Local Government Finance Bill

This has been an interesting debate, marked by a number of contributions from people with real expertise in local government finance and real concern—from those on the Opposition Benches—about what the Bill means for their communities. I do not have time to do justice to them all, but my right hon. Friends the Members for Wentworth and Dearne (John Healey) and for Greenwich and Woolwich (Mr Raynsford), both distinguished former Ministers, made some serious points, as did my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Communities and Local Government Committee, supported by my hon. Friends the Members for Stalybridge and Hyde (Jonathan Reynolds), for Plymouth, Moor View (Alison Seabeck), for Stoke-on-Trent Central (Tristram Hunt), for Lewisham East (Heidi Alexander), for Sefton Central (Bill Esterson), for North Durham (Mr Jones), and for Stockton North (Alex Cunningham). They were all united in their deep suspicion of the Government's motives and they are right to be, because as usual the Government began with grandiose declarations about what they intended to do, but that ended in failure. There has been a failure to look properly at local government finance as a whole, a failure to consider need and a real failure to accept the Government's own role in promoting economic development. We have ended up with a deeply flawed Bill in which we are asked to write a blank cheque for the Secretary of State. He will decide the tariffs and top-ups, he will decide the amount of the levy and he will decide who gets a safety net payment. He is rapidly becoming the Del Boy of local government finance, selling us all dodgy schemes while he sits there, rubbing his hands and saying, ““You know it makes sense.”” We are not buying, and we are not buying because we know his record. We saw how in the so-called Localism Act 2011 he gave himself 100 more powers. We have seen him design a local government finance settlement to centralise power and devolve the blame. That is exactly what the Government are up to now, and it was clear from the moment of their consultation, when they said that"““local authorities can be reluctant to allow commercial development and promote economic growth””." I ask the Government, as I have asked them before, to name one such local authority. I know of no local authority—certainly no Labour local authority—that is not desperate to attract jobs and growth. It is not local councils that have stalled the economy, but this Government, who inherited an economy that was growing faster than the EU average and faster than that of the United States, and who destroyed it with a slash-and-burn approach to public spending. Of course, the Secretary of State is a true believer in that. He began in 2010 with in-year cuts to specific grants, which by their very nature target the most deprived communities. He then designed a local Government finance settlement that we are asked to accept as the baseline for business rate redistribution and that is breathtaking in its unfairness. One need only look at the heat maps to see where the cuts fall: the north-east, Yorkshire, the north-west, parts of inner London and parts of the midlands. As a result of the Secretary of State's settlement, by 2012-13 Liverpool will have lost spending power of £235 per person, Hartlepool £183, Newcastle £144 and Wokingham—the Government's favourite council—just £1. That is what we are asked to accept as the baseline—a baseline, moreover, that includes the new homes bonus and the 2011-12 council tax freeze grant. That all gives advantages to authorities with a high tax base over those with a low tax base. The system starts from inequality and it will go on to entrench it further. There is nothing in the Bill about the infrastructure that many areas need to allow them to develop and there is nothing about the surplus capacity in many of our cities. Liverpool has empty office space that is already subject to rates, which could create 15,000 jobs if brought back into use, but hardly any extra income for the local authority. An area such as Halton has 22.3% of its business property with an empty rating assessment. Again, that could create more jobs but hardly any extra income for the local authority. The big black hole in the Government's Bill is any recognition of their own responsibility to promote growth and help weaker economies to grow. It is not surprising then that they have even failed to address where business rates are a proper measure of economic growth at all. Commercial and retail premises generate far more business rate than manufacturing and small businesses. Small business start-ups, internet businesses and sectors such as tourism are vital to our economy but generate little in business rate. Nationally, we need those businesses. We need the skills they bring, the innovation they develop and the exports they gain. It is typical of the Government's muddled thinking that they claim to support manufacturing and small businesses but then design a scheme with a built-in incentive for retail. No wonder the Secretary of State has been told by the leaders of local authorities in manufacturing areas that the Bill gives preference to retail over manufacturing. The Bill also gives preference to the rich over the poor. Under the scheme, the gap between rich and poor areas and between north and south will widen—even if top-ups and tariffs grow by the retail prices index. It will widen even if all local authorities generate the same increase in business rates and council tax, because another thing that the Government have failed to consider is the different tax base of local authorities, particularly the different council tax base, which is not in the Bill at all. They have nothing to say about areas such as the north-east, where 56% of properties are in band A and 86% are in bands A to C. They have nothing to say about the difference between those areas and Surrey, for example, where 75% of properties are in band D or above. They have nothing to say about it because they do not want to address the problem of inequality. The same is also true of the Government's suggestion about the localisation of council tax benefit, which we will need to discuss in much more detail in Committee. The scheme will ensure that the people who are hit hardest will be the working poor—the people who go out every week to earn their poverty—and this from the Government who say they want to make work pay. Another big thing that is missing from the Bill is any assessment of need. This Government with a Cabinet stuffed full of millionaires do not care about those who need local services. I know the Secretary of State is going to tell me that he is not a millionaire, but he hardly represents the squeezed middle, does he? The Government have nothing to say about areas such as Liverpool, which has seen a 73% increase in special guardianship orders since 2009, or Durham, where nearly 2.5 times as many people require home care as in Surrey. They have nothing to say about areas such as Halton, where 24% of the population have a limiting long-term illness. In future, those services cannot be safeguarded if business rates fall because the Bill introduces a postcode lottery in services and benefits. No longer will a person's entitlement depend on their situation; it will depend on where they live. It is for that reason that we oppose the Bill. It will increase the disparity between rich and poor; it will hit the poorest areas most; and it will in the end ensure, as my hon. Friend the Member for North Durham said, a two-tier, two-speed economy in Britain. For that reason, I urge my hon. Friends to oppose the Bill in the Lobby tonight.