Local Government Finance Bill

Steve McCabe 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

[Mr Jones]

As the hon. Gentleman will know, the Bill does not deal with the principle of what additional matters will or will not be devolved to local government. Social care funding is an extremely important issue. It is this Government who have given local authorities the opportunity to spend up to an additional £900 million on social care in the next two years, on top of the additional package of £3.5 billion to which we have given councils access. In total, we have given them access to an additional £7.6 billion in the spending review period, which is dedicated solely to adult social care.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Does the Minister accept that the Bill will significantly increase the rates demand on hospitals at a time when the health service is extremely hard pressed? For example, the rates demand on Queen Elizabeth hospital in Birmingham will rise to £7 million. If the Minister is willing to look at discretionary relief on public toilets, is he willing to look again at discretionary relief for hospitals?

[Mr Jones]

I am sure that, having perused the Bill, the hon. Gentleman will know that NHS hospitals do not feature in the increase to which he referred. I think he was referring to the 2017 business rate revaluation. That exercise has been undertaken by the Valuation Office Agency, which is independent of the Government. The Government have provided a package of transitional relief amounting to £3.6 billion, and NHS hospitals will be subject to the same transitional relief as other ratepayers whose business rate bill will increase as a result of the revaluation. As many Members will know, the revaluation was not designed to raise more or less business rate overall. It is a fiscally neutral exercise, which means that some business rate bills have increased and others have decreased as a result of the independent valuations made by the independent agency.

The Bill does not determine funding levels for individual councils. We continue to work with people throughout local government to deliver the fair funding review, which takes a wholesale look at councils’ relative needs and resources. We remain committed to implementing a new funding formula in time for the implementation of 100% business rates retention in 2019-20.

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[Mr Thomas]

I will address the hon. Gentleman’s interesting question in the context of Surrey County Council’s announcement last week that it will hold a referendum on a 15% increase in council tax. I wonder how he or Ministers in the Chamber will be advising people who live in Surrey, including the Chancellor of the Exchequer, to vote in that referendum.

Perhaps one can sympathise with Surrey county councillors after not a single penny of new money was put into local government to help to tackle the social care crisis. Few people in local government think that the Secretary of State’s statement last month on local government finance will stabilise the care market, enable the recruitment of extra frontline care workers, ease the pressure on NHS hospitals, or ensure that all families with loved ones who need help will see them getting the level of care they actually need.

One reason why Surrey’s decision is so striking is because it has been able to increase spending on adult social care by more than 34% since 2010-11. Some councils have had to decrease spending on adult social care by almost the same proportion over the same period. In fact, only two out of the 152 social care-providing local authorities have been able to increase their spending on social care by more than Surrey, so if Surrey says that it cannot cope with the demand for social care, where can?

Although even Oxfordshire and Surrey have been unable to protect frontline services, the impact of local government cuts has been disproportionately felt across the country. The Bill offers no guarantee that the situation will get any better. The poorer an area, the greater its needs and the more it relies on public services, which are often funded by the revenue support grant, yet this Government’s cuts have hit the poorest areas the hardest.

The Institute for Fiscal Studies has stated that those councils

“among the tenth which are most grant-reliant have had to cut their spending on services by 33% on average, compared to 9% for those…councils among the tenth which are least grant-reliant.”

We cannot even call that a postcode lottery. It is true that postcodes matter, but it is not luck or chance that determines the quality or quantity of local services; it is the actions of this Government and their decisions taken in Whitehall. That is the context in which we must consider this paving Bill today.

Before any Government Member again tries to advance the idea that local councils are set to get a significant stream of new funds from keeping 100% of business rates, Ministers have always made it clear that what they give, with great fanfare, with the one hand today, they will take away on another day—probably when fewer people are looking—with the other. The Bill will apparently be fiscally neutral.

[Steve McCabe]

Birmingham City Council is a perfect example of giving with the one hand and taking with the other. It has been pretty brutally treated by this Government. Birmingham gets £5.6 million from the new adult social care fund, but it is losing £5.6 million as a direct result of the changes to the new homes bonus.

