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Local Government Finance Bill

Volume 552: debated on Wednesday 31 October 2012

Consideration of Lords amendments

I must draw the House’s attention to the fact that financial privilege is involved in Lords amendments 1, 2, 4, 5 10 and 19 to 85. If the House agrees them, I will cause an appropriate entry to be made in the Journal.

Clause 1

Local retention of non-domestic rates

This group contains all the amendments made in the other place to the provisions allowing for a business rates retention scheme. The scheme will, for the first time in a generation, allow local areas to share in the proceeds of growth. Continuing the precedent set when the Bill was considered in this House, each amendment was introduced by the Government to make the changes that we believed would improve the Bill. The majority of the amendments are highly technical and, in several cases, have been introduced in direct response to the discussions that we have continued to hold with local government on the operation of the scheme. Other recommendations give effect to local government’s preferred approach or, in one case, to a recommendation of the Delegated Powers and Regulatory Reform Committee.

Owing to their largely technical nature, I do not plan to explain each amendment in the group in detail—though I could be tempted—but I will outline what they do. They enable the Government to deliver on our commitment fully to fund the five-year discount on business rates up to the state aid de minimis level for businesses moving to an enterprise zone before April 2015. They provide for the scheme to operate on local government’s preferred administrative approach. That approach—the collection fund approach—is currently used for council tax, and so is familiar to it, and works well. They also provide for the appropriate assurance of calculation and information supplied under the business rates retention scheme.

The amendments will also clarify some points of detail for local government. In particular, they will remove any ambiguity about the basis on which local authorities can apply for a safety net payment on account—an important process. Authorities anticipate that they will need safety net support and will be able to access that support before the end of the financial year, and to simplify the arrangements for designing a pool without reducing the safeguards in place for pool authorities by removing the duty to undertake consultation with those likely to be affected by a pooling designation or revocation and in direct response to strongly held views of local government on this point.

Taken together, these technical amendments to the non-domestic rating provisions will give effect to smooth implementation of the rates retention scheme, and I urge hon. Members to agree to them.

As the Minister said, many of the amendments in this group are technical. I do not wish to take up too much time on them—[Interruption.] That is the Minister’s job, not mine. If his Whips want him to talk for longer, that is his problem. There are a number of issues I want to raise in relation to one or two amendments.

We do not have a problem with Lords amendment 1 or the subsequent amendments dealing with discretionary rate relief in enterprise zones, or with Lords amendment 2, which implements a recommendation by the Delegated Powers and Regulatory Reform Committee. We support that, as we did in the other place.

The group of amendments beginning with Lords amendment 19, however, which deals with administration of the rate-retention system, raises a couple of questions on which I would appreciate clarification from the Minister. Billing authorities are being required to estimate their income before the start of the financial year. That estimate will determine the amount to be paid to Government as a central share and the amount to be paid to precepting authorities, to be transferred to their own funds. There are a number of amendments consequent on that change. If amounts are different, I understand that they will appear as surpluses or deficits on the authority’s collection fund. However, will the Minister clarify what would happen where a firm paying a major proportion of the authority’s business rates closed down mid-year—an example we have raised throughout the Bill’s progress? Surely that would lead to a deficit in the collection fund, so what would the local authority’s position be? Can a collection fund be run at a deficit, or would the shortfall have to be made up from reserves? I should make it clear that I am talking about a really catastrophic event, such as a firm that pays maybe 20% or 30% of the business rates in an area closing down, as happened with Alcan in Northumberland, for example.

As the Minister said, Lords amendments 34 to 38 deal with the arrangements for assurance. It is rather typical of the muddled way in which the Government go about things that they are having to make arrangements to take effect subsequent to the abolition of the Audit Commission before they have actually abolished it—so far they have only a draft Bill. The amendments ensure that the Secretary of State will define the assurance requirements though directions and produce certification instructions—I am sure he will work on them personally over the Christmas holiday. The amendments show the mess that the Government have got themselves into. They have no legislation ready to abolish the Audit Commission, yet they are having to put in place provisions in this Bill. The Government have ended up giving yet more power to the Secretary of State, in what was supposed to be a Bill to give more power to local authorities.

I would be grateful if the Minister clarified those points before we move on to the next group of amendments.

I welcome the stance that my hon. Friend the Minister has taken with this Bill. It is sensible to adopt the Lords amendments that he has outlined, and I am glad to see them. When I was responsible for the Bill in my previous role, they seemed to me to offer useful clarification and to strengthen the Bill.

I am particularly pleased that my hon. Friend referred to pooling. It is important that we encourage local authorities to explore to the maximum the opportunities that pooling makes available. The reason for that—the reason I think the Lords amendments are helpful—is that as the economy picks up, as it will, development opportunities will in many cases enhance the interdependency of neighbouring authorities. My London borough of Bromley is a good example. Many people in Bromley work in central London, but they are effectively part of the same economic area. The borough council pays for the services it gives people as residents, who contribute to the London economy through their work in the west end, the City of London or elsewhere, including, in some cases, across London borough boundaries—they may work in Croydon or somewhere such as that.

There is therefore great merit in giving local authorities not only the maximum flexibility to pool, but the maximum encouragement to do so, because one would not want a council to approve a substantial development on its boundaries that might bring it all the financial benefits, but which needed planning support from neighbouring authorities under the duty to co-operate and their good will because of where the work force come from. Pooling is important, and the Lords amendments give us sensible flexibilities.

Importantly, pooling fits with some of the other parts of the Government’s localism agenda. One of the arguments made earlier—I noted it in their lordships’ discussion—was about enabling local authorities to have adequate critical mass with their retained business rates, which they can use for tax increment financing, for example. The Bill has been important in taking steps forward on that. A pool will have a greater critical mass of funding, which can be used to approach the markets and enables greater leverage.

My hon. Friend did a great deal of work on the Bill, for which I thank him. The Select Committee on Communities and Local Government visited Manchester some months ago, where we saw some fantastic examples of regeneration. Some had gone incredibly well, although admittedly one or two had not gone quite so well. Does he feel that pooling arrangements are likely to help such projects in future?

I believe they can. Manchester is an interesting example. Indeed, my hon. Friend must be intuitive, because I was about to say that pooling can often fit sensibly with the other development that we have seen—in which Manchester has been something of a pathfinder—which is the establishment of joint authorities. It is a classic means of dealing with co-operation by local authorities from the bottom up without the need for—dare I say it in the current climate?—unitary reorganisation. The ability to form a joint authority creates the ability to procure jointly, pool business rates jointly and, therefore, invest jointly, as well as a raft of other things, which are beyond the scope of this Bill.

I am with the hon. Gentleman on pooling and how economies such as those in Greater Manchester work, but he should not get too carried away with the Manchester example, because my understanding is that Tory Trafford and Liberal Democrat Stockport are not very keen on the idea of pooling resources.

All those authorities signed up to the concept of the joint authority. Any pooling will have to involve sensible negotiation between the various authorities about what is in their mutual interest. I would have thought that a degree of caution was perfectly understandable at this stage in the process. The important thing we are doing in this Bill is putting in place the legislative means to enable areas such as Manchester and other areas with pooling to take up more of the opportunities as, I hope, confidence grows. I hope that my hon. Friend the Minister will confirm that the ability to pool is yet another reason the Government have no intention of going down the route of imposing top-down unitary reorganisation—I am sure this is a timely moment at which to remind ourselves of that point. I hope that the opportunity to pool will also encourage other conurbations to develop a similar approach to that being taken in Greater Manchester. Pooling would provide a means of achieving many of the benefits of what were once described as city regions, without the need for the top-down imposition that went with those arrangements.

Does my hon. Friend envisage pooling working across county boundaries? My constituency lies in the east Lancashire economic area—within which co-operation would work well—but quite a lot of the economic activity spreads over into Yorkshire. For example, a lot of businesses have their headquarters in Lancashire and premises in Yorkshire.

I must confess that my view on that has shifted somewhat. I was initially sceptical about cross-county boundary pooling, because of the potential administrative complexities involved. For example, we would have to consider how to deal with the tier split where two-tier areas were involved. It might be easier to achieve where only adjoining unitaries were involved. We should not rule it out totally, however. It is important to recognise that the proposal that we are debating fits into the broader localism agenda, in that it recognises that economic geography might not follow the purely administrative geography of an area. I am in favour of maximum flexibility, and my hon. Friend has raised a good example. In my area, Bromley would probably fall within the area of Greater London, but there are some local authorities on the edge of London, such as Thurrock, Slough and Watford, whose economic geography would make them as much a part of the London economic area as of the shire county of which they are a part. I hope that the Government will consider this as an option, provided that the technical issues can be resolved. Perhaps the Minister will deal in detail with the important point that my hon. Friend has just raised.

It is particularly useful to explore that point in the context of the pool providing an opportunity to raise funding for infrastructure investment. Earlier this week, in our debate on the Public Service Pensions Bill, we discussed raising the cap on the amount of local authority pension funds that could be put into infrastructure investment. I favour raising the cap, as the Bill proposes. The proposal before us today would provide yet another means of raising revenue streams that could be put together to enhance the amount of a local authority’s investment leverage.

It is worth bearing it in mind that that happens elsewhere in Europe. We see a degree of it in the Federal Republic of Germany, but the area that I know best is in France. The French have developed quite sophisticated models of co-operation, known as communautés urbaines. They are generally similar to a Greater Manchester-style joint authority, stretching across a conurbation. An example that I know well is that of greater Toulouse, which, thanks to the pooling of resources, has been able to procure, invest and deliver infrastructure jointly. This has led to the development of a metro system in Toulouse, a tramway going out to the suburbs and improved road links to Blagnac airport. Toulouse is an historic city with a considerable learning pool in the centre, but it is also inextricably linked to Aérospatiale and the avionics industries around Blagnac, which are outside the municipal boundary. I am reminded that such co-operation was the logic behind local enterprise partnerships.

My hon. Friend knows my constituency well. I see parallels between his examples and the expansion of Southend airport, which is owned by Southend unitary authority but located in the district of Rochford. How would the proposals impact on my constituents? It sounds as though they could present an exciting opportunity.

I am quite well acquainted with my hon. Friend’s constituency, and I have visited Southend airport on a number of occasions. He has provided a classic example of how pooling could unlock significant opportunities. As he knows, Southend’s boundaries are tightly drawn around its urban area, but it is clearly part of a broader south Essex conurbation. Its development opportunities, of which the airport is an example, lie almost entirely outside its boundary, but people would think of them as being part of Southend because they form part of the economic area. It would cause all manner of upheaval if we were to resolve the problems through the top-down imposition of a unitary structure in south-east Essex, as we have seen happen elsewhere.

This kind of pooling, however, would give Southend and the neighbouring Rochford district an incentive to share the benefits that would come from the development of areas in Rochford that were on the periphery of Southend. The pooling of the retained rates would enhance Rochford’s council tax base. The measure would also make Southend a more attractive business destination, because it would be able to open up economic development and infrastructure opportunities that it would be unable to do entirely within its own boundary.

My hon. Friend’s constituency provides a good example of how pooling could work. I can envisage Southend, Rochford and, say, Castle Point forming a natural economic subset that would hold together very willingly. The south-east local enterprise partnership, comprising Essex, Kent and East Sussex, is the largest in the country. That would probably not be regarded as a logical area in which to pool, although it might be more appropriate in some of the smaller LEPs that fit more tightly the economic geography of their area.

