Local Government Finance Bill
Lord McKenzie of Luton Excerpts(13 years, 7 months ago)
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Lord McKenzie of Luton
My Lords, I shall also speak to our other amendments in this group. The amendments would defer the requirement on local authorities to introduce a council tax reduction scheme by one year so that it will be made no later than 31 January 2014 to come into effect on 1 April 2014. I am delighted to see that this has the support of both parts of the coalition, or at least I think it does since noble Lords have put their names to it, but perhaps things have changed. We should recognise that the Secretary of State has a power under the Bill to defer the introduction of these requirements, but seems intent on rushing ahead with the current timetable. This amendment is not designed to be a wrecking amendment. We have made clear our preference for any council tax support scheme to be part of universal credit, or at least for there to be a national system. However, should this preference not prevail, what is to be put in place must be properly thought through and consulted on, be capable of implementation and be fair.
Designing a council tax support system is not to be taken lightly. Council tax benefit, despite its relatively low take-up, currently offers support to nearly 6 million recipients: by definition, the poorest and the most disadvantaged. The Bill provides only the framework for what is required. The detail will come with the regulations and we are told that these will definitely be with us before Report, but that could be October. We have the statement of intent, but it is not the definitive position and an addendum is promised, and perhaps we can inquire when that will be forthcoming. As I say, designing a benefit or support system is never straightforward. People do not all live straightforward and routine lives that can easily be categorised and encompassed within a simple set of rules. The Government’s own timeframe, in designing and implementing universal credit, is in part recognition of this. It is new territory for local councils. Administering a system is one thing; designing one is something else, especially as the design is supposed to encompass clear work incentives and to sit alongside both the universal credit and the existing benefit system for some years to come.
The current council tax benefit system is hugely complex and no doubt this is one of the reasons for low take-up, but it has a whole raft of components that are there for good reasons. This is not an exhaustive list, but the matters catered for include a basic applicable amount, disabled child premiums, disability premiums, enhanced disability premiums, severe disability premiums, carers’ premiums, the ESA support group component and the ESA WRAG component. There is a disallowance of certain benefits that we compute in income, which include attendance allowance, child benefit, constant attendance allowance, and DLA care and mobility components. There are income disregards at different rates, deduction of income for childcare costs for lone parents, permitted work rules, the second adult rebate alternative, the backdating of claims and the run-on provisions. Moreover, the interface with universal credit is complex, and we will debate that in more detail in subsequent amendments.
This is not only about deciding whether universal credit will feature as income in a council tax support scheme. There are related allowance issues, embedded in the current system, which might be otiose or need to be supplemented: the treatment of unearned income, childcare costs and passporting. Currently, I understand that some two-thirds of council tax benefit recipients are passported on to 100% benefit. Having to means-test all these will present a major administrative burden for local authorities. Of course, we have not yet had the final details of universal credit. These are not due, we understand, until the autumn. Perhaps the Minister will confirm that that is his understanding.
What is the current expectation of when all the detail will be known? How confident is the Minister that local authorities have a full understanding of the intricacies of the possible interactions between universal credit and the existing system? What is the current understanding of the volumes that will flow on to universal credit next year? Which features of the default system reflect the interface with universal credit? We know that universal credit is going to be taken as income, but that is just one component.
We are told in the statement of intent that in prescribing the requirements of those who have reached the qualifying age for state pension and for the default scheme, the requirements will replicate as far as possible the existing provisions. Can we be advised of the detail where the provisions are not replicated? I am happy to have that by letter if it is not available this afternoon.
Of course, the risks for councils are huge. The system is no longer to be demand-led AME-funded. Financial risk passes to local authorities together with the 10% cut—or indeed more—in central government funding. As London councils point out, the focus in the short term may be the 10%, but there is a need to consider the sustainability of any system in the longer term. Increased demand and take-up will add to cost.
The need for local authorities to have more time should be obvious. If the Government want local authorities to have regard to local factors and to have schemes that deliver positive incentives to work, those local authorities need the capacity to do the job properly. To have to do this in short order at a time of considerable turbulence, when staffing levels are under pressure, budgets are being cut, system and organisational changes due to housing benefit are being rolled into universal credit—
Lord Colwyn
My Lords, I think everyone has returned. Shall we continue with the noble Lord, Lord McKenzie?
Lord McKenzie of Luton
My Lords, I was explaining that to have to do this in short order at a time of considerable turbulence—when staffing levels are under pressure, budgets are being cut, and systemic and organisational changes due to housing benefit being rolled into universal credit are being contemplated—is simply unreasonable. At this point, perhaps I should refer to the report of the Local Government Chronicle from 16 February this year. It says:
“More suppliers have joined in the criticism of the government’s welfare reform timetable that risks leaving councils to foot the entire bill for a £480m gap in council tax benefit funding. With Capita having already labelled next year’s deadline ‘impossible’, other suppliers have confirmed they have raised the issue with the Department for Communities and Local Government. As previously reported by LGC, Capita wrote to more than 150 customers in January telling them: ‘It will not be possible to put new systems in place by March 2013, when councils are due to set up their own council tax benefit schemes incorporating a 10% cut in funding’”.
If local authorities are to fulfil the task of taking account of local factors, and in particular to deliver positive work incentives in drawing up a draft scheme, they must know the detail of the universal credit, which will come into existence in 2013. This is especially so given the need for consultation. The statement of intent requires a billing authority to consult any major precepting authority that has the power to issue a precept to it, then to publish a draft scheme, and then to consult such other persons as are likely to have an interest in the operation of the scheme.
What is the latest time at which the Government think that consultation can proceed under these provisions? As for major precepting authorities, it has yet to be determined how funding is to be allocated between the tiers. Although the final say is with the billing authorities, any disagreement on the draft at this point might have considerable impact on the timing of the publication of a draft scheme. Those others who are likely to have an interest in the operation of the scheme could be a very wide group of people.
We discussed last week that it should certainly include local precepting authorities, which will bear part of the cost. When the Government have felt fit to remind local authorities of their responsibilities under the Equality Act 2010, making it clear that they will have to consider how a scheme might affect people who share a relevant protective characteristic, they will certainly need to consider the impact of their scheme on disabled people.
Local authorities have a specific duty under the Child Poverty Act to work with local partners to reduce and mitigate the effects of child poverty. They will be required to take into account their local child poverty needs assessment in designing and developing localised schemes. They will also need to have regard to the position of those at risk of becoming homeless. The statement of intent makes it abundantly clear that inadequate consultation could lead to judicial review, a matter to which we will return shortly.
The Government know that they are putting local government in an extremely difficult position by this timetable. That is why they are validating consultation commenced before the passing of the Act and why they are implicitly encouraging a consultation period of less than the 12 weeks encouraged by the code. This simply will not do. The statement is clear about the prescribed pension credit age scheme, and the Government have been clear that, in developing local council tax reduction schemes, vulnerable groups should be protected. They declined to define further “vulnerable groups”, but we will press them on that later.
Vulnerable groups should be protected and are clearly entitled to be consulted in a meaningful way. The Government are offering or insisting on one they made earlier, in the form of a default scheme. This is designed to be equivalent to existing arrangements. Of course, for those tempted to take this up or who are left with no practical option but to do so, that comes at a cost, because they will have to find the 10% cut in funding. Those who cannot live with the default system are encouraged to adopt a system using the same factors as present, as that would reduce the amount of time and expense in changing the IT systems. That is hardly a principled base on which to build a council tax benefit system.
If local authorities are to play the part required of them, whether we agree with it or not, it must surely be right for them to be given time to do the job properly. We are well aware that councils are working hard to meet the exceptional challenges that this legislation brings. Local government has a strong history of delivering the near impossible, but the timetable must be judged not by the pace of the quickest and the best resourced—those who have a ready pool of extra resources from second homes and empty properties—but surely by the least well resourced, who run the risk of having the default scheme imposed with the 10%-plus hit on services.
We are aware that there is a view that if there is to be a year’s deferral, the Government will extract their 10% by some other means. The Government seem to be adept at finding money here or there for a waste collection scheme or change in fuel duty. However, this is fundamentally about fairness; the Government are asking a lot of local authorities. A chance to do the job properly in the interests of the poorest and most disadvantaged is not unreasonable. I beg to move.
Lord Jenkin of Roding
My Lords, I added my name to some of these amendments. I do not need to go quite as far back as 16 February, which was the date of the Local Government Chronicle article from which the noble Lord, Lord McKenzie, quoted. I go back to a meeting held on 28 May for London Councils, which that body asked me to chair and which was attended by a number of your Lordships. It was addressed by senior officials of London Councils and it aroused in me considerable apprehensions about the timetable to which the noble Lord, Lord McKenzie, referred. At that time, it was clear to those officials that a number of councils in London would have difficulty in adhering to the timetable. That caused me some alarm. My noble friend Lady Hanham will remember that I came to see her and expressed some of the anxieties that had been voiced on that occasion. My noble friend undertook to take account of them and asked that the bodies write to her directly because she had not had quite the same message from the officials in her department, and they did.
However, since then it has become apparent that quite a lot of councils have taken the bit between their teeth. They have realised where they are, and that they will have to devise and adopt schemes for council tax support, as required by the Bill. I am sure that many of them have no wish to be involved in a default scheme, although that is always a fall-back. They have got on with it.
Indeed, when I consulted the Local Government Association—I do not think I need to declare my interest again—its members’ view was made clear to me. Given, as the noble Lord, Lord McKenzie, said, that £500 million savings have to be found in any event, and one remembers that actually the commitment for that goes back to the initial statement in 2010, the dangers of postponement exceed the dangers of trying to keep to the timetable. In putting my name to the amendment, I wanted primarily to raise the anxieties that had been expressed by London Councils, recognising, as does the noble Lord, that this is not a universal view of local authorities.
The main problem that London Councils saw in implementing the date in the Bill is that it would be nearly impossible for councils to be able to achieve what they wanted to achieve by the due date, given the administrative problems with which they would be faced. More particularly, they would be faced with IT problems. Councils, as everyone knows, use a great deal of IT in drawing up their budgets, devising policies and administering the results of their decisions. Much of that is quite properly outsourced to expert providers. At that time, back in May, London Councils saw that there would be some difficulty in getting those providers to come up with the necessary changes.
However, as I said, it now becomes clear that a good many councils are getting on with it. It is to the credit of local government that they are not sitting back, holding up their hands in horror and saying that they cannot deal with it. They do not wish to be where they are, but they have to accept that the Government have set the timetable and they are jolly well going to do their best, as the representatives of the people in the area for which they are councillors, to go ahead and get on with it.
Earl Attlee
My Lords, that is always the danger of straying from local government affairs. My point is that the 10% cut in council tax benefit is painful, and I do not deny it, but we have very good projects to spend the money on.
Localising support for council tax is an important localist reform that gives local authorities a greater stake in the economic future of their local area and stronger incentives to get people back into work. It helps to make local authorities fully accountable for decisions over council tax levels and strengthens the incentives to drive down fraud and error. Localisation also has the advantage of giving local authorities real control over how a reduction in funding is managed. It will enable local authorities to offer council tax reductions that match local circumstances and local funding while supporting local policies. Local authorities will take different approaches to managing the reduction, but that is localism in action. Local authorities know their services, their taxpayers and their vulnerable groups, and are best placed to take decisions that affect them.
Delaying localisation does not mean that there will be no saving. There will still be more than £400 million savings to find in 2013-14. Funding for council tax support makes up a significant amount of the local share in the retained business rates system. Not giving local authorities control over this funding from the outset will significantly reduce the funding in the local share and so reduce the incentive that retained business rates are intended to deliver. I know that many noble Lords are supportive of the proposals to enable local authorities to keep a share of the proceeds of growth and would be keen to see local authorities benefit even more from growth. Not localising council tax support would have the opposite effect.
Concerns have been expressed about local authorities’ readiness to implement the schemes. I should like to remind the Committee of the number of significant steps taken by the Government to ensure that local authorities are well placed to press ahead with the development of their local schemes. We have paid £30 million of initial funding to help meet the costs of planning and analysing draft schemes for both billing and precepting authorities. We have provided a free online calculator to help local authorities analyse the potential impacts of their proposed schemes. We have published statements of intent, setting out the details of what will be covered in secondary legislation. We have issued a consultation setting out provisional funding allocations for all authorities. We have published guidance to ensure that local authorities understand their existing responsibilities in relation to vulnerable groups, which I know was a very important point for many noble Lords. We have published guidance setting out the general principles of supporting work incentives to help local authorities design support.
The Government have been clear that local authorities must ensure that they are on the front foot in preparing for this reform. There are things that councils should be doing to help in their preparations: understanding the circumstances of those in their area who currently claim support; ensuring that elected members are aware of the decisions they will need to take; engaging with precepting authorities, such as police and fire authorities; and preparing for consultation.
My noble friends Lord Jenkin and Lord Tope, the noble Lord, Lord McKenzie, and the noble Baroness, Lady Hollis, talked about IT issues. Noble Lords are right to suggest that local authorities and IT suppliers are already getting to grips with the problem. However, there is no need to go for a new and complex system in year one. I would add that if I was an IT supplier, I would point out initially how difficult and expensive it will be because it would be a sensible thing to do in order to try to encourage delay, but noble Lords know that we cannot delay.
The Bill was amended on Report in the other place to make clear that local authorities are able to consult precepting authorities, produce a draft scheme and consult more widely—all before the Bill receives Royal Assent. This was intended to support local authorities in their preparations. I am pleased to note that some local authorities, including that of my noble friend Lord Tope, have already embarked on a public consultation on their schemes.
The noble Lord, Lord McKenzie, talked about the complex matters that LAs will have to take into consideration. However, it seems that LAs are already getting stuck into their work and that it is not an insurmountable obstacle. Local authorities are best placed to take decisions about who should receive support with their council tax. Councils should have the flexibility to manage the reductions in central funding that are crucial to our plans for reducing the deficit. Local authorities should also have a strong incentive to grow their economy by bringing as much funding as possible into the retained business rates system as early as possible and giving them every reason to go for growth.
The noble Lord, Lord McKenzie, asked whether the universal credit details will be available. He is right to suggest that they will be available in the autumn. He also touched on the default scheme. LAs could opt to use the default scheme, but perhaps with some amendment to secure some easy savings. Local authorities could choose to develop a more sophisticated scheme later, but that is a choice that they will have to make.
Lord McKenzie of Luton
My Lords, I thank the Minister for his response and all noble Lords who have spoken in this debate, particularly my noble friends who spoke in support of the proposition. The noble Lord, Lord Jenkin, and the noble Earl, Lord Lytton, passed on their concerns about the apprehensions that still exist out there over the readiness of all local authorities to deliver.
I shall comment first on the contribution of my noble friend Lady Lister, who made a crucial point. Designing systems of benefit can be complex. People’s lives are complex. How does the Minister deal with the point that my noble friend raised about the lack of child poverty strategies? The Government themselves have issued literature that says that councils should have regard to their obligations under the Child Poverty Act. However, here we are, knowing that there is a big gap in the system but the Government want local authorities to press ahead irrespective of that. That issue alone opens up the prospect of judicial review in a whole raft of cases.
No one is arguing—I certainly am not—that local councils are simply sitting back and ignoring all this. I accept that local councils have a strong track record of delivering in very difficult circumstances. However, in something such as this, surely the key point concerns the time capacity of all councils to be able to deliver. The consequence of councils not being able to deliver, particularly those that are less well resourced, is that they are more likely to have to fall back on the default system or to have it imposed on them. That is a double whammy for them: not only do they not have sufficient opportunity to look at local needs but they must pick up the 10% funding tab. That seems particularly iniquitous.
My noble friend Lord Beecham made the point that we are not dealing here with a national scheme. Local authorities that are dealing with the process will perhaps want to weigh one scheme against an adjoining scheme. My noble friend Lady Hollis talked about the issues of timing in two-tier authorities. My understanding is that in that first round of engagement, even though there does not have to be formal agreement between an upper tier and a district or authority, there is meant to be a meeting of minds and a process by which it can take place. That has to be a real process and it takes time. That is a different process from reaching a conclusion and then consulting widely among a range of people on its outcome. I suggest that that requires something much more substantial.
We recognise that deferral would mean that the so-called localisation of council tax could not deliver the saving that the Government are looking for in that way for 2013-14. I simply reiterate the point that the Government have been adept in other ways in finding funding for this or that project. Looking across the whole of government, I find it difficult to believe that something of an equivalent scale could not be delivered in this case.
I object to the characterisation of what is happening as a little cut here and a little cut there. We are talking about reductions in support for some of the poorest people in our communities. I would not characterise that as a little cut here and there.
The Minister said that nobody was required to reinvent a whole new system, but the reality is that we have a whole new system coming down the track called universal credit. We are not arguing here that council tax should be part of that, although the more one goes into the detail the more blindingly obvious becomes that argument. But that is not what this amendment is about—it is trying to probe the interaction and relationship between universal credit and any revised council tax benefit system. There are lots of points where it ought to interact, if we want to have issues around work incentives properly structured.
The IFS booklet—and what on earth would we do without the IFS?—has a complex chapter on this. But if the details of universal credit are not going to be known until the autumn, which the Minister has confirmed, how can local authorities properly take the detail into account in devising their schemes and consulting on their schemes? It is a practical impossibility. Quite apart from the time needed to understand and test what those interactions with that system should be, it seems entirely wrong to say that it is irrelevant to the timing when it is fundamental.
The Minister did not answer the point about what components of universal credit were at the moment incorporated in the default scheme that the Government are going to impose. We know one aspect of it—that universal credit will take account of income—but that is just one of the possible interactions. What are the consequential changes to the allowances, the housing component and a range of other things? Presumably, the Government have taken a view at least in respect of the default scheme. It would be helpful to know the detail.
The noble Lord, Lord Palmer, said that we should not put off until tomorrow what we could do today. I do not disagree with that, but we are not asking for time for local authorities to sit back and do nothing. We are asking for some local authorities that will struggle the most to get a meaningful system in place to have a bit more time to get it right. So we do not judge this by the well resourced and bigger councils that do not need to worry about the cost of it because they have plenty of second properties on their patch and can generate extra revenue from that. The smaller and more challenged resource-constrained are the ones that we particularly speak for in this amendment.
I see that we will not have a meeting of minds on this across the Room this afternoon—
Earl Attlee
My Lords, I am grateful for the opportunity to contribute again. The noble Baroness, Lady Lister, talked about the complexities of the scheme. Yes, I understand that it is a very complex area and there are lots of factors to be taken into consideration. However, if a local authority wants to have a complex scheme, it can have one in later years, and it can go for a simple scheme perhaps based on the default scheme in year one.
The noble Baroness raised a very interesting point about the child poverty strategy. We are merely stating that there are existing strategies that councils need to consider in developing schemes. However, she raised a very interesting point about absent child poverty strategies. I will look into the issue and come back to her.
Earl Attlee
Today, yes. I remind noble Lords that, in respect of the difficulties of devising schemes, we have provided £30 million for local authorities.
Lord McKenzie of Luton
I pick up on the point about complexity. I do not think that local authorities are anxious to devise complex schemes; they are trying to devise relevant schemes, particularly those that are focused on poorer members of their communities. It is good news that the default scheme details have been issued today, but I struggle to see how they might be comprehensive if some key aspects of the universal credit are not going to be available until October. Surely how those two things sit together is pretty important for the development of schemes.
The Minister said that the regulations issued today would cover issues about the protected arrangements. Perhaps he could answer a specific question. How does the protection given for pensioners apply to households with two people entitled to state pension credit if one person has reached that age and the other is below that age?
Earl Attlee
On the point about universal credit, we are aware that the approach in the regulations needs further refinement, and we will continue to work with the DWP on the detailed approach to be able to set this out for LAs in the autumn. However, we believe that that provides a clear general indication of how we intend income to be taken into account in the default scheme, which is intended as a legal back-stop and not a model scheme. While LAs will be free to adopt or build on the approach taken in the default scheme regulations, they will not be compelled to do so if they bring forward their own scheme. I hope that that helps the noble Lord.
Lord McKenzie of Luton
I understand the point. If the details of the universal credit that we know can be taken account of only generally in relation to the default scheme, which may or may not help the authorities that want to rely on that, surely it is equally the case for any other tailored scheme that a local authority may wish to devise. How can it consult on something that inevitably is incomplete? We are trying to get an answer to that point. I am not sure that we shall succeed this afternoon. We have given this matter a good airing. I believe that the noble Lord, Lord Tope, said that we should make the best we can of this. Frankly, that is not good enough when we are devising detailed benefit schemes. We ought to have a higher standard than that. I think that is being denied to some local authorities by this timetable. For the time being, I beg leave to withdraw the amendment.
Earl Attlee
My Lords, I thank the noble Baroness for explaining her amendment, which she has done with some useful detail. I have plenty to say, but perhaps I will have to write to her on some of the detail after consulting my officials.
Amendment 74 would require local authorities to have regard to the impact of their scheme on the work incentives for those in work or actively seeking work. The noble Baroness is right to point to the importance of local schemes supporting incentives to work. It is of the utmost importance that people get more overall income in work than out of work and that people should get more overall income from working more and earning more. It will not be in the interests of local authorities to design schemes that discourage work, locking their residents into low aspiration and poverty. Making local authorities financially responsible for the provision of support gives them a real stake in getting people back into work.
To aid local authorities in designing schemes that support positive work incentives and the objectives of universal credit, we have already published guidance setting out the key design features that could support work incentives and which local authorities will want to consider in designing their schemes. The guidance considers the main design features of local schemes that can be used to support work incentives, including how income from universal credit is treated, how other income is treated and the point at which support is withdrawn. It also considers other factors that can influence decisions about work, including how the scheme is administered and communicated to applicants.
Data sharing related to universal credit between the Department for Work and Pensions and local authorities will be an important way in which local authorities can ensure that their schemes work with the grain of universal credit. The Department for Communities and Local Government and the Department for Work and Pensions are working together to ensure that the necessary data-sharing arrangements can be put in place. We want to ensure that, where possible, local authorities continue to have access to the same data on claimants of existing benefits and will be provided with a breakdown of the full universal credit award before the application of any tapers or sanctions, together with the final amount that the claimant receives.
Furthermore, the Government are doing everything in their power to reduce the risk of potentially unhelpful interaction between local schemes and national universal credit. Indeed, changes have already been made to the proposed design of universal credit to increase some income disregards. These changes will help to reduce the risk of “dual tapering”, where council tax support and universal credit are withdrawn simultaneously, leading to higher marginal deduction rates—the rate at which the gains from increased earnings through work are reduced by the withdrawal of benefits and increased tax—and will help to ensure that the incentives to enter work remain strong.
Finally, as I have already mentioned, we are today publishing draft regulations that set out how we propose to treat universal credit income under the default scheme. We will continue to work with the DWP on the detail of the approach, but we believe that it provides a clear general indication of how we intend to take UC income into account in the default scheme. Local authorities will be able to consider whether to take this or a similar approach. With those explanations, I hope that the noble Baroness will feel able to withdraw her amendment.
Lord McKenzie of Luton
The noble Earl referred to data sharing, in particular to help in the transfer of people who otherwise would be in receipt of 100% benefit under the existing system. I think that all the documentation we have seen talks about the Government working on these matters. Can the noble Earl say when that process is going to be completed? Will the arrangements for data sharing definitely be in place by 1 April 2013? I think that he also said that the Government are doing “everything in their power” to ensure a sensible outcome so far as universal credit is concerned. One would dispute that because the phrase “everything in their power” could include putting council tax benefit where it belongs as part of that. But the noble Earl said specifically that they have addressed the issue of income and how that is to be dealt with—I think we understand that, because we touched on it in an earlier session. What other adjustments so far as universal credit and its interrelation with other schemes are concerned are currently being contemplated? Will the Government be publishing any thoughts, analysis or guidance?
Earl Attlee
My Lords, the answer to that question is, I understand, yes. My answer to the noble Lord, Lord McKenzie of Luton, is that clearly the arrangements for data sharing will have to be in place by 1 April, otherwise it will not work. We are working to ensure that the data-sharing arrangements are in place at the appropriate moment. Universal credit will come in next October.
Lord McKenzie of Luton
Is the Minister saying that the appropriate moment by which the arrangements have to be in place is October?
Earl Attlee
My Lords, I think that this revises my initial comments. Universal credit will come in next October.
Lord McKenzie of Luton
Perhaps I may press the Minister on that point because it was originally understood that in October next year all new claimants would be claimants for universal credit. There seems to have been some change to that and this issue is obviously important because local authorities have to assess the volume of claims that they will deal with. Can the Minister confirm that the arrangement is that all new claimants coming through from October 2013 will go straight into universal credit and not into JSA, ESA or income support?
Baroness Hollis of Heigham
The legacy cases will spend two, three or perhaps four years coming across.
Earl Attlee
My Lords, council tax support is part of the total rate retention support. Local authorities can make arrangements for their scheme. They do not have to rely just on the funds relating to council tax benefits.
Lord McKenzie of Luton
I wonder whether the Minister could help me on one further point. He talked about pensioners being protected. Can he deal with the point about the circumstances in which one member of a couple may have reached state pension age but the other has not? Is that household protected under the Government’s proposition?
Earl Attlee
My Lords, it is clear that I am going to have to write to noble Lords on a lot of these points.
“( ) No regulations under paragraphs 2 and 4 of the new Schedule 1A to the LGFA 1992 shall be made unless a draft of the instrument has been laid before and approved by resolution of each House of Parliament.”
Lord McKenzie of Luton
My Lords, this is a brief and, I hope, straightforward amendment that I trust the Minister will accept in principle, if not in its detailed wording.
Schedule 4, as we are all now well aware, introduces a new schedule to the Local Government Finance Act 1992 and hence the framework for the council tax reduction schemes. However, regulations under paragraph 2 of the schedule can cover a range of matters, including stating who must or must not be included in a scheme, maximum and minimum reductions, and what might be included to mirror existing arrangements. Paragraph 4 covers regulations for a default scheme. The Delegated Powers and Regulatory Reform Committee, in its fourth report of the Session, reviewed the powers of the Bill and concluded:
“The change from national rules to local schemes is not an insignificant one in an area of law that the government acknowledges must secure appropriate support for vulnerable individuals, and the constraints and requirements imposed by regulations under paragraph 2 will form an important feature of the local schemes. It seems likely that some authorities may model their own schemes on the ‘default scheme’ established by regulations under paragraph 4. In the light of that, we recommend that the Bill should require the affirmative procedure for regulations under paragraphs 2 and 4 of new Schedule 1A”.
This is what the amendment seeks to achieve. I beg to move.
Earl Attlee
My Lords, the effect of the amendment would be to make regulations prescribing the requirements for a local scheme and prescribing a default scheme subject to the affirmative procedure. I fully recognise that these regulations will be vital to the operation of local schemes and that provisions in the default scheme could influence the decisions that local authorities take about the shape of the scheme that they wish to operate for working-age claimants, which will generally not be covered by the prescribed requirements.
It is because of the importance of both sets of regulations that the Government published their statements of intent in May, setting out in great detail what they intend to cover in these regulations. Importantly, the statement of intent made clear that with a very few limited exceptions the effect of these regulations would be the same as those currently in operation in relation to council tax benefit: that is to say, local schemes will be required to include provision in respect of pension credit-aged claimants that is the same as the current council tax benefit scheme. For the default scheme, regulations will recreate the current scheme for all claimants.
We are today publishing the draft regulations for the local scheme—which in the main will set out the requirements relating to those of state pension credit age, and which I will refer to as the pensioner regulations—and the default scheme. This will put beyond doubt that our intention is to recreate the effect of existing council tax benefit regulations in the default scheme and to require equivalent provision to be made for those of pension credit age in all local schemes.
Council tax benefit regulations have been in force in various forms for a number of years. Local authorities understand their operation and effect. It is not our intention to bring in significant new untested processes and procedures, and by publishing draft regulations well in advance of the regulations actually coming into force, and ahead of Royal Assent, there will be considerable opportunity for scrutiny by local authorities, Members of this House and the other place.
The default scheme is not intended to apply generally, but only in those authorities who fail to adopt a scheme in time, and for the first year of the localised scheme. Thereafter, any scheme in operation in a local authority will in effect be its adopted scheme, and it will be able to review and alter or replace it for 2014. I understand that the Delegated Powers and Regulatory Reform Committee has indicated that additional scrutiny is needed because local authorities may choose to model their schemes on the default scheme. If they choose to do this, they will in effect be choosing to model their scheme on the existing regulations. The changes that we will be making in bringing forward our own regulations will be limited and largely confined to taking into account changes in other parts of the welfare system. While local authorities may choose to model their schemes on the default scheme, they will not be required to do so.
In relation to the pensioner regulations, government may from time to time need to amend the regulations. This may be needed to amend cash values in the means test, or to reflect future changes to the welfare system. It would not be a good use of parliamentary time to require a debate each and every time an amendment is required.
In conclusion, I am not persuaded that it is sensible to make subject to the affirmative procedure regulations that will recreate provisions that have been in operation for a number of years and that will be published in draft form for consultation while this Bill is still before the House and well before Report. This will give noble Lords ample opportunity to debate the regulations, and I am not clear what value there would be in further parliamentary debate at the point where they are made. In publishing draft regulations now, noble Lords will nevertheless be able to consider while the Bill is still before Parliament what, if any, provisions in the draft regulations differ sufficiently from the existing regulations to warrant making the regulations subject to the affirmative procedure. I therefore suggest that the noble Lord withdraws his amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply. I must say that I am a bit taken aback. I thought that it would be pretty much routine to accept the recommendations of the Delegated Powers and Regulatory Reform Committee. I thought that the reasoning was a bit spurious. It is welcome that regulations have been published now and welcome that we will, I hope, have some chance to debate them when we get to Report, although debating at that stage is not necessarily the iterative process that we could have in Committee.
Baroness Hollis of Heigham
Can my noble friend recall any other instance in the past 10 years or so when recommendations from the Delegated Powers Committee suggesting that we go for an affirmative rather than negative procedure have not been followed by the Government?
Lord McKenzie of Luton
I cannot. I can remember one occasion as a Minister when I was minded not to take the advice, but Ministers always did if it was pressed upon them. I am truly shocked by what the Minister says. We have other business to debate tonight so I am not going to prolong the thing, but this is something to which we will come back on Report because I do not think that the answer is satisfactory. I beg leave to withdraw the amendment.
Local Government Finance Bill
Lord McKenzie of Luton Excerpts(13 years, 7 months ago)
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Lord Jenkin of Roding
My Lords, I am delighted that what we have come to call the enlarged coalition is supporting the amendment.
It addresses a simple point. Under the existing system whereby business rates are pooled and go to central government, a change in the system of relief from business rates is entirely a matter for central government and has no implications for local authorities. However, once the retained business rate scheme is working, then local authorities will of course have a direct interest in such changes. Indeed, there could be circumstances where a change in the way in which business rates and relief from them are assessed could give rise to some considerable difficulties for local authorities in their budgeting and managing their expenditure.
Of course, this is inherent in the change. The Government are indeed transferring some of the risk to local authorities because that seems to be an inevitable consequence. What we are asking for here—it is a simple point—is that the Government should consult local authorities and the local authority organisations before any such changes are made, so that they can at least have a say and perhaps do their best to persuade the Government when a particular change is not appropriate. Those local authorities and organisations will have an argument because the change may well affect their funding. The least we can therefore ask, and it is a modest request, is that the Government accept this new clause and accept that local authorities should be consulted before there are changes in the business rate. I beg to move.
Lord McKenzie of Luton
My Lords, I am happy to confirm that the broad alliance remains intact. We are very happy to support the amendment. The key points have been made. We are in a changed environment where what happens to business rates can have a direct impact on local government and this request is straightforward and honest, as the noble Lord described.
Lord Tope
My Lords, I am not sure now whether I am part of an enlarged coalition or a broad alliance, but whatever it is I am pleased to be part of it. I feel comfortable in such a coalition and alliance. My name and that of my noble friend Lord Palmer of Childs Hill have been added to the amendment and we are pleased to support it. The points have been made.
Perhaps I may add one thing. I suspect that it is unlikely that the Minister will stand up in a moment and say, “No, of course the Government will not consult anyone about this; we will just do it”. I do not think that that is going to happen. I am sure that we will receive reassurance that consultations would take place. I expect that we would have reassurance that the results of the consultation would be taken carefully into account. However, it is the next stage that also concerns many local authorities, and it certainly concerns me. If, as is very likely, there are financial implications from any such policy changes, the reassurance that I should like from the Minister is that the cost and effect of such policy changes will be fully funded by the Government, either anyway or under the new burdens initiative. Frankly, that is one of the key points that we are concerned about—not whether the Government will give us warm words and reassurances about consultation, but whether the effects of any such change will also be fully funded. I look forward to the Minister’s reply.
Lord True
My Lords, the noble Earl has raised a number of issues and I know that my noble friend will respond. That will be important because as business rates take the burden over the coming years these issues will become matters of considerable controversy and potentially democratic controversy. Knowing the noble Earl’s expertise and the courtesy of my noble friend, I am sure that these matters will be discussed further over this summer. I hope that in her response she will not necessarily rule out the idea of at least exploring these proposals. It may be that the Government have the necessary powers that the noble Earl is referring to in Amendment 96 to make adjustments in the system. But if that is not the case, it is a matter that we ought to consider further because this area will bear further examination. Indeed, I referred to an incident in my borough, which demonstrated the problems that can arise.
