John Healey
MP for Rawmarsh and Conisbrough · Labour · United Kingdom
“Mr Spock, I think some would say, Mr Speaker! My hon. Friend is right. Despite global conflicts, trade tensions and rising threats in the world, which are pushing up inflation, bearing down on growth and pushing up borrowing costs, the UK economy is demonstrating huge resilience.”
“The Prime Minister and I have been clear that we must cut the costs of welfare. On levels of taxation, we had a period of Conservative Government, with low growth and high debt. They crashed the economy with the mini-Budget, and we had levels of taxation that were putting pressure on business, adding to the cost of living.”
“The hon. Lady is talking to the person who led the work to establish a defence and security partnership with the European Union and bilateral agreements with other countries, on which we now build both our economic strength and our national security strength. On the question of the Budget, I ask the hon.”
“Since day one in the job, the Prime Minister and I have been in lockstep in our determination to meet Britain’s fiscal rules. This is the bedrock on which we build good growth and help give a bit of breathing space to families and businesses.”
“May I start by paying tribute to my predecessor, my right hon. Friend the Member for Leeds West and Pudsey (Rachel Reeves)? I am proud to have been a member of a Government with the first female Chancellor in 700 years.”
“My hon. Friend speaks up very strongly for his local area. He is right about the importance of pubs, social clubs and live venues, and about the importance of the 20% cut that we announced in July. These are the things that make the places where we live the places that we also love.”
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“In all honesty, that is the sort of prescription we expect to find in a memorandum from a publications manager to a graphic designer and a press officer, not from central Government to elected local government officials throughout England. If the Minister and the Secretary of State are to have any credibility on the claim that this is a localising move and a localising measure, they should back off and guarantee what they say. If the schemes should be under local control, as the Minister and Secretary of State claim, the Government should give local authorities the powers to control them, not take those powers and exercise them from the centre.”
“In paragraph 3(4) of schedule 4, the Secretary of State may make regulations on the procedure for preparing the scheme, including in paragraph 3(5) regulations to “require the authority to produce documents of a particular description”; regulations to “include requirements as to the form and content of documents produced in connection with the preparation of the scheme”; regulations on the “requirements…about the manner in which such documents must be published”; regulations to “require the authority to make copies of such documents available” in certain ways, and “to supply” copies of such documents to certain people; and even regulations to prescribe the charges that local councils should make for those documents.”
“My hon. Friend is absolutely right. Any increase in need, demand and, as a consequence, cost will all have to be borne by the local authority—borne by switching funding from other budgets that perhaps support important local services, or borne by cutting back within the council tax support scheme the support that is paid to those who remain eligible. However, I want to exemplify the challenge that the Minister faces to justify the powers that the Secretary of State is taking in the Bill in order to prescribe from the centre.”
“If the Government are able to set the key constraints and parameters of any scheme, and to do so at any time, it is entirely possible not only that local flexibility—the ability to tailor to local circumstances—will be undermined, but that local authorities will devise their schemes, set about implementing them, and then find that they have to revise them because the Secretary of State has decided to step in and make regulations under the many regulation-making powers that he has available to him in this primary legislation. If it is pensioners today, could it be carers tomorrow and ex-service personnel the day after?”
“To be honest, no Minister of any Government is immune to that temptation. I am sure that it would be possible for the Minister to find one or two examples where I myself might have made such moves as a Local Government Minister. However, we in this House have a right to challenge the Government on what they claim is the underpinning principle of the Bill and to point out how the principles they claim are not matched in their legislation. There is a strong, principled case for the Secretary of State to back off, loosen the reins, and let those in local government devise the schemes that they will be obliged and required to run. There is a principled case and a practical case for the amendments.”
“Perhaps that is not as serious a case to put to the Government as ex-service personnel and carers, but my hon. Friend makes the point. If the Secretary of State had a particular concern about cat lovers, he could indeed use these regulations to make special provision for council tax support for them.”
