Amendment 22, in clause 3, page 3, line 21, leave out ‘2013’ and insert ‘2014’.
Amendment 23, in clause 4, page 3, line 35, leave out ‘2013’ and insert ‘2014’.
Amendment 24, in clause 5, page 4, line 5, leave out ‘2013’ and insert ‘2014’.
Amendment 25, in clause 6, page 4, line 22, leave out ‘2013’ and insert ‘2014’.
We have tabled these amendments because we are concerned about the way the Bill is being rushed through the House and, should it be enacted, the short time allowed for its implementation. Understandably, the Bill deals with difficult questions. It is not easy when dealing with local government finance to resolve exactly where the line should be drawn between central and local government, how far services should be uniform and how far we are prepared to tolerate variations in them. I accept that the Government carried out a consultation before bringing in the Bill, but the problem is that the Bill seems to reflect little of that consultation.
In addition, the Bill is being taken through the House at a break-neck pace. It was published on
Why are the Government so worried about taking evidence upstairs in Committee? They might be a little worried about what they could hear, because the truth is that local councils, having started to look at the Bill in detail, are particularly concerned about the speed of implementation for its provisions and are struck by the number of powers being given to the Secretary of State.
Does my hon. Friend agree that another possible motive for considering the Bill on the Floor of the House is the coalition Government’s botched programming of business for this Session and the fact that, were it not being considered here, there would be little to be heard in the Chamber?
My hon. Friend makes an extremely good point, which I will come to in a moment.
If the Bill comes into force, one extremely complex system will be removed and replaced with another extremely complex system, without time for local authorities to prepare for it.
Before my hon. Friend moves on from the question of evidence, I do not want her to overlook the value of such evidence. Does she agree that democracy works better when a wide range of organisations has an opportunity to contribute effectively to our discussions? Evidence sessions in a Public Bill Committee give organisations that represent people with a wide range of interests the chance to assess, analyse and propose amendments to improve legislation. That stage will be sorely missed because of the way in which the Government are handling the Bill.
I could not agree more with my right hon. Friend. Since I have entered this House, I have learned that the best way to improve legislation is to scrutinise it effectively and listen to those who will have to deal with it when it comes in. If the Government chose to take evidence, they would have ample opportunity to table amendments to the Bill in Committee or on Report.
I am grateful to the hon. Gentleman for that point. Although he is correct in saying that many of us have been local councillors, I point out to him, with all due deference because this applies to me as well, that many of us were local councillors some time ago and that the system of local government has altered in the time since. It would be beneficial for the House to hear from those who are running local councils now. I sincerely regret that we have not had time to do so.
My hon. Friend, who is a distinguished former leader of a local authority, makes a valid point. I agree with him on one thing: local government finance is exceedingly complicated. For that reason, it might well have been useful to hear in Committee from people such as finance officers in local authorities who will have to deal with this procedure from day to day. They might well have been able to suggest technical amendments that would have been beneficial to the Committee and which, if we are honest, are beyond the expertise of most hon. Members.
Will the hon. Lady remind the Committee how many months of extensive consultation the proposals for the Bill have gone through before this stage and how many changes to the scheme were proposed and then adopted?
The hon. Gentleman should recognise that it is not much use having a consultation unless it informs the legislation. [ Interruption. ] Local authorities say that it has not. A second process, which many Members have found useful, is to allow people to give evidence on the exact wording and form of the Bill once it has been published. I believe that if we are serious about the legislation that we introduce in this House, it is right and proper to give people the opportunity to do that. People have not had time to do so with this Bill because we are not having evidence sessions in Committee. The House introduced such evidence sessions because it was believed that they would improve legislation. It is a pity that the Government have decided to miss them out.
Is it not very clear to my hon. Friend and to Government Members that there is something slightly odd about a Bill that is supposed to give benefits to local government arousing considerable anxiety and concern in local government, as we have seen in the briefings that we have received? Is that not clear evidence of the need for further thought and attention to the detail to ensure that we do not end up with a disaster that is problematic for local government, rather than a measure that gives greater discretion and benefits to local government?
My right hon. Friend makes a very good point. In delivering local services, we are meant to be partners with local government. It is right and proper that the House has an opportunity to take on board the views of local government on the legislation.
As my right hon. Friend is a London Member, perhaps I may read out what London Councils says:
“The retention scheme as written is extremely complex and does not, in our view, incorporate adequate reward and incentive for local authorities. London Councils believes that the Government needs to urgently rethink the business rate retention scheme that it has set out in the Bill.”
If we had had a proper Committee stage upstairs, we could have taken evidence on that matter, considered technical amendments and debated them properly. It is a shame that we are not doing so.
I agree with my hon. Friend completely. We are only doing things in this way because the Government do not have enough to fill our days. Since we have the innovation of the whole Committee stage on the Floor of the House, could we not have another innovation of having witnesses before us? There is a special place for them at the Bar of the House. We could devote one day, or perhaps additional days, to hearing exactly what those in local government think about the legislation.
My hon. Friend, as usual, makes an interesting point, but he is tempting me to go beyond my remit and discuss the procedures of the House. Perhaps the Procedure Committee could look at that point.
Before my hon. Friend moves off the question of procedure, does she agree that it is important that we do not lose sight of the fact that the introduction of evidence sessions as part of the Public Bill Committee process, as opposed to the Standing Committee process, was one of the good reforms of the previous Parliament? Mr Syms is right that there is useful expertise across the House from Members with a background in local government. However, unlike the previous consultation and the public statements of Ministers, evidence sessions would give members of the Committee and Members who are following the legislation time and help in getting to grips with the content of the Bill. It serves our purpose, as well as the wider purpose of better legislation, to have those evidence sessions and not to put them to one side, as the Government are doing in this case.
My right hon. Friend is right. We do have a lot of expertise across the House, but we need up-to-date and informed expertise, which is what evidence sessions give us.
There is no procedure to do that in Committee of the whole House. Mr Bryant was taking the hon. Lady away from the subject that is before us.
I will just make a little progress.
Councils are expected to prepare for the changes that the Bill will bring in without knowing exactly what they are preparing for. This is an enabling Bill and we have not seen any draft regulations to go with it. In the Government proposals, there is no guarantee that councils will not be worse off after the first year of the scheme. Councils do not yet know what percentage of business rates they will be allowed to keep. They do not know how the levy will be set, nor who will qualify for a safety-net payment and in what circumstances. They do not know what their business rate baseline will be.
My hon. Friend is making an incredibly important point, which cuts to the heart of the matter. The Government say that they are in favour of localism, yet they have created a Bill in which the Secretary of State retains many powers. As my hon. Friend says, those powers are not defined, so it is not clear whether local government will keep business rates and how much it will keep, or whether and when the Secretary of State will intervene.
My hon. Friend makes a powerful point. As the Bill progresses, we will table amendments to attempt to clarify some of those matters. However, at the moment, local authorities are in the dark about what they will deal with next year, if the Bill is passed.
As with so much legislation under this Government, whether in Committee or on the Floor of the House, we are being asked to consider the Bill blind. We are not given the background information that we need—for example, the national planning policy framework in the case of the Localism Bill. Does my hon. Friend agree that the Bill, like so much current legislation, is therefore likely to form part of the logjam in the other place at some point further down the line? The amendment makes enormous sense, because the last thing we want is legislation stuck in the other place, and, in this instance, for the timetable to be missed.
My hon. Friend makes an important point about our not seeing the draft regulations. It is difficult to debate the Bill properly without them and it also makes matters difficult for local authorities. Moreover, the measure is a carry-over Bill. The Government have got themselves into such a mess with their legislation backing up in the Lords that they cannot, even with the extended Session, guarantee that the Bill will get through before the Queen’s Speech.
May I pull up my hon. Friend on one point? She referred to councils, but she means councils in England. Is there not a particular irony here, in that the Conservative party has spent the past few years campaigning for English votes for English folks in the House, yet by holding the Committee stage on the Floor of the House, Welsh Members of Parliament are almost required to take part in the process when otherwise they would not be allowed to do so?
