Local Government Finance Bill

I beg to move, That the Bill be now read a Second time. It is a relief to be called after all that waiting, Madam Deputy Speaker. The coalition agreement committed the Government to supporting sustainable growth and enterprise, balanced across the country. It also pledged the radical devolution of power and greater financial autonomy to local government. This Bill delivers on those promises. It aims to introduce much-needed reforms to make England's local government finance system more effective at supporting local jobs, local firms and local enterprises. This is not just about redistributing a pot of cash differently; it is about providing the best possible chances to foster more growth, generate more cash and make a bigger pot. The case for change is widely recognised. The OECD has called the English local government finance system one of the most centralised in the world. The Labour Government knew that, but failed to deliver on reform. There were Green Papers, White Papers, the ““Balance of Funding”” report, the Lyons inquiry and, if that was not enough, the Labour party manifesto at the last general election boldly pledged another commission on local government finance. What little reform was introduced, such as the so-called local authority business growth incentive scheme, was timid, inconsistent and ineffective. The only thing Labour managed to do was to double council tax and halve local services, such as bin collections—pay more and get less. Where others have failed to deliver, however, the coalition is ready to act. Nowhere is the need for change more apparent than in relation to business rates. Currently, councils collect rates for local businesses, but they are no more than the agents for central Government. No sooner is the cash in than Whitehall whisks it away. Whitehall feeds the figures into a very complex formula. Each council waits with bated breath to see how much it will get back. The 160-page local government finance report requires a detailed knowledge of multiple regression to fathom it out. The system creates a perverse regime of incentives. Councils that work hardest to boost local businesses do not see their efforts reflected in the state of their finances. In fact, local economies that become more successful can effectively see their central Government grant cut. The regime actively encouraged councils to talk down their area, to mask their success and to amplify their deprivation; it breeds a begging-bowl mentality and a race to the bottom. Surely, now more than ever, we should welcome growth and reward incentives. There is some criticism that Labour failed to deliver on its election pledges. Well, we are here to help. In the Localism Act 2011, we introduced a general power of competence, implementing a pledge in the 1983 Labour party manifesto. However, we have now moved on to the 1997 Labour party manifesto, and we are moving towards the localisation of business rates. The Government believe that councils should have every possible incentive to encourage local business, support local jobs and create the conditions for the local economy to thrive. The Bill paves the way to repatriating business rates. We want to give councils a greater proportion of the rates they raise locally. Every council that grows its business rate base can be sure that it will see an increase in its income, compared to the status quo. Putting in place the right incentives gives every council every possible reason to go for growth, which creates the potential to raise more cash overall to invest in local services and local community priorities. Of course, we have heard a few grumbles already.