction in the public health grant. Is it any wonder that we now have a social care and NHS crisis when councils around the country are having to make cuts of that size? I echo the point made by my hon. Friend the Chair of the Communities and Local Government Committee that we need to look at a new way of funding social care with a root-and-branch consideration of how that might be done in future.

The most important thing to remember is that the Bill does not represent any additional funding for councils in the short term. As the Minister said, it is fiscally neutral. While I welcome some of its measures, and although I support in principle the ability of local authorities to retain business rates, there have to be safeguards for those authorities that are less able to raise such revenue. In that regard, the Bill gives rise to more questions than answers. In fact, it raises more questions than answers about local government funding in general.

There is no clarity at all about the most important issue raised by the Bill: how will the Government handle the need for a redistribution mechanism? How will a fairer funding formula operate? What is the basis for any replacement tariff and top-ups? How do we stop the poorest councils losing out? The Government say that councils will not lose out—they are conducting a fair funding review and a needs assessment—but I hope that the House will forgive my scepticism about the Tories’ commitment to fair funding in local government as the poorer cities have consistently lost out over the past six years, particularly compared with the southern shires.

[Steve Double (St Austell and Newquay) (Con)]

I am listening with great interest to the hon. Gentleman. Will he acknowledge that rural counties and councils have been underfunded by central Government for many years and that all we are doing is addressing the imbalance that has been in place for a very long time?

[Jeff Smith]

There is an issue with rural funding that needs to be looked at. We calculate that if Manchester had had a fair and equal share of funding cuts across England—not protection from cuts, but the average cut—we would be £1.5 million a week better off, which would go a long way in local government spending.

I agree with my hon. Friend the Member for Sheffield South East (Mr Betts) that the Government need to approach the abolition of the revenue support grant with caution. Councils have different dependencies on RSG. For example, Westminster would need to retain only 8% of its business rates to replace the grant that it currently receives, whereas Wirral would require 187% of its business rates to retain the same amount as its current grant, and the figure for south Tyneside is 259%. That illustrates the London problem: how do we address the much stronger ability of the capital, particularly the City of London, to raise business rates revenue? In all likelihood, that issue will be exacerbated by the proposed house price indexing, which as I understand it means that London will be able to raise £700 million more while everywhere else might raise less. Unless the Government make clear how they are going to redistribute funds, we will run the risk of poorer areas being left behind, especially those where business and industry have been in long-term decline and finding solutions is genuinely difficult. Manchester has a very well run Labour council and we are doing pretty well, but plenty of other areas around the country are struggling and will genuinely struggle to drive growth in the future.

Forgive me for wanting to see the detail before I am convinced by the Bill. We will need to see much more detail as it passes through the House as too much is unclear. For example, there is no clarity about the role of specialist grant funding. In my experience of the extremely complex world of local government finance, it is very easy for Government to make cuts under the radar via reductions in specialist grants. I have seen that happen in Manchester. It is not unusual for the Government to use such a mechanism to force difficult decisions on local councils.

I will end with some positive points. Giving local authorities the ability to reduce the national business rates multiplier has potential, but there are obvious concerns about a race to the bottom as a consequence. I am pleased that tax powers are being given to the mayoral combined authorities to fund new infrastructure projects and to stimulate growth—that has to be good news. I also welcome the multi-year settlements, which are a much more sensible way of allowing councils to plan for the future. While we welcome some of the Bill’s measures in principle, I cannot support it without being given a lot more detail and some sense that the Government know how they are going to address inequality between areas and how they are going to make sure that areas such as Manchester will not lose out in the long term.

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[Steve Double (St Austell and Newquay) (Con)]

It is a pleasure to follow the hon. Member for Great Grimsby (Melanie Onn) and to contribute to this debate. I also wish the Minister a happy birthday—I am sure there is nowhere else he would rather be.

I am delighted that the Government, through the Bill, are continuing their agenda for devolution. The measures in the Bill will revolutionise how finances are raised and bring greater flexibility and accountability to local government. The retention of business rates, for which local councils have been asking over many years, is welcome. The developments in the Bill are particularly welcome in Cornwall, not least because Cornwall is one of the pilot areas for the 100% retention of business rates, which will enable us to be an early adapter and to contribute to fine tuning its roll-out across the country.