My hon. Friend makes an interesting point, although I have never known him to need any pushing to take part in any process in the House—thankfully, because he contributes so much.
The Bill is hugely complicated, local authorities do not know what faces them, and the measure will not get through until the next Session. On the Government’s timetable, the Bill must get Royal Assent by July. That means that regulations may not be put before the House until after the Bill has finished its passage. The House will rise earlier than usual this year because of the Olympics, which means that they may not be put before the House until the autumn. That causes real difficulty for local authorities, because it leaves so much uncertainty about what they will have to deal with.
I feel a bit like Banquo’s ghost in this debate because I was chair of finance on the Greater London council, whose expenditure tipped Mrs Thatcher over the edge and into nationalising the business rates. There are real problems with the complexities of the Bill, as set out in the briefing from London Councils. It is difficult for individual Members of Parliament and individual local authorities to work out the implications for one’s area. Although we cannot receive witnesses on the Floor of the House, as the Deputy Speaker said, the Government have introduced a procedure whereby we can pause a Bill to enable us to undertake further consideration and consultation with the relevant interested parties. Perhaps the Government could consider that at some point during the day. We might want to pause the Bill and come back to it later, after more detailed discussions with interested parties.
I am grateful to my hon. Friend for reminding us of two things: that a Conservative Government nationalised business rates and the idea of a pause. The Government are in such a mess with most of their legislation that the whole lot could probably do with a pause while they rethink.
Let me revert to the uncertainty for local authorities. They have made it clear that they are concerned about the short time they will have, following the passage of the Bill and the regulations that go with it, to make changes to their systems. London Councils said:
“All of these changes will require substantial changes to systems and processes at the local level, and we are extremely concerned that not enough time is being allowed for all of these policies to be properly thought through and implemented.”
I could not put it better myself.
Local authorities are being asked to cope with not only changes to non-domestic rates, but the localisation of council tax benefit at the same time. That will require new IT systems, which are unlikely to be ready, and more changes to local council revenues.
There are only three, possibly four companies in the UK that are capable of producing the sort of software that local authorities might require. Clearly, they will have a capacity problem if they are faced with hundreds of local authorities wanting individual systems. That is concerning.
My hon. Friend is right—there will be a capacity problem. Again, it would have been useful to hear witnesses from the relevant companies and consider the time scale they need.
Councils will also have to cope with changes to their revenue. It is likely that some people who receive a cut in their council tax benefit will not be able to pay, and collection rates will fall. That will affect some local authorities far more than others. The change also brings with it the possibility of more claims, because we are moving from perceiving something as a benefit to its appearing as a reduction in the council tax bill. All those with expertise in benefits say that it is likely that more pensioners will claim. That is a good thing, but local authorities need time to adjust their budgets because they face a 10% reduction in the amount of money available, coupled with protection for pensioners, and the possibility of more claims.
My hon. Friend is making a powerful case. She is considering the changes to the benefits scheme and she highlights the fact that an increase in pensioners’ claims as a result of the changes would be a further problem for local authorities. Indeed, it will be a major problem for them, because they will not receive the funding to pay for it that they get under the current benefits scheme. They are being asked to budget in advance, with all the uncertainties, knowing that the downside risk remains with them if the financial position is not as good as they thought when they budgeted. There is no safety net in the benefits part of the system for authorities that find themselves in difficulty. That is a fundamental problem, which is arousing real concern in local government circles. It is extraordinary that the Government are not giving an opportunity for those serious problems to be understood.
My right hon. Friend is, of course, right. Throughout the Bill, financial risks are transferred to local authorities. The Government set the system but transfer the financial risk elsewhere.
Let me return to the problems with IT systems. Earlier, my hon. Friend Alison Seabeck mentioned that only a few firms provide those systems. Interestingly, Capita has sent an e-mail to benefit and council tax managers to set out its concerns about the timing of the system. The manager who sent the e-mail writes:
“I think the most important point to make is that I remain concerned and disappointed that the timetable remains unchanged meaning that primary and secondary legislation will not be passed until the summer / autumn / winter 2012. Without the framework and detailed regulations underpinning both the local schemes and means for ensuring that pensioners now and in the future remain protected or treated equally, it is impossible to commence planning for software changes.”
That is the system with which the Government are expecting local authorities to cope.
There are other changes in the Bill—provisions on tax increment financing, on the rating of empty properties, and on exemptions from the scheme for renewable energy projects—for which local councils need time to plan, adjust their budgets and rethink the way they do things. Those measures require changes to how councils organise themselves and changes to IT systems. Many local authorities are making it clear that they believe the Bill does not give them sufficient time to prepare for those changes.
May I make a suggestion to the Minister—it is meant to be a helpful one? I try to be helpful occasionally even if the Whip is giggling away. Why not run the proposed system as a shadow system for one year to see how it works and iron out the glitches? Why not continue with the old system for a year but give local authorities an indication of what they would have received under the new system? That would allow any problems to be ironed out and the system to work properly.
Above all, the Opposition are saying that Ministers ought to take note of the people who must implement the changes on the ground—the people who collect the rates, who design the systems, who administer council tax benefit and deliver the services. If the Government rush the implementation of the Bill and it all goes wrong, chaos could result. They need to take the opportunity to test the system properly and to think things through. If they insist on introducing this hugely complex system, they need at least to give themselves time to run it properly and ensure that local councils can adapt their systems properly. That is why I have moved amendment 20 today. It might be helpful if I tell the Committee at this point that the Opposition intend to press the amendment to a Division.
I, too, have been an Opposition politician. Opposition politicians often argue that Bills taken on the Floor of the House really ought to be taken in a Public Bill Committee; and when there is a Public Bill Committee, they argue as eloquently as possible that the Bill ought to be taken on the Floor of the House. When Opposition politicians are not sure what to do about a Bill, one thing they say is that it has not been considered for long enough. They then try, as amendment 20 does, to delay the commencement date, because that is a good substitute for hearing their views on such reforms. If they can press an amendment, such as amendment 20, to a Division after a debate, that is very good, because in that way they cannot discuss some of the important issues in, say, schedules 1, 2 and 3. Perhaps we will end today not quite knowing where the Opposition are on some of those issues.
The reality is that we probably have the most centralised system of local government in the western world. The Bill is a step in the right direction for devolving power. Perhaps it does not go far enough, but we will doubtless see as the Committee progresses over its three days what assurances we get from the Minister on the pace at which the Government are going.
I am confident that the Government’s instincts are right. My experience of local government officials is that they must always second-guess central Government. Some are pretty good at it. Rather than prevaricating, if we are to change the system, the sooner we do so, the better. I therefore support my hon. Friend the Minister.
The reason the Bill is being taken on the Floor of the House is that there is no business—the business is in a logjam up in the other place.
It is important that the Bill gets detailed scrutiny. As my hon. Friend Helen Jones said, in a Public Bill Committee, we would have been allowed not only to scrutinise the Bill, but to take evidence from councils, professionals and others with such expertise. We will not have that opportunity. As one who sat on one of the very first pre-legislative scrutiny Committees back in 2001—it was on the Civil Contingencies Act 2004—I was converted and became a great fan of such pre-legislative scrutiny. That Committee was given the chance to look at the proposals in detail, and as my hon. Friend said earlier, the Bill will bring about a radical change in local government finance in this country.
We had just over three hours last week on Second Reading.
As my right hon. Friend says, we had two hours on Second Reading for Back Benchers. What we will see with this Bill is what we have seen with a number of Bills. They fly through the House at the speed of light only to land in the other place to be picked apart slowly but surely because of their terrible drafting and the draconian implications they will have for many of our constituents. I can foresee exactly what will happen with this Bill. When we look at the next few weeks of business programmed for the House, we can see that we could have unlimited time to debate the Bill, but time will be limited, and the Government will push the Bill through with undue haste because they are determined to do so.
