Local Government Finance Bill — House of Commons, 2017-01-23
Topic: Government Operations
Richard Grosvenor Plunkett-Ernle-Erle-Drax (Conservative, Centre-right): It is a pleasure to take part in this debate and to follow the hon. Member for Manchester, Withington (Jeff Smith). The Bill’s timing is unfortunate. Certainly in South Dorset, this shake-up of local government finance is regarded as part of a perfect storm. Everyone’s minds appear to be concentrated on the ongoing local authority reorganisation, but in addition we now have the question of funding, and how it will be done fairly and devolved properly. However, I entirely endorse the general thrust, as the Government are heading in the right way. Before I forget, on this great day, may I also wish a happy birthday to the Minister for Housing and Planning? I am sure that he would rather be somewhere else instead of listening to me this evening I endorse devolution. Local people should have more power to make local decisions—there is no division across the House on that point—but with devolution comes a responsibility, if I can put it like that, for the Government to ensure that there is fair play, whether it be in the difference between urban and rural, or in the difference between the poorer and wealthier parts of our country. As I said in an intervention, moving to the system that the Government propose for business rates raises the question of whether rural areas and the poorer parts of the country will get the funding that they deserve Before I move on to talk about five brief points, let me set out my other concern: as pressures on finance grow, the perception from many councillors in my constituency is that the Government are putting more of the tax-raising powers into councillors’ hands, but they are not so keen on that if they do not have the resources to ensure that everything is dished out properly and fairly. I just raise that as a concern, but overall I welcome the path that the Government are taking I asked around, as is my duty as an MP, to find out what officers and councillors thought of the Bill. As an MP, I must act without fear or favour, so it is my duty to mention five brief points that have been raised: the new homes bonus; adult social care; the business rates appeal; second homes; and underfunding in general. I will touch briefly on all five, starting with the new homes bonus. The significant funding change set out in February 2016 has seen the reduction of six years’ funding to five years in ’17-’18 and four years from ’18-’19 onwards. Worryingly, the inbuilt so-called deadweight of 0.25% set out in the consultation was suddenly changed to 0.4% in December 2016, nine months after the consultation closed. I ask colleagues’ forgiveness for the dryness of my words but, let us face it, this subject is fairly dry and can get rather detailed The scheme was designed to reward councils for building new homes, but with the deadweight, there is a risk that the incentive is removed. For example, in Weymouth and Portland, the deadweight is 108 homes, so Weymouth and Portland built 234 homes in 2016-17, but received the new homes bonus for only 126 homes. The incentive has been removed and there are no transitional measures to limit the impact. The calculations are based on band D, which disadvantages councils such Weymouth and Portland where the average property is band B. Even if the authority sees a substantial growth in the number of homes, it will not benefit from the new homes bonus to the extent that the Government might like. It is predicted that Weymouth and Portland will lose just shy of £1 million in new homes bonus between now and 2020. The Society of District Council Treasurers has made several points about the Government’s plans, saying that they are "severe" and that they "come so late in the budget planning process that many authorities will have little option at this stage apart from reducing reserves." The society adds that imposing a baseline of 0.4% is "far more drastic" than the 0.25% mentioned in the consultation. Emerging local plans that include a substantial number of new homes often face fierce opposition—nowhere is that more true than in my seat—but the plans are often made more tempting by the promise of funding from the new homes bonus. However, the reward has now been reduced in cash terms, so resistance to new homes is even greater I move on to adult social care, about which I have no doubt that all Members have very serious concerns. I do not like to use the word "crisis" because I think that it describes something considerably more serious than our current situation. In the view of those I have spoken to, business rates retention "does nothing" to address urgent needs. Across the country, the £240 million achieved in savings from the new homes bonus reform is going to social care as a one-off grant. This means that while social care gets one year’s resuscitation, councils of course lose out Taking funding from district councils in such a way forces them to review discretionary services, such as low-level support for older people and other vulnerable groups. We have talked about public conveniences and the interesting fact—I had no idea about this until I listened to a debate by Age UK—that there are 2 million people who cannot be more than 10 minutes from a public convenience. If they are further away, obviously there is a disaster, so many elderly people do not leave their homes. In effect, we are forcing them to stay in their homes and that cannot be right In addition, unitary authorities get all the money and two-tier councils, such as those in parts of South Dorset, have to split their revenue, so the district council loses and the county council gains. Social care is delivered through a grant that favours the northern metropolitan areas and takes away from councils such as ours. South Dorset has an increasing elderly population, which is only going to get bigger, so the pressure on adult social care is only going to increase Business rates appeals are increasing, and they are costly. Under the new 50% retention rate rules, local government must pay 40% of appeals and settlements against business rates. This year, a company called Perenco, which runs the Wytch Farm onshore oil platform, won a £5 million appeal, and the Ministry of Defence won two £2.5 million appeals for its two Army camps. Both organisations had appealed against Purbeck District Council. Forty per cent. of £7.5 million is £3 million, payable by Purbeck District Council directly. It tries to keep £1 million a year as a safety net, so that is three years of safety net wiped out On second homes, the view is that they put up house prices and reduce the number of local people living in the area. That is, again, of concern across the House. So long as a second home is available to rent for 140 days a year—if it is registered as a holiday let and liable for business rates—it avoids council tax. The system lowers the cost of home ownership for those who least need it—they live tax-free in a second home—instead of being a tax relief for a small business, as was the intention. Business rates relief on second homes makes very little difference to the district, but a huge difference to the county council and the Chancellor. At least 200 newly registered second homes in Purbeck over the last couple of years will mean a loss of £500,000 a year in revenue. At the moment, Purbeck District Council needs to assess how many homes to build, and it automatically adds 10% simply to counteract the effect of second homes Finally, in the view of those I have spoken to, the chronic underfunding of district councils is not addressed by the safety net. It is not addressed by the transition grant payments, which only increase uncertainty for budgets if they are recalculated every two years. It is not addressed by paying £65 million to the upper quartile of "super sparsity" local authorities. Their view is that rural services should be separately funded. Finally, it is not addressed by the top-slicing of the new homes bonus. The new homes bonus should be separately funded as well With those points I shall conclude. As I said to the Minister of State—again, a very happy birthday to him —I support the direction of travel, but I am a little bit concerned about much of the detail.