Local Government Finance Bill

Bill Esterson Excerpts

Tuesday 10th January 2012 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

I shall speak about the business rates proposals, the many gaps in the Bill and the unanswered questions. The councils that have faced the biggest cuts will lose most from the proposed changes to business rates. The impact of the local government cuts on businesses will take many years to work their way through, because there will be less money in the economy where the cuts in the public sector are greatest. In Sefton the cuts are already affecting businesses that rely for much of their trade on the public sector. The economy in Sefton, Liverpool and across the north-west will face greater pressures than the areas where the cuts have been far smaller.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Would my hon. Friend be surprised to hear that when I asked the Secretary of State, in this very House on 18 July, whether he would

“guarantee that Liverpool will not see a real-terms cut in its funding”

in the first two years following the changes, he said:

“Yes, it is going to do better out of this system”?—[Official Report, 18 July 2011; Vol. 531, c. 670.]

[Bill Esterson]

I am grateful to my hon. Friend, who is absolutely right. The Secretary of State made similar remarks in his speech today, and I will explain why he is completely wrong.

The reality is that even if the starting point for business rate retention is after the main element of the cuts has gone through, some businesses will struggle to survive in areas where the cuts have been greatest. Councils in those areas will therefore experience falling business rates, with a further impact on the services that can be provided by the councils that have faced the biggest cuts. Areas such as Sefton and Liverpool have some of the most deprived communities in the country. The scale of the Government’s cuts has already hit those communities harder than the more prosperous parts of the country, and that includes the loss of services to some of the most vulnerable.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

Does the hon. Gentleman recognise that in the past five years Sefton has had an annual increase in its business rate of 6.1%, and Liverpool has had an annual increase of 8.2%?

[Bill Esterson]

I am glad the Minister made that comment, because it gives me the chance to make the point that that was before the massive cuts in Sefton, Liverpool and other metropolitan boroughs made it unlikely that such developments will continue. It is very likely that we will see a reduction in business growth as a result of the impact on the economy.

[Andrew Stunell]

It’s the same old record.

[Bill Esterson]

The Minister says it is the same old record—but it is the same old Tories doing the same old things to the most deprived communities.

The Government’s proposals in the Bill are unfair and hit the poorest communities hardest. They also ignore the reality that, as my hon. Friend the Member for Lewisham East (Heidi Alexander) said, councils have a limited role in promoting growth. Only authorities that grow business rates above the level of the Government’s national assumption will benefit, while the others will lose, so the gap between the most prosperous and the less well-off will widen.

The Secretary of State retains many of the powers relating to business rates. The centralising tendency is very much in evidence, and the more the Bill is scrutinised, the clearer it becomes that localism will be dished out in very small doses, at the bidding of the Secretary of State. The Treasury is to take a cut of any growth in business rates. That undermines the stated aim of incentivising local councils, and it risks limiting the likely take-up by the vast majority of councils—a point being made by many local authority leaders.

I am aware of the many concerns about the plans for the local retention of business rates. Many questions still need to be answered. The Government plan to reward councils that exceed national growth expectations, so they will, by definition, artificially punish areas that have low growth, such as rural areas or areas where major industries have recently shut down.

The measures will also penalise areas such as Sefton, where there is a shortage of available industrial land, and where there are limits on the potential for economic development. Sefton is in the process of putting together its core strategy, and it is struggling to find the development land needed to benefit from the Secretary of State’s proposals. I hope he will take on board the very real concerns not only of council leaders, but of businesses that face the problem of being unable to create growth because they do not have land available.

Given the Government’s record in applying the current cuts unfairly, there is no confidence that they will not do the same with business rates localisation. Incentives for local councils to generate economic activity are one thing, but a system that undermines local authorities serving deprived communities and boosts those in least need is not the way forward. The Secretary of State should think again.