As has already been said, the time scale set out in the Bill leaves councils with a huge dilemma, which is why I support amendments 20 and 21 to 25. I said this on Second Reading, but I will say it again: the Bill is highly political in the sense that the Government are shifting blame from themselves to local councils under the guise of localism. A good example of that in the Bill is the administration of council tax benefit. The measure contains a poison pill. Local councils must defend their decisions on implementing a 10% cut locally. Clearly, the Minister and the Secretary of State will turn round and say, “It’s not us, Guv; it’s local councils.” That has been the Government’s approach to responsibility throughout. It is nothing to do with localism; it is a highly political and cynical attempt to deflect the blame from where it should lie—it should lie with the Government, not local councils.
My hon. Friend makes an important point that counters the assertion of Mr Syms. He said that Opposition Members argue that the Government are going too far too fast with the Bill because we do not know what to say about it. Does my hon. Friend agree, to the contrary, that the local authorities that must implement the Bill are worried about the rapid time scale? Authorities in Yorkshire and the Humber have told us that they are concerned about
“the rapid timetable for these reforms, given the huge levels of complexity involved and the radical implications they will have on councils’ ability to fund services to local communities”.
That is why my hon. Friend Helen Jones was so right to table the amendments.
I agree totally with my right hon. Friend. The Bill also has the backdrop of councils having to introduce draconian cuts—County Durham must take £125 million out of its budget over the next four years.
That is alongside the uncertainty in the Bill. Neither hon. Members nor councils know about the regulations, and they will not know exactly how the rebate system will work. When they are budgeting for future years, it is important that councils know what they can do. The time scale in the Bill means that they are walking into the new arrangements blindly. They do not know what they must deduct, because we do not have the regulations before us.
Having spent 11 years as a local councillor, I can reflect on the fact that in almost no year that I can remember did we have any certainty about our finances. It was all entirely settled by national Government through an incredibly complex system that nobody understood. I am stretched to understand why the hon. Gentleman thinks the new system will be any more confusing.
I do not know when the hon. Gentleman left local government, but we introduced three-year budgeting, which helped local councils. I agree that under the old system, when I was a councillor in the days when the Tories were last in government, the biggest problem for councils was having to guess what their annual budget would be. I am not sure whether three-year budgets were introduced by my right hon. Friend Mr Raynsford, who is in his place, but they gave councils some certainty. The Bill will add more uncertainty. Councils will be asked to second-guess what the system will be, and we will have no opportunity to scrutinise it before it becomes law.
It is precisely that uncertainty that is unsettling a number of local authorities, including Tameside metropolitan borough council in my constituency. Had we had the opportunity to scrutinise properly the impact of the Government’s changes on various local authorities as part of the process of deliberating on the Bill, we would have been able to assess the winners and losers across the country. Despite the picture that Ministers paint that everybody is a winner and nobody is a loser, the reality is quite the contrary. Over the coming years, as the new mechanism operates, the gap between authorities that win and those that lose will widen. I believe that areas such as mine, and no doubt my hon. Friend’s, will be the losers.
I agree, and that uncertainty will be a problem not just because councils will not know what the rebate is going to be. It is quite clear that Durham is not going to gain from the new system, and it was interesting to hear the Secretary of State and the Minister say last week that the area would be a net gainer. However, the Secretary of State failed to tell the House—he is very good at that—that he was referring to the last five years’ figures, for some of which time the economy of County Durham was growing. Now, under the coalition Government, it is—
It is not at all. If the hon. Gentleman comes to my constituency and says that to the 21% of young people who are unemployed, I am sure they will find it very amusing. It is quite clear that given the economies of regions such as the north-east, if local authorities do not know what their compensation will be, they will not be able to make plans.
It is interesting that Government Members seem quite quiet this afternoon, including the Liberal Democrats, who claim to be the party of local government.
No, and that is possibly because they will have to explain to northern councils why they are supporting measures that will have a terrible effect on their budgets. They sidestep that issue and say that it is all because the matter is covered by the coalition agreement, and then we have the usual deathly silence from them. We need to remind all our constituents on every possible occasion that such draconian cuts could not be got through the House without the support of the Liberal Democrats.
Would the hon. Gentleman like to tell the House whether he agrees with the principle of local authorities retaining more of their business rates? That is what we are meant to be discussing, and I would very much like to hear his view.
I think the hon. Lady represents Dorset, and there is a big difference between Dorset and parts of County Durham. Even though there are some very beautiful parts of County Durham, I am sure that Dorset’s economic activity shows it to be far more affluent than parts of County Durham. I support local decisions being taken at a local level, but I do not support a system in which her constituents in wealthier areas will gain at the expense of constituencies such as mine that need support for economic development.
What we heard last week on Second Reading from Government Members was absolutely disgraceful. Conservative Member after Conservative Member referred to local councillors not being interested in economic development. I have to say that I have never yet met one who does not want to increase the economic vibrancy of their area. They put a lot of effort into doing that, and such comments show again the prejudice of Government Members.
The changes to council tax benefit will be a nightmare for councils not just because of the localisation of the system but because of its top-slicing—
I am sorry, but I think you are chairing the Committee, Mr Amess, not a Liberal Democrat Member who usually has very little to say, and frankly when he does it is not very interesting.
I am talking about the time scale of what is being introduced. We will have to work out the methodology of how the funds are to be distributed. We hear, for example, that pensioners are not going to be included, which will have an effect on some poorer councils, such as the eastern part of County Durham, with large ageing populations. The time scale for the system’s introduction is very limited, and there is uncertainty about exactly how it will happen. Instead, the Bill should have included the schedules, procedures, mechanisms for redistribution and so on.
The hon. Gentleman seems to be arguing that because there is uncertainty, the Bill should be delayed. May I remind him of the words of the chairman of the Local Government Association, which I am sure he has read? He stated:
“The current system of funding local government is incredibly complex and does not meet the needs of all the people we serve.”
He also said:
“Now more than ever, we need to put in place a funding system that will support local public services and generate economic growth.”
Is that not an argument for progressing more quickly rather than for delaying?
The Conservative party needs to learn lessons, because every time it has dabbled in local government finance it has got its fingers burned. The hon. Gentleman talks about the current system being complicated, but the proposals in the Bill cannot exactly be said to be very simple, and it is clear that it will centralise power into the hands of the Secretary of State and take it away from local councils.
We have heard a rather partial and not very accurate account of the LGA’s view. Perhaps Christopher Pincher has not read its briefing. I will not go into the details, because interventions must be brief, but it states that
“the LGA supports amendment 60 which would postpone the introduction of the scheme by 12 months.”
One fact that is absolutely undeniable is that Durham’s business rate growth has been greater than the national average, so the Bill will help the hon. Gentleman’s constituents, not hinder them.
I am sorry, but when the hon. Gentleman gets his briefing notes from Conservative central office or wherever, he should perhaps examine how the figures are presented. The Secretary of State is very good at presenting figures. They are actually the figures for the past five years, when we had a growing employment base in County Durham.
Indeed. Now, we see that the latest unemployment figure is nearly 7.8% for my constituency and nearly 12% for the north-east in general, and businesses are closing. Is Christopher Pincher saying that those businesses are somehow going to grow over the next few years as a result of this measure? In fact, councils will lack certainty about how much they will get. The local authority is one of the biggest employers in County Durham, but there has been a reduction in the numbers of people. I think the policy is that by cutting back in local government and public services, all these new jobs will rush forward from the private sector, but today’s figures show that 67,000 people have left the public service in the last quarter, while only 5,000 jobs have been created in the private sector.
As I said on Second Reading about my constituents in the north-east, the Bill will actually help the affluent south. Clearly, it is a damn sight easier to attract business to the likes of Westminster and other economic hotspots in the south-east of England than to parts of County Durham. That is no criticism of the work that local councils do to attract jobs—for instance, with the council’s full support, the area has succeeded in attracting Hitachi trains to Newton Aycliffe in County
Durham. I know of the tremendous work that my hon. Friend Phil Wilson did on that campaign.