Speaking as an Essex boy myself, I should point out that, in areas such as that of my hon. Friend the Member for Rochford and Southend East (James Duddridge), pooling would take place across boundaries, in a sense. Although all the places concerned are all in Essex, Southend is a unitary authority and the two areas surrounding it—its hinterland—are still districts in the two-tier county of Essex. The point about the ability to pool across boundaries is important, and I hope that my hon. Friend the Minister will address the technical issues involved. In this case, how would we resolve the question of Southend unitary authority not having to do a tier split of its benefit from the pool, even though the two surrounding districts would have to take into account the tier split? I do not think that the problem is beyond being reconciled, and such pooling would provide a powerful tool to encourage inward investment into Southend.

The same would apply to another part of the Thames Gateway with which I am familiar, on the other side of the river, in the Medway towns. It would be sensible to give them the opportunity to have a pooling arrangement with their adjoining districts in the two-tier county of Kent. It would therefore make sense to sort out any technical obstacles to that type of flexibility. As my hon. Friend the Member for Rossendale and Darwen (Jake Berry) suggested, even starker cases that cross long-established country boundaries could still make sense in economic terms. There is considerable merit in the proposals.

It has rightly been observed that this proposal is by no means the only element in what is a considerable stream of technical amendments in this group. It would probably be appropriate if I now dealt with the others as best I can—unless I stray off course, Mr Speaker, although I know that you will not let me do that.

We are all looking forward to the development of the hon. Gentleman’s further arguments with eager anticipation.

Before my hon. Friend rushes on to his next point, may I slow him down a little and draw him back to the pooling of funds? He has spoken eloquently about my constituency of Rochford and Southend East, but does he think that areas involved in such pooling arrangements need to be contiguous? For example, there are many synergies between Thurrock, a unitary, and Southend, another unitary. The two are close, but they do not actually touch. Similarly, along the Thames Gateway line, we see places such as Margate and other seaside towns that could work well together even though they are not neighbours. Would they still be able to pool?

That is taking the argument beyond what I was considering when I left office, which gave me more time to reflect on these matters. My hon. Friend and I both had a little time to reflect over the summer. Like me, he has been putting it to constructive use. I think there is merit in providing that option: why not? If the economic geography is such that the two areas hang together, why should we rule out such a possibility? In this day and age, investment decisions will be driven precisely by factors such as economic characteristics, infrastructure opportunities and the nature of the work force and the market, rather than by geographic contiguity alone.

I mentioned earlier, for example, that Slough has a great deal in common with the economy of west London, without being actually contiguous to the London borough of Hillingdon. As I recall, a little bit of the county of Berkshire is located between the two. If such arrangements were wanted, merit could be seen in allowing Slough to enter into a pool with Hillingdon, with some other west London authorities or with Watford. Equally, going in the other direction, Slough might want to involve Reading. There is an argument for saying that there is a natural economic geography that starts almost at the Hammersmith flyover and which goes out through Brentford and then through what is generally called silicon valley. Those opportunities are also important.

My hon. Friend is making an interesting argument. I wonder if I might plumb his expertise a little further. It occurs to me that some of the local enterprise partnerships that have been formed are natural economic areas that plainly do not run according to local authority boundaries. I am thinking particularly of what I think is called the Gatwick partnership, which runs from Croydon all the way down to Brighton. Indeed, in my own county of Hampshire, we have the M3 partnership, which runs up that artery towards the businesses and markets of London. I want to examine my hon. Friend’s knowledge of this subject. Is it possible for local authorities to pool partially, as it seems to me that in certain cases—with the Solent partnership, for example—there would be some logic in that? It seems right and proper that some of the moneys from Portsmouth and Southampton should be invested in that partnership or be centred on its work, but perhaps those two cities could look outside that area as well. Will he explain how that might work?

I suppose it comes back to the technical issues that I mentioned on coping with tier splits in two-tier areas. We should not rule out the ability to try to achieve that, particularly if it can be done by agreement. It would be interesting to see if partial pooling could be achieved. It might not be something that happens at the beginning, but the point to remember about the whole of this local government finance reform is that it is making a major change in providing the legal mechanisms and the tools necessary for local authorities to use in relation to retained business rates. That is very important in itself, as this is, after all, the first time in many of our political lifetimes that the Treasury has forgone an element of revenue.

At the moment, all the business rates are, in effect, nationalised, taken back to the Treasury and distributed on a formulaic basis, which does not provide the sort of incentive for economic development and investment that we all wish to see. The Bill puts that right. I hope it will be possible to make pooling more attractive over time. As the deficit is paid down and the economy grows, the local share available to go into the pool can perhaps increase from its current 50% level. That would make retention as a whole and pooling more attractive, because the pot produced from the pool will, of course, be greater, and therefore even more attractive as a potential investment vehicle. I think we should examine the case with some care.

As my hon. Friend develops his argument, I would be interested to hear how his views might relate to east Lancashire. When we formed the LEP, the borough council of Rossendale, which I represent, did not want to go into a wider Lancashire LEP. Eventually, it did so, however, and I think the then Housing Minister made absolutely the right decision on that occasion, as the arrangement has proved to be a great success. When it comes to the pooling of two-tier authorities, I could foresee a situation in which Rossendale council, which looks south towards Manchester for economic growth, would want to team up with the Associated Greater Manchester Authorities, but Lancashire county council could wish it to remain within Lancashire county for pooling purposes. In that exact situation, in my hon. Friend’s opinion, who would have sway and which argument would win?

If I were a lawyer, like my hon. Friend, I would be advising the parties to try to come to some negotiation rather than litigating, if I might put it that way, as it would not be in the authorities’ interest to get into a dispute. The general approach has been, of course, that in the two-tier areas the bulk of the incentive should rightly go to the planning authority, as its members have to take the decision to allow development that may sometimes be controversial. It is right for such an authority to say to its electors, or to the people who sometimes complain about what the planning authorities do, that there are benefits to come from looking at the bigger picture, some of which will be captured for the local communities. I can see why that would be a sensible development, but it does not mean that I have become an advocate of unitary restructuring. It might be simpler, but the fact remains that the two-tier option has been taken into account in respect of the structures put in place by the Bill.

If I may finish the point, I will happily give way to my old sparring partner. I think we should be prepared, as we develop the scheme, to provide maximum flexibility.

I apologise for not having been able to be present at the start of the hon. Gentleman’s contribution, but I have come in at a very interesting part of his speech. Does this not show up the exact problem with two-tier areas and two-tier authorities, in that fostering and supporting economic growth is so much more than simply the planning system, as it involves education, skills and transport? Many such responsibilities in two-tier areas are held at county level rather than at district level.

I do not see it as a problem; the issue can be grappled with and dealt with. The right hon. Gentleman and I have debated unitary restructuring on more than one occasion over the years, and we end up on different sides of the fence. My point is that through co-operation it is possible to ensure that the economic development levers, which generally sit with the county council, can be sensibly allied to the development levers, which sit with the district council. A good example can be found in Essex, as Chelmsford has a successful local planning authority in Chelmsford borough council—it might now be Chelmsford city council since the town has been given city status—and has not experienced the friction that is sometimes used as an argument to justify unitary authorities. Both the county and its county town have recognised that it is in both their economic interests to grow Chelmsford as a significant hub in that part of the world. In that case, unitary reorganisation was not necessary to achieve significant economic regeneration in Chelmsford.

I have to say that some of the downsides of unitary reorganisation that we saw under the previous Government, when it was enforced against the wishes of the local authorities, were a distraction from the serious job of getting on with economic development, promotion of the area and encouraging investment by sensible planning decisions. These issues can never be seen in isolation. The incentives in the Bill, linked with the duty to co-operate in planning terms, provide a further incentive for sensible arrangements not only between adjoining local planning authorities, but with the county authority as a highway authority, as highway considerations are often important in determining where development is acceptable and therefore where the investment might come from.

There is a bit of queue. I shall give way to my hon. Friend the Member for Bedford (Richard Fuller) first, as he rose first.

I am grateful for my hon. Friend’s generosity in giving way, first because I know that he is eager to deal with other matters in his speech and I do not wish to delay him unduly, and secondly because to describe myself as a novice when it comes to local government finance would be an insult to novices throughout the country. I have learned more about the subject as a result of listening to my hon. Friend, who exhibits the patience of Aristotle teaching one of his slower students.

My question relates partly to the issue of two-tier and one-tier local authorities and their decision-making processes, and partly to the interaction between the attitudes to pooling taken by local authorities and those taken by the local and broader business communities. May I briefly draw a parallel? Sometimes there is a clear understanding between teachers and people who wish to set up a free school, but the project is delayed by some intransigence or slowness of understanding on the part of the local authority. Similarly, different authorities have different ideas about how they wish to proceed. For example, my own county, which benefits from unitary structures, contains some rather small areas. Will my hon. Friend comment on that?

My hon. Friend has raised a couple of important points. I shall begin with the last, if I may—and I shall not forget the other Members who wish to intervene.

We should not make the error of thinking that unitary status is always a solution. Some unitary authorities that are on the small side do not follow their natural boundaries, and their critical mass is towards the lower end of the scale in terms of economic, financial and managerial capacity. It is clear to us now that the creation of a string of fairly small unitaries was not necessarily the best solution. We should not assume that unitary is always good and two-tier is always bad. Some unitaries work and some do not; some two-tier areas work, while in others there are tensions. We need to ensure that they work better in future, and I believe that the Bill and the Lords amendments will be one means of helping them to achieve that.

My hon. Friend’s point about perception is important too. I experienced some frustration when I was first elected as a councillor in the London borough of Havering in 1974—[Interruption.] I must tell the hon. Member for Hartlepool (Mr Wright) that it was a little after the Municipal Reform Act 1835, but it was a while ago nevertheless. In those days, not only was I one of the few members of our 60-odd-strong council who were interested in taking part in the pan-London bodies that we had to have, but I was regarded as very dangerous—dangerously outward-looking—because I had stood for the Greater London Council as well. In 1974, some members of the borough council still thought in terms of the two predecessor authorities. We did not have cabinets in those days, but there was concern about whether the committee chairmen were drawn sufficiently from the Romford end or the Hornchurch end, even if they were members of the same political party. That inward-looking tendency is one of the bigger challenges that we face in dealing with local government as a whole, but attitudes have improved massively since those days in 1974, which is to local government’s credit.

Order. I remind the hon. Gentleman that we are discussing an amendment. I know that he has been tempted away from it by the hon. Member for Bedford (Richard Fuller) and that he wishes to return to it, but I should like us to get past 1974, right up to date, and back to the amendment, on which I know that the hon. Gentleman was about to enlighten the House.

You are, as always, the guardian of rectitude in this place, Mr Deputy Speaker, and, as you know, I am always the willing servant of rectitude in these matters. The point that I was making was that we had indeed moved on a great deal since 1974, in terms of thinking as well as chronology. The situation is better than it was. However, we still have to deal with some entrenched thinking. I believe that, by promoting pooling, the amendment can break down some of that thinking, which, as was pointed out by my hon. Friend the Member for Bedford, can spill into other areas of policy decision-making as well as those relating to local government finance. I hope that, by encouraging economic investment, pooling will make it easier and more desirable to provide the educational opportunities cited by my hon. Friend in the context of free schools. His point was well made: all the various legislative measures interact as part of a broader localism agenda.

Now I must not forget the hon. Member for Hartlepool, who tried to intervene earlier.