I am not going to tempt the noble Earl to his feet immediately, but perhaps when he replies to the Minister’s response he will say how he envisages in Amendment 70ZC this concept of a decline in market value being a reason, rather than a proximate event, to occasion appeals and change. I am not absolutely certain as to how he envisages that would be triggered. Would it be triggered by each individual land holder? You could have whole series of appeals in the light of a general trend in market decline. The noble Earl nods, so I think that that is the case. If that doctrine is to be imported into law, for some of the reasons that the noble Earl set out, some mechanism might be needed for collective action in those circumstances, otherwise it could be another reason for a proliferation of appeals that might come out of the works.
I listened with great interest to what the noble Earl said and I hope that we can be assured we will have the flexibility to address some of these issues as they arise over the next few years.
Lord McKenzie of Luton
My Lords, the noble Earl has treated us to a veritable manifesto of issues. Like the noble Lord, Lord True, I am grateful to have had the benefit of his expertise on these matters. Perhaps I may also say in the noble Earl’s defence, if he needs it, that I am advised that the 20-minute rule does not apply to legislation—quite apart from the fact that the noble Earl could have degrouped all his amendments.
It also seems that some of the issues raised would impact on local business rate deals. In line with the discussion we have just had and the amendment of the noble Lord, Lord Jenkin, we would expect there to be some consultation on that. I hope that noble Lords will understand if we formally reserve our Front-Bench position on some of these issues, at least until we have heard from the Minister. The list prompted a visit to the Valuation Office Agency website to try and get some briefing. It is worth reflecting that the group of amendments brings home the breadth of responsibilities of the Valuation Office Agency and underlines the importance of the points made in earlier debates by the noble Earl about the significance of maintaining this important service. Its work includes not only the compilation of rateable values for some 1.7 million non-domestic properties in England and 100,000 in Wales, and the list of council tax bands for some 23 million properties in England and 1.5 million in Wales, but determining local housing allowances across 153 broad market rental areas in England. That is a heck of a responsibility and a major task.
The theme of much of the noble Earl’s group of amendments is the fitness for purpose of the current system, with particular issues around appeals. If the noble Baroness is unable to give satisfaction on that this afternoon, it would lend itself to an amendment on Report, saying that there should be, within a period of time—maybe two or three years—a specific report on how the system is coping with the business rate retention scheme. Given where we are, that is probably the best that we can do with the generality of those issues. Have the Government recently assessed the fitness for purpose of the Valuation Office Agency and the system that it supports in driving forward the business rate retention scheme?
Having said that, perhaps I might comment on one or two specific amendments. Amendment 62 requests the paying off in instalments of backdated liabilities. I seem to recollect that we had some heated debates about the backdated liabilities suffered by some ports. They were paid off in instalments. There was a facility to allow that, so I wonder why there is not sufficient in the system to protect that at the moment.
As the noble Earl identified, there are issues not only for rural petrol filling stations but for shops and rural pubs. I am particularly interested in who bears the cost of these reliefs under the current system. How will that break down under the business rate retention scheme? Will there be a switch in the bearing of costs for that? Will 50% now be borne by local government and 50% by central government? What is the change on that?
On Amendment 64, the noble Earl talked about no reallocation of funding coming the way of parish and neighbourhood councils. My understanding is that there is certainly an expectation that the grant for council tax support will be paid to billing authorities and major precepting authorities. The bit attributable to local precepting authorities goes to billing authorities and there is an expectation that they should engage with parish and town councils with the prospect of payment being made. Therefore, to that extent at least, there will be some relief.
In Amendment 65, the noble Earl refers to completion of a single annual return. We are not opposed to this principle, although if the system is creaking at the moment, I am not sure of the benefit of imposing another annual return—even a simple one—if there is no resource to deal with it. There is nothing worse than having a system of returns that simply cannot be coped with; the system is brought into disrepute.
Perhaps the Minister will tell us how central rating lists will work under the business rate retention scheme. The central bit of these rating liabilities deals with hereditaments such as railways, telecoms infrastructure, toll motorways and so on, which straddle multiple billing authorities. These liabilities are collected by the Secretary of State. How is the local share fed back to appropriate billing authorities, if at all?
Amendment 68 seeks to reflect the role of billing authorities in the appeal system, given the changed circumstances that arise where billing authorities have a more direct interest in the outcome of rates collection. That does not seem unreasonable. I shall be particularly interested in the response of the noble Baroness on that. I will not comment further on the specific amendments, but there is a case emerging for having a specific look at the whole system—not to hold things up, but so that we can make a judgment in a relatively short space of time as to whether it is fit for purpose for the new demands that are being imposed upon it.
Baroness Hanham
My Lords, I am not sure that I can wind this up in 20 minutes, but I will do my best, gracefully, as I go along. I first thank the noble Earl for raising this subject in the way that he has. I am also extremely grateful to him for the discussions that we have had following the previous day, when I pointed out to him that if I had to answer every amendment one by one I would have 30 pages of speaking notes, which might take us longer than 20 minutes.
With the noble Earl’s agreement—and, I now hope, the Committee’s—I propose to tell the Committee what the noble Earl’s four main themes are, and will then write on each of the specific amendments so that the Government’s answer to each is there. That will help the Committee at the next stage. I am manifestly not going to be able to answer all the points today.
The answers are grouped under the noble Earl’s points about the valuation system not being well managed; that it should be independent of the Treasury; that the Valuation Office Agency and the Valuation Tribunal Service have been adopting, as the noble Earl put it, several bad practices; and that there are abuses by a small number of rating advisers. Those are the four themes that I will go through and, following the Committee sitting, we will make sure that every Member of the Committee and the Library has a response to each of the amendments. I thank the noble Earl for grouping them together, as it could have been even longer had he chosen to speak only to two or three at the same time.
First, on the resourcing and management of the rating and appeals system, ratepayers expect their rating assessment to be correct, and for appeals to be resolved quickly. This will always be the case, but under the rates retention system it would become increasingly important that the rating system delivered a good service for both ratepayers and local government. I appreciate the noble Earl’s concerns regarding the backlog of appeals in the rating system. We share those concerns. The Valuation Office Agency is working flat out to clear over 250,000 appeals by the end of March 2013, including the majority of the outstanding appeals against the 2005 rating list. It has recruited additional front-line staff and has transferred staff from other work areas to speed up the clearance times for these outstanding appeals. Around 75% of all appeals on the 2010 list to date have resulted in no change to the rateable value, but we are well aware of how significant business rates are to all businesses and that this makes the fast and efficient processing of appeals vitally important. Likewise, the Valuation Tribunal Service is proactively working to ensure that appeals that cannot be resolved through initial discussions with the Valuation Office Agency are listed and dealt with by the tribunal. In fact, only some 2% of listed cases result in disputes being brought before a tribunal panel, with the rest being settled between the parties.
I hope that I have been able to offer some comfort to the noble Earl that the valuation and appeal system will be able to cope with the rates retention. Let me also assure him that the resourcing and performance of the Valuation Office Agency and valuation tribunal are a matter for regular discussion in the Government, especially now as we move into the rates retention system. As with all public bodies, the Valuation Office Agency and valuation tribunal have to deliver their services in challenging financial circumstances, but we are fully aware of the important role that they will play in the rates retention system and we will ensure that they have the necessary capabilities to meet these objectives.
The second theme of the noble Earl, Lord Lytton, is the Valuation Office Agency’s response to rates retention. An example of those capabilities is the way in which the Valuation Office Agency has responded to the planned introduction of rates retention. Since as early as late last year, the Valuation Office Agency has been working with local government to understand what local authorities will need to budget effectively under rates retention. It recognises that there will be step change in its relationship with local government and it has established a dedicated project team for rates retention. This has already led to several discussions with local government and with the Local Government Association. While I understand the concerns of the noble Earl, I hope that he will agree that to date the Valuation Office Agency has responded well to the rates retention scheme and is working with local government to ensure its smooth implementation.
The Valuation Office Agency is independent. An essential part of any system of tax is that the public have confidence in their tax assessments—not only in the accurate level of those assessments but in the manner in which they have been reached. I agree with the noble Earl that the independence of the Valuation Office Agency is important. That is why valuation officers who perform their statutory functions, such as the assessment of individual rateable values, act independently of Ministers. In this respect they have to answer to the courts rather than to the Government.
We also have to recognise that the Valuation Office Agency is a public sector body, spending public funds, and is part of the delivery system for business rates and council tax. That is why it is right that the Valuation Office Agency should answer to the Government for its overall performance. As such, the Valuation Office Agency forms part of Her Majesty’s Revenue and Customs and reports to Ministers in the Treasury for its work. It also accounts to Parliament—this is the point about the report—in the form of an annual report, and senior officials in the Valuation Office Agency can be called to give evidence to Select Committees.
While I appreciate the noble Earl’s point, in practice we have to strike a balance to preserve both the independence of the Valuation Office Agency’s statutory functions and the need to maintain the accountability of public servants. The noble Earl’s amendment would prevent the Valuation Office Agency from reporting to either the Treasury or the Department for Communities and Local Government, and under those circumstances I do not believe that we could deliver that accountability.
The noble Earl also raised concerns about some of the practices and procedures of the Valuation Office Agency and the valuation tribunal. Having just stressed the importance of the independence of the Valuation Office Agency when exercising its statutory functions, I think that the Committee would be disappointed if I signalled a willingness to interfere in its day-to-day work. I appreciate the concerns that the noble Earl’s amendments have raised in such areas as invalid appeals and the use of a strike-out by the valuation tribunal. We have powers to make regulations on any matter relating to the valuation tribunal and we have made regulations under those powers that describe when a strike-out can be used. However, in line with other tribunals, we do not describe all the necessary procedures in those regulations, but instead allow the valuation tribunal to make directions. Those directions describe the procedures that must be followed in taking an appeal through to a valuation tribunal hearing. The Secretary of State has given the valuation tribunal, in line with other tribunals, the power to strike out appeals where the appellant has failed to follow the directions.
This is not a matter that we take lightly. It is important for the effective operation of a fair judicial system that a valuation tribunal is able to set directions and enforce them through the use of a strike-out. The tribunal will consult its users before it introduces any standard directions, and any parties will be made fully aware of the requirements, by means of practice statements and information leaflets, when they make an appeal. Therefore, while noting the noble Earl’s concerns, I do not believe that we should change the current system. Allowing these matters to be set out in directions rather than regulations will ensure that the tribunal can lay down procedures that reflect the nature of the court and are responsive to changing circumstances. The system would not be improved through our direct intervention or by bringing all the procedures into regulations.
The noble Earl referred also to abuses by some agents. He raised valid points about abuses of the system by ratepayers’ representatives. I know that he works closely with the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation. Both organisations have clear professional standards. The Valuation Office Agency includes guidance on its website about employing a rating agent and how to contact these organisations for advice, so it would not be appropriate to regulate in this area. I hope that the noble Earl will agree that by stringently and consistently applying professional standards, the professional bodies and the Valuation Office Agency can address some of the abuses that he mentioned.
I have not addressed every amendment—as I said I would not. However, I thank the noble Earl for the knowledge he brought. I hope that he will feel able not to press his amendments on the basis of the explanations provided and of the assurance that, before Report, he will have a reply to each one.
I was asked by the noble Lord, Lord McKenzie, whether under the current system local government pays all costs of mandatory reliefs. It pays between 0% and 75% of the costs of reliefs for eligible businesses and some not-for-profit agencies. If a local authority chooses to go beyond the existing rate reliefs to grant extra relief using the business rate discount powers in the Localism Act, it can meet the cost locally. If not, the cost will be reimbursed. However, from next April the system of funding business rate reliefs will change as part of wider reforms. We will shortly publish a consultation paper setting out the details of this. The basic principle is that changes in rates income, including changes in relief, will be shared 50:50 with central government. I hope that that answers the noble Lord’s question.
There may be other points that noble Lords wish to pursue with me. I think that I answered the point of my noble friend Lord True about the fact that a number of important issues have been raised, and individual replies will be given on all the amendments so that we can consider them further at a later stage.
Lord McKenzie of Luton
Perhaps the noble Baroness is in a position to answer the question about how a system of central lists would work alongside local and central shares for business rate retention purposes.
Baroness Hanham
I would rather leave that and answer all the questions together, so that there will be a composite answer to all the points raised.
The Earl of Lytton
My Lords, briefly, I stand guilty as charged in the sense that I made my maiden speech in this House during the passage of the Local Government Finance Act 1988, which introduced the poll tax. I said at the time that it was unfair and unlikely to work, but I was a greenhorn and my comments were probably not well informed.
I will follow on from what the noble Lord, Lord Beecham, said. The constraints that will fall on council tax payers, and in particular on those in receipt of relief, will of necessity enable those who are so advised to mount an appeal against their banding. In circumstances where the bandings are 21 years old, there will be every opportunity for a challenge to be successful on account of the age of the tax base. It was for that reason that I tabled my earlier amendment on the transfer of the loan to the valuation tribunal.
Dealing with the personal circumstances of individual claimants who are partly supported by benefits will not be quick. It will not be easy to dispose of such cases in a short time. The risk is that the system will become clogged by appeals that will take an inherently long time to resolve because they will have to delve into the details of individuals’ financial circumstances. We will debate an amendment tabled by the noble Baroness, Lady Hanham, which will probably assist us. None the less, the policy will produce a significant load on the system unless it is better resourced.
I make no comment on whether the process is destined to work. This goes into areas of local government finance that are beyond my ken. However, I warn against the inevitable transfer and the unforeseen consequence of what may happen in the wider domain of appeals.
Lord McKenzie of Luton
My Lords, the amendments in this group seek to include support for council tax as part of the universal credit. We support them all. My noble friend Lady Hollis made a typically powerful presentation, and the amendments were spoken to in a supportive way by almost every noble Lord, including my noble friends Lady Sherlock, Lady Lister and Lord Smith, and the noble Lord, Lord Greaves. The noble Lord, Lord Tope, expressed a degree of equivocation. The noble Lord, Lord True, issued the caveat that we should be careful about amendments that we had yet to debate.
Including council tax as part of universal credit is not a new position. We argued strenuously during the passage of the Welfare Reform Act that this was where it belonged, and we know that Ministers in the DWP agree. The Government’s arguments in favour of localising council tax support are that it can be varied across the country in accordance with local need; and, because the costs will fall on local councils, there is an incentive to promote employment so that people are floated off benefits. My noble friend Lady Hollis destroyed that argument pretty powerfully. Of course, the Government are pursuing two policies—one of supposed localisation and one of cuts. That is what makes these things particularly challenging. The incentive effect depends on how these cuts are to be applied since means-testing support for council tax more aggressively leads to weaker work incentives than reducing support for all claimants. As the IFS put it:
“Reforms that save the full 10% typically involve reducing support for those currently entitled to maximum CTB—those on the lowest incomes. And those options that do protect the poorest claimants either fail to generate large savings, or significantly weaken work incentives”.
That is why my noble friend Lady Sherlock pointedly asked: how, at one time, do you both help the poor and make people better off in work? That was the commitment made by the Government. How will they do it on this basis? Issues around work incentives for localised schemes are not straightforward and must be considered in the context of universal credit as well.
As my noble friend Lady Hollis made clear, we have supported the concept of universal credit—not every aspect of its proposed implementation, including payment frequency, second earners and wallet-and-purse issues, but the fundamental architecture. It is a structure that, as my noble friend explained, clearly simplifies the benefit system and provides a common taper which, together with income disregards, will make work pay and give clear incentives to work. It encompasses tax credits as well as benefits and is an “in and out of work” benefit. It is the natural home for council tax benefit and it is understood that this was the original intention. However, it would be good to have on the record the point in time at which the Government’s position on this changed and why.
Keeping council tax benefit outside universal credit, with the prospect of dozens if not hundreds of local schemes, undermines that simplification. It potentially undermines the rationalisation of work incentives, with the prospect of overlapping taper rates. These are not just theoretical matters. The Government have promulgated a default scheme that will be imposed on local councils that do not introduce a local scheme by next January. How does this default scheme sit alongside universal credit? In particular, how is universal credit to be treated for the purposes of the default scheme? My noble friend Lady Lister referred to an answer given to my honourable friend Stephen Timms in another place: it is up to local councils to decide how they do this. However, we are dealing here with a scheme that the Government have promulgated and that they will impose on local councils. Therefore, the Government must know how they will treat universal credit in that default scheme—that is the scheme that they are promoting.
At present, tax credits are taken into account as income for council tax benefit. Income-related benefits, such as JSA, IB and ESA, are not and passport individuals on to maximum council tax benefit. Universal credit substitutes for benefits and tax credits, so how will it be treated in the default scheme? Will the Minister also tell us how overlaps in tapers between universal credit and the default scheme are to be avoided, if they are? These are not just points of interest; they are fundamental to the operation of the scheme that the Government will impose in just a few months’ time. The logical route in all this is to follow my noble friend’s prescription and include council tax benefit as part of universal credit from the start. We do not doubt that this is where it will end up eventually.
My noble friend Lady Hollis made the point that the proposition advanced by the Government means that take-up campaigns will be deterred. With a number of noble Lords, she talked about the collection of small amounts and the difficulty that that will create. My noble friend Lord Smith and a number of noble Lords referred back to the poll tax and all that that entailed, particularly the point that young people disappeared from the system. We cannot allow that to happen again. My noble friend and the noble Lord, Lord Greaves, referred to the difficulty in budgeting that the proposed system will bring forward. I understand that there are not many second homes in Wigan and we do not have too many in Luton either.
Lord McKenzie of Luton
My Lords, we support the thrust of these amendments. I will start with Amendment 73A, spoken to by the noble Lord, Lord Jenkin, and supported by the noble Lords, Lord Shipley and Lord Tope, about the new burdens doctrine. I was broadly going to support this anyway. A new burden in this context would be if there were increased take-up of the benefits system in a subsequent year, so on that basis it is doubly worth supporting. It is not as though we are dealing with a new service or something of that nature, but if we are including in that definition the fact that there will be changes in the volume of take-up, it is certainly right to push back at the Government on that.
My noble friend Lady Hollis’s amendment gave a devastating critique of what the proposals will actually mean for individual local authorities and the people who will be hurt. My noble friend talked about adjoining authorities, one that included DLA in the computation of income and one that did not. What a nonsense when people are being forced into those sorts of judgments.
The noble Lord, Lord Shipley, said that one of the problems is that the timescale is too tight. I hope that we will be able to have common cause in an amendment that is coming up—I hope shortly; if not, next week—to address that specific issue.
My noble friend Lord Smith asked what local authority would not want to find jobs for young people. Part of the problem for some local authorities is that their economic regeneration departments are under pressure from the cuts that are already there, so it is not lack of desire to do that; the capacity to do it is becoming increasingly constrained.
Issues were raised about who is going to do the forecasting for the council tax benefit expenditure for the year in question, not only for 2013-14 but for subsequent years. The fear has been expressed here—and I share it—that 90% of forecast subsidised council tax benefit expenditure in reality will be an underestimate for what actually comes to fruition.
Perhaps I can press the Minister on a couple of techie points. I would guess that at the moment the reimbursement to local authorities for council tax benefit is on subsidised council tax benefit expenditure, and I think that is because there is not a full subsidy where a benefit is paid incorrectly or late. How is that going to work under a supposed localised system? Who is going to make the judgments, under various schemes that do not have the same parameters, whether a benefit is paid incorrectly or late? Is that what we mean by the reference to subsidised council tax expenditure?
Can the noble Earl also deal with the fact that this is going to be funded by way of the business rate retention scheme? What does that actually mean in practice? Are we saying that part of the central share is going to be used to fund this? Will it be deducted from the total business rates collected in the first instance and then split on a local and central basis? Precisely what does that mean?
On the specific issue of having to forecast subsidised council tax benefit expenditure, if that means making a judgment about that which is paid properly, correctly and in accordance with the scheme, it is clearly going to be much more difficult with a whole raft of different local schemes. The fundamental point that noble Lords have made is that is that the 10% cut—or whatever it turns out to be—is going to impose impossible conditions on local authorities having to make the judgment of Solomon. It is deeply uncomfortable and deeply unfair.
Earl Attlee
My Lords, I thank the noble Baroness, Lady Hollis, for the explanation of her amendments. The noble Baroness first asked me what was wrong with the CTB scheme. The answer is that there is no incentive on the local authority to reduce the claimant count.
Earl Attlee
My Lords, I accept the noble Lord’s analysis of what would happen but the question is: why does it not happen now? Why do we not suddenly see a 20% increase in claimants? The noble Lord is describing a hypothetical situation.
Lord McKenzie of Luton
The Minister may wish to cast his mind back to the Pensions Bill, which we debated a couple of yours ago, and the representations that were made by the Royal British Legion, for example. It wanted a change to the name of council tax benefit because it believed that elderly people in particular were dissuaded from taking it up. They saw it as a benefit and that was something with which they were uncomfortable.
Baroness Hollis of Heigham
They wanted it to be called a council tax rebate.
Lord McKenzie of Luton
The nature of this arrangement could cause more people to claim without a campaign for take-up. Why on earth would we want to build any problem into the scheme that would dissuade councils or anyone else from encouraging people to take up their rights?
Earl Attlee
But unfortunately we have to make savings.
The noble Baroness, Lady Hollis, suggested that this reform does not support local financial accountability. I disagree. Currently, local authorities can put up council tax without any regard for the impact on the cost of council tax benefit. This reform changes that by ending the subsidising of council tax increases from the benefits bill. There have been previous attempts to address this acknowledged problem. The recent report by the Institute for Fiscal Studies, to which the noble Baroness Lady Sherlock referred, noted that this reform restored the link between council tax increases and the benefits bill.
I was asked who should not get CTB. It is not black and white. The point of localisation is that councils will have the option to continue with the current scheme and find savings elsewhere, or to reduce some awards a little and raise money on empty homes. Localisation will mean that councillors will have choices about how they manage the cuts. There may be different schemes across the country. We trust local government to choose how to deliver local services to vulnerable groups. We trust them to deliver this scheme to support local people with their council tax bills. This is local accountability in action.
Speaking to Amendment 73A, my noble friend Lord Jenkin asked what happens once the spending review period ends and whether there are any guarantees for local government. Funding for the first two years of localised schemes is derived from the Office for Budget Responsibility forecast for spending on council tax benefit, which reflects existing spending and therefore assumptions about underlying demographic changes and council tax increases. Thereafter, decisions about overall levels of funding will be taken as part of the spending review process, which will provide an opportunity to consider cost pressures. Funding will be allocated via the retained business rate system, and the recent consultation set out provisional allocations.
Lord McKenzie of Luton
I am sorry to interrupt the Minister; I know he is trying to make progress. Assuming the first year is 2013-14, if the forecast by the OBR proves to be inadequate, will there be a basis for revision for the subsequent year within the spending review? Can the Minister say precisely what funding being provided by the business rate retention scheme means in practice?
Earl Attlee
My Lords, that is one of those matters of detail that the noble Lord will have to look forward to in my letter.
The noble Lord, Lord Jenkin, asked whether this policy reform was a new burden. This reform is not a new burden. Local authorities will have a significant degree of control over how a 10% reduction in expenditure on the current council tax benefit is achieved, enabling them to benefit local priorities and their own financial circumstances as they see fit. The Government are committed to carrying out a new burdens assessment regarding the administration of the schemes, and are gathering data on administrative costs to support this assessment.
I was asked whether the Government would be able to adjust allocations. As I said, the spending review provides an opportunity to review overall funding levels. Funding is allocated through the retained business rates. Baseline allocations will be set for 2013. Councils will have the flexibility and responsibility to design schemes that match local circumstances. Adjusting allocations would undermine the key principle at the heart of our reforms to local government finance, since funding will be within the retained business rate system. As we discussed in previous debates, it is essential that there is a sufficiently long period between resets to incentivise growth. Frequent adjustments to funding allocations would undermine this wider principle. Local authorities will have a range of flexibilities enabling them to manage costs in the mean time, including making adjustments to their own organisations and costs.
Increasing local financial accountability is a key objective of the localism agenda. Localising support for council tax gives local authorities an increased stake in the economic future of their local area, strengthening the incentive to support people back into employment. It also increases financial accountability by helping to make local authorities accountable for decisions over council tax levels, putting an end to the central subsidy of council tax increases.
There is widespread recognition of the need to reduce welfare spending. As I mentioned, spending on council tax benefit doubled under the previous Administration and it is essential that we take steps to bring it back under control. The saving from localisation announced in the spending review is a crucial contribution to the vital task of tackling the deficit.
Localisation gives local authorities significant control over how to manage the reduction in funding. Authorities will be able to offer council tax reductions that reflect local circumstances and priorities. They can decide whether to pass the reduction on to council tax payers, use flexibility over council tax or manage the reduction within their budgets. The noble Baroness, Lady Hollis, talked about the difficulty of collecting relatively small amounts of money and I will have to weary the Committee by repeating that it is up to local authorities to devise their schemes and take account of that difficulty.
Amendment 71 makes delivering the savings impossible and would in fact encourage local authorities to plan for that. The intention behind it is not realistic. The 10% saving has to be delivered, and we have given local authorities the freedom to decide how best to do this in their local area.
I do not deny that we are in hard times. The noble Baroness went into government in 1997 in a period of steady economic growth. The present Government are faced with truly dreadful financial circumstances.
Lord McKenzie of Luton
Does the Minister accept that when the coalition Government came into office they were experiencing a period of economic growth?
Earl Attlee
My Lords, I will accept that, but we also know why we have gone into a double-dip recession, which is not our responsibility.
The default scheme is intended as a legal back-stop, a safety net to ensure that those in financial need can continue to receive support. To fund a default scheme fully, as Amendment 71 would require, would send a message that local authorities do not need to take responsibility for developing a local scheme. It would make delivering the saving—which was called for in the spending review—impossible. Local authorities do not need to wait for the default scheme. Pragmatic councils are pushing ahead with the job at hand. Local authorities are starting to think through how to manage the reduction to best reflect local priorities: Harrow, Brent and Chiltern councils are already consulting on the design of their schemes.
Amendment 75 seems to be intended to prevent local authorities from designing a scheme to help deliver a saving. This does not seem responsible. It is right that local authorities have the flexibility to decide how to manage a reduction in funding, reflecting the circumstances of their area. Constraining their ability to do this prevents them from taking sensible local decisions about their priorities and what is affordable.
At the end of our debate on the last group of amendments the noble Baroness, Lady Hollis, accused me of not answering some of her more technical questions—questions that, I suggest, even my noble friend Lady Hanham would find taxing, so it is not surprising that I cannot answer them. Of course I listen to the Committee’s concerns very carefully and I will discuss the technical points with my excellent team of officials. I do not accept that there is any weakness in the team behind me. Any weakness lies with me because I am not an expert in local government. However, I will try to serve the Committee as best I can.
Local Government Finance Bill
Lord McKenzie of Luton Excerpts(13 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Earl of Lytton
My Lords, in moving Amendment 18 and speaking to Amendments 28 and 29, my purpose is primarily to flag up an issue of principle. I remind the Committee of my involvement with the first tier of local government, as president of the National Association of Local Councils, the national body representing parish and town councils, and whose assistance in this matter I acknowledge.
My support for the idea of a larger share of business rates going to billing authorities under the business rate retention scheme which we discussed on Tuesday was, I have to admit, not entirely altruistic. It was founded on the belief that too little was being channelled back to the billing authority given the many other claims on the funding stream implicit in that arrangement, certainly if we are to have any real incentive flowing from it. By implication, therefore, little or nothing would be available in practice, even if the principle of my amendments was agreed, to flow to the first tier of local government.
The Bill is—in part, at any rate, or so we are led to believe—about introducing the financial aspects of the Government’s localism agenda, which I support wholeheartedly. It is a process of trickling down powers and responsibilities from central government to local government and from local government to neighbourhoods and parishes. I hope that that is a given—I am glad to see the Minister nodding. At Second Reading, I flagged up an issue concerning a defect in the Bill, namely that the process of financial trickle-down seemed to halt at the principal authority level. There is nothing in the Bill for parish, town and neighbourhood councils. In short, and viewed in very local terms, the financial benefits do not flow to the very local level where the properties on which the tax is raised are actually located and in which locality exists a neighbourhood-based, statutorily constituted and precepting local authority.
I remind the Committee that local initiatives which would raise revenue in business rate terms are not by any means confined to principal authorities. Parish and town councils up and down the country are, and continue to be, involved in schemes to encourage retail, commercial and other value-added activity.
These amendments are framed in what I admit is a deliberately crude fashion with a view to highlighting the complete absence of a local council share in the retained element of the BRRS and to ask why, in the name of all that is called localism, the redistribution of this is limited to major precepting bodies only. Removing the word “major” from various provisions as a qualification to the beneficiary precepting bodies is intended thereby to include local councils which also have a precept in the redistribution benefit.
Before 1989—I think that was the date, but my memory may have failed me—parish and town councils did get such a share, but it was scrapped when the community charge was introduced. While that denial of benefit might have been appropriate at the time, local councils have made enormous advances and shown what they are capable of doing. Indeed, I have a list with me of the very many initiatives up and down the country which all show how much can be achieved with tiny sums of money. I think that the Minister would be amazed at just how much can be done with very little money if the collaborative ethos and common purpose that particularly hallmark neighbourhood and parish initiatives are given a fair chance. However, that cannot be done without any resources at all.
Many of these initiatives are specifically aimed at business activity. The demise in the ability of principal authorities to fund many services, let alone any new initiatives, leave the local council—often a parish or town council with quality council status and a real drive to benefit their community—to pick up the reins. As I have said, this cannot be achieved without some resources. We already know the common practice of principal authorities agreeing to pass services and functions to parishes yet simultaneously claiming that there is no budgetary allocation to pass on to enable those services to be provided in practice.
I do not entirely blame principal authorities. In fact, I have been involved on and off with principal authorities for rather longer than I have been involved with parish and town councils in many respects. Principal authorities have been caught financially between what can only be described as a rock and a hard place. However, at local council level it looks bad and in neighbourhood terms it seems almost like a financial sleight of hand, which is known in the jargon of the sector as double taxation; namely, the service is passed further down the line but none of the resources—which are somewhere implicit because there is a cost element in a principal authority’s budget—get passed on. The closure of public toilets in resort towns that rely heavily on coach loads of day visitors and attempts by the town councils to keep them open is just one exemplar of that situation.
I cannot know what the Minister’s response will be, although I have my suspicions. Probably the least likely outcome is that she will accept the amendment. The question then is: what does she propose? Will there be a line of funding that will benefit the local council sector, and what guarantees can she give that, if that money is made available via a principal authority, it will be passed on?
I am realistic about funding things at neighbourhood and local council level. I accept that the question of how to distribute such a local council share will arise if the principle is accepted, but that is further down the line. Furthermore, I also accept that the last thing that we need is a plethora of very small schemes or even those which are not worth while just because money is available or because it will be lost if it is not spent in a particular financial year. Worthwhile projects, unfortunately, have lead-in periods that do not sit conveniently into a fiscal year template. I am familiar with the undesirable effects of an overrestrictive “use it or lose it” regime.
The Government’s message regarding local government finance is clear: not only is there no new money but there will be a 10% cut. However, if anything is to work at neighbourhood, parish and town council level, there has to be some redistribution of resources, unless the Government are willing to stand accused of some sort of large-scale deception by the very constituents they promised to assist. I hope that that is not the case. However, given that the maximum effect can be achieved with tiny resources and the ability at local council level to leverage a huge amount of voluntary commitment, there is a very good reason to make a modest redistribution. I look forward with interest to the Minister’s response on this matter, which I believe is critical to the objectives of true localism. I beg to move.
Lord McKenzie of Luton
My Lords, this is an intriguing series of amendments, and we have a degree of sympathy with them. The amendments would include parish and town councils within the scope of those for whom billing authorities must share their portion of the business rates. I suspect that the difficulty with this is that other parts of the components of the scheme for business rate retention would have to be applied as well. You could not just make the payment without the other bits and apply it potentially to many thousands of authorities.
Under the current local government arrangements business rates are paid to central government and come back via the formula grant, not, I understand it, to local precepting authorities but to billing major precepting authorities. However, this does not work under the business rate retention scheme. The retained business rates have to be allocated between authorities and the proposed basis is that, with two-tier arrangements, 80% of the business rate would be allocated to district authorities and 20% to major precepting authorities—police and fire and rescue included. As I understand it, the rationale for the 80/20 split is that lower-tier authorities are typically responsible for planning and more able to influence economic development.
The noble Earl might well argue—he touched on this—that the new regime for neighbourhood planning opens up that opportunity more to parish and town councils. Some are already very much involved in a drive to improve the economy of their areas. However, if such councils are not to be encompassed within the tariff top-up arrangements for billing authorities, it would seem to follow that they should have their own calculation. It might not be difficult to establish the business rate base but to derive a funding amount would presumably require some breaking out of the formula grant, and I am not sure how easy that would be to do.
In passing, we should note that there will be a requirement for billing authorities to work with local precepting authorities to address the council tax support funding. If I have read the documentation correctly, it is envisaged that this could well involve a payment from such authorities to town and parish councils.
While I understand where the noble Earl is coming from on this, the practicalities make the amendment difficult to accept. However, I will be interested to hear the Minister’s response. There is the germ of an idea here that needs support.
Lord Shipley
My Lords, I think I agree with the comments of the noble Lord. There is an issue here that relates to the deletion of “major”. Will the Minister respond on the content of the Localism Act? On the rights and powers of precepting authorities, my memory is that some crucial amendments were made to the Bill on Report, which enabled the protection of the rights of parish councils and neighbourhood planning councils. Is the Localism Act sufficient to deliver the resources that should lie within the money, particularly that raised through the community infrastructure levy, to very small neighbourhood areas? I would appreciate the Minister’s guidance on that point.
the percentage referred to in paragraphs (a) and (b) shall be determined following full consultation with local government”
Lord McKenzie of Luton
My Lords, I shall speak also to Amendments 32 and 40 in this group. Amendment 19 relates to the determination of the central and local shares and requires them to be set after full consultation with local government. It is accepted that this determination must currently be specified in a local government finance report and thus be subject to a parliamentary process, but that is not a substitute for engagement with local government.
