‘(1) Before any alteration to the Business Rate Retention Scheme, an independent body must conduct a full needs assessment of every billing authority.

(2) The conclusions of the assessment under subsection (1) must be taken into account when considering any changes to calculations under paragraph 2 of Schedule 7B to the Local Government Finance Act 1988 that are made as part of the BRRS reset.”—

This new clause would require a full needs assessment to be carried out for every billing authority in order to inform the new tariff and top ups system at each BRRS reset.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following:

New clause 3—Local Authority Needs Commission—

‘(1) There shall be a body called the Local Authority Needs Commission (“the Commission”).

(2) It shall be the duty of the Commission to carry out assessments of the matters specified in subsection (4) from time to time as it thinks fit, but no less than once every two calendar years.

(3) It shall be the duty of the Commission to carry out assessments of the matters specified in subsection (8) when requested to do so by the Secretary of State.

(4) The matters specified in this subsection are, in respect of each billing authority in England, all matters which the Commission considers are relevant to an understanding of the resource need of each billing authority, including, but not confined to—

(a) the extent of social deprivation in the area,

(b) the resident and day-time populations of the area,

(c) the condition of housing stock in the area,

(d) the economic profile of the area,

(e) the population density of the area,

(f) the ethnic composition of the population of the area,

(g) the extent to which the population of the area has a first language other than English.

(5) It shall be the duty of the Commission to assess the impact of any new requirement imposed upon a billing authority—

(a) by legislation, or

(b) by direction from the Secretary of State

as soon as is reasonably practicably after the introduction of the new requirement takes effect.

(6) An assessment under subsection (5) must include a needs assessment of the billing authority in relation to the new requirement, having regard to the matters specified in subsection (4), which must be made publicly available.

(7) It shall be the duty of the Secretary of State, before making a grant to billing authorities under—

(a) section 78 of the 1988 Act, or

(b) section 31 of the Local Government Act 2003

to inform the Commission of the billing authorities intended to receive a grant and request the Commission to undertake an assessment in accordance with subsection (3).

(8) The matters specified in this subsection are, in respect of each billing authority in England intended to receive a grant, all matters which the Commission considers are relevant to an understanding of the resource need of each such billing authority, including, but not confined to, the matters specified in paragraphs (a) to (g) of subsection (4).

(9) Any assessment made under subsection (2), (3) or (5) shall be laid before the House of Commons by the Secretary of State as soon as practicable after the final version of the assessment has been provided to the Secretary of State by the Commission.

(10) Schedule (Local Authority Needs Commission: further provision) makes further provision about the Commission.”

New schedule 1—Local Authority Needs Commission: further provision—

Membership, chair and deputy chair

1 (1) The member of the Commission are to be—

(a) a chair appointed by the Secretary of State, and

(b) at least four other member appointed by the Secretary of State.

(2) Before appointing members under sub-paragraph (1)(b), the Secretary of State must consult the chair.

(3) The Commission may appoint one of the members as the deputy chair.

(4) The Secretary of State must have regard to the desirability of securing that the Commission (taken as a whole) has experience in or knowledge of—

(a) the management of local government finances,

(b) research into matters relating to social and economic needs and their assessment.

Term of office

2 Members are to hold and vacate office in accordance with the terms of their appointment, subject to the following provisions.

3 Members must be appointed for a term of not more than 5 years.

4 A member may resign by giving notice in writing to the Secretary of State.

(a) resigns that office by giving notice in writing to the Secretary of State, or

(b) ceases to be a member.

6 A person who holds or has held office as the chair, or as the deputy chair or other member, may be reappointed, whether or not to the same office.

Staff and facilities

7 The Secretary of State may provide the Commission with—

(a) such staff,

(b) such accommodation, equipment and other facilities, and

(c) such sums,

as the Secretary of State may determine are required by the Commission in the exercise of its functions.

Research

8 (1) The Commission may at any time request the Secretary of State to carry out, or commission others to carry out, such research on behalf of the Commission for the purpose of the carrying out of the Commission’s functions as the Commission may specify in the request.

(2) If the Secretary of State decides not to comply with the request, the Secretary of State must notify the Commission of the reasons for the decision.

Payments to members

9 The Secretary of State may pay to or in respect of the members of the Commission such remuneration, allowances and expenses as the Secretary of State may determine.

