Committee (3rd Day)

Part of Cities and Local Government Devolution Bill [HL] – in the House of Lords at 4:00 pm on 29th June 2015.

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Photo of Lord Smith of Leigh Lord Smith of Leigh Labour 4:00 pm, 29th June 2015

My Lords, one of the amendments put forward by my noble friend Lord Beecham has reminded me that in Greater Manchester we had an argument with the Government about getting back our share of growth in business rates for the actions that we were taking. Through the city deal process we managed to convince Ministers that it would be a good scheme to take up, but unfortunately we then had to go to the Treasury and it took 18 months or more to get agreement on that. However, it is a model by which we can clearly demonstrate that the growth created through the work of the combined authority could be used for further investment to benefit and create further growth in the area.

I am certainly a supporter of fiscal devolution, which in a sense is the missing clause in this Bill. We need to think about what it is and what we mean to achieve. However, if we are to get the allocations of money from central government, which is a form of decentralisation, we need further freedom to agree with the Government what would be provided by the money. We can transfer funding from one field to another in a different and more effective way in some areas, provided that we do what was agreed in the deal with the Government.

I have said a number of times in this House—sometimes late at night a couple of years ago when my noble friend Lord McKenzie and I were talking to the Government about the change to business rates—that our system of local government finance in the UK is now a busted flush. There are two main taxes that we rely on. The revaluation means that business rates are no longer justifiable. There needs to be a major review and I am pleased that the Government are carrying that out. The other main form of taxation—council tax—has not been revalued since 1991, so a new house built in 2015 has to be valued as though it was built in 1991. A connection to broadband would not be a feature, because clearly in 1991 such things were not invented. There obviously has to be all-party agreement on this, because we do not want a system that is going to be changed when there is a change of government. We have to have a system, built for the 2020s, that gives local authorities the independence and freedom they need.

On fair funding, I am surprised that my noble friend Lord Beecham and the noble Lord, Lord Shipley, did not quote their former council, Newcastle City Council. It has done some wonderful work on this and produced what it referred to as a “heat map”, which shows in red the areas that have had the greatest reduction in council funding and in green those that have had the least. Guess what: most of the red areas are in the north or in urban areas, and this could be substituted for political control.