“There is no time to consult local residents, to design the computer software systems necessary to run these schemes or to test them and put them into practice, to work out how the tapers to the new universal credit system will have to work with the council tax support system, or to plan for the new local scheme in the context of next year’s budget planning by local authorities. This is a disaster waiting to happen. The Government have not done the work needed for local government to do the work that it needs to do. I say this to Ministers: take a leaf out of the Health Secretary’s book, pause, listen, and be prepared to put back the start of this scheme from April next year to April 2014.”
“Friend made about his amendments 6, 7, 10 and 13, to which my name has been added. There are good reasons for making this part of the benefits system local, but there is no justification for doing it by making harsh cuts to the national and local totals of spend available, by capping the totals against any future rise in needs or costs, by requiring local councils to carry all the risk of any increases in claims, or by forcing very big cuts in council tax support for many of those who need it most. When we last debated this in Committee in January, my right hon. Friend and I noted that councils were faced with an extraordinarily tight timetable of 12 months until the point at which they would have to have these new schemes in place. That period is now eight months.”
“In practice, that means that a local authority will have to run contingency spending plans, budgets and council tax levels until the result of the referendum is known, and if it is unsuccessful, those contingency budgets will need to be put in place and new council tax bills issued. That process must take place around the turn of the financial year, and by early May at the latest, yet the Bill requires that the council tax support scheme must be designed and in place by January—before most local authorities finalise and agree their budgets and council tax levels, and certainly before the level in any referendum might be established. That mismatch indicates that this reform is ill thought out, rushed and likely to be wrong, and it reinforces the arguments that my right hon.”
“The amendment attempts to flush out whether the Government have properly considered the impact of the Bill in relation to the provisions of the Localism Act 2011, which allows a local authority, in setting its budget and its council tax, to put to the vote in a referendum a level of council tax that it might want to propose for its area, and allows local residents to veto what they may regard as excessive council tax rises. Under those powers, a local authority must hold a referendum no later than the first Thursday in May of the financial year to which the council tax would relate.”
“Perhaps, Mr Deputy Speaker, I had better not pursue that. However, it is certainly true that given their drubbing a couple of weeks ago, the Liberal Democrats will have to chase votes wherever they can find them. Amendment 1 is designed to challenge the Government to concede, and to give a commitment to this House, that should they use their powers under the Bill and make stipulations about the schemes that local authorities will run, they will at least consult local government before doing so. Amendment 3, which also stands in my name, exemplifies my belief that, as my right hon. Friend the Member for Greenwich and Woolwich argued, this is a rushed reform that has been introduced without an ear to proper consultation or a thought to the consequences.”
“There is no power, however, to make regulations to exempt payments as a result of changes through a reset. If I am mistaken, I would like the Minister to indicate where that power lies. If no such provision exists in the legislation, will he confirm that the Government will honour the commitment they made in their response to the consultation and will amend the Bill so that any payments resulting from a reset can be disregarded—and disregarded in full—for the purpose of the TIF areas? The Minister would be welcome to accept my new clause if he needs to do so.”
“This deals with the regulation-making powers of the Secretary of State, referring to regulations that can “provide for that amount or that proportion to be disregarded for the purposes of calculations under any of the following provisions”— in other words, regulation-making powers that can lead to the disregard of a proportion of business rates in specified areas, namely TIF areas, for particular payments that would otherwise be due. The provision goes on to identify payments to the central share, payments by billing to precepting local authorities, levy payments, safety net payments, payments on account and payments that follow from changes either to the local government finance report or to an amending report of a local government financing report.”
“The Government made the commitment to ring-fencing, stating in the White Paper of October 2010: “We will introduce new borrowing powers to enable authorities to carry out Tax Increment Financing”. In response to the consultation, the Government also made a commitment to “allow a limited number of Tax Increment Financing Projects to be exempted from any levy and reset for 25 years.” That is the crucial commitment that I want to test against the content of the Bill before us. I expressed my concern about the freedom of the ring-fencing from any effects of reset to the Secretary of State on Second Reading on 10 January. He had no answer: either he did not know, or he did not want to say. Let me therefore point the Minister to the source of my concern, which relates to paragraph 37(1)(d) of schedule 1 on page 32.”
