Power to reduce non-domestic rating multipliers

Local Government Finance Bill – in a Public Bill Committee at 2:00 pm on 9th February 2017.

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Question (this day) again proposed, That the clause stand part of the Bill.

I remind the Committee that with this it will be convenient to discuss the following:

That schedule 2 be the Second schedule to the Bill.

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

The clause allows local authorities to specify a multiplier discount. The effect will be to enable them to reduce the nationally determined business rates in their area.

Schedule 2 provides two delegated powers. The first enables the Secretary of State to add, vary or amend descriptions of local authorities that can exercise this power, so that he or she can respond to changes in the organisation of local government. The second gives the Secretary of State the power to set a maximum multiplier discount that a relevant authority, as defined in schedule 2, may apply. The Local Government Finance Act 1988, as amended by the Bill, and regulations made under that Act, will allow the Government to ensure that the income of a tiered authority in a two-tier area is protected from a discount introduced by another authority.

We encourage two-tier areas to work together when setting a discount. Under paragraph 6C, the authority introducing a discount must inform the Secretary of State and other affected authorities of its intention to do so by 31 December in the preceding financial year. The list of relevant authorities under the schedule is defined in new paragraph 6A(2) and includes lower and upper-tier authorities, as well as unitary authorities and the Greater London Authority, all of which receive a share of business rates. New paragraph 6B(1) sets out how a multiplier discount must be expressed by an authority. Overall, these changes give local authorities the flexibility to attract business investment, while providing businesses with the stability of knowing that business rates will not increase beyond the national level.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

My hon. Friends on the Labour Front Bench, whose amendments 45 and 46 would have enabled an increase in rates, will be happy to know that schedule 2 allows that. Paragraph 6 of schedule 2, which starts on line 32 of page 42 of the Bill, amends paragraph 3A of our old friend, schedule 7 of the Local Government Finance Act 1988. Paragraph 6 goes through aspects of multiplier discount and refers, in lines 1 and 2 of page 43, to taking

“the sum of those multiplier discounts.”

I cannot see that the Bill prevents a negative multiplier discount, though I stand to be corrected by the Minister. I look around the room at all the MPs on the Committee; they all studied mathematics far more recently than I did—I make no mention of you, Sir David—but my understanding is that if there is a negative multiplier discount, the result is a positive. That would produce the effect sought unsuccessfully by my hon. Friends through amendments 45 and 46.

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

For the record, let me clarify that we were not seeking to change Labour party policy in this area, so my hon. Friend is wrong, unusually, to say that we were advocating an increase in business rates. We were merely seeking an opportunity to raise the suggestion made by the Select Committee on Communities and Local Government—and particularly the hon. Members for Thirsk and Malton, and for Northampton South—which advocated in its report a power for local authorities to increase business rates if they wanted to.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am grateful to my hon. Friend for that clarification. I apologise to the Committee if I mis-expressed myself. I was not advocating one course or the other, because I believe in local control and localism, but on my reading, the amendments made by schedule 2 would allow that increase.

The Minister adverted to new paragraph 6B, which is to be inserted into schedule 7 to the 1988 Act; it starts at line 27 of page 44 of the Bill. Under new paragraph 6B(3), the Secretary of State can, as the Minister said, set a maximum. The Secretary of State spoke this morning about incentivising and stimulating, and about local authorities working hard and being flexible to attract business. He referred to tools to incentivise local growth, without, of course, producing any evidence relating to the incentives, or their prospects of success, but we have already been around the block several times on the subject of the lack of evidence, so I shall leave that.

However, while we are talking about localism, sub-paragraph (3) is another instance of a power being reserved, if not grabbed, by central Government—the power for the Secretary of State to set a maximum for a multiplier discount. That does not seem to me to bolster localism. Broadly speaking, if we go along with what the Minister says—with the idea that 100% retention of business rates and so on will incentivise local authorities to be even more pro-business, whatever the colour of the authority—we should let local authorities act accordingly and make what outside observers and indeed some residents may see as mistakes. That is what localism is about: letting local authorities take decisions and bear the consequences.

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

It is hard to think of a recent example, but perhaps the Government are trying to prevent a local authority from threatening to increase the rate to such an extent that there is local outcry, forcing the Government to do a back-room deal to resolve the issue.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I cannot think that that could possibly happen in any county in England. However, I wonder whether specifying a maximum multiplier discount, which, as I understand it is, in lay terms, a floor below which a local authority must not go, is to do with a Government attempt to shore up local government finances. The present Government and their coalition predecessor nicked loads of money from local authorities, so local authorities without enough money might still be tempted, in a beggar-my-neighbour way, to use the powers provided generally, were it not for schedule 2, to set a multiplier discount at a very low rate.

Of course Government finances are in a complete mess, and the national debt has gone up nearly two thirds in the past six years. There are real problems with the Government finances. They are not under control, and that is reflected in local authority finances. Some local authorities might be tempted to take action that outside observers and the Secretary of State might regard as foolish. What, therefore, does the Secretary of State do? He reserves powers, under schedule 2, to set a maximum multiplier discount.

That goes against the grain of what the Government are professing to do in the Bill—bolstering localism, and giving local authorities non-evidenced incentives to be business-friendly. A local authority cannot get too business-friendly by setting out too much of a multiplier discount, because then the Secretary of State will say, “You cannot do that.” Again, there are contradictory messages. I do not say that nothing my party says is ever contradictory. On occasions it could be pointed out that things I or my colleagues have said are contradictory; that is the human condition. However, we are dealing with a Bill presented by a Government who talk about local control, and schedule 2 contains an example that shows them going in the opposite direction.

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

I will respond briefly. The hon. Gentleman’s argument and the intervention by the hon. Member for Harrow West showed how confused the Opposition are about this area of policy. I have clearly set out how the clause would operate, and explained that the intention is to allow local authorities to apply a discount to their multiplier if they wish. To respond to the question of the hon. Member for Wolverhampton South West, the Secretary of State will have the power to stipulate a maximum increase in a business rate supplement, and we are showing some consistency for when things go the other way and an area might want to reduce the multiplier. The clause is therefore not inconsistent with the Bill.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Schedule 2