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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“On the new system that will be introduced under the Local Government Finance Bill, will the Minister confirm that it is a carry-over Bill and that page 640 of “Erskine May”—which says that “the procedure should be used in respect of bills which had not yet left the first House”— therefore applies? With the Government having forced the Bill through Committee of the whole House in three days, which means that outside organisations cannot give evidence and have not had time to get to grips with the Bill, will the Minister confirm that “Erskine May” means that this House will not have the Report stage of the Bill until after the Queen’s Speech?”
“My hon. Friend talks about the tight time scale and the argument for the Government seriously considering putting implementation back for a year. Does he accept that although it is a year today that councils have to have an approved scheme in place—otherwise they will have to use the present scheme—we do not yet know when the Government will require schemes to be submitted for approval, or how quickly they undertake to turn those decisions round, or the principles by which they will require the schemes to operate and therefore be able to get approval—”
“My hon. Friend is making the clear and strong case that the new scheme will increase the financial risks to local authorities. Does she accept that local authorities will therefore have to increase their financial reserves, and to do that, they will have to increase the cuts that they make to expenditure, and possibly to services?”
“My hon. Friend is making the case very cogently that council treasurers will take a prudent view; does she agree that that runs completely counter to the advice that councillors are getting from the Secretary of State, who is talking about reserves being “piggy banks”, and who says: “These untapped funds exist to ensure councils can respond to unexpected situations like the pressing need to tackle the nation’s unprecedented level of debt”? That advice clearly runs contrary to the principles of good local government, and it simply will not and cannot be followed by councils.”
“As my hon. Friend the Member for Warrington North said, they are transferring what is currently annually managed expenditure—the current costs of the council tax benefit scheme are driven by factors that are not under the control of councils—to funding that is covered by the local government departmental expenditure limit. That will put an unrealistic and unfair funding noose around the neck of local government, because the year one base level will involve a 10% cut. My fear is that what could and should be a good move for local government and the people it serves—a locally designed council tax support scheme—is damaged and discredited before it starts by the design of the scheme.”
“Authorities are being asked to take on the new risk without the flexibility to allow them to discharge the responsibilities that they are taking on fairly, effectively or appropriately for their area. Whether the 10% cut leads to pressure on councils’ funding, pressure for them to find cash from other sources or greater cuts for those who are not protected will depend on how the cut is distributed across local authorities, local decisions on the design of the scheme, the make-up of the population within an authority’s area, the proportion of people who are protected by central Government and the degree to which the move from a council tax benefit to a council tax discount encourages take-up among people who are already entitled to support but do not claim it. Central Government would not make this move if it affected themselves.”
“It shows a lack of true localism and a transfer of considerable financial risk from central Government to local government, which promises to have a severe impact on support for many current recipients of council tax benefit. The Bill also sets out an unrealistically and unfeasibly tight time scale. The Secretary of State is more sophisticated than the image and manner that he often cultivates would suggest, but his politics on this matter are brutal and brutish. In my view, the intention is simply to transfer to local authorities the financial risk of the increasing cost of support for council tax costs. The Government want to get local authorities to take the blame for the cuts being imposed by central Government. Financial risk is crucial for any local authority when it considers the future.”
“It is a real pleasure to serve under your chairmanship, Mr Crausby. I rise to support the amendments and new clause in the names of my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) and my hon. Friends the Members for Sheffield South East (Mr Betts) and for Warrington North (Helen Jones). The problem, which my right hon. Friend the Member for Greenwich and Woolwich hits on directly in his amendment 79, is that council tax reduction schemes will be undermined from the start by the 10% funding cut and the constraints that the Government are putting in place to compensate for the problem that it will create. Throughout the part of the Bill dealing with council tax, we consistently see hallmarks of the scheme that run contrary to the Government’s declared aims.”
“The effect is uncertain, but it is possible to make some projections. In my authority of Rotherham—a member of the SIGOMA group—if the pensioners are protected in the way in which the Government clearly believe that they will be, everyone else who is currently entitled to support, including many who work but get low wages, and therefore require and have a right to that support, will take a cut of not 10% but 19.5%.”
“My hon. Friend is talking about plugging the hole caused by the 10% cut and highlighting the feeble arguments from Ministers about the flexibility around the second home discount. Has he asked himself why the Government have not considered the single person’s discount, which is worth £2.4 billion in total—more than five times the 10% cut?”
“The Minister talked about the IT suppliers and working to ensure that their new systems are in place by April next year, but they are going to need to be ready, fully designed, tested and operational well before the end of this year during the period when local authorities will be consulting on and designing their schemes and reassuring themselves that they can be put in place. Is not the reality more likely to be that the options on schemes will be restricted by the designs that the software suppliers will have ready to go?”
