Determination of principles for determining whether council tax excessive

Local Government Finance Bill – in a Public Bill Committee at 4:30 pm on 7th February 2017.

Alert me about debates like this

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government) 4:30 pm, 7th February 2017

I beg to move amendment 20, in clause 4, page 6, line 41, at end insert—

“(c) must include conclusions from the assessment of needs that has been carried out in respect of the local authority area; and

(d) must include details of efficiency savings made by the local authority.”

This amendment would require the report published by the Secretary of State on the set of principles to include conclusions from an assessment of needs carried out for the local authority area and details of efficiency savings undertaken by the local authority.

It is a great pleasure to move this probing amendment. It is inspired in part by the example of Surrey County Council and, perhaps surprisingly, some words of wisdom from the previous Prime Minister, who famously described local government as

“officially the most efficient part of the public sector.”

That is one of the few things he said as leader of the Conservative party that I am tempted to agree with. The Conservative party—Ministers have been doing it again today in the run-up to the housing White Paper—has a tendency to blame all the ills of the world on local councils.

Amendment 20 is merely an attempt to make clear, not only to Ministers but to those who watch and read our proceedings, that there is a more complex picture about the scale of the challenges facing local government that should be taken into account, wherefore those residents make an assessment as to whether the council tax ask they are expected to pay—if, indeed, it goes above the threshold—is excessive or not.

Surely there is a case for recognition of some assessment of need. Surely there is also for recognition of the scale of efficiency savings that councils have sought down the years—they ought to be taken into account. My council, Harrow, has led the way in seeking to become a commercial council. It has worked with organisations such as IBM on new social care apps that have dramatically improved the quality of the marketplace, to use the language of Conservative Members, for private social care providers at a local level. They are commercialising the app that they have developed and generating significant revenues for the local authority. The product they have offered is innovative, increases efficiency and leads to a better quality of service. Sadly, we do not hear enough examples like that. It is in that spirit that I move amendment 20. Much has been made of the £5.8 billion funding gap that the LGA says will be present by 2020. Again, that is a further demonstration of the need for and demand on local authority services. Surely that should be taken into account.

If there ever was a decision by a county council that was well-timed, it is surely the decision of Surrey County Council today not to go ahead with its 15% referendum. The council leader apparently reported to his fellow councillors that he has had lengthy conversations with the Government and has received various reassurances—he would not say what those were, funnily enough. As a result, he has recommended to his council that the referendum should not go ahead, which it has accepted. I suspect that the tireless campaigning of my friend Robert Evans, the one Labour councillor in Surrey, has intimidated the Conservative leader into backing down. If that is not the case, one has to praise the political skill of the leader of Surrey County Council—if the cheque is in the post to him, as it sounds as though it is—for his act of brinkmanship.

What Conservative councils will take from Surrey’s experience, if indeed the cheque does eventually arrive, is that all they need to do is threaten big council tax increases and the Government will bend to their will. If at some future point my friend Robert Evans were to become the leader of Surrey County Council—I suspect that prospect is not too far off—and propose a 15% council tax referendum, it would be seized on by the Minister, and various nonsense about the profligacy of Labour councils would be repeated ad infinitum on the Floor of the House and in Committees left, right and centre.

Surrey County Council has exposed the weakness of Ministers’ arguments around the threshold. Nevertheless, it will perhaps be interesting to hear him take this opportunity to acknowledge the scale of the funding gap that the LGA has identified and praise local authorities such as Harrow Council for the work it has done to offer more efficient services.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I wish my hon. Friend good luck with this amendment. Essentially, amendment 20 asks the Government to collate evidence and act upon it. Given what we have heard in the Committee so far, I will be suitably and happily astounded if the Government accept the amendment and the concept that evidence is important.

Photo of Marcus Jones Marcus Jones Parliamentary Under-Secretary (Department for Communities and Local Government) (Local Government)

I thank the hon. Member for Harrow West for his explanation of the intention and effect of amendment 20, which would require a referendum principles report made by the Secretary of State to include conclusions from an assessment of needs as well as details of efficiency savings for local authority areas.

