Gareth Thomas
MP for Harrow West · Labour (Co-op) · United Kingdom
“Local councils such as Harrow need to invest more in youth facilities that divert young people away from crime. Some of the CCTV projects in my constituency that Harrow council has turned down—in Wealdstone, south Harrow and central Harrow—should get funding.”
“I congratulate my hon. Friend the Member for Pendle and Clitheroe (Jonathan Hinder) on securing the debate and on the way in which he approached the subject. I join him and my hon.”
“I also want to suggest that the Metropolitan police does not get recognition across the whole of the UK for its hugely important work in tackling national and international crime, and that perhaps more recognition of that is required in the funding formula.”
“In particular, in Harrow, we recently saw enforcement teams contracted out to an organisation called Kingdom. The responsibility for that contract was with Harrow council. There was widespread criticism of the way some of the staff employed by Kingdom tried to levy fines on a number of young people in south Harrow, in my constituency.”
“One way we can further support the Metropolitan police is by allowing it to keep more of the proceeds from successful operations, such as recovering stolen funds hidden in bitcoin assets. I congratulate my hon.”
“Mayor of London Sadiq Khan has done a huge amount to try to redirect funding from other parts of his budget to minimise the impact of that cut.”
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“We have had an interesting debate. The challenge set before the Minister in amendments 1 and 23 was to clarify the Government’s intent towards the redistribution concerns of local authorities. We have not yet had clear answers to my specific questions on redistribution. I asked how redistribution would work in practice. We have not had an answer to that question. I asked whether there would be amendments to the system for tariffs and top-ups. I do not think that the Minister mentioned them at all in his response. I asked how, given the importance of revenue support and other grants to ensure that areas’ spending power is equalised, the new system would make such compensation. We have had only a partial answer to that—I will come back to it in the clause stand part debate.”
“If they are underfunded—I do not blame them for this—they have to put the money towards their statutory obligations and cut back on some of their discretionary activities.”––[ Official Report , Local Government Finance Public Bill Committee, 31 January 2017; c. 45, Q81.]”
“Secondly, throughout much of the country, particularly over the last few years, there has been very little development”. That would suggest that the current system of 50% distribution has not produced evidence that 100% business rates retention will offer any more of an incentive. He went on: “Thirdly, where there has been development, it has tended to be out-of-town shopping centres. The way that the system has worked since the last reform has given local authorities an incentive to give consent to out-of-town shopping centres, which take away trade from the existing town centre.” He also said something rather revealing on incentives to work with business: “What I think is more important is that if local authorities are correctly funded to do what they are meant to do, they will be supportive of business.”
“It was rather revealing that he talked about the blunting of incentives if redistribution continued to be a significant factor; that rather gave the game away and will worry many in local government as to what this measure will mean in practice. I was fascinated by the hon. Gentleman’s recollection of witnesses’ enthusiasm for the incentives in the Bill. Let me draw him back to the evidence we received on Tuesday from Mr Dominic Williams of the Federation of Small Businesses. Commenting on the incentives that Ministers suggest are in the Bill, he said: “our view is that that is not really an effective incentive, for a number of reasons. First, it only applies to the development of new physical property. It is an incentive to permit more development; it is not necessarily an incentive to look after your existing business community.”
“My hon. Friend makes a good point. I will come back to the issue of new responsibilities, if he will forgive me, because it is better covered in our debate on clause 1 stand part than on amendments 1 and 23. It was lovely to have the hon. Member for North Swindon get up and take part in this debate. I hope he will not be intimidated and will be a regular contributor on other occasions. I had a sense of Don Quixote and his trusty, loyal servant Sancho Panza as the hon. Gentleman defended the Bill’s principles without really getting into the issues of redistribution that we touch on in the amendments.”
“As I said, the hon. Gentleman’s contribution was inspirational in terms of recalling great literature of the past and the tale of Don Quixote and Sancho Panza. The evidence from the FSB was revealing: the economic incentives will not be anything like as significant as Ministers hope and the measure will help to drive further reductions in spending power, it would appear, without any evidence from Ministers to the contrary.”
“I take my hon. Friend’s analogy—50% versus 100% is interesting. Given that 50% business rates devolution was championed as an economic incentive in promoting growth, and the business community does not think it has worked, it is not clear what evidence there is to justify the so-called economic incentives still being in place and arguably being greater when there is 100% business rates devolution.”