“As the Centre for Cities said in response to the Government’s consultation: “When the Government introduces Tax Increment Financing…it should be based on ‘Option 2’—a ringfenced TIF which is best suited for local investment finance within the proposed business rate retention system.” That point was echoed by the British Property Federation, which said: “Failing to ring-fence the income stream for that length of time”— its submission referred to a 25 to 30-year period— “would generally render the upfront investment unbankable, because the risks associated with it become too difficult to model, understand and price. TIF will only work with the sort of total ring-fencing proposed under Option 2”.”
“TIFs build on the commitment that Labour made in government, in the Budget 2010, a commitment that was backed by a capital down payment of £120 million. However, if the TIFs system is to work—that is, if local authorities are to borrow money for up-front infrastructure investment against the anticipated increase in business rate income as a result of the new infrastructure —there must above all be certainty for those long-term investments to be made. There needs to be certainty for a clear business plan and then an investment plan to be put in place; otherwise TIFs will not get off the ground and will not work. That certainty is required over a 20 to 30-year time scale, which is why it is needed in legislation.”
“I rise to speak to new clauses 1 and 11, and amendments 62 and 63. My purpose with new clause 1 is to encourage the Minister to confirm, on behalf of the Government, that the necessary powers exist in legislation to make tax increment financing work in future, and also to confirm Ministers’ intent and commitment to using those powers. The case for TIFs—tax increment financing schemes—is unarguable. I myself have been arguing it for a number of years, first in the Treasury and then in the Department for Communities and Local Government. There are local government regulations in Scotland to allow six TIF pilots to go ahead. The use of TIFs is widespread in Canada and the US, particularly in areas where regeneration is required; indeed, only one state in the US—Arizona—does not have TIF legislation.”
“The disregard on business rate payments, a proportion of which would otherwise become payable by the local authority, would be allowed under various headings, but this would not apply to the reset. Fundamentally, that is the biggest upset factor of all, so the case for disregarding that is probably stronger than it is for the smaller-beer measures for which regulations can be designed to protect.”
“I would have thought the hon. Gentleman, who represents the Cities of London and Westminster, would recognise more than anyone else that for the sort of commercial investment required to get TIFs off the ground in circumscribed and specific areas, certainty is a premium. If the 25 or 30-year commitment required to make this work could be periodically completely set to one side in a reset process, I put it to him that the inherent risk created by that and the inherent lack of certainty entailed by it would undermine the ability to raise the finance necessary to get the TIFs off the ground. As to the hon. Gentleman’s point about new towns, the regulations allow the disregard in the specified areas that are designated as TIF areas only.”
“Alongside that, the projected yield from business rates is set to go up by nearly £1 billion next year and by more than half a billion the year after that. That means that the gap between the projected business rates yield and central Government’s commitment to resource spending on local government is more than £2 billion for next year, and £4 billion for the year after that. There is a significant and growing gap between the business rates yield and spending on local government.”
“Thus leaving out the reset, which the Government promised they would not do, does not make sense if we want the provisions to work. I hope the Minister will be able to provide the confirmation we need and be able to build it into the Bill. This issue will certainly need to be confirmed at later stages of the Bill. Amendment 62 is designed to get to the heart of the relative share of the business rate take as between central and local government. The figures for projected resource spending on local government under the current spending review demonstrate a significant reduction for next year and the year after that—of nearly half a billion between this year and the next, and of more than £1.5 billion between next year and the year after that in nominal terms.”
“Thank you, Mr Deputy Speaker. I got the gist. I welcome this Bill and I want it to work. My fear is that without the certainty around potential resets—we do not know when or how often they might happen; we do not know whether they will happen every 10 years; we do not know how they will work in future—there will be huge risk and uncertainty in the system. It is not a question of whether I am satisfied by the provision; it is a question of whether the potential investors, who will determine whether the TIFs work or not, are satisfied. I am trying to convey the sentiment that I have picked up from my discussions with banks, commercial organisations, the British Property Federation and some of the City’s policy experts, who all say, “Look, we require a ring fence; it must be total”.”
“The Government’s top-slicing of at least 50% of the business rates revenue and 50% of the business rates growth above the baseline will reduce the incentives for local authorities to support growth, which were meant to be part of the design of the system. It will also reduce the certainty that would enable authorities to plan their finances on more than a year-by-year basis, and reduce the Government’s own ability to claim that this is a localising reform. I am sure that we will hear from the Minister—and I have heard this before—that the Government have declared their intention of returning the revenues in the central share to local government; but, as has been pointed out by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), we have been given no details, and we do not know what purposes or constraints that may entail.”
“My hon. Friend, who has experience of local government, has put his finger on the button. What worries me is that the Bill gives the Secretary of State power to set the central and local shares—in other words, to determine the division of the business rates take—in each and every year, indefinitely. I am not talking just about what will happen next year and the year after that, or about what will happen until the end of the current spending review period. From year to year, local government simply will not know where it stands until the Secretary of State makes the decision. The central and local shares could vary, and central Government could decide to take a greater share.”
“There could be a full reset, whereby all the business rate growth up to the point of the reset was redistributed—meaning, in effect, that the baseline of the whole system would be reset by means of the new, and total, business rates pot—or there could be a partial reset, meaning that business growth would be retained at local level, and just the initial baseline would be reset. That represents a very wide range of possibilities for local authorities. If the Minister wants authorities to be able to plan for the future on the basis of the new system, he must provide them with some of the answers to such questions, sooner rather than later.”
“My hon. Friend may well be right, and his Select Committee will doubtless keep a close eye on the matter. I hope that the Minister will give us some answers tonight, but I am sure that, if he does not, Ministers in the other place will be pressed on the point. The other gaping hole in the Bill is the absence of any specific measure that would tell us when and how the Government would deal with the reset in the future. The two options that they presented in their statement of intent last week could lead to fundamentally different outcomes.”
“My new clause requires that, at the very least, the Secretary of State must consult the parties that would be affected by changes in national business rates policy before making such decisions. Under the new system, the stakes for councils will be higher, so the guarantee to consult them before any changes are made is the minimum that Ministers should promise.”
“It said in response to the consultation of October 2011 that “the FSB is concerned that the incentive system could actually deter local authorities from promoting and utilising the reliefs available to small businesses such as small business rate relief, rural rate relief and hardship relief…It would mean that a local authority would lose out on income if it increased the proportion of businesses that received rate relief or would make money if the number of businesses able to get reliefs fell.” I am sure the Minister does not want to design into the new system perverse incentives that will hit small firms in that way. As currently proposed, the new system will be bad for local authorities, and could be bad for local small and medium-sized firms.”
“Local authorities will be hit by the consequences of decisions that they did not make and that they cannot control. That is unfair and unreasonable. It may surprise some Members to learn that the Federation of Small Businesses has also made that argument.”
“The power for setting and changing business rates policy—business rate reliefs, which are mandatory, as well as the payment schedules for business rates and the transition periods for business rate increases—will continue to rest with the Secretary of State and the national Government. Currently, any national business rate policy changes have no direct impact on local authority finances or local authority budgets. In future they will, however. They will not be local government decisions, but they will create consequences that local government will have to deal with. If the Government decide to change the rate or the type of mandatory rate reliefs, or to allow the deferral of part of the change in business rate bills, that will have a direct impact on that year’s yield in the area concerned, and therefore on the local authority’s funding.”
“If the appeals are won by the company, the local authority has to manage the volatility and has to bear the loss up to the level of the safety net threshold—which, according to the statement of intent in the Government’s publications of Thursday last week, is likely to be somewhere between 7.5% and 10%. Amendment 63 is an attempt to make sure that once the calculations and the thresholds are determined, safety net payments take full account of rating appeals. Linked to that, I hope the Government will accept the case for fully compensating local authorities from the levy pot for the impact of any successful business appeals—over which they have no control, and which they cannot predict. New clause 11 is relatively modest, and I hope the Minister will accept it in principle, if not in practice at this stage.”
“We must ensure that the impacts of appeals do not affect the funding base of the local authorities; we must not expose authorities to vagaries in the system and to the impact of appeals, when they cannot predict them, control the risk of them or benefit from them. Actually, neither can they benefit from business rate increases through revaluation, at least while the Government put in place transition relief. I tabled amendment 63 because the Government are creating a one-way bet, in which the Chancellor wins each way and the councils lose each time.”
