Local retention of 100% of non-domestic rates

Part of Local Government Finance Bill – in a Public Bill Committee at 11:45 am on 2 February 2017.

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Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government) 11:45, 2 February 2017

My hon. Friend makes a good point. I would not say that the concern from the business community about business rates revaluation has dominated the pages of the Evening Standard, but it has been a significant theme for those who follow local government in London and business rates issues, as I do.

To return to the distribution of funding between multiple tiers of local government and, particularly, the allocation of funding between counties and districts, one concern is that if districts’ funding share were to be reduced, they would be less reliant on top-ups but more exposed to the risk of a fall in business rate income. Clearly, counties face the reverse risk that, if Ministers decide to reduce the available top-ups, services offered by county authorities to residents will come under even more pressure.

A similar tension was noted earlier by my hon. Friend the Member for Wolverhampton South West. Ministers have talked about an incentive under the Bill for districts to capture business rate income by championing big businesses that want to build warehouses or other property, but would a lower share of income for districts reduce that incentive? The system of top-ups and tariffs critical to the extent and effectiveness of redistribution arrangements under the Bill is key to whether the incentives to promote new economic development that Ministers say the Bill will generate will work. Whether the incentives work in practice is intimately linked to the redistribution arrangements.

Amendment 1 would still require districts to pay a percentage of business rates to the Secretary of State, so that some of the funding could be directed onward to counties and beyond. This is an opportunity for Ministers to clarify their intentions as to redistribution between districts and counties. As I have suggested, one concern about the Bill is whether the huge incentives—the revolutionary incentives that the Minister talked about—for local economic development will materialise in practice. If they do not, the practicalities of redistribution become even more critical.

We have heard at some length about the type of economic development that could be created under the Bill. It is property-based growth. The only way in which local authorities will benefit from the purported incentives under the Bill will be by large businesses locating in their areas. It is easier to see how those incentives might exist for an authority with a large amount of land capable of development. However, quite a few authorities —you will not find it hard to imagine which ones they might be, Mr Gapes—face significant barriers to that type of development, and therefore to that type of local economic growth. That underlines the need to get the redistribution arrangements right.

Let me offer up the example of Allerdale Council, which is in the northern part of the Lake district. It serves the community of Keswick, but is surrounded by the wonderful mountains of the Lake district. Obviously, as the name of the area implies, it is home to some great lakes. It is a very rural authority, so there is a significant amount of land, but it cannot be earmarked for property-based growth for large businesses as it is designated for farming and used by farmers. The scope for Allerdale Council to benefit from the economic incentives that the Minister says will exist is, I suspect, not quite as great as he might hope. It is important that we get the redistribution right for a council such as Allerdale.

One also thinks of the coastal authorities to which the hon. Member for Waveney alluded. It is fairly obvious to see what one of the barriers to growth in a coastal authority is. It is crucial that we recognise that the opportunities for the type of economic growth that the Minister and the witnesses said might be possible—the sort of large warehouse-type development, or the big retail supermarket shopping mall-type development—will not be obvious for rural authorities or for coastal authorities. It is critical that we get the redistribution arrangements right. My amendments 1 and 23 are central to achieving that.