The Bill is being rushed through with undue haste. We are expecting councils and local people to walk blindly into the future. The parties in government sometimes try to portray this as a simplified system, but it is not; it will be a centralised and bureaucratic system. We cannot allow a situation to develop in which local people or local government do not know how much money they will get or how the system will work in practice.
Is not one merit of pausing, delaying and taking stock of the changes that it would allow us to get the baseline starting point absolutely right for each local authority, which is crucial, and is it not the case that using the 2012-13 formula grant model, including the damping, to determine the baseline will, for local authorities such as mine in Tameside, lock in the funding losses arising from the damping exercise and the disproportionate reduction in funding from the 2011-12 and 2012-13 settlements?
Yes. That would have come out had we had proper pre-legislative scrutiny in Committee. It is the same for County Durham. Under the funding settlement introduced last year by the Conservatives and Liberal Democrats, County Durham lost about £10 million. That will be in the system for ever more now because of the measures in the Bill. Surprisingly, Wokingham council, Surrey council and many others gained from the system. That injustice will be written into the Bill for ever.
I declare an interest as a member of Portsmouth city council and the executive member for economic development. The hon. Gentleman states that the Bill will greatly damage local authorities. Will he reflect on why, over 13 years, the previous Labour Government, who received similar complaints from local authorities, did little or nothing to assist them by putting local finance on a proper footing?
That is not true. We did. We had a three-year settlement and an increase in the settlement. Through the regional development agency in the north-east, we were putting money into areas such as Country Durham so that they could work with local councils to attract new businesses. I know that the hon. Gentleman does not necessarily agree with everything that the coalition does, but unfortunately, in places such as the north-east, it is taking away the main driver, the RDAs, that local councils could work with to attract more businesses to the north-east.
My recollection of those years was that money was taken away from the city of Portsmouth, where there was high unemployment and great deprivation, and that the benefits went to places such as County Durham. We felt for a long time that the formula was very unfair and we campaigned to get it changed, but the Labour Government turned a deaf ear to the pleas from authorities such as Portsmouth which were trying to make a rational case for equalisation and a much fairer distribution.
But Portsmouth council received a year-on-year increase in its grant. It is interesting to hear a Liberal Democrat argue that deprivation should not be important to how local government money is spent. I would not be surprised to hear that from the Secretary of State because, frankly, I do not think that he cares—for instance, his support for his own Conservative areas at the expense of areas such as the north-east is highly political.
Does my hon. Friend recall the piles of Liberal Democrat leaflets over many years calling for more and more expenditure? Now that they are in government they are taking a slightly different approach.
Exactly. Not for the first time, some of those chickens are coming home to roost. Hopefully, we will have fewer Liberal Democrat “Focus” leaflets claiming credit for everything that goes right and criticising everything else that the previous Government did. Some of those northern councils had Liberal Democrats, but thankfully, in places such as Newcastle and Sheffield, the electorate have seen through them.
In conclusion, the timetable for the Bill needs to be rethought. As suggested by my hon. Friend Chris Bryant, if we can take witnesses at this stage, we should consider doing so, because otherwise the same will happen as has happened with a lot of Bills this Session: the Bill will be rushed through here only to be held up in the other place, where the ladies and gentlemen will give it the proper scrutiny that it deserves.
I want to make just a few comments. I also consider it regrettable that the Committee stage is being taken here and not in one of the Committee Rooms. The quality of debate might have been better in that environment.
I am sympathetic to the amendments on deferment. I want to discuss that point in particular. After many, many years of seeking the change for which most in the House have called, we have before us a radical and important shift in the relationship between local government and central Government, but we face a potentially enormous change of not just a financial nature but a constitutional nature. One of the concerns that I guess we all share is about the unknown consequences of the redistributional impact.
Yes, there are tariffs and top-ups, and we welcome the application of the retail prices index to the baselines for business rates and local authority funding—that is welcome—but actually local government finance is not too complex. Yes, the formula and weightings are complex. We all know about the complexities of what goes into the computer and the figures that come out, but its purpose at the moment is actually pretty simple: to redistribute funds to authorities on the basis of need. That is pretty simple. But we are moving from that system to a new system.
We all welcome, I think, the principle behind localisation. The trouble is that, with many of the things we are facing, the easier it is to accept something in principle, the more difficult it is to challenge the consequences. Because we are talking about such a strong principle, which many of us hold, we are willing to accept some of the consequences, or potential consequences, when we are not fully aware of what they will be. There may or may not be a change if we move from a system based on the allocation of funds by need to one based on allocation by growth in business rates. However one thing we do know is that if things go wrong, it must, by definition, be one that, with the total pot—
Let me just finish; I shall not be much longer.
I understand all the measures that are built in, but if the total pot is the same and there is a redistribution, it must be to the disadvantage of the beneficiary authorities that receive most of the formula grant. That is a concern, and although it might not affect those authorities for the first few years, because of the baseline protection, the unknown consequences—
Let me just get through this.
The Bill is not too complex. One of the arguments against having witnesses—it would have been useful to do that—is that we will get the opinions of only those witnesses. The truth is that nobody knows what the outcome of this will be, because it is dependent on the growth in business rates, while the strategy of re-balancing the economy will have implications for different parts of the national economy.
On a point of order, Mr Amess. Any written evidence submitted to a Public Bill Committee, and not just the oral evidence taken in its opening sittings, will be circulated to all members of that Committee. May we have your guidance, and then the reassurance of the Minister or the House as appropriate, that any written evidence submitted to this Committee of the whole House will be circulated to all Members, who may all have an interest in participating?
The Standing Order on written evidence does not apply to Committees of the whole House, so I am afraid that I shall have to disappoint the right hon. Gentleman.
Further to that point of order, Mr Amess. Is it not possible for the House itself to decide that it would be appropriate for evidence supplied to this Committee to be circulated to all Members?
Further to that point of order, Mr Amess. As the Chairman of this Committee, you will have noticed that the programme order suggests that there will be at least two more part-days for our proceedings. Will you do your best to ensure that the suggestion made by Mr Hancock is put to the right authorities, so that, if agreed, a decision can be put in place for the final two of these three days in Committee of the whole House?
I will reflect on the point that the right hon. Gentleman has made, and obviously those on the Treasury Bench have heard it. What is proposed might not be possible because of time constraints, but I will certainly reflect on it.
Order. I would remind all hon. Members that this is the mother of all Parliaments, and we conduct ourselves in a civilised way. I am aware that something has been happening that is outside what is normal debate, but I would ask hon. Members please to calm down.
The issue that I want the Minister to consider is not so much to do with the resets—whether they should be every 10 years or every three years—because the reset implies that something needs changing, and the truth is that we do not know whether anything will. What is much more important, as we venture into the unknown, is how quickly everything is reviewed. That might be after one year, or two years, and not necessarily the three years proposed by the amendment. We need to have clear evidence as soon as possible about the impact and the consequences of what is proposed in the Bill.
I am grateful for the opportunity to speak in this debate, Mr Amess. I just want to pick up on the point made by Mr Ward about the principle of this Bill. I think that he said that most people in the Committee agree with it. I agree with the principle that local authorities should do all they can to promote economic prosperity and growth in their areas. I am not sure that I necessarily agree with the principle of retention and localisation of business rates, although I will not repeat my concerns about that point, which I expressed on Second Reading last week.
I support the amendment tabled by my right hon. and hon. Friends on the Front Bench, because it is overly optimistic, shall we say, of the Government to think that they will be able to get this legislation through and that councils will be able to put the requisite systems in place to introduce the new system of finance in 2013. If we are to have this new system, the commencement date should be moved back, to 2014.