Status

10 The Commission is not to be regarded—

(a) as the servant or agent of the Crown, or

(b) as enjoying any status, privilege or immunity of the Crown.

Sub-committees

11 The Commission may establish sub-committees.

Validity of proceedings

12 The Commission may regulate—

(a) its own procedure (including quorum), and

(b) the procedure of any sub-committee (including quorum).

13 The validity of anything done by the Commission or any sub-committee is not affected by—

(a) any vacancy in the membership of the Commission or subcommittee, or

(b) any defect in the appointment of any member of the Commission or sub-committee.

Discharge of functions

14 The Commission may authorise a sub-committee or member to exercise any of the Commission’s functions.

Public records

15 In Schedule 1 to the Public Records Act 1958 (definition of public records) in Part 2 of the Table at the end of paragraph 3 at the appropriate place insert—

“The Local Authority Needs Commission”

Parliamentary Commissioner

16 In Schedule 2 to the Parliamentary Commissioner Act 1967 (departments etc subject to investigation) at the appropriate place insert—

“The Local Authority Needs Commission”

Disqualification

17 (1) In Part 2 of Schedule 1 to the House of Commons Disqualification Act 1975 (bodies of which all members are disqualified) at the appropriate place insert—

“The Local Authority Needs Commission”

Freedom of information

18 In Part 6 of Schedule 1 to the Freedom of Information Act 2000 (other public bodies and offices: general) at the appropriate place insert—

“The Local Authority Needs Commission”

It is a pleasure to serve under your chairmanship, Sir David. We have had a lot of debates in this Committee about moving to a new system of self-sustaining local government. There have been great calls from central Government for a level of independence, and my hon. Friend the Member for Harrow West has challenged the Government on just how independent local government will be and what safeguards will be in place to ensure it is funded adequately so it can carry out its legal responsibilities. We are effectively being asked to agree the framework without knowing what the method of assessment will be. We are understandably nervous about that, as is local government, particularly given the kick-off with the business rate revaluation. We are not sure whether the Chancellor or the Secretary of State will grant concessions that mean that even less money is available to deliver local public services.

With these new clauses and the new schedule, we want to set out a positive alternative and show what we could do in a constructive, cross-party way to put local government funding on a fair and firm footing. These are not new ideas. I will be honest and admit that we copied and pasted them. Why reinvent the wheel? If somebody has gone to the trouble of doing the work, carrying out the investigation, understanding the evidence base and consulting with the industry, the sector and those affected, we ought to listen to what they have to say and consider it in the right way.

Members might be aware that the Local Government Association commissioned an independent review into local government finance and whether it is sustainable. The review recognised that we are in a period of austerity, but that demand for public services is increasing all the time. It also recognised that the world is changing, and that how people access and interact with public services is changing, too. How people work is changing, and the part of the workforce that works across different institutions is changing, too.

In the review, the Independent Commission on Local Government Finance highlighted a number of things and set out its vision of a self-financing system that promotes self-reliance and self-sufficiency in local government, encourages areas to be innovative, promotes local decision making on service delivery, ensures transparency in how it works and in the division of responsibilities between central and local government, and maintains support for the most vulnerable people in the community. It came out with a series of recommendations, which are directly relevant to these clauses and are worth talking about in some detail. If we can get agreement on this today, we will not only show the country that some things are above party politics—in my view, funding vital frontline services should be one of them—but show local government that the work it has undertaken in previous years to research and develop an alternative idea has paid off and been respected and adopted by the Government with the support of the Opposition. That is our intention, and I hope the Minister responds with the same degree of charity. Hopefully, we can make some progress.

Critical to the recommendations was the establishment of an independent body to advise the Government on funding needs in each local area and on the allocation of funding to local areas and sub-regional areas that have combined authority arrangements in place. The report talks a great deal about how local freedoms should be in place—in particular, the freedoms to set local discounts and to decide how much, if any, council tax should increase without the Secretary of State imposing a referendum cap. It also talks about a business rate retention scheme that could be introduced.

