Local Government Finance Bill
Debate between James Heappey and Marcus JonesMonday 23rd January 2017
(7 years, 3 months ago)
Commons ChamberRead Full debate Local Government Finance Bill 2016-17 View all Local Government Finance Bill 2016-17 Debates Read Hansard Text
Mr Jones
I am sure that, having perused the Bill, the hon. Gentleman will know that NHS hospitals do not feature in the increase to which he referred. I think he was referring to the 2017 business rate revaluation. That exercise has been undertaken by the Valuation Office Agency, which is independent of the Government. The Government have provided a package of transitional relief amounting to £3.6 billion, and NHS hospitals will be subject to the same transitional relief as other ratepayers whose business rate bill will increase as a result of the revaluation. As many Members will know, the revaluation was not designed to raise more or less business rate overall. It is a fiscally neutral exercise, which means that some business rate bills have increased and others have decreased as a result of the independent valuations made by the independent agency.
The Bill does not determine funding levels for individual councils. We continue to work with people throughout local government to deliver the fair funding review, which takes a wholesale look at councils’ relative needs and resources. We remain committed to implementing a new funding formula in time for the implementation of 100% business rates retention in 2019-20.
James Heappey (Wells) (Con)
Does the Minister agree that, although the devolution of business rates is extremely welcome, the funding gap between predominantly urban and predominantly rural authorities is already too wide? Does he agree that the review must ensure that that gap closes as soon as possible, and certainly does not widen?
Mr Jones
That, indeed, is why a rural services delivery grant was inserted into last year’s local government finance settlement, with its four-year deal. As my hon. Friend knows, this is not part of the Bill, but we are undertaking a fair funding review because local authorities in many parts of the country have apparently pointed out that the last proper needs assessment took place about 10 years ago, and that in many areas the demographic has changed completely in the intervening period. We are considering carefully how resources should be distributed across the system.
Local Government Funding: Rural Areas
Debate between James Heappey and Marcus Jones
Mr Jones
That brings me back to why we introduced a four-year settlement. In a moment, I wish to talk about the move to full business rate retention. Hopefully, within those comments, I will be able to reassure Members that, at this point, it is by no means a done deal.
We have given careful consideration to the challenges that rural areas face. That has led us to propose an increase in support for the most sparsely populated rural areas by increasing the rural services delivery grant from £15.5 million this year to £65 million in 2019-20.
As hon. Members know, the new homes bonus was due to come to an end, but our view is that it has been a useful contributor to the increase in planning permissions being granted, with payments since its introduction in 2011 totalling just under £3.4 billion, reflecting the building of more than 700,000 new homes and the bringing back into use over 100,000 empty homes. We have been able to retain the new homes bonus, subject to reforms on which we are consulting and on which views are being encouraged.
Overall, our proposals are fair. Core spending power for councils will be virtually unchanged over the Parliament—£44.5 billion in 2015-16, and £44.3 billion in 2019-20. This is a substantially slower pace of spending reductions than councils had to deliver between 2009-10 and 2015-16.
The rural-urban funding gap has been falling year on year. Between 2012-13 and 2015-16 it went down by over £200 million, decreasing from 11% to 6% for unitary authorities and from 19% to 11% for districts. Our proposals mean that it will continue falling throughout this spending period, and core spending power will increase by 0.2% for rural areas, compared with a 0.7% reduction for urban areas, by the end of the Parliament.
James Heappey
Will my hon. Friend confirm that if the gap between urban and rural is closing, albeit slowly, unfortunately that is happening on the back of an increased council tax burden in rural areas?
Mr Jones
I hear what my hon. Friend says. Council tax is now 11% lower in real terms than it was in 2010. The Government’s assumptions do not assume a 2% increase in council tax, but a consumer prices index inflation increase in council tax. The calculations also show that once we get to the end of this Parliament, if councils were minded to take up the flexibility that has been offered, council tax would still be lower in real terms than it was in 2010.