Last week on Second Reading we heard a lot about how the issue of local government finance had been much debated and how the previous Government commissioned the Lyons review. We had an historical “tour de force”, going through the history of local government finance, even referring to the work of Layfield in the 1970s. Government Members seemed to suggest that there was a case for just getting on and doing something to localise business rate retention, but doing something for the sake of it is not the same as doing something because it is the right thing to do and because it will work. The complexity of the new scheme that is being proposed will not make the system of local government finance any more transparent to local councils and councillors, or even the general public, because what we have before us is a system with a whole range of baselines, tariffs, top-ups, levies, set-asides and safety net payments.
My hon. Friend mentioned the issue of setting the baseline. It is absolutely crucial that we get that right, so that local authorities are not put at an immediate disadvantage. She talked about the tariffs and top-up system. However, the introduction of the new system is also predicated on every local authority in the country having the same council tax base and the same ability to raise income from council tax if it faces a reduction in its business rates. Local authorities such as Tameside—where more than 90% of the properties are in band A or B—do not have the same ability to raise extra income from council tax, should they lose out on the business rate formula.
My hon. Friend makes a very fair point, and if I am correct, those on our Front Bench have tabled amendments for debate later that deal with exactly that point.
We need to take longer to scrutinise the Bill and for the proposals within it to come into force, because I would contest that this Government do not know whether they are coming or going in relation to local government finance and the retention of business rates, or how this proposal will stimulate growth in local economies.
I think it will be, and that very point was made last week. The Government claim to be localising but they are, in effect, centralising.
I thought one of the most telling points on Second Reading last week related to where the Government are coming from with this Bill and what they understand local authorities to be doing to promote economic development. The most telling point was when the shadow Secretary of State stood up to expose this Government’s inconsistencies on what local authorities are doing currently. He pointed out that one document published by the Government said:
“We know that local authorities are keen to grow their local economies”,
while another said:
“local authorities are generally reluctant to...promote economic growth”—[Hansard, 10 January 2012; Vol. 538, c. 91.]
The Government are speaking with a forked tongue on this issue, and if the rationale is not clear, why are we going through this process of rushing to get this measure on the statute book and forcing local authorities to implement a scheme that might not have the impact on local economic growth that the Government want?
I think the Government are unclear about what local authorities are doing now to promote economic development, and I think they are unclear about the impact of their own cuts on economic development services in councils, which, as we all know, are a non-statutory service. I know that difficult decisions are having to be taken. My local authority lost a town centre management team, which was a liaison point between the business community and the council. That happened precisely because the Government imposed unfair cuts on local authorities in Lewisham to the tune of £80 million over the next three years out of a £270 million revenue budget.
When the Secretary of State came before the Select Committee in September last year, I questioned him closely about what he anticipated local authorities would do differently from what they are doing now to encourage economic growth and development in their areas as a result of this proposal. I argued that these measures were being rushed through, that we need more time and that the Government need to be clearer about what they are doing. Let me share with the Committee what the Secretary of State said to me when I questioned him in the Select Committee. I had to question him three times. I was asking a specific question about what local authorities would do differently. The Secretary of State said:
“I think they would see the reward.”
“No. What would they do?”
He then said:
“Please do not badger me like this; I am a sensitive man.”
[Interruption.] Well, the Minister says that it was a joke, but I can tell him that the Secretary of State’s following paragraph most certainly was a joke. To be honest, it was a complete load of nonsense. The Secretary of State could not answer my question, and he started to talk about sea shanties. I think this cuts to the heart—[Interruption.] I know, it was mad; I could not fathom it at all, to be honest.
My point is that Ministers are not clear about what they expect local authorities to change as a result of the new system of local government financing. They may have started with the best will in the world, but we have a hugely convoluted and complex system that, as I said earlier, contains a whole series of assumptions about baselines, about which authorities are tariff authorities and which are top-ups, about how much the set aside is going to be and for how long it will apply, about how much the levies will be, about who decides on what counts as disproportionate gain, and so forth. The position we are left in is vague, opaque and no clearer than under our current system.
My hon. Friend is making a powerful case about the volatility, the unpredictability and the rogue factors that can throw out revenue from a business rate base. Is not the real argument for delaying the commencement of these provisions connected to that, combined with the fact that 2013-14, when this system is supposed to come into place, is also year three of local councils having to deal with the spending review settlement introduced by this Government? The finances are very tight, so predictability and certainty will be key to councils planning their way through that. Those are the really powerful arguments that my hon. Friend is making to justify putting back the commencement, as recommended by our Front-Bench team.
My right hon. Friend expresses the case incredibly well; I agree with everything he said.
Have we not seen examples in this Parliament of the Government taking a pause—taking a break—and saying, “This is quite a complex piece of legislation”? I am referring to the Health and Social Care Bill. While this Bill might not be as sexy—I do not really think that the proposed changes to the NHS are in any way sexy; indeed, I think they are destructive and very controversial—these proposals are very controversial as well. I suggest that the Government pause and listen to what local authorities are saying.
My hon. Friend amplifies her case. On Second Reading, she told the House something from which this Committee would benefit. I believe she pointed out that the ninth largest business in her borough was the local police station, while the biggest business rate payer was a business with a small office above a bowling alley, which happened to be the national headquarters of a national firm. That illustrated perfectly how contingent a local council’s business rate take is on accidents and other contingencies of business location and so forth. It showed how unpredictable and volatile the business rate stream can be.
I was not going to repeat my comments on Second Reading, but my right hon. Friend tempts me into reiterating some of my remarks about the differing ability of different councils to promote and develop their local economies. Sometimes the business rate take will be dependent on a whole range of different things, not just on what a local authority is or is not doing. I suggest that Ministers go back to their geography lessons and learn what we all learned at school about why businesses locate in different parts of the country and how success can breed success so that areas with a large business rate are likely to grow much faster than those with a smaller rate. I know that the Government propose to check disproportionate growth and the effect of having a larger business base to start with, but it is undoubtedly the case that different parts of the country have different abilities to attract and grow businesses.
The Government’s policies are making those differences even more explicit. Last year saw the National Insurance Contributions Bill, which gives a national insurance holiday to small businesses that are starting up outside London and the south-east, so it is not really a level playing field for local authorities. A small business setting up in, say, Middlesbrough or Birmingham might be able to get a tax break, while a similar business setting up in Lewisham might be operating in exactly the same type of area, employing exactly the same number of people with the same turnover and the same profit margins, yet not get such a break. Is that company as likely to locate in an area where there is a tax break as in one where there is not, like London?
My hon. Friend makes her point well. The Government’s left hand does not know what their right hand is doing. Let us consider transport policy and the potential impact of transport infrastructure investment in benefiting one area over another. No high-speed rail link is proposed for Plymouth, for example. Even though Plymouth is struggling and needs good transport interconnections, the money is not going there. Such issues are hugely important in businesses’ decisions about where to locate or expand.
I completely agree with my hon. Friend. I tried on Second Reading to make some of those points. Local economies grow because of a range of factors, including transport and the availability and type of land—it is not all about what a local authority is doing. One can argue that a local authority should foster economic growth through its planning policies and decisions, but the vast majority of councils across the country do that already. The partial retention of business rates will not stimulate local authorities to think, “Hang on, we need to look at our planning policies to decide what more we can do to foster economic growth.”
As I mentioned on Second Reading, I had exactly that reaction from Havant borough council, which is by no means a wealthy council. When I explained the changes, it was enthusiastic and said explicitly, “We will now have to re-examine how we plan. We will have to think about what we will do to stimulate business.” It was excited and believed that the proposal would make a difference to its policies towards businesses in the local area.
I have not had the same reaction from my local authority, although the hon. Gentleman and I represent very different parts of the country. If the Government’s proposal prompts local authorities to think more positively about what they can do, that is all well and good, but it is not the whole answer. I would also urge caution, as developments need to be appropriate. The benefits of increased business rates as a result of new commercial development, arguably in unsuitable locations, might drive more local authorities to grant planning permission for unsuitable developments. We need the right development in the right place, with local government financed in a way that allows it to provide the services needed by the local population.