At times, reports come out of Parliament that say, “Local government just doesn’t get it right,” and reports come out of local government that say, “Parliament just doesn’t get it,” but what inspired me about this report is that it is not like that at all. It says, “The system isn’t working for any party, so we need to find a new model that works for all concerned.” The language used throughout the report is very much about working together. When it talks about an independent body being set up, it is not saying that local government does not trust national Government; it is saying that having an independent body to one side, to advise, would add to decision making and help Government. Government would still have the ability to hold the ring, but they would have the depth and quality of an independent body sat to one side. There is a great deal to be commended in that.

The report should be read, and read in the spirit in which it is intended. The commission’s membership is significant: it has the experience of former civil servants, people who have worked in the private sector, people who have worked for health authorities and accountancy firms, and entrepreneurs who have experience of creating value from the ground up and being successful in their industries. It includes people who have experience of working all over Europe and around the world who are, at their core, used to setting up complex financial systems and making them work in their practical application. That has been quite absent from the debates we have had.

We have talked about systems and processes, and we have talked about governance to a degree, but we have not really talked about the pounds and pence. That matters to the communities we are here to serve. When we have asked questions about that, we have been told an assessment will be made at some point that will take into account a range of criteria, all of which we have discussed over the course of the Committee’s sittings, but we are still none the wiser as to what that will mean in practice. What will it mean for a town like Oldham or a city like Oxford? The truth is that, today, we just do not know.

If we believe that the best public services are formed around communities and individuals rather than governments and institutions, maybe the answer will not derive from this building. Allowing freedom at a local level to co-produce and having an independent body that liaises and interacts at a local level, reporting and feeding back to Government, would add a lot of value to the work that Government are doing.

I am not the Secretary of State; I am not even a Minister, but I imagine that if I was in either of those positions, I would not relish the current annual responsibility to produce a financial statement to Parliament. There are two ways of dealing with that: we either do what the Government of the day propose, which is to delete that requirement altogether, or—this would be my preference—we have the assessment in place but ensure that we have the cover of a strong evidence base, that the assessment is tested and supported by rigorous criteria that can be objectively assessed and challenged by anybody interested, and that the process is one to which people can contribute if they are affected by the decision that will ultimately be taken. That would be a far more forward-thinking way of running Government post-Brexit.

When people went to the polling stations and voted to remain or leave, I do not believe for one second they were talking about repatriating powers from the EU to this building. I think they were saying, “I want more power and determination over my life. I’m sick of having things done to me. When my son, daughter, grandchildren or I need a new house, I want there to be a home to get. When the quality of the school isn’t good enough, I want it to improve and be the best it can be. When I want to get a better job, I want to know that the route to that is available to me and I won’t have barriers put in front of me.” The truth is that our communities are so diverse and different that we cannot design that here; it has to be designed within the community, and there has to be a funding model to support it.

We can talk as much as we want—warm words are great. We are all aware that Brexit means Brexit, but we do not know what the new world means, if we are honest. We do not know what a United Kingdom is and whether we will have one if we carry on. Even if we know the place of a further devolved Scotland, Wales and Northern Ireland, not many people can draw out where the Government intend to take a devolved England. The fragmentation of devolution we have seen so far, the absence of a framework and the complete lack of fair funding to support the delivery of local public services and economic growth are a major barrier to having a post-Brexit solution that works for our communities.

This is more important to the Government of the day than just a technical exercise to establish a body to report to the Government; it is about a fundamental reset of the relationship between local communities and their directly elected local authorities, which determine how much money is spent on local priorities, public services and inward investment.

I do not intend to detain the Committee for much longer, but we think that these new clauses are important. We tabled several amendments, having locked ourselves away in a room and thought, “This is going to be a good debating topic,” or, “I’m sure the Government haven’t done their work on this; we might expose one or two weaknesses.” That is the nature of opposition and, to be fair, those amendments worked quite well, but new clauses 2 and 3 and new schedule 1 were not tabled with that intention at all. We are trying to be the voice of local government in this place and to ensure that its interests are represented. As I said, I think the answer has been presented. If the Government of the day do not recognise that they have a gift, which has been adopted by local government on a cross-party basis, and do not take it, they will miss a trick and face further disquiet from their local government ranks.