“I must say that it is welcome to hear the Minister say that the Government are committing themselves to draft regulations published while the Bill is before the House. Will he make it clear whether that means this House or the other House?”
“The hon. Gentleman is making a persuasive case, which is consistent with pooling principles elsewhere in the Bill, and I hope he makes some headway with Ministers. Does he not agree that, with only four minutes left when we started this group of amendments, only the third of 10 on the selection paper, there are some important issues that we have not reached, and that if they are to be aired we will have to return to them on Report?”
“Does the Minister accept that the big block on the approval of applications is the failure to provide the match funding that is needed for many investments to boost jobs and growth? There is £245 million going begging that is earmarked for Yorkshire. What is the Minister going to do about match funding?”
“The economy has flatlined for more than 12 months since the Chancellor’s spending review, unemployment has hit a 17-year high and the national debt has now topped £1 trillion. What has gone wrong?”
“My hon. Friend posed the question of how anyone could have certainty about what will and will not apply in a TIF area. Given the Second Reading debate and the performance of the Secretary of State, the one certain answer is that such certainty will not come from asking the Secretary of State. When I challenged him, he simply could not say whether resets would apply to TIF schemes. That is a matter of serious concern to all of us who want to make the schemes work.”
“My hon. Friend is developing a powerful case. As my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) said, the Committee should at least expect to see confirmation of the principles on which judgments about disproportionate benefit will be made and on which any levy will be based, but that is not in the Bill. The principles on which a levy would be based are not even set out in the response to the consultation that was published in December. That is not good enough, and we expect more from the Minister and his colleagues.”
“I want to believe that the Minister can make this work, but the more I listen to him, the more complex and uncertain this system seems to me. I wonder whether he has really grasped this issue and whether he has looked at his own authority. In 2006-07, his authority—Bromley—suffered a loss of business rate income of more than half. In at least two of the following five years, the volatility was more than 10% of the total business rate income. In that sort of situation, which has been exemplified within his own authority, the system of top-ups and tariffs will be complex and uncertain, and some authorities will find themselves top-up authorities in one year and tariff authorities in the next. That will make essential local government planning very difficult.”
“I am grateful to the Minister, who is being generous in giving way. Whether it is the top-up and the tariff or the set-aside and levy that are designed to deal with this wild volatility, the central point remains: many local authorities, including his, see great variations year on year in their business rate income. That makes essential financial planning and management, particularly when finances are tough, much harder to do and calls into question the very design of the new system.”
“The Minister has indeed been generous, but these are Committee proceedings. May I pursue the point raised by my hon. Friend the Member for North Durham (Mr Jones) about what constitutes a significant drop? Would the Minister regard as significant the £52.2 million drop in his Bromley local authority’s business rate income in 2006-07? Would he regard last year’s drop of £5.5 million as significant? For the purposes of the provisions we are debating, would he regard both, either or neither as significant to his local authority?”
“Clearly, prudent councils will set sums by against risk. The central problem with the system is its unpredictability and volatility. To make provision against risk, one has to be able to quantify it. That is highly uncertain. For instance, how would the treasurer of Brentwood council—the Secretary of State’s local council—have been able to anticipate a drop of more than a third in the business rates revenue last year? It was probably due to factors beyond their control, and they would have been unable to hedge against and provide for that sort of risk.”
“The Minister may have meant it lightly, but he has just said a serious thing. It suggests that Ministers in this Government make arbitrary and personal decisions about the funding going to local councils, that are not based on any fair, open or objective formula.”
“On a point of order, Mr Amess. The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), wound up the previous debate for the Government, but I am not certain that Hansard will record exactly how he voted. Now he has rejoined the Front Bench having gone absent for a little while, perhaps he could tell us.”
“Before my hon. Friend moves on from the question of evidence, I do not want her to overlook the value of such evidence. Does she agree that democracy works better when a wide range of organisations has an opportunity to contribute effectively to our discussions? Evidence sessions in a Public Bill Committee give organisations that represent people with a wide range of interests the chance to assess, analyse and propose amendments to improve legislation. That stage will be sorely missed because of the way in which the Government are handling the Bill.”
“It serves our purpose, as well as the wider purpose of better legislation, to have those evidence sessions and not to put them to one side, as the Government are doing in this case.”
“Before my hon. Friend moves off the question of procedure, does she agree that it is important that we do not lose sight of the fact that the introduction of evidence sessions as part of the Public Bill Committee process, as opposed to the Standing Committee process, was one of the good reforms of the previous Parliament? The hon. Member for Poole (Mr Syms) is right that there is useful expertise across the House from Members with a background in local government. However, unlike the previous consultation and the public statements of Ministers, evidence sessions would give members of the Committee and Members who are following the legislation time and help in getting to grips with the content of the Bill.”