My hon. Friend is getting to the heart of why a pause is needed for deliberation on the possible impacts across the country of such far-reaching changes: some local authorities might have an over-reliance on one sector in developing economic regeneration plans. In my local authority, Tameside, the largest business rate take is from IKEA, the second largest is from Morrisons, and the third largest is from the Crown Point North retail development in Denton. The three main beneficiaries of the proposal would therefore be retail developments. There is no capacity for more retail on such a scale in Tameside without destroying the market across Greater Manchester, of which Tameside is an integral part.
My hon. Friend is right to ask whether the proposal will result in the development and business growth that the country needs. There are only so many supermarkets and out-of-town retail centres that the country needs. It was suggested on Second Reading that the kind of economic growth that we would ideally like has a lower business rate take. In my constituency, I am struck by the small companies that start up in people’s homes—Lewisham does not have large tracts of land where businesses are located. The Government need to think hard about the development that the proposal would stimulate. I support the amendment.
Like many Members, I was disappointed by how the proposal has been handled. One reason why I voted against the Bill on Second Reading was that I felt it unfair that something as important and precious as local government should be treated in such a cavalier way. Rather than being dealt with on the Floor of the House, a Bill of such size warrants close scrutiny in Committee, including oral evidence sessions. I am delighted, Mr Amess, that you are prepared to take to the usual channels the important proposal that the evidence that has been submitted should be offered to all Members of the House.
During my 40 years’ experience of local authorities, every Government have used local government as an excuse. Time after time, they have talked about devolving power, but they have devolved nothing more than blame, and responsibility without resources. That has plagued local government for four decades. I regret that once again a matter as important as the future of local government finance is being bulldozed through the House in this way. It is unfair, and it will lead to great problems.
Ministers cannot begin to understand how difficult times are for local administrations that have to put together a budget for not one but three years. As we have heard, implementation will come when the third year of the round of cuts will bite deepest in many local authorities. Do Ministers truly believe that a local authority such as mine, Portsmouth, which daily challenges the market to bring inward investment to the city, is not doing all it can to make it clear that we are open for business and actively to support economic development projects? We would welcome anyone to come and see what the city has to offer. It is an insult to local government to suggest that such activity is not happening, and I resent being party to a coalition that is giving that impression. I am surprised, to say the least, at the comments from the Local Government Association, and disappointed that it is not being more forceful in defending the rights of local authorities and challenging this type of legislation.
I hope that there is still time for Ministers to think again. I chaired Committee proceedings on the Health and Social Care Bill, and was delighted at the end of those Committee proceedings, which were the longest since 1997, that the Government gave a commitment to the House and the Committee that they would take time to think again. The implications of much of the Bill leave too many unanswered questions. There is no detail about how the safety net will be implemented and how such judgments will be made. We are told that local authorities will be able to apply to be beneficiaries of the safety net procedures, but not when they have to make that application, how long a decision will take, or exactly when or how the money will materialise. Such questions would have been dealt with in Committee in greater detail. Ministers would have been able to give members of the Committee detailed responses to questions. However, three days’ consideration on the Floor of the House does not give experts in the Department enough time to brief Ministers properly to answer legitimate points raised by hon. Members. That cannot be the right way to deal with as important a matter as local government finance.
On Second Reading, Hilary Benn spoke about the Layfield report. I remember hearing Frank Layfield express his views on local government finance. At the time of his report, we all thought that it would be the turning point, that there would be proper transparency about local government financing, and that all local authorities, irrespective of where they were in the country, would be able to say, “We get a fair deal from Government.” It was said that everyone would know the formula for the funding of local government, but here we are, nearly 40 years on, and it is still hidden in mystique. The Bill perpetuates that situation although the formula should not be anything other than transparent, and council and business rate payers demand that transparency. I am at a loss to understand why the Government, whom I support, are not prepared to give local government the trust that it deserves, and reveal how they are calculating the formula.
I do not want to see the disparity that was referred to by Mr Jones between his city and the city of Portsmouth, because I believe that the problems of poor people in my city and those who are striving to keep their businesses alive are the same as those faced by his constituents. We need an equal share of the resources that are available to local government, but they must be decided on the basis of a formula that is readily available for examination. Such a formula does not exist at present, and unfortunately the Bill does not make me feel at all enthusiastic about the possibility that it will exist in the future. For that reason, I have grave reservations about my ability to support it at any stage.
Let me first draw attention to my interests as declared in the Register of Members’ Financial Interests, and specifically to my role as a columnist for the Municipal Journal—the MJ.
I hope and believe that when the Minister sums up, he will have to reflect on the fact that every Member who has spoken—with the sole exception of Mr Syms, to whose contribution I shall return in a moment—has expressed real reservations about the timetable that is being adopted, in the context of both parliamentary consideration of the Bill and implementation of the measures contained in it. That is fairly remarkable, given that it was supposed to be a flagship Bill granting local government more freedom, and a measure that local government should welcome. Indeed, the hon. Member for Poole, whom I have known for many years and for whom I have a great deal of respect, made that the key point of his argument. He seemed to be saying, “This is a step in the right direction: let us get on with it, because it gives more discretion to local government.” The hon. Gentleman must wonder—as, indeed, I hope Ministers will wonder—why, if the Bill is of such benefit to local government, local government is so apprehensive about it. He must wonder why Members on his own side of the House, albeit on the Liberal Democrat Benches, have been so critical of the timetable. Let us think about that.
It is not just the organisation representing London councils, which happens to be Labour-controlled at present, that has been highly critical of the timetable and has urged delay. I must remind Christopher Pincher, who suggested that the Local Government Association was wholly in favour of rapid action, that in its evidence it specifically supported an amendment that would delay implementation of the benefit changes until 2014. Even the LGA, a Conservative-controlled body, has expressed strong reservations about the timetable, while local government experts from whom we would normally expect to hear in evidence sessions are amazingly critical.
A week ago there was a very good article in Public Finance by Sarah Philips, who was an adviser to the Lyons inquiry and knows the issues thoroughly and deeply. She made some telling comments, such as these:
“The government’s repeated use of the term ‘local’ in relation to the planned changes hasn’t been enough to persuade councils that these will be an improvement. Current local government funding is incomprehensible, but these proposals taken together are even more complex and opaque. They have been criticised by councils, commentators and the communities and local government select committee—on most of the criteria the government set for itself and others… ‘Rich’ councils were looking forward to keeping most of their business rates and being free of central control. ‘Poorer’ councils were hoping for some continuation of equalisation, to recognise the huge range of needs and council tax revenues and their limited scope to increase business rates.”
Many of my hon. Friends have made the same points during the debate. Sarah Philips continues:
“The proposed tariff and top-ups and central levy limit incentives for growth, yet do not give much hope that services in ‘poorer’ areas can continue undiminished—or that it will be possible to prevent a two-tier system.
The proposals acknowledge only implicitly the risks of localised funding. In Europe and Australia, many smaller authorities and those in poorer areas have struggled to provide quality services and many have gone bankrupt or merged. The plans threaten the technical and financial viability of small district councils. Losing Housing Benefit will remove an economy of scale with processing the council tax support—limiting the ability to maintain a corporate centre.”
Those are just some of the comments that have been made by a real expert on local government finance—an officer who is clearly extremely anxious about the implications of the Bill. I hope that Government Members who have suggested that we should get on with it will pause to think about the serious risks attached to such action.
George Hollingbery said in an intervention that local authorities had had to cope with annual changes in settlements in the past. As was pointed out by my hon. Friend Mr Jones, our Government changed that and adopted a three-year cycle, but in any event there is a fundamental difference between an annual change in the settlement—which affects the actual amount of grant that an authority will receive for that year—and a complete change in the administrative system. The separation between council tax benefit and universal credit will require the establishment of a whole new administration and an entirely different system for the making and processing of applications, along with different computer programmes to determine eligibility and provide for the granting of discounts.