I am grateful to the hon. Gentleman, who is being characteristically generous and engaging. I want to move on from 1862, when he was first elected, and away from 1974, when you were born, Mr Deputy Speaker—I hope to catch your eye again: that is why I am trying to be as helpful as possible—to today. Has the hon. Gentleman had a chance to look at Lord Heseltine’s review, which was published today, and which strikes me as very significant in relation to local economic development? In particular, has he had a chance to read recommendation 11? It states:

“All two-tier English local authorities outside London should pursue a path towards unitary status. The Government should encourage this and work with authorities to clarify the process and enable it to happen.”

Notwithstanding his earlier comments, does the hon. Gentleman agree with that?

I note that the hon. Gentleman has both read them and counted them. Anyway, I cannot pretend to have read all of Lord Heseltine’s tour de force of a report, but the cursory reading that time allowed me while I was preparing my brief notes for the debate—[Laughter]—did give me a flavour of that helpful and valuable document. I think that it contains much that we, as a Government, would wish to take on board. As for the specific point raised by the hon. Gentleman in relation to recommendation 11, I do not agree with it, for reasons that I have already given. I believe that an imposed form of unitary restructuring is unnecessary, and that the devices and tools given to local authorities by the amendment reinforce the reasons for not following the route proposed by Lord Heseltine.

My hon. Friend the Member for Bedford (Richard Fuller) described himself as a novice. I am less modest—I thought that I understood the amendment before I came into the Chamber—but, despite the eloquence of my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), I have become somewhat confused. Perhaps you will allow me a slightly lengthy intervention, Mr Deputy Speaker, in order to avoid a lengthy speech from me later in the debate.

The “Commentary on Lords amendments” in the explanatory notes refers to “billing authorities” and “precepting authorities”. My hon. Friend has already referred to planning authorities and highways authorities. In fact, the commentary uses the phrase “major precepting authorities”, but does not explain what “major” means in this context. Perhaps I am slightly sensitive about such terms because I represent a slightly smaller precepting authority, but is a distinction being made between parish and district councils, or between major and minor precepting authorities? My hon. Friend knows a great deal more about these matters than I do, but I was equally confused by the reference to billing authorities, given that police and fire authorities are effectively billing authorities. What do those terms actually mean?

My hon. Friend makes a fair point. You will be familiar, Mr Deputy Speaker, with a joke that is well known in local government finance circles. It is said that the formula grant is like the Schleswig-Holstein question. Only three people have ever understood it; one is dead, one has gone mad, and the third has forgotten. The same is true of some of the complexities of local government finance. When I arrived at the Department for Communities and Local Government, I was not wholly convinced that that was a joke, but there were some very sound officials who put me right on all occasions.

The nomenclature to which my hon. Friend refers is slightly historic, but it is important. For practical purposes, the billing authority will be the unitary authority in the case of the Southend part of my his constituency, and the district council in the Rochford part. In most cases the major precepting authority is a county council. In Greater London, in my case, the London borough of Bromley is the billing authority, but the Mayor of London and the Greater London authority is the major preceptor. I think fire and police authorities also count as major precepting authorities. That is because of how they have developed and become separated from the county councils, although they were originally intended to be part of them.

Let me finish the point, and if I am not making it clear, perhaps I will need to repeat it.

The major preceptors have certain statutory rights in respect of consultation, and they do more or less what its says on the tin: they deliver a significant amount of services, especially in county councils, and in two-tier areas the county council precept will often be the largest part of the bill, rather than the district council element of the council tax, although they are, of course, itemised separately.

My hon. Friend is endeavouring to explain the situation, but I am now less convinced that I support the amendment. The explanatory notes refer to passing a proportion of the amount to the major precepting authorities. Will that be in only one direction, so Southend could pass to Essex county council, but Essex could not pass to Southend even if it was in the wider county’s interest?

That point is slightly different from the pooling point. I was talking about the provisions that deal with the tier splits. We are returning some of the moneys—the business rate—directly to local government. That was formerly taken by the Treasury and distributed by formula grant. Some of those moneys will be needed to fund district council functions in two-tier areas, and some will be needed to fund county council functions in two-tier areas.

That highlights why there has to be a passing of money. It is collected by the billing authority; that is the case at the moment. Southend borough council and Rochford district council collect all the business rates and then have to send the money to central Government as, I think, a monthly payment. It is then returned in the local government finance settlement each year, predominantly by way of the formula grant—although there are one or two other grants, as this is a slightly complex world. We are allowing authorities to keep some of that money at the beginning, but because it has to fund two types of authority—

Order. I am sure the hon. Gentleman will want to address his comments through the Chair, rather than personally across the Bench to his colleague, as he is currently doing. I am also sure that he is not filibustering; I can see that there is no organisation.

As you know, Mr Deputy Speaker, the last thing I would ever wish to do is filibuster. I have spent a large proportion of my life dealing with local government finance, and I wish we could explain things in one simple sentence, as that would make life a lot easier for many of us.

I have outlined the essence of the issue, and the reasons why we have references to billing authorities and major precepting authorities. There are other precepts; the parish council can levy a precept, but it is not a major precepting authority. Very occasionally, there will also be certain levies put on top, but for our current purposes we need not discuss that and add further confusion.

Usually the district council in a two-tier area is the planning authority, and it is also the billing authority. Importantly, however, for investment purposes—this is where this point links in with the question of business rates retention—the highway authority will tend to be the county council, which often has significant economic development resources that district councils do not have, and the education authority will be the most significant body for the skills agenda and in attracting the required work force. That is why pooling makes sense. It links the pooling of resources with pooling and collaboration on a raft of issues, which is essential in the modern world.

For many of us, Mr Deputy Speaker, my hon. Friend’s speech is not a filibuster; it is a master class in explaining some of the intricacies of non-domestic rates and pooling. Having listened to his account of the complex relationship between different authorities, I think I may be slipping from my novice ranking. I ask my hon. Friend to return to his response to the hon. Member for Hartlepool (Mr Wright), who referred to today’s report by Lord Heseltine. Does my hon. Friend agree that there are some valid arguments in Lord Heseltine’s suggestions on unitary authorities, as they will help to simplify the relationship between businesses and local authorities? This is an extremely important point. As this is a master class, I think all of us would like to hear a very full response from my hon. Friend.

My hon. Friend is very kind. He knows a great deal about this topic, as I know from having visited Bedford on a number of occasions when we were in opposition and he was the prospective parliamentary candidate.

Order. I say to the hon. Gentleman that we do not need to rehearse the CV of any Member. Furthermore, I am worried that Members may become more confused about the issues in hand after his detailed explanations. We must now address the amendment alone, and not embark on a tour of the country.

Order. Let me reiterate that we will now deal with Lords amendment 1 and we will not be distracted from that.

Lords amendment 1 is important because it enables pooling, and pooling is one reason why irrelevances such as unitary reorganisation need not trouble the Government in the future.

I represent a Birmingham constituency. The local government structure in the area arises from the fact that the West Midlands county council was abolished in 1985 and three functions were dealt with separately: the police and the fire service are now precepting authorities, while the integrated transport authority—it used to be the passenger transport authority—is not a precepting authority. In terms of encouraging economic development, therefore, there is a key question as to whether pooling serves to improve transport. Will the Minister comment on—

Order. The hon. Member for Bromley and Chislehurst (Robert Neill) is a former Minister; he is not still a Minister. Also, interventions need to be shorter. If Members wish to speak, they should put their name down, and I am sure we will be able to accommodate them.

My hon. Friend makes a fair point. When seeking clarity on these matters, we are sometimes bedevilled by history. A passenger transport authority would, I suspect, be a levying authority rather than a precepting authority for the purposes under discussion. At present, it would not necessarily fall within the scope of this pooling. It is important to raise such topics, however. There must be a means whereby the pooling of retained business rates includes incentives for transport authorities. In Greater Manchester, the solution has been the creation of a joint authority. There might be merit in considering a similar solution in Birmingham. I am sure the Minister will take that point on board, and I ask him to address it in his concluding remarks. It is also worth pointing out that if there is a large amount of money in the business rate pool, more money can, of course, be leveraged into investment, particularly for infrastructure purposes—and infrastructure investment is precisely what authorities want.

The key point is that public transport is an important driver of economic development, and it therefore needs to be encouraged through the pooling process.

I agree, and I am sure we will be able to find ways to address that. The amendment in question and the pooling of business rates is one of the tools, and it is an important one, but it is not the only tool the Government are putting into the local authority box.

Greater Manchester provides a good example for pooling resources, and not only in terms of business rates. The 10 district councils of Greater Manchester have already decided to pool their local transport fund allocations. That is a gamble for some of them, because they are not getting the direct benefits of the new Metrolink extensions, while other parts of the county are.

That was a helpful intervention, and I hope that it will go some way to helping my hon. Friend the Member for Birmingham, Yardley (John Hemming), because one important source of funding for passenger transport authorities is the allocations that come to the constituent local councils, which they can then use. This is about ensuring that there can be a sensible linkage. If they pool the allocations, it will be logical to find a mechanism whereby they can pool the product of the retained business rate, so that the two can be aligned. The hon. Gentleman makes a very important point.

Understanding, always, that this is exclusively about the pooling of business rates, it occurs to me that there might be the odd occasion when councils wish to pool some element of their council tax. Will my hon. Friend confirm whether that was considered as a possibility for the Bill or whether it was rejected at an early stage?

When I was in the Department, we did not get into the issue of pooling council tax, for the simple reason that we were dealing with the business rates element. As I saw it, the first step in the equation was to secure the return of a significant amount of business rates revenue to local authorities, rather than for it to be taken back through the nationalised system, as I might call it, whereby it goes to the Treasury and is then redistributed through the formula grant, the point being that over a period of time we would be able to make local authorities less dependent on formula grant as the principal source of their income.

Interestingly, we should perhaps explore, as a future step along the road, the means whereby local authorities might voluntarily—I stress that this must have a voluntary basis—examine ways of aligning their council tax receipts. After all, authorities can seek to pool the product of that in their investment decisions at the moment. I referred to the success of the communautés urbaines in France, which has come about because they have been able to set up joint investment funds and procure directly. In a sense, they have been putting together the product of their local taxes, and we might able to do that. We must remember that the billing authority sets the level of council tax in any given place, but there is no reason now why local authorities in an area could not deliberately align their council tax levels if they wished to do so to make sure that their area was not disadvantaged economically by having different rates within what might be almost the same built-up area. That is important. The level of the business rate is not changed by these proposals, because the multiplier continues to be set nationally, but the incentive is in retaining the product. The amendment provides us with the important tool of giving maximum flexibility in the pooling of the product to get the maximum benefit from investment for the area, particularly in economic development terms.

On the amendment and its effect on enterprise zones, I have been an advocate of the do-it-yourself enterprise zone, which I hope could be achieved in east Lancashire, along the M65 corridor, by using the localisation of business rates. Local authorities would be able to give rate holidays to people who set up new businesses within a DIY enterprise zone. This amendment allows a deduction for rates which should have been in the enterprise zone. Would that preclude the DIY enterprise zone or encourage such a zone?

It ought to be a means of encouraging that type of zone. That seems to be the logic of the proposal. Being able to offset and make the deduction is necessary in ensuring that there is an incentive. I am sure that the Minister will be able to confirm that position. My hon. Friend the Member for Rossendale and Darwen makes an important point about the interaction of pooling and enterprise zones: it is important not to create a disincentive to having an enterprise zone. Equally, we must not create a distortion in the local economy whereby investment is purely sucked into an enterprise zone because of the benefits, and other parts of the local authority area or the conurbation, which happen not to be in an enterprise zone but have real development opportunities, are set at a disadvantage. It is important to make sure that we get that interaction right.

