Local Government Finance Bill

Indeed. My hon. Friend hits on a point that is important to local government as a whole. Local authorities cannot avoid their statutory responsibilities, so other services are squeezed. In future we may well see richer authorities developing a Pickles park here and there and naming public libraries after this beneficent Secretary of State, but it will be very hard for other authorities. We have included unemployment in the factors that the Secretary of State must take into account. There are a number of reasons for that. Unemployment increases ill-health, it forces more families into poverty, and it is an indicator of the state of business in an area. But high levels of unemployment also increase the demand for local authority services. As one of my hon. Friends said earlier, it will increase the demand for council tax benefit, for example. As more people become employed, many more rightly receive discounts on other services, such as leisure services. So unemployment increases demand at the same time as locking the authority into a cycle of falling revenue. The theory behind the Bill is that local authorities can resolve that problem simply by expanding their business rate base and attracting more jobs. This was the theory that the Deputy Prime Minister set out when he explained the Government's proposals to council leaders. He said:"““The new system will start on a level playing field—where you progress from there is up to you.””" It is a wonderful thing to be a Liberal Democrat. They can conduct politics exactly as if they are writing a ““Focus”” leaflet. But in the first place, there is no level playing field. We have debated endlessly what we see is the unfairness of the current local government financial settlement, which forms the basis for rate redistribution and penalises the poorest local authorities most. The simplest statistic is the most telling and it bears repeating. The 10% most deprived authorities lose four times as much as the 10% least deprived. The cumulative cuts in per capita spending hit the poorest hardest. I quoted some statistics on Second Reading, but let me quote a few more now. By 2012-13, South Tyneside will have lost £183 per person in spending power and Middlesbrough £156. The national average is £47. The average in the south-east is £31. A few councils actually gain. Basingstoke and Deane gains more than £6 per person. But the Government simply refuse to look at local council resources as a whole, and inexplicably they refuse to consider the varying council tax yields from local authorities, which is why we want to put that in the Bill. In the north-east, 85% of properties are in bands A to C. In Surrey, 75% of properties are in band D and above, compared with just 9% in Sunderland, which means that it will raise a lot less from the same level of council tax. For example, South Tyneside has 66% of its properties in band A, and its council tax base per person is 0.2966. In Kensington and Chelsea, fewer than 2% of the properties are in band A, and the council tax base is 0.5524. From a national standard band D tax of £1,439, Kensington and Chelsea would raise £795 per person, South Tyneside just £427. Earlier, my right hon. Friend the Member for Wentworth and Dearne picked up the Bexley and Barnsley problem, where Bexley and Barnsley have a similar population, but Bexley raises about £37 million a year more in council tax. As I said, resource equalisation used to try to compensate for that up to 2010-11, but it is now being eroded. Inequalities will be entrenched unless these things are taken into account when the central and local shares are decided. I come now to the second of the Deputy Prime Minister's assertions, which was that once the scheme had started, how far a council progressed was up to it. I do not believe it is, and that is why we would like to put the ability to benefit from business rate growth as one of the factors to be taken into account in the Bill. First, such a statement ignores the Government's responsibility for promoting growth. It has been estimated that 80% of growth is down to Government actions, and only 20% down to what the local council does. But it also ignores the fact that many areas need infrastructure investment in order to grow. For example, Northumberland, the most beautiful county in England, has a sparse population, a large part of its area is national park, thus restricting the kind of development it can have, and it has a poor infrastructure. It needs national investment in that infrastructure in order to grow. That some local authorities find it easier to grow than others has to be recognised and provided for in any system of distribution. It is no good the Government simply pointing to their proposals on tax increment financing as a solution. TIFs cannot provide a high-speed rail link to the north-east. They cannot give it a big new road system. Yet transport is the key to unlocking some of the regional inequalities in the economy. Secondly, we have to acknowledge that for a number of reasons it is much easier to attract new businesses to some areas than to others. Westminster is a prime example. It has a multi-million pound base of national and international company headquarters. It is much easier for them to attract new investment than, say, Consett. Cambridge has a wonderful high-tech hub centred on its university. Because in business like tends to follow like, attracting more businesses is much easier for such places than it is for local authorities starting from scratch. My hon. Friend the Member for Lewisham East (Heidi Alexander) gave a good example in her excellent speech on Second Reading. She suggested that Catford was less likely to develop in the way that Old Street had because Catford was not on the tube map, and that makes things more difficult. The Government say that this issue will be dealt with by their proposed levy system, but they suggest that the levy will take back only a proportion of disproportionate growth, rather than compensate for it completely, so inequalities will grow, and they will grow even if the top-ups and tariffs are uprated by the retail prices index, as was noted earlier. It is estimated that, even with the uprating, the cash funding growth over four years could be 139.6% in the City of London, but 21.1% in Bury. It could be over 90% in Westminster, but 21.9% in Knowsley. The reason is obvious: a highly geared authority with an existing large tax base, relative to its funding levels, will do better from a business rate retention scheme than an authority with a lower tax base even if the rates grow by the same percentage. The Government have recognised that in part through their proposed levy, but it will not compensate for all the unfair growth. We believe that it would be fairer and better if the local and central shares were decided on the basis of all the things listed in the amendment, especially an assessment of need.