We accept that there has been extensive engagement in relation to the Bill but what does the Minister see as the regular process going forward in this regard? Perhaps she could outline for us an anticipated timeline of events in future years after the introduction of the business rate retention scheme, although I hesitate to call it a steady state.
Amendment 32 relates to tariffs and top-ups. The local government finance report will spell out the basis of the calculation of these payments, but before it is laid, the Secretary of State must notify such local government representatives as he sees fit. The amendment requires there to be a consultation rather than local government just being notified. Amendment 40 is a parallel amendment related to the process for amending reports.
I will just touch on the amendments in the name of my noble friend Lord Smith, who is unable to be here today. Amendment 20 mirrors our Amendment 19 and is identical. Amendment 23 causes the finance report to give details of the consultation; a proposition which we support. Amendment 25 requires the report that should be sent to local authorities to be there by the end of November, for obvious reasons. Amendment 33 mirrors our Amendment 32 and is a duplicate. Amendment 34 requires that the Secretary of State must consult on the detail and not just on the general nature of the proposals, which is the requirement at the moment. These amendments are all about proper engagement with the local government sector. Perhaps the Minister will let us know the Government's intention. I beg to move.
Lord Shipley
My Lords, I first declare my interest as a vice-president of the Local Government Association, which is the first of the afternoon. I apologise for missing Tuesday's Committee when large numbers of noble Lords were making a similar declaration.
Lord Shipley
That would actually be a quicker way of proceeding.
I agree with the amendment moved by the noble Lord. The Localism Act was about devolving power and decentralising decision-making. This set of amendments makes it clear that there should be full consultation with local government before decisions are made. When decisions are made, that cannot just be about notifying those decisions but should clearly explain through consultation first but secondly explanation of the decision that has been made, particularly in a matter as complex as tariffs and top-ups. Thirdly, there has to be consultation on the detail not just on the general nature of things.
I hope that the Minister will take on board that feeling because the Localism Act has changed the balance of responsibility between central and local government. It would help enormously if it were not just left for the Secretary of State to have a set of powers whereby things can be announced but not actually explained.
Earl Attlee
I thank noble Lords for their helpful explanations of these amendments. They deal variously with aspects of the local government finance report, particularly around the consultation arrangements that will apply. I agree that proper engagement is very important to ensure a successful outcome.
The Bill provides that the central and local shares, and the basis of calculation of payments flowing to and from local authorities, will have to be set out in the annual local government finance report. As we do currently, we will continue to consult local government on a draft local government finance report in the autumn before laying the report before the House of Commons in January or February each year. The noble Lord, Lord McKenzie, accepted this point in his opening remarks.
Amendment 25, tabled by the noble Lord, Lord Smith, and I think spoken to by the noble Lord, Lord McKenzie, seeks to bring forward the laying of the final local government finance report. Although I can sympathise with the good intentions of the noble Lord in bringing forward this amendment, I cannot recommend that the Committee accepts it. Amendment 25 would bring forward the process by three months from the current timetable.
The Government have always endeavoured to give local authorities the information they need as early as possible. The noble Lord, Lord McKenzie, asked me about the timetable. The current process for the local government finance report is as follows: the summer consultation is in about July and sets out the basis of calculation; the draft report comes out in approximately November and has the detail; and the final report comes out in January 2013. As for the future process, we may not need to carry out the summer consultation in future years unless there are substantial changes to the calculations.
In the past, the local government finance report timetable has been driven by the availability of up-to-date data to make the necessary calculations. Under a rate retention scheme, this will still be the case. For example, the September RPI figure, which will be used to uprate tariffs and top-ups, will not be available until later in the year. In reset years, the need for updated data will increase.
Although I cannot accept the noble Lord’s amendment, I can assure him that the Government will continue to use their best endeavours to ensure that local government, as far as possible, has the information that it needs to undertake its budgeting processes. Although I understand the intention behind each of the amendments in this group, I ask noble Lords to withdraw them. I believe they are either unnecessary, since, in practice, consultation with local government will continue to take place as it does now as a matter of course, or, in the case of the timing of the report, undesirable, since they may limit our ability to use the most up-to-date data for calculations. I am sure that that is not what the Committee desires.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply and all noble Lords who have spoken in this short debate. Nearly every one who spoke was sympathetic to and in agreement with the thrust of these amendments. Indeed, that was the tenor of the noble Lord’s comments. I understood from what he said—it seems to be on the record and we will read it in Hansard tomorrow—that there is the clear intention to continue to consult with local government on a timely basis. That is very important.
We have to reflect a bit on the issue around getting that information available in November, but the noble Lord, Lord True, and the noble Earl, Lord Lytton, made some very powerful points in support of the amendment—in particular, the sooner you know what your resources are, the better able you are to deal with those who are looking to you for support and engagement.
I agree with my noble friend Lord Beecham, as ever, that there are other interested groups here, particularly concerning the central share and how that is going to be dealt with. I think that the noble Lord, Lord Shipley, was right when he said that the Localism Act has basically changed the scene so far as this is concerned. I take a degree of comfort from the Minister’s response—particularly the commitment to make sure that the consultation continues.
I guess that we will have to see what the nature of the components is. We will be coming later to what is likely to be in a local government finance report, given that formula grants are going to be less important, if not disappear altogether. We will also be dealing with what is in the document to consult on. In the mean time, I thank the Minister for her response and beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I shall speak also to Amendments 27, 30 and 31. Amendment 26 relates to payments to the Secretary of State of a billing authority’s central share. Regulations can define the non-domestic rating income and include, among other things, an assumption of an authority acting diligently. Ministers may well say that this term is well embedded in the local government finance legislation, and doubtless the Minister will be able to point us in the right direction so far as concerns its meaning and why it is necessary. However, perhaps we can just recap. Whose judgment will determine whether an authority has acted diligently and what regard will the judgment have to what might be varying policy frameworks? Are the Government looking for something here which goes beyond efficient billing and collection arrangements?
On Tuesday, we heard from the noble Earl, Lord Lytton, about the maintenance of the business rating system and the challenges faced there. He highlighted the fact that collection risks are on local councils but that maintenance obligations lie with the Government. Perhaps the obligation for authorities to act diligently will be matched by an obligation on the Government properly to fund the valuation service.
If the Secretary of State deemed a council not to have acted diligently, what would the consequences be? Would the council have a right of appeal? If the Government are confident about the benefit of the incentive in these provisions, why is it not enough to encourage councils to act diligently?
Amendment 27 is a minor probe concerning payments of the central share. Paragraph 7(2) of Schedule 1 contains the words,
“in the course of the year”,
which suggests that all payments, even if subsequently adjusted, will be made during the year rather than later and in respect of the year. The amendment of my noble friend Lord Smith suggests that it should be paid in two instalments. Perhaps the Minister can enlighten us about the Government’s intent on that.
Amendment 30 refers to payments to major precepting authorities. This provision again deals with an authority’s non-domestic rating income, which will be defined in regulations as the amount payable to it,
“subject to such adjustments as may be specified”.
It is understood that the adjustments that would be made will include such matters as mandatory, discretionary and hardship reliefs, and the cost of collection, et cetera.
The noble Baroness will be aware of representations received from Sporta concerning the impact of the new system on mandatory and discretionary relief. Sporta represents charitable, leisure and cultural trusts. Under current arrangements, the Government meet the cost of mandatory relief and a proportion of discretionary relief, which is recognised in the government’s technical paper 2, Measuring Business Rates. I have the authority of the chief executive of Sporta to quote from the letter. It refers to the business rate retention scheme and the central and local shares. He says:
“The effect of this approach will dissuade many authorities to set up, extend or support leisure and cultural trusts—for two main and exceptional reasons. First, leisure trusts operations can involve large amounts of buildings and facilities, and therefore business rate concessions are significant. Therefore any transfer to them, or new investments by existing trusts, would impose substantial unfunded costs on the local authority. Second, unlike with the position of most other charities, local authorities can themselves directly influence the creation of trusts—by deciding or not to transfer assets to them on a lease and by awarding, or not, a contract to them for operation of facilities. The disincentives created by unfunded concessions could therefore be great and thus the benefits of having more community facilities run by trusts would therefore be lost—and this is happening now as local authorities react to the statements which the Government has already made”.
It goes on to say:
“We understand that the DCLG Working Party which is considering the regulations recognises in principle the problems for the charitable sector which the prospective loss of compensation for local authorities will create. However, we should like to ensure that DCLG are fully aware of the special problems which will be faced by leisure and cultural trusts, because of their scale and as a result of the fact that the formation of the trusts can often be dependent on the decisions of local authorities themselves”.
The concern relates to new or extended provision, as it seems that existing provision would be reflected in calculating the baseline and, therefore, the tariffs and top-ups. Those will not be changed—apart from RPI adjustments—until resetting. In the mean time, local authorities will take a 50% hit for any relief granted. Perhaps the noble Baroness can give us an update on current thinking because this seems to be a particularly serious issue. I would be interested to hear if there is a solution in hand.
Amendment 31 is again a minor probe. This is about certified accounts. It makes reference to the use of certified calculations or information, which is related to payments to the major precepting authorities. Can the Minister expand on what use is anticipated of these accounts and information? There is a broader issue, which I do not propose to press, about what is being certified by auditors and what the nature of that certification is, but perhaps that is a matter that I might take up outside of the Committee.
Amendment 39, in the name of my noble friend Lord Smith, requires the Secretary of State to make top-up payments in two instalments, which seems an entirely reasonable proposition. I beg to move.
Baroness Hanham
In reply to the last point of my noble friend Lord True, if I can provide anything useful, of course I will. My noble friend is the leader of a council and, as far as I know, he has been acting under the duress of being presumed to be acting diligently ever since he took over. This has been part of the Local Government Finance Act 1988 since it was passed. It is not new. It is entirely the same wording as local government has been operating under for the past 24 years and it is well understood. Local government finance officers must also understand it. It means that you go about getting in the money that you are required to have to the very best of your ability. The challenge—particularly now, with the economy in the situation that it is—is to get in as much as possible of the amount that you should have.
I am not sure whether the Government will judge the level of diligence but it is perfectly open to someone else to challenge whether a local authority has acted diligently if, for example, its revenue drops substantially. I do not think there is anything more that we can say about it but I will be more helpful if I can. However, this is a very well worn path, which is probably no different from what we will do.
The noble Earl, Lord Lytton, raised the question of holiday homes. I know that he has extensive amendments coming up later. The local authority collects only the money as assessed against whatever the nature of the property is. If a valuation office, which must value all properties, values a holiday let as a normal domestic property, so be it. The local authority does not challenge that. It is left to the valuation office or anybody else to suggest that perhaps a property is being used as a business and might need to be looked at again. Therefore, holiday homes are not particularly relevant to this matter at the moment. I hope that is helpful.
Lord McKenzie of Luton
My Lords, I thank the Minister again for her response to these amendments. On the issue of acting diligently, this is a probing amendment; I did not necessarily want the words deleted from the text. I wanted to understand how they might be applied in the current situation. We are in a different situation. Previously, the collection of business rates was turned over to central government and came back via a formula. That formula drove what local authorities had. It is going to be different in future; that is what the system is about. The Minister said that this is well tried and tested. How many challenges have been made under these provisions in the past three years? Who have those challenges come from? She hinted that they might come from anyone. It would not necessarily be the Government who have to take this view. This is important, particularly in the light of the comments by the noble Earl, Lord Lytton, whose knowledge of the rating system is profound and will be very helpful to us in this Committee. He can spot nuances that would not be apparent to some of us at least. We need more information on this. We will look to bring something forward on Report if we cannot get some clearer idea.
Will the Minister at least deal with the question of whether there is a right of appeal and what the sanction will be? If a local authority was deemed not to have acted diligently, what would the Government do? Would they gross up the business rate they receive in the calculations that are made? What is the sanction? Is it one that only government can apply? Is there a right of appeal against it? This raises lots of questions.
The other amendments were effectively probing, apart from the amendment about mandatory and discretionary rate relief. Quite apart from the specific circumstances that Sporta has written about—I understand there is some discussion on them—there are issues of principle here. How will it work in future for new provision that under the old system, and under the new system, would be subject to mandatory relief? The Government would have picked up the whole of the tab for that, but now it gets shared with the local authority. The local authority picks up half the cost which, other things being equal, is likely to make it less inclined to grant relief, not because it would not wish to, but simply because it would not have the resources to do it. Is that analysis right, or is there a different analysis? I know there are issues about how the baseline is set and how the existing provision features, but can we at least have a bit more about that as well?
Baroness Hanham
Mandatory is mandatory. Mandatory means that you have got to do it. I am more concerned about the discretionary aspect. There are two lots: a mandatory grant and a discretionary grant. As I understand it—I am sort of swinging backwards and forwards here—the mandatory grant will be taken into account in the share. It would not be deducted, as it were, from the local authority’s income. I will write to the noble Lord on that because we do not want confusion. It seems to me that if it is an absolute requirement to pay it, there must be some payoff from that. Local authorities determine what they should collect and what they write off. Their auditors check it. I shall write to the noble Lord further on the mandatory grant because I do not think we are getting anywhere.
With regard to due diligence, it refers in practice to the sums that a local authority writes off as bad debts. It is for a billing authority to determine those sums and for the authority’s auditor to determine that they are reasonable. Due diligence would seem to me to work on the basis that you use your best endeavours. The noble Lord asked whether anyone has ever been challenged on it. I think that is going to be very hard to unearth because local authorities would be the only ones to know. If we have anything useful on that, I will let the noble Lord know, and also whether there could be an appeal. It might be helpful and save the noble Lord a lot of trouble on Report if we lay that out more clearly for him and for Members of the Committee, which I will do.
Lord McKenzie of Luton
I am grateful to the Minister. I am happy to leave to correspondence the issue of due diligence, the consequences, and what appeal rights there may be. I hope that we will know in good time for Report so that we can revisit it if we need to.
I will just have one more go at mandatory relief. I go back to the document that the department itself issued: technical paper 2 Measuring Business Rates. Paragraph 4.22 states:
“The main consultation paper explained that there would be no changes to the current system of reliefs, or to the criteria that determine eligibility. The Government does not believe that, under a rates retention scheme, the cost of mandatory relief should be borne entirely by the authorities in whose area it arises”.
The same follows for discretionary relief.
Particularly in relation to discretionary relief, that must be a deterrent. I presume that that comes because of the 50:50 share. From what the Minister said earlier, are the Government reviewing this issue to reconsider whether there are any changes to the impact of the legislation that they might introduce? This does not affect only sport: I am sure that the department has had representations from a number of entities on this. Again, we would certainly wish to explore this further on Report if we cannot get some clarity or solutions relating to this by the time we get there.
Baroness Hanham
My Lords, the answer to the noble Lord’s point is that it will be part of the consultation in the summer. Consideration is still being given to the position on reliefs and the consultation will produce an answer. I hope that by Report we will know for certain what the answer is. But I take the noble Lord point’s completely about something that you have to do and how that will be shared. Discretionary seems to be more something that is within the ability of the council to decide. But I do not want to dig myself any deeper into a hole here. I will leave it and write to the noble Lord. I understand that the noble Lord is happy about due diligence.
Baroness Hanham
That is a little wider than the amendment, but we will look at Hansard and see.
Lord McKenzie of Luton
I do not think that the Minister is right to categorise my position as ”happy” on this, but I am content that there is a way forward and we will get some further information. Cordially, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, as we have heard, Amendment 35 requires that any review of tariffs and top-ups must be undertaken in conjunction with any revaluation of rateable values. As I understand it, that is broadly the intent of the Government. However, it would seem that locking into this approach effectively gives fixed reset periods. One of the problems with this, as the Government have identified, is that the further in advance a reset period is known, the more possible it becomes for local authorities to plan on that basis and potentially manage growth and investment in their areas to achieve maximum gains from the reset process. This could result in perverse outcomes as local authorities seek to defer growth in their local areas in the year before a reset is due. It also produces a rigidity in the system and an ability to have regard to how resources in the system are aligned to changing levels of underlying need.
In their response to the resource consultation, the Government have said that it is proposed to adjust each authority’s tariff or top-up following revaluation to ensure as far as possible that their income from business rates retention will be unaffected by the valuation. However, I am not sure whether that necessarily amounts to a full resetting involving the recalibration of the baseline; it seems to be a different process. Perhaps we can have some clarification on this. Indeed, I am not sure that it would be possible to use the formulation to set the baseline at the point of a revaluation because the business rate base would be the historic one, not the updated one. I would be grateful for some clarity as to what is involved in an adjusting of tariffs and top-ups that is not the full reset—I can see from the Box behind the Minister that that probably is the position. Of course, having regard to changes in relative needs in resources is absolutely key, and we support that.
It is a difficult balance between preserving the flexibility of earlier resets so that you can respond more quickly to changes in needs and resources and seeking the benefits of a practical update that perhaps has the benefit of a longer-term incentive. On balance, we would argue for the flexibility to be able to respond more readily, particularly given some of the data about how quickly the council tax base can change over time.
The Earl of Lytton
My Lords, I support the principle of what the noble Lord, Lord Tope, said in moving the amendment because we are in circumstances of unparalleled turmoil in the non-domestic sector. The present—2010—local rating lists are based on an antecedent date of 2008. It will not escape the Committee that that coincides with the peak of the market before much of the fallout of the financial situation had filtered its way though. One of the effects of that has been to produce some significant shifts in the way in which land use is now looked at. It will also be apparent to many noble Lords that there has been a growing level of conversions of properties that were once commercial into residential. This is, for many reasons, to do with the problems of building on greenfield sites, issues concerning the interim arrangements regarding the national planning policy framework and the removal—effectively the abolition—of the strategic planning system when the coalition came into being. I do not apportion any blame. We are where we are.
It is quite clear that a lot of businesses are paying rates on the basis of transitional relief escalation based on 2008 levels of value and are increasingly of the view that they are unsustainable. I have previously pointed out that on a like-for-like basis, non-domestic ratepayers appear to be paying more pro rata for their floor space than residential property owners pay under council tax for equivalent space. That may not be the case in central London—I have to defer to the noble Lord, Lord True, and others with greater knowledge of that—but in the rural shires, that certainly seems to be the situation. This fuels all sorts of things. If something is used for a commercial purpose, it fuels a lack of willingness to make any sort of declaration because people do not want it to go that way. One might say that there is no incentive on a billing authority to point something up as a non-domestic hereditament in circumstances where it gets 50% clawback. If it were under council tax, it would have got the lot, but I leave that for the time being because that is not the thrust of what I wish to say.
Next year we will have another antecedent valuation date for the 2015 valuation. The likelihood is that outside central London large numbers of values will fall. The transitional relief for substantial movement may well kick in, so as they have been counting up year on year towards 2015, after 2015 they may well be counting back down again. I have great concern about the reset not being until 2020 because the turmoil visited upon all sectors, residential and non-domestic, public sector and private sector alike, is making for great uncertainty and a great deal of unpredictability. It seems to me that by 2020, seven years down the road, assuming this comes into force in 2013, it will be so far out of date that something needs to be done about it before that time. I know that the Institute of Revenues Rating and Valuation, of which I am a member, is equally concerned about the long-term effects, given the problems with the arrangements for the reset and valuation being so out of kilter in their degree of modernity.
This is a science. One has to try to work out how many financial criteria dance on the head of one pin, and I might not be the best person to describe this in detail, but I foresee a problem and I would like to hear what the Minister has to say about it.
Lord McKenzie of Luton
That was helpful, as I have been trying to understand the difference between a full reset and a change in the tariffs and top-ups. What factors would be taken into account? The noble Baroness said that need is going to be ignored, which would certainly bother a number of us. How is that going to be achieved?
Baroness Hanham
My Lords, the needs assessment will be the same as the assessments for the baseline that were made initially. As I understand it, you would have to revaluate against that baseline. Any adjustments needed to that as a result of the revaluation would be made on the financial basis that there is no change to the amount a local authority is receiving unless there has been some change in the baseline or in the ingredients of the baseline. I think that is correct as to how the assessment will be made and, again, I will write if it is not.
“(3) Such basis of calculation must take account each year of an assessment of the level of need in each local authority, and in particular their ability to comply with their equality duty and obligations under the Child Poverty Act and homelessness provisions.”
Lord McKenzie of Luton
My Lords, in moving Amendment 37, I shall speak also to Amendment 38. We are still with tariffs and top-ups, which are important because, apart from levies and safety nets, they are the route to seek to address matters of needs and resources. Some local authorities collect more business rates than they currently receive in formula grant, while business rates collected by others are lower than their current funding levels. Hence, there is a need to rebalance resources, a process that we support. However, this requires establishing a business rates baseline for each authority and a baseline funding level. Amendment 37 sets down a general test for this, which requires that the basis for calculation that must be set out in the local government finance report should specifically have regard to an assessment of need. This amendment particularises that local authorities should be resourced to be able to comply with their equality duties, their obligations under the Child Poverty Act and homelessness provisions. The noble Baroness will note that these are the very same issues that central government has pressed on local government, reminding it of its responsibilities in relation to council tax support schemes.
Amendment 38 requires the local government finance report to set out details of the calculation of the baseline position. Establishing the baseline requires establishing the business rate that each billing authority collects and how this is shared between billing and non-billing authorities. The Government have proposed that this is determined by averaging business rates income, although the number of years over which it is averaged has not yet, apparently, been agreed. The amendment requires this to be made explicit in the finance report, but perhaps the Minister can in any case give us an update on this as well as set out the criteria that will determine the final basis of determination. Reverting to our previous discussion, how would this work in relation to a revaluation if the basis of the business rate baseline was an historic average? It would be difficult to do that at the point at which you had a revaluation because you would be averaging on the old basis. There is a difficulty there, but that is an aside.
Establishing the baseline also involves determining an income or funding level, and it is proposed that it is based on the 2012-13 formula grant, subject to some adjustments. It is these adjustments that the amendment also requires to be spelt out. In this regard, we support the decision to update population data, as these are a key driver of the cost of services.
So far as relative needs formulae are concerned, the Government maintain that they have increased the proportion of formula grant distribution going to relative needs at the expense of the central allocation, as this would support the most dependent authorities. For the purpose of the tariff/top-up calculation, the higher the formula, the lower the tariff or the higher the top-up will be. Can the Minister update us on what is happening on these adjustments and tell us the current thinking because the outcome of these deliberations is locked in until a reset and it can be significant? If the proposal is to set the formula grant for the current year, the Government switched data to help the disadvantaged authorities by the central and relative needs shares. If they are thinking of putting that into reverse for the purpose of this calculation, then presumably the risk is that those disadvantaged authorities will not have the benefit that the formula for the current year has given them. I should be very grateful if the Minister could deal with that.
Paragraph 2.47 of the resource review consultation document states:
“In the current settlement we increased the proportion of formula grant distribution going to relative needs at the expense of the central allocation to support the most dependent authorities but made no change to relative resources”.
On the consultation, it states:
“Responses were mixed on this point and we have decided to look again at this issue prior to further consultation, when we will take a decision on whether, or not, to consult on any proposals”.
So the question is: are the Government going to consult and what are those proposals? I beg to move.
Lord Shipley
Perhaps I may intervene for a moment in relation to Amendment 37 to probe the meaning of the word “need”. I should like to raise an issue concerning exempt student households. It is becoming an increasingly serious matter on which I would appreciate the Minister’s guidance.
Student households are exempt from council tax. They are also exempt from business rates where it is a house in multiple occupation but owned by a landlord. The principle has been that councils get reimbursed from the national pot. In the past couple of years, that has not been happening as it should, and in some cases there is around a 25% deficit so that only around three-quarters of the income that would be expected is being received, yet local services are being provided without all the income that is necessary to pay for them.
I understand that the consultation that is taking place over the summer with local authorities will look at this issue, but I am seeking an assurance from the Minister that the matter will be taken very seriously. In the past, need has been taken to include full reimbursement of the loss because student housing is exempt.
Baroness Hanham
My Lords, I will write to noble Lords on both those matters. Clearly there is a slight difference of emphasis and it would be more helpful if I wrote to the Committee.
Lord McKenzie of Luton
My Lords, I thank the Minister for her reply. Of course, we are in the Moses Room so I shall withdraw Amendment 37 and not move Amendment 38. Before I do so, I return to the issue of the baseline and needs and resources. Even if one accepts that the formulation used when setting the baseline is a fair and reasonable basis on which to do so, what evidence do the Government have to suggest that it is capable of holding in an appropriate way and that there will not be a divergence of needs and resources over seven years, 10 years or any other period?
Baroness Hanham
My Lords, when I was winding up I said that the Government would keep this under review and that, if there were a major change, the Government would be prepared to look at it on an individual authority basis within the local government finance settlements. Is that what the noble Lord, Lord McKenzie, is asking?
Lord McKenzie of Luton
In part it is. I can see that the Government might feel moved to adjust the formulation following a very significant change. However, we are talking about people’s lives here. Incremental changes to support can have a dramatic effect on them. I have looked at the impact assessment and the assessment of economic benefit, which was a fairly opaque document. I am trying to identify what work the Government have done so that we do not need to worry about resetting after three years, five years or any other period, and so that we are confident that, broadly, those parameters will hold over that period.
Baroness Hanham
I will let the noble Lord, Lord McKenzie, know. Whatever the calculation up to that point, the intention is to ensure that there is a settled time between resets in order to establish growth and benefits from that. I have said that a couple of times. The noble Lord will not expect me to answer now on all the calculations. I shall take a look and, if I can get further information for him, I will do so in due course.
Lord McKenzie of Luton
I am grateful for that and look forward to the further information. It seems that, in all this, the incentive effect takes priority over the needs issue, which is unfortunate. However, for the time being, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, in moving Amendment 41, I shall also speak to our other amendments in this group, Amendments 42, 44, 45 and 45A. Amendment 41 is a probing amendment. It concerns regulations about the levy payment calculations. These can be made,
“by reference to such other factors as may be specified in the regulations”.
Will the Minister indicate the type of other factors that it is envisaged might feature?
Amendment 42 would require the Secretary of State to allow 28 days for representations to be made on the basis of the calculation and to implement a process for receiving representations. I am sure that there will be informal arrangements but there should be some formal process by which local authorities can challenge the calculation.
Amendment 44 requires a report to Parliament after three years. The Government have yet to conclude on the safety net but it could be something like a 7.5% to 10% reduction from baseline funding, which, as time goes by, other than being uprated by RPI, would become an increasingly distant figure. Can we have an update on the thinking and on what evidence will be used? A significant diminution in base funding for an authority could be cumulative and we would be very concerned about that. We have debated before a significant loss of the business rate base: we heard from the noble Lord, Lord Greaves, last week. Some of it might be involuntary because of major closures; some of it might be voluntary, such as the discouragement of major regeneration projects. We need a clear path to review how it is working, so we believe that a report to Parliament at three years to see how that safety net is operating is very important.
In similar vein, Amendment 45 seeks to put down some criteria and the need for an evidence base. I apologise for the late tabling of Amendment 45A; it just got stuck in the system. It is a probing amendment intended to focus on the cumulative impact of the safety net, particularly when local authority reserves are being depleted and, in any event, the Government are focusing on levels of reserves.
I have put my name to Amendment 46, which is in the name of the noble Lord, Lord Jenkin, who will perhaps talk to it if necessary. There is something of a hotchpotch of issues there but it is intended to be probing in order to understand issues concerning the levy concept. I beg to move.
Lord Jenkin of Roding
My Lords, this group includes Amendment 46 in my name, to which I am delighted to see the noble Lord, Lord McKenzie, has added his name. We come to this in a splendid example of a total coalition, if I may put it like that to my noble friend the Minister.
I will say a word about a special point that affects the City of London in a moment, but the point about Amendment 46 is that it is asking that volatility in local authority income due to rating appeals is formally recognised and “fully compensated”. The justice of this is self-evident. Under the current proposals for business rate retention, local authorities will be unable to benefit from business rate yield growth due to rental increases after revaluation. However, when it comes to reductions, local authorities are expected to manage and absorb funding volatility caused by rating appeals after revaluation, subject to the provisions of the safety net. Of course, volatility in funding will fall entirely on the local authority.
Just as with other matters of this kind, it is not within the control of local authorities because the rating revaluations are all done by the Valuation Office Agency, which is outwith local authority control, and yet the Bill is providing that local authorities must bear the risk. This seems unbalanced and unfair. If it is right one way, it must surely have the converse effect of being right the other way. I should be grateful to hear my noble friend’s answer to that.
Under the current proposals there is what London Councils describes as asymmetry—a view that I entirely endorse. It seems to me that they are wholly asymmetrical and that, in these circumstances, there must be some form of indemnity from the Government against significant VOA errors. Without this, local authorities will simply have to bear the whole risk, which could be quite substantial.
I give notice that the City corporation has raised with me a separate point on which it may wish somebody to table an amendment on Report. It is a slightly different point but it comes up under the same general issue. It is technically distinct from our proposal, which I have just described under Amendment 46; nevertheless, it seems to be in some way similar. Our Amendment 46 deals with appeals founded on some error by the VOA. The City’s difficulty concerns appeals or alterations founded on a subsequent change of circumstances—namely, for instance, a movement in the local property market that produces an oversupply of commercial property. They have had experience of this in the City. Of course, it does not affect just one office or one set of business premises; it affects them all at much the same time. Therefore, it could have quite a serious impact on the City and on other areas where there are high concentrations of high-yield commercial property.
Even after the dispute has been resolved, the refunds can be backdated for several years, which means that the local authority has to wait for them. Here again the argument should be that local authorities should not be exposed to this kind of risk, because the Government have already accepted that they are not to be exposed to bearing the risk of general movements in the local property market. If it is right there, why is the same argument not applied to movements due to appeals from the valuation office? I understand that it would be appropriate to raise a separate amendment if one was going to try to incorporate something in the Bill, so at this point I am just giving notice of this issue to my noble friend. However, I think that there is a point on which she may wish to comment—she probably knows about this—as well as on what I would call the enlarged coalition proposal under Amendment 46 that the volatility of the ordinary valuation process should be borne by the Government and not by local authorities.
Lord McKenzie of Luton
My Lords, I formally put on the record that I am pleased to be part of this expanded but temporary coalition. The case has been well made. The broader point that the noble Lord, Lord Jenkin, made is well worth pursuing, and I would be happy to talk to, and possibly again support, him and extend this coalition in those limited circumstances.
Baroness Hanham
If the noble Lord is going to join the coalition, why not from the Front Bench, given the way things are going?
This group of amendments presents a good opportunity to discuss the key element of the rates retention scheme; that is, the operation of the levy and the safety net. From the outset, we have signalled our intention that the rates retention scheme will include a safety net mechanism to protect local authorities from significant downward shocks to their income. We did so in recognition of the inherent volatility in the business rates system, to which my noble friend Lord Palmer has just referred, that can see rates income vary from year to year, principally because of appeals, to which the noble Earl, Lord Lytton, referred, which are generally out of the local authority’s control, or a sudden change in local economic circumstances as a result of, for example, the closure or relocation of a major business. The safety net will be funded by a levy on the disproportionate benefits that some authorities would otherwise experience simply because of their high initial business rates baseline. The detailed calculations required to determine whether a local authority is to make a levy payment or receive a safety net payment and, if so, the amount of any such payments will be set out in regulations, which will be subject to the affirmative resolution procedure under paragraphs 20 and 23 of the schedule. In both cases, those regulations will need to set out the precise detail of what is to be measured and how it is to be measured, and the provisions in paragraphs 20 and 23 give the scope to be able to include all relevant items in defining income for the purposes of the calculations. Amendment 41, moved by the noble Lord, Lord McKenzie, seeks to remove some of that scope by removing the ability in regulations to make provision for the calculation of levy payments to be by reference to some factor other than retained business rates income.
I shall lay out how we think the calculations will work. The noble Lord, Lord McKenzie, will be aware that we intend to set a proportional levy at 1:1, which will mean that all authorities can expect to retain up to 1% growth in their baseline funding level for every 1% growth in their authority’s business rates baseline. This will require the authority’s retained rates income for the year to be compared with its baseline starting level. In other words, that is the rates income we initially calculated that the authority would collect—its business rates baseline—plus or minus any top-up or tariff before applying the levy rate to the difference between the two. The initial comparison or the application of the levy rate could be described as another factor.
We are also trying to create a legislative framework that will stand the test of time. Noble Lords have already referred to the need to keep the safety net under review, and we agree with that. A consequence of keeping it under review is that we may at some point in the future want to redefine how the safety net works and we may—who knows?—want to include a reference to other factors. If a future Government were to do that, they would, of course, have to get the agreement of Parliament to those changes through the affirmative resolution procedure, so the right level of scrutiny is clearly available.
There is no secret conspiracy here. We do not intend to take account of some other mysterious factors. The provisions as they stand simply enable the way the levy payments are to be calculated to be set out in regulations. It is true that they may also provide some flexibility, but we have no plans to do anything other than provide for a proportionate levy on retained business rates income, as I have set out.
I have more sympathy with the noble Lord’s Amendment 42—that must be the first time I have said that since we started.
Baroness Hanham
My Lords, I am happy to do that. The historic figures, which will be used across the country, will be used as the basis of what we have been talking about. We can try to bottom out the detailed calculations between now and Report. It is probably more helpful if I write to Members of the Committee so that they can see what they are. However, the rates system is not new; we have had a system of business rates for ages. At least some of it will not change at all. There have been rates and appeals for all that time. There is not a huge difference in the mechanism but the results may be slightly different. I will write to noble Lords about that as well; it will be a long letter.