We have heard today how Lord Heseltine has produced an excellent report, and we must remember that he was the first proponent of enterprise zones. Does my hon. Friend believe that if the amendment is agreed to there will be a peppering of mini enterprise zones, which could be run by local authorities or groups of local authorities by pooling business rates and enabling advantages locally? There could be, for example, a mini silicon valley in Rossendale. Does he think that is the likely outcome?

I hope that if there is the political and economic will to do that, we will see it; I favour the maximum diversity in these measures. We should seek to give the maximum flexibility to local authorities on how they use these various tools, because that is genuinely localist. What will be appropriate in Rossendale will probably not be appropriate in Bromley, but it is sensible that those alternatives are available. I want an emphasis on outcomes, rather than on structure or process. Breaking down the barriers that can sometimes be an impediment is an important part of that. My hon. Friend the Member for Bedford talked about a mindset. Just as breaking that down is important, so, too, is breaking down the structural impediments that might stifle the initiative that I am increasingly finding local authorities want to take up through the opportunities that come from business rates retention. That is an important part of the mix that we must introduce.

One of the issues about hypothecating the pooled revenue from national non-domestic rates is that we can develop further employment. Does the hon. Gentleman feel there is merit in having a facility for localised sector tendering, funded by a transport authority, receiving money through the pooled process of the national non-domestic rates—it is now localised non-domestic rates, of course—on the basis that that would make it easier for people to get to work by bus?

That is an interesting proposition. I had not specifically applied my mind to it and I cannot say off the top of my head whether or not the legislation would permit it. I am sure the Minister will be advised on that before he responds. We ought to be examining all these matters.

I am conscious that this is a technical measure and that we have to discuss a number of other important measures. I have probably said all I need to say on pooling. Other elements of a more technical kind are contained in the schedules, which are addressed in amendments 19 to 82. I would not dream of dealing with those individually, but it is important that we examine them carefully—yet briefly—because, as is always the way of local government on these things, the devil is in the detail of the schedules. Indeed, when, as Ministers, we looked at the Bill early on, we found that most of the work is in the schedules. Amendments 19 to 82 seem to deal with some of the important issues that the hon. Member for Warrington North (Helen Jones) raised: the questions relating to how we deal with deficits or surpluses in the collection fund. The solution that the Government propose is workable and elegant, and will merit attention. The amendments clarify and strengthen the position, so I hope that they will also commend themselves to the House.

Important amendments are also proposed to the schedules in respect of the position of major precepting and billing authorities. I am sorry that my hon. Friend the Member for Rochford and Southend East is not in his place, as those amendments will help to clarify the issues he raised. I hope that those amendments, too, will be seen as important and valuable. Although there are a lot of them, they deal with certain themes, and all of them, taken together, represent a significant strengthening of the Bill. I hope that this stream of amendments will commend itself to the House.

It is a great pleasure to follow my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), who has identified some key issues that are important both generally and in relation to particular areas. I want to add to his comments on pooling and the arrangements for different types of authorities.

I represent a constituency that has district councils, a county council and a unitary authority. Indeed, Dorset’s local enterprise partnership has boundaries that encompass two unitaries, umpteen districts and the county council. It is important that we should be clear on how pooling can take place so that we can facilitate it, because I certainly see it as a driver for growth. The important point, however, is about choice. Some authorities might not want to play and although that might be a pity, the important point is that this is all about our localism agenda and putting more power into people’s hands at the lowest possible level.

Rather than yielding to recommendation 11 of Lord Heseltine’s report, which is that we should impose unitary authorities, is it not true that we are much more likely to get unitary-type authorities by accretion through election and localism than by imposing them from the top down? They will also last longer and be more robust.

I sincerely believe that the driver must come from local people at a local level. Anything imposed from above inhibits good local decision making and will inhibit growth.

I am talking about making decisions at the lowest possible level and I and, I assume, many other Members have been lobbied by the National Association of Local Councils. Of course, my hon. Friend the Member for Bromley and Chislehurst dealt with the question of the distribution of the business rates between the billing authority and the precepts but, as I understand it, town and parish councils do not come into the equation. I would be very pleased if the Minister could clarify the difference the amendments will make and how it will be possible for the billing authority to drive activity down to the local level and to town and parish councils. I happen to be attending the annual meeting of the Dorset Association of Town and Parish Councils on Saturday, so it would be helpful if I could be clear about what we pass today.

Were we to consider devolving fiscal powers to town and parish councils, would we not also need to review their functions as a corollary? By comparison with international examples, our town and parish councils have very limited functions that are at the most micro level—they just have powers on street lights, fencing and allotments, for example. If we are going to take an holistic approach, we should perhaps consider in their entirety the functions that we expect parish and town councils to discharge.

There have been many innovations in some areas with the close working of councils at all levels. We want to generate a spirit of that happening at all levels, because we all know that in difficult economic circumstances parish and town councils have taken over some functions. It has happened rather naturally and sometimes it works well, such as when they have the “Links” man deal with all the weeds. It can be as simple as that, but there is a lot more scope for such working. I agree with my hon. Friend on that general principle.

Let me return to the thrust of this whole section of the Bill: the business rate retention scheme. It is incredibly important to add to the growth agenda and it is an important ingredient. It puts local decision making where it should be and provides opportunities and flexibility. I hope that with our good growth figures during the last quarter, we will all be incentivised to do the best we can for our local economies. Members of Parliament should take a leadership role and support those organisations. What an opportunity!

Finally, I believe that the Local Government Association is in favour of the retention of the local business rates, but there are of course doubts about the details. May I ask the Minister whether the LGA is fully behind the amendments? It is true that Members of the other place scrutinised the Bill extremely thoroughly. Some very good ideas came out of that scrutiny and although I totally support the thrust of the amendments, I merely seek the clarification that I have requested.

I apologise, Mr Deputy Speaker, for not being present at the outset of the debate. I want to make a few brief points.

Let me echo some of the points made by the hon. Member for Mid Dorset and North Poole (Annette Brooke) in her commendably succinct contribution to the debate—

The right hon. Gentleman admonishes me. It was powerful and eloquent. The hon. Lady has great experience in local government in Dorset and she added to the debate.

It is timely to remember the basis on which business rates were centralised. I do not want to go too much into the history, but there was a significant degree of criticism of the decision of the previous Conservative Government to centralise business rates. There was an historical context, however, given what happened in too many of our large municipalities under the metropolitan district councils, particularly in the midlands and the north of England. The local councils had a mandate, and I accept that, and were elected by local ratepayers—later council tax payers—but they often used that mandate to attack the policies of central Government. One way they did that was by significantly increasing business rates, which were then localised, above the rate of inflation.

The Government had to choose what to do about that fiscal weapon, used disproportionately by Labour councils, and its impact on regeneration, growth, business development and entrepreneurship in the areas where it was used. That was the context. I am a localist—actually, I was a localist, but I am probably now a born-again centralist. However, I was then a localist.

I must not be too unkind to the right hon. Lord Heseltine, but I fear that his views on regeneration have ossified and, perhaps, stopped in about 1981. The answer to every question for Lord Heseltine involves banging the table, big figures, big organisations and big macho approaches to local government, but that does not always reflect the nuances of the different power structures and checks and balances in modern local government in a 21st-century country. I hope that I have not been too unkind to Lord Heseltine, but I am sure he has heard worse—[Interruption.] He speaks incredibly highly of me. He is a very talented man who created a fantastic business—

Order. I know that the hon. Gentleman wants to deal with Lords amendment 1. I am sure that Lord Heseltine will not lose any sleep over his comments, so perhaps we can get back to the amendment.

I was meandering among the ash trees of Lord Heseltine’s arboretum, Mr Deputy Speaker, and—

We must respect the unique nature and authenticity of local government. When my right hon. Friend the Chancellor reads the report and teases out its nuances, I am sure that there will be more with which he agrees than with which he disagrees.

The context of centralising business rates was the desire to give a break to businesses, which often encountered difficulties dealing with local authorities that were not business-focused and did not make protecting the interests of individual workers in growing businesses a priority, which was especially the case in places such as Liverpool and Manchester.

I am sure that my hon. Friend accepts that the exciting aspect of the Bill, which is reflected in these Lords amendments, is that it gives local authorities a stake in making their communities a success for the first time. The hon. Member for Mid Dorset and North Poole (Annette Brooke) talked about even parish councils having a stake in making their communities a success. As a born-again centralist, does my hon. Friend welcome those things?

I certainly do, but the reason I am, in some respects, a born-again centralist is that I have witnessed the huge logjams that often occur in the planning system, which my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) knows about. There was never a more excellent local government Minister than him, and it is a great loss to local and central Government that he no longer occupies that position. However, he will do a fantastic job on behalf of his constituents as a diligent and community-focused Member.

There is an intellectual coherence in the Bill, because when we examined the regional development agencies—[Laughter.] Labour Members laugh, but the RDAs were bureaucratic and wasteful, and they failed to deliver—[Interruption.] That is absolutely true.

I thank the hon. Gentleman for taking an intervention on such an important point. May I remind him that One North East, the RDA for the north-east, was independently assessed as delivering £4.50 to the regional economy for every pound of public investment?

When I was shadow regeneration Minister, I met One North East in a rather salubrious hotel in central Newcastle. I agree that it did some good work, but if we consider all the regional development agencies throughout the country, they failed in two respects. They did not ameliorate the internal divisions in the economies in their areas, because even in the north-east, the economies of Stockton and Middlesbrough are amazingly different from those of Morpeth and Hexham, and they are amazingly different from those of Bishop Auckland or the City of Durham. At the same time, the RDAs failed to tackle social, demographic and economic inequalities between the regions, and they did not facilitate the growth in private sector jobs and regeneration that we would have wanted in the north-west and the north-east, although that did happen in London, the south-east and the south-west.

May I reinforce my hon. Friend’s point? I am sure that he is aware not only that the regional development agency system failed to address such regional inequalities, but that inequality between the regions actually grew rather than reduced under the Labour Government, despite the expense of such a top-heavy bureaucracy.

My hon. Friend makes a typically astute point. The Local Government Association did not have an axe to grind against the previous Government, but it produced several reports showing that the significant public investment in regional development agencies under that Labour Government did not deliver objective outputs. My hon. Friend and I have scrutinised regeneration legislation that has addressed those points.

There is an intellectual coherence in the Bill because if we are devolving power to the lowest level, which the hon. Member for Mid Dorset and North Poole talked about, and if we are to give local authorities a vested interest—and fiscal incentive—in driving regeneration and growth on the basis of local priorities, which my hon. Friend the Member for Rossendale and Darwen (Jake Berry) mentioned, local enterprise partnerships are the model to use. Those partnerships are driven by business and give local authorities of whatever political persuasion the opportunity to show leadership and vision.

I will be honest with hon. Members: there are some fantastic Labour councils, such as Lewisham and Wigan. I am positive about Wigan, which is a fantastic place to live, because my wife is from there. It is unfortunate that it has a Labour council, but to give it its due, it is doing a good job. The local enterprise partnerships have a complementary relationship with the new homes bonus, and there is therefore a fiscal incentive to drive forward a philosophy on the basis of local need. Money comes into the pot via the new homes bonus, and then local authorities may make a value judgment about whether the quality of life in their area is such that they wish to build hundreds or thousands of new homes, or to keep things as they are. Authorities know that they will not get that fiscal incentive for the delivery of core services. My local authority in Peterborough wants to build 25,000 homes between 2009 and 2026, so it will have a fiscal incentive to encourage the building of private sector and shared equity housing, as well as social and affordable housing.