“Let me make it clear: I do support the principle of 100% business rates devolution, but the job of the Opposition is to expose where there is a lack of evidence, to challenge Ministers to provide that evidence and to ask for the detail of how the system is going to work. In the absence of that, one is entitled to have a little scepticism.”
“The hon. Gentleman was unfortunately not here at 11.30 am when I made clear our support for the principle of 100% business rates retention. Clearly, we want the system to work. However, I suggest to him that the purpose of this Committee is surely to probe what evidence there is for the case that the Government are making. He is slightly more considered than the usual Conservative MP one gets to sit opposite on these Committees, so I ask him where the evidence is, for instance in an impact assessment, to suggest that there will be a significant increase in economic growth as a result of the Bill? If the 50% business rates devolution did not offer that evidence, as one would have expected it might, where is the evidence that 100% business rates devolution will produce that?”
“Gentleman made a valiant try by suggesting that pooling might work. I do not know whether he knows Keswick in the Lake District, which is the central town in Allerdale.”
“It is interesting that the Minister chooses to talk about the levy and not the lack of evidence for economic growth having been generated by the 50% business rates devolution. One would have thought that there would have been some evidence to justify the assertions that were made in 2013-14 by his predecessor that a whole new wave of economic growth would be generated as a result of the measures. In the clause 1 stand part debate, I hope to suggest that factors other than local councils’ attitude to development might be holding back economic growth. Sadly, we did not hear anything from either the Minister or the hon. Member for North Swindon that offered confidence to a council such as Allerdale Borough Council that its difficulties with the barriers to economic growth will be dealt with. The hon.”
“It is not a coastal area, but it is surrounded by other local authorities that are part of the Lake District national park, which are similarly challenged in terms of constraints on the land they can use. One suspects that the natural pool of authorities that Allerdale council could work with would face similar challenges in terms of land being available for economic growth. That underlines the concern about redistribution.”
“My hon. Friend tempts me now into very difficult territory. The shadow Chancellor has long eyes and if I were to rush to pronounce on a whole series of new measures on fiscal devolution without having first spoken to him, I would get into very serious trouble. Nevertheless, my hon. Friend makes a very interesting point.”
“I am grateful as ever for your advice, Mr Gapes. The other concern that was touched on, but not answered, by both the Minister and the hon. Member for North Swindon was the concern about Heathrow. The extra business rates growth that will surely come in the wake of a third runway at Heathrow—their treasurers, if not their local residents, will surely already be beginning to count up and look forward to all the extra revenue—will probably be far more significant in terms of promoting economic growth in the areas surrounding that third runway than anything that local councils might do.”
“With respect to the hon. Gentleman, that is precisely my point. In terms of business rates, the authorities that will benefit most from a third runway at Heathrow will be the local authorities in the immediate surrounding area. Without effective redistribution, there might be some additional business rates from businesses operating in Cornwall that are perhaps attracted to Britain as a result of a third runway, but primarily the main authorities that will benefit from the increase in business rates growth from that third runway will be the local authorities in the surrounding area.”
“I gently suggest to Government Members that Heathrow brings the issue into fairly graphic light. In the evidence that Professor Tony Travers gave on Tuesday, he acknowledged that, where there is a major infrastructure development, that, rather than any actions of the local council, is likely to be the key driver of economic growth and business rates in an area. One can imagine the same issue with High Speed 2, which, wherever a main station or terminus is located, will be the key driver of economic growth in an area, notwithstanding other measures that the local authority might take. That surely justifies even more the case for redistribution of the revenue generated by business rates.”
“Amendment proposed : 2, in clause 1, page 1, line 7, leave out subsection (2) and insert— “(2) In Schedule 7B, in paragraph 8 of part 3, after sub-paragraph (1) insert— ‘(1B) The regulations may, in particular, make provision for the determination of an amount to be deducted in order that the billing authority retains the specified amount for the purposes of funding social care services.’”— (Mr Gareth Thomas.) This amendment would enable billing authorities to retain a specified proportion of non-domestic rating income specifically for the purposes of funding social care services. Question put, That the amendment be made.”
“11 Downing Street to lobby the Treasury for more finance for social care. In that context, I might have been willing not to move the amendment, but the social care crisis is so serious that we feel that we need to divide the Committee on amendment 2. I beg to ask leave to withdraw amendment 1. Amendment, by leave, withdrawn.”