Another element contributing to the uncertainty that will characterise the proposed new system is the possibility of fluctuations in business rates throughout the year. The Secretary of State implied that councils would somehow be compensated if a large employer disappeared—Alcan in Northumberland, for instance, is unfortunately being closed—but the Bill contains no details about that compensation.
There are certainly no details about how the compensation arrangements and the safety net procedure will work. Nor is there any indication that central Government are prepared to accept that they are putting local authorities in an impossible position by proposing that they should take all the downside risk of a serious increase in demand for council tax benefit in any one year which they cannot themselves have anticipated.
What will happen to a local authority if a local business closes? What will happen if there is a serious rise in unemployment in the district, and as a consequence a large number of additional claims for council tax benefit are received? The authority will have no safety net. All that the Government propose is the possibility of some sharing or pooling arrangement with neighbourhood authorities to offset the risk. That is not compensating local government; it is local government having to help itself out in order to cope with the risk that is being transferred to it by central Government.
I must first draw Members’ attention to my indirect interest in the interest declared by my right hon. Friend. I should have done that earlier, but I did not get around to it.
Might not a pooling arrangement lead to different problems popping up in different authorities at different times during the year? Exactly when and how will the safety net begin to operate in all those individual instances, and will authorities really want to share such a degree of risk?
There are two different elements. One is the safety net system, which the Government have outlined without giving us the details, and which is designed to cope with circumstances in which there is a serious reduction in non-domestic rate revenue because of changes beyond a local authority’s control. That safety net exists, at least in principle. There might also be changes in benefit demand. Indeed, both of those elements might arise, as there might be a reduction in business rates because of the closure of a business and an increase in benefit claims because the people employed by that business are now out of work and therefore require help with their council tax. There could therefore be a double whammy. There is no safety net from Government to help local authorities with the second element. Instead, there is only the suggestion that there might be some pooling of risk, which is an unacceptable response to a very serious problem.
I agree with my right hon. Friend. There is also no detail as to how the pooling of risk will work, such as whether it will be a voluntary system or enforced by the Government. In my region of the north-east, Newcastle and Sunderland would probably pool together only if they were forced to do so by Government diktat.
I am not going to go into the relations between different local authorities. My hon. Friend Heidi Alexander and I are constituency neighbours and I am sure our local authorities would want to co-operate in the most friendly way, although I am not sure whether that attitude would be replicated by all authorities in other parts of the country.
I was responding to the comments of the hon. Member for Meon Valley by observing that this change is much more complex than just an annual change in the settlement. Substantial administrative change is involved, too. Capita is a company that provides a lot of revenue services and undertakes benefit work for local authorities so it might be expected to see business opportunities in this change, but it is sounding the alarm about the risks involved in trying to programme this major change on an impossibly tight timetable.
A lot of detail is involved in the specification of the scheme, and the Government will impose the requirements that there are to be no losses for certain categories of participant, no inconsistencies in respect of the universal credit, and no disincentives to work. It is difficult to see how that can be achieved if there is to be a 10% cut in the overall council tax benefit. Pensioners are to be entirely protected and they represent more than a third of recipients, so it is hard to see how the other recipients, those of working age who are in employment or looking for work, will not be subject to cuts. How can a commercial company, such as a software firm, that is helping local authorities to prepare to administer these schemes possibly get arrangements properly in place under such circumstances? That is the real challenge to the Government.
As I said on Second Reading, the Government are risking a repeat of the fiasco that occurred when the housing benefit scheme was first introduced by a Conservative Government in 1982-83. That was rushed. The detailed specification and implementation arrangements were not available in time and there was chaos across the country. There were appalling examples of people being left without money for weeks and months, and people facing eviction from private homes because they were not getting the benefit they ought to have had. There was huge hardship, and there were also serious problems in authorities throughout the country.
I say in all sincerity to the Government that they are taking a very serious risk in pressing ahead with these changes to a very tight timetable without giving Members the opportunity to scrutinise and question the detailed arrangements, such as the specification of the scheme and the safety net. We are not being given the opportunity to test the provisions so as to find any weaknesses, yet local government will be expected to implement them to an impossibly tight timetable.
I say to the hon. Member for Poole that the Opposition are not using the timetable issue as an excuse. There is a genuine anxiety that is shared across local government. We must remember that the change will affect not only local authorities but their residents. Some 6 million people receive council tax benefit, which is one of the largest numbers of recipients of any category of benefit in the country. All these people are being put at risk by the Government’s unwise timetable.
I urge the Minister to give further thought to that point, and to heed the Select Committee’s sound advice to defer implementation for a year. I also know that Liberal Democrat Members have reservations, and I therefore urge them to do the right thing by joining us in opposing this rushed and unwise timetable.
It is a pleasure to see you in the Chair, Mr Amess. You and I know something of local government from our experiences of it over the years. We therefore know that the issue of local government finance has been around the houses, as we say in our part of the world, for a very long time. At long last, something is being done about it.
I say to Helen Jones that I do not accept the premise that underpins her arguments. Throughout this debate the Opposition have raised specious arguments and engaged in manufactured indignation. The reality is that the Government are bringing forward a serious and important reform, which the Opposition are seeking to delay. That is not in the interests of local government, who suffer under the thoroughly unsatisfactory, opaque and unfair system Labour bequeathed, which denied local authorities the opportunity to have a portion of the business rates localised for their benefit. The Opposition want to delay the introduction of a valuable growth incentive for local government, which would also encourage national growth, so be in the interests of the national economy.
Let me make a little more progress first.
It is a little cheeky of Opposition Members to say that this change is being rushed forward. Much of the first part of the hon. Lady’s opening speech was taken up with a complaint that somehow less scrutiny of a Bill is possible if it is considered on the Floor of the House, when every Member can participate, than if it is sent upstairs into Committee. Is there a precedent for that, however? Yes, as a matter of fact there is, and it was under the previous Government. Their Digital Economy Act 2010 had 50 clauses, three of which were taken on the Floor of the House. That did not happen in the early part of the Session either; instead, that contentious Bill was considered in the wash-up. I will not take any lessons from the hon. Lady’s specious arguments, therefore.
As the Minister argues that it is important to get these provisions through quickly to provide incentives for economic development, what does he think local authorities would be doing after they are introduced that they are not doing now?
The hon. Lady fails to grasp the basic principle underlying the Bill. The problem at present is that local authorities have no incentive to encourage growth. Instead, they potentially have a burden. They have no ability to grow the tax base.
I will give way again shortly.
Unfortunately, throughout this debate Opposition Members have articulated their old mindset. It is a mindset that does down local government, and I find that surprising given the experience some Opposition Members have of that. They do not seem to recognise that most local authorities want to advance their local economies even though they currently get no revenue benefit from doing so. We will make a key difference by giving them a tool to get such benefits.
Is not one of the major changes that there will be an incentive for ordinary rate payers and electors to support a particular scheme? There is currently no incentive for them to do so because there is no financial benefit for people who contribute to local government.
My hon. Friend is entirely right. Unfortunately, under the previous Government there was a belief that we had to create an increasingly centralised and complex system to deliver results. The party that is criticising us now brought in capping and the comprehensive area assessment, which trammelled local authorities rather than freed them. I can understand, however, why this is a sensitive topic for Opposition Members. In their 1997 election manifesto they said they would localise the business rate, and they spent 13 years not doing so. Some of the principal architects of that commitment are sitting on the Opposition Benches in today’s debate, so I can understand that they might have a bit of a guilty conscience.
I shall give way to the hon. Lady, as she may not have been here during that time—although I do not entirely exempt her from what I said.