“I believe that areas in which there is a particular concentration of a single or consistent business type are particularly vulnerable to a big impact from them. The hon. Member for Cities of London and Westminster (Mark Field), who has just left the Chamber, may recall that in 2007-08 a full 20% of the business rates yield of the City of London was lost as a result of successful backdated appeals. So the appeals add another important, volatile element to the system of business rates. Those appeals are made against decisions by the Valuation Office Agency, not local authorities. The system is managed by the VOA and tribunals, not the local authority, and it brings benefits to the companies that are successful, not the local authorities.”
“In Sunderland there was a £17 million drop between 2010 and 2011, and in the year before that there had been a £12 million rise. I can tell the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), that in the middle of 2005-06, the business rates income in his borough of Bromley halved. In two of the last four years, the changes—up and down, and up and down again—have amounted to more than 10%. The funding stream is inherently volatile, and, in my view, is inherently unsuitable as a basis for the funding of essential local government services. The main purpose of amendment 63, however, is to draw attention to concern about the volatility caused by appeals.”
“Indeed. I have my misgivings about whether any approach to the reset procedure can make the system fair after more than a few years. Indeed, I am still to be convinced that the system can be reset in a fair and proper way. But, Mr Deputy Speaker, I digress beyond the scope of the amendments that I tabled. Let me now turn to amendment 63. During earlier debates on the Bill in the Chamber, I argued that this was an unsuitable system for long-term Government funding. Ultimately, business rates yield is too volatile, and it is too volatile on a year-by-year basis. Let me give three examples, a couple of which will be close to home for those on both Front Benches. In Warrington the business rates yield has dropped by £10 million over the last 10 years, from £53 million to just £43 million.”
“Members of another place will study the Minister’s remarks this evening very carefully and return to a number of points. I am grateful to him for his comments about TIF funding, and I was pleased by most, if not all of them. I, too, will study the Hansard record of his comments very carefully indeed. I beg to ask leave to withdraw the clause. Clause, by leave, withdrawn.”
“On Tuesday, the Health Secretary said that the veto was justified because the NHS risk register case is exceptional. On Wednesday, Earl Howe, the Health Minister, said: “This isn’t just about the NHS. The Cabinet collectively took a decision that this was a matter that extended across Government.” On Tuesday, the Health Secretary said that he was blocking publication, but on Wednesday, the same Health Minister said: “We have every intention of publishing the risk register”. This is a conspiracy and a cock-up. Is it not typical of this Government—too incompetent even to organise a decent cover-up?”
“There are now more than 1 million families with children whose home is privately rented, and Shelter says that a third of them cut down on food to pay their rents and they can all be kicked out with less than a month’s notice. Why are the Government so out of touch with the pressure that people face that they are denying even the basic security of a legal right to a written tenancy agreement?”
“The clear rules against any sales on installation visits, which the Minister published earlier this month as part of his update on the smart meter programme, should help, but they will help only if they are fully and toughly enforced. Like all other hon. Members, I received the Minister’s update letter, coincidentally dated today, on the smart meter programme. I thank him for it, but it has little or nothing to say about the areas of greatest concern. Let us call them the four Cs: cost; consumer confidence; controlled testing in trials and proper pilots; and the contract for the data and communications nerve centre.”
“Which?, Consumer Focus and the Office of Fair Trading are all picking up complaints, often about mis-selling, in an industry where consumer protection is still too weak and consumer trust in energy companies is at an all-time low. For instance, we are picking up reports of energy reps cold calling, with the customer believing that the purpose of the visit is to install a smart meter whereas the real purpose is to switch supplier; reports of customers being told that they qualify for a smart meter, as long as they switch supplier; and reports of reps offering free smart meters if people sign up to their energy supplier.”
“Those benefits include: an end to estimated energy bills; detailed real-time information on energy use, with options to reduce consumption and bills; new tariffs based on time of use, consumption, carbon emissions and a range of other factors; pay-as-you-go options so we can put an end to the penalty premium that hits the poorest, who use prepayment meters at present; better control of distributed energy generation and microgeneration; easier switching; and, of course, remote connection, disconnection and meter reading without the need for a field work force. However, the installation of smart meters is showing early signs of problems for consumers.”