Lord McKenzie of Luton
My Lords, I thank the noble Baroness again for her responses to these amendments. She said that business rates have been with us for a long time. They have but what is before us is a fundamental change in which risk moves from central government to local authorities. It is a lot of risk for local authorities. Like a number of noble Lords who have spoken, I understand that something is embedded in the baseline figures, but I am not convinced that that fundamentally deals with the ongoing problem that the noble Lord, Lord Jenkin, has outlined. Like the noble Lord and others, I will read the record on that. I am sure that it is something to which we shall return.
I was on the point of being overjoyed by the Minister’s response to Amendment 42 but was less so when she was not able to accept it. However, I am grateful that at least the spirit of the amendment is alive and that it will be taken away for further consideration.
On Amendment 44, I accept that there will be ongoing routine monitoring and assessment of how the safety net will work. That is not inconsistent with there being some formal report to Parliament on how it has worked and what its effects will be. We will certainly wish to return to it on Report. In the mean time, I beg leave to withdraw the amendment.
Lord Jenkin of Roding
We now turn to the issue of the distribution of the remaining balance of the levy fund, which comes on page 36 of the Bill. As the Bill currently stands, it is entirely up to the Secretary of State to decide how that is going to be done: whether it is going to be rolled over or distributed to local authorities. Amendments 47 and 48 propose that this should be a matter of consultation between the local authorities and the Government, and then be subject to approval by Parliament via the local government finance report. Without that, there is no way for Parliament to exercise any control over the distribution of the levy, which could be quite a significant sum at the end of the period to which it applies.
The logic of the system that the Government are introducing is that it is local government money. It should therefore be returned to the local authorities and not be the subject of a further centralisation of control by the department. It is the old question and the department seems to want to retain overall control over the decision as to whether the balance should be rolled over or distributed, whereas in accordance with any sort of localism agenda it should be recognised that it is local government money and it is for local government to decide what should happen. At least it should be the subject of consultation, as the amendment provides, and then be dealt with subsequently in the local government finance report and so be within the control of Parliament. I hope that my noble friend will be able to see the sense of that and how it is in accordance with the Government’s overall policy of localism. I beg to move.
Lord McKenzie of Luton
My Lords, I have added my name to Amendments 47 and 48 and wholeheartedly support the proposition that has been argued by the noble Lord, Lord Jenkin. There is nothing more to say on that matter.
The noble Lord, Lord Beecham, and I also have Amendment 49 in this group, which is a bit of a failsafe proposal. It says:
“Should any part of a balance on a levy account for any year remain undistributed after 3 years from the end of that year, the Secretary of State shall report to Parliament on the reasons therefore”.
If it is accumulating over that period, there is real cause for concern. This is an added protection and certainly does not displace the propositions in the earlier two amendments.
Lord Palmer of Childs Hill
My Lords, the noble Lord, Lord Jenkin, has covered most of this but I wish to add a few words on Amendment 47. This ensures that the Secretary of State must consult on whether the remaining balance on the levy account is redistributed to local government or rolled over to the following year. I really feel that this amendment is trying to prevent this legislation from resembling the National Lottery, where if someone does not win a prize it is rolled over to the next round. Here, instead of there being a balance that is distributed to the people whence it came, we are suggesting that it is rolled over to the next lot of recipients in some lottery-type arrangement. All this amendment is trying to do is to limit the levy to the period to which it relates and to those who have contributed to the levy within that period.
“Publication of Impacts and ResetsCalculation and supply of information on the impact on total resources available for Local Authorities39A (1) The Secretary of State must for each year and in relation to each billing authority in England identify—
(a) the total level of resources available for each billing authority in the preceding year including—(i) the local share of an authority’s non-domestic rating income;(ii) the total of any top up or tariff;(iii) the total of any levy paid to the Government;(iv) the total of any safety net paid by the Government;(v) the total amount of resources raised through council tax;(vi) the total of any homes bonus paid by the Government;(vii) any other payments made by the Government considered appropriate to be included by the Government following consultation with local government;(b) an estimate of the total level of resources available for each billing authority in the forthcoming year including—(i) the local share of an authority’s non-domestic rating income;(ii) the total of any top up or tariff;(iii) the total of any levy paid to the Government;(iv) the total of any safety net paid by the Government;(v) the total amount of resources raised through council tax;(vi) the total of any homes bonus paid by the Government;(vii) any other payments made by the Government considered appropriate to be included by the Government following consultation with local government. 39B (1) The information under paragraph 40A must be set out in a report, to be called an “Impact of Business Rates Retention Report”.
(2) The Secretary of State must for each year, alongside the local government finance report, lay or make arrangements for laying, the Impact of Business Rates Retention Report before the House of Commons.
(3) As soon as is reasonably practicable after an Impact of Business Rate Retention Report is laid before the House of Commons, the Secretary of State must send a copy of the report to each relevant authority.
Resets of the Business Rates Retention System39C (1) The Secretary of State shall be required to make arrangements for a ‘reset’ of the Business Retention System every 3 years to coincide with each spending review period.
(2) The reset is to take on board a reassessment for each authority of—
(a) relative spending needs;(b) relative resources available through council tax income;(c) relative resources available through business rates.(3) The assessment of relative need is to be determined in full consultation with local government.
Designation of tax increment financing schemes39D (1) The Secretary of State may by regulation—
(a) designate one or more tax increment financing schemes;(b) provide for the calculation in accordance with the regulations, for each year for which the designation has effect and in relation to the billing authority of the amount mentioned in sub-paragraph (2);(c) provide for that amount to be disregarded for the purpose of the calculation under paragraph 39C(2).(2) The amount referred to in sub-paragraph (1)(b) is the total amount which, if the authority acted diligently, would be payable to it for the year under section 43 or 45 in respect of the hereditaments in the tax increment financing scheme.”
Lord McKenzie of Luton
My Lords, I beg to move Amendment 54 in the name of my noble friend Lord Smith, who is unable to be with us today. The thrust of the amendment is to cause a report, termed an,
“Impact of Business Rates Retention Report”.
It calls for the report to be laid before the House of Commons alongside the local government finance report. I believe that the intention is that the report would cover the current and upcoming year. It further calls for the Secretary of State to make arrangements for a reset of the system every three years, which we have debated already, to coincide with each spending review period. We have not particularly touched upon that issue. The amendment also requires the Secretary of State to designate one or more TIF scheme and for the revenues to be disregarded in assessing the reset of the business rate retention scheme; a matter which we have just debated at some length.
The thrust of this amendment is a reminder of the complexity of the new system and the difficulty which will confront local authorities in setting their budgets, especially in the early years of implementation. I note in passing that the proposed report is focussed on billing authorities, but it would seem logical to extend it to major precepting authorities. In any event, the report should include payments to major precepting authorities. It would also be appropriate for such a report specifically to identify revenue support or Section 31 grants payable to local authorities and also the central share of business rates aid to central government.
My noble friend’s amendment, however, raises the issue of what the local government finance report will look like in the future. No doubt thousands of councillors will miss ploughing through the intricacies of the formula grant, although this will have to be covered at the outset to set tariffs and top-ups. Under this Bill, the local government finance report must precede the specifying of central and local shares, the basis of calculation of tariffs and top-ups and the amounts to be credited to the levy account. However, what will happen routinely to the relative needs formula after the initial calculation of these matters? Will this still feature as part of the annual local government finance report? If not, on what basis will the Government be able to assess need for determining whether there should be an early reset or an in-year safety-net payment—indeed, for the distribution of revenue support grant itself? It would be helpful if the Minister at least outlined these and perhaps arranged to write in detail.
Baroness Hanham
My Lords, as the noble Lord has acknowledged, we discussed in earlier amendments a number of the things that he has raised, focusing too on the case for requiring the Secretary of State to undertake reviews of resources and need, and for the Secretary of State to take account of changes in relative needs and resources in resets of the system. Given those exchanges, I will not rehearse all the arguments again as they will be on record.
However, it will not surprise the Committee that I cannot support the amendment, as it would fundamentally undermine the purpose of our changes to the funding of local government. There are two key principles at the core of those changes. The first is to deliver a powerful incentive for local authorities to drive growth in their area, and to benefit from that growth. I remind the Committee that such authorities are all around the country; growth is not a southern phenomenon.
Secondly, we are clear that the arrangements should deliver strong protections to those areas that are less able to generate growth or where the business rates are less than the needs of that area. That takes in tariffs, top-ups and levies. We have made clear that baseline funding levels will be equivalent to what councils would have received under the formula grant. As a result, each local authority’s baseline funding level, and therefore the calculation of its tariff or top-up, will be based on figures that take account of the different needs of each area, so our changes will recognise relative needs.
Having established the baselines, an integral part of our proposals is to provide certainty and predictability to councils. Those authorities that have a lower business rates base need to have certainty that their top-up payments will remain fixed, subject to being uprated by RPI annually. Those authorities that, at the beginning of the scheme, have spending needs in excess of their business rates need to have confidence that any tariff that they are paying is fixed—again, subject to being uprated by RPI.
That level of stability in the scheme is crucial to enabling local authorities to carry out their budget planning. At the heart of our arrangements is enabling local councils to benefit from growth. To maximise that incentive effect, we have set out an aspiration to allow 10 years before resetting tariffs and top-ups. At the start of the scheme, the statement of intent that we published in May confirmed that we would not expect a reset to take place before 2020—and I have acknowledged that that is eight years, not 10.
The use of a lengthy period between resets was also strongly supported by respondents to the consultation that we undertook last year on the parameters of the proposals. However, we have also been clear that in exceptional circumstances we could consider the need for a reset to be undertaken on a different timescale. This could reflect on significant changes in need and resources. Noble Lords can be reassured that we are not blind to such possibilities.
Noble Lords will also appreciate that each year we will publish a draft local government finance report which will be subject to consultation and approval in the other place. I am sure that authorities will use the opportunity provided by the provisional settlement, as they always have done, to make their views known on the resources available to them. As always, we will listen carefully to any such representations.
However, at this stage we are confident that we have developed the right balance between providing an appropriate timeframe for councils to benefit from the incentive effect while also providing stability and security for councils. A period of only three years between resets would not achieve that balance and would, in my view, undermine the incentive effect.
The amendment also proposes text on the designation of tax increment finance schemes. As we discussed, TIF is very firmly part of our proposals, and paragraph 37 already provides the appropriate powers to facilitate such schemes and to ensure that the business rates from such schemes are disregarded for the purposes of setting top-ups, tariff and levy amounts. With those explanations, I hope that the noble Lord will be able to withdraw the amendment.
Lord McKenzie of Luton
I thank the Minister for her response. I think that we have aired issues of reset and TIF enough for today. However, I want to return to the first part of my noble friend’s amendment. I did not have the chance to discuss the background with him so I am interpretingwhat he may have intended, but it gives rise to an issue about what that local government finance report will routinely look like in the future.
Obviously, the first year will have particular features, but if we look at current local government finance reports, there is a whole raft of information and regression analysis that drives the formula grant and helps establish need right across the country. What will happen to that in the future? Presumably, the information will not routinely need to be available on the Government’s proposition in that report, so what will it look like? What will it contain? It will clearly have to contain certain information that has to precede the decisions and payments and so forth that flow from the Bill, but what will be the core of that and will it have details about the revenue support grant and the basis on which it might be distributed?
Baroness Hanham
I am not going to detain the Committee tonight. We have the details and I will make sure that the noble Lord has them. The ingredients of the local government finance report, which will be annual, will probably change from time to time, but if I may, I will write to the noble Lord with the details.
Lord McKenzie of Luton
I am grateful to the Minister and beg leave to withdraw the amendment.
Earl Attlee
My Lords, the Committee has made very good progress but I would be extremely grateful if we could consider this amendment. I do not think it will take very long and it would be advisable to take it.
Earl Attlee
My Lords, I have agreed with the usual channels that we would do so.
Lord McKenzie of Luton
My Lords, I am happy with that and do not think it is going to take very long. I start with an apology for tabling these amendments just yesterday, but they arose out of the debate we had on Tuesday and I make no apology for returning to the issue of the local and central share, and what this entails. We accept entirely that the Government intend to use the central share for the purpose of local government in England, although, as defined, this does not have to mean actually paying it to local government. This is what the statement of intent promises. It is also clear that for the first two years of the scheme, revenue support grant will be made available to local authorities to keep them whole, because their local share of business rates will be below the control total set by the 2010 spending review.
This amendment looks beyond these years and requires revenue support grant to be paid in any year when the central share is positive. It is of course at this stage just by way of a probe, because it begs a lot of questions and we need a lot more detail to make it secure. However, it is designed to give the Government the chance to say how they are going to use the central share and on what basis. They must have some notion. What principles will be applied after 2014-15? Will its use be driven by a needs/resources approach or on some other basis? What is that basis?
I was going to have another go at a question I posed previously. I think it may have been dealt with in the letter I received from the noble Baroness—for which I thank her—just before Committee started. I have not yet had a chance to absorb it. I will perhaps reserve my powder on that particular issue but the substantive issue remains as to what that central share will be used for after those initial two years and on what basis will any use of it be determined.
Baroness Hanham
My Lords, I thank the noble Lord for dealing with the amendment briefly. I think that other members of the Committee, who look like they are gathering their papers together, will be grateful if I can be equally brief. As the noble Lord said, we have covered quite a bit in previous amendments and I hope that my letter to all members of the Committee will deal with some of those issues. We know, and I have explained, that the central share will be repaid in total to local government. I acknowledge that it will come back in a way that is not in the control of local government but it will come back in the form of specific grants, initially with the revenue support grant part of that. The revenue support grant might reduce in due course, but, if it does, the local share will increase. It will be a balancing act between one and the other. Because of the relationship between the central share and fiscal control, it is conceivable that there could be a situation where no revenue support grant was paid but the Government would still be collecting some small amount of central share that they would again return to local government via specific grants.
In general, the proposition is that everything that goes to government by central share would go back to local government by other specific grants, some of which are laid out. We have had some discussion about that. I have had discussions elsewhere on what the specific grants would be and I hope we may be able to throw more light on that in the not-too-distant future. I hope that the noble Lord will withdraw the amendment.
Lord McKenzie of Luton
I thank the Minister for her reply, which has taken us a little further forward. We well understand that, one way or another, the central share will be used in its entirety for local government in England. Knowing what that means in more detail, particularly its distributional effect, still eludes us. It certainly eludes me. It would be helpful if more information on that could be forthcoming between now and Report. I know we will want to return to this issue. For this evening’s purposes, I am happy to beg leave to withdraw the amendment.
Local Government Finance Bill
Lord McKenzie of Luton Excerpts(13 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“( ) paragraph 6 (regulations about non-domestic rating income);”
Lord McKenzie of Luton
My Lords, I shall speak also to Amendments 2, 3 and 4. At the start of our deliberations, it might be helpful if I set out our approach to these Committee proceedings. This is a framework Bill. A tremendous amount is being left to regulation-making powers in the Bill—at least a couple of dozen powers on my count—which comprises just 19 clauses. We accept that the framework has been filled in in part by recent statements of intent and that there is a plethora of technical and other papers, but that is not the same as having a complete set of draft regulations. We will therefore use the opportunity of this Committee to probe the detail of what is intended and get as much as we can on the record. We will also seek to insure, where appropriate, that those regulation-making powers give the maximum opportunity for parliamentary scrutiny, hence these amendments.
Clause 1 introduces new Schedule 7B, which contains the nuts and bolts of the business rate retention scheme. It provides, among other things, for certain of the new regulations to be by way of the affirmative procedure and the rest by the negative process. This group of amendments adds to those that should fall into the affirmative category.
Amendment 4 concerns paragraphs 37 and 38 of the schedule. The Delegated Powers and Regulatory Reform Committee recommended that regulations made by virtue of paragraph 39 should be subject to the affirmative procedure because they impose a liability on a billing authority. This is what the amendment seeks to achieve. Paragraph 39 refers to regulations under paragraphs 37 and 38, and it is presumably those that should be subject to the affirmative procedure. Although we will want to discuss the detailed provisions later in our deliberations, we assume that the Government accept the Delegated Powers Committee’s recommendations on this matter, even if not our precise wording.
Amendment 1 deals with paragraph 6. This requires, following a local government finance report, payments of the central share of non-domestic rates to the Secretary of State. However, the regulation-making power includes the power to define what non-domestic rate income is and what adjustments can be made to amounts payable. We will discuss some of the detail of this later, but the power to define what income is for the purposes of the local/central split, including judgments about authorities acting diligently, is, we suggest, significant and should be subject to the affirmative procedure, at the very least on its first use.
Amendment 2 seeks to bring the provisions concerning payment on account under the safety net arrangements within the affirmative procedure. Again, we argue that this is much more than a mechanistic provision concerning calculation. It is potentially very significant for some authorities. It covers the circumstances in which safety net payments might come about. We welcome the fact that other regulations relating to the levy and safety net are to be subject to the affirmative procedure and consider that the same should apply to paragraph 26. So far as we can tell, the issues around payment on account are not covered in the statement of intent or in the government response to the resource review consultation. The consequences of catastrophic reductions in year of a business rate base, likely to be accompanied also by an upsurge in eligibility for council tax support, need serious consideration and should be subject to the affirmative procedure.
Finally, Amendment 3 focuses on paragraph 30, which deals with transitional protection payments. These are existing arrangements designed to dampen the effect of changes to business rate liabilities arising from revaluation. This could have a significant implication for the business rate retention scheme, and it is proposed to take the effect of this outside of the scheme. This requires regulations concerning calculations of a billing authority’s deemed rate in income and actual rate in income, including judgments about whether an authority has acted diligently. This is, again, a very significant provision, which should be subject to the affirmative procedure. We are in uncharted waters over lots of these areas, on a range of key issues, and we should do all we can to strengthen the parliamentary scrutiny. I beg to move.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, as the noble Lord, Lord McKenzie, said, this is framework legislation—as indeed is Local Government Finance Act 1988, which precedes it. It is therefore to be expected that there will be a number of detailed matters which will be dealt with in regulations. The appropriate level of parliamentary scrutiny for each set of regulations will differ depending on the precise subject matter at hand, and we have carefully considered the appropriate level of scrutiny for each of them.
This is why provision is already made for a number of regulation-making powers in the Bill to be subject to the affirmative procedure, as the noble Lord acknowledged. Regulations under paragraphs 8, 20 and 23, for example, which all deal with the calculation of various payments under the scheme, will be under affirmative order. The Government have made these regulations in particular subject to the affirmative procedure in recognition of the need for the highest level of parliamentary scrutiny over such types of finance provisions, given their significance and impact within the rates retention scheme.
Similarly, the tariff and top-up payments that will flow to and from local authorities will be determined by the local government finance report for a year, which must be approved by resolution of the House of Commons. That again affords the appropriate level of parliamentary scrutiny over key payments within the scheme.
All other regulation-making powers in connection with the non-domestic rating in the Bill are subject to the negative resolution procedure, as the noble Lord said. This is in line with the approach that is currently taken in the existing Schedule 8 to the Local Government Finance Act 1988, and also reflects the more technical or administrative nature of those powers. These include the regulations specified by the noble Lord in his Amendments 1 and 4.
The Delegated Powers and Regulatory Reform Committee, as the noble Lord has acknowledged, has carefully considered the Bill in advance of our debate today. The fourth report of the Committee, published on 21 June, considered that not only is the balance in new Schedule 7B between provision in the Bill and provision in delegated legislation “about right”, but also that the level of parliamentary control over regulations set out in the Bill is, subject to one exception which I will come on to in a moment,
“appropriate according to the relative significance of the various powers conferred”.
Noble Lords will not therefore be surprised when I say that I agree with the conclusions of the Delegated Powers and Regulatory Reform Committee on this point and therefore cannot accept their amendments.
We have carefully considered what the appropriate level of parliamentary scrutiny should be for each regulation-making power in the Bill, and our approach is supported by the findings of the Delegated Powers and Regulatory Reform Committee, whose responsibility it is to consider such issues. However, I hope that the noble Lord’s disappointment in my response will be tempered by my confirmation that we will bring forward an amendment at Report to make those regulations made by virtue of paragraph 39 subject to the affirmative procedure. I think that that is what the noble Lord was looking for. This is the exception to which I referred earlier, and in line with the recommendations. With those explanations, I hope that the noble Lord may feel able to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for her reply. Of course, I will withdraw the amendment given where we are. I am pleased that the Minister has confirmed that government amendments will be tabled to deal with the recommendations from the Select Committee. But I shall dwell for a little on two provisions to try to explain further why we believe that their significance is such that they should be subject to wider parliamentary scrutiny.
On payments on account of the safety net, the provision was put in the Bill, as the Minister knows, to give local authorities that are suffering in year from a significant downturn in their business rates an opportunity to get support during the year rather than wait until after the year, which is the general structure of the scheme. In the circumstances in which those opportunities present themselves, it is of crucial importance to local authorities to know what the rules of that provision are. I would have thought that it was also important for our scrutiny of something of that magnitude, which is not simply an issue of narrow accounting but an issue of real substance as to how a key part of the business rate retention scheme will work. I shall not dwell further on the paragraph 6 issue, other than to say that this is not just about accounting for the debits and credits; it is about a definition of income for the purposes of these provisions. I am sure that I will not manage to change the Minister’s view on the matter this afternoon, but we would like to reflect on it because these are significant provisions that deserve wider parliamentary scrutiny. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, in moving Amendment 5 I shall also speak to the other consequential amendments—Amendments 55, 57, 58 and 60—in this group. The amendments would defer the introduction of the business rate retention scheme for at least a year, as determined by a resolution of Parliament. We recognise that the Secretary of State already has power in the Bill to defer its introduction until a later year, but all the indications are that he has no intention of doing so. The Minister will no doubt confirm that.
My noble friend Lord Smith’s Amendments 6 and 7, which we support, are very much an alternative formulation. If passed, they would require the Secretary of State to defer the introduction.
This is not about seeking to wreck the proposal or to kick it into the long grass. We support a localist approach and the concept of a business rate incentive scheme, so why should we defer? First, and very importantly, we do not yet have legislation; it will be October or even November this year before the Bill becomes law. I am bound to say that it seems somewhat discourteous of the Government to prejudge what might come out of your Lordships’ deliberations. To be clear, we are intent on proper scrutiny of the Bill but are not trying to slow it up. The Localism Act, of which I am sure we all have fond memories, ended up in a completely different place after it had been through your Lordships' House. I do not predict quite the same rate of change on this one. However, it seems to me that we should wait to see the final shape of the legislation—to pre-empt it would be unfortunate.
Lord Palmer of Childs Hill
My Lords, may I pick up on the point made by the noble Lord, Lord Beecham, about reserves? I hope that when the Minister replies to that point, as she was asked to do, she will include within it how the strong reservations of the accountants’ organisation CIPFA about how much local authorities should hold in reserves will fit in with what the Secretary of State has apparently said. I hope that she will talk about specific reserves as well as unallocated reserves. It would be great if this could be clarified at some stage.
Lord McKenzie of Luton
My Lords, before the Minister replies, perhaps I might return to the reference made by the noble Lord, Lord Jenkin, to London Councils. I accept entirely that London Councils has changed its position on deferment of the business rate component of this Bill—the briefing that we had a month ago certainly put us in a different slot—and I was not seeking to suggest otherwise. However, I was seeking to relay what is still its current view, as I understand it, which is that the scheme needs to be urgently revamped if it is to produce the radical shift in the structure of local government funding that the Bill proposes. I do not know what process the noble Lord might feel there is to achieve that if there is no deferment of the Bill. Are we going to follow up with an amendment Bill next year? How is it actually to come about? What is there within the Bill that would enable that radical restructuring that is apparently wanted? I do not know whether that is what the noble Lord supports.
Lord Jenkin of Roding
I am grateful to the noble Lord for giving me an opportunity to explain. I referred a few moments ago to the number of amendments tabled on the first part of the Bill that would make quite substantial changes, particularly about the division between the central and local shares of business rates revenue. That would be a change that, if my noble friend Lady Hanham could persuade her colleagues that it might be accepted, would go a long way towards meeting the concerns not only of London Councils but of the Local Government Association and local authorities generally, which are anxious to see a faster process of the localisation of business rates revenue. I will no doubt have an opportunity to talk about this a little later, but I do not think that the questions of timing and of the changes that we are proposing are in any way inconsistent. As my noble friend Lord Tope said, there would be some regret if this were to be delayed. I think that both he and I were making that point. Perhaps that is a way of explaining to and satisfying the noble Lord, Lord McKenzie, that there is no inconsistency in what we were arguing.
Lord Smith of Leigh
My Lords, I welcome the Minister’s reassurances that information will be in the hands of local authorities—we will test that on Report in October when we can see what happens. I do not think that I ever said that I wanted this provision to be deferred; I simply made the point that a stage will come when it is too late. The Minister herself said that, in using the word “extremes”. I would be interested to know what those extremes might be that would delay the provision from 1 April. She also thinks that there could be circumstances that lead to delay. My point was very simple: as long as the information is available so that we can put it into place, that is fine. But we will obviously be able to test that out.
Lord McKenzie of Luton
My Lords, I thank the Minister for her response to the amendment, which I will in due course withdraw. I follow on from the wise words of my noble friend Lord Smith, who has incredible practical experience of leading a major council. I was unclear from the Minister’s reply whether we had the assurance that all draft rates will be available by the time we get to Report, or all the information needed. There is not necessarily a position on that; all the information that somebody needs is one thing, but seeing it in terms of regulations that will, we hope, in due course go through the parliamentary process is something else. The Minister said that the timeframe is consistent with the current timeframe of the local government financial settlement. Well, yes—but this is not a routine local government finance settlement. It is a significant change, so aligning it timewise is not necessarily appropriate. The noble Lords, Lord Tope and Lord Jenkin, both said that there would be disappointment if there was a deferment. That may be the view of some but I know that it is not the view of everyone.
I am not sure that we fully covered the issues raised by my noble friend Lord Beecham and the noble Lord, Lord Palmer, about reserves, particularly the issue around CIPFA advice. It would be good if the Minister covered that before we put this matter to bed.
The noble Earl, Lord Lytton, again made a very powerful point. I was struck by his contribution at Second Reading. Summarising the concerns, he said that risks are about to be bestowed on billing authorities but the maintenance of the tax base is with central government. That mismatch is a real issue. Later in our deliberations we will come to some amendments that may enable us to go into that, but I am not sure that there is not a broader issue about having the ability to test the appropriateness of the rating system to bear the weight of this new way of dealing with local government finance. However, we will have to see when we get to those amendments.
Perhaps the noble Baroness would deal with the issue of reserves and clarify whether we are talking about draft regulations or about information in another form. We have had lots of statements of intent, which have been very helpful, but they do not amount to fine detail. If we have draft regulations by Report, when is it expected that they will come into effect? What is the rough timetable?
Baroness Hanham
My Lords, the regulations that are going to be of significance will be in draft form. I guess that that will be most of them and any that are not will not be worrying us. I think that I can give the Committee an assurance that the draft regulations will be available for us to consider by Report. That is what I would want to happen and I take that on board.
I apologise for not having picked up my noble friend Lord Palmer’s comment about reserves. I shall have to write to him about that, although I ought to know how they are interlocking. Unfortunately, I did not hear the Secretary of State’s speech at the local government conference but I am sure that, whatever he said, he was not getting at local government in any way. However, there are a number of aspects of reserves—main reserves and specific reserves—and perhaps I may write to Members of the Committee before the next stage to give them the information that I think they are looking for. I hope that that will satisfy that aspect of their queries.
Lord McKenzie of Luton
My Lords, I thank the noble Baroness for her further explanations on that. I propose to withdraw the amendment. In doing so, I would just comment that I did not refer earlier to the comments of the noble Lord, Lord Jenkin, on deferral of the council tax benefit support scheme. I think that that might be more fruitful territory when we reach that provision. I beg leave to withdraw the amendment.
“Representations from local authorities regarding a re-set of the system
(1) The Secretary of State shall establish a mechanism to allow local authorities to make representations on whether they believe a re-set of the system is required.
(2) The Secretary of State shall, prior to the publication of the Local Government Financial Report in any year, give consideration to any representations he has received, and must lay before the House of Commons a report detailing—
(a) any representations he has received from local authorities on whether it would be appropriate to re-set the system; and(b) his or her decision on such representations and the reasons for that decision.”
Lord McKenzie of Luton
My Lords, Amendment 8 would introduce a new clause concerning a reset of the system. A reset would involve reassessing individual authorities’ baseline funding levels and a recalculation of tariffs and top-ups. The technical paper issued last year on establishing the baseline suggested that a reset might involve a completely new method of assessing relative needs and resources, but the purpose of this amendment is not to stray into that territory. The purpose of this amendment is to cause there to be a mechanism that would allow local authorities to make representations on whether they believe a reset of the system is required. Such a mechanism would include an obligation on the Secretary of State to report to the House of Commons on representations received and decisions made thereon, with reasons.
In their response to the consultation on the business rate retention proposals the Government made clear their aspiration for the reset period to be 10 years, and they have stated that they do not propose to reset until 2020 at the earliest—an aspiration, we should note, that would extend to the end of the next Parliament and beyond. However, they have acknowledged that in exceptional circumstances a reset could be required within the 10-year period. Will the Minister tell us what would count as exceptional circumstances?
We acknowledge that certainty over not only the quantum but the period of an opportunity will enhance the incentive. The longer the period between resets, the greater the likely incentive for business growth, as local authorities will retain the benefit of the growth for longer and it will be more encouraging of longer-term investments. That is notwithstanding the fact that the legislation would permit a reset on an annual basis.
There is, however, another side of the coin. Long periods between resets could lead to circumstances where the baseline funding position of an authority does not reflect its funding needs. Population movements, which the Government themselves identified in their response, could lead to the level of resources diverging significantly from core service pressures. We have a debate next Thursday on funding for adult social care, which is a clear example of pressure on services. Setting needs for a decade based even on an updated formula grant for 2012-13 might not be the firmest foundation.
Absent resetting, how could local authorities address the divergence experienced between needs and resources? With the safety net only being available when the business rate base falls by a certain amount and with restrictions on council tax rises—even if those were possible—where can authorities look? We will soon be debating how the Government intend to deploy the 50% central share of business rate, so I would be interested to know the basis on which that might occur longer term.
This amendment seeks only a modest but formal process for local authorities to propose a partial or full reset of the system. Of course there will always be informal opportunities to press a case, but in the interests of transparency we argue for the amendment. I beg to move.
Baroness Hanham
Yes, I will. We feel that this would be overly bureaucratic. As I laid out in my response, this can happen. If somebody has a reason or a need for a reset, or they think that they have, they can make representations. I do not think that that requires legislation. I do not intend, unless I am pushed at another stage, to accept that it is necessary at all, as such provision already exists. There is already a process by which that can happen.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister. We have probably aired this enough, at least for this occasion. I am grateful in particular for the acknowledgement that exceptional circumstances exist when issues are out of line with need. That begs a whole range of other questions, but having that on the record is useful. We might want to explore it further at a later stage, but for now I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, there are a number of propositions on our agenda concerning the local/central share. We welcome the opportunity to probe all of the issues, as indeed we have done in this debate, and I hope to focus on a consensus for the next stage of our deliberations on Report. I am happy to work with the noble Lords, Lord Jenkin and Lord Tope, to try to achieve just that.
The central share and its application is one of the more troubling aspects of this part of the Bill. It is troubling in the sense of lacking considerable detail, certainly beyond the early years of the scheme. It may be that all of this detail is tucked away in the plethora of documentation provided to us, and doubtless the Minister will point us in the right direction if it is. But there is not much light shed on the subject in the revised statement of intent of last month. Our concern, which has been echoed today, is that the central share will be used in whole or in part to fund matters that would otherwise have been funded by central government. Another concern is clearly the basis on which the central share is to be returned to local government, and there is of course the quantum of the share—the 50:50 split. But these issues about where the money will go and where it will end up clearly troubled the noble Lord, Lord Greaves, and the noble Earl, Lord Lytton, and others who have spoken.
What is driving the local/central split is the Government’s desire to control the overall envelope of local authority spending, routinely determined through the local government finance settlement. What this is currently controlling of course is the formula grant and its distribution. There is a range of other funding available to local government—its own fees and charges and council tax—as well as hitherto a series of grants, some non-ring-fenced and others which are. These grants do not all fall within the orbit of CLG. Such grants are controlled through the usual departments’ DEL processes. Although we have challenged the Government’s draconian cuts for local government—28% in Wigan, as we heard—we were not proposing to open up a broad debate on this aspect except to say that, by the reduction in the control total, the Government have added to the certainty that the business rate in aggregate will exceed the control total.
Of course, currently the whole of the business rate collected is returned on some basis to local government through the formula grant. Indeed central government tops that up with revenue support grant as well as formula police grant. We are now told that for the key year of 2014-15, which has the lowest spending control total, business rates will exceed that total and, therefore, cannot just be left uncontrolled in the hands of local government. A percentage will be peeled away to be applied to local government by central government.
For the record, perhaps the Minister would set down how the 50% has been calculated. What is the forecast of national business rates for 2014-15 and the extent to which that exceeds the control total? How is the 50:50 local control share split derived from that? The technical paper 2 sets out how that will be done and which multipliers are to be used, but some work must have been done to derive the 50:50 proposal. It would be very helpful if we could have that detail. Please can we be given the figures? How much headroom have the Government given themselves between the control totals and the local shares for 2014-15? The intention is that local authorities will be kept whole for 2013-14, based on the application of the formula grant. Can the Minister say whether it is expected to utilise the whole of the central share for that year in this way?