It is a pleasure to serve under your chairmanship again, Sir David. I rise to speak to these new clauses because they are extremely important for the local government sector and would add huge value for the Government. Not only are we struggling to work our way through the Bill without the evidence that we need about the fair funding settlement and so on, as my hon. Friend the Member for Harrow West has said, but year after year, when we come to the local government funding settlement, the Government have to defend themselves against accusations of unfairness, pork barrel politics and so on, in the face of quite extreme evidence—particularly in the last few years as cuts have been applied—of unfairness in the way that local government funding is distributed. Opposition seats are often the hardest hit, and areas of need have seen the hardest cuts. I urge the Government to defend themselves to some extent against such accusations, and these new clauses would provide them with a positive way to do that.

There has been a total lack of clarity in the way that the funding formula is applied. In last year’s debate about local government funding, we even saw Conservative MPs stand up and say to the Minister, “I was going to vote against the local government funding settlement, but since our conversation and since I was given some transitional arrangements, I have decided to support it.” That is obviously extremely distressing to Opposition Members, who are trying to fight for our communities and have seen our constituencies ravaged by local government cuts. There seems to be a preference: people who can get in and advocate their case to the Minister will get funding. That lack of clarity exposes the Government to criticism, and we are offering them an opportunity to defend themselves and give the rest of the country, the local government sector and Opposition MPs some confidence in the way they distribute funding.

There is a second important issue: if we devolve business rates and give local authorities more power to decide on the future of funding, we could leave them in a difficult situation. During the evidence sessions, I asked one of the local government representatives whether she felt local government could co-operate and work in partnership or whether there would be competition, with local authorities essentially fighting each other for the biggest slice of the cake. I have to say that her answer did not fill me with confidence that there really was a united sense of partnership. In my view, having an independent commission and the evidence base on which to proceed would be extremely helpful to both the local government family and the Government themselves.

My biggest concern is that we hear from Government Members: “We have had enough of evidence.” We seem to live in a post-truth, post-evidence world. We are offering the Government the opportunity to have evidence about demand, need and how we can best serve our local communities through local government funding. This is an opportunity for the Government to respond fully and ensure that they are fair and above any accusations or criticism. This seems like an obvious one, and I cannot understand why the Government would object, so I urge them to accept these new clauses.

I salute my hon. Friends the Members for Oldham West and Royton and for Redcar for their perseverance. As I said this morning, the Opposition have solicited evidence from the Government 33 times before today in Committee—and evidence came there none. As my hon. Friend the Member for Oldham West and Royton said a moment ago, he wants a strong evidence base, and so does my hon. Friend the Member for Redcar.

My hon. Friend the Member for Oldham West and Royton also said—I think I have got this right; it was a double negative—that he was not saying that local government does not trust central Government. I have to tell him that I am saying that. I do not trust central Government, and the reason is that they do not want the evidence, because it would lay bare the unfair nature of local government funding and, in particular, local government cuts over the last six years. I suspect that those cuts have taken their toll in communities such as Redcar and Oldham, just as they have in Wolverhampton. The Government keep hoping that people will not notice and, thus far, they have done not a bad job of keeping away from it. New clause 3(4) would solicit evidence on

“the resource need of each billing authority”.

Subsection (5) states:

“It shall be the duty of the Commission to assess the impact of any new requirement imposed upon a billing authority”.

Well, the Government do not want that evidence.

Using my own local authority in the west midlands as an example, the evidence is clear that over the last seven years almost, the cut in the central Government grant to Wolverhampton residents has been more than £200 a head, in one of the most deprived cities in England. Correspondingly, the alliterative Wokingham, in one of the most advantaged places in England—good luck to them—has seen a slight increase in funding per capita. I hope that the Minister is going to get up and astound me and say that he accepts these amendments, but I would be extremely surprised, because they would require evidence to be generated and the Government do not want such evidence.

The distribution of resources and the assessment of the relative needs of local government is an essential feature of the local government finance system, but those elements do not require legislation to determine them. However, I thank Labour Members for providing me with the opportunity to outline the work we are doing in that area.

Before doing so, I would say that I have heard what has been said, particularly by the hon. Member for Oldham West and Royton. It was unclear whether the commission would be there to simply divide the money available at the time between local authorities, or whether there is a role for it to determine the total money available and national policy on council tax. Were it the latter, it is important to set out that those issues have been determined for many years by central Government. Successive Governments, including Conservative Governments, the coalition Government of Liberal Democrats and Conservatives, and Labour Governments, have held to those principles.