“My hon. Friend makes an important point that counters the assertion of the hon. Member for Poole (Mr Syms). He said that Opposition Members argue that the Government are going too far too fast with the Bill because we do not know what to say about it. Does my hon. Friend agree, to the contrary, that the local authorities that must implement the Bill are worried about the rapid time scale? Authorities in Yorkshire and the Humber have told us that they are concerned about “the rapid timetable for these reforms, given the huge levels of complexity involved and the radical implications they will have on councils’ ability to fund services to local communities”. That is why my hon. Friend the Member for Warrington North (Helen Jones) was so right to table the amendments.”
“On a point of order, Mr Amess. Any written evidence submitted to a Public Bill Committee, and not just the oral evidence taken in its opening sittings, will be circulated to all members of that Committee. May we have your guidance, and then the reassurance of the Minister or the House as appropriate, that any written evidence submitted to this Committee of the whole House will be circulated to all Members, who may all have an interest in participating?”
“Further to that point of order, Mr Amess. As the Chairman of this Committee, you will have noticed that the programme order suggests that there will be at least two more part-days for our proceedings. Will you do your best to ensure that the suggestion made by the hon. Member for Portsmouth South (Mr Hancock) is put to the right authorities, so that, if agreed, a decision can be put in place for the final two of these three days in Committee of the whole House?”
“My hon. Friend is making a powerful case about the volatility, the unpredictability and the rogue factors that can throw out revenue from a business rate base. Is not the real argument for delaying the commencement of these provisions connected to that, combined with the fact that 2013-14, when this system is supposed to come into place, is also year three of local councils having to deal with the spending review settlement introduced by this Government? The finances are very tight, so predictability and certainty will be key to councils planning their way through that. Those are the really powerful arguments that my hon. Friend is making to justify putting back the commencement, as recommended by our Front-Bench team.”
“My hon. Friend amplifies her case. On Second Reading, she told the House something from which this Committee would benefit. I believe she pointed out that the ninth largest business in her borough was the local police station, while the biggest business rate payer was a business with a small office above a bowling alley, which happened to be the national headquarters of a national firm. That illustrated perfectly how contingent a local council’s business rate take is on accidents and other contingencies of business location and so forth. It showed how unpredictable and volatile the business rate stream can be.”
“Amendment 46 and the rest of the group reflect four consistent concerns about this part of the Bill on business rates. First, it will create a greater uncertainty for local government in its flow of funding and its ability to plan financially, and therefore its capacity to cope with the funding squeeze now and foreseeably in the next few years. It undermines an essential stability in funding for sensible longer-term planning and sensible long-term service reform and change. Secondly, the amendments reflect the distrust of central Government with regard to the use of the business rates funding stream as a cash cow to help to cover the cost of failures in economic policy when revenue streams from other sources fall off, as we have seen during the last 12 months.”
“It is a pleasure to serve on this Committee of the whole House under your chairmanship, Mr. Robertson, and that of your colleague, Mr. Amess. Amendment 46 is a probing amendment in an important group of amendments that the Committee will discuss. I have a number of questions for the Minister, which I hope he will be able to answer when he replies, but if not, I hope that he will answer in writing, as would usually be the case. I notice that two of the amendments are among the 17 that the Government have already tabled at this very early stage to their own Bill. In this case they correct not just drafting errors, but quite serious errors in basic sums. The Minister can speak to those himself when he contributes to the debate.”
“It will not take account of the fact that there are three times as many looked-after children in South Tyneside as in Surrey or that there are five times as many children in poverty in Middlesbrough as in Wokingham. It will not take into account the capacity of a local area to raise resources, in particular through council tax. It will not take into account the fact that Bexley and Barnsley have a similar population, but that Bexley raises £37 million more in council tax each year. It will take no account of the fact that Brent has a similar population to Rotherham, but raises £22 million more each year in council tax.”
“My hon. Friend, as a former leader of St Helens council, knows a great deal about the local government finance system and the pressures on local government. He may not have heard my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) in the last debate refer to what has just been described as a double whammy. In other words, there may be a loss of potential income at the same time as, and as a result of, the event that causes a greater need and demand for the services that have to be funded through that revenue stream. That is a concern. I want to ensure that the Committee is clear that this is a fundamental shift in the basis of our funding calculations and in what local councils in England have to spend. The system will no longer work on the basis of need.”
“Like my hon. Friend, I am not surprised by that. I seriously question whether the scheme will work even on its own terms, but I support the principle of a system that provides some rewards and incentives to local authorities so that they better support growth in business, jobs and the economy. The cost of doing that in the Bill and under the new system is very great given that they take no account of need or resources, and do away with the decades-old principle of equalisation.”
“The hon. Gentleman has a lot of experience of local government and was a distinguished leader of a council in north, not south London. However, no one could tell that from the comment that he has just made. As to my fiddling the figures in the local government formula, my goodness, many people say that Labour should have learned many more lessons more clearly from the extent to which the Tories did that before 1997.”
