Cities and Local Government Devolution Bill [HL]
Debate between Lord McKenzie of Luton and Lord Brooke of Sutton Mandeville
Lord Brooke of Sutton Mandeville
I realise that the drafting of the amendment is not the noble Lord’s, but in proposed new subsection (9), to which he referred a moment ago, it might be sensible if the penultimate word in the penultimate line was struck out at this juncture, as, at the moment, it constitutes nonsense.
Lord McKenzie of Luton
Are we dealing with Amendment 79B and proposed new subsection (9)?
Cities and Local Government Devolution Bill [HL]
Debate between Lord McKenzie of Luton and Lord Brooke of Sutton Mandeville
Lord McKenzie of Luton
My Lords, we are fully committed to openness and transparency in the proceedings of local government, combined authorities and mayoral combined authorities. We would draw the line so that the same rules operated as for local government currently. We would have reservations about taking it back beyond that—certainly taking it into the area of advice.
That raises a question; I do not know whether the Minister can help us with it. When there are discussions and negotiations about devolution deals, are they in the public domain?
Lord Brooke of Sutton Mandeville (Con)
My Lords, my first intervention in proceedings on the Bill were when we were discussing the same subject in Committee. There were references then, as there have been today, to the 1972 Act. The particular episode to which I referred in that previous debate was the Private Member’s Bill introduced by Margaret Thatcher in the 1959-64 Parliament, which was her first real appearance on the parliamentary scene. My late noble kinsman sat on the Front Bench throughout the passage of her Bill.
I have taken an interest in the subject going back a great deal further, to that moment in 1809—we were fighting the French at the time—when the Treasury intervened to say that three particular government departments which it had nominated must by 12 noon on any day, on anything which had been in any way controversial or interesting in the morning’s papers, agree the Government’s position, which would then literally, in the language of government, become the line to take thereafter for the rest of the day. When I served as a Treasury Minister, the reason that I had responsibility for the Central Office of Information went back to that fact, because it was the Treasury which had set up the system in the first place.
I want also to say a brief word about the passage of the then Greater London Authority Bill, because it was the first Bill under which the evidence of those advising councillors in local authorities could be made available to the public at large. I am not in any way intending to pour anything hostile into wounds that are long since healed, but the Minister in charge of that Bill made an extremely loyal and long-term defence of the fact that that provision was in the text of the Bill—which it was not. I am afraid that I did go on pestering the Minister in charge of the Bill—no names, no pack-drill—as to where in the text of the Bill, which we were looking at, that information was. Eventually, he broke down and admitted that they were planning to do it and were going to put down an amendment, but had not actually put down the amendment before. It was very loyal of him to have defended and covered for the junior Minister, the Minister who should have put it down.
This has long been an interest and I shall be very interested indeed to hear what my noble friend says in responding to the propositions that have been put in front of her.
Cities and Local Government Devolution Bill [HL]
Debate between Lord McKenzie of Luton and Lord Brooke of Sutton Mandeville
Lord McKenzie of Luton
My Lords, we agree with the noble Baroness, Lady Janke, that we should give some thought to this issue, although I hope she will understand if we are unable to support the amendment as it stands. I will spell out some of the technical issues in a moment. But it does provide an opportunity to probe the Government’s intention on the devolution of fiscal resources to local authorities, including combined authorities—that is, where they are going on their journey.
My noble friend Lord Beecham will set out shortly the policy position we reached before the election on the growth of business rate retention. It accords with Amendment 43 in supporting multiyear finance settlements, for the obvious reason of enabling more effective long-term planning. However, we might consider fiscal devolution over three areas. First, we should look at the current funding arrangements: business rates, council tax, revenue support grants and specific grants. Secondly, we should look at how devolution budgets are to be made available—if functions are being transferred, what is happening to the money? Thirdly, we should look at whether any national taxes are to be devolved to local authorities and combined authorities. We seek to understand the Government’s policy on each of these matters.
National taxes are the thrust of Amendment 43, which appears to focus on property taxes, which have an unambiguous attribution to a specific area. This would appear to be perfectly possible for stamp duty land tax, which is levied on the purchase of residential and non-residential land and property, and for the annual tax on enveloped buildings, which applies to UK residential property put in a corporate wrapper. But capital gains tax appears to be more problematic because a tax liability could arise from netting off losses against gains—for example, a loss on a building in Birmingham against a gain on a building in Manchester—and making it more specific would be difficult. Similarly, the use of an annual allowance that is available generally against gains, and the taxation of corporations in relation to capital gains and how that is identified within an overall assessment, could also be problematic.