“Friend the Member for Oldham West and Royton gave, will nevertheless not be reassured about their financial situation from 2020 given the changes that have taken place already since they signed on the dotted line. It is clear from the Minister’s response that an awful lot of detail about how redistribution will work in practice is missing. Granted, that work is taking place and many people in local government have had the opportunity to think about it, but worryingly, no one in local government or this House has had the chance properly to look at that detail. I do not intend to press amendments 1 and 23 to a Division, but I do intend to press amendment 2. The Minister has not given us any reassurance that he grasps the scale of the social care crisis. He could have said that he and the Secretary of State were marching daily down to No.”
“Friend talked about the additional responsibilities that will fall on local government, as did my hon. Friend the Member for Wolverhampton South West. The clause 1 stand part debate will give us an opportunity to focus on the revenue support grant and the issues associated with ending that, and that debate is perhaps a better place for me to comment about those new responsibilities. In winding up, the Minister came back to the idea of how wonderful it is for local authorities’ finances that four-year deals have been offered. It is already clear that the terms on which local authorities signed up to those deals are beginning to change. Many authorities that signed up believing it was the right thing to do and still believe it was the right thing to do, for the reasons that my hon.”
“The Minister says that it will be, but he opposes amendments 1 and 23, which seek to re-enshrine redistribution at the heart of local government funding arrangements. He has given us no information about how redistribution will work. We have to wait until mañana for the fairer funding review to report—it will not report for at least another 12 months, even if it sticks to time. In his excellent contribution, my hon. Friend the Member for Oldham West and Royton underlined the point about the lack of money for social care. The interjection into the debate by the Association of Directors of Adult Social Services about what the Chancellor of the Exchequer should do in the Budget is a further timely reminder of our responsibilities in thinking about social care provision beyond 2020. My hon.”
“One would think that Conservative Members of Parliament representing rural areas would get to their feet at some point to say that they worried about the impact that the additional responsibilities and loss of funding might have on their area. Retaining the provision for some revenue support grant to be paid might be a way for the Minister to settle the concerns of rural Members of Parliament.”
“As a result, some £12.8 billion-worth of new responsibilities are likely to be passed to local government. That is a concern, because there is still absolutely no clarity about which of those extra responsibilities will be passed down, or about the impact on local government’s financial budgets. Surely it is sensible to keep provision for some revenue support grant to be paid to local authorities while the debate about which new responsibilities will be passed to local government is concluded. The consultation document—Ministers have still not published the 450 responses generated since last July—gave a strong hint that at least five of the pots of additional money available to local government will be abolished. The rural services delivery grant is, I think, worth about £65 million and the public health grant is worth some £3 billion.”
“That is a good thing if one is a business owner; for the director of finance at a local authority worrying about how to pay for the provision of local services, it is not such a good thing. Again, very little consultation took place before that measure was announced. We have touched on the changes around the new homes bonus to provide a little bit of extra social care funding. All those changes dramatically affect the local authority finance landscape. Keeping the revenue support grant is one way of helping to ease the challenges facing those local authorities in particularly difficult circumstances because of the scale of the barriers to economic growth in their area. My hon. Friends the Members for Oldham West and Royton, and for Wolverhampton South West, talked about the measure supposedly being fiscally neutral.”
“The revenue support grant might help to compensate for that loss of revenue, but at the moment Ministers are saying that they want to abolish any provision of the revenue support grant at all. There is some suggestion that local authorities will be compensated for that £700 billion loss. If that is right, it would be good news. However, keeping the provision to allow some revenue support grant to be provided by Ministers to equalise variations in the impact on finances would surely be a good thing if we are committed, as my hon. Friend the Member for Oldham West and Royton said, to the idea of a one-nation England with no person or area left behind. The change from the retail prices index to the consumer prices index, again announced in that Budget, may mean that businesses have to pay substantially less in business rates over the years.”
“If one looks at the regularity with which Governments seek to change the landscape for local authorities, one can sympathise with any treasurer or director of finance in local government who tears their hair out immediately after a Budget, whether it is from my party or the Conservative party, such is the change that comes local government’s way. One need only think of the previous Chancellor of the Exchequer’s most recent Budget, in which measures to extend business rates relief to smaller businesses and shops will take some £700 billion out of the total business rates take in England over the next five years. There was very little consultation about the loss of that funding from the business rates tax take for local authorities.”
“We have debated the importance of equalising things out, because there is not enough of a revenue support grant in social care, but councils have a huge range of other responsibilities: school improvement, provision of leisure services and so on. Without a revenue support grant, if an authority has a small business rates tax base and a small council tax base, it may face having to offer much worse provision, in terms of leisure centres, school improvements, refuse collections and so on, than an authority with a high business rates tax base. Why is that so important?”
“85.] I have to say that I do not play golf; my source of leisure is watching the mighty Arsenal scoring their way to victory, so I will make the same analogy in football terms: it is like trying to play a match with defenders but no strikers, or with strikers but no defenders. I believe that other measures are needed to encourage incentives for economic growth and to achieve equalisation within the system. When we debated amendments 1, 2 and 23, we did not focus on whether the revenue support grant should continue to be offered. We can see from the way the Bill is drafted that Ministers want to abolish the revenue support grant completely. My concern about that is that the revenue support grant has hitherto been one of the key ways of equalising things within the system of local government finance.”
“The question of whether clause 1 should stand part of the Bill cuts to the heart of the debate about incentives for economic growth versus concerns about redistribution. In an intervention earlier today, the hon. Member for Thirsk and Malton drew my attention—as if I needed it drawn—to the strong support of the Chair of the Communities and Local Government Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), for the principles of the Bill. However, on Second Reading, my hon. Friend recognised that we need to “marry the need to give incentives for development…with the need to equalise within the system”. He said: “My concern is that trying to do that with one tax”— business rates— “is a bit like trying to play a round of golf with one club.” —[ Official Report , 23 January 2017; Vol. 620, c.”
“That is true; there would be additional revenue from the payment of council tax, but would that be equivalent or similar to the quantum generated by the businesses that had been there?”
“The hon. Gentleman makes an interesting point. He would also acknowledge that if one has significant numbers of new people living in an area, one has to increase the services there. He presents an optimistic scenario, but although the business rates income might be matched, there might be additional costs arising from the provision of new or extra services.”
“The Minister is right: the local authority could do that, but let us assume that, for whatever reason, it does not. Not every local authority will want to stop every landlord from converting land to offer housing. I think about my council and the housing crisis in London. There is a very difficult conundrum and balancing act for local authorities. Do they try to take action to deal with the housing crisis, because of the 100% business rate devolution? Do they look to encourage business rates growth? If Ministers cannot sort out the housing crisis, local authorities in this situation will be caught between a rock and a hard place, and they will have to make very difficult choices.”
“I welcome any further devolution of funding to the Mayor of London and to London local authorities. I am sure that the Minister will not think that is the answer sorted, regarding the provision of new housing—”
“I am very grateful, Mr Gapes, for your direction that we should not talk about the housing crisis in London. However, you will realise that the revenue support grant helps to provide finance to address some of the concerns about homelessness. Obviously, one of the reasons for wanting to retain, potentially, some revenue support grant within the current local government system is to make it easier for financially challenged local authorities to deal with homelessness and some of the other issues that we have mentioned. My last point, Mr Gapes—”
“Therefore, local authorities deserve more recognition from Ministers, and not only those run by Conservative council leaders but others—such as Manchester and Oldham, and some in London, such as Hackney or Haringey—where there is a championing of the business community at local level and a real desire to see economic growth. Surely, keeping the provision in the Bill for a little bit of revenue support grant might be, in the long run, one way of dealing with some of the issues on local government finance. That is worth thinking about by Ministers.”
“For now. My last point is to ask whether there is a whole series of other impediments to economic growth. The implicit assumption that Ministers always seem to make in relation to the Bill is that local government is responsible for a lack of economic growth. Ministers are careful not to say that in such specific and grand terms, but that is the implicit charge behind the Bill. One thinks of the difficulties in gaining access to finance that many small businesses experience as just one example of an impediment to growth.”
“Is my hon. Friend aware of figures I have seen from the House of Commons Library that suggest two thirds of businesses do not pay any business rates at all? If the point about economic incentives is right, authorities have to get particular types of businesses. If they cannot, they are in trouble—all the more reason, surely, to retain provision for revenue support grant to be offered, to help authorities that cannot attract that type of big business.”
“Can my hon. Friend see a case for the retention of at least some revenue support grant in a situation where an authority with a low business rate base receiving a top-up decides to reduce the business rate multiplier? There is a risk that other local authorities paying a tariff will be effectively subsidising the reduction in business rate multiplier in that area, hence the need for the revenue support grant as an alternative.”
“I hope I can tempt my hon. Friend a little more on the Minister’s intervention. That is probably the first bit of clarity we have had on how the system might work in practice. The Minister appears to have said that if an authority reduces the business rate multiplier, no top-up will be available to it, even if it has a low business rates base, making it even less likely that authorities will choose that option. Keeping revenue support grants, surely, is potentially a better alternative for a local authority worried about its long-term financial position.”
“I hope that my hon. Friend will have noticed and will address the fact that, if I may say so, the hon. Member for Thirsk and Malton slightly distorts what I asked the Minister. I asked: where is the economic evidence that 100% business rates retention will work? Presumably, 50% business rates retention has been successful in encouraging the sort of development that the hon. Member for North Swindon thinks will be part of the new Jerusalem under 100% business rates retention. If the Minister can point me to that piece of economic evidence, I will sleep even easier at night than I do already.”
“My hon. Friend makes an important point about support for authorities in areas in which there is an increase in refugees being housed. Surely keeping the provision for revenue support grant would give the Government an easier mechanism for helping local authorities and their citizens to handle some of the additional issues that will arise. Retaining the revenue support grant in legislation would also enable Ministers to get money more easily to areas that are hit hard by flooding. When the hon. Member for North Swindon visits Keswick Town Council and Allerdale Borough Council, he will understand the significance of my point about flooding.”
“I intervene briefly to make the point that perhaps the difference between the provision of revenue support grant and of the grant for flooding to which the Minister alluded is that the grant for flooding was given after the event, whereas the provision of revenue support grant allows authorities to think ahead—“There may be issues around flooding here, so we will allow flood defences to be built earlier by providing a bit of money though the revenue support grant now.””
“One small reason to celebrate at the end of this clause stand part debate will be the revelation that something the Minister proposed in the consultation document is confirmed and will be a reality. As he is on a roll in that respect, will he tell us how long the gap between reset periods will be? Has his Department made a decision on that?”
“I will respond briefly to the Minister. The Labour party will not object to the clause standing part of the Bill, but with this caveat: the abolition of so much grant funding from central Government to local authorities is an issue of considerable concern to local government, notwithstanding its general support for the principle of 100% business rates devolution. We will reflect on what the Minister has said, we will celebrate the little bit of clarity that we got in the debate, but we will not object to clause 1 standing part of the Bill. Question put and agreed to . Clause 1 accordingly ordered to stand part of the Bill . Ordered, That further consideration be now adjourned. — (Jackie Doyle-Price.)”
“On a point of order, Mr Gapes. You will probably be aware that the Minister’s Department issued in July last year a consultation document that is pertinent to the Bill. The Minister indicated in his witness appearance that he hoped soon to see the publication of those responses, which would be germane to the scrutiny of the Bill. I wonder whether you have had any indication from the Minister or whether the Minister might be suitably prompted to respond to my point of order to indicate when that might happen.”
“I am grateful for the Minister’s intervention. It would also be helpful to see soon details of how the pilot on 100% business rates retention schemes will work. That is germane to the passage of the Bill. I would also like an answer to a written question I have asked about an impact assessment setting out the economic effects of the scheme, which, again, is germane to the scrutiny of the Bill.”
“I beg to move amendment 1, in clause 1, page 1, line 7, leave out subsection (2). This amendment would remove subsection (2) of Clause 1, retaining the requirement that a billing authority pays a proportion of non-domestic rating income to the Secretary of State.”
“Given the importance of revenue support grant and other section 31 grants to helping to ensure spending power between areas is equalised, how will the new system compensate for the loss of revenue support grant and the promised addition of extra responsibilities to local authorities?”
“Opposition Members made clear our support for the principle of the devolution of 100% of business rates on Second Reading. We also made clear our concern about the almost complete absence of detail on how the measures the Bill paves the way for will work in practice. In the absence of that detail, many in local government and those who follow it closely are worried about the impact of this measure on the provision and quality of local services. The first big issue with the measure as it currently stands is redistribution. Essentially, the key questions are as follows. How will the redistribution mechanisms associated with this measure work in practice? How will the Minister and his officials seek to amend the system of tariffs and top-ups?”
“On the local share, there is a system of tariffs and top-ups, with those local authorities with relatively high business rates revenues paying a tariff and, conversely, those local authorities with relatively low business rates revenues receiving a top-up. The new system will see a proportion of business rates revenue paid into an account that will handle payments to and from authorities, including tariffs, top-ups and safety net payments. Amendment 1 would delete subsection (2), thereby retaining the requirement for a billing authority to pay a proportion of non-domestic rating income to the Secretary of State. Amendment 23 follows on from that. It amends schedule 1 to enable a local and central share to be retained for designated authorities, with the Secretary of State required to publish the criteria for the use of such funds.”