I appreciate the intention behind the amendment, but I do not agree that it would be appropriate to include the suggested information in a principles report. Council tax referendum principles exist for a very specific purpose: to protect council tax payers by defining an excessive increase, so that they can make a final direct decision. It is open to authorities to set large increases and put them to a local referendum if they feel they are necessary to support local services.

Photo of Jim McMahon Jim McMahon Shadow Minister (Communities and Local Government) (Devolution)

I wonder whether, in the spirit of an equal, balanced relationship, the Secretary of State would be inclined to grant a national referendum on the projected 25% council tax increase.

Photo of Marcus Jones Marcus Jones Parliamentary Under-Secretary (Department for Communities and Local Government) (Local Government)

As I have said many times in this Committee, in real terms council tax is currently 9% lower than it was in 2010. I do not intend to take any lectures from the hon. Gentleman, bearing in mind that council tax doubled between 1997 and 2010 when his party were in power. I am not too sure that I will be blown off course by that advice.

The referendum principles report is not intended to provide an analysis of local authority need, its success in achieving efficiencies or an account of any other matter. It is a technical instrument to set the parameters by which a referendum might be triggered. As Members will be aware, the Bill creates a new requirement to consult representatives of local government before principles are set. That will allow the sector to make representations about their circumstances and needs before the Secretary of State makes his or her final decisions, whatever the future holds. That will be more useful to local authorities than prescribing the content of a referendum principles report.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government)

I made clear that this was a probing amendment. The Minister could have given some sense to local government that he understood the scale of funding difficulties it faces by 2020. He chose not to. He could have praised councils such as Harrow that have led the way in terms of a more efficient offer, but he chose not to. I do not intend to make a thing of it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government)

I beg to move amendment 21, in clause 4, page 6, line 45, at end insert—

“(1C) A report under this section must be approved by a resolution of the House of Commons.”

This amendment would require any report on the principles relating to the tax excessive threshold, and therefore principles around circumstances in which a referendum must be held, to be approved by the House of Commons.

With this it will be convenient to discuss amendment 22, in clause 4, page 7, line 45, at end insert—

“(3ZA) A report made under this section in relation to any authority must be approved by a resolution of the House of Commons.”

This amendment would require the House of Commons to approve any report relating to alternative notional amounts for tax excessive thresholds made by the Secretary of State in relation to any authority.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government)

Let me be brief, because we have had quite a trip around the issue of scrutiny of local government finance. Amendments 21 and 22 simply provide the House of Commons with the opportunity to scrutinise local authority finance. The Minister, as we know, does not want the scrutiny of a local government finance settlement, so perhaps he and Government Members might be willing to support the idea that new council tax excessive thresholds should have to be approved by the House of Commons. That is the spirit of the amendments.

Photo of Marcus Jones Marcus Jones Parliamentary Under-Secretary (Department for Communities and Local Government) (Local Government)

The amendments would require council tax referendum principles and alternative notional amount reports made by the Secretary of State to be approved by the House of Commons. I appreciate the hon. Gentleman’s wish to retain the current practice of requiring the reports to be laid for approval. However, I believe that it is not necessary in a new era where we seek to offer certainty and where there will no longer be a local government finance settlement handing out resources following the approval of the House.

To be helpful, I remind the Committee that the Secretary of State will for the first time be required to consult representatives of local government about referendum principles. He or she will also be required to consult any authority that will be affected by a report that sets an alternative notional amount, and will take into account representations received from Members of Parliament, members of the public and organisations with an interest. The new approach to determining referendum principles and alternative notional amounts is well suited to the future funding model for local government and offers dialogue and transparency to the sector. I therefore ask the hon. Member for Harrow West to withdraw his amendment, as he suggested he might do.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government) 4:45 pm, 7th February 2017

I did not suggest that I might withdraw the amendment, although I sought to be brief, as we have already had a trip around the issues. The Minister’s further reassurance that he will consult local authorities is welcome, but he should have to consult the House of Commons as well. In that spirit, I intend to ask the Committee to divide on the amendment.

Question put, That the amendment be made.

The Committee divided:

Ayes 6, Noes 9.

Division number 5 Seasonal Working — Determination of principles for determining whether council tax excessive

Aye: 6 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Marcus Jones Marcus Jones Parliamentary Under-Secretary (Department for Communities and Local Government) (Local Government)

The clause aligns the process for setting council tax referendum principles with reforms to the wider local government finance system under schedule 1 to the Bill. It will enable the Government to offer local authorities far more certainty about their future financial position by setting referendum principles for multiple years.

Chapter 4ZA of the Local Government Finance Act 1992 allows the Secretary of State to determine a set of principles for each financial year, which local authorities in England must use to determine whether their council tax increase is excessive. Under existing legislation, the principles must be set out in a report and approved by the House of Commons by the time that it approves the annual local government finance report. Where no principles are set, the Secretary of State must lay a report before the House explaining why.

The Government defining an “excessive increase” has been part of the council tax system for decades. As I said to the hon. Member for Oldham West and Royton, council tax in real terms has been 9% lower than it was in 2010-11; it will still be lower in real terms in 2019-20, but only if Government continue to work with local authorities and maintain a referendum threshold, as we promised in our 2015 manifesto.

Local authorities must determine each year whether they have set an excessive increase as soon as reasonably practical after the principles have been approved. Where an authority’s functions or structure have changed, the Secretary of State may set an alternative notional amount to enable a like-for-like comparison to be made with the council tax set in the previous financial year. That must also be set out in a report and be approved by the House of Commons.

The clause amends sections 52ZB to 52ZE of the 1992 Act. The provisions introduced by clause 4(2) mean that when setting council tax for the first year to which the principles report applies, local authorities must determine whether it is excessive as soon as reasonably practicable after the report is made. In other years, they must make the determination as soon as reasonably practicable after they have made their council tax calculations.

Subsection (3) changes the processes of determining council tax referendum principles and alternative notional amounts. In particular, it allows the Secretary of State to set the principles over multiple years, providing councils, police and crime commissioners, fire authorities and the Greater London Authority with welcome clarity about their council tax income.

The Secretary of State is required by subsection (6) to finalise the principles before the beginning of the first financial year to which they apply. The provisions introduced by subsection (8) mean that he must also send a copy of that report to each billing and major precepting authority, and publish it in an appropriate format, to bring it to the attention of other authorities that may be affected. Separate reports may be made for different categories of authority for the same year.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party, Shadow Minister (Communities and Local Government)

Has the Minister been privy to any conversations within the Department for Communities and Local Government, or across Whitehall more generally, about Surrey County Council’s proposed 15% referendum, and what the Government might have said to the leader of Surrey County Council to persuade him not to go ahead with that referendum?

Photo of Marcus Jones Marcus Jones Parliamentary Under-Secretary (Department for Communities and Local Government) (Local Government)

That probably takes me slightly wider than the scope of the Bill. I think that the hon. Gentleman is presupposing the discussions that happened and the outcome of the situation. It is more likely that Mr Robert Evans had more of an effect, as he said was the case; perhaps he will be the next leader of Surrey County Council, although that is about as likely as Jeremy Corbyn becoming the next Prime Minister, which many of us believe is not very likely.

Moving on, clause 4(8) also allows referendum principles to be amended by making a further report to replace a previous one. That must be done prior to the start of the first financial year to which the new principles apply. Finally, subsection (13) means that authorities subject to a proposed alternative notional amount must be consulted and receive a copy of the final report, which must be made prior to the start of the financial year in which it will have effect.

In conclusion, this measure will enable Government to provide local authorities with greater certainty about their future council tax income, and complements other provisions in this Bill.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5