Local Government Finance Bill

It is a pleasure to serve on this Committee of the whole House under your chairmanship, Mr. Robertson, and that of your colleague, Mr. Amess. Amendment 46 is a probing amendment in an important group of amendments that the Committee will discuss. I have a number of questions for the Minister, which I hope he will be able to answer when he replies, but if not, I hope that he will answer in writing, as would usually be the case. I notice that two of the amendments are among the 17 that the Government have already tabled at this very early stage to their own Bill. In this case they correct not just drafting errors, but quite serious errors in basic sums. The Minister can speak to those himself when he contributes to the debate. Amendment 46 and the rest of the group reflect four consistent concerns about this part of the Bill on business rates. First, it will create a greater uncertainty for local government in its flow of funding and its ability to plan financially, and therefore its capacity to cope with the funding squeeze now and foreseeably in the next few years. It undermines an essential stability in funding for sensible longer-term planning and sensible long-term service reform and change. Secondly, the amendments reflect the distrust of central Government with regard to the use of the business rates funding stream as a cash cow to help to cover the cost of failures in economic policy when revenue streams from other sources fall off, as we have seen during the last 12 months. Thirdly, they reflect unease that central Government will make decisions without local authorities, the people affected or this House being properly consulted or given an opportunity to make their views known as part of the process. Fourthly, they reflect a concern that many of the most important decisions in the operation of the new system will be made by central Government, rather than local government. I recognise that there is localisation in the Bill, but too much of it is the localisation of risk and responsibility, rather than of resources, and too much of it is central Government offloading blame for potential service cuts and service failures in future. The all-party Local Government Association has stated:"““What councils, their residents and local businesses want is a fair and simple funding system that gives councils greater financial autonomy, supports local services and encourages economic growth.””" We all back that aspiration, but there are doubts that the Bill will achieve any of those aims effectively, let alone all of them. London Councils, which supports the changes in principle, is even more direct in its criticisms. Among its reservations, it states in a briefing for Members that"““the Bill as drafted creates a fiendishly complex system in which the level of the business rate incentive is uncertain and unpredictable—this undermines entirely the Government's aims of promoting local economic growth via the business rate base and delivering a clear link between local authorities and local businesses.””" The concern at the heart of amendment 46 relates to the difference between the total payments from local businesses via local authorities in respect of the central share, set out in schedule 1 in proposed new paragraph 2(1)(c), and the central allocation of those funds for local government use, set out in proposed new paragraph 2(4). The concern is that the difference between those two totals will in future be taken by the Treasury. The concern is shared by the normally cautious LGA, which states:"““Local Government will not have access to the full real terms growth in business rates in 2013-14 and 2014-15 through the mechanism of the 'set-aside' even though they will now use proportional shares rather than a government forecast.””" However, my concern is about what will happen beyond 2014. On that point, the LGA states:"““The Government's proposals indicate that the set-aside will continue beyond 2015. There is little rationale for this, as the main justification for the set-aside was to ensure that the scheme functions within the spending control totals issued in 2010””—" meaning the Government's spending review—"““and therefore works alongside the deficit reduction programme. Continuing the set aside beyond this point reduces the incentive to grow business rates and acts as a form of central government control in a system which is designed to do the opposite.””" That means that in future a locally raised revenue stream will be appropriated centrally to cover costs currently borne by the national Government. In other words, it will create a slush fund for the Chancellor for the first time in 2015, which incidentally is likely to be a general election year. I have several further questions for the Minister. What is the projected yield from business rates in 2015 and for each of the following five years? Secondly, what falls within the definition of"““for the purposes of local government in England””?" Those are the purposes for which the Bill allows the Government to use any surplus yield. Thirdly, what guarantee is there that the Government will not use this funding stream as a substitute to cover the costs of their current funding responsibilities in policing, employment support services, skills, national housing investment, universities, particularly to support innovation and research and development, health, in particular to cover the costs of elderly people, or housing benefit? What guarantee is there that local business funding, via local authorities, which is designed to pay for local services in the first instance, will not be used to substitute for those central Government costs? The Bill contains a big change that is being forced through too fast. It is a reform that builds unfairness into the system like a ratchet. It means that in future, essential local services such as care for the elderly and for vulnerable children, street cleaning, waste collection, road maintenance, and fire and rescue services will no longer be funded on the basis of need or population, but on the basis of the ability to raise tax and pay for the costs locally.