Budget Statement - Motion to Take Note

Part of the debate – in the House of Lords at 5:44 pm on 14th March 2017.

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Photo of Lord Beecham Lord Beecham Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Justice) 5:44 pm, 14th March 2017

My Lords, I refer to my local government interests.

Seventy years ago this November, the Labour Chancellor of the Exchequer, Hugh Dalton, was sacked by Clem Attlee for disclosing in general terms to a journalist the details of his Budget while he was on his way to the Chamber to deliver it. This year’s prize winner in the parliamentary leak show is Philip Hammond, whose Budget last week, appropriately close to the ides of March, contained little of note which had not already been trailed in the media. Not that this amounted to much, in any event. The Treasury’s summary of the Budget boasts of “robust economic growth”—without, of course, mentioning that much of this is due to household spending fuelled by debt. It also purports to tackle two areas of growing public concern: the crisis in social care and the state of our schools.

In relation to social care, the King’s Fund forecasts a £2.8 billion annual shortfall by 2020. The Budget allocates £2 billion in total by 2020, manifestly leaving a substantial gap—of the order of £2 billion annually—at a time when needs will continue to grow. As the noble Lord, Lord Porter, chair of the Local Government Association, pointed out in the association’s response to the Budget, local authorities are facing an overall funding gap of £5.8 billion by 2020, such that, as helpful as the announcement of extra funding is,

“short-term pressures remain and the challenge of finding a long-term solution to the social care crisis is far from over”.

Since 2010, Newcastle alone has had to reduce social care spending by £40 million a year. Even after the extra funding, it now faces further cumulative cuts in funding for social care of £19.2 million by 2020, or £38.7 million in total over the next three years—and this in the context of an overall cut in funding for the council of £290 million a year by 2020.

On schools, in which investment is critical for the future of our economy, £216 million will be invested nationally in maintaining existing schools, whereas the National Audit Office reports that no less than £6.7 billion is needed to rebuild dilapidated school buildings across the country, such that the allocation represents 3% of what is required. Yet £360 million—50% more than will be invested in this maintenance programme—will be allocated to new free schools. I remind the House that councils cannot invest in new schools due to the Government’s obsession with the free school concept. Here again, the Conservative-led Local Government Association calls for councils to,

“have a role in determining where new free schools are created”,

and to have a say over,

“whether or not selective schools are introduced in”,

currently,

“non-selective areas”.

On the fiscal front, two areas are currently generating concerns. The first—about which a number of your Lordships have spoken—is the change in national insurance contributions for the self-employed, in flagrant contravention, as we have heard, of the Conservative manifesto commitment in 2015. At the very least, any such change should surely reflect the different circumstances of the self-employed in relation, for example, to sick pay, holiday pay and employer contributions to pensions. The Government need to review the tax and benefit systems and the employment aspects of the so-called gig economy, which threatens to be, if I may be excused the pun, “uber alles”. Personally, I am beginning to wonder whether NI itself is in need of a fundamental review. People tend to forget that the impact of national insurance contributions is felt even before income tax becomes payable. At the very least, we should examine aligning the two systems at both ends of the income scale.

The second area is business rates. Here, the problems have been exacerbated by the deliberate decision of the coalition and the Conservative Government to postpone the revaluation, and they have been compounded by the failure to have regard to the changes in the market, with online retailers taking a growing share of that market from the low-rated sheds outside urban areas. Given the Government’s policy of substituting business rates for revenue support grant to councils, it is surely necessary urgently to review the system, including the approach to valuations. I suspect that in addition there will be an avalanche of appeals, which themselves are costly for councils. Will the Government reimburse councils for such costs?

Will the Government clarify how they propose to ensure that councils with relatively low business rate income can be compensated for the effect of replacing grant with the proceeds of business rates? When can we expect an announcement about the distribution of such rates?

Mention of rates brings me to the issue of council tax. It is 25 years since this replaced the poll tax and, over time, it has become increasingly unfair. I remind the House that there are eight bands for council tax, with the top band paying only three times as much as the lowest. I can illustrate the outcome from my experience in Newcastle. Zoopla, an organisation that values properties and publishes those assessments, valued properties in two streets in the ward that I have represented for just under 50 years at £49,000 and £76,000 respectively. They are in band A, the bottom tier, and the council tax is £1,008 per year. In a street near where I live, a house in band H, the top band, was sold recently for more than £2 million. The council tax payable for that property is £3,024—only three times more than for a property a fortieth of its value. For the record, my own four-bedroomed house is in band F, the sixth band. The council tax that I pay is £2,084 and the house is worth perhaps £750,000—substantially more than those of my constituents, but their council tax bears no real relation to the difference in value.

This is a grotesquely unfair system that the Government adamantly refuse to change. They could do so by having a revaluation and then adding more bands at the top and bottom of the scale without, if they so choose, necessarily increasing the total yield. Why do they not take action? Why are they equally complacent about the stagnation of earnings, which according to the Institute for Fiscal Studies will be no higher in 2022 than in 2007—15 years without any real rise in earnings? It is time for the rhetoric of the just about managing to be translated into action and extended to those who, through no fault of their own, are just not managing.