Local Government Finance

Steve Double Excerpts

Wednesday 7th February 2018 Commons Chamber

[Rishi Sunak]

We have gone above and beyond the four-year deal in listening and responding to what the sector wants. That is why last year we allowed increased flexibility in the use of the adult social care precept, and why this year we have proposed additional flexibility on the core council tax referendum principle.

On adult social care, of which we have heard much today, on top of the extra £2 billion announced at the spring Budget last year, we have now announced an additional £150 million extension to the adult social care support grant, and we have increased the rural services delivery grant to its highest-ever level.

We are also building on the highly popular business rates retention scheme. Local authorities estimate that in the year just finishing they will keep about £1.3 billion in business rates growth, and we expect this to be maintained going forward.

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

The Minister knows that I have raised a number of times the issue of people avoiding paying both council tax and business rates on holiday homes by converting them to business use and enjoying small business rate relief. Councils in tourist areas are losing out from that. Will he commit to trying to close that loophole?

[Rishi Sunak]

I thank my hon. Friend for his intervention. He rightly points out that he raised this issue in Prime Minister’s Question Time earlier and has made representations to me about it. I am pleased to confirm that my officials and I are looking into the matter. He makes the point well. The existing system does leave some scope for ambiguity, and we will look into that.

The vital funding that comes from business rates retention—over £1 billion—is a direct result of local authorities driving economic growth in their areas, and it is on top of the core settlement funding that we have announced today. Over the long term, local government will be transformed, becoming increasingly self-sufficient with local resources funding local services. But to achieve that, we all know that the funding formula needs to become fairer, more transparent and more responsive to changing demands. Getting it right will of course be a challenge, but the prize if we can do that is a system that will be truly fit for the modern world and allow councils to face the future with confidence.

The business rates retention proposals that we mentioned earlier are a key step in this journey, and we hope to see local authorities retaining 75% of business rates from 2020-21. There is a great deal of enthusiasm across the country for this new model, and I can assure the House that I and my Department are committed to working with the sector to make this a success.

I turn briefly to some of the specific points that have been made. The hon. Member for Sheffield South East (Mr Betts) and my hon. Friend the Member for North Dorset (Simon Hoare) were right to pay tribute to local councillors who have, we acknowledge, made difficult decisions and have done an extraordinary job over the past few years. My hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski), for North Dorset, for Waveney (Peter Aldous), for Redditch (Rachel Maclean) and for Ludlow (Mr Dunne) talked about rural areas and the need for fair funding. I can assure them that we are committed to that. The fair funding review will specifically take a fresh look at how council tax should be taken into account when redistributing income, and relative costs of delivering services will also be considered.

My hon. Friends the Members for Corby (Tom Pursglove) and for Wellingborough (Mr Bone) rightly talked about the role of governance and leadership in local councils. They were followed by my hon. Friend the Member for Newton Abbot (Anne Marie Morris), who rightly said that it is not just about how much, but how it is spent. Unaccompanied asylum seekers and the costs that councils have to bear were raised by my hon. Friend the Member for Corby and the hon. Member for Dover (Charlie Elphicke). I am pleased to announce that the Government have allocated funding from a £29 million pot for exactly that. My hon. Friend the Member for Corby will be pleased to know that Northamptonshire will receive £231,000 from that grant, and the hon. Member for Dover will know that Kent will receive more than £1 million.

Opposition Members talked a lot about whether the funding was fair. They pointed to Knowsley, so they will be pleased to learn that it receives core spending power per dwelling 26% higher than the average. Indeed, across the country, the 10 most deprived local authorities receive core spending power per dwelling 23% higher than the least deprived. We heard a lot from the Opposition about money. Indeed, the hon. Member for Dover put it well: there is no question to which the answer is not more money. We all know where that money has to come from—our hard-working taxpayers. Under the last Labour Government council tax doubled, and that is what we would have to look forward to again.

This is a settlement that honours our commitment to local government—delivering certainty, recognising the challenges and making additional resources available, all while keeping excessive council tax rises in check. It gives councils the resources they need to provide the world-class services that their communities expect and deserve. I commend it to the House.

Question put.

The House proceeded to a Division.