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Business Rates

Volume 530: debated on Monday 20 June 2011

18. What assessment he has made of the likely effects of retention of business rates on local authorities in areas with high levels of deprivation. (60291)

The local government resource review is considering options to allow authorities to receive the repatriation of business rates. We will publish our proposals in July for consultation. We have been clear all along that the review will continue to support people where needed, to consider how to fund authorities where locally raised funding would be insufficient to meet budget requirements and to control council tax levels.

I am very grateful to the Secretary of State for his answer. I am sure he will agree that local authorities have a key role to play in promoting growth. There are very strong arguments in favour of allowing local authorities to keep their business rates, but given the great disparity that exists between local authorities across the country, can he give us a bit more detail about how he will make sure that local authorities in disadvantaged areas that do not have a strong business base will still be able to fund essential services?

I am grateful for the right hon. Gentleman’s question, because it allows me to make it absolutely clear that there is absolutely no intention whatever for councils to receive anything less than they currently receive with regard to the amount of grant. Manchester receives £714 per head and Trafford receives £325 per head. That kind of bridging is not easy to do, but I want him to understand that the system we are proposing will fully meet the aspirations of places such as Manchester, which has a very dynamic economy. We want to ensure that we no longer take from areas where growth exists, as happens under the existing provisions.

Hastings recently fell to 19th from the bottom on the index of multiple deprivation. Can the Secretary of State reassure me that in the new assessment, with business rates as a right incentive for councils, areas of deprivation will still get the support they need from central Government while growth comes back?

The short answer is yes. My hon. Friend is a doughty defender of her constituents, but there is irony in the fact that the worse an authority can present itself, the more grant it gets. When I was council leader I often wanted to state what the good reasons for coming to the area were, and I think we have found a system under which councils will be able to do that. Hon. Members should not be under any illusions—the existing system is bust; it is broken. It simply does not deliver and we want a system that will deliver for the richest and the poorest.

But while the Stockport part of my constituency would broadly break even from localising business rates by raising almost the same amount as it gets in formula grant under the current arrangements, the Tameside part of my constituency would see a massive 35.7% drop—a shortfall of some £30 million funding. Does the Secretary of State understand that coming on top of his front-loaded cuts, such a massive reduction in funding for one of England’s poorest local authorities would be an unacceptable outcome?

My advice to the hon. Gentleman is to cancel the leaflet. If it has already gone, pull it back. There is no intention whatsoever, under any circumstances, that he should lose 34%—not in one lump, not in a series of lumps. He is going to have to trust me. We are producing a scheme that he will like. We are producing a scheme such that he might even consider crossing the Floor.