John Healey
Main Page: John Healey (Labour - Wentworth and Dearne)(12 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
John Healey (Wentworth and Dearne) (Lab)
My hon. Friend posed the question of how anyone could have certainty about what will and will not apply in a TIF area. Given the Second Reading debate and the performance of the Secretary of State, the one certain answer is that such certainty will not come from asking the Secretary of State. When I challenged him, he simply could not say whether resets would apply to TIF schemes. That is a matter of serious concern to all of us who want to make the schemes work.
Helen Jones
I am grateful to the hon. Gentleman, who makes a fair point about regulations. I do not know whether they will be with us before Third Reading, but at that point we will have finished debating the Bill in Committee, so it will not be terribly helpful. He makes an interesting point about what he sees as a disproportionate gain. However, the problem is that that is not what Ministers see as a disproportionate gain. That is why we are trying to get some definition into the Bill. Local authorities cannot plan unless there is some certainty in the system, and as yet we do not know what it will be.
John Healey
My hon. Friend is developing a powerful case. As my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said, the Committee should at least expect to see confirmation of the principles on which judgments about disproportionate benefit will be made and on which any levy will be based, but that is not in the Bill. The principles on which a levy would be based are not even set out in the response to the consultation that was published in December. That is not good enough, and we expect more from the Minister and his colleagues.
Helen Jones
Again, my right hon. Friend makes a telling point. The consultation document merely says that there will be a proportionate levy. The obvious question to put is this: “What is the proportion and how will it be decided for each authority?”
Mr George Howarth
It is a great pleasure to follow the hon. Member for Cities of London and Westminster (Mark Field). I sat through his speech last week on the first day in Committee, in which he pleaded the case for Westminster. I found it difficult to sleep that night, given the strong concerns that he raised about the consequences of the Bill for his constituency. On reflection, I decided that it might not be that bad really.
I have some sympathy with the Minister, with the amendments and, indeed, with the Bill. Local government finance generally is so technical that it reminds me of the Schleswig-Holstein affair. People think that they understand it, but many years later they have forgotten it. Some 25 years ago, when I was a local authority finance chairman, I actually understood multiple regression analysis, but if anyone were to intervene and ask me to explain it now, I would struggle.
Robert Neill
I think I can help the right hon. Gentleman and I note the very constructive way in which he makes his point. There are two things that one has to distinguish, the first of which relates to the period of setting the baseline regarding tariffs and top-ups, which are adjusted by inflation. The idea of the levy and the set-aside is to deal either with a level of growth well beyond that rate or with a loss of business rates well beyond it. The principle of the system is to make sure that beyond the tariff and the top-up a sufficient amount of growth can always come through, for those who achieve growth, so there is an incentive effect. It would clearly be wrong to define “disproportionate” in such a way as to cream off any prospect of growth. That is why it is sensible to consult local government on quantums and the methodology for achieving that.
Equally, we can envisage circumstances, although we hope they will not occur, in which local authorities suffer significant losses in their rate base, which are greater than would occur with the normal volatility of business rate fluctuations and which they can do nothing about. That is what is suggested might happen when someone moves out. We have always indicated that we intend there should be safety-net protection for such authorities, which should be paid for from a levy on what we regard as disproportionate gain. If one gives words their ordinary English meaning one sees that we are talking about a system that will not scoop off all the incentive, and I think we can talk sensibly, from the experience of local authorities, about means of achieving that. I want to assure hon. Members that that is the scenario we are looking at.
John Healey
I want to believe that the Minister can make this work, but the more I listen to him, the more complex and uncertain this system seems to me. I wonder whether he has really grasped this issue and whether he has looked at his own authority. In 2006-07, his authority—Bromley—suffered a loss of business rate income of more than half. In at least two of the following five years, the volatility was more than 10% of the total business rate income. In that sort of situation, which has been exemplified within his own authority, the system of top-ups and tariffs will be complex and uncertain, and some authorities will find themselves top-up authorities in one year and tariff authorities in the next. That will make essential local government planning very difficult.
Robert Neill
With respect to the right hon. Gentleman—I have genuine regard for his attention to detail in these matters—we have made it very clear from the outset that the top-up and the tariff will come as a consequence of the setting of the baseline, which will not change until the reset. The protection that authorities will have is that the amount of the top-up and the tariff will move with RPI, so there will not be erosion because of that. All that is separate from the set-aside—the safety net, in effect—and the levy, which will deal with significant loss when someone closes down a business or something of that kind.
John Healey
I am grateful to the Minister, who is being generous in giving way. Whether it is the top-up and the tariff or the set-aside and levy that are designed to deal with this wild volatility, the central point remains: many local authorities, including his, see great variations year on year in their business rate income. That makes essential financial planning and management, particularly when finances are tough, much harder to do and calls into question the very design of the new system.
Robert Neill
With respect to the right hon. Gentleman, he makes the case for having a decent period between the resets, with the protection of the uprating of the tariffs and top-ups. I know that he follows these matters closely, but there is a distinction between the operation of that system and the levy and safety-net arrangements. On his criticism about complication, I have to say that although he did not create it, he presided in a distinguished and elegant fashion over the four-block system. If anyone thinks that is simple, then I say that Schleswig-Holstein is a minor province of outer Mongolia by comparison. This system is simpler and more transparent and it gives an incentive. That is why my authority welcomes the principle. However, because I accept that these are technical matters, as the right hon. Gentleman knows from his experience, it is sensible that we have the flexibility to consult on the options right across the board and, when we have consulted local authorities, they will be scrutinised by the House under the affirmative resolution procedure.
Robert Neill
That is a degree of hypothesis that it is not realistic to deal with at this stage. If the hon. Gentleman looks at the detail of the regulations, he will see that the very fact that we are creating the ability to carry over year to year makes provision to deal with the point he makes.
Robert Neill
I have been very generous and I am about to finish, but I will give way once more.
John Healey
The Minister has indeed been generous, but these are Committee proceedings. May I pursue the point raised by my hon. Friend the Member for North Durham (Mr Jones) about what constitutes a significant drop? Would the Minister regard as significant the £52.2 million drop in his Bromley local authority’s business rate income in 2006-07? Would he regard last year’s drop of £5.5 million as significant? For the purposes of the provisions we are debating, would he regard both, either or neither as significant to his local authority?
Robert Neill
With respect to the right hon. Gentleman, to answer the question in those terms would prejudge the whole point of the consultation. I shall not do that. Hon Members have probed and have, I think, received clear answers, so I hope they will withdraw the amendment. If not, I ask the Committee to vote against it.
Helen Jones
That is an important point. Whatever happens, some local authorities cannot win.
John Healey
Clearly, prudent councils will set sums by against risk. The central problem with the system is its unpredictability and volatility. To make provision against risk, one has to be able to quantify it. That is highly uncertain. For instance, how would the treasurer of Brentwood council—the Secretary of State’s local council—have been able to anticipate a drop of more than a third in the business rates revenue last year? It was probably due to factors beyond their control, and they would have been unable to hedge against and provide for that sort of risk.
Andrew Stunell
The right hon. Gentleman should be careful about making that argument; I might be tempted to take away his damping. That would be the unchallengeable fact in what he said.
John Healey
The Minister may have meant it lightly, but he has just said a serious thing. It suggests that Ministers in this Government make arbitrary and personal decisions about the funding going to local councils, that are not based on any fair, open or objective formula.
Andrew Stunell
That is of course wilfully misunderstanding the point I made. The damping mechanism means that Knowsley does not get what the Labour Government decided it should get if the formula of need was applied correctly. The damping formula is protecting Knowsley from full implementation of the needs formula that the Labour Government introduced, and the right hon. Member for Knowsley wants me to keep it. Let us be quite clear. I am sorry if my lightly enunciated remark was taken as meaning anything other than that the right hon. Gentleman advanced a contradictory argument to the one he was making a few minutes ago.
John Healey
On a point of order, Mr Amess. The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), wound up the previous debate for the Government, but I am not certain that Hansard will record exactly how he voted. Now he has rejoined the Front Bench having gone absent for a little while, perhaps he could tell us.
The Temporary Chair (Mr David Amess)
I am afraid I have to tell the right hon. Gentleman that that is not a point of order. The Committee will have heard what he said and will draw its own conclusions.