Local Government Finance Bill

It is perfectly fair to observe that the local government finance system in this country is highly centralised, and many of us have often said that we want to make it less so. The Bill will do precisely that. I am reminded of the old phrase, ““Half a loaf is better than none.”” As the hon. Gentleman will know, the Lyons inquiry into local government, which the previous Government established, found that the system was too centralised, but Opposition Members conveniently ignored that when in government. We are doing something about it, so his ambition is being met at least in part. I will say something about how this will operate. The central and local shares will have to be set out in the annual local government finance report. We will consult local government on the draft report, as we currently do, which will then be laid before the House and subject to the rigour of parliamentary scrutiny. A statutory consultation, as proposed in amendment 38, is unnecessary, as that will happen as a matter of course. We do not envisage that the shares, once they have been set at the outset, will be changed from year to year. That gives certainty that the uprating for the top-ups and tariffs will be protected until we come to a reset. We have already debated what will be the most appropriate period before a reset. That is why amendment 37 does not give any greater clarity. The Government's intention is that the money that comes into the central share will be returned in its entirety to local government, as currently required by the Finance Act 1988. We will do so by funding local government by grant that is outside what is currently formula grant and will now be in the rates retention scheme. There are plenty of examples of localised grants that are made in that way—for example those relating to neighbourhood policing and homelessness grants. The suggestion, from the authors of the current system, that that is centralising should win the award for chutzpah of the year so far, although it is only 18 January. These changes are an important step towards localisation. There is a great deal of detail and we have undertaken to consult on the regulations, and I assure hon. Members that they will be subject to the scrutiny procedures of the House. As I said earlier, we have set up a working group at official level to talk through the details with the local government sector. I have a great deal of respect for the right hon. Member for Wentworth and Dearne (John Healey), who is no longer in his place but, for the reasons I have set out, I do not believe that amendment 46 is necessary to achieve a degree of fairness in the system. It would have a perverse effect, as it would prevent any of the central share money from being used to fund transitional protection arrangements under the transitional rate relief scheme. Schedule 1, as drafted, permits that, which means that transitional payments under the rate relief scheme would not fall on local government. Central Government would be in a position to pick up the cost if disparities arose. Under the amendments, the costs would have to fall on local government, which is not his intention. I hope that he will consider withdrawing the amendment before we come to vote. I will turn briefly to the two Government amendments in the group. They relate to seriously technical parts of the schedule. I apologise for that, but they are important. First, they increase the amount that can be debited from the main rating account to include payments received in respect of central list contributions and payments that are made as contributions in aid. Those payments are made directly to the Secretary of State. The central list relates essentially to occupiers of network property. That is entered not on any individual local authority's rating list, but on the central rating list. Contributions in aid relate to certain property that is exempt from rating and is occupied by central Government, such as that for visiting forces, international headquarters and so on. We want to ensure that that is not counted in a way that is to the detriment of local government in determining the appropriate shares. By allowing those sums to be included, the amendments will reduce the central share and allow local government to keep more of the local rates that they raise. They are technical amendments, but they work to the advantage of the local authority sector as a whole. Secondly, the amendments will ensure that central Government cannot debit any sums that need to be repaid in respect of an earlier year. It sometimes happens that in the course of a year, authorities are expected to pay their central share contribution on the basis of an estimate made at the start of the year. That happens to some degree now in the calculation of business rate payments and there is a reconciliation at the end of the year. The amendments will simply ensure that reconciliation works in a way that allows payments to be made back to local authorities. Again, that will ensure that local authorities keep a bigger share of the local rates that they collect. These are both benign amendments that, in a modest way, strengthen the position of local authorities even further. I accept that this is a marginal part of the system, but it is none the less important to get it right. I urge Members to support the two Government amendments and hope that they will reject the amendments of Opposition Members if they are pressed to a vote. Amendment 46 negatived. Amendments made: 1, page 11, line 31, after 'exceed' insert '—(a)'. Amendment 2, page 11, line 32, leave out '(1)(c)' and insert