In regard to the work already under way, we announced the fair funding review last year, which was universally welcomed by the local government sector. The review is conducting a thorough examination of what a relative needs assessment formula should be in a world where local government spending is funded by local government resources and not central grant. The findings of that review will set the initial baseline for the 100% business rate retention system.

From the start, we have recognised the essential role that local government has to play in shaping those reforms. That is why we have been working collaboratively with the Local Government Association, which is responsible for representing a broad range of views held by different sections of local government and their member authorities. That effective working relationship has already seen the establishment of a steering group supported by a number of technical working groups, which my officials co-chair with colleagues from the Local Government Association. That gives local experts a unique opportunity to help shape the review, and all the work of those groups is available online, adding real transparency to the progress of the review.

The process for assessing the relative needs of local government is well precedented and was, of course, followed by the Opposition when Labour was in power. Our collaborative and transparent approach represents a significant improvement on that process. In the summer, we published a call for evidence that set out key questions that the review will address. The Secretary of State has confirmed that he will report back to the House on the progress of that review.

Creating a new commission to consider needs assessment and new burdens, as these new clauses would do, blurs accountability for that important work and would add another significant layer of unnecessary bureaucracy, over-complicating the process for assessing the relative needs of local government. It is important to point out that it would undoubtedly lead to a situation where it simply costs the taxpayer more money.

Our proposals offer a better guarantee of a transparent process, supported by the best available advice from local government and elsewhere. On that basis, I ask the Opposition not to press the new clause.

Thank you, Sir David, for the opportunity to respond to the Minister. I cannot understand why the Government are so reluctant to accept these measures. Of all the changes in the Bill, some are extremely minor and it would not require legislation for the Government just to get on and make them. Their argument is that they have put them in the Bill to give clarity and to ensure that there is a clearly understood framework in place. If they were to establish an independent body to look at a needs-based assessment, potentially with redistribution, it would be right for it to form part of the same transparent framework that has been proposed for far more minor changes.

Will my hon. Friend join me in congratulating the Minister on decrying the amendments with a straight face, claiming that they would add another layer of bureaucracy, when he has introduced a Bill that will bring in at least 12 sets of new regulations?

I absolutely share that point. There are 12 sets of regulations and something like 56 new powers for the Secretary of State. We are not seeing a loosening of what binds the hands of local government; it is much more a tightening. I do not think that that will be well received.

The main thing is how we move forward. There is so much uncertainty now, not just with the amount of demand in the system for public services. We have seen the social care demand, but there will also be child safeguarding and educational attainment demands and mental health and disability support pressures very soon. That is notwithstanding all the other 700 services that local authorities deliver on a daily basis to support our residents.

We are seeing a genuine crisis in public services in many parts of our country. Some have been more protected than others and some have been more affected than others, but there will be an impact across almost every community in the country. Either the Government are lining up to continue to ignore the scale of that problem and what it means to individuals, families and communities—following a similar pattern of behaviour to that which we have seen under the coalition and the current Governments—or they genuinely want to get a grip and put in place a more sustainable system that would prevent such shocks to local public services. If local government is saying that, through an independently commissioned report that has been agreed by every party political party—including the Conservative party—on the Local Government Association, I cannot understand for the life of me why the Government do not just take that with both hands and run with it. At the moment, their defence seems to be, “That would cost money. It would cost money to have this independent system in place.”

Let us be clear about what the role of that independent body would be. It would be there to assess the need in each area against some objective criteria that would be agreed with central and local government. The Government have said they are going to do that anyway, so let us put that to one side; it will happen whether this body exists or not.

We then talk about redistribution. We know how much money will be required, because a thorough and in-depth review would have taken place. We then need to understand how much money we have and how much we distribute to meet the demand that has now been identified. What Government would not want the ability to say, “This is an independent recommendation”. It would be a gift. We know that they are fearful of scrutiny. We have seen that in the decision that the annual financial settlement will not come to Parliament in the future—they do not want that parliamentary debate. But this gives them a gift to say, “This is not the Government’s saying this; this is an independent body that has worked in consultation with local government.”