It would doubtless be possible to introduce rules to govern all of this, but with further significant complications to the tax system. On compliance, these taxes are geared to a national system and it would be necessary to disaggregate such matters. What is the rationale for attributing these taxes to a combined authority: is it the practicality of a ready additional source of revenue being made available, or because the focus of the combined authority’s activity can positively influence the tax outcome? It is presumed, of course, that the proposition is not to change the tax rates.
Nationally, stamp duty land tax raised just short of £10 billion in 2013-14 and capital gains tax just shy of £4 billion. I do not have the figure for corporation tax on capital gains. But these taxes can be volatile. Stamp duty land tax increased that year by 36%. Of course, it is not easy to predict. Is the growth in stamp duty land tax a good thing? The volume of property transactions in an area might be indicative of a thriving local economy—which could attract investment—but in so far as it is attributable to rising prices, it might simply reflect a failure to tackle supply.
We know the total spending power of local authorities in 2014-15 was in the order of £49 billion, including—though we do not have the precise figure—£10 billion-plus in revenue support grant. If the revenue support grant were, effectively, to be at least replaced by directly accruing property taxes and all business rates were to be devolved, what would be the mechanisms for dealing with the differing needs and resources of the local authorities? Presumably, business rates would continue to have tariffs, top-ups, levies and safety nets, which would help, but it is a little unclear whether the proposed full retention of business rates would be at individual authority or combined authority level. Is the noble Baroness suggesting that this could be done by pooling or by another mechanism? I think it could be done by pooling. The amendment refers to “business rate supplements”. Do these not already accrue to the relevant county or unitary district councils? Does the noble Baroness’s amendment contemplate that additional, erstwhile national revenues would substitute for devolved budgets, or eliminate the revenue support grant?
The Independent Commission on Local Government Finance set out the reasons why local government in England and the services it provides are no longer sustainable in the current form. It called for urgent devolution of powers, funding and taxes to groups of local authorities. We know from the Manchester agreement and our debates the main policy areas that central government appear to be willing to negotiate deals on for transferring functions, but we do not know whether they are willing to do anything on fiscal devolution. Is anything being contemplated, particularly with regard to existing national revenue streams such as stamp duty being devolved to local government? To what extent do the Government plan to adopt the recommendation of the noble Lord, Lord Heseltine, in brigading key national budgets and passing these as single parts to combined authorities, to do with as they see fit? In his No Stone Unturned report, the noble Lord argued the need to bring together separate funding streams which support the building blocks of growth into a single funding pot for local areas. He said that the model could be applied across England, but could not be introduced before 2015-16. We are now there. What are the plans? Is the noble Lord’s advice being rejected?
Will the Minister also tell us whether, as part of the devolution agenda, any fundamental change is contemplated to the current business rate and council tax regimes? Will the reset of the business rate retention scheme not happen until 2020? What is the latest position on the revaluation, which had already been deferred by the previous Government?
On fees and charges, it is estimated that local authorities raise some £10 billion a year. Some of these are locally determined and some are not. Is work under way to remove central government’s control over some of these? What scope would there be for a combined authority to seek increased freedom in this regard as part of a devolution deal? Addressing these fiscal issues is a test of how much central government trust local authorities and combined authorities.
Lord Brooke of Sutton Mandeville
My Lords, this is a brief intervention. One of the most attractive features underlying this legislation is the restoration of local pride up and down the country in the communities and neighbourhoods involved. I have always regretted from my time as Higher Education Minister that the relationship between universities and their surrounding communities, which had been very strong in the 19th century, gradually declined as the years went on and were not nearly as effective as they had historically been.
In the light of the amendment which has been moved, I wish to make a generic remark rather than a technical one. I can recall the circumstances in which decisions were taken at national level to reduce the amount of money retained by a local authority in terms of the resources raised within it. The local authority’s powers to have that retention were diminished. I recall that those circumstances arose because of the view of local business that it was perfectly possible for the economic situation in which it had to work to be changed overnight by a large switch in the power of an authority. I shall therefore be interested in what sense emerges from the Government, when my noble friend comes to reply, of not going backwards on that consequence of the circumstances which they replaced.