Local Government Finance Bill

At this stage of the debate we always try not to double up on what others have said, but the hon. Member for Sefton Central (Bill Esterson) said it would be fine if the present local government finance scheme had actually dealt with the differences between authorities. Many Opposition Members have talked about perverse incentives and about a lot of history, but let me explain some history. I spent 17 years as a Conservative member of Hackney council, which the shadow Secretary of State referred to as one of Britain's poorest boroughs. When I joined the council as a Conservative—as Members can imagine, there were not many Conservatives on Hackney council—it used to proclaim itself Britain's poorest borough for a reason. There was almost a perverse incentive for it to do so. I am not saying that Labour councillors did not want to see the council and its tenants better off, but it was in their interests, given the funding regime, to exaggerate how badly off Hackney was. It meant that they could get more from the rate support grant. That perverse incentive has continued. I shall give another example from those days and my early learning experiences in local government in the 1980s. I used to sit on the housing committee, and once while discussing housing benefits I made what I thought was a stirring speech on behalf of Hackney's tenants when the Labour party wanted to increase rents by 6.8%. I was complimented afterwards on the standard of my speech. Members might not believe it but I was a new young councillor then. But I was told, ““Actually Eric, it doesn't matter. They're all on benefits so we can just put up the rents.”” We are not saying—although I understand that the Opposition have tried to say it—that the change proposed by my right hon. Friend the Secretary of State is a massive revolution along the lines of the community charge, but, as other Government Members have said, it will mean that we can begin to provide councillors with a way of raising extra money by entering a bargaining system with business. The main thing that counts when encouraging business growth is a person's ability to put their own money on the table. At the moment, though, there is little in the system to give councillors that ability. I believe that these reforms are the first step along that road. Members have mentioned the north-side divide. I represent a part of the north, and my district councils are looking forward to these reforms. For example, Lancaster council can now envisage finally being able to raise money off its own back, go into partnership with local businesses and perhaps open that third bridge.