The Bill rights a wrong that has existed among the political classes in local government for years. Our country does not devolve sufficient power locally, and our rate of raising money locally is probably the lowest in the western world. We have not engaged as we should have done over the years in things such as residential estate investment trusts and giving fiscal incentives for the building of private sector housing. We have not engaged with local authority bonds, unlike Canada and the United States. It is anathema to us that we should use a bond issue to fund the building of a bridge, a community centre or a new road, but that happens in every municipality in the United States. Boards of supervisors and mayors in towns, counties, cities and states throughout America think nothing of that, but for us it is like another world. It is good that we are now focusing on delivering infrastructure that is aligned with local people’s priorities.

I know that you will forgive me, Mr Deputy Speaker, for my little perambulation observing the vicissitudes in Lord Heseltine’s thoughts about regeneration. However, the Bill makes sense and gives weight to the Government’s real commitment to localism.

I shall try to cover the general points raised in the excellent speeches that we have heard and then deal with the specific questions asked by the hon. Member for Warrington North (Helen Jones) and others.

The proposals on the retention of business rates represent a fundamental shift in the way in which local authorities are funded. They give councils a strong financial incentive to drive local economic growth. We will ensure that there is a stable starting point for the scheme so that no council is worse off as a result of its business rates base at its outset, and that will be achieved through a system of tariffs and top-ups that will be fixed in future years so that councils benefit from the growth of their business rates. Tariffs and top-ups will be uprated by inflation to ensure that a major part of authorities’ top-up income under the scheme is not eroded in real terms.

We have also proposed further protections to ensure that councils can meet local needs, including a safety net—I will directly deal with the specific question asked by the hon. Member for Warrington North later—that will be funded by a levy that recovers a share of any disproportionate gain from growth. The safety net will help to ensure that service provision does not suffer as a result of any volatility in a council’s business rates base. We announced that we intended to set the safety net threshold at a level between 7.5% and 10%, with the proportional levy ratio at 1:1, subject to consultation. That consultation took place over the summer; it has now ended, and we will consider the responses that we received before we take a final decision for this year’s settlement.

During yesterday’s excellent debate on business rates, I made the point that one business in my constituency—the nuclear power station—contributes 15% of all business rates collected in Hartlepool. The Minister says that the safety net will be between 7.5% and 10%, so how will the policy address my specific constituency concerns?

I thank the hon. Gentleman for his question. I will come to that specific point, as the hon. Lady raised a similar one.

Where councils want to join forces to pool their business rates, sharing the rewards and risks with their neighbours and thinking together strategically about how they should invest the money—a topic on which we have spent some time this afternoon—they will be able to do so. I will come back to that in response to the points raised by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill).

The proposals for business rates retention will give all local authorities unfettered access to tax increment financing. There will be no constraints. From April 2013 local authorities will be able to get on with implementation. We are also making £150 million available to fund a limited number of new development deals—projects in the core cities.

A number of Members commented at length on issues related to pooling. My hon. Friend the Member for Bromley and Chislehurst was the first to raise this in his remarks. I record my thanks to him for the fantastic work he did in bringing the Bill to the point at which I inherited it. He gave a great speech outlining some of the thoughts underlying the Bill and answering a great number of questions from Members to help everybody in the House have a fuller and better understanding of where the Bill is coming from and therefore what it aims to deliver.

Business rates retention changes the ground rules for local government and moves power back to where it should be. To pick up on a point made by my hon. Friend the Member for Peterborough (Mr Jackson), it effectively puts local money back with local people in local communities—local money for and by, to coin a phrase, local communities.

I note the Minister’s support for the concept of pooling. It is right that if local authorities choose to bring their capacities together, they should be allowed to do so. Does that not rather contrast, however, with the Government’s response to the Select Committee’s report on housing, in which we suggested that local authorities might be able to pool their capabilities to borrow under their housing revenue account—

Order. Mr Betts, I do not know how long you have been in the Chamber. I presume you have not just come in. That was a very long intervention. I am sure the Minister will recognise the question that you have posed to him already. I take it that you had finished the question, as it was so long.

I thank the Chairman of the Select Committee. I would like to thank him for his courtesy in inviting me to the Select Committee on Monday, and I enjoyed talking through some of the issues that local councils face. He tempts me to move outside the scope of the amendments, and I think the Deputy Speaker has made clear his views on their scope, but I will expand a little further on pooling without being tempted too far outside the terms of the amendments.

Pooling gives councils a new tool to support economic growth across their area and greater ability to invest in the things that will have a greater impact on economic growth. As has been noted, the more the money comes together, the bigger its multiplier effect—the leveraging—can be. My hon. Friend the Member for Bromley and Chislehurst made a comparison between this and the debate earlier this week on pension schemes, and how, by bringing that money together and building it up into bigger pots, it can have a much more beneficial impact on local areas. That is why it is important that we allow councils to support economic priorities that have a benefit across a wider area. We are allowing councils better to weather any downturns in business rates income by sharing fluctuations in those rates. I will come back to the issue of a particular business.

It is worth local authorities looking at and thinking through the effects of pooling, which will give them greater resilience and greater buying power and allow greater economic growth. I encourage local authorities to consider it, and they have until 9 November to submit proposals. Earlier this year we had more than 20 expressions of interest from authorities. I stress that pooling is wholly voluntary but in terms of resilience, buying power and the ability to grow, I encourage councils to look carefully at it.

We heard queries about whether pools may cross county boundaries and whether they must be linked geographically or in any other way. In the true spirit of localism, it is for councils themselves to determine the make-up of a pool. They will not be restricted to pooling within a county boundary, allowing rates retention to support the priorities of local enterprise partnerships where this is what councils want.

I take this opportunity to congratulate my hon. Friend on his appointment as a Minister, with his great experience as leader of Brentwood borough council. I agree with his point that local enterprise partnerships are based on authentic sub-regional and local economies. Does he see a time when it might be possible to try to—

Order. I am sorry. We must have shorter interventions. I cannot say that to Members on one side of the House without saying it to those on the other. I am sure the Minister has grasped the question.

Does my hon. Friend foresee the Government trying to encourage a more holistic approach, pulling together initiatives such as Growing Places, Get Britain Moving and the Portas review, using the funding he is speaking about?

My hon. Friend makes an excellent point and I am pleased that he had the chance to make that succinct intervention. An important by-product of business rates pooling is the opportunity for local authorities to look across the piece at whether they can pool to give themselves greater resilience, to look at the other funds that they can bring in, including the new homes bonus, and to look at their local enterprise partnership, their Portas money and any city deals that they might have, and how they can pull these things together, so that those authorities can work together to supercharge the opportunity to be part of local economic growth and to drive it from their local perspective.

Could pooling of business rates apply sectorally as well—for example, the automotive industry? Could Sunderland city council, with Nissan in its patch, link with Coventry council, where Jaguar Land Rover is located, in order to push forward the UK automotive industry? Does the Minister anticipate that?

The hon. Gentleman makes a very interesting suggestion. As I said, there is no county boundary restriction on local authorities working together. One of the more imaginative things that we are seeing in local government generally is that authorities are not delineated by their geographic boundaries. We have seen, for example, the excellent shared services and other work between South Holland and Breckland district council, which do not share a geographic boundary but have found a way of working together. Such arrangements are possible and councils should looking for such interesting and exciting opportunities to work together.

We have, however, said that there should be a clear rationale for the geographic coverage of a pool if councils are to work together. It is important that councils have the flexibility to do what is right for them. That has worked well in local enterprise partnerships, on which a number of speakers have commented this afternoon. One of the reasons that LEPs are gaining such support and will be such a long-term success and powerhouse is that they have not been artificially designed and drawn on a map by people in Whitehall. They have come about as a result of communities, business organisations and local authorities coming together to decide what works for them and their community.

Some interesting structures have developed. For example, in my part of the world, Great Yarmouth, the New Anglia partnership crosses the county boundary between Norfolk and Suffolk. It focuses much of its time on the energy industry across Lowestoft and Great Yarmouth. It goes further in that it does not pick just one piece of land as its enterprise zone. It has a number of different sites because that is what the local business people, communities and local authorities coming together thought would work best for them. That is showing success already.

Councils can choose whether they join a business rates pool, with all the benefits that that brings, during each reset period. Enterprise zones are different. In interventions and speeches, Members have asked about opportunities for pooling and whether that will lead, in effect, to mini-enterprise zones. It is worth noting that there is effectively the opportunity for local authorities to create—I think the Secretary of State has used the phrase—enterprise zone-lites by putting many of the opportunities that enterprise zones offer into local areas to drive growth, but enterprise zones differ in respect of pooling. Enterprise zones, as my hon. Friend the Member for Rossendale and Darwen (Jake Berry)—he is no longer in his place—rightly pointed out, offer a wider and longer-term series of benefits because they run over 25 years and receive additional funds from the Treasury. Councils, working with their local partners, will need to consider what is right for their local areas. If they can do that, together with pooling, as I said in my opening remarks, they will see some real benefits for supercharging their economic growth.

Will my hon. Friend have a word with our colleagues in the Treasury about the design of some fiscal policies that are based on regional boundaries, such as the national insurance holiday, which disadvantage those on the wrong side? For instance, Peterborough was at a disadvantage compared with, say, Corby or the south of Lincolnshire because it was in a different county and region. There was an obvious disincentive for businesses to consider Peterborough, based on that fiscal change.

My hon. Friend makes a good point, and he makes it so well that I have no doubt that the Treasury will have heard it directly, so I will leave it there.

I congratulate my hon. Friend on the admirable speech he is making and warmly congratulate him face to face on his new appointment. I am delighted he has succeeded me. I think that we share the same philosophy in these matters. He made an important point about pooling, for which I am grateful, and there are some other issues that my hon. Friend the Member for Meon Valley (George Hollingbery) raised. As I understand it, the key element in Lords amendment 1, which deals with my hon. Friend’s point, is that the Government have undertaken to fund the discretionary rate relief in relation to enterprise zones so that there is not the disincentive to have an enterprise zone that there might otherwise be. Will he indicate that that is the way the rate relief will be delivered so that we can be sure that it is worth while for a local authority to have an enterprise zone without prejudicing the benefits of rate retention?

I thank my hon. Friend for his intervention and hope that you, Mr Deputy Speaker, will allow me 30-seconds’ leeway to thank him for his kind words. This is the first time I have been at the Dispatch Box during a debate in which he, who he is a good friend, has spoken, so I want to put on the record how fortunate I am to be following in the footsteps of someone who laid so clear a path, and one that I support and agree with. Equally, that offers a challenge, because I have quite an act to follow. As in all the matters we are discussing this afternoon, he is absolutely right that enterprise zones are structured in that way so that there is no such disincentive. It is important to bear in mind how the incentives work. Business rates retention offers local authorities a clear incentive to help drive growth, because they will benefit from all the growth they see. That is something we very much want to see so that local authorities are absolutely at the heart of driving economic growth.

I will turn now to some of the question hon. Members asked. The hon. Member for Warrington North asked what happens when a major business goes down mid year, a point the hon. Member for Hartlepool (Mr Wright) also touched on. The payments to major precepting authorities would be set on the basis of estimates of income made by the billing authority. Those payments will not change, so billing authorities might need to consider how they would fund any shortfall in the short term before the safety net calculations are made.

Will the Minister explain how a billing authority would fund a shortfall of 20% in its business rate income?