Appendix A to The Local Government Finance Settlement in England: A Guide to the Basics sets out a complete list of grants for the current year. Can the Minister confirm that, at least in theory, any of those could, in whole or in part, be funded from the central share? If you look at it, you will see that it includes, from the Department for Education, the dedicated schools grant, the pupil premium grant, the early intervention grant, the extended rights for free travel, and from the Department for Health, the learning disability and health reform grant. Those are very substantial amounts of money that concern local government in England and, on the proposition that the Government have advanced today, they could fall within the ambit of that description. If not, it would be good to have a denial on the record.
There is a separate issue about the extent to which the local and central shares are calculated after deducting amounts to cover the new homes bonus and other matters. Reading the various documents, I was a little confused about where the funding for the new homes bonus was ending up. Originally, I understood that it came from central Government and was not part of the local government settlement. On the basis of what we have read, I am not sure whether it is now being met from within the business rate total, the top-slice in a sense. If that is wrong, perhaps the Minister could put me right on that.
If the central share is to be used to replace any of these grants, the distribution of it would presumably follow existing rules, but if we prevent that happening, what other options do the Government have for distributing the central share? That hugely important question has been asked by many noble Lords in this debate. We are entitled to know the basis on which the central share will be made available to local government. At one extreme, which we could probably support, it might be distributed strictly by reference to a needs and resources analysis, such as formula grant, which, notwithstanding tariffs and top-ups, could ameliorate the consequences of the distributional effects of the business rate retention scheme. So it might be good for equity but not as good as an incentive. At the other extreme, it could be distributed in a way that is neutral between authorities or as favours the more advantaged authorities. There are no hard and fast rules and we need some clarity from the Government on this crucial point.
Lord Greaves
I wonder whether I can help the noble Lord. Does he agree that a further question, in addition to the very detailed ones that he is asking about the different grants, is whether any of this money might be distributed through non-departmental bodies—quangos and so on—such as the Homes and Communities Agency, and whether some of the money that they disperse might come from this source?
Lord McKenzie of Luton
That is a very interesting question. We have an amendment coming up which is intended to probe the heads under which various categories of institution are counted as qualifying as English local government. It is a possibility but we can specifically probe that when we come to the next group of amendments.
This really is the most troubling aspect of these proposals. Unless I am missing something, it is an area where we do not have enough information. On one basis, we might be happy with a share that is not 50% but 30%, and on another basis we would not want any central share at all. Under Amendment 9, my noble friend Lord Smith probed why we have that particular formulation. I am sure that the Minister has an answer.
Amendment 17 touches on the hugely important issue of not only having information about the current year but being able to project what is likely to happen in subsequent years, particularly in an environment where councils are having to save every penny they can and take painful decisions about cutting back on services.
Amendment 12 in the name of the noble Lord, Lord Jenkin, seeks to ensure that the quantum of the central share will not grow from year to year. Given the RPI increase in rateable values, this should mean that the percentage of the central share gradually declines.
However, we need to be mindful that all these matters could be achieved by central government charging grants against the national business rate collection so that both central and local shares decline in amount— effectively top-slicing. Perhaps we can have amendments to deal with that, as we need to protect against that possibility.
Amendments 21 and 22 in the name of the noble Lord, Lord Jenkin, offer a rather novel approach, which dictates a gradually reducing percentage share of a billing authority’s central share and a gradually increasing percentage of a billing authority’s local share, so that whatever is top-sliced—if anything is—what remains is increasingly skewed to the local share. I think that that approach has some real merit. I should be very happy to engage in discussions to see how it might be developed and made watertight if it is to be included in the legislation so that the Government do not have a way round it. Subject to what the Minister says about the distribution of the central share, we would seek to support that.
Amendment 16 in the name of the noble Lord, Lord Best, seeks to preclude the determination of a local and central share after the financial year ending 31 March 2015. Whether we can support this depends on what happens to the central share. If its application provides a means of redressing possible adverse distributional consequences of the BRRS, there may be an argument for its continuance. Otherwise, it is the business rate scheme that will drive the distribution of the control total, or its equivalent. Even if the rebasing is fair at the point that tariffs and top-ups are established, the dynamic does not mean that it will continue in that way until the reset date.
I shall comment briefly on a few of the contributions to this debate. The noble Lord, Lord Greaves, made the point that whether the figure is 50% or somewhat higher, it will not necessarily change the world for some authorities, particularly smaller ones. I would echo that from Luton’s perspective. My noble friend Lady Hollis reiterated the point about cutting the link between business and local government through the nationalisation. However, we should not berate the noble Lord, Lord Jenkin, any further; I think that he has redeemed himself by his approach, and he has certainly done so with his introduction to this debate, which was very constructive.
The noble Baroness, Lady Eaton, talked about the RSG distribution and the formula grant. I think she was referring to how you set the baseline and the parameters that are going to be used, and we are going to have some debate on that. If the resetting is not going to be for seven or 10 years, getting that as right as possible is hugely important. It might be—we might get some good news from the Minister—that it could be ameliorated in part by use of the 50% central share, but I am not sure that we are going to get that news this afternoon. I am looking forward to the Minister’s reply.
Baroness Hanham
My Lords, so do I. I am grateful to all noble Lords who have spoken to their amendments. They asked a number of questions, in particular, the noble Lord, Lord McKenzie of Luton, at the end. Some of them I will be able to deal with, but some I will not. I think the sensible thing is for me to make sure that we give a written response to questions where there is a need for detail so that we can come back to them at the next stage or have discussions in between, if that is necessary on the full information, not all of which I have today.
I shall start with Amendment 9, which was moved very shortly by the noble Lord, Lord Smith, and seems to require about six pages in reply. I am going to have to skim through this extremely important matter which has clearly shaken the tree a bit. On the face of it, Amendment 9 makes a very simple change to the accounting arrangements for the central share but, as the noble Lord, Lord Smith, probably knows, it has a far greater effect than it may seem.
I shall say a little about how the provisions will work. Paragraph 1 of new Schedule 7B requires a “main non-domestic rating account” to be kept for a year. Most payments to and from local authorities in respect of business rates will be made into and out of this account. The exceptions are levy and safety net payments, which we will come on to later.
Paragraph 2 sets out the payments to be credited to, or debited from, the main account. This includes sums received from local authorities in respect of the central share. We have said that the central share of business rates would be used for the purpose of funding grants to local government outside the rates retention scheme. I shall return to that later. The provisions that enable this are set out in sub-paragraphs (3) to (5).
Amendment 9 seeks to make it clear that the sum that can be debited from the account in respect of the central share shall equal the payments received by the Secretary of State from authorities in respect of the central share. That sounds very simple and sensible, but in fact it does not take account of the Government’s intention to use some of the central share money to fund the transitional protection payments provided for in Part 8 of the schedule. This is because, following revaluations, the Government are obliged by current legislation to put in place a transitional relief scheme, so that business ratepayers whose bills increase significantly can see their bills phased in over a number of years. The transitional relief scheme is paid for by similarly phasing down the bills of those ratepayers who see their liability fall significantly as a result of a revaluation. Earlier, the noble Earl, Lord Lytton, was discussing the effect of appeals on precisely this area.
In the context of the rates retention scheme, this means that some authorities could see lower income as a result of the transitional scheme being put in place for ratepayers and some higher as the transitional scheme unwound. That is clearly an untenable situation. Authorities’ income is supposed to reflect their success in promoting development and not the technical vagaries of the transitional relief regulations, so we have always said that we would take transitional relief completely outside the rates retention scheme and provide for a separate series of payments to and from authorities depending on whether they see more or less income as a result of the transitional relief scheme. Part 8 gives effect to this.
The payments themselves, however, will be credited and debited to the main rating account. I hope that the Committee is following this. The scheme will be set up to balance over time but, in any year, we may pay out more to authorities than we get in. So the current wording in paragraph 2(4), which Amendment 9 seeks to change, demonstrates that if there is a deficit, it can be met from central government’s share. In other words, central government will bear that cost. So while central government could choose to debit less than it has received from authorities by way of central share income, it cannot debit more. On the strength of this explanation, I hope that the noble Lord, Lord Smith, will feel able to withdraw his amendment.
I turn now to the remaining amendments in this group. The noble Lord, Lord Jenkin, explained very clearly and plainly what he is trying to do. Amendments 12 and 21 would effectively mean that the central share could never be increased, since it could never be greater than the previous year’s central share. Amendment 16 would set the central share for the current spending review period only, and Amendments 17 and 22 would fix the central and local share—or a trajectory for them—over a number of years.
The noble Lord, Lord Jenkin, and other noble Lords asked about increasing the local share. We have always made it clear that over time we would hope to increase the local share, particularly once we have the finances back on track. It is difficult to see how legislatively we could allow that bearing, in mind that this whole question of the economy is such a difficult area at the moment.
We have also made it clear that in setting up the rates retention scheme, our aspiration is to provide for a long period between resets of up to 10 years. The corollary of that is that the central and local shares and also the tariff and top-up payments will be fixed for the duration of the reset period. By definition, the 50% rate would go on for 10 years unless there is an amendment. Between resets, therefore, we do not anticipate central and local shares changing from year to year. The 50% will last until 2020. That will give local authorities much greater long-term certainty about their financial obligations to central government and the funding that they can expect to receive from government than under the current three-year spending review process. However, the Government must retain the ability to alter the local share of business rates where it is necessary to maintain affordability and protect the interests of the taxpayer and the wider economy. However, it would be imprudent to presume that there might never be a time when we might need to increase the central share.
The percentage approach to the central and local shares of business rates was adopted in response to views expressed in last year’s consultation about the potential risk of being expected to pay a fixed sum in business rates to central government. By sharing business rates on a percentage basis, some of the reward of positive growth, but also some of the risks of negative growth, will be borne equally by central government. The Government have, and always will have, an interest in public spending, and it is unrealistic to expect the Government to take their hands off it completely and to constrain themselves, as Amendments 12, 16, 17 and 21 suggest.
I will have to write to noble Lords about some of these points because I may not have the answers, but I was asked how the 50% share was set. How did we get there? The Government have considered a range of factors involved. If the information about the setting of the 50% share is not available before the next stage, it will be available in the local government finance report in the figures for business rate totals. That may not be soon enough for noble Lords.
Lord McKenzie of Luton
Can I just clarify this? The detail of the clarification is to come but, in respect of 2014-15, is it the case that the local share that derives from that calculation is equal to, or about equal to, the control total that the Government are seeking to apply to local government and that there is no extra in there?
Baroness Hanham
It is going to be based on the base from this year. Every local authority will be equal when it starts on this system, but the tariffs and top-ups will bring that to the equality base when there is too much in one and not enough in the other. So that will be the first shuffle to get the equality base across the piece.
Lord McKenzie of Luton
If the Minister could just clarify this, it would be really helpful. As I understand it, the local and central shares have been calculated by reference to the lowest of the control total years. I understand why arithmetically that is so. In respect of that year, is the 50% local share that comes from that calculation equal to the control total for that year? Is it the case that there is no extra in the central share and that just enough has been left for 2014-15 to be able to apply the control total and keep it intact, or has central government taken more than that?
Baroness Hanham
The Government will provide revenue support grants to make up the difference between the local share of the business rates and the spending control totals for local government in 2013-14 and 2014-15, having taken into account the amounts needed. Noble Lords asked about the new homes bonus. In future years, the total amount of grant funding will be determined through spending reviews and the Government will set up the base for distribution in the annual local government finance report. I do not think that that will answer the noble Lord’s question, but I will write to him.
Baroness Hanham
And I had better write to the noble Lord, I think. That seems pretty fair.
I was asked about the specific grants. The funding will be from the central share and the finance for specific grants, and that will include the revenue support grant. I will write on the specific grants that already exist and tell the Committee what is included.
The noble Baroness, Lady Eaton, asked about the local authorities’ pool and how the money gets distributed if they go into one with others. Frankly, that will be a matter for the pool to decide; they will regulate themselves. We would expect there to be a local government lead on that so that they can receive payments and that formal arrangements would be agreed on the operation of a pool, so it will be governed by some sort of constraints.
The noble Baroness, Lady Hollis, asked who paid and who gained, but that rather depends what you mean by who pays and who gains. We have always said that no council will be worse off as a result of its business rate base at the outset of the scheme. That was what I was trying to explain about the base, the tariffs and the top-ups. I am sorry if I did not come across well, but that is what the situation is. The information that the noble Baroness sought will be available at a point of the draft local government finance report. That will be my answer to some of the questions: that the information will be ready for a bit later on, I hope before we consider this matter further. I hope that that covers the points made.
There have been a lot of discussions, some of which we will come to on further amendments. I note what the noble Lord, Lord Tope, said about local government’s disappointment regarding the split. I appreciate that that is the situation, but we ought not to ignore the fact that by making the local business rate stay with local government, even if things are then done to it, we are setting a very sensible principle: giving the business rate to local government and maintaining it with it. That principle can then be worked on in the future, regarding how much is left. However, I think we have established an important principle here. I hope the noble Lord is happy to withdraw the amendment.
Lord Palmer of Childs Hill
My Lords, in moving this amendment, I shall speak also to Amendments 13 and 14. It appears that the effect of the central share is to allow the Government to reduce what would have been grants outside the formula grant—that is, paid for by general taxation—and thus allow the business rates to take up the slack. The Treasury could thus substitute business rates for other taxes. I would like to ask if the Minister agrees that there is a danger of improving central government’s fiscal position at local taxpayers’ expense. That is the crux of this very short amendment.
This would not have an immediate effect; the estimates have been made by various local government bodies that the effect could begin in 2016-17, but it could be a real effect.
The central share will come back to councils, as we have discussed, but not necessarily the same councils, in the form of grants. Other noble Lords have given an example of Westminster and have said that that is why there has to be a reallocation of these moneys. I understand and appreciate that, but the real problem is that one reallocates business rates to give an incentive to local authorities to improve businesses within their areas and improve the economy in those areas. Many of them need that incentive; the current system of business rates whereby you collect the money and keep none of it is not an incentive, which is why this is an improvement. If you take away and redistribute, you lose a lot of that incentive from the places where there could be a great improvement in the economy.
Mention has been made by other noble Lords as to the 50%. I could have come in at that stage, but I thought that I would include it in what I am saying now. There is one other aspect to a 50% share, which has not been broached by other noble Lords—that 50% for the Government and 50% for the local councils is a dangerous percentage. Local authorities will lose, as they have in other instances, the difference between the half-empty and the half-full bottle. You know exactly what it is when it is 50%, but it is more difficult when they start recalculating and the share is 51% and 49%, as has been my experience in local authorities. Measuring the value of local council housing, when the example given by CIPFA was 50:50, when the local authority came to use the calculation they took the wrong half, because it was never 50%—it was always something else. Someone in Whitehall may know how to do it; there is a rumour that that is the case. But there is a danger that when you have 50:50, you will end up with 51:49, which would mean that you would not know which was the Government’s share and which was the local authorities’. I would hope that the larger share would be for the local authorities.
The amendment makes the point that the Treasury will be able to switch grants that have been paid for by general taxation into the rates system and in effect raid local businesses to assist the Exchequer. All this will, of course, be in addition to the cut of £500 million, in terms of the legislation overall. Amendments 10, 13 and 14 seek to protect local councils and central government from that usual thing of temptation, because it is not easy to resist temptation. As Oscar Wilde said, “I can resist anything except temptation”. I do not think that we should put too much temptation in the way of central government. I beg to move.
Lord McKenzie of Luton
My Lords, we have Amendments 11 and 24 in this group. Amendment 11 is a very straightforward probing amendment; it refers to paragraph 2(5) on page 20 and is to do with payments to local government in England. Presently it reads:
“The reference in sub-paragraph (3) to use for the purposes of local government in England includes the making of payments under an Act or an instrument made under an Act (whenever passed or made) to”—
then it gives a range of authorities.
Baroness Hanham
My Lords, as I was saying before I was rudely interrupted by the television screen, currently the Government determine how much local government spending the country can afford and they set local government grant totals—both formula grant and specific grants—accordingly. Redistributed business rates income is then used to fund formula grant and any difference is made up from revenue support grant. That is the situation at the moment. The more business rates there are in the system, the less revenue support grant is needed, and vice versa. Therefore, since 1990, business rates have been used in partial replacement of revenue support grant.
Although the mechanism is different under the rates retention scheme, the principle is exactly the same. The business rates retained through the central share will be used to finance both revenue support grant and specific grants in the same way as they are currently used to finance formula grant. Earlier the noble Lord asked me, although I was not able to answer, whether grants relevant to local government from other departments are included. They will be put into that one pot, so all the grants will be relevant. Therefore, we cannot see why the Government would need to accept Amendment 14, as it would place greater restrictions on central government than currently exist. I hope that, looked at in this way, the noble Lord will agree not to press his amendment.
Amendments 10 and 13 accept the principle that the central share should be used to finance other grants but seek to ensure that this happens only if the Government are satisfied that the overall needs of local government will be met. The overall need of local government will be, as it is now, a factor that, along with the wider economic situation, will inform the amount of specific and revenue support grant that government will provide to local authorities.
At future spending reviews, the Government will have regard to the resources available to authorities from their own resources—council tax and, in future, retained business rates—along with the overall spending needs of local government and the fiscal situation of the country, to determine how much grant should be provided.
I hope that, having reflected on the nature of the spending review and the reality that the overall needs of local government will be fully considered as part of that process, the noble Lord will agree to withdraw his amendment. The Bill contains assurances that any money paid by way of central share will be used by government only for the purposes of local government.
On Report in the other place, amendments were made to the Bill to make clearer what was meant by “local government” in this context. The list set out in paragraph 2(5) of Schedule 1, however, was not intended to be exhaustive. Rather, it was illustrative of the sorts of bodies that would be covered by the phrase “local government”. Amendment 11 would have the effect of making the list definitive—something that it was never designed to be, and therefore I cannot accept the amendment. It could otherwise be added to or detracted from and have something else substituted.
Amendment 24 would require the Secretary of State to set out in a local government finance report what payments the Secretary of State had made from the central share. I have rather more sympathy with the principle of this amendment and, although the details are probably over the top, we have discussed it and I think we have said that it will be available just before the local government finance report. However, I must say to noble Lords that the amendment is unnecessary. It will be clear from government accounts how much revenue support grant and specific grants central government have paid out in any year. It will also be clear how much has been collected by way of the central share and debited from the national accounts. It will therefore be obvious whether the Government have used the central share money in support of local government.
Nevertheless, I am prepared to think about whether, regardless, it would be helpful to set this out in the local government finance report in respect of an earlier year. Because of the timing of the outturn data, that would mean that we could not set out this information except in respect of the two previous years, which might make it a little out of date. However, we will consider that and talk to the LGA about it. I hope that, having heard those comments, the noble Lord will be happy to withdraw his amendment.
Lord McKenzie of Luton
The noble Baroness dealt with the question of whether the list in sub-paragraph (5) is complete, and the answer was that it is not. If it were, however, what other bodies would be on there? Would it be a vast range? Can she give us a clue as to which others might have sat on that list?
Baroness Hanham
I think I have said all I can say. The list is not complete and others can be substituted or interposed if necessary. Those will arise at other times but I do not know what they are. If we have information on or a sort of idea of which others we might be talking about, I will let the noble Lord know, but at the moment it is simply left that other bodies may be included.
Airports (Amendment) Bill [HL]
Lord McKenzie of Luton Excerpts(13 years, 11 months ago)
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Lord McKenzie of Luton
My Lords, I apologise for rising to speak in the gap, although I have given notice. I readily accept the importance of air transport in connectivity. We should congratulate the noble Lord, Lord Empey, on bringing forward this important discussion. I will speak briefly about the role of—even—London Luton airport, and why its position should be enshrined as part of the air infrastructure, and to make sure that that is fully acknowledged and encouraged.
The Bill seeks to amend the Airports Act 1986. I remember that Act being introduced. It was a means of forcing local authorities to put their airport into separate corporate entities. We railed against it at the time—in retrospect, wrongly. It is bizarre to think that, before those days, we operated Luton Airport as a committee of the council. Things have moved on. London Luton Airport has had the benefit of a public/private partnership. It was the UK’s fastest growing airport last year. It plans to deal with some 10 million passengers in the current year, and is consulting on a planning application that could increase capacity to something like 16 million passengers a year, or maybe even higher. Not in any way to deny Heathrow or the arguments advanced for it, I would argue that the airport should be seen as an integral part of the London air transport network. It already serves a significant part of the collective catchment area of London airports.
Issues about connections are important. If the issue is how quickly you can get from Belfast to the capital, going via Luton could be just as fast as going via Heathrow, if you have to get off the flight and get on the train or underground, get a taxi or whatever. That is not to argue against improvements to those rail networks. The point about connecting flights is a fair one. Clearly that is more difficult to do. Even within Heathrow itself, it depends where your connecting flights are going from. With five terminals in Heathrow itself, it is not like stepping from one platform to another.
My point is that, in all this debate, the contribution of airports such as London Luton Airport should not be overlooked. It is not a perfect solution to all the issues of connectivity that have been raised by the Bill, but while there are constraints on Heathrow, whatever the future of its expansion entails, airports such as London Luton Airport have a real contribution to make. They have the benefit of having the strong support of their local communities, principally because a big franchise fee comes into the local council and helps to keep spending up, or council tax down, or both. London Luton Airport should feature, and I urge that it does feature, in the Government’s consideration of airport policy to deal with these issues as well as others.
Gypsies and Travellers
Lord McKenzie of Luton Excerpts(13 years, 11 months ago)
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Earl Attlee
My Lords, the noble Lord makes an important and interesting point. It is much easier to have an unauthorised encampment removed if the local authority has already made appropriate provision.
Lord McKenzie of Luton
My Lords, as the Minister has acknowledged, there is a shortage of adequate permanent and transit sites for Gypsies and Travellers, but, at the same time, the Government are dismantling regional spatial strategies, one of the objectives of which was to set targets concerning the number of pitches that each local authority should provide. What evidence do the Government have which suggests that the replacement duty to co-operate will better encourage local authorities to meet their own and their neighbours’ responsibilities?
Earl Attlee
My Lords, as I have said, we have not seen the full government policy because that will be announced shortly. The previous Government’s model of top-down pitch targets under regional strategies has not delivered. Between 2000 and 2010, the number of caravans on unauthorised developments increased from 728 to 3,895.
Localism Bill
Lord McKenzie of Luton Excerpts(14 years, 4 months ago)
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Lord Smith of Finsbury
My Lords, I support the noble Lords, Lord Borrie and Lord Black, in welcoming the Government’s amendment and I agree with them about withdrawing our alternative amendments.
As chairman of the Advertising Standards Authority I believe strongly in the enormous value of responsible advertising. The outdoor advertising industry is, overwhelmingly, hugely responsible. The amendment ensures that that responsibility and the freedom to advertise that goes along with it will remain firmly in place, and sensibly so. I welcome the Government’s amendment. I thank them for listening and for producing a highly acceptable formula in their amendment.
Lord McKenzie of Luton
My Lords, we obviously support the Government’s amendments on retrospective planning permission, particularly those in relation to unauthorised advertisements. I understand that my noble friend Lord Borrie and his colleagues will not press their amendments. The Government should be congratulated on listening to the arguments from across the House and the discussions that took place outside the Chamber. We have got a good outcome to this issue which we support. We thank the Government for listening.
Lord Shutt of Greetland
My Lords, I am grateful for those four splendid contributions.
Lord Boyd of Duncansby
My Lords, this is the first time that I have spoken on Report, so I repeat my declaration of interest: I am a solicitor in private practice and registered as a foreign lawyer in England and Wales, and some of my practice involves planning. I recollect that in Committee I stood to support amendments in terms very similar to those before the House this evening. I cannot now recollect in whose names the amendments stood, but I was pleased that the Minister, the noble Earl, Lord Attlee, offered to discuss that issue. It may be that I and others took our eyes off the ball, as it were, in following up the matter. I do not want to take the time of the House unnecessarily because both my noble friend Lord Berkeley and the noble Lord, Lord Jenkin, have gone through remarkably succinctly the detail of the amendments in the group.
The central issue is that the development consent order is expected to be an omnibus order that will encompass a range of other consents and will reduce the number of applications that a developer has to make, thereby making the development procedure that much easier.
The amendments address two issues seriously. The first is the range of further consents required beyond the development consent order. My noble friend Lord Berkeley listed the consents that are still needed—another 42 are still required, including 36 in Wales. Of course, there are occasions when you require specialist input that only specialist agencies can give—these are necessary safeguards—but, on the other hand, the policy behind this ought to be to reduce to the minimum the number of other consents that are required. That would be consistent with this Government’s approach to reducing regulation and removing red tape. There are a large number of these further consents that can be effectively removed without reducing the necessary safeguards. At Committee stage, I gave an example of the London Gateway Port Harbour Empowerment Order 2008, which is an order under the Harbours Act which included provisions for the benefit of the Environment Agency, and would be a model for that.
The second strand is the further consents and procedures necessary on top of what the IPC grants in a development consent order—in other words, the further consents from the Secretary of State where, for example, land of statutory undertakers is being compulsorily acquired or the special parliamentary procedure applies. This procedure is not one that is used very often, yet we find, as my noble friend Lord Berkeley said, that the first application to be granted by the IPC requires that further consent.
Some might say that we need to have a proper check and balance. I accept that when the Infrastructure Planning Commission, which the Government told us was an unelected quango, was making its decisions independently of any outside scrutiny, it might then have been appropriate to keep a number of other procedures and safeguards in process—safeguards which were accountable. Now that we have the Secretary of State giving the final decision, you can incorporate within that the necessary safeguards that some noble Lords may wish to see.
There are also, within this group, issues in relation to the discharge of requirements. I do not intend to take up the House’s time on that, but there are important issues in relation to ensuring that the regime that we create works effectively and that the transition from the Infrastructure Planning Commission, which makes the decision at present, to one where the Secretary of State is deciding on the recommendations of the major infrastructure unit of the Planning Inspectorate, is effective too.
I hope that the Minister will look at these issues seriously. They are important and they are designed to reduce the amount of bureaucracy and red tape that there is and make this a streamlined process.
I make one final point. A European Commission study into the consenting regimes for major infrastructure projects throughout the European Union commended the one-stop shop, which at the moment is encompassed within the Infrastructure Planning Commission, but which, when this Bill goes through, will still be there but with the Secretary of State. My understanding is that the European Commission is likely to make regulations to ensure the acceleration of the deployment of priority energy infrastructure projects by concentrating resources, simplifying and enhancing permission procedures and making use of innovative financial instruments. In order to enhance national permitting and granting processes, each member state will be required to create a competent authority—a one-stop shop—responsible for those tasks. Therefore, it looks as though we will get a seal of approval, if that is required, from the European Commission. We can make things better.
I hope that the Minister will take away these matters and look at them seriously.
Lord McKenzie of Luton
My Lords, it is unfortunate that a raft of technical amendments have come forward very late in the day, and seemingly in an environment where the promised engagement in Committee was not fully realised. That is not the best way for us to deal with these hugely important matters. It means that we are stacking up yet another issue to deal with at Third Reading. Whether we get through Third Reading in one day remains to be seen.
I hope that we all agree that, in relation to infrastructure, we want an efficient and effective system of dealing with planning. We have heard arguments about a one-stop shop and the extent to which we are some way from that. We have heard about the issues around the extent to which there should be a parliamentary process now that the Secretary of State is the ultimate decision-maker. I say to my noble and learned friend Lord Boyd and to my noble friend Lord Berkeley that I would need a bit of convincing to step aside from a parliamentary procedure just because the Secretary of State is making the final decision. We have debated the Bill in some detail and the issue of the powers of the Secretary of State has been a running sore in our deliberations, but I remain to be convinced on that.
Certainly I agree with and support the importance of having a one-stop shop on the raft of consents that apparently are still needed. However, the clock is ticking on Third Reading. This is an opportunity to sort out some issues, but we do not have much time in which to do it. It may be, as my noble and learned friend Lord Boyd said, that the EU could overtake us on this matter. We have a couple of weeks before Third Reading and there are very serious issues that have been raised tonight by all three noble Lords. The noble Lord, Lord Jenkin, also raised new points that we had not touched on before about who can make these qualifying requests, as well as issues around pre-application consultation. I hope that the Minister will be able to give us a full response on these issues. Generally, I find that we are in an unsatisfactory position on a hugely important issue for this country.
Earl Attlee
My Lords, I thank all noble Lords who have spoken. On the point about meetings, I cannot understand what has gone wrong. I would never resist meetings, not least because I find them so valuable. It is my responsibility to call a meeting. On the other hand, if it looks as though the meeting is not going to happen, a reminder would be helpful—and I do enjoy the meetings that I have with the noble Lord, Lord Berkeley.
We are very short on time. The amendments in this group seek to change the Planning Act 2008. Although they are technical in nature, they are none the less important, so I shall respond to each in turn. Amendments 223AA and 223AB, in the name of my noble friend Lord Jenkin, seek to limit the circumstances in which a qualifying request for a direction under Section 35 of the Planning Act 2008, as amended by Clause 120 of the Localism Bill, may be made. The amendments would restrict those who can make a qualifying request to the proposed applicant and the authority in question. Amendment 223AB would prevent a qualifying request from being made after an application is made to the relevant authority.
Lord Berkeley
My Lords, I assure the House that I shall be quicker than the last group of amendments. This is something that has come up quite recently, when we have tried to see how the IPC and the Planning Act 2008 should be applied to railway projects. It appears that there is no minimum size for railway projects to have to go to the IPC under the Planning Act. The example that has been brought to my attention is the electrification of the Great Western main line between Airport Junction, which is near Heathrow, and Cardiff, where Network Rail may have to demolish certain bridges or do other works. It mainly has the permitted development rights for those works but some of them may creep a few yards outside those rights. It has been suggested that any such creep would need permission through the IPC, so the amendment suggests that it would be nice if the Secretary of State were minded to direct that specific and maybe small developments outside the limits of permitted developments could proceed without any other process, on the basis that they were quite small.
It is not just about the electrification of the Great Western main line. The East West Rail project, roughly between Oxford and Milton Keynes, has found two places where the existing railway has never had permission. One little connection between two lines was built in the last war and nobody can find the documentation giving it permission; it may be with the British Rail Property Board but it has not found it. There is another place where the route that got permission went through a farm and the actual railway went round it; clearly the person owning the farm at the time saw somebody all right and there was a gentle deviation, which of course was no problem 150 years ago. Quite rightly, the promoters of this line want to get the legal situation correct before they start building.
There is a problem here which requires some change to the Planning Act, probably to Section 14. Perhaps the Secretary of State might be minded to bring forward regulations to find a way of getting some smaller railway projects permissions in a process outside of the IPC, which is meant for big projects and takes a long time to do. One can debate whether the problems here are with the Transport and Works Act, an ordinary planning application or something else, but I am sure the Minister will understand them. Maybe he has a better solution. I am grateful to him for the meeting that he arranged some time this summer. I cannot remember when it was now but we had a good discussion about this. What we do not want is for our new Secretary of State for Transport to turn round in six months’ time and say that the electrification is held up for a couple of years because they cannot get permission for a couple of yards’ extension to a bridge and that it has to go to the IPC. On that basis, I beg to move.
Lord McKenzie of Luton
My Lords, my noble friend has brought forward what seems to be an entirely reasonable proposition. I look forward to the Minister’s reply. I add only that I do not know whether the same issue arises in relation to projects other than railway projects. Perhaps the Minister can cover that as well.
Lord Lucas
My Lords, I was thinking, as that speech went on, what it would have been like if we had been discussing, a couple of hundred years ago, the idea of opening up deep-mine coal in northern England. I think we would have been rather more aware of the dangers and that the dangers would have been rather more real. Houses do fall down coal-mines from time to time; the idea that they could fall down a hole made by fracking gas two miles deep is really not tenable. I am very sad to say this, as an ex-member of both Friends of the Earth and Greenpeace, but there is a typical, current environmentalist film around called “Gasland”, which, as far as I can establish, peddles nothing but lies, including that tap. If you drill a well through coal-seams you get gas out of it. That is not surprising, and methane is not exactly dangerous anyway. We are talking about a technology that, by and large, chucks household chemicals two miles deep. There is a chance of them coming back to the surface, but I am sure we will be careful about what we allow to be stuck down the wells.
I am someone who, although I do not have the pleasure of living in Lancashire, has lived in the Hampshire oilfields. Noble Lords may remember that in the 1980s there was a nice little mini-boom in wells all over mid-Hampshire, which we suffered happily without any great effect. There was a month when the drills were busy and then you were just left with a hut. That is really what happens with shale gas; you have a well every half kilometre or so and you are left with a garden shed that produces gas. It is not exactly an environmental problem, other than the interference when the drilling is going on. I think this is something that we will deal with extremely well within the boundaries of our ordinary and sensible systems for dealing with potential environmental hazards and for planning.
In fact, the Bill will make things better, because one of the problems with such developments in the past has been that they have benefited the oil company, they have benefited the Government and benefited the landowner who is lucky enough to have the well drilled on his patch, but the local community, which has put up with the noise, the transport during the drilling and the continuing risk of something going on with the well, gets nothing. Under the Bill, of course—under neighbourhood planning—the benefit will be shared and that will be a great step forward.
