Local Government Finance Bill

Steve Rotheram Excerpts

Tuesday 24th January 2012 Commons Chamber

In the meantime, without that economic expansion, which is incremental, slow and difficult to manage, we still have those needs, which will be unmet unless the local government finance system works in such a way that there is redistribution from wealthier areas to those in the greatest need. We are confronted with the very reverse of that, however. The areas that will be the most disproportionately and adversely affected are those with the greatest needs, and those that will be the most rewarded and that can most easily cope with the changes are those with the fewest needs.

[Steve Rotheram (Liverpool, Walton) (Lab)]

My right hon. Friend is making a powerful point about the needs of specific areas, and he is correct in saying that Liverpool, Walton now has, unfortunately, the fifth highest level of unemployment in the country. Liverpool as a whole therefore needs more support. How does he think the Government can justify the fact that, proportionally, places such as Liverpool have been hit the hardest and that Liverpool has had to take a cut of £141 million in the past two years?

[Mr Howarth]

I shall give my hon. Friend two possible answers to his question, and I shall leave him to decide which is correct. The first possibility is that the Secretary of State and the Ministers responsible for this Bill genuinely believe that areas such as mine and that of my hon. Friend have the capacity create to economic growth—a bit like turning on a tap—and to widen the tax base and increase the revenue that they get through the business rates. They might also think that we are not doing enough to attract new investment into our areas. My hon. Friend and I know that that is not the case, however.

The alternative answer was put forward in very explicit terms by my hon. Friend the Member for North Durham (Mr Jones) earlier. It is that these measures are a crude way of rewarding those areas that send Conservative and Liberal Democrat MPs to this House and penalising those that do not. To put it even more crudely than my hon. Friend the Member for North Durham did—although I am not entirely sure that that is possible—I think that the Government are rewarding their friends and penalising their enemies.

I am not standing here as the representative of the Knowsley constituency to cry crocodile tears or to wave around the levels of deprivation that exist there. Those are facts. This is not a question of sentiment or of special pleading. The reality is that, as a result of historical events, some of which took place at least 20 years ago, we have problems and, as a result, we have needs. Unless the Bill can satisfy me and the people of Knowsley that those needs will be taken into account when the grant formula is determined, the more bleak interpretation that my hon. Friend the Member for Liverpool, Walton drew out of me a moment ago will be the inescapable conclusion.

I hope that the Government will accept the amendment, either here or in the House of Lords, later in the proceedings. They must not fall back on the argument that we heard earlier, when they said, “Don’t worry, we’ll take all this into account in the regulations. It will all become clear then.” The risks involved are so great for my constituents and for the local authority in Knowsley that it is impossible for me to accept those assurances. I do not believe that they have been given dishonestly. I accept that they have been given in good faith, but I have been around long enough to know that promises made in the heat of the moment in Committee in response to concerns about specific provisions have a habit of getting lost in the ether later. We need clarity, but we need it now. Local authorities are expected to plan on a long-term basis to meet their needs and determine their expenditure on services. Without that clarity, we will find ourselves in a position, some years down the line, in which the worst possible interpretation that we can put on the Bill will be the nightmare reality.

--- Later in debate ---

[Andrew Stunell]

Similar questions were asked about the Government’s decision to apply the new homes bonus to empty homes. We were asked what possible difference that could make, but it has reduced the number of empty homes by 21,000 this year and, as I go around the country, I find that local authorities are, for the first time, seized with the importance and necessity of tackling empty homes because that is an income stream for them. That will definitely be the case with local authorities in this situation. Indeed, the Opposition have given some illustrations that suggest that they rather fear that it might. There have been questions about whether the measure will prohibit the redevelopment of sites if authorities cannot keep the business rate income coming in. Opposition Members see that the perception about receiving a business rate income will be a significant consideration for local authorities of all kinds.

[Steve Rotheram]

It appears that the Minister is trying to advance the argument that that there are local authorities that are not interested in attracting inward investment. Can he name one?

[Andrew Stunell]

I am certainly not going to name an authority that is failing to get its inward investment, but I invite the hon. Gentleman to frame his remark and revisit it in four years’ time, when he will see the results of the change we are introducing.

One of the central criticisms of the Bill has been based on a misunderstanding of what happens at the moment and a deep pessimism about what it is possible to achieve in the future. Let us look at the area of the hon. Member for Liverpool, Walton (Steve Rotheram). In the four-year period from 2005-06 to 2009-10 the average annual increase in business rates in Liverpool was 8.2%. It absolutely is not the case that Liverpool loses out by getting business rates instead of formula grant. The hon. Gentleman might like to ask the treasurer at Liverpool what the annual average increase in formula grant was at that time, because that is what we are comparing—formula grant that is delivered to Liverpool and dictated by Whitehall against a business rate income that is in Liverpool’s hands. As I have said, the increase in those four years was 8.2% and I challenge the hon. Gentleman to say that the outgoing Labour Government were as generous as that. Let us not automatically assume that because an authority has difficult and challenging circumstances it is not possible for it to have increases in rates or that that is not happening.

--- Later in debate ---

[Mr Jones]

Exactly. Hidden in the Bill is the localisation of council tax benefit, which the Minister does not like to talk about and which comes with a 10% cut. As unemployment is rising in the north-east under this Government, more people will qualify for that benefit. Where will the money come from if it is locked into this system? The only other option for local government would be to increase the domestic rates, but there is an inbuilt problem in doing so. For example, in the north-east, 50% of properties are in band A, so the amount that can be generated is limited. In Surrey, only 2% of houses are in band A, so it is easier for some of the wealthier areas to generate that cash if they wish to do so. An increase of 1% in council tax in Durham, for example, gives a lot less in the long-run than the same increase would in Surrey.

[Steve Rotheram]

Is my hon. Friend aware of the heat map that has been produced that illustrates precisely what he is underlining? Those areas of highest deprivation that have been hit the hardest just happen to be areas that have Labour Members of Parliament.

[Mr Jones]

They are. My hon. Friend mentioned that map earlier and it only has to be seen—it screams inequality and exposes what the Conservative element of this coalition is about. It does not care about areas such as Liverpool and so on but about rewarding areas in the south-east, where its voters are. That is blatantly political. I am surprised that the Liberal Democrats are going along with it, but I presume that they have written off most of their northern MPs and councils for the next election in exchange for the Deputy Prime Minister’s post. Certainly, that inequality will be there when one looks at some northern councils and I do not understand why the Liberal Democrats are going along with this given the blatant unfairness that it will lock into the system. The hon. Member for Mid Dorset and North Poole (Annette Brooke) said that she would like a review of this issue, but there is no sign that the Government want to look at or take on board anything that has been said in the House or by local Government regarding the Bill.