I must stress that that is the approach the Local Government Association wanted and has been pushing for. It is also linked to the operation of the safety net more generally if a business has a problem mid-year. The draft regulations we published last week envisage safety net calculations and payments being made after the end of the financial year, and safety net payments on account to be made where the authority thinks, on the basis of its estimates before the start of the year, that its rates income will be less than the threshold. The draft does not currently propose that authorities be able to apply during the year for a safety net payment on account, in line with the clear views of our local government finance working group. These regulations are out to consultation in draft, and we look forward to receiving comments and will obviously feed back.

The hon. Member for Warrington North also commented on the discrepancy, as she perceives it, between some of the Bill’s clauses and the situation with regard to the Audit Commission. I was somewhat flabbergasted, because I think that she might have been trying to argue for retaining the Audit Commission, but this is a transitional phase. It seems amazing to suggest delaying parts of the Bill or not having the clause that will allow it to move forward in dealing with that side of the Audit Commission, because the Bill is about driving growth of about £10 billion. To do something because of her views on the Audit Commission seems very short-sighted for our economy, so she will excuse us if we resist that.

I will turn to the comments made by my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke), who made a powerful and clear speech in which she talked about town and parish councils working together. On the technical side of her point, I point out that parish councils raise their own cash with their precept; they are funded not through the money raised by business rates, but directly through council tax. We feel that it is right that the district billing authorities receive funds from business rates as they are the key local drivers of growth. However, I want to stress that I feel clearly—this has been reflected in the comments made by several hon. Members this afternoon—that they should work with all bodies that can support growth, including parish councils, and will be involved in some areas in the potential for growth.

We have worked with the Local Government Association, the National Association of Local Councils, with which I had a good meeting earlier this week, and other organisations and parties in the other place throughout the passage of the Bill, and I would like to thank all parties that have been involved in feeding into it. It is also important to note that there is a range of measures for driving economic growth at community level, which provides parish councils with a particular opportunity to get involved. There are community budgets, neighbourhood planning, the right to build, the right to challenge, and the community share scheme, all of which will play a huge part.

My hon. Friend the Member for Mid Dorset and North Poole—I know that parish councils are close to her heart—will have noted that only today we announced formally the measures to make it easier to establish new parish, town and community councils, which I think is an important step forward, working with local communities, to offer the opportunity for more people to get involved and to be part of their local community. Their local council at parish, district, county, unitary and metropolitan level will be part of driving economic growth, which is at the heart of the move forward with the business rates retention scheme.

My hon. Friend the Member for Peterborough (Mr Jackson) spoke clearly about the power and ability of LEPs and touched on Lord Heseltine’s report, which highlights exactly where LEPs and local enterprise zones have a huge part to play. As I have said, the business rates retention scheme makes a fundamental shift in the way local authorities are funded. It will give councils a strong financial incentive to be part of driving local economic growth.

In the spirit of localism, will the Minister now commit to implementing the recommendations of the Morgan report, commissioned by the Welsh Government, which calls for the full devolution of responsibility for business taxes to the Welsh Government so that they, too, can increase their taxation base?

I thank the hon. Gentleman for his intervention, but he will excuse me if I stay within the remit of the Bill and do not delve into changes to financial and tax arrangements that the Treasury, the Welsh Assembly, the Local Government Association and many Members across the House will undoubtedly have a view on. I welcome his decision to choose this moment to start that debate.

What I think is important in business rates retention and the way it moves the goalposts and the way local councils work is that it is really starting to shift back to what local authorities always want—I know this from my time as a council leader—which is to have their hands on the purse strings and the ability to have a direct impact on the amount of money they can bring in. They want more direct control over the way they work, their decisions, the way they develop the local economy and community and the way they involve the community. Local authorities will see a financial benefit and will be able to use that income to provide even more benefits for their communities and residents, and perhaps they will also use it to keep council tax down and, in so doing, further develop the work the Government are rightly doing through the council tax freezes we have brought in over the past few years. This is a very important step forward, and we are pleased that local government seems to be enthused by it. We hope that it motivates them towards growth.

We are looking at the consultation results that we have received, and we will return to them later this year. We are setting out a whole new framework in which local government can work and where it becomes part of driving its local economy. That is not only a key part of how it shapes its community; it means that it can benefit from the advantages and growth that it sees in that community. The community will see that the local authority is benefiting in that way, and we will get a positive circle that can only be good for our communities, for our residents, and for economic growth in our country.

Lords amendment 1 agreed to, with Commons financial privileges waived.

Lords amendment 2 agreed to, with Commons financial privileges waived.

Before Clause 9

Council tax reduction schemes: review

With this it will be convenient to discuss Lords amendment 16, amendment (a) thereto, and Lords amendments 18 and 83 to 90.

Amendment 3 was moved in the other place by my noble Friend Baroness Hollis of Heigham. It calls for one very simple thing: a review of how the new system for council tax support is working three years after the Bill as enacted comes into effect. We tabled amendment (a) to make clear the original intention of the amendment in applying only to England because this is a devolved matter in Wales. When my noble Friend introduced the amendment in the Lords, she made a clear and persuasive case that was supported by a good majority.

The Government opposed the measure at the time, but I understand that they may now decide to accept it; the Minister will tell us. Opposition Members may wonder why that is, but in fact, we know why. The Government know that their policy on council tax is a shambles. It is so bad that they cannot even convince their own Members to support it. Their councils in North Yorkshire, including the Foreign Secretary’s council, have campaigned against its unfairness. The departmental Secretary of State’s own county council says that it has major implications for some of the most vulnerable members of the community. West Oxfordshire, the Prime Minister’s council, has refused to implement any scheme at all and will rely on the default scheme. Westminster, the Tories’ flagship local authority, which we hear so much about, says that it will not implement it because residents are already adversely affected by changes to local housing allowance and other benefit cuts. This is what Westminster said in one of the documents that it submitted:

“The previous Community Charge (Poll Tax) experience shows that there are inherent difficulties in asking benefit claimants to pay small sums of Council Tax. This can make the debt difficult, and in some cases uneconomical, to collect.”

It also says:

“A decision to pass on the funding cut to claimants would be a reputational risk for the Council, as residents will perceive the cut as a local authority decision (rather than a central government given benefit cut).”

In their consultations, Tameside suggested that it would need to make £3.575 million of savings, while Stockport said that it would need £2.4 million of savings in relation to any new council tax support scheme. If Stockport or Tameside applied for and were eligible for the DCLG’s support mechanism, Tameside would get only £460,379 and Stockport £385,550. This is so unfair.

Indeed; my hon. Friend is exactly right. I will want to return to those issues later.

What is happening, of course, is that councils that are better off with fewer claimants can afford to subsidise the scheme, while others cannot. I have quoted Westminster, the flagship Tory local authority, and that is before we even move on to what the Government’s noble Friends in the Lords say. Last week Lord Jenkin was asked by the BBC whether there were echoes of the poll tax in this proposal. He said, “Yes, oh yes”—and after all, he should know, as he was the architect of the poll tax. When he warns the Government of the risk of backlash, they should listen, because he knows what happened last time. The late Lord Newton of Braintree—not, by anyone’s standards, a woolly liberal—is recorded as having said in the Lords last year:

“Is it sane?...I can hardly believe my ears”.—[Official Report, House of Lords, 6 October 2011; Vol. 730, c. GC377.]

These are the Government’s allies, let us remember, and if they are aware of the problems it is no wonder the Government are now thinking about a review.

The Liberal Democrats—those who are here—should listen to Lord Greaves, the architect of many of their by-election victories, who told the Lancashire Telegraph that the scheme was “disgraceful” and told the Financial Times that it was

“the poll tax all over again.”

How far have the Lib Dems fallen that the party of Lloyd George is now voting for Pickles’ poll tax?

No wonder the Government are trying to find a way out of the mess they have created. No wonder they have decided not only that a review might be a good idea but to bring in some transitional relief as well.

Can the hon. Lady clarify the position of Labour Front Benchers? Do they object to the principle of localising council tax benefit—the principle, and not necessarily the situation we are in—or would they prefer that the system were returned to the Department for Work and Pensions and thus centralised rather than localised?

Labour Front Benchers believe in a fair deal for vulnerable people wherever in the country they happen to live, and we do not believe that a disabled person in Wokingham should be treated differently from a disabled person in Wigan. Our principle is that the help that someone gets should be dependent on their situation, not on where they happen to live. That is a key part of our policy. Let me say this to the hon. Lady: this is a policy designed to hit the poorest people hardest, especially the poorest people who happen to live in the poorest local authorities, which have already taken the biggest cuts in spending power, as we have seen during the passage of the Bill. Let us remember the figures. Liverpool will have lost £235 per person in spending power. In Hartlepool, the figure is £183. In Wokingham—I could not resist mentioning it just once more in the context of this Bill—it is a grand total of £1.

I put it to my hon. Friend that we may well have disagreement between individual Members, and possibly even parties, about whether it is a localist measure to devolve council tax benefit to local authorities or whether it is sensible to have a national benefit, but no one who is sensible, looking at this, can possibly agree that it is proper and right to make a 10% arbitrary cut in the amount of money available for such people at the time that the system is being decentralised. That is what is utterly objectionable and what the hon. Member for Mid Dorset and North Poole (Annette Brooke) should be apologising for.

My right hon. Friend is right. The reduction in the money available for council tax benefit is not the only thing that we are dealing with. The very same councils will be hit by the Government scheme for business rate localisation before being hit again by the reduction in the amount available for council tax. The Government call it a 10% cut, but in fact it is much more than that, because their calculations are based on what they think the cost of council tax benefit payments will be next year. It is no surprise to hon. Members who have followed the Bill’s passage through Parliament to learn that the Government believe that the cost will go down. In fact, the number of claims is rising as more people face reduced hours of work or unemployment. The Government have produced a wonderful document, which could have been written by Pollyanna, stating that claims will go down because the number of people on jobseeker’s allowance will go down and pensioner take-up will decline and so on. That is nonsense.

The hon. Lady is very good at rubbishing proposals for reform, but will she accept her and her party’s responsibility for getting into a situation whereby spending on council tax benefit doubled on their watch? Given that they are so good at criticising everybody else, what would they do to reform the situation and actually help councils get people back into work?

I say to the hon. Gentleman that the one thing we would not do is target the poorest and most vulnerable for cuts at the same time as giving a tax cut to millionaires. The Government’s priorities are entirely wrong.

Surely one thing we could do is agree with Birmingham council’s proposal to defer the plan for at least one year, so that the transitional arrangements can be properly worked out and places such as Birmingham will not end up losing about £10 million, which no fair-minded person would believe was the deliberate intention.

My hon. Friend makes a very good point. During the passage of the Bill we have repeatedly tabled amendments asking for the measure to be deferred, but the Government have always turned them down. His figures are right, too: Birmingham will lose more than £10 million, Manchester almost £5 million, Liverpool £6.1 million, Haringey £3.8 million and Cherwell £747,000. The poorest authorities are losing more money overall, have more claimants and are therefore less likely to be able to make up the shortfall.

As I have said, a person’s entitlement will no longer depend on their position—it will depend on where they live. An unemployed person in Peterborough will be treated differently from an unemployed person in Portsmouth, and a disabled person in Wokingham will be treated differently from a disabled person in Wigan. That is why this is a wrong-headed policy that will need review and, when we get to that review, the policy’s ill-effects will be all too apparent.

My hon. Friend is being incredibly generous in giving way. I have mentioned the £3.575 million that the Tameside council scheme will lose. That comes on top of the council’s delivery of £43 million of savings in 2010-11 and 2011-12 and £22 million of savings this year, and it estimates a further £70.4 million of savings over the next three years. That is the real unfairness of this—it is hitting the same communities time and again.