“It involves both gas and electricity meters; it builds in a requirement for an in-home display for all consumers; it sees installation as being led by energy suppliers rather than the energy distribution and network firms; it has functionality for the consumer, the energy supply companies and the network operators that is far ahead of smart meters in other countries; and it places a single central data communications provider at the nerve centre of the system. That is why consumer groups, including Which?, as well as energy companies and industry experts, all accept the potential benefits.”
“The aim is to install 55 million high-tech gas and electricity meters in all UK households and businesses by 2020. I am told that those involved in the project have as their mantra, “Starting well and finishing early.” If the Government get this wrong, it could end up starting badly, failing to finish and costing the consumer dearly. Let me start by being upbeat. Our UK smart metering plan has a number of world-first features.”
“I am grateful to have secured this Adjournment debate. I am both a supporter and a sceptic of smart meters. I strongly back the benefits that could come from universal smart meters with the right specifications for all consumers, but I am concerned that the Government need to get a grip on some of the essential elements of the national programme. I am also concerned that consumers will end up footing the big national bill without knowing it. There are, too, already consumer complaints over early installation of smart meters, which could irrevocably damage confidence and the reputation of the programme if they are allowed to escalate. This is a hugely ambitious prospectus for us all. It was kicked off by Labour when in government, and is now being continued by the coalition.”
“I hope that Ministers will heed the warnings and adjust the Government’s approach, because this is an area where I and millions of hard-pressed consumers paying high electricity bills all want the Government to succeed.”
“It is certainly better than allowing the 23 active energy suppliers simply to do their own thing. If that approach is right in principle and in practice for data communications, it is, however, reasonable to ask why a similar, tighter, Government-led approach is not right for meter installation as well. Which? is so concerned that it wants Ministers to call a halt to the current roll-out strategy, which is led by suppliers, to get proper trials under way, and then to restart the roll-out in 2014, so that it works for consumers, who in the end will pay for it. In conclusion, there are serious questions about how the Government are handling this huge national programme.”
“The PAC, again rightly, warns in the fifth conclusion of its report: “We expect the Department to take on board the lessons learned from other large Government IT programmes and to ensure that the contracts they place are sufficiently flexible to cater for smart grids and avoid additional costs falling to consumers.” In my view, the Government have the right approach: as long as levels of security and reliability are sensibly specified, as long as the system is kept as simple as possible, and as long as this is done and tested in good time for the national roll-out, so that the extra costs of modifying or upgrading meters are avoided, the single competitively appointed supplier for data and communications could make the market and the service more efficient.”
“I am told that in the Granada region, a team of 7,000 volunteers stood ready to step in to help consumers who were struggling to deal with switchover to make that change. The fourth C is the contract for the central data communications and data services company. This is required, of course, to link smart meters to suppliers.”
“In particular, I am concerned that the poorest will be put last. Smart meters should do away for good with higher charges for people who prepay for their energy, but none of British Gas’s 400,000 smart meters replaced prepayment meters and Government work on how prepayment will be built into the smart meter specs is being pushed back further into the future. It simply will not happen if each supplier is left to do its own thing, or to do nothing. It must be a higher priority for Ministers to sort out specifying what will be required for prepayment in all smart meters; trialling the installation and use of such meters; and establishing what help is needed for the most vulnerable. The digital switchover is a good example of both what can be done and the scale of what might be needed.”
“British Gas has already installed 400,000 smart meters and tells me that only a quarter will need replacing in the light of the Government’s latest technical specifications and that its trials are producing valuable data and intelligence for the future. A more common view among consumer groups, energy supply companies and industry experts is that a greater grip is required from Government and that prior to the start of the planned roll-out from 2014, all aspects of the programme and its participants should be thoroughly tested. They believe that much greater direction and co-ordination is required by Government of the big energy companies to test different communications links, different ways of getting consumer confidence and the interoperability between suppliers and devices.”