I certainly was not here when the previous Administration were in government, but I would like to give the Minister another opportunity to answer the question put to him by my hon. Friend Helen Jones from the Front Bench about what exactly a local authority would be doing differently under these proposals from what they are doing now. If this is about planning policy, what evidence does he have to suggest that granting permissions for extra commercial floor space results in an increased business growth take?
The hon. Lady must simply not have been listening to my hon. Friend Mr Syms, who made the point perfectly that our proposal is a desirable and a good thing. I know it is difficult for her to get this point, but two things are involved. First, we are giving an incentive back to local authorities. Secondly, we are giving local authorities an additional tool in the box of their financial levers. I would have thought that she would have recognised that from her long experience in local government.
The Minister talks about business growth, but given the changes in the national planning policy framework does he agree that this measure may be an incentive to develop commercial premises on greenfield sites, more so than in the past, and that it might override planning priorities?
Absolutely not, and to see that the hon. Gentleman has only to think about two things, the first of which is planning policy. Any planning application has to be in accord with the planning policies that are set out—both in the local plan and in our new national planning policy framework—which give protection against ideas such as he mentions. Secondly, we cannot create a market and demand where there is none, although perhaps he does not get that fact, and so neither of the things he mentions would occur. Our approach enables and incentivises local authorities to work much more closely with their business communities on an ongoing basis.
It is very surprising to hear such a degree of criticism from Labour Members, because they need only look at what is done in most of the United Kingdom’s competitor countries to see that, in general, a closer alignment of local funding mechanisms with local business growth advantages the local economy. That is a basic proposition and they just do not seem to want to take it on board.
Unfortunately, this debate seems to have got muddled and become a discussion of two lots of dates. One relates to the retention of business rates, a move which I wholeheartedly support; I believe that we should get on with it as fast as we can. However, we also need to address the issue raised by Mr Raynsford about the implementation of systems to provide council tax benefit. Hon. Members from all parts of the House, and those in local government, have genuine concerns about that implementation and about the ability of local authorities to develop the systems to provide the localisation of council tax benefit. Will the Minister give an answer on that issue?
I shall deal with both those points and give a little detail as to why the suggestion that we are rushing is not well-founded. It is worth remembering that the Government consulted widely on this proposal, and let me deal first with the point about business rate retention.
Last year, we set out a detailed consultation document outlining our proposals, and the local government information unit has recognised that we have amended a number of our proposals on tariffs, set-asides and top-ups to reflect those matters. We issued eight highly detailed technical papers, to which we received some 461 substantial responses. The idea that there has not been very full engagement with the local government sector simply does not hold water. Indeed, there have been collaborations and discussions between officials of my Department and the local authority organisations throughout the process. To deal with the design of the systems and the regulations that go with them we have set up an official-level working group, which includes representatives of the Department, the Local Government Association, the Society of District Council Treasurers, the Society of County Treasurers and the other financial bodies—so the point is specifically being worked on. The timetable is challenging, but the ability to return a proportion of the business rates to local government is a really important tool, not only to give local authorities greater resilience in their funding streams, but for ensuring national growth.
I have given way to the hon. Gentleman once already.
It is also worth remembering, in the context of other points made, that we are sticking to the existing timetable that applies to the local government finance settlement process. I understand the frustrations of my hon. Friends the Members for Bradford East (Mr Ward) and for Portsmouth South (Mr Hancock) about the suffering that everyone in local government has undergone in the past few years, but I do not think that keeping the current flawed floor blocks and formula grant model for another year would benefit anyone. I can certainly assure them that we will work with the local government sector and the professional members and officers as we go forward.
Before the new scheme is introduced in April 2013, local authorities will be consulted on their baseline funding at the end of 2012, and after a debate in this House, where scrutiny will be provided, they will receive their final settlement early in 2013. So there is no change to the current timelines that local authorities have to work on. Of course there is plenty of precedent for developing regulations as the Bill is taken forward, and they, in turn, will be subject to scrutiny in this House. This is an enabling Bill, just as the Local Government Finance Bill was in 1988; we are following the precedent.
This interesting debate has had some detailed contributions from my hon. and right hon. Friends, many of whom have extensive experience in local government. All we have really heard from Government Members is Mr Syms saying, “These are the normal Opposition tactics.” It is quite right for an Opposition to highlight flaws in a Bill, and this Bill is full of flaws. The Minister gets very excitable but he has not provided an answer on these flaws. He will not provide an answer as to why it is so important to get these provisions up and running in 2013 and what local authorities would do differently in terms of economic development then from what they do now.
Why did the hon. Lady’s Government never follow through on their election pledge and localise the business rate, when they had 13 years to do so?
Coming from a member of the party that nationalised the business rates in the first place, that question shows real cheek. It is no good the hon. Gentleman getting so aggravated now when his party nationalised the rates in the first place.
The Minister will not answer questions on other points, either. He will not answer the question about the lack of certainty for local authorities in the provisions. He knows that it might not be possible to bring them in on time, and so does the Secretary of State, as clause 1 retains the power to delay implementation. If the Government were confident about being able to bring the provisions in at the right time, they would not need that power.
My hon. Friends have made the case very clearly for how complex and opaque the proposed change is, for the risks it poses to the whole local government system and for the unforeseen consequences that might result. I have heard nothing from the Minister to change our minds, so we will therefore seek to press the amendment to a Division.
I will endeavour to deal with the clause stand part debate as swiftly as I can. Clause 1 sets up the necessary part of the scheme. As is often the way with a finance Bill, it establishes the framework, which is then covered in the regulations. Schedule 1, which we shall come to shortly, sets out most of the detail. I suspect that the issues between us have largely been debated in relation to the amendment and the principle. I am happy to respond to any points that hon. Members may wish to raise.
The Minister is right to say that the clause sets out the framework for the Bill, and that earlier we debated most of the issues between us. I welcome the fact that the regulations will be subject to the affirmative resolution procedure in the House. That is helpful, but we stick to our view that the Government are trying to introduce the provisions in the Bill too fast and that there is still a great deal of uncertainty for local councils. We will debate those issues on further amendments so I shall not detain the Committee now.
I want to place on record, in the debate on clause 1, how important it is to reform local government finance, to do it in a timely fashion and to do it in such a way that it both incentivises and equalises. Those principles are firmly embodied in the framework. We have heard it said that the retention of business rates will not incentivise. I wonder why the previous Government introduced LABGI—the local authority business growth incentives scheme—which rewarded local government for business expansion, but not very efficiently. It was not a built-in system, which has to be better. I therefore found some of the comments odd, in the light of that recent policy.
There is general consensus that the local government system of funding needs to be reviewed, but does the hon. Lady agree that people will be suspicious if that has not been done through independent analysis and by people who can be trusted to make the right decisions? That is what previous Governments have done and is exactly what this Government are not proposing to do. They intend to impose a system that has not been scrutinised.
I believe the Minister explained earlier how the detailed proposals would be scrutinised later in the process of setting the 2013 terms of the revision. What I want to see in the end is a more transparent scheme. That is extremely important, so that local councils are not continually trying to find little bits here, there and everywhere that they can come up and lobby about. We need clarity. I am pleased with the framework.
I agree with my hon. Friend Annette Brooke. It is important that we move forward. Helen Jones is right. The affirmative procedure will apply to the matters that come under the Bill. It is worth saying that the degree of transparency on the one hand and fairness on the other is governed by, for example, the changes to the central and local share split, which will come through shortly, and the operation of the tariffs and top-ups. Those will be included in the local government finance report, and that too will be subject to parliamentary scrutiny in the usual way each year, so it is a clear and transparent system.
That sort of belt-and-braces procedure is not at all uncommon. It is our firm intention to press ahead with implementation from 2013 so that local authorities and the national economy can benefit from the Bill. As my hon. Friend the Member for Mid Dorset and North Poole said, the desirability to move to a more transparent system away from the existing model was recognised by the Lyons inquiry, which was set up by the previous Government. It recommended a move towards a localisation of the business rate, and we are taking an important step in that direction.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.