My hon. Friend makes his point eloquently. The Government have always failed to acknowledge not only that this policy affects the same economies again and again, but that it has a devastating effect on local attempts to grow their economy. The very people who are losing money are those who went out and spent money in local shops and businesses, because, by the very nature of their low incomes, they have to spend everything they get. Councils are now faced with the most awful decisions and the people being hit hardest are people with disabilities, their carers and, most of all, the working poor—the people who this Government try to pretend do not exist.

We all remember the former Housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps), telling a Select Committee that if someone was working they would not get council tax benefit, because they would not need it. He did not believe that people who were in work received council tax benefit. He did not believe in the existence of those 743,000 people who are on non-passported council tax benefit and are in work. I admit that I sometimes find it difficult to believe in the existence of the right hon. Gentleman, because he has so many different identities—I often wonder whether he is an internet marketing guru masquerading as a member of the Government—but those working people on low incomes are certainly there and cannot be ignored.

Among the options that councils are consulting on are: paying no award less than £5 a week; restricting awards to the cost for a band D and, in some cases, even a band A property; restricting awards between 80% and 90% of value; increasing the taper; and abolishing the second adult rebate. The list goes on and it gets worse. One council—Tendring—is proposing residency criteria, so that people will only become eligible for support if they have lived in the district for five years. If someone moves there for work—after all, the Government want people to move for work—and happens to lose their job, hard luck: they will not get a penny. Those of us who know our history will recognise that proposal immediately for what it is. It is a reinstitution of the Poor Law—if someone needs relief, they should move back to their own parish, or in this case their own borough. On that basis, I wonder whether the Government live in the 21st or the 18th century.

It is no wonder that the Government have introduced a £100 million transitional relief fund. There is no better proof of the shambles that they are in than the fact that they have made that announcement after local authorities have begun consultations on their schemes.

My hon. Friend is making a very important point. This should not come as a surprise to the Government. The Communities and Local Government Committee inquiry reported in September 2011, and in the report we drew attention to the problems at that time with the time scale, the difficulties with implementation and the unintended consequences. We asked the Government to consider a delay in order to allow more time for everything to happen. Their only response has been to complicate matters even further with a £100 million offer right at the last minute and in the middle of a consultation process. Could there be a more cack-handed way of running a policy?

I am tempted to say to my hon. Friend, who is the distinguished Chair of the Committee, that I cannot think of a more cack-handed policy, but then again this Government constantly surprise us by coming up with something more cack-handed than we had ever thought of. He is right about the problems with the transitional relief fund. Councils have begun consultation on their schemes, but now the Government want them redesigned to qualify for a transitional grant. Their conditions include the requirement that those currently receiving 100% relief should pay no more than 8.5% of tax, that the taper does not increase above 25%, and that there is no sharp decline in support for people entering work. Having embarked on a system that they insisted should rest on local decision making, they are now dictating how the scheme should be designed.

Even so, that does not solve the problems. There is no legal clarity on whether councils will now have to consult again on these new schemes. Could the Minister give councils some advice about that? There is no indication of how, if they have to do another consultation, its cost will be met, and there is still a £400 million funding gap, even according to the Government’s own figures.

To return to Tameside council, one of the two authorities in my constituency, it tells me that the recent announcement on transitional funding will cause it added difficulties and that

“the indicative grant would be insufficient to bridge the funding gap, and the money is for one year only.”

My hon. Friend is entirely right. It is not sufficient to bridge the funding gap. It seems from the indicative amounts that my own local authority will get back £320,000, including money for the police and fire authority precepts, but lose £1.3 million. Birmingham will get back £2.4 million out of £10 million, Manchester £1.1 million out £5 million, Liverpool nearly £1.5 million out of £6.1 million and Haringey £888,000 out of £3.8 million.

Those councils are caught in a dilemma once again. If they adopt the Secretary of State’s scheme, there will still be a huge funding gap, and how will it be met? It would be difficult under the Government’s scheme to meet it through cuts to council tax benefits for other claimants of working age, pensioners are protected and there is a limit on the council tax rises that local authorities can introduce, so the only alternative is cuts in services. Yet local authorities that are already managing to fund the shortfall will now get a windfall. Westminster will get £318,000 and West Oxfordshire £116,000. That is not transitional relief for local councils, it is emergency relief for Conservative councillors facing the electorate next May.

May I help the shadow Minister? The way that Tameside could fund the shortfall is perhaps to dip into the £45 million increase in its reserves for the financial year 2011-12.

The hon. Gentleman, as a former leader of a local authority, should know that in the current circumstances, local authority treasurers are advising councils to build up reserves because of the uncertainty of the system that the Government are introducing.

Will the hon. Lady share with the House her view on whether borough treasurers should run their local communities and councils, or whether the leaders and politicians should make those decisions?

Of course the politicians should make the decisions, but in cases such as this they make them based on proper professional advice. If they did not, the Minister would be the first to criticise them.

My hon. Friend will know that under the Government’s proposals, the entire downside risk—the risk of further expenditure as the result of an increase in the number of claimants or further demand for council tax benefit—all has to be borne by the local authority, so it is hardly surprising if treasurers are advising their councils that they need to build up reserves against eventualities imposed on them by Government decisions.

My right hon. Friend is entirely right. I suspect that if a council found itself in financial difficulty and did not have reserves, Ministers would be the first to stand up and accuse it of failing to plan prudently for that eventuality.

The scheme will last only one year. Will schemes have to be redesigned again after that? If so, people will have had to cope with three different council tax benefit systems in three years. Currently, they might pay nothing, but next year they might pay 8.5%. After that, who knows—15%, 20%, 30%? There is huge uncertainty for the poorest people in the community.

As my right hon. Friend says, local councils will also be left with huge financial uncertainty. The Government believe that the number of pensioners claiming council tax benefit will drop, but everyone who deals with benefits believes that it will rise, because in future the sum in question will be shown as a reduction in someone’s council tax bill rather than a separate benefit. If unemployment goes up in an area, if a major employer closes down or if there are increases in part-time working, as there have been recently, local authorities will bear all the financial risk.

Does my hon. Friend share my confusion about the Government’s thinking and the lack of joined-up decision making between Departments? Universal credit is being introduced, which was supposed to simplify the benefits system, yet here we have the Government making the council tax benefit system more complicated and setting it aside from the universal credit proposals.

My hon. Friend is quite right. One problem with the system that the Government are introducing is that people will face two tests for benefits, possibly with two different tapers. For someone in the universal credit pilot, it will have to be decided whether the council tax benefit taper is applied before or after the universal credit taper. That clearly has not been thought through.

That is not the only complication, of course. An individual whose income has changed and who has difficulties will now face the problem of going to the local council offices to sort out their council tax benefit, then going to the Department for Work and Pensions—either at the office if they can get there, or online or over the telephone—to sort out their housing benefit changes. Will that not confuse things enormously for people who are already struggling with financial difficulties?

Absolutely right, and because of that there is real doubt among local authorities about whether they can collect payments from people who have never had to pay anything before and simply will not have the money to pay. Treasurers are predicting collection rates of only about 40% or 50%, and local authorities predict huge deficits because of the likelihood that they will not collect most of the money. What, then, are local authorities to do? Will they take people to court when they know that they do not have the money to pay? That would carry a huge cost to recover a small sum of money.

My hon. Friend is helpfully shedding a lot of light on an extraordinary mess. It has been widely reported that it is the product of a spat, a huge row in Cabinet between the Secretary of State for Communities and Local Government, who wanted to promote localism and show that something of a localist character was happening, and the Secretary of State for Work and Pensions, who wanted sensible reform of the welfare system. Unfortunately, the Secretary of State for Communities and Local Government won. Is that my hon. Friend’s understanding of how we have got into this completely indefensible mess?

My right hon. Friend may well be right. The Government seem to be able to get into a mess quite easily. The problem is that the people on the receiving end of their decisions are the poorest and most vulnerable in our community.

There is no doubt that the hon. Lady makes a powerful argument, and as a former deputy leader of a council I appreciate the difficulty that councils will have. It is also an unfortunate truth that those who need benefits will suffer most when they are withdrawn. However, I do not quite follow her argument about what she would like done about that. Does she wish the whole scheme to be repealed, so that we end up with the status quo ante, does she wish to have further delays in the scheme, or does she wish to implement it in part? I understand her arguments against it, but I do not understand what she thinks would replace it.

We made it clear that we did not want the scheme in the first place, and we voted against it. We made it clear that if the Government were introducing universal credit, they should make it universal. The clue is in the name—if there is to be universal credit, it has to include everything.

There is a question that clearly follows, which I know is asked many times of the Opposition. Given that half a billion pounds of annual savings are attached to the change, can the hon. Lady please tell me where the extra half a billion pounds of savings would come from?

First, we would not give millionaires a tax cut. We would introduce the measures that the shadow Chancellor has set out, which would raise money to invest in infrastructure. The hon. Gentleman also has to bear in mind the contradiction in the Government’s policy. They want councils to grow their local economies, but at the same time they are taking a massive amount of money out of the most deprived local economies—money that would otherwise be spent in shops and businesses.

May I make a little progress? I have given way quite a lot.

We need to think clearly about who the people affected are and what the Government think of them.

I have been reading the Minister’s blog; it is very entertaining and I recommend it to my hon. Friends as it is a treasure trove of Tory doublethink. The Minister begins by repeating the usual mantra that if someone is not in work, it is their own fault. He states that too many people

“expect to be able to rely on benefits and those who are hard at work are starting to get the hump.”

Let me say to him that 1,540 people in Great Yarmouth might start to get the hump with him because they are employed and in receipt of council tax benefit.

There are others. Will the Minister tell his disabled constituents, the vast majority of whom would like nothing better than to have a job, why they face an increase in their council tax? The Government trumpet their council tax freeze while imposing council tax rises on the poorest people in the country. When the Minister next visits a group of carers in his constituency—people who do daily the things that most of us could not imagine doing, and who save the country millions of pounds every year—will he say why their reward is an increase in council tax?

Elsewhere on his blog, the Minister writes that

“the sign of a compassionate country and a modern democracy is how it caters for those who are most vulnerable.”

That is what I mean by doublethink, which I think Orwell defined as the ability to hold two contradictory ideas at the same time, while believing in both of them.

Does my hon. Friend believe that the only localism in which the Government are interested is localising responsibility for cuts? The Government like to talk the talk on protecting the vulnerable while making it necessary for councils to cut the assistance that such people desperately need.

My hon. Friend is entirely right. We have said throughout discussions on this Bill that it is about centralising power and devolving the blame—after all, Tory-run Westminster council recognises that. That is the test the Minister set for his Government—the sign of a compassionate society in a modern democracy—but I am afraid the Government have failed that, and failed some of the poorest, most vulnerable people in our society. Benefits for people who are disabled will no longer depend on their disability, but on where they happen to live. We are talking about people who are sacrificing their careers to look after members of their family who are ill or disabled, and those who go out to work every week for poverty wages, because they believe that working—when they can work—is the right thing to do.

The Government seek to stigmatise those people as scroungers and they should hang their head in shame. Those people are doing the right thing, contributing to society and doing their best on a low income. The amounts they are being asked to pay may not seem much to people on the Government Benches, but to an individual or family living on the edge, they are unobtainable. Every penny they have is accounted for and there is nothing left for emergencies. To try and find even a couple of pounds at the end of the week is out of the question; it is just not there. That is why council treasurers are expecting to collect only 40p in every £1, and why we risk a repeat of the poll tax fiasco, when thousands of people left the electoral register to try and avoid the tax, and 5,000 people went to prison.