Lord McKenzie of Luton
My Lords, if I understand my noble friend’s proposition, it is that the hydraulic fracturing of underground rock will be brought within the national infrastructure projects regime, the planning regime that deals with major projects. I think that is central to what my noble friend is moving. We have had a wider debate about the potential importance of shale gas, what that might mean and the risks associated with it. It seems to me that we need a broader regime that encompasses all those issues: licensing regimes, as the noble Lord, Lord Greaves, said, not only to deal with exploration, but with exploitation as well. If there is to be no national infrastructure projects approach to this, then planning, presumably, is a matter for local planning authorities and, indeed, neighbourhood planning. That does not seem to me to fit well with something that is potentially of huge national significance, with potentially huge risks and uncertainties attached to it.
The noble Lord, Lord Greaves, said that this issue is worthy of a further debate. Perhaps when we have debated the NPPF to death we might turn our attention to it. I am a novice on this, but it is a fascinating and hugely important issue. I can remember when North Sea oil first opened up. It was a project on which I worked in my former life and I know some of the debate that went on around that. However, if I understand it correctly, my noble friend’s proposition about the environment within which the planning ought to be considered is a straightforward one, and he makes a good case.
Earl Attlee
My Lords, Amendment 223B seeks to require the Secretary of State, by order, within 12 months of Royal Assent, to add hydraulic fracturing of underground rock, commonly known as “fracking”, to the list of nationally significant infrastructure projects in Section 14(1) of the 2008 Act.
The first exploration for shale gas in the UK has begun only recently. Fracturing has so far been used on one shale gas drill site in Lancashire but is currently suspended pending a geomechanical study into seismic activity.
The noble Lord, Lord Berkeley, raised some wider planning issues, but fracking is no more difficult or technical than other mineral extraction methods, and my noble friend Lord Lucas said as much. The noble Lord, Lord Greaves, covered some of the regulatory issues, and I shall not go over that ground again. My noble friend Lord Jenkin referred to a small earthquake. Of course he was actually referring to a seismic event, which is slightly different.
The amendment would require hydraulic fracturing to be added to the types of activity that are considered nationally significant. It is not necessary, however, to use this Bill for that purpose; a secondary power exists to achieve this. I am happy to undertake that this issue will be raised with my colleagues in the Department of Energy and Climate Change and, if it appears appropriate to the purposes of the Bill to add this type of activity to the list of nationally significant infrastructure projects, we will use the secondary power. On that basis, I hope the noble Lord will feel able to withdraw his amendment.
Lord McKenzie of Luton
My Lords, we are in total agreement with the amendment; indeed we should have added our name to it. I apologise for not having done that. One of the issues that was raised previously was about regulation, and if you have a new regulation then something has got to go. I would urge the Government not only to take on board this proposition but to look and see what might be gained by trying to streamline other notification procedures, particularly in relation to building regulations and notifications in respect of the community infrastructure levy. Why can these not potentially be combined into one notification procedure? So you have got two out, and only one in, on that basis. That notwithstanding, it does seem a very sensible proposition which we support.
Earl Attlee
My Lords, my noble friend’s Amendment 223C is, as he has said, a simpler, more permissive version of the one he tabled in Committee. However, I regret to say that it still does not overcome the Government’s concerns that this would add yet a further element of complexity and box-ticking to the application process for both the applicant and the local planning authorities and yet yield no practical benefit for local planning authorities.
In the March 2011 Plan for Growth, the Government clearly cited the problem of the cumulative additional cost to business of new regulations introduced since 1998. It is essential that reforms continue to reduce costs, delays and bureaucracy in the planning system and support the Government’s collective approach to driving sustainable economic growth. Local planning authorities can, and do, ask for notification of commencement of development when and where they think it necessary. A developer failing to notify the local authority that the works had commenced would not be a good start to the relationship between them.
My noble friend may argue that an administrative scheme has no teeth if the developer does not return the form but the Government’s view is that new Section 106D, to be inserted by the amendment, would have no teeth either. Making the commencement of development without giving notice a breach of planning control implies that enforcement action could be taken. However, the point of enforcement action is to remedy breaches of planning control. Once development has started it will no longer be possible to give prior notice, so the breach could not technically be remedied and enforcement action would be ineffective. If it turns out that the developer has failed to comply with pre-commencement conditions as well as not giving notice, then the local planning authority can take such action as it sees fit, perhaps by serving a breach of condition notice.
The Government’s view is that this amendment will inject additional complexity into the planning process yet provide little practical benefit. I invite my noble friend to withdraw his amendment.
Lord Best
My Lords, I think the government amendment does something helpful. Councillors on planning committees have to face the accusation, if they are not careful, that they are selling planning consents, that they are just doing it for the money. There is ambivalence as to whether they can take on board the fact that it is surely important to consider that the local community may benefit financially from what happens if the development goes ahead.
The Minister has clarified the circumstances in which it is entirely legitimate for the planning committee to say, “Yes, we have taken on board the fact that there are financial gains for the locality as a result of this. It is not the only thing we take into account. It has no greater weight than the other material considerations. The fact that local people are going to benefit from this”—as the noble Earl made so clear—“can be taken into account, but don’t let anybody accuse us, the planning committee, of just doing it for the money. We’re doing something that is legitimate”, as this clause makes clear. I think it can be quite helpful.
Lord McKenzie of Luton
My Lords, I speak in support of Amendment 223D to leave out Clause 130 and in support of the noble Baronesses, Lady Parminter and Lady Hamwee, my noble friend Lord Howarth and the noble Lord, Lord Greaves. To argue that these amendments are unnecessary and that this clause is necessary because it addresses the issue of confusion seems to be turning the matter on its head. We know there is confusion because the clause exists. The noble Baroness, Lady Parminter, said that it takes something to get the CPRE, the TCPA and the RTPI in the same position and all very concerned about this. They do not arrive at spurious conclusions. They have impressed on us and all noble Lords their real concerns about the impact of these provisions.
The noble Lord, Lord Best, said that the provision helps councillors understand what they can and cannot do. The Government’s basic proposition in this is that the clause does not change the law. If the clause does not change the law, why have it? The proposition that noble Lords, particularly the noble Lord, Lord Greaves, referred to—that it does no harm—is an extremely spurious basis on which to legislate, particularly in such an important area. I accept that the Minister made some effort to differentiate situations where material considerations—local financial considerations—can legitimately be taken into account from those where they cannot, but that analysis does not depend upon the clause and the amendments before us but upon the law as it currently is. Are we not much better off leaving the law as it currently is rather than introducing something that does not, with great respect, clarify matters but adds to the confusion?
The very existence of the clause, amended or not, has caused great controversy. What changes the existing position? How does the new homes bonus or CIL change, from the Government’s point of view, and to what extent can it be taken into account as a material consideration? As I understand it from the Minister, nothing changes. All it does is describe the law as it is. If that description is the cause of confusion and uncertainty, surely we are better off without it. It seems a very straightforward proposition. It seems to me that the onus should be on those seeking to introduce and sustain the clause as amended to explain why. To say that it does no harm is a totally inadequate justification for a provision that is causing great consternation among many people involved in planning, who are experts and who have been in the field for a very long time. I urge the Government to reconsider this matter. If the only justification for the clause is that it will help to deal with uncertainty, I hope the Minister will accept just from the discussion tonight that in many quarters it clearly does not and that we are better off without it.
Baroness Gardner of Parkes
My Lords, I discussed this amendment to a certain extent at an earlier stage. Therefore, I do not feel I need to say very much, especially so late at night.
The reason for tabling it is that there are little pockets of between two and five acres in between lots of other houses and buildings. I know of some that are described as green belt and are so listed and yet there is a conference centre next to them and huge buildings around them. To my mind, those are infill sites. I do not know the government ruling as to what exactly comprises an infill site, but it seems to me that if you have a small patch of land, whatever its classification, it is not really green belt if it is just a little bit in the middle of places. Yet it might already have all the infrastructure of transport, electricity and the things that are needed for development, and could provide a valuable space for either a children’s home or housing or something of that type. It is for that reason that I move this amendment.
Lord McKenzie of Luton
My Lords, the issue of green belt is one of those matters which has caused great consternation. Obviously, we will have to await the final version of the NPPF. Of course, it is not for me to defend the NPPF in its current form, but as currently drafted it seems to address what the noble Baroness is in part seeking. The NPPF states that:
“A local planning authority should regard the construction of new buildings as inappropriate in Green Belt. Exceptions to this are: limited infilling in villages, and limited affordable housing for local community needs under policies set out in the Local Plan; or limited infilling or the partial or complete redevelopment of previously developed sites”.
That is envisaged within the NPPF as I understand it.
In terms of the infrastructure, it is not always right that the services and infrastructure exist before, rather than being provided as a consequence or as part of, the development. I understood that it might be implicit in the noble Baroness’s amendment that it needed to be there before, rather than arising as an alternative. Therefore, I struggle to support the amendment in its current form. But the issues around development in the green belt are very important. We need to track what is going to happen and what the final version of the NPPF will be.
Earl Attlee
My Lords, my noble friend’s amendment seeks to allow infilling on green belt land if,
“sufficient infrastructure and services exist as to make the development reasonable”.
This test is not related to green belt policy, which is about preserving openness, preventing the unrestricted sprawl of built-up areas and preventing the merger of towns. You could well have land with sufficient infrastructure, but allowing development on it would put at risk the key principles of the green belt policy. In any case, the law already requires determinations under the Planning Acts to be made in accordance with the development plan,
“unless material considerations indicate otherwise”.
Infrastructure is one of the material considerations routinely taken into account by decision-makers in planning cases.
As observed by the noble Lord, Lord McKenzie, the draft national planning policy framework contains the Government’s proposed policies on planning, including the green belt. It includes exceptions, set out in a similar way as current green belt policy, for certain categories of development. For example, it allows for the re-use of buildings, and the extension or replacement of dwellings. It also provides for the infilling or redevelopment of previously developed sites. I believe that these policies provide the flexibility to achieve the outcomes which my noble friend is seeking.
Given that current national policy has delivered a strong level of protection, I do not think it appropriate to make changes to green belt policy through legislative means. If changes are required to green belt policy, they should be carefully considered as part of the ongoing consultation and, if appropriate, taken forward through the framework. I hope that my noble friend will feel able to withdraw her amendment.
Lord Greaves
My Lords, because of the time of night, I shall make a couple of statements rather than explain them. This is not the right Bill or the time to do this. It probably does not require any amendment to Section 15 of the Commons Act. It can be dealt with in two ways: first, local authorities can pull their fingers out and not be unnecessarily legalistic and bureaucratic, which in my experience they have been; and, secondly, by tweaking secondary legislation. It is not necessary to do it here. The problem can be solved in a much more efficient way in secondary legislation through Defra.
Lord McKenzie of Luton
My Lords, I support the noble Lord, Lord Best, in what he seeks. The noble Lord, Lord Greaves, says that this is not the right Bill. It may be that it is not appropriate to put something in primary legislation but, surely, it is absolutely pertinent that we discuss it in the context of the Bill before us. It cannot be outwith the thrust of this Bill, given the whole range of stuff that is encompassed in it. I think that the noble Lord is simply seeking clarification of what the Government intend, what they propose to do, and when and how they propose to do it. If it is in secondary legislation, that is fine, but clarity is needed.
“Report on Part 5
(1) The Secretary of State must—
(a) establish an independent review of the planning provisions introduced by Part 5;(b) publish a report on this review, including any recommendations for change; and(c) lay a copy of the report before both Houses of Parliament within 3 years of section 97 coming into force.(2) The report required under subsection (2) must, in particular—
(a) have regard to and report on the effectiveness of the provisions in producing sustainable development outcomes;(b) report on the extent to which planning permission has been granted in respect of brownfield land;(c) report on the extent to which open spaces and the green belt have been protected;(d) report on the extent to which affordable and sustainable housing targets have been achieved;(e) provide statistical information about the number of planning applications that were approved, approved but not actioned, or appealed before and after the commencement of that Part.”
Lord McKenzie of Luton
My Lords, I beg to move Amendment 232AA. This calls for an independent review of the provisions of Part 5 of this Act; it calls for a report of this review, and it requires a copy of the report to be presented to both Houses of Parliament.
In particular, it requires the report to cover the effectiveness of sustainable development outcomes; the extent to which brownfield land has been developed; the extent to which green belt has been protected; whether affordable housing targets have been achieved; and data about planning approvals and rejections, et cetera. In short, it requires taking stock of how the new planning landscape is working in practice. It will no doubt be argued that there is going to be post-legislative scrutiny of this legislation in any event, but we consider the ramifications of this part of the Localism Bill to be of particular significance and that it should have this special focus. It requires this report within three years of entry into force, but this timescale is not sacrosanct for us.
If Ministers have confidence in their case, this should not present a difficulty. There can be no doubt that in recent months, since the publication of this Bill, and particularly since the publication of the draft NPPF, the profile of planning—and the purpose of planning—has been raised in our country and our communities. One would not normally expect to see headlines in the Telegraph dominated by planning matters; and we have in a way been startled spectators in unpleasant exchanges between the Planning Minister and no less a body than the National Trust.
Whatever the Government intended to be the outcome of these proposed changes to our planning system, there is no doubt that the way they have gone about it has caused chaos and added huge uncertainty in the planning system, of itself creating paralysis and holding back growth, the very thing they were supposedly designed to stimulate. The fears are that the Government were redefining the purpose of the planning system and refocusing on economic growth to the detriment of the broader requirements of sustainable development. There were plenty of signals to this effect: the presumption in favour of sustainable development; the denial hitherto of transitional provisions; the very wording of the NPPF, which contains no recognisable definition of sustainable development; the scrapping of “brownfield first”; and the inevitable uncertainty created by cramming 1,000 pages of regulation and guidance into 50, even accounting for the removal of overlaps and duplication. Alongside this was the introduction of the neighbourhood planning regime, to be supported by local planning authorities at a time of stretched resources; the duty to co-operate as a substitute for regional and sub-regional spatial strategies; and the operation of the new homes bonus as the supposed driver of new dwellings. Uncertainty abounds. We need a process for Parliament to be able to take stock of where this is all taking us. I beg to move.
Lord Lucas
I hope we see annual reports. This is such an exciting, interesting and unexplored area that we are going into that we really need to know what is going on rather earlier than three years. However, I would measure things in a much happier vein than the list of grizzles in proposed subsection (2) in this amendment. It is going to make a great change and advance to people’s lives—and I would like to see that documented—as much as create possible pitfalls.
Baroness Hanham
My Lords, at this time of night I am going to resist the temptation thrown at me by the Labour Lord opposite to discuss further the sustainable development in the NPPF—great sighs of relief opposite. I will therefore confine myself to the proposal that there should be a report on progress.
We agree that there should be a transparent system for monitoring and reporting. As with decentralising decision-making over housing and planning matters to councils and local communities, we expect them to report progress on all aspects of planning and to make this available to local communities to whom they are accountable. The Planning and Compulsory Purchase Act 2004 already places a duty on councils to undertake a survey of matters affecting the development of their area, including—I promise I will not go back to sustainable development again—its physical, economic, social and environmental characteristics.
The council is already required to produce an annual monitoring report of local planning activity. Our proposals in the Bill and local planning regulations, on which we have recently consulted, will streamline the process for preparing these reports, reducing the burden on councils and strengthening public accountability. Local planning regulations will also require councils to report progress in relation to neighbourhood development plans and demonstrate how they have worked with others under the duty to co-operate.
My department will support councils in this process by continuing to produce official statistics that can contribute to the evidence base used by councils to develop their plans. With these reassurances, I hope the noble Lord will withdraw the amendment.
Lord McKenzie of Luton
My Lords, I am grateful to the noble Baroness for that response but it did not deal with the central point. I accept that there are a range of reporting requirements for local authorities over a range of aspects, but the purpose of this amendment was to say that we have a new system here. A great deal of uncertainty surrounds it. It is right that both Houses of Parliament should be able to take stock of how it has worked out overall. If I understood him, the noble Lord, Lord Lucas, was in favour of more frequent reporting than three years. Three years does not seem an unreasonable timeframe. It would be a pity if we could not take the whole of Part 5 and have some report back on how it has all worked out as a package at a macro level. This is not the time of night to pursue this in greater depth, but I ask the Government to reconsider this issue. In the mean time, I beg leave to withdraw the amendment.
Lord Boyd of Duncansby
My Lords, briefly, Clause 218 was put in without any debate in Committee. I simply thank the Government for having looked at the issue, bringing forward Clause 218 and then engaging with the Compulsory Purchase Association to discuss the amendments that are now being moved by the Government. I very much welcome this. Part 8 is an important part of the new Bill. I thank noble Lords for their time.
Lord McKenzie of Luton
I am grateful that noble Lords have heard the reassurance and thanks of my noble and learned friend Lord Boyd directly. We have relied on him for advice on the appropriateness of this and are happy to support the amendments.
Lord Shutt of Greetland
My Lords, this not-quite-final group consists of minor technical and consequential amendments to Part 9 and the schedules to the Bill that have not been picked up in earlier groups. I beg to move.
Lord McKenzie of Luton
My Lords, I thought that we were going to have a short speech from the Minister. The first few amendments here are to do with transfer schemes and tax issues arising from the core cities amendments that we discussed earlier, so I am happy to support them, and indeed the rest of the amendments in this group.
“(ba) an order under section (Power to transfer local public functions to permitted authorities) (but see section (Orders under section (Power to transfer local public functions to permitted authorities): procedure),”
Localism Bill
Lord McKenzie of Luton Excerpts(14 years, 4 months ago)
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The Earl of Lytton
My Lords, I rise briefly first to declare an interest as a practising chartered surveyor and as someone who is involved with planning, although I am not a chartered town planner.
There seems to me to be three particular issues here. One of them, as has already been touched on by the noble Lord, Lord Cormack, is the corpus of knowledge that is currently involved in the planning system. If we uproot that, we will cause delay, doubt, risk and uncertainty. There are economic implications, so we must try to avoid that. We have seen some of the public pronouncements that are based on questions of doubt about what is intended here. A great deal of clarification is needed.
Secondly, the noble Lord, Lord Howarth of Newport, referred to the effect on economic growth. Yes, planning is a huge driver of economic growth in so many ways. While I would not wish to suggest that it is the be-all and end-all of economic growth, it is clearly something that is tangible that the general public can relate to. We must not lose sight of the fact that it is going to be one of the significant factors, if for instance what we are told about the lack of completions on housing is true.
My last point is to do with neighbourhood plans. I must declare another interest here as the president of the National Association of Local Councils, whose member parish and town councils may be those very bodies that are having to draw up a neighbourhood plan. A neighbourhood plan has to be in conformity with the principal authority’s local plan, and if the principal authority’s local plan is not in place, or is in disarray or is out of date, then we have a problem. This has a knock-on effect. I ask the Minister to give the House some reassurance that there is going to be some sort of seamless transition that will take place. I do not wish to add to what has already been said about the timescale over which that is to be done; and there may be different timescales for different bits for all I know, but the transition does have to be, to some degree, seamless. With regard to my first point about the economics of doubt, it is very important that we get this right.
Lord McKenzie of Luton
My Lords, like all noble Lords who have spoken in this debate today, we support the need for transitional provisions that have clarity as to their meaning as well as a reasonable timescale that reflects the capacity both of local planning authorities and of the inspectorate. Like the noble Lord, Lord Greaves, I believe that this is probably the most serious issue left unresolved from Part 5 of the Bill. We hope that we will get a clear message from the Minister today. We added our name to the original amendment of the noble Lord, Lord Best, which bit the dust by being pre-empted, and we support the thrust of the amendments of the noble Lords, Lord Best and Lord Greaves.
It is imperative that we avoid a lacuna, with the prospect of all or most local plans being absent, silent or indeterminate or having policies that are out of date under the current NPPF formulation. Under the presumption in favour of development, this would lead to an emphasis on approving development proposals unless the adverse impacts of development would significantly and demonstrably outweigh the benefits when assessed against the framework policies. I assert that 50-odd pages of framework cannot be an effective substitute for all the local plans and the thousands of pages of guidance that currently exist.
Baroness Hanham
My Lords, I will have to write to the noble Lord on that. I do not know whether these are going to be consolidated. I do know, and have said before, that there is a requirement on local authorities to provide sites and for them to work co-operatively with other local authorities to see that they have sufficient sites for their needs. The noble Lord says there will be 50 per cent less. I will need to come back on that.
I hope that I have more or less dealt with all the questions I have been asked. I sense that I will not totally satisfy noble Lords on the transitional period. I hope there will be an acceptance that a laid-down transitional period has not proved very helpful in the past, and it may not be helpful in the future, but that we are committed to guidance of some sort.
Lord McKenzie of Luton
Before the noble Baroness sits down, I may have missed it and she may have covered it, but we could now have a situation where a local planning authority has a core strategy in place consistent with the existing regional spatial strategy, and that regional spatial strategy, for a period, is not going to be revoked because of the environmental assessment. If in the interim the NPPF is introduced with its presumption in favour of sustainable development, those two will not be identical. Which is going to prevail in the interim in those circumstances?
Baroness Hanham
My Lords, while the regional strategies are there and before they have been revoked, the plan will have to have regard to them. They will also have to have regard to the emerging NPPF in determining a planning application. Unless they conflict wildly, that should work very well. There is going to be a short period only before the regional strategies are revoked. I do not think there will be any inconsistency. Local authorities are going to want to keep only part of the regional strategies in their local development plan and they ought to be able to work in conjunction with the NPPF for the short space of time, if that is necessary.
With the explanations I have given, I hope that the noble Lord, Lord Best, will feel able to withdraw his amendment. I am afraid I said that the NPPF consultation ended yesterday; in the interests of accuracy, it ends today.
Lord Shipley
My Lords, I agree with my noble friend Lord Jenkin on the need to be clearer on the gain to neighbourhoods and parishes from the community infrastructure levy. Whether that is done in the Bill, through guidance or by other means, it will be extremely important that local people in neighbourhood areas where development is taking place understand what the community gain might be as a consequence of that development.
My point is a parallel issue which relates to the duty to co-operate. It is implicit in the Bill that there is a duty to co-operate between councils on the community infrastructure levy. However, I am not certain that it is sufficiently explicit and in urban areas where there are boundaries between different local authorities, a development that could take place wholly in one council area might well impact upon the infrastructure and the well-being of one or more neighbouring council areas. To what extent should we make it explicit that there should be a duty to co-operate between local authorities on the community infrastructure levy where a development is taking place very close to a boundary? That will need to be clear, certainly by Third Reading, otherwise there could be a great deal of strain between local authorities over what a duty to co-operate over sustainable development actually means and how it is delivered on the ground.
Lord McKenzie of Luton
My Lords, we share some of the concerns expressed by the noble Lord, Lord Jenkin, and have some sympathy with his amendments. When we discussed this issue at Committee I thought we had established that, as previously structured, CIL gave quite a lot of scope for supporting local communities beyond what one might think of as the very strict interpretation of infrastructure, but this seems to be taking us a step further. The letter that I had from the noble Baroness was, I think, generally circulated and says:
“We are proposing amendments that would allow local authorities and parish and community councils to use this proportion of the funds to support development by providing infrastructure or addressing any other matter necessary to address the demands that new development places on the local area”.
This is potentially a very wide extension of what it was anticipated that CIL would be used for.
The noble Lord, Lord Shipley, raises a different point about what happens with adjoining authorities and how that fits together with the duty to co-operate. We also need to consider how this sort of formulation fits together with Clause 130, which we are going to discuss in due course. The noble Lord, Lord Jenkin, said that he would not go so far as to call this a bribe, but it is potentially a substantial inducement to an area to accept development and we need to reflect on that as well. Having expressed concerns about the possible dilution of funding for infrastructure, which is needed up and down our country, I pose the question that we raised when we covered it in Committee—my apologies to the Minister if he covered it—about the prospect of CIL being used for affordable housing. I am not sure where that discussion has gone, but there have been some real questions asked about the extension of CIL which takes it beyond its original intent. The new intent is not necessarily bad, as the noble Lord, Lord Jenkin, said, but we need to reflect on what it means for the funding that is available for infrastructure in an area.
Earl Attlee
My Lords, I thank all noble Lords who have contributed to this short debate. Responding first to my noble friend Lord Jenkin, yes, we have moved a long way with the community infrastructure levy. My noble friend talked about Section 205 and the restrictions on the application of CIL. He is accurate in terms of history but he will recognise the need to develop good policies as time goes on. He kindly organised a meeting between me, him and the Institution of Civil Engineers, which I found useful.
My noble friend referred to local needs and to changing attitudes. We need to change attitudes because, quite often, the knee-jerk reaction can often be “no”, and that is not helpful for development. Local authorities are best placed to determine the infrastructure need in terms of logistics and so on, but local communities are best placed to determine their much more local needs.
My noble friend asked what a meaningful proportion of CIL is. We are consulting on the matter and have invited views on the question. We have not taken a view on this and will carefully consider the representations made during the consultation period before determining the proportion of funds that should be directed to neighbourhoods that host new development. However, we are clear that the level must be sufficient to give neighbourhoods a meaningful contribution to meeting the impacts of development in their area. This needs to be balanced with the central purpose of the levy, which is to ensure that some or all of the costs of supporting new development are met by the developers.
My noble friend also asked whether there was any limit on how a meaningful proportion must be used. Our changes allow for a proportion of CIL receipts to support development of parish and neighbourhood areas by providing either infrastructure or anything else that is concerned with meeting the demands that the development places on the area. However, the spending must support development of the area. It may not be used to fill gaps in local authority resources. I am happy to give that reassurance.
We are making this change because new development creates local demands that are concerned with matters other than infrastructure. For instance, the provision of new dwellings will increase the population of an area and new or extended office premises will increase the number of people working in an area. Increased numbers of residents or people coming into an area to work will create demands on services in the area, including transport, training, education, health, social and other services, community assets and utilities.
My noble friend Lord Shipley asked about cross-boundary needs in urban areas. It is a good question but I shall have to write to him before Third Reading.
The noble Lord, Lord McKenzie, asked about affordable housing. When setting a CIL charge a local authority must have regard to the viability of development in its area. In considering this viability, the local authority must take into account requirements normally provided for through Section 106—for instance, affordable housing—that will arise from the development. My noble friend will recall that we have tightened up on the use of Section 106.
The statutory framework for CIL provides for protection for affordable housing. This was, no doubt, in the minds of the previous Administration when they implemented the levy. However, we acknowledge that the guidance does not set this out as clearly and robustly as it could. We will revisit the guidance to make it clear that the imposition of a levy must not harm the delivery of affordable housing or other local policies set out in the local plan. I have asked my officials to work with the National Housing Federation to develop appropriate changes and we will reflect on the outcome in updated guidance from the Secretary of State. We are consulting on whether to allow CIL receipts to be used to fund affordable housing. We have asked for views on whether this approach could support local delivery of affordable housing by improving outcomes and offering better value for money. We will determine whether to make the change once we have received and considered the responses.
Inspiration has arrived to answer the question of my noble friend Lord Shipley, who asked to what extent authorities should be required to co-operate in using CIL receipts. This legislation allows authorities to pool resources to deliver infrastructure that supports their areas. We have the power to make statutory guidance about the duty to co-operate, and this could cover matters such as CIL.
The noble Lord, Lord McKenzie of Luton, asked about how CIL money could be used to perhaps bribe communities—
Lord McKenzie of Luton
I do not believe I said that. I was referring to how it was not described by the noble Lord, Lord Jenkin, to touch upon the fact that if these are inducements for communities to accept development, we need to reflect on the issues we are going to discuss in relation to Clause 130. I was not arguing in favour of bribing communities.
Earl Attlee
My Lords, I am struggling to read my inspiration here. However, I intend to make a substantive speech in our debate on Clause 130, which I think the House will find very helpful.
Lord Lucas
My Lords, I entirely support my noble friend’s amendment for two principal reasons. One is that local authorities can game the system anyway—all they do is get their councillors to get a group of 20 members round locally and kick off the process that is in the Bill. That will be an expensive and tiresome way of doing it and will result in councils being divided up on ward boundaries, which is not perhaps the right way of doing it because wards have been created for equality of size and electoral convenience rather than to encompass natural communities.
My other reason for supporting the amendment is that it is the best hope—despite all the other hopes that I shall express later in respect of my amendments—of getting the Bill to work in cities. As it stands, the Bill has very little to offer a city community. What a city wants, by and large, is the local application of the policies of its council rather than a hand in planning, where in a built-out environment there is very little to offer. Co-operation and working with the council to establish the area that is a neighbourhood will be a great deal easier if that comes from the council rather than a community that does not exist and has no momentum or reason to create itself. The whole process of creating neighbourhoods will happen much better in cities when guided by councils. If we consider not just relatively easy parts, such as Lavender Hill, but areas where communities are at loggerheads, how the system set out in the Bill will work when it will merely become a vehicle for neighbourhood power struggles rather than anything really creative, is beyond me. The department needs to get a grip on the question of cities, particularly inner-cities, and how we are to bring the benefits of the Bill to them.
My noble friend’s amendment seems to address this most constructively, and I hope that the department, even at this stage, will start to pay some attention to that. We all had a wake-up in our holidays and reappeared here when we suddenly discovered that communities in cities were not as strong as we might have liked to hope. This is the “Department for Communities” and it ought to be doing something, but it is not, I am sad to say.
Lord McKenzie of Luton
My Lords, I got more supportive of the amendment the longer the debate went on. I was almost there when the noble Lord, Lord True, had finished his introduction. Let me say, first, that a world in which the noble Lord, Lord Newton, is beyond temptation is not something that I wish to contemplate.
We accept entirely the thrust of the proposition of the noble Lord, Lord True. If you have robust engagement with communities that works and delivers, why tear that up and replace it with something else? However, there is a conundrum. What will the process be by which we say that not only is the existing process sufficient but we have to withdraw from parish councils the other opportunities that are provided in the Bill in respect of the creation of neighbourhood forums? One might read the proposition in the noble Lord’s amendment to say that that has to be decided between local authorities and the Secretary of State. Of course, that would leave out the voices of the community.
I agree with what the amendment is trying to achieve, but—perhaps the noble Lord has simply truncated his presentation and has thought this through—how you decide whether what is working locally is sufficient such that you will not apply those other provisions in the Bill is a question that needs to be answered. One could not disagree with the proposition that, if you have good engagement at the moment in a variety of different circumstances across the country—particularly important is the issue of urban communities, as the noble Lord, Lord Lucas, said—that should be preserved. How you do it and how you switch off the other mechanisms is key.
Baroness Hanham
My Lords, once again we have had an interesting debate on this part of the Bill and I am grateful to those who have taken part. I am also grateful to the noble Lord, Lord McKenzie, for putting his finger on one of the conundrums. One would have to decide how you work out how a local authority is doing it better than anyone else. That is perhaps something that will have to be decided anyway in the course of the process that has been laid out.
This amendment would allow a local authority to make a neighbourhood plan or order without a referendum being held or a neighbourhood forum being established. The basis on which this decision would be made is whether the local authority has an adequate process of neighbourhood engagement—I am not quite sure that that is how my noble friend put it, but I think that that is what it means—to enable the formation of neighbourhood plans. It is, as he suggested, a permissive approach. Whether this process is adequate will be determined, as the noble Lord, Lord McKenzie, has said, by the Secretary of State—which is not a terribly localist aspiration.
The effect of the amendment would be to give a very significant degree of power to the Secretary of State. I wonder whether that is entirely what is wanted. The Secretary of State would be allowed to control the neighbourhood planning process and bypass the referendum stage, because he would have to agree whether a local council is well advanced in what it was doing. I fully appreciate, however, the noble Lord’s concerns about the delay in holding a referendum on a neighbourhood plan or the way that it can be demonstrably shown that the local planning authority and the community at large are content for the neighbourhood plan or order to come into force.
Lord Deben
My Lords, I hesitate to disagree with my noble friends on this subject but I would hope that the Minister will be careful before she automatically goes down the tempting line of adding cultural to the environment. The reason for that is very clear. First, I have to declare an interest: the division between the Department of the Environment and the Department for Culture was a huge mistake. But it was not made on the basis of a difference: it was made on the basis of personalities. It was set up in that way to provide particular jobs for particular people, which is why culture and sport were put together. As it was done by a Prime Minister whom I strongly supported, I do not think that people can complain about my point.
I do not think that the idea that there is an eternal justification for this distinction based on the division in government is acceptable. I understand the reason for it but it has some very dangerous aspects to it. Let me give a simple example. I have fought for a long time to protect the countryside in Suffolk—its environment and its beauty. Part of that is stopping the sea taking it away. One of the things that the previous Government did, which was wholly unacceptable, was to downgrade the nature of the heritage contribution to the environment by making the points that they scored when they came to discuss the issue of coastal defence. Without any discussion with the heritage lobby, they lowered the importance of heritage within the environment.
I cannot consider the environment without considering culture. I believe that “environment” is a word which covers our cultural heritage as much as it does—I am afraid I am going to insult people—woolly animals. One of the problems is that the environment is often talked about as if it is about woolly animals. It is not—it is about the whole ambience in which we live. To exclude culture from the environment, or to suggest that there is a distinction, seems to me to have very serious import. I would hope that a future Government would reunite the environment with culture. That is where it should be. It is much closer to that than, for example, the media, which seem to me to have only a tangential effect on it. Much of the media seems to me neither cultural nor environmental. I do not see that the media should therefore necessarily be in the same box. To be told that the future of legislation should be based on a mistaken decision in the past about divisions between Ministries seems to me to be a fault.
One of the problems the Government have got themselves into—I am sure my noble friend Lord Cormack will agree with this—is that some of the language that has been used in the context of planning has led people to believe that our commitment to our environment, be it the cultural environment or the natural environment, has been less than strong. I think that has subsequently been put right and has been remedied not only by my noble friend but by the Prime Minister and others. However, I beg my noble friend to be very careful about this. I know that the House wishes to move on, but I have stayed—I have not had temptation—for this amendment, because I think we have to stand firm on the statement that the environment is not just about the natural environment but that the urban environment, the cultural environment and the spiritual environment all fit in. If she gives way on this, I would argue that there ought to be amendments about the spiritual environment. We have had this before. If we are going to start dividing the environment up, I would find it unacceptable to leave the spiritual side of life out of the Bill. I am able to accept it because the word “environment” carries that meaning for me just as much as it implies the natural environment and the cultural environment.
I hope that the Government will take this very seriously and that those who lobby my noble friend Lady Hanham are told very clearly that if they have not managed to establish the idea that great poetry, plays, architecture and heritage are part of the environment, then they need to present their case more effectively.
Lord McKenzie of Luton
My Lords, I shall work back through the amendments, starting with Amendment 205A, which is tabled in the name of the noble Lord, Lord Lucas. I doubt whether the wording is actually necessary, as it is probably encompassed by what is already in the Bill, but I do think it is an admirable amendment and its thrust is certainly something we support. With regard to the amendments tabled by the noble Lord, Lord Brooke, I was persuaded by the points that have just been made by the noble Lord, Lord Deben.
I should like to ask the Minister for clarification concerning the Government’s amendment, the thrust of which was to dispel a concern that business neighbourhood forums were going to be focused on business to the exclusion of the environment and other social and economic aspects. I think the wording has now changed, so that it ensures that neighbourhood forums always have a purpose which seeks to promote the overall economic, social and environmental well-being of the neighbourhood area. The original formulation—which is the one used in the amendments of the noble Lord, Lord Brooke—was that it should relate to individuals who want to live in the area. There may not be a great distinction in those formulations, but I should be grateful if the Minister could help us on that. Amendment 205ZA, which deals with concerns about the focus of neighbourhood business forums, is to be welcomed.
Lord Brooke of Sutton Mandeville
In that case, I shall give way to the noble Lord, Lord McKenzie, who I think wants to intervene.
Lord McKenzie of Luton
I am conscious that the Minister has spoken, but can she deal with one point, which may be just a matter of drafting? The existing Bill refers to,
“furthering the social, economic and environmental well-being of individuals living, or wanting to live, in an area”.
The amendment would change that to,
“it is established for the express purpose of promoting or improving the social, economic and environmental well-being of an area”.
The reference to “individuals” has slipped out. This may be a point of drafting rather than one of substance, and I am trying to see what it is if there is one. Can the Minister give us an assurance on that?
Baroness Hanham
I think my inspiration has arrived in this note. We have used the phrase “well-being of an area” because it is already used in the Local Government Act. We want the purpose to relate to the area rather than to the well-being of individuals within the area. It is not a mistake and the word “individuals” has been taken out, but by definition individuals would make up an area. You cannot deal with one without taking account of the other.
“( ) A neighbourhood forum designated under this section is to be taken for the purposes of section 6(3)(b) of the Human Rights Act 1998 and section 149(2) of the Equality Act 2010 to be exercising a function of a public nature when exercising functions under this Act.”
Lord McKenzie of Luton
I hope to be brief in moving this amendment because I think a point here was left outstanding. This brings back an amendment that was introduced by the noble Lord, Lord Greaves, in Committee. In responding to the amendment, I think the noble Baroness confirmed that plans could not be approved under these provisions unless they were compatible with the Human Rights Act, but she said that neighbourhood forums do not exercise a public function and therefore we have the anomaly originally pointed out by the noble Lord, Lord Greaves, that parish councils are subject to the equality duty while neighbourhood forums are not. This remains an issue of concern because the impact assessment for these provisions points out that certain communities are much less likely to engage and therefore be involved in this process than others. I do not think we dealt with the question of whether there is a technical problem in bringing neighbourhood forums within the scope of the equality duty, notwithstanding that they apparently do not exercise public functions. Otherwise, there is an issue about doing all we can to ensure that all communities have a chance to become engaged in these neighbourhood planning opportunities. I beg to move.
Lord Greaves
My Lords, the noble Lord, Lord McKenzie, has quite rightly said that I brought this amendment forward at the Committee stage. I apologise to him because I had intended to add my name to his amendment at this stage, but in the hustle and bustle of the Bill, I failed to do so. The noble Lord has set out the position clearly and I do not have anything to add other than to support his remarks.
Baroness Hanham
My Lords, I do not think we have ever said anything different. The neighbourhood forums are to come together within a neighbourhood area and their prime purpose is to put forward the neighbourhood plan. They were never expected to be longstanding or permanent organisations and the shortest time, I think, is up to five years. That has been the situation all along and if there is anything different from that—noble Lords have been drawing their breath and sucking their teeth at that response—I will write to the noble Lord.
Lord McKenzie of Luton
My Lords, I thank the noble Baroness for those two answers, effectively. The latter one is rather illuminating. Will the noble Baroness drop me and other noble Lords a line to confirm that notwithstanding that the Equalities Act does not ab initio apply to neighbourhood forums, it cannot be brought within its scope, so that we have that added reassurance of the thrust of that equality duty? Having said that, I beg leave to withdraw the amendment.
Baroness Hanham
My Lords, I will certainly write to the noble Lord, but my response will be in Hansard and I do not anticipate that it will change.
Baroness Hanham
Amendment 205C ensures that a neighbourhood area for which there is a parish council can be modified only with the consent of that council. We have listened to the cogent arguments put forward by the noble Lords, Lord Greaves and Lord Tope, and brought forward this amendment to meet those concerns. I am grateful to the noble Lords for raising this issue. The amendment is entirely consistent with the localist thrust of the Bill and will ensure that changes cannot be imposed on parishes in a top-down manner.
Amendment 206A is intended to make it clear that neighbourhood development plans are flexible and that the policies can apply to all or part of a neighbourhood area. That is to say that they do not need to have policies that apply across the whole neighbourhood area. That had always been our intention, but this amendment addresses concerns raised in Committee that the provisions about flexibility were not clear on this point. This flexibility is important. We want communities to be able to use neighbourhood planning in ways which reflect their aspirations and their vision for the future. We want to make clear, therefore, that there are no unnecessary, top-down restrictions: neighbourhood development plans can be as simple or as ambitious as the community wants to make them. They can include policies covering the whole area, or could have just one or two policies focused on a specific site, such as a high street or valued green space.
Amendment 210B seeks to emphasise the central importance that the Government place on effective consultation in neighbourhood planning. Therefore, rather than leaving consultation requirements to secondary legislation, this amendment would require a qualifying body to submit a consultation statement to the local planning authority prior to independent examination. Amendment 210B also makes it clear that this consultation statement should set out who has been consulted in developing the neighbourhood plan or order and a summary of the key issues raised through that consultation. It responds to concerns raised by several Peers and partner organisations in Committee that the Bill did not contain explicit consultation requirements for neighbourhood planning or the need for evidence to show that the views of others had been listened to and considered in the development of the neighbourhood planning proposals. Further detailed consultation requirements will be set out in secondary legislation. I beg to move.
Lord McKenzie of Luton
My Lords, before I speak to our Amendment 226 in this group, I have a few general comments about the contributions of other noble Lords. Some compelling points have been made about the need to address this issue. I suspect, although it may not be the case, that this is largely a London issue because, as the noble Lord, Lord Jenkin, said, it is particularly associated with very high land value. I can honestly say that I have not encountered it in Luton to date, but it may apply to other areas of the country. I see that the noble Baroness, Lady Parminter, has clearly experienced it. We are interested in hearing the Minister’s view on whether the way forward is to deal with a combination of codes of practice, party wall legislation changes, and issues around insurance or bonds.
Our Amendment 226 would amend Amendment 225 from the noble Lord, Lord Jenkin, and my noble friend Lord Berkeley, with its code of practice for subterranean development. It is simply to ensure that the importance of promoting good health and safety and minimising the risk of injury or ill health to workers and the public is part of any addressing of the issue. I was prompted to bring it forward by simply looking at the text of the amendment of the noble Lord, Lord Jenkin, about the code of practice. He talks about “noise and vibration”, and,
“dust, dirt and the risk of an infestation of vermin”—
all things that one can imagine are an integral part of excavation. It is important that we focus on the safety of people working in that environment as well as the convenience of neighbours and the owners of the property itself.
Construction is still a pretty unsafe working environment. It has got a lot better over the last decade, although I do not have the very recent figures on fatalities and fatal accidents. Most concerns arise in small house-building and refurbishment projects, the sorts of projects that one would envisage being involved here. Although I am advised that no special codes or regulations need to be introduced to deal with this—the CDM regulations of 2007 and the guidance around them are sufficient—in considering all these matters we should have uppermost in our minds the safety of people who undertake what can be quite dangerous work. In so far as protecting the public is concerned, I was advised that on one occasion the development was subterranean to such an extent that the skip on the road outside went through the road. Obviously there were risks of injury to the public from that. That is the purpose of my amendment, which I hope is entirely non-contentious.
Lord Lucas
My Lords, I hope that my noble friend will find a way forward in this area. It seems so consonant with what we are doing in the Bill to give those who are polluted some comeback or control over those who pollute. That seems a good principle to push forward on.
Lord Lucas
There is not much to say in substance about this amendment because my noble friend’s answer to the first part is yes, and to the second part, “Hard luck, we blew that out of the water earlier because we no longer have local referendums”. However, I want to explore the implications behind this amendment because my noble friend was kind enough to write to me during the Recess. There are some interesting aspects of localism and I should like to have a clear understanding of the Government’s position.
My noble friend wrote to me as follows:
“Neighbourhood planning offers an exciting opportunity for local communities—through a parish council or neighbourhood forum—to initiate meaningful negotiations with landowners over how their land may be used in a way which benefits the landowner and the community alike. It is of course of fundamental importance that any agreements reached are transparent, that any developments coming forward are acceptable within the broad ‘basic conditions’ for neighbourhood planning, and that landowners are not ‘held to ransom’ or unreasonably prevented from developing their land in any way which is acceptable in broader planning terms. The parish council or neighbourhood forum will in developing their neighbourhood planning proposals consult with a range of stakeholders, including landowners. They may also talk to the landowner about whether their land is accessible and deliverable and what types of development the landowner may consider accommodating on their land. This is important to ensure that any proposals in a neighbourhood plan or order have the support of those organisations and individuals needed to ensure delivery during the plan period. In the case of a neighbourhood development order they may also discuss what conditions may need to be built into the order, or whether there are any matters that will need to be provided for via a related planning agreement (for example the provision of services or infrastructure), to make development acceptable when considered against the basic conditions for neighbourhood planning. The responsibility for confirming what conditions or planning agreements are necessary to make the proposed development acceptable will sit with the local planning authority and the independent examiner. If a neighbourhood development order gave permission for a modest housing development, but required that to be accompanied by such extensive community benefits that the overall development would be rendered financially unviable, then the landowner would remain at liberty to apply to the local planning authority for planning permission for a less expensive scheme, in the normal way. Planning obligations need to meet strict legal tests if they are to be relevant considerations. These are set out in regulations, case law and guidance. These provide that a planning obligation may only constitute a reason for granting planning permission for the development if the obligation is necessary, directly related to the development and fairly and reasonably related in scale and kind to the development. If a planning obligation does not satisfy these tests it will not be a material consideration. Whatever negotiations and agreements do take place, it is important to note that what land is allocated in a plan or given planning permission in an order should never simply be a matter of which landowner can be persuaded to share the biggest proportion of any land value uplift with the community. It has to be about enabling any developments which the community support and which are acceptable when considered against the basic conditions”.
That is a very fair summary of the position as is. But, of course, this is localism. In a parish, words such as “fair” and, indeed, “sustainability” have altered meanings. The parish might, for instance, choose to talk to all landowners and ask them to put forward proposals for the way in which they might like to see development on their land, and for ways of mitigating any adverse effects on the neighbourhood that they perceive. The parish will then publish all proposals and invite comments from the public, which will be passed on to the landowners. The parish will then invite landowners to submit modified proposals in the light of comments, together with binding commitments to the mitigations that they have themselves—the landowners—proposed. The parish will then publish all proposals and invite the public to rank them. The most popular of the proposals will then go forward as a draft neighbourhood plan.
That is as fair as fair can be. There are no obligations on the landowners that they have not proposed themselves. All factors will be taken into consideration in the process of the parish ranking which ones they like best. I am sure that in most parishes the process will result in a large slice of the landowner’s planning gain ending up with the parish community. That is what I hope we are going to see as a result of the Bill. I hope that my noble friend will tell me that she sees no holes in my logic. I beg to move.
Lord McKenzie of Luton
My Lords, I had some reservations when I first read this amendment, but then was reassured when the noble Lord, Lord Lucas, went through the planning obligations provisions and the test that had to be met. He then worried me a bit when he went on to describe it as an auction among landowners in the parish potentially seeking out the highest bidder. I would need to read the record and I would be interested in what the Minister has to say about that. Does that not have the potential to be outwith the strict application of planning obligations and the rules that go with that? I do not assert that it is, but certainly the way in which it was expressed gave me some cause for concern that that might be the path that one was heading down. I would be happy to read the record and be reassured otherwise.
Baroness Hanham
My Lords, Amendment 210A would give new rights for qualifying bodies—neighbourhood forums and parish councils—to negotiate with landowners on infrastructure contributions and to promote proposals for parishing at the same time as they are preparing a neighbourhood plan. We discussed the issue of parishing earlier on.
The first part of Amendment 210A would allow a qualifying body—the neighbourhood forum or the parish—to negotiate with landowners for contributions to be paid to the community. The expectation is that the landowners would subsequently agree the contributions with the local authority through formal agreements—for example, Section 106 agreements. There is nothing to stop local communities talking to landowners about how their land may be used in a way which benefits the landowner and community, but the responsibility for confirming what conditions or agreements are necessary to make the proposed development acceptable must remain with the local planning authority. In determining a planning application, the authority will have regard to the provisions of the development plan, including any neighbourhood plans in force.
The amendment would cause significant confusion about when such contributions would be paid by the landowner, how they would meet the strict legal tests for planning obligations and how any of the community’s negotiations could be secured by legal agreements between the landowner and the local authority. I want to make it clear that whatever negotiations and agreements take place, what land is allocated in a plan should never be simply a case of which landowner is prepared to share the biggest proportion of land value uplift with the community. That was the point that the noble Lord, Lord McKenzie, was making. I accept the broad approach of the noble Lord, Lord Lucas, to this. However, I must reassert that it is the local planning authorities which must determine what obligations are necessary to mitigate development impacts, and that will include financial ones.
The second part of Amendment 210A seeks to empower qualifying bodies to promote referendums or proposals on parishing alongside referendums on neighbourhood planning. In my recent letter to the noble Lord, Lord Lucas, which he has quoted extensively and which I have placed in the House Library, I repeated our commitment in the public services White Paper to consider how to make it easier for local people, including neighbourhood forums, to take advantage of existing legislation which allows for the establishment of parish or community councils. Nothing would legally prevent the joint holding of referendums into a neighbourhood plan and into proposals for creating a new parish council.
With these reassurances—on the commitment from landowners and on parishing—I hope that the noble Lord will be happy to withdraw the amendment.
Lord Lucas
My Lords, I will speak at the same time to Amendment 210AB. Amendment 210AC, which is in this group, was admirably covered earlier by an amendment tabled by the noble Lord, Lord Greaves. I will not need to speak to Amendment 232A, which appears later; I am sure that the reply my noble friend will give on these amendments will cover that too.
Since we have done away with local referenda, we need some way of making localism relevant within cities. Planning is not the issue that is really going to get to people in cities. It is much more, as I said earlier, aspects of the way that they are dealt with by local councils within the matters that they have within their gift. I have picked up, in Amendment 210AB, their control over the way roads are used. When an area wants to examine pedestrianisation and alternative uses for parts of the street, to allow children to play or to affect the speed limits—and, talking more of Lavender Hill, the way in which parking regulations are enforced—those aspects are the sort of things that engage the spirit of the community.
A lot that happens under permitted development orders within planning—the way in which the streetscape changes, the way in which change of use is permitted to commercial premises and the developments of shopping streets that result from that—just goes ahead under permitted development and is not within the scope of neighbourhood planning as foreseen in this Bill. Yet those are the things that engage an urban community. If we want to make something of this Bill and the virtues that it will bring in urban communities, we have to look at giving local, neighbourhood communities some power over these things. I prefer the route that my noble friend Lord True proposed. That is a better way of doing things: to have a clear and formal partnership with good local authorities that will allow these things to develop and allow a voice.
In Battersea, which is within Wandsworth—a good Conservative council; it has been that for a long time—one still does not get that sort of bite on the way that things happen locally. I cannot afford to move to Richmond, so I am rather keen that we do something that will bite on my local council and to get to the position where we have within a neighbourhood plan some things to give urban communities a hold on things that they care about. I have picked two examples of the right way to go about it. That way, we have a hope of using the Bill to create vibrant urban communities that will have a real effect on what happens locally, which is mostly an apparition of the power of the local council. I am not addicted to this way of doing it. However, it is very important that we take this chance to try to create strong, geographically based—rather than racially or spiritually based—neighbourhood communities in cities. I beg to move.
Lord McKenzie of Luton
My Lords, this is another interesting series of amendments tabled by the noble Lord. I cannot but agree with the proposition that doing what we can to build and empower strong local communities must be right. I am not sure that the prescription which the noble Lord offers is right in its totality, particularly on road traffic regulations. In my experience, if one wants to engage a community one has a consultation on pedestrianisation, a one-way system or residents’ parking and sees what the response is. If a council sought to impose something like that without proper consultation, we would certainly see the spirit of the community engendered by those events. However, if we gave each neighbourhood particular powers, for example over pedestrianisation, we would face a clear issue of the view taken by adjoining neighbourhoods. We would almost need to reinvent the duty to co-operate at neighbourhood forum level if we went down this path. The basic proposition to use the opportunities that the Bill presents to enliven, empower and engage communities in an urban setting is absolutely right, but I am not sure whether the prescription of the noble Lord is the best way to achieve it.
Baroness Hanham
My Lords, Amendment 210AA would allow neighbourhood development orders to restrict permitted development rights in a neighbourhood area in order to preserve local amenities. Neighbourhood planning has been designed as a new addition to the existing planning system. It is permissive in nature. Therefore, it adds to existing permitted development rights rather than removing rights that already exist. Neighbourhood planning is at the forefront of delivering the Government's reforms and it should not be used to stop or restrict development. Rather, it gives people a real opportunity to shape and influence the places where they live. We need to ensure that the ambitions of people for their neighbourhood are consistent with the needs and ambitions of the residents of the wider area. I listened carefully to the noble Lord, Lord Lucas, when he spoke about cities and the effect on neighbourhood planning there. I have a lot of sympathy with the fact that local communities often do not come together, but part of the neighbourhood planning ought to ensure that groups are coming together to discuss all the issues around planning.
My concern with Amendment 210AB is that it would extend the powers available to communities to control the development and planning of their local areas by amending the Road Traffic Regulation Act 1984. It would expand the local authority’s ability to make traffic regulation orders and by-laws to preserve or improve a local area’s amenities. This is not strictly related to the neighbourhood planning provisions being introduced by the Bill, but does relate to the Government’s wider commitment to extend the powers of local authorities and communities to shape their local areas.
First, I reassure the noble Lord, Lord Lucas, that I support the principle that local authorities and communities should have a greater say in safeguarding local amenities. Similarly, the planning of a neighbourhood should be a holistic process that looks beyond just land-use planning matters to the wider community well-being of an area. A community may use the opportunity of preparing a neighbourhood plan to discuss its priorities for transport in the area. However, there are two key issues with the amendment. First, because neighbourhood plans form part of the statutory development plan for a local area, they can relate only to the development and use of land. Secondly, traffic regulations and by-laws should be a measure of last resort in achieving the goals of sustainable transport that the noble Lord seeks. By-laws create criminal offences intended to prevent specific nuisances. If used inappropriately, they can have a significant adverse effect on the local environment and economy. They should be employed only when all other measures have failed. Therefore, this amendment is unnecessary.
Again, I do not want to undermine the noble Lord’s principle of making sure that local neighbourhoods have the opportunity to discuss the things that affect them. If ever there was anything that affected them, it is traffic, parking and so on. However, this cannot be dealt with under localism in this part of the Bill, which covers neighbourhood planning. As a wider objective, I do not think that anybody would have any disagreement with the idea that local neighbourhoods should be at the forefront of thinking about the wider things that matter to them. It is just not appropriate here. I hope that with those explanations, the noble Lord will withdraw his amendment.
Localism Bill
Lord McKenzie of Luton Excerpts(14 years, 4 months ago)
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Lord Lucas
That is a nice illustration. There are bits of wording; as my noble friend Lord Deben said, if we are going to put something in legislation, then we must produce something that works in the courts. An authority must know that it is complying with the law and other people must be able to judge whether it has complied with the law. There are bits in here which are frankly impossible from that point of view. The words “of all” appear several times, and completely remove the definition from reality when it comes to deciding the matter in a court. There are things about future generations, where we cannot know or even begin to imagine. We hardly know what is happening to the economy next week, let alone what will be the effects of a future development on future generations. We can do our best to assess that, but we cannot be held accountable for whether it does or does not; one just produces an immediate morass in the courts if one goes down that route.
There is a lack, as several noble Lords have said, of development, or the understanding of development. If you are going to assess a sustainable development you have to look at it as a whole, as a picture of everything that is happening, and not its individual bits; as a picture of what will happen over time, and not at any particular instant. There is no recognition of that at all in this definition. You could trip up a development just because it is doing a bit of harm to something, even though looked at as a whole it was doing good.
Indeed, many developments harm things but do good in other ways, and some developments compromise the ability of future generations to meet their own needs. Every time you take a bit of coal, gravel or gas out of the ground, that is not available to future generations. It is inevitable that we are living with compromise and fuzziness in this area. It is up to us to do our best by some well designed guiding lights, but we should not try to pin down a legal definition to something which is not suitable for it.
Lord McKenzie of Luton
I thank the noble Lord, Lord Greaves, for moving this amendment. We have added our names to it and give it our full support. On a point of detail, I wonder if the reference to the Planning Act in subsection (3) of the amendment should be 2008 rather than 2004. I particularly commend the spelling out of the guiding principles rather than the adoption of the usual shorthand of the 2005 principles.
The amendment adopts the formulation of promoting sustainable development rather than contributing to it or furthering it, which we discussed in Committee. As the noble Lord said, this amendment would enshrine in primary legislation the duty to promote sustainable development at every tier of the process, including the Secretary of State, although the duty imposed on the Secretary of State relates only to the functions concerning applications for development consent, and this would not appear to cover, for example, the Secretary of State’s engagement with promulgating a national planning policy framework. We might just reflect on that.
There has been a divide in part of our debate today between those who say that these definitions should not be in primary legislation, those who say that it should be in the national planning policy framework and those who say that we should not necessarily seek to spell these out at all. We believe that it is right for it to be in primary legislation. I agree with the noble Baroness, Lady Parminter, on that. A number of noble Lords, including the noble Lord, Lord Deben, and my noble friend Lord Howarth, queried whether doing so in a sense gives litigants a chance to challenge every decision whichever way it goes. I would argue a corollary: that not having a reasonably sophisticated framework in which these things can be judged equally, if not creating a greater opportunity for litigation, which is one of the key issues with the national planning policy framework as it stands, is a lawyer’s charter.
The noble Lord, Lord Lucas, said that we cannot possibly live every part of our life by this wording. He is right. There will always be a balance, a judgment, to be made about future generations and the current, and about local and national. To do that within the context that this wording creates gives us a real opportunity of achieving what we would broadly all sign up to.
When we discussed this matter in Committee, I understood that the Minister had indicated no change to the Labour Government’s position on the meaning of sustainable development. I think that we had one exchange and I thought that that was confirmed. If this is correct, it is very hard to see how this is reflected in the draft NPPF, which might be interpreted as giving primacy to economic development and be a view that the noble Lord, Lord Deben, may support.
A number of inclusions or omissions suggest a move away from the definition reflected in the amendment in the name of the noble Lord, Lord Greaves. The abandonment of brownfield first, the lack of content around social justice or equality and weaknesses around affordable housing proposals do not seem consistent with no change to the definition of sustainable development. If this debate does nothing else, it gives us the opportunity to hear directly from the Front Bench whether that definition is something to which it adheres, however it may be expressed in legislation or be the framework itself.
The right reverend Prelate raised spirituality and the extent to which that is included. One might argue that it is encompassed within ensuring a strong, healthy and just society, which may be the root to addressing the issues identified by the right reverend Prelate. The noble Lord, Lord Deben, referred to sustainability as being what conservatism was all about. I read these principles and say that it is a fairly good description of what socialism is all about. I am not quite sure what conclusion we might reach from that. It will never be an all-encompassing definition. Certainly, it seems to me to be not inappropriate, if we can get this in the Bill, to spell it out, to expand it and to meet the aspirations of my noble friend about including cultural in the definition. It seems to me that a strong strand from this debate is that there does not have to be a conflict between growth and the environment. The two can be encompassed. There will always be a balance in that judgment.
I was as interested as ever to hear from the noble Lord, Lord Jenkin, about his earlier experience and his historical references. He was there right at the start, although perhaps there is a competing claim that it was the noble Lord, Lord Deben, who produced, via John Major, the term “sustainability” first. I do not mind who produced it first but we should seek to make sure that we encompass it in these important planning changes before us in the most appropriate way.
We would sign up to the definition and to it being in the Bill. Given where we are in this process, it is very important that we have a clear position from the Government certainly no later than Third Reading. Whether we get partial satisfaction today on this remains to be seen but we certainly cannot let it drift beyond Third Reading. If the Government are not able to bring something forward by then, I urge the noble Lord, Lord Greaves, to revisit this—we would support him—and test the opinion of the House.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, in the daily horoscopes sometimes I am a Virgo and sometimes a Librarian. Today I shall be a Librarian because they are hugely well balanced and see both sides of any discussion. That is precisely the position that I am in today. It has been a very helpful discussion with, as so often, real feelings behind it. From the outset, I shall say that I hear what everybody has to say about this. I may not be able to provide a definitive answer by the end but we are getting nearer to one.
The balancing act here is to do with the question of a definition. The noble Lord, Lord Howarth, put his finger on it: the more you define it, the more trouble you get into legally. This is something that we have to take into account. Indeed, what we have also learnt from the debate is that there are potentially still extras that people would like to put into the definition. I fully see why and accept the wish of the right reverend Prelate to see spirituality included, and what the noble Baroness, Lady Andrews, said about culture and heritage. I hear what my noble friend Lord Cormack says about the importance of development enhancing. However, with this we begin to string out a lot of things that sustainable development is meant to cover. This is a difficulty that perhaps both Governments have had over the period. We all believe in sustainability. We can all define it to our own satisfaction, but the question is whether through that definition you end up in a legal minefield. The comments and speeches today have been very helpful in that regard and will certainly take us forward.
The first thing that I want to say is that we support the principle that planning should promote sustainable development. Indeed, it is central to the approach that we have taken in the draft national planning policy framework. The framework, as presently structured, makes it clear that planning has three pillars: the environmental, the economic and the social. Those are the three pillars that contribute most to a planning decision. We fully recognise that we have to balance those three elements.
Secondly, we also believe that the objective of sustainable development is appropriate for statute. There is already a duty on those preparing local plans to do so with the objective of contributing to the achievement of sustainable development. That is already the situation. The Bill will introduce a new duty to co-operate in relation to planning for sustainable development, which will ensure that councils and other public bodies co-operate effectively on strategic planning matters, including sustainable development. Our Amendment 210D, which I will move formally at the end, would extend this principle to neighbourhood planning by placing on all neighbourhood planning proposals an explicit condition relating to sustainable development. This ensures that the principle of sustainable development runs through all levels of plan-making—strategic, local and neighbourhood.
Thirdly, I understand the desire to ensure that there is clarity and consistency in the meaning of sustainable development. We have heard this afternoon how difficult that is to achieve. Everybody sees just another little gate that they might open to put forward something that they feel strongly about. I recognise that there are strong views and, as I said at the beginning, I have heard clearly what has been said. I shall ask that we reflect on that when I come to the end.
“National Planning Policy Framework
(1) The Secretary of State must issue, designate and update a National Planning Policy Framework, which will establish policies to achieve sustainable development in the development and other use of land.
(2) Such policies should relate to mitigation of, and adaption to, climate change.
(3) Before designating a document as the National Planning Policy Framework for the purposes of this Act or before amending any such document, the Secretary of State must carry out an appraisal of the sustainability of the policy set out in the document or any amendments to it.
(4) A document may be designated as a National Planning Policy Framework for the purposes of this Act only if any consultation, publicity or parliamentary requirements set out by the Secretary of State have been complied with in relation to it.
(5) The requirements in subsection (4) above apply to any amendments to a National Planning Policy Framework.”
Lord McKenzie of Luton
My Lords, the purpose of this amendment is to impose a duty on the Secretary of State to produce and keep up to date,
“a National Planning Policy Framework, which will establish policies to achieve sustainable development … including mitigation of, and adaption to, climate change”.
This also requires a consultation process and a parliamentary process.
I am aware that some would argue against this proposition and that it opens the door to giving parliamentary sanction to a framework that they may consider to be flawed. However, given the potentially profound effect an NPPF can have, we consider that the better argument is for Parliament to be able to have its say. Obviously we welcome the opportunity for upcoming debates in your Lordships’ House—even two of them—but this is not a substitute for a proper parliamentary process.
I remind noble Lords that the coalition agreement said:
“We will publish and present to Parliament a simple and consolidated national planning framework covering all forms of development and setting out national economic, environmental and social priorities”.
As I said in Committee, if that commitment can be enshrined in the coalition agreement, why not in the Bill? To be clear, the amendment does not seek to put the NPPF in the Bill; it simply seeks the obligation for one to be produced and updated and to be subject to a consultation and parliamentary process, which can be determined by the Secretary of State.
When we debated this issue in Committee, we did so in the absence of an official draft of the NPPF. This of course we now have, although it did not see the light of day until we were embarking on the Summer Recess. Indeed, the announcement of the planning framework while Parliament was not sitting increased fears that Ministers were trying to steamroller through important changes without proper scrutiny or debate. An assurance of a proper consultation and parliamentary process could have lessened these fears and potentially obviated some of the more unpleasant exchanges that ensued via the national press.
This amendment does not seek to spark a debate on the merits or otherwise of the NPPF, but there can be no doubt about its significance, whatever its final form and interpretation.
Lord Jenkin of Roding
The noble Lord has accused the Government of trying to sneak through the framework document because it was published during the recess. I am quite sure that he will have had, as I have, a letter from my noble friend that says:
“We are keen to take every opportunity to consult on and improve the text of the draft framework. We are inviting the Communities and Local Government Select Committee to comment … and are seeking to secure time for both Houses to consider the draft framework in the autumn”.
Did he have that letter?
Lord McKenzie of Luton
Yes, I did. The point I was making was that the document came at the start of the recess and not everyone out there got that letter—and there are plenty of people out there with a very keen interest in the NPPF. We as parliamentarians may have done; others did not. If in fact the Government are happy and prepared to have these processes then let us get it enshrined in the legislation so that it can operate in the future as well. As I said, an assurance of a proper consultation and parliamentary process could have lessened those fears and potentially obviated some of those very unpleasant exchanges that took place.
The presumption in favour of sustainable development, the definitions of sustainability, the implications for the green belt and green space, the impact on housing, particularly affordable housing, and town centre policies are all matters that go to the heart of our national life. Planning is an important democratic means of mediating between different interests, in the public interest. There must surely be due process and a role for Parliament. Despite some misgivings, I understood that it worked for the national policy statements. I took it from our exchanges in Committee that the Government were not averse to this approach—indeed, if they are going to facilitate a process before Parliament, that would seem to support that conclusion. In the light of experience of the NPPF to date, I invite the Government to accept this amendment. I beg to move.
Lord Berkeley
My Lords, I would like to ask the Minister a simple question. Under the Planning Act 2008, the national policy statements—which I think everyone welcomed at the time—require parliamentary approval and debate. I do not think that there has been any problem with that. They require consultation and they have had it, although some of them are receiving it rather later than some of us would like to see, though I am sure that they will come eventually. It seems to me that the national planning policy framework is a sort of parallel document to the national policy statements for planning and in respect of other smaller developments which do not come within the scope of the NPSs. As the NPSs have a link to the planning legislation, it seems logical that the national planning policy framework also should have one. I welcome the consultation and the debates that we are going to have. It would, however, seem to make it a simpler and clearer structure if there was a reference in the Localism Bill to the NPPF—not what it should say or anything like that, but just a reference.
Lord McKenzie of Luton
My Lords, I thank the Minister for that reply. Parts of it, I am bound to say, I thought were a little strange. In terms of the comparison with the national policy statements, she suggested that the NPPF had a lesser impact because local plans only had to have regard to it. Given where the Government are on the presumption in favour of sustainable development and where they are so far on transitional provisions, is it not the fact, or the likelihood, that unless something else changes before we conclude with this legislation, the NPPF will be the key document for determining a whole range of development applications? This is because local plans may not be up to date or complete for all the reasons that we are going to discuss shortly. To make that distinction therefore seemed to me somewhat strange.
The noble Baroness also said that there was no statutory requirement to have a sustainability appraisal of the NPPF. But is there a statutory requirement—again we are pre-empting an amendment we will come to—to have a sustainability assessment associated with the revocation of regional spatial strategies? If the Government are doing an assessment for that on a voluntary basis, as I understand them to be, then that does not seem to be a very coherent argument for not having an appraisal of the NPPF.