Where we are going and what the end looks like is extremely unclear. We have been promised an independent assessment of need. We do not know the criteria, the timescale, the membership or the status. We do not know whether it will be inside or outside the Government or completely independent. Will it sit within local government? We do not know the detail of any of that. We do not know what the new business rate devolution will be. We do not even know which different schemes have been negotiated in each of the pilot authorities, let alone the sweetheart deal that has been agreed with Surrey, which is the only single authority negotiated business rate retention pilot in the country—I am sure the Minister will say whether this is right or wrong. All the rest have been done through a devolution deal through their combined authority arrangements or the imposition of directly elected Mayors. Surrey is being treated in a very special way—a way that other local authorities are not. The Government cannot craft a special sweetheart deal for everybody. At some point, we have to accept that the quantum of money is a quantum of money and we have to teem and ladle.

I think the hon. Gentleman knows in his own heart that I have been quite clear that we need a pilot in a two-tier area. Councils across that part of the local government sector will be invited to put their name forward to be part of that pilot. No decisions around that have been made.

Coming back to the quantum of funding that the hon. Gentleman has just mentioned: I am still unclear on this. Is he saying that the commission that he wants to set up would determine the overall quantum of funding and things such as council tax setting? While he alludes to that, he has not actually said that as yet.

I hope that the Minister does not mind too much. We have done our best to be helpful and constructive and to offer ideas. Ultimately, there is only one person in this room drawing a ministerial salary and being driven around by a chauffeur and it is not me, yet.

Will the hon. Gentleman give way?

You have to earn the perks that come with the job. I am not going to give way. We need to make progress. I am happy to receive a letter from the Minister if he feels it is necessary to justify his position. What is most important is not to conflate a number of different points that have been made that are legitimate and stand on their own two feet—they are not one and the same thing. There is a world of difference between establishing an independent financial commission to understand the need in each area for public services and then to advise back to the Government what that assessed need should be. Government may well say as part of the remit of that review that there is a quantum of money that is limited and within the criteria that are set, they may well seek advice from the independent body on how to teem and ladle within that quantum. There has been no suggestion that the independent body would take away the right of the Treasury to determine how taxation is generated and spent in the country. It is very clear if the Minister reads the new clauses and the new schedule that the remit is to advise Government.

Does my hon. Friend agree that it would help the Minister, whether chauffeur-driven, well-paid or not, with all his officials, to do the Opposition the courtesy of reading new clause 3? If he reads new clause 3, it is entirely clear that the proposed commission would not usurp the power of the Secretary of State to decide on the grant.

That is absolutely right. I suppose that in some ways I took it for granted that the Minister would read the papers. Perhaps I should not have done that and I should have read it out line by line. What the new clause intends to do is very clear. I am a new member so perhaps I am entitled to a degree of naivety— some other people do not have that excuse. We were so prescriptive because we did not want it to be conflated or confused, and we wanted it to be accepted as a constructive amendment on that basis. I hope that the Minister has read it. It is clear what it is intended to do and what it is not intended to do.

Perhaps this is just the way Parliament works: in this type of debate in a Bill Committee, Opposition amendments are not accepted. That is the way that democracy works, and the Government have the right to decide what they will and will not accept. I fully appreciate that. We will be pressing new clause 3 to a vote, but if the Government will not support it, I would at least ask them to negotiate with the Local Government Association—which represents our local government base—on the best way forward. There is so much uncertainty. When councils are being asked to take on more responsibility as part of the business rate retention scheme, with even more uncertainty about growing demand and less ability to even be able to teem and ladle money across different services in their area, they will want to know that there is transparency in whatever process follows. Every Opposition Member will be open, as am I, to an active debate about what the settlement criteria could be. Some of that will be about sparsity, about understanding the additional cost of delivering services in rural areas. But some of it will be about deprivation; understanding that there is deprivation that requires additional service delivery in an area.

If we cannot have that debate in an open and mature way, then people in our communities will suffer. I have not come to this place for people in Oldham to suffer any more than they need to. It is an open offer. I am here to work, and the Government should take that as an invitation to have an active debate about what that criteria should be and about what type of independent assessment there ought to be. Perhaps we can then reach some common ground that demonstrates to our local government base that we are mature, that we understand the seriousness of the issues that councils face, and that we are willing to look forward and be transparent in that process. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 3