My hon. Friend makes a powerful point about how the council tax benefit scheme is likely to hit some of the poorest and most vulnerable people in society, in particular the working poor. They are likely to be the same people who are also caught up with changes to housing benefit, and potentially with under-occupancy rules, and who have seen their tax credits reduced.

My hon. Friend makes the point I was about to come to. We are talking about many of the same people who have lost tax credits because they cannot get extra hours at work, and many will also be losing housing benefit, as well as having to find money for extra council tax payments. I know the Government do not want to hear this, but we are going to say it again and again because it is true: the Government are introducing these measures on the same day as they fund a tax cut for millionaires. Nothing could demonstrate better how out of touch this Government are with the lives of most people. I wonder whether the Minister is proud of the system he is introducing.

Many hon. Members are already facing in their constituency surgeries people who are on the edge. Those people have fallen behind with small amounts each week, and are then faced with arrears and liability orders. Then the bailiffs arrive, and there is an additional charge of £120 to the local authority, or up to £200 for the bailiffs’ costs. There is physical intimidation by bailiffs. This supposed reform will increase that on a scale we have not seen before.

My hon. Friend is entirely right. Many of us will have seen in our surgeries what is beginning to happen to some of the poorest people in our communities. I have seen people crying in mine, either because of what they face now, or because they know what is coming in April but do not know how they will cope. Many of those people are working—they are going out to work.

All Labour Members—and, I imagine, a few Government Members if they think about it—recognise the picture painted by my hon. Friend. Does it not mean that a number of the vulnerable people who will suffer as a result of these measures will need extra support from the local authority, or from the voluntary and third sectors, to get the advice they need? That advice will not be there, however, partly because the council is having to pay the administrative costs of the system that has caused the problems in the first place.

My hon. Friend is entirely right. I already find in my constituency that the organisations to which I used to refer people for help—as, I am sure, did many of my hon. Friends—are so overburdened, or in some cases have closed down, that help is simply not there. This is a very short-term policy that is causing financial instability for local councils and is an attack on the living standards of the most vulnerable people. The least the Government can do is hold a review in three years’ time.

It may be that the Government still believe that the system will work—although that is increasingly looking unlikely—but I think they are beginning to get cold feet. They know what these reforms will do in their constituencies and local authorities, and that they will be unworkable. By the time we get to the review, it is likely that the Ministers who introduced these measures will have moved on. The poorest and most vulnerable people, however, will still be paying the price. I hope that the Minister will at least accept a review, because by the time it takes place, it will be obvious what a miserable, vindictive and failed scheme this is.

That was a vintage performance from the hon. Lady, full of high-blown rhetoric, plenty of sneering, sarcasm and knocking copy, and devoid of a single element of constructive analysis. It was devoid of any sense of constructive alternative, and recognition of the reality of the economic mess for which her party was responsible. It was devoid of any sense of shame. The greatest shame in the House lies on the Labour party. The greatest threat to the living standards of the most vulnerable—

The hon. Gentleman is getting very worked up again, but may I remind him that, when his Government took office, the economy was growing and unemployment was falling? If he calls that a failure, what does he call the longest double-dip recession since the war?

I call the greatest deficit in our peacetime history a failure. The benefits system that Labour created was so confusing and complex—it has some 32 different benefits in it—that it is virtually impossible for anyone to navigate it. I call that a failure. I call the fact that spending on council tax benefit doubled over the 13 years of the Labour Government a failure, because they did not achieve what should have been the objective of aiding people back into work. Some of my constituents have not known the opportunity of work for three generations. I call that a failure. The suggestion that the Labour party did anything other than fail is a bogus one. No amount of rhetoric and high-flown words can hide that reality.

We have not heard from Labour Members what they would do about the problem. They have made not a single constructive suggestion.

If the right hon. Gentleman will be patient, I will give way to him in due course.

What would Labour Members do to make the saving, which is a necessary contribution to the reduction of the deficit they created? We have not heard anything about that. What would they do to reform the system to increase the incentives to get people who are unemployed into work? What would they do to ensure that, when people move into work, the loss of benefit is not too great a disincentive? Our transitional scheme seeks to deal with that, but what would they do? We have heard not a word on that.

I am grateful to the hon. Gentleman for giving way. I listened to him for almost an hour earlier in the debate, so I hope he will not ask me again to be patient—I have been very patient already.

I put it to the hon. Gentleman that he is complaining not about rhetoric—we have heard quite a lot of his rhetoric—but about the experience of Members of Parliament who know from their constituencies that very large numbers of people will be badly hit by the measures, and will suffer hardship, deprivation and poverty as a result of them. He should be ashamed of the remarks he has made.

The right hon. Gentleman is always touchy when his Government’s record is called into question, but he must learn to live with that, because his record is questionable. The simple truth is that the Labour Government’s doubling of spending on council tax benefit is not a success; it is a mark of failure. I have heard not one word on what Labour Members would do to redress the situation.

I am relaxed about whether there is a review. The provisions of the Bill require local authorities, at local level, to keep their schemes under review. I am confident that a national review would demonstrate that the measure is necessary. Not a word has been said by Labour Members about how they would make good the funding gap that would be left if nothing were done. There is nothing from them about that. It is like the old prayer that is adopted—“Lord make me virtuous, but not yet.” They say they want to reduce the deficit, but they will not tell us when or how they will do so. Failing to reduce the deficit damages the underlying economy, real and sustainable growth, and the prospect of real and sustainable jobs for the very people about whom they claim to be concerned. Locking people into a massively complicated benefits system, which they created, is not helping—[Laughter.] Labour Members’ laughter demonstrates the air of unreality that hovers over them. They will not accept their responsibility. They behave like ostriches. To paraphrase the late George Carman QC, they prefer to put their heads in the sand, thereby revealing their thinking parts.

As I have said, it is inevitable that those who are on benefits suffer when benefits are withdrawn, but there is nothing compassionate about the long-term failure of the previous Government to address the number of people on benefits and the enormous increase in the bill for those benefits. The inevitable consequence was that one day, when spending had to contract, as it now most definitely does, that group of people would suffer. What is compassionate about that?

My hon. Friend is absolutely right. There is nothing compassionate about that. The attitude of Labour Members is blinkered—to put it as charitably as I can. They think the only way to deal with people compassionately is by continuing with a rigid and failed system.

For a split millisecond, the hon. Gentleman had me sold on the idea that he was convinced about a simplified benefits system. If he is convinced, why does he believe council tax benefit should not be part of the universal credit system? The proposals will result in a different council tax benefit system for every local authority area in the country.

The hon. Gentleman, whom I respect in these matters, makes an interesting point. I have two points to make in response. First, we consulted prior to the design of the system, and one question that came up is whether we should include council tax benefit in the universal credit. The cross-party local authority associations did not want that, which we reflected in the Bill. That was their view at the time and I still believe they were right. We adopted a localist stance, and we need take no lessons on that.

Secondly, the hon. Gentleman says there will be different approaches in different areas, but I should gently tell him that he betrays the error of the Labour party’s thinking. Labour Members take a monolithic approach, but local economic circumstances, the demands on people who are not in work, and the demand that they place on council budgets, vary from place to place. The whole point of localising the scheme is to recognise that local authorities are generally better placed than a monolithic and centrally administered scheme to recognise the particular influences on the jobs market and routes back into work in different places.

I congratulate my hon. Friend on the work he put into the Bill, which is a worthwhile contribution to localism. Does he agree that one great virtue of localism is that it gives elected local authorities the opportunity to inculcate their values in the local community? Tendring council might have values it wants to promote in the context of the legislation, but socialist local authorities might want to implement more socialism locally.

My hon. Friend is absolutely right. Labour Members’ approach is bizarre. They claim to be localist but object when anything is localised. They claim to recognise the need to reduce the deficit—I am never quite sure about that—but never actually say how or when they would do it. Instead, they just give a blanket criticism of anything that seeks to move things forward.

The hon. Member for Warrington North (Helen Jones) talked about West Oxfordshire and Westminster councils not having schemes as if that was a bad thing. Does my hon. Friend agree that, actually, the decision to protect local residents by not changing the schemes is an example of the very point we are making—it is about local choice?

The words of Little Sir Echo from the Opposition Benches!

My hon. Friend the Minister is absolutely right. The decision to use the default scheme is a local choice. The ability to design schemes in different ways is, and should be, a local choice. It is strange that there should be any objection to that. The Government have provided help, of course, and not only through the transitional scheme, which I regard not as a mark of weakness but as a mature and sensible reflection on how to proceed in a constructive way. [Interruption.] Again, that sense of unreality wafts across from the Opposition Benches. They prefer to exist in this land of denial where nothing is wrong with the current system, when it is manifestly failing.

Given that the hon. Gentleman was previously the Minister in charge of the Bill, will he explain why, if it was a mature and sensible reflection, he did not have it a year ago? How can it possibly strike him as mature and sensible halfway through the period when local authorities are consulting on the policies they are trying to develop?

We did some very sensible and mature things a year ago: we paid out £30 million upfront to assist with the design of the scheme; we gave early notice of our statement of intent; we enabled local authorities to run their consultations early while the secondary legislation was going through; and we listened to suggestions for further refinements, such as ensuring that the taper works smoothly so that it eases people back into work as their income rises. The Government should be congratulated on taking all that on board, not criticised, but that is not going to happen, of course, such is the Opposition’s unreal mindset. They seem to have locked themselves into a closed way of thinking.

What is the best way of getting people back into the labour market? How do we deal with the fraud that, I regret to say, is an issue with some benefits? The vast majority of benefit claimants act honestly and properly, but significant sums are, I am sorry to say, lost to fraud. That is far better dealt with locally, because local council officials and members have better local knowledge and are better linked to the various enforcement agencies. Significant savings for the honest and genuine claimant can be made through the better running of the scheme and by dealing with issues such as fraud, but those things are better dealt with locally.

In considering the proposal from the other place for a review over the next two or three years, does my hon. Friend agree that there is scope for the administration of grouped or pooled schemes across a local area? Under such a scheme, specialist advice, such as fraud advice, might be more economically obtained.

That is a sensible and useful point. As in our earlier discussion about pooling business rates, there is sense in pooling some of the critical mass and resource available between local authorities. Again, if we are trying to get people back into the job markets, which might span more than one local authority area, it is sensible for there to be a means for local authorities to work together. That is a constructive suggestion. Would that we had heard any such constructive suggestion from the Opposition.

The hon. Gentleman might remember from those days that I was involved, as an officer, in setting up the local fraud units, which were successful. We learned then that chasing small amounts of money, which these will be, was not cost-effective. What happens is that others decide, “If I’m not going to be chased, I won’t pay.” The problem with this proposal is that it will increase fraud, not reduce it.

The point I take from the hon. Gentleman, whose experience I respect, is that, yes, it is not sensible to chase very small sums of money, but that is why the transitional scheme, for example, works to incentivise councils not to do precisely that. We have sensibly reflected on that.

It is important that we get to grips with this intractable issue. Amendment (a) sounds innocuous, and if my hon. Friend the Minister advises the House to accept it, I would have no difficulty in doing so, but the Labour party has not tabled it out of an interest in carrying out a significant and worthwhile review. It is simply a device for the Labour party to get off the hook for not having any constructive alternative to put forward.

I have heard a number of speeches by the hon. Member for Bromley and Chislehurst (Robert Neill), but that was probably the worst. There was a total failure to acknowledge any problem with the proposals we are debating this afternoon and an attempt to deflect blame, rather than recognising that he has created something that will haunt him, his colleagues and all Members of Parliