Devolution in England

George Hollingbery Excerpts

Monday 2nd March 2015 Commons Chamber

[Mr Betts]

That has been true so far, but the positions in Scotland and in Wales are going to change. They will have more tax-raising powers and will be held to account. Otherwise, we will have a body that simply spends and gives out the largess, but is not held accountable for raising the money in the first place.

The Committee tried to deal with some difficult issues. We recognise that we may not have got absolutely all the details right. We felt, on balance, that there was a very clear case that devolution would encourage greater growth, particularly in cities. That applies to counties as well, but there are very clear figures for cities. Unlike other countries where the GVA of their major cities tends to be above the national average, with the exception of London and Bristol, the GVAs of the major cities in this country are actually below the national average. There is a fundamental problem there. Devolution does not necessarily guarantee more growth, but it removes some of the current restrictions on decisions being taken at a local level that can make growth take place.

[George Hollingbery (Meon Valley) (Con)]

I am grateful to the Chair of the Select Committee with whom I served for some time, although I did not take part in this report. One problem of devolution as he describes it, particularly on the issue of GVA in cities, is potentially the buoyancy and predictability of taxation and revenues. I would have thought that if this was done too rapidly and without some sort of mechanism from central Government to iron out fluctuations, there could be some very severe problems.

[Mr Betts]

I was going to come on to equalisation. Some areas have a greater ability to create and get the benefits of growth than others. This was a difficult issue, and we looked at it. I see the former Minister the hon. Member for Bromley and Chislehurst (Robert Neill) in his place. We thought that what had been done with the business rate retention scheme, or at least the partial retention scheme, was actually quite a good model: a starting point where a certain amount of tax is collected and transferred to a local authority in exchange for the grant that is currently given. The extra receipts that come in through growth would be kept in that area. Some receipts might in future be disproportionate, perhaps because of a very large increase in rateable values that are not directly linked to the efforts of an authority, so there should be a resetting arrangement every so often to take account of that.

We thought that was quite a careful way of doing it. We have probably gone further, in that we recommend that the totality of business rates be kept at local level and there should be a right within a group of authorities, a combined authority or the Greater London authority to set business rates as well—and obviously the element of any increase in the business rate level should not be taken back by central Government. It is a complicated issue, but we thought that the Government had basically got it right in their business rate retention scheme, which could be used as a model for the totality of business rates, or for stamp duty or capital gains tax, bearing in mind the fact that stamp duty is much more a London issue and therefore slightly more complicated. We recommend the idea in principle, but we recognise that it needs to be looked at in the way the hon. Member for Bromley and Chislehurst mentioned.

We tried to deal with equalisation. We suggested that an independent body be set up to deal with problems of resetting and other issues where there might be a conflict between central and local government. The Government dismissed that and thought that they could do all those things. We thought it would probably be useful to have a body like the Office for Budget Responsibility in the local government sphere.

In principle, we are recommending that a framework be set out for how more powers could be devolved, with local authorities setting out their governance arrangements, how they will be fiscally responsible and the sort of strategy they have for using any powers that are devolved to them. We recognised that progress would probably be made more quickly in some areas than in others and that initially the GLA and the combined authorities would probably be best placed to take on those powers. We see them very quickly taking on place-based budgets, strategic planning and housing, and the sorts of health arrangements proposed for Greater Manchester—I will be careful to go back to that with my hon. Friend the Member for Wigan (Lisa Nandy) present. Indeed, the Government intend to introduce primary legislation to allow those sorts of powers to be taken by the combined authorities. We also recommended the devolution of 100% of business rates, setting the multiplier on business rates, stamp duty and capital gains tax, and flexibility with council tax bands as well.

Although all local authorities could go there, we thought there were some changes that could immediately be made to the powers available to all local authorities, including the complete freedom to set council tax. It is quite staggering that the one tax that local authorities have got—the one that is supposedly theirs—is one for which any increase by more than the Secretary of State thinks is appropriate has to be put to a referendum. There is no other tax in this country for which we have to have a referendum to increase it. Those sorts of freedoms could be given straight away. We thought there could be further freedoms by pushing the commissioning of the Work programme down to all local authorities and that controls over fees and charges could be freed up. Why should the Secretary of State fix fees and charges? They should be fixed at a more local level.