[Mr Thomas]

My hon. Friend makes a good point. Many local authorities throughout the country have seen services such as housing similarly disadvantaged by the Secretary of State’s decision.

There is no detail of what extra responsibilities will be passed to councils, or which of the additional grants that councils currently receive for their responsibilities will be taken away. Even though councils’ statutory responsibilities are not being properly funded now, Ministers expect councils to take on even more while losing further funding.

As I have indicated, I welcome the Secretary of State’s confirmation that he will not go ahead with his predecessor’s plan to get councils to handle attendance allowance but, as I made clear in my intervention on the Minister, this merely raises the question of what will happen to other specialist funding. The House will have heard the Minister refusing to rule out the end of the better care fund, which I hope the hon. Member for Totnes (Dr Wollaston) clocked, or the end of the £3 billion public health grant. Members representing rural areas would be right to worry about the future of the rural services delivery grant, which is also flagged up for possible axing in the Government’s consultation document.

The Minister has again promised that no local authority will lose out. Does that mean that local authorities will not lose out in year one because there might be some transitional help, or does it mean that every council will be better off and able to meet its statutory responsibilities in full throughout the next Parliament? I welcome Ministers’ intention to pilot their policy approach in five areas, and it is crucial that there is a fair system of top-ups and tariffs for redistributing resources between authorities.

Ministers have indicated that the system will be similar to the one that they introduced under the 50% business rate retention scheme in 2013-14, but that is not wholly reassuring. The Institute for Fiscal Studies has considered what would have happened between 2013-14 and now if 100% of business rates had been retained instead. It found that 16 councils would have seen their funding increase by 20% or more, whereas just one council has seen such a significant increase under the 50% retention scheme. Conversely, 122 councils would have seen their funding fall, with 12 losing more than 2% of their funding. No council has lost that much under the 50% scheme. To have a fair funding system under a 100% business rate retention scheme, the system of top-ups and tariffs must be amended, so why have Ministers introduced the Bill without publishing the responses to their consultation on the detailed implementation of that measure, which closed last July, and without even a date for the publication of their fair funding review?

The Bill raises more questions than it answers. For example, how will Ministers handle the business rates income of a local authority that benefits from a major national Government decision, such as to expand Heathrow or to build a high-speed rail terminus in its authority area? The business rates of Hillingdon Council, which neighbours my council, have always benefited from Heathrow. Westminster City Council similarly benefits considerably from business rates income that arises because of its fortunate proximity to major national assets. In such cases, how will some of the inevitable growth in business rates income, which will have little, if anything, to do with council policy, be redistributed to help authorities that do not benefit from such big advantages? Ironically, although Hillingdon Council has opposed the expansion of Heathrow, it stands to benefit significantly from business rates growth while doing nothing at all to help to generate it.

We also want to explore what would happen if a major business closed or moved away through no fault of the local authority concerned. The sudden loss of a major source of business rates income would have huge implications for the future of local services, but the safety net that Ministers are proposing looks less than generous, especially when we do not know how frequently the needs of each local authority will be reassessed and the top-ups and tariffs system will be reset.

The decision to allow only mayoral combined authorities to introduce an infrastructure supplement appears petty and vindictive. If a community needs infrastructure urgently, local English leaders should not have to jump through extra hoops to put together funding just because they are not a mayor.

Too many big decisions relating to how the business rates regime will work in practice are not yet clear, and too many big decisions will remain with the Secretary of State once the new regime is in place—that much is clear. As my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Select Committee, made it clear, it therefore seems a little drastic to abolish the need for Ministers to be held accountable annually for their performance on local government finance. It appears that they will still be decisive players in deciding which parts of England benefit more from business rates and which less so. The House should be able to hold the Secretary of State to account specifically for his performance on this matter.

Local government in England and the local services that the people of England rely on have been poorly treated by the Conservative party in the years since 2010, and the Bill could make things even worse. We will give the Bill a fair wind tonight and seek to improve it, but if significant change is not forthcoming, we will have to consider afresh our approach to the Government’s handling of this issue.