That is another sign, following the devolution deal for Cornwall agreed in 2015, that the Government recognise the particular challenges and identity of Cornwall. I am sure that Members across the House will be aware of Cornwall’s dramatic geography: we jut out 90 miles into the Atlantic; our foundations are built on granite; and we are surrounded by fish-bearing seas on three sides, while the River Tamar almost gives us island status. Our geography has contributed to our unique identity and independent attitude, although it also presents many challenges. We have only one neighbouring county—Devon.

Our land is rich in natural resources. Only this week, that was taken further, with the announcement of large lithium deposits, and extraction of this precious metal is now eagerly expected. With the growing global demand for lithium for the production of batteries, this stands to write another chapter in Cornwall’s long history of mining, following on from tin, copper and China clay. We hope to breed a whole new generation of Ross Poldarks—hopefully, a bit more successfully. This change will mean that the local authority will be able to benefit directly from the future growth of this new industry. It will hopefully mean that the local authority will be very supportive of developing this new industry in the near future.

Cornwall’s claim to its own independent identity in culture has been long established, and its desire for greater self-rule has been rekindled in recent times. These days, we Cornish do not march in anger on Westminster as we did in 1497 to protest at the imposition of yet another tax. That attempt did not end too well for the Cornish. No, we have learned, and we now prefer to work more constructively with the Westminster Government, but the desire for greater devolution of powers remains as strong as ever.

I wholeheartedly welcome this Bill as a key move towards devolving more powers. It is an ideal balance between being given the autonomy required to act and being accountable locally without progressing into the unnecessary and expensive bureaucracy of yet another layer of government. I do not believe that we need yet another layer of government in Cornwall, as some would like to see, but I support and I am working towards giving greater powers to the existing bodies in Cornwall. The measures in this Bill will take another step towards making Cornwall Council more responsible and more accountable for Cornwall’s future.

The current review of business rates was long overdue. The delay had led to rates being out of sync with the business community and the constantly changing landscape that businesses face. It left areas that are struggling for whatever reason further disadvantaged, putting additional unwelcome pressures on them. When a high street is blighted with empty shop space, the last thing it needs is yet more businesses pulling out because of high rates, leaving more shops empty, which can reduce the footfall and further disadvantage those left behind.

With the new measures in the Bill, councils will be able to take a more flexible approach, which has to be welcomed, by being able to adapt the local business rates to suit the needs of their communities and businesses. They can work to attract new businesses where they are needed. This freedom for local authorities to set and vary business rates according to local needs and situations, which will come in 2020, will be a key advantage. It is the local equivalent of Brexit—taking back control for the good of the local community instead of having a one-size-fits-all scenario imposed by a remote authority that all too often does not actually fit in any case.

Alongside that, there are other specific key changes in the Bill, one of which I would like to address in closing. Over recent years, I have campaigned on the importance of public toilets, which are essential in a tourist area such as Cornwall. I have to choose my words carefully here, but a few years ago when I was the cabinet member on Cornwall Council responsible for public toilets, I spent many months touring the 285 public conveniences of Cornwall. I spent far more hours than I would like to admit in some of those toilets.

In recent years, Cornwall Council has been seeking to hand over all its public toilets to town and parish councils and other community organisations. One of the biggest barriers to that is the cost of running the toilets—and a large part of the cost is that they are liable for business rates. Its seems crazy to me that public toilets are liable for rates. They are an essential public service and do not make a profit; they are not a business. Thankfully, the Government have recognised this, and from April 2018, local authorities will be able to use their “discretionary relief powers”—“relief” seems to be the appropriate term here—to remove the business rate liabilities for toilets.

My Cornish colleagues and I raised that with the former Prime Minister, David Cameron, back in 2015 when he visited the county. We have been pressing for this change since, and I am delighted to see that the penny has dropped and that the Government are now addressing this issue. That will enable councils throughout the country to drop the lunacy of charging themselves rates to provide something as basic as a toilet, as well as reducing the costs of running toilets for parish councils and other community organisations that may wish to take on that task.

I am pleased to be able to welcome and support the Bill. The measures that it contains represent another significant step in the Government’s vision of, and commitment to, the devolution of appropriate powers and responsibilities to local government.

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[Simon Hoare]

rose—

[Steve Double]

rose—

[Jim McMahon]

I am going to make some progress, because it is the Minister’s birthday and he has cake with candles waiting at home. There are also a great deal of unanswered questions that he needs to address at the Dispatch Box.