UK Parliament / Open data

Local Government Finance Bill

I beg to move, That the Bill be now read the Third time.

This is a bit like coming out in the play-off final after the brief half-time break at Wembley on Saturday. We just need a little bit more to close the deal as far as this Bill is concerned—[Interruption.] It did not have to go to penalties.

We have had a lengthy and sometimes constructive debate during the Bill’s progress through the House, and it is worth taking stock now. The House has the opportunity to make a considerable game shift in the relationship between central and local government. We are now in a position to move away from what has been, on any independent view—as consistently endorsed by independent experts, going back to Layfield, the Lyons inquiry and the resource review—the unhealthy level of dependence of local government on central Government for income that has accrued over the years. As part of the Government’s localism agenda, we intend to hand back power to local people and the authorities that represent them. I hope that that principle will be recognised by hon. Members on both sides of the House.

I shall set out what the Bill does and its wider context as part of the coalition’s localism agenda. It is recognised that giving greater local control over expenditure and revenue raising is desirable. The principle of business rates retention is therefore supported across the House. Once we drill under some of the rhetoric, there is also a general recognition that welfare spending needs to be brought under control, and that it is right that local authorities should have control over council tax support.

The Bill incentivises local authorities to go for growth, because that is the other part of the agenda that the coalition regards as critical. We need to encourage sustainable growth and the Bill incentivises local authorities to grow their tax base by directly linking financial benefit to the decisions that they take on, for example, planning permissions that lead to more commercial floor space and economic activity, and in the design of their council tax support schemes that incentivise them to get claimants back into work, which is where we all want to see them wherever possible. It enables councils to decide how best to manage their contribution to reducing the deficit. All thoughtful commentators accept that a contribution must be made and that it is more likely to be nuanced and effectively delivered if there is local input into the design of that contribution.

Local authorities will also be given the freedom to decide how to help provide for the most vulnerable in their communities. I hope that no one seriously thinks that any party has a monopoly on concern for vulnerable people in their communities. The Government regard the vulnerable as a top priority, and that is why we have increased the weighting given to the needs element of the formula grant in our financial settlements; why we have maintained that in the baseline; why we introduced transition grants; and why we will ensure that local authorities that deal with some of those areas of greatest cost pressure in relation to adult social care and children’s care will be designated as top-up authorities and will have a degree of certainty about their funding by index-linking and protection from volatility. That is a practical commitment to helping to protect the most vulnerable in society.

The reforms are also part of our wider approach to supporting growth, which is our best hope of having the money that we need to support services for the vulnerable in a sustainable way; to get more people back into work; and to enable us to pay down the deficit, which at the moment ties the hands of central Government in seeking to deliver the services that we all want to see for our communities. We have made real progress on this front over the past two years. The Bill sets important incentives for business rate retention and helping people back into work through council tax support, but that is linked to other parts of the agenda. We are encouraging local authorities to build new homes, through the new homes bonus, an incentive for both commercial activity and domestic building. Homes as well as jobs are central to the incentives we are putting in place.

The local enterprise partnerships are bringing together businesses and civic leaders to provide strong local leadership and to drive growth. My right hon. Friend the Secretary of State, I and all the Ministers involved in the legislation very much hope that the Bill will not only make technical changes but bring about an attitude change in the relationship between local government and their business communities. Many of our competitors have a much closer relationship between their local authorities and the big economic drivers, but that has not always been incentivised in the UK. The Bill will enable it to happen and—I hope—help that mindset to develop. The LEPs will play a part in that by setting up the structure to enable it to happen.

We have put in place 24 enterprise zones offering discounted business rates and simplified planning to attract new local business and investment. The regional

growth fund, the Growing Places fund and the Get Britain Building fund are providing a £3.3 billion boost to local economies and supporting tens of thousands of jobs, and through our welfare reforms we are seeking to bring welfare spending back under control and to target support. The 2010 spending review focused on reducing welfare costs through savings of about £7 billion a year.

Localising council tax support will help to deliver savings of £500 million across Great Britain—this in an area of activity where expenditure more than doubled under the Labour Government. It is not a sign of a healthy economy that expenditure on council tax benefit should have doubled between 1997 and 2009-10. Instead, we are providing strong incentives for local authorities to support growth and improve employment opportunities, helping to reduce poverty and reliance on support, as well as hold down costs in the long term. Speaking as someone whose grandfather clawed his way out of poverty in the east end, I, like plenty of other Government Members, have as much personal experience of such things as anyone else who has spoken.

The Bill has received extensive scrutiny. Its core principles were set out in the coalition agenda; we then proceeded with the local government resource review in early 2011; there was a consultation, along with eight detailed, technical papers to explain the thinking behind the reforms; and we have discussed the detail of the scheme through our local government finance working group and several sub-working groups. We have by no means ignored the views of local authorities; on the contrary, we have sought to engage with them, and will continue to do so, at every stage in the process. Those groups have been meeting frequently since January.

Localising council tax is a pragmatic approach to balancing the need for reform with ensuring a sensible level of deficit reduction, and builds on the welfare reform White Paper, published in autumn 2010, setting out our broad intentions. We undertook pre-consultation engagement with local authorities and other groups to help them to understand the issues, and held delivery partner engagement events last August and September, as well as a full three-month consultation from August to October that generated about 400 responses.

Against that background of consultation, nobody can say that the Government have not sought to engage with people over our reforms. Against that background of consultation and information sharing, last Thursday we published a series of statements of intent to provide clarity and assurance to the House and councils about how the reforms, including our proposal to fund localised support for council tax, will work in practice.

I shall tell the House what we have published so far and how much we have sought to set out the agenda. We have announced that business rates will be split 50:50 between central and local government and confirmed that central Government will return their share of business rates, in its entirety, to local government, and we have confirmed that the system will not be reset until 2020 at the earliest to give sufficient reward and long-term certainty while ensuring that the scheme will be fiscally sustainable, thus protecting the interests of taxpayers and the wider economy.

Our economic analysis, which has been independently verified, suggests that a 50% local share over a seven-year reset could create an additional £10 billion of gross domestic product. That figure is based on the multiplication

of additional commercial floor space created through our incentive effect and, then, the additional gross GDP that stems from the economic activity in that commercial floor space.

We have set out the statements of intent indicating what will be in the secondary legislation, including—as was noted in the previous debate—the safety net threshold, to be set at between 7.5% and 10%, to protect against volatility.

On the localisation of council tax support, we have been clear that we will seek to provide as much detail as possible as early as possible. We continue to work with local authorities and service providers on the design of the scheme. [Laughter.] I know that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) does not believe that any proposal that he did not make could be taken seriously, but that perhaps says rather more about him than about the Government.

Type
Proceeding contribution
Reference
545 cc946-9 
Session
2012-13
Chamber / Committee
House of Commons chamber
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