Local Government Finance Bill

Debate between George Howarth and Helen Jones

Tuesday 24th January 2012 Commons Chamber

[Helen Jones]

My hon. Friend, herself the former leader of a major local authority, makes a fair point. It is what we have been debating throughout the Bill. Everywhere we look in it, we see no consideration of need; the poorest local authorities are being penalised most at every point.

We have said that the Bill does not recognise the barriers to growth that some areas face, such as the lack of appropriate transport infrastructure or of surplus capacity, as my hon. Friend will know from Halton, near her own area of Liverpool, for example. Everyone seems to accept that some growth happens simply because of where it is. Add to that the fact that councils also face a 10% cut in money to fund council tax benefit and we see that there will be real pressure on many local authorities. They will face having to cut benefits for some of the poorest people, having to cut services or having to raise council tax. We all know how difficult it is going to be to raise council tax. The result of the changes is that stronger local economies will find it easier to grow while others find themselves caught in a trap of rising demand and declining resources.

[Mr George Howarth]

My hon. Friend mentioned Knowsley. Does she accept that the problem is not just current, but stretches out into the future? My information is that from 2017-18, wealthier authorities will begin to see real-terms growth in resources, yet Knowsley will still face year-on-year reductions in resources of more than 5%. After 10 years, it will still have reductions of 3.8%. If what we are discussing is wrong now, it will become progressively more wrong as the years go by.

[Helen Jones]

My right hon. Friend has hit on the key to the Bill. It is not simply wrong in the beginning; it will increase inequalities—get more and more wrong—as it proceeds.

Inequalities will widen, even if the top-ups and tariffs are uprated by the retail prices index, and the levy will not fully compensate for that. Remember that even if we get a proper definition of what constitutes a disproportionate gain—bearing in mind the earlier debate, that seems unlikely at the moment—councils need to pay only a proportion of that in levy. The logic of that is that some areas will benefit from disproportionate growth. Others will fall further behind.

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[Helen Jones]

I did not say that they were in every constituency: I said that they are concentrated in London and the south-east, which is a plain fact.

In any case, we do not believe that this is the way to proceed. If the Government do not take steps to tackle the gap—and those steps are not set out in the Bill—services in many councils will decline, while others are able to reduce, even abolish their council tax as time goes on. We will therefore seek to divide the Committee on the amendment later, and I commend it to my hon. Friends.

[Mr George Howarth]

I rise to support my hon. Friend the Member for Warrington North (Helen Jones) on amendment 65, which encapsulates an important principle. The 2012-13 settlement, which will be used as the baseline for the new finance system that is to be introduced, has a number of problems that will affect areas such as Knowsley disproportionately—we have already heard examples from other areas.

It is important for Knowsley in particular—and I hope the Minister will comment on this when he replies to the debate—that the system is based on the damped allocations, including the grant floor, as that will lock £6 million in for Knowsley, which is a very important sum of money. The baseline also needs to consider the scale of cuts faced by some local authorities in the recent multi-year settlement which, as my hon. Friend has said, targeted some of the most deprived areas in Britain, including Knowsley. It is worth reminding the Committee that Knowsley’s cut in revenue spending power per head of population in 2011-12 was £156.09 compared with the average in England as a whole of £49.18.

If the Secretary of State were here for this debate, he would be sitting there smiling and might even be tempted to say, “The point we’re trying to make with this Bill is that local authorities such as Knowsley should go out and promote their businesses, get more inward investment and shore up the business rate, the benefits of which would offset some of these problems.” However, the difficulty is, first, that that does not address the fact that we cannot switch around economic activity in a given area in a short space of time. We can do it over time, and Knowsley has been quite successful in retaining major industries. Earlier I quoted the example of Jaguar Land Rover, which has remained in Knowsley; indeed, it has grown, with new products and a major recruitment programme last year. New businesses can also be attracted, which is what we did with QVC, a massive business, employing about 1,500 people in Knowsley, and a major contributor to the business rates of the borough. However, doing that takes time, and such changes cannot be made in a short space of time.

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[Mr George Howarth]

rose—

[Helen Jones]

rose—

[Andrew Stunell]

I shall give way to the right hon. Gentleman and then to the hon. Lady.

Local Government Finance Bill

Debate between George Howarth and Helen Jones

Wednesday 18th January 2012 Commons Chamber

[Helen Jones]

The hon. Gentleman makes a fair point, although I do not believe it is impossible to find independent people in the sector and of course the Government could have taken the Bill into Public Bill Committee and taken evidence, and then had a long Report stage on the Floor of the House to enable Members to participate.

To go back to my point, we are not against providing incentives for local authorities, but we do not believe that this Bill goes about it in the right way. We believe that any system has to be fair and equitable, and must recognise that weaker local economies find it harder to achieve growth and need help to do so. The Government have signally failed to recognise their responsibilities in that regard and we are faced with a “Leave it to Pickles” Bill. The Secretary of State is going to decide who gets what on the top-ups, the tariffs and so on. That is all being left to regulations, with no indication given as to the factors that he will take into account. As I keep saying, there are no draft regulations for us to look at.

[Mr George Howarth (Knowsley) (Lab)]

I apologise for not being able to be here for the earlier part of the debate. My hon. Friend knows my constituency well. Does she agree that unless we make a provision along the lines of amendment 19, which deals with need, the capacity to benefit from business rate growth and the council tax base of the authority, areas such as Knowsley are likely to be badly penalised?

[Helen Jones]

My right hon. Friend, who has been a doughty champion of his constituency for many years, hits on exactly the point that we are trying to make: unless the distribution of the central and local share is based on a number of factors, inequality will be built into the system—indeed, it is built in already because of the starting point. We do not believe that this approach is good enough. The future of communities and of the services available, particularly to the poorest people in this country, cannot simply be left to chance. If the Government believe in fairness and really believe that they would take into account the factors we mention in any case in determining central and local shares, I cannot see why they would have a problem in accepting our amendment. After all, the Prime Minister and the Deputy Prime Minister told us during their now forgotten love-in back in May 2010, before the romance had gone and they started squabbling, that they

“will ensure that fairness is at the heart of…decisions so that all those most in need are protected.”

That is all we are asking for in this amendment and the others that follow it.

Unfortunately, the Bill does not provide that fairness. If it goes through as drafted, service provision will, as my right hon. Friend the Member for Wentworth and Dearne said, increasingly be based on the ability to raise local business rates and council tax. As council tax increases will often be subject to a referendum, most of the demand will be put on local business rates.