We are partly looking back, and partly shutting the stable door after the horse has bolted on the first NPPF, but this is looking forward as well. It deals not only with the existing NPPF, but requires there to be some parliamentary process attached to it. Of course I accept that we have two debates, by one route or another, coming up in your Lordships’ House. I am not sure what the arrangements are at the other end; the Select Committee always has the opportunity to review a policy and hold the Government to account. However, that is not the same as having a formal process by which Parliament can have its say and express its opinion on this hugely important document before it is finalised. If the NPPF were so insignificant and something that people only had to have regard to, then why on earth has there been this great furore both inside and outside Parliament? It is partly because of trying to understand the Government’s intent, and I can see that that can be resolved in due course. I also accept that the Government are as a matter of fact involved in a lot of consultation and discussion, and that is to be welcomed. But what is so wrong in having that as an obligation written on the—
Lord Greaves
My Lords, I cannot avoid teasing the noble Lord, and I hope he will answer this question. The national planning policy framework will replace planning policy statements and such of the old planning policy guidance documents as still exist. Why was it not necessary to have a requirement for planning policy statements on the face of primary legislation if it is now necessary to have it for the NPPF?
Lord McKenzie of Luton
My Lords, an argument could be mounted to that effect. I prayed in aid my absence from those debates before, so I shall excuse myself. The question is a fair one, but that does not necessarily mean that the balance should come down in favour of not having this process for the NPPF. It is such a hugely important document. One has just to look at the impact assessment of some of the changes being proposed covering town centre and parking policies. These things are very important and really go to the heart of our national life in so many respects. It is about communities, how we conduct our lives and how we plan for the future. To take that formally outwith Parliament does not seem to be right. In the circumstances, I am inclined to test the view of the House on this matter.
Lord Beecham
My Lords, I was taken with the Minister’s venture into the area of astrology earlier. However, I think she called herself a “Librarian”. I think a librarian is someone who works in a library. I think she meant “Libran”, which is rather different. I hope she will forgive me if I assume the role of a scorpion when we look at this amendment, as Scorpio is my astrological sign.
I am slightly puzzled by the explanatory letter that the noble Baroness circulated a couple of days ago. Perhaps, in her reply, she will be kind enough to elucidate it further because the letter refers to,
“an environmental assessment of the regional strategy”.
I am not sure what that means. Are only the environmental aspects of regional strategies being assessed? Could she explain how the process of assessment is taking place? The letter also says that this is on a “voluntary basis”, which I take to mean that it is a non-statutory exercise and that the Government will be consulting on these documents shortly. I do not know whether those documents are yet available or, if so, where they might be obtained, but I would also be grateful if she could indicate the nature of the consultative process. For example, we now have local enterprise partnerships, so will those partnerships be consulted? I assume local authorities will be, but one could also assume that those partnerships would be involved in all that.
Like other Members of your Lordships' House, I regret the demise of all the regional development agencies, although I accept that in some areas they were not particularly effective or popular. However, I suspect that we may see, just as in health, the quiet restoration of something rather similar—perhaps more at the sub-regional level, but no doubt under another name. I hope that the Minister will be able to confirm that that approach of looking at sub-regions will be part of this assessment and will also take note of some of the other developments in policy over the past few months; for example, the creation of enterprise zones and the operation, such as it has been, of the regional growth fund. These matters are clearly relevant to the planning regime, but it is not clear whether and to what extent they will be part of this assessment.
This group also refers to the position of transitional arrangements. The noble Lord, Lord Best, will no doubt be speaking about that, and I do not want to anticipate what he will say, but I strongly support the terms of his amendment because there is a considerable danger of a gap which would create difficulties in the light of the arrangements that the Bill contains. I hope the Minister will consider sympathetically the amendment that the noble Lord will, no doubt, move shortly. I would be grateful if the Minister could clarify, if not today, then subsequently, the questions I have raised.
Lord McKenzie of Luton
My Lords, like my noble friend I was puzzled by this group of amendments, and I hope the Minister can help us on a range of points. This seems a further twist in the saga of regional spatial strategies. The Secretary of State sought to do this by diktat and was ruled out of order, then it was provided for in the Bill before us and now, according to the letter from the Minister to which my noble friend Lord Beecham referred, by a stand-alone order-making power. Along the way, the Government seem to have determined voluntarily that they wish to undertake an environmental assessment of the revocation of the regional strategies and the structure plan policy, so it is the process of revocation which is the subject of that assessment.
Can we hear a little more from the Minister about how this all came about? At what point was the decision taken to undertake an environmental assessment of the proposed actions? Who is conducting the assessment and what are its precise terms of reference? How long is it expected to take? What is the status of local development frameworks in the interim? Can the Minister explain how this fits together with the NPPF and, in particular, the presumption in favour of sustainable development? We know that there are local plans which, together with existing regional spatial strategies are, one might say, complete one day but not the next, unless the transition provisions are put in place. The statement that we want to do away with regional spatial strategies as soon as possible and then the caveat about “subject to the sustainability assessments” smacks a little of predetermination rather than predisposition. Does this hold out the prospect of some regional spatial strategies being revoked and others not? If so, how does this all fit together? Is there not a risk that all this just creates further uncertainties in the planning world? Will the order be subject to the affirmative or negative arrangements? The Minister may say that this is all code for having some fairly loose transitional provisions, but this seems a rather strange set of amendments. Like my noble friend, I would greatly appreciate some further explanations.
Baroness Hanham
I did not say that. I said that they will be put forward as soon as possible after Royal Assent. The consultation on the environmental assessment is taking place. You cannot do anything without having taken account of the consultation, so the revocations will be only after the consultation has been considered.
Lord McKenzie of Luton
I am sorry to ask the Minister again, but I think it is important we get to the bottom of this. Can she tell us why there is this change in approach? This was not the original plan, was it? If it was, this group of amendments would not be necessary. How does the presumption in favour of sustainable development work in the interim? For so long as those local plans and the regional spatial strategies which support them are in place, will they hold sway? That will obviously change the minute the plug is pulled, if it is, on the regional spatial strategies. I am interested to understand why and at what point it was decided to undertake these environmental assessments. Can the Minister confirm that what is being assessed is the consequence of the revocation of those strategies? It seems a fairly significant change in where we all thought we were heading and did not want to head.
Baroness Hanham
My Lords, I think I am right in saying that there was a legal challenge that required these environmental assessments to be carried out. It is a necessity to make sure that they are all carried forward properly. The noble Lord asked about the relevance to the presumption in favour of sustainable development. There will be no change to that until the local development frameworks are developed and the national planning framework comes in.
Lord McKenzie of Luton
If the noble Baroness would forgive me, I am trying to understand the status of the NPPF in the interim before—or if—these strategies are revoked. Where does that leave the presumption over that period? It seems from what she said that there has been a legal challenge which, essentially, has forced the Government to go down this route. I therefore presume that this is not just a cosmetic exercise but is real; and the consequence could be that some strategies might be revoked and others not. Is that right? It seems to me to leave an entirely chaotic situation. Does the Minister recognise that it could lead us into a situation which nobody has contemplated or to date recognised?
Baroness Hanham
My Lords, the national planning policy framework is being consulted upon and, once it is an approved document, it will be the document to which people will refer and will replace the regional strategies. The consultation on the environmental impact assessments is a consultation, as I have said, and we will need time to consider it. If all the orders can be dealt with at, or nearly, the same time, they will be. All I can say is that a consultation is a consultation and there are always results; you cannot ignore them so we will have to wait and see the response and the impact of it. I will not know that until the 12-week period is over and the consultation can be considered.
As for regional spatial strategies, their effect stays until they are revoked. The national planning policy framework will then either have been put forward just before that or very shortly afterwards. By that stage, anyway, it will be capable of being the primary document.
Lord McKenzie of Luton
I will not press the Minister again but, given what I think is a quite significant development, could I ask for the chance of discussions before Third Reading, so we fully understand all its ramifications?
Baroness Hanham
I am sorry that I have not succeeded in convincing the noble Lord but, yes, of course we are happy to discuss this issue further and we will make arrangements to do that.
Lord Greaves
My Lords, my noble friend has missed a little of the discussion this afternoon. I have to confess that I always thought that Essex was in East Anglia and I claim to be a geographer. I stand corrected and I will never make that mistake again. All I know is that all those places in that easterly bulge in the country are deplorably flat.
The serious point that I want to make on these amendments is simply to lend my support to the point made by the noble Baroness, Lady Young of Old Scone, and the noble Lord, Lord Deben. It would be good for the Government to use “development” and “sustainable development” in a rather more rigorous manner and not confuse them with each other quite so much.
Lord McKenzie of Luton
My Lords, my noble friend Lady Young’s amendments are entirely reasonable and I see the thrust of them, but I thought that they were about removing the term “sustainable” from provisions in the Bill and not adding it.
On the duty to co-operate, the noble Lord, Lord Deben, makes an interesting point about knowing how to be local. However, to be local on a sustainable basis in some respects needs co-operation and engagement not only with near neighbours but on a broader front. Some of us have ongoing concerns about the demise of regional spatial strategies. They were not necessarily the answer to everything and were perhaps not perfect, but with those gone the only thing that exists between the regional strategies that were there hitherto and local authorities is this duty to co-operate.
It seems to me that there should be requirements on local authorities to co-operate. Part of the problem is knowing how extensive that co-operation would and should be—for example, on transport or waste issues. Unless there is recognition that this must be an integral part of the way forward, then I think this really is going to be a recipe for isolationism, that we are going to draw up the barriers around our little location, irrespective of what happens around us. As regards definitions of the eastern region, I can say as somebody who lives in Luton—long since known as the urban bottom of the county—that Luton and the rest of Bedfordshire do not always do things the same way. I must apologise—I have been referring to the noble Lord, Lord Gummer, and it should be Lord Deben. I do apologise. Thank you for that correction.
I hope that I have made my point. It seems to me that my noble friend is addressing the strength and importance of the duty to co-operate, and in that we support her.
Baroness Hanham
My Lords, I, too, am guilty of the terrible solecism of not referring to the noble Lord as Lord Deben. I have known him so long as John Gummer that Gummer naturally slipped out. None the less, I apologise.
“(3) The scheme must contain—
(a) an assessment expressed in numerical terms concerning the present and projected levels of accommodation need and demand in the district of the housing market area within which the local planning authority falls; and(b) the authority’s proposals for addressing such needs and demands.(3A) The proposals referred to in subsection (3) shall include the authority’s plans relating to the provision of housing, including affordable housing, in its district.””
Lord McKenzie of Luton
My Lords, in moving Amendment 204A, I shall speak also to Amendment 204G. These amendments focus on housing and housing assessment.
A consequence to the change in planning, especially the demise of regional spatial strategies, means that local authorities will no longer be able to blame development on regional requirements. It is now down to them. This places particular emphasis on assessment of housing need, including, importantly, the needs of the vulnerable and affordable housing requirements. That is why, at the urging of the National Housing Federation among others, we seek to ensure that there is a clear and comprehensive statutory duty on local authorities to maintain an adequate assessment. The federation states that structurally the focus is on the planning system in the medium term at least being plan-led. Again, this is good, although it places a greater burden on housing associations to forward plan development programmes, since proposals may have to be made through the local plan process, given that local plans will be expected to identify the key proposed housing sites so that the plan can demonstrate that it is sustainable. In the short term, it is likely that there will be more appeals, as house builders try to take advantage of the presumption in favour of sustainable development where plans are out of date and a five-year plus land supply cannot be demonstrated.
The appeal process may raise issues about whether affordable housing policies are up to date, and some developers will argue that present policies fail to reflect the affordable rent regime or the changes in grant availability. They will also argue that viability prevents them providing full levels of affordable housing. Housing associations may need to monitor appeals to ensure that affordable housing levels are not squeezed, potentially offering support to local planning authorities to evidence need for affordable housing in the market area. Housing in its broadest sense—accommodation needs—must be robustly assessed in preparing local plans. With 1.7 million households on social housing waiting lists across the country, it is vital that this is laid down in law.
The reforms to the planning system outlined in the Bill offer a new opportunity for local people to play a more active role in shaping development in their area. However, in order for them to do this, it is vital that they have access to the information that they need. This will enable them to make informed decisions and hold their local authority to account. Hence these amendments will put a duty on local councils to outline in detail in their local plan how they will address housing need. To support this, councils will be expected to provide good-quality data on affordable housing need and demand. There are a number of benefits to this approach, such as transparency; by ensuring that local authorities undertake a robust assessment of housing need, residents will have the information that they require to fully understand local planning decisions. Then there will be comparisons; detailed information will allow residents to compare the performance of their local council to that of neighbouring authorities, which will allow local people to develop a better understanding of how their council is performing. In addition, there is accessibility, with complex data put in an accessible format. Local people without a formal planning background will be able to engage in the planning decisions that affect their local area.
These amendments will also put into law a clear requirement on councils to undertake a strategic assessment of housing and accommodation needs and demand in their local areas. While the national planning policy framework promotes this, we firmly believe that the issue is too important to leave to regulations and guidance alone. With millions of people on social housing waiting lists, many with complex care and support requirements, this duty will ensure that councils have the information that they need to appropriately house people in their communities. The information will be invaluable in determining the amount of accommodation required, including affordable housing.
In Committee, the Government said that they would be requiring an absolutely clear, transparent and robust numerical assessment of housing need. However, it was argued that Section 13 of the Planning and Compulsory Purchase Act 2004 already outlined the necessary duty, when that section does not require local authorities to consider future need and demand in their areas. For the sake of future generations, it is vital that councils are required to make and act on these projections. To avoid local plans concentrating narrowly on immediate housing need to the exclusion of future requirements, it is crucial that that duty is put into law. I beg to move.
Lord Beecham
My Lords, I congratulate my noble friend on tabling these amendments, which deal with one of the most crucial social issues that affect the country today. Looking round this Chamber, I almost regret to say that most of your Lordships will recall the famous television programme from the 1960s, “Cathy Come Home”, which really drew attention to the acute state of housing need at that time. We are not quite in that position, but we seem to be approaching it, and the lack of house building currently planned would seem to bring the day nearer when we would be back to the future in those terms. So these are very timely and relevant amendments, not least because there are some indications that already there is a willingness on the part of some local authorities to waive or reduce the proportion of affordable homes within developments. But even if that were not correct, we need a further elucidation of what is meant by affordable homes.
Affordability will vary from place to place, but more than that the issue of tenure needs to be addressed. While it may be perfectly reasonable to prescribe a proportion of homes for owner occupation, the demand for rented accommodation is still high. I can speak from the experience of the ward that I represent in Newcastle, where a significant regeneration scheme is under way, with a very modest element of affordable homes within it and, within that, an even more modest allocation of homes to rent. Yet given the socio-economic profile of the area, I suspect that there will be much greater demand for rented accommodation than there is likely to be in the course of this regeneration.
I am sure my noble friend and the Minister will agree that, whether or not these amendments are passed, attention needs to be given to assessing separately, as it were, the need for rented occupation and owner-occupied accommodation. That rented accommodation need not necessarily be in the form of social housing by local authorities or registered social landlords—it could be private rented accommodation but at rents which are affordable to the local community to meet that local demand. I hope that, as this matter goes forward, whether in the statutory form or otherwise, that further refinement of the concept of affordability can be taken into account and reflected in policy.
Baroness Hanham
My Lords, I thank noble Lords for their contributions. As one would expect, it ended up with a wider discussion on housing. We have had that on earlier parts of the Bill, which does not mean that we do not have to listen again to the important points that were made. Before I start on the amendments, two areas of thought were triggered in my mind. A concern was raised by the noble Lord, Lord Newton, that with localism and local neighbourhood planning, no one would accept having housing in their area and that they keep trying to shovel it off to somewhere else. That will not be possible because the neighbourhood plans will have to conform to the local development plans, which will have a clear indication of, first, the number of properties and housing they expect to be built and, secondly, the general area. The neighbourhood plans will be able perhaps to say, “Well, we would rather not have it there but we could have it there”. There will be no possibility that they will not deliver what the local development framework requires. That should be helpful.
The Government are committed to 150,000 new homes before the next election, which will be a great deal more than we have seen over the past few years. My honourable friend Grant Shapps at the other end is actively pursuing policies to ensure that housing is developed. The new house bonus is meant to contribute to and encourage both the building of new housing and the improvement of properties. It covers affordable rents and encourages other capital expenditure. The pressure to produce more housing will be there from the Government.
We are asked to talk here about the possibility of a mandatory housing assessment, which we have already discussed a couple of times. I have tried to persuade the House, so far without success, that it is unnecessary to put this in the Bill formally. As my noble friend Lord Greaves has just helpfully pointed out and as I was going to say, the draft national planning policy framework has very clear policies on how much housing must be built and what the local authority’s responsibility will be. That has been combined with the guidance on strategic housing market assessments, which already sets out a framework for local authorities to take account of need and demand for both market and affordable housing, and to keep this under review over the plan period.
Local authorities already need to prepare an annual monitoring report covering housing delivery, which they must publish locally and which sets the context for reviews of plan policies. Preparing evidence is part and parcel of the plan-making process that has its own robust requirements for publication and consultation. Making local authorities publish assessments prior to undertaking local plan preparation would add yet another layer of unnecessary bureaucracy. I fully agree that local authorities should understand and plan properly for housing and affordable housing requirements. However, since existing requirements perform the functions intended by these amendments, I cannot support them. They are already being carried out.
An important point was raised by the noble Baroness, Lady Whitaker, and much supported by my noble friend Lord Boswell, on Gypsies and Travellers. I am sure noble Lords are aware that local authorities have a statutory responsibility for assessing Travellers’ needs. Every local authority, when undertaking a review of housing needs for its district, is required to consider the needs of Travellers under Section 8 of the Housing Act 1985. Local authorities are also required to prepare a strategy to demonstrate how they will meet the accommodation requirements of Travellers. All the requirements are there; it is up to the local authorities to make sure that they fulfil them and carry out their obligations under the various aspects of legislation.
With the explanation that these amendments are not needed, and that there are good, robust policies to ensure that there is housing assessment as well as to make sure that affordable housing and other housing will be built, I hope the noble Lord will withdraw his amendment.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for her response, although I do not agree with some of what she said. More than 150,000 new homes a year—
Lord McKenzie of Luton
I am sorry—over four years. However, even 150,000 a year is less than what the previous Government achieved. If you go back a couple of years, the number of housing starts was the highest for around 20 years. The Government constantly quote a later figure, which was affected by the financial crisis. However, if you look at the data over the period you will see something else.
Lord Greaves
I wonder if there is confusion here between housing starts and affordable housing starts.
Lord McKenzie of Luton
Indeed, the noble Lord is absolutely right. However, I understand that the mechanism to achieve affordable housing is through 80 per cent of market rents being the primary funding source for it. Therefore, what the Government have done has slashed capital funding for affordable housing by driving an approach that jacks up rents, which for many people will be paid out of the housing benefit budget. It is difficult to see the logic of that approach from the Government’s point of view.
The Minister’s response to the noble Lord, Lord Newton, was to say that local development plans have to be adhered to. I thought that the noble Lord’s point was about what happens in adjoining local authorities and how they can be persuaded to provide affordable or other housing when a neighbouring authority is fully developed or has little room to develop further. As I have mentioned, that is precisely the situation in which we find ourselves in Luton, as do other local authorities. The noble Baroness says that the route is through the NPPF; I think the noble Lord, Lord Greaves, quoted from that. However, as we have debated, it is a question of having regard to that. We want to put something transparent in the Bill. That transparency will help the understanding of local people as well.
Lord Greaves
If the NPPF had only to “have regard to”, people might be less concerned about it. Is it not the case that local plans—core strategies—will not be approved by the inspection process unless they conform to the NPPF? They do not just have to have regard to it.
Lord McKenzie of Luton
That may be the case up to a point. How that works in practice remains to be tested, particularly given the pressures on the inspectors. We shall come to that point in a moment.
I say to the noble Lord, Lord Greaves, that I am old enough to have watched “Cathy Come Home”. I think I did; it was on a black and white television. It was a defining moment in our country. We are at risk of going back to that. These assessments must also be seen in the context of what is happening to housing benefit. We know that many people will be made homeless and that many will be uprooted from their current communities and forced into new ones. Following the point of the noble Lord, Lord Williamson, about how robust and up to date those assessments are, they would also need to take account of such movements, which could be very significant.
I very much warmed to the comments of my noble friend Lady Whitaker and the noble Lord, Lord Boswell. The Minister’s response was that there is already a statutory responsibility. However, the reality is that to date it has not delivered for Gypsy and Traveller families. It is right that we should focus on that. It was absolutely commendable of the noble Lord and my noble friend to do so in the course of this debate.
My noble friend Lord Beecham, in supporting the amendment, said that we should look not just at social housing or affordable housing—whatever description we apply to it—but at the private rented sector as well. That is absolutely right: we have to look at all areas, particularly the private rented sector. We know that the formation of households over the next decade will increase—certainly at a faster rate than new homes are projected to be provided. That is the source of some challenge.
The noble Lord, Lord Greaves, made the point that it is not just about whether somebody can afford a property but about what they are affording. What is the quality of the home that they are able to access? That is why, like him, I am a great supporter of the social housing sector. I am sure the noble Lord himself remembers council house-building when it took place and Parker Morris standards, with decent garden sizes. That may not be easy for us to return to but it was indicative of a time when we believed that people should be properly and decently housed.
Baroness Gardner of Parkes
My Lords, I was very involved in housing when Parker Morris standards were still used—
Lord McKenzie of Luton
I should be very interested to learn what the noble Baroness wanted to say about Parker Morris standards. Perhaps we can speak in the break.
My understanding is that the real difference between us here is whether this matter should be dealt with in guidance, through the NPPF or in the Bill. We believe that it is such a fundamental issue that it should be in the Bill. Indeed, if we are on the same page regarding what we want to achieve, I do not see why the Government cannot accede to having this as an integral part of the legislation. It is a key and fundamental—
Baroness Gardner of Parkes
I am told that I am not out of order and that I can therefore ask the noble Lord a question. Is he aware that when the Parker Morris standards were in force, the standard of all the local authority housing, as it was at that time—social housing has widened since then with housing associations —was way above that produced by any commercial developer? I have heard noble Lords in this Chamber say the reverse of that, but that is not the case. Parker Morris was the town clerk of Westminster City Council. His standards were too high and could not continue to be afforded. Is the noble Lord aware of that?
Lord McKenzie of Luton
Indeed. I am certainly aware of the challenges that that produced but I hang on to the point that it was a good period for the provision of housing, with people, whatever their means, having the chance to live in decent houses in good neighbourhoods. Indeed, for 20-odd years I had the privilege of representing a patch on Luton council built just after the Second World War to those standards and it was a great place. However, that is a bit of a diversion from the amendments before us, and that is my fault.
As I said, the difference between us is whether this matter should be in the Bill or otherwise. I accept that the Government are not going to be moved on this. We will continue to make the arguments but, for the time being, I beg leave to withdraw the amendment.
Localism Bill
Lord McKenzie of Luton Excerpts(14 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“( ) On application by a relevant authority, the Secretary of State may direct that the substitute calculations referred to in subsection (5) may be increased by an amount determined by the Secretary of State.”
Lord McKenzie of Luton
My Lords, the purpose of the amendment is to try to have a safety valve in the arrangements for referendums around council tax, and for the outcomes of those, whereby the Secretary of State, notwithstanding the early determination, may direct that a substitute calculation can be increased by an amount determined by the Secretary of State. When we debated these amendments before we instanced particular circumstances where it was perhaps difficult for a local authority to disclose fully some of the sensitivities around its budget. Those matters might be commercially confidential or there might be a dispute outstanding. To spell out the consequences, risks and costs associated with that that could fall on the local authority, which could be difficult and prejudice its position. Hence the proposition that there should be an opportunity for the Secretary of State, obviously after discussions, to increase the amount determined. It may be that the Minister will say that this could be dealt with earlier in the process when the Secretary of State designates certain categories of authority, and that there will then be scope through that discussion to itemise just a few or even one particular local authority. That would be the mechanism to allow a council tax increase which was relevant to that local authority, but which was greater than the amount generally determined. That is the purpose of the amendment. I beg to move.
Earl Attlee
My Lords, I fear that my response on this occasion will be fairly similar to the previous one. The amendment does not take account of the fact that the provisional principles for council tax referendums will be announced at the same time as the provisional local government finance settlement. Authorities will then have the opportunity to make the Secretary of State aware of any exceptional circumstances that they consider he should take into account when determining the principles.
The noble Lord, Lord McKenzie, suggested that there may be financial problems that the local authority is reluctant to disclose. But what about being open to the Secretary of State about its problems? Surely it would want to keep the Secretary of State informed. I do not understand how the situation could arise whereby a local authority was in severe difficulties but wanted to keep that quiet from the Secretary of State.
Lord McKenzie of Luton
I am sorry if I was not clear. The concern was not about being open and transparent with the Secretary of State, but about the process of a referendum laying bare some difficult situations that could prejudice the outcome of those so far as the wider public is concerned. Obviously, in due course, everything would have to be properly reported and accounted for in the public domain, but there could be some sensitivity around issues just at the point where the referendum might be undertaken. That is the issue we are seeking to safeguard.
Earl Attlee
I think that I can accept, as the noble Lord describes, that you might not want to make the difficulties public at the time of the referendum, should that be necessary, but I do not understand why the local authority would not make it clear to the Secretary of State that there was a problem locally. It might have been a minor disaster, or a facility could have been destroyed, for example. The Secretary of State may or may not be aware of it but the local authority could tell the Secretary of State, and if it is a matter that does not need to be fully advertised then the Secretary of State could perhaps put it in a different category. It might be common knowledge, and therefore it would not be a surprise that the local authority was put in a different category.
In addition, if an authority is faced with difficulties prior to the referendum being held, the Secretary of State may direct that the authority need not hold a referendum if he considers that it will be unable to discharge its functions effectively or unable to meet its financial obligations. It cannot be right to allow an authority to apply to set an excessive council tax after it has been rejected by the electorate, nor can it be right for the Secretary of State to set a higher level of council tax after a referendum.
I do not think that this is localist. Indeed, it would defeat the whole reason for having a council tax referendum in the first place—to let the local electorate decide. I therefore ask the noble Lord to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I am grateful to the noble Earl for his explanation. We had this response and exchange previously. I should stress that I was not in any way suggesting that a difficulty which a local authority may be in should not be fully shared with the Secretary of State. I was simply expressing the difficulty, at that point in time, of having to expose it fully in the public domain because of the adverse consequences that it might bring, to the detriment of the taxpayers in that area. That was the issue that I was seeking to pursue.
I take the noble Earl’s point that doing this perhaps after the referendum has been lost would seem to negate that process. However, I hang on to the point that there needs to be some mechanism to deal with it. The noble Earl referred to provisions, which we will cover in a different way in Amendments 196A and 196B, whereby if the Secretary of State is of the view that an authority is unable to discharge its functions or would be unable to meet its financial obligations the Secretary of State can step in. However, when we discussed that matter last time, it emerged that that would be an in extremis situation and I am still trying to focus on an issue when that situation has not been reached but it might be a material contractual issue that the local authority is facing. The issue may have reached a critical stage in negotiations, or there may be litigation pending or under way. I am suggesting a safety valve to deal with that.
If the Minister is saying that the best way of dealing with that is to have these discussions earlier so that there can be a separate category for that authority, I would accept that as a route forward. Quite how it would be viewed by the wider public if an individual authority, which presumably would have to be named, were to be separately categorised, and the inferences that might be drawn, could give rise to some—
Earl Attlee
My Lords, you could have a category with a single authority or with two authorities that have some bad luck, where something went wrong, and they could be treated a little more generously than others.
Lord McKenzie of Luton
Again, I am grateful for that. I hold to the view that although it may help in some instances, being named separately in a category with a potential council tax increase that was greater than that of most other authorities could itself engender inquiries, concerns and speculation over what might be going on. There is no easy way round this but I am happy to accept the Minister’s assurance that this type of issue could be dealt with through the mechanism that he identifies. I am content to leave it there and beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I beg to move Amendment 195K but shall not move Amendments 195L or 195M because this is an overlapping provision. This amendment would delete the detailed list of issues where guidance can be given by the Secretary of State in relation to a referendum. Regulations can touch upon provisions relating to: the question to be asked; the publicity to be given in connection with a referendum; the limitation of expenditure in connection with a referendum; the conduct of the authority, members of the authority and officers of the authority; when, where and how voting in a referendum is to take place; how the votes cast in a referendum are to be counted; and for disregarding alterations in a register of electors and so on. I contend that those issues should be left to the local authority to determine. If we are to be adherent to localism and want to trust local authorities, then we do not need this degree of prescription.
I am afraid that I missed all the fun over the removal of referendums earlier in the Bill as I was in the Committee on the Welfare Reform Bill. This is one area where referendums clearly remain in the Bill but I believe that the prescription should be removed.
Earl Attlee
My Lords, this amendment removes the power to make regulations in relation to significant issues relating to the conduct of council tax referendums. If there are to be no regulations, what are there to be? Are authorities to be left to make up their own rules on conducting council tax referendums and counting the votes?
Voters are entitled to see referendums handled in a consistent way with proper safeguards. The Government have accepted, on the recommendation of your Lordships’ Delegated Powers and Regulatory Reform Committee, that the regulations should be subject to the affirmative resolution procedure.
When I responded to similar amendments proposed in Committee, I said that the regulations would be modelled on existing regulations on the conduct of referendums on local government executive arrangements and would be subject to consultation with the Electoral Commission. Therefore, we are not suggesting a completely different system for operating a referendum; we are merely suggesting changes, where necessary, for this particular type of referendum.
Given that the regulations will be given considerable scrutiny and will be subject to the approval of both Houses, I request that the amendment be withdrawn.
Lord McKenzie of Luton
My Lords, I do not think that we are going to agree on this issue. We think that the Bill is unduly prescriptive and unnecessary. Clearly, the local authority has to have a referendum if it is going to deal with its council tax levels or if it wishes to go above the designated level. It cannot avoid that. If it acted spuriously or arbitrarily, it could obviously be held accountable for that.
There is also the question, which we touched on in Committee, of what happens if the referendum is found to be flawed in some respect in due course. What happens to the declared outcome of that referendum? That is an adjunct to these provisions but, on the specifics of seeking the removal of this prescription, I think that I understand the Government’s position. I do not agree with it but I do not see that there is a great point in pursuing it further this evening and I beg leave to withdraw the amendment.
Earl Attlee
My Lords, in its report, your Lordships’ Delegated Powers and Regulatory Reform Committee recommended that regulations made under new Section 52ZQ should be subject to the affirmative procedure.
These regulations will set out the rules for conducting council tax referendums, and I am content that the Bill should be aligned with this recommendation. To give effect to this recommendation, Amendments 196 and 197 will add new subsection (6A) to new Section 52ZQ of the Local Government Finance Act 1992, which is inserted by Schedule 5 to the Bill, and will amend Schedule 6 accordingly.
There are a number of further minor and technical amendments—Amendments 197A, 197ZA, 197ZB, 197ZC, 197ZD and 197ZE. These do not alter the policy effect of the council tax referendums provisions but they ensure that minor drafting errors are corrected and that the provisions operate appropriately in relation to Wales. If your Lordships desire, I can give more detail on these amendments, but I assure noble Lords that they are minor and technical. I beg to move.
Lord McKenzie of Luton
My Lords, I am content with the government amendments and have no points to raise in connection therewith. Although they are grouped together, I have not yet spoken to Amendments 196A and 196B. I do not know whether they will be called separately but I can support the government amendments as they stand.
Lord McKenzie of Luton
My Lords, this amendment takes us back to the point that we touched on earlier this evening: whether circumstances might arise where currently the Secretary of State can determine whether an authority will be unable to discharge its functions in an effective manner or will be unable to meet its financial obligations unless it has a so-termed excessive council tax increase. Our amendment would bring to that process the right to seek an independent assessment of those same criteria, so that there is a process, other than, or in addition to, the Secretary of State’s own engagement with that decision. That may, in part, provide a route for dealing with the issue that we discussed earlier concerning one-off events arising for local authorities.
My understanding is that these tests are to be judged in the extreme—only if there is a cataclysmic situation and not one somewhere along the spectrum before that. I do not think that that is what the wording actually says or what the natural meaning would be. However, I believe that an authority should have a right to an independent assessment when it is heading towards situations which are very serious for it and which, without an excessive council tax increase, it could not see its way through.
Earl Attlee
My Lords, similar amendments were withdrawn in Committee. I set out the Government’s position there and my noble friend Lady Hanham followed up in significant detail in her letter to the noble Lord, Lord Beecham, dated 19 July, a copy of which has been placed in the Library of the House. I shall not repeat all those points in detail, other than to reiterate that it would be inappropriate for an unelected and unaccountable person to make the decision, which will involve a judgment about whether local taxpayers should be entirely unprotected from excessive increases for a financial year.
My noble friend’s letter made it clear that authorities will be able to make the Secretary of State aware of any special circumstances applying to them during the process when council tax principles are formulated and finally determined. We talked about the possibility of having a separate category. If my right honourable friend got this decision wrong, clearly there could be very serious consequences if it turned out that a local authority was not able to carry out its functions, and there would be political repercussions for my right honourable friend. My noble friend also said the Government would keep an open mind about the context within which this power to disapply a council tax referendum would be used. With this in mind I would ask the noble Lord to withdraw these amendments.
Lord McKenzie of Luton
My Lords, I am grateful again for that assurance being on the record. As with our earlier discussion, if the categorisation of authorities heading for severe difficulties is the route to deal with it, I am pleased to see that on record. I beg leave to withdraw the amendment.