“The very point that I am making is that the current system, complex as it is, takes account of resources—an area’s capacity to raise revenue, especially through council tax—as well as the needs of the population in that area for the essential services that local authorities provide. The formula covers both and is based on the principle that I outlined.”
“We are making big decisions, largely in the dark, and we are being asked to give members of the Government significant regulation-making powers that will define the most important dimensions of the way in which the system works and what is available for people in different areas. I want to underline the point that spending to meet increased need in future will have to be funded by the business rates increase. The council tax freeze and referendum start to remove that as a realistic alternative source of additional funds.”
“Whatever side of the House we are on, we should endorse the principle that objective, sometimes independent, assessment is the basis for better decisions. I have never been one for saying that important decisions, which should be taken by politicians, who then are accountable for them, should necessarily be outsourced to independent experts who do not have the direct accountability that we and members of the Government have, but my hon. Friend makes an important point that is relevant to our discussions. It is impossible to make any sensible assessment, let alone a sound, independent assessment, of what the system will mean for the future. That makes our discussions and the decisions that we are required to make as members of the Committee difficult.”
“The hon. Gentleman is right—there will be resets—but we do not know after what period or on what basis, so there is no guarantee that the accounting of need in the current system, which will be frozen at the point when the new system starts, will be reflected in a formula for, assessment of, or decisions on resetting. He might want to pursue that point with his hon. Friend the Minister.”
“My hon. Friend is right—I am about to make a similar point on relatively affluent areas becoming relatively more affluent under the proposed system. The Government’s declared intention is for a 10-year gap between resets. I have my doubts about whether a reset after that period will be capable of restoring a proper reflection of need or a proper fairness in the system. We will speak later to amendments that would create much shorter reset periods, but they would not change fundamentally how the system will work to build in an advantage for already affluent areas with a higher business base. That advantage will just get bigger over the period between resets.”
“My hon. Friend is really saying that we have not had a council tax revaluation. The problem he describes is a problem for any Government, but Governments will experience a similar problem with business rates as a result of the Bill.”
“If it did remove it, it would remove the incentive element that they want to build into the system. Having been a local government Minister for two years, introduced the first ever three-year settlement for local government and altered the formula to better reflect needs and resources, I know that there are always winners and losers from any change. The whole House knows that. However, the councils that have a big business rates base, a strong council tax take and high levels of growth will be win-win-win councils, and those that do not will find that they are lose-lose-lose councils. That is the unfairness that is built into the design of the new system. It will increase divisions and tensions in our country.”
“I have looked back at the latest gross value added statistics published by the Office for National Statistics just before Christmas. Last year’s figures showed a difference of more than 3% between growth in London and that in Lincolnshire, Cornwall or Merseyside. In other words, it is clear that from year one the gap between affluent and less affluent areas will grow. The business rates base, and therefore income for councils, will grow faster in some areas than others, as it has in the past. Even if there were the same rate of growth in all areas, the relative size of the business base income, which is higher for some councils than others, would mean a greater actual cash income for some councils. The top-up and tariff system that the Government are designing will reduce, but not remove, that disparity.”
“My hon. Friend makes a powerful point. It is certainly clear from how the cuts to local government have fallen in this Government’s first two years that certain areas, including his and mine , have borne a much greater burden than others. The other part of the double whammy, to use my hon. Friend’s expression, is designed into the system, and it should give the Committee cause for concern. It is that the local distribution of the business rates is very uneven. For instance, Kensington and Chelsea has a much smaller population than Rotherham or Barnsley—I represent part of both those boroughs—but raises five times as much in business rates as Barnsley and three and a half times as much as Rotherham. The opportunities to grow the business base are also uneven.”
“The extent to which it is a step in the right direction remains to be seen. There is an element of its direction that is right, which is the desire to see greater incentives for local councils to support the growth of their business base, and greater rewards for doing so. How those incentives will work is weak and potentially perverse, but the principle is nevertheless in the right direction. The potential practical problems that we are beginning to tease out are part of the debate that we need to have.”
“They will indeed. As my hon. Friend states, there is a double disadvantage to areas such as his. He paints that picture and concern very vividly.”
“My hon. Friend is right, and I suspect that it will be one of the Minister’s biggest headaches in the system. I doubt whether he will come to the conclusion—although perhaps he should—that the real answer is unitary authorities across the country. [Interruption.] But I sense that I may be tempted into territory that falls well beyond my amendment and the whole group of amendments.”
“My hon. Friend is right. She made that point powerfully last week in her Second Reading speech, which was one of the best that the House heard. Whether for children or councils, incentives need to be simple, and the rewards and rules need to be clear, but the system that the Bill will introduce falls far short of those basic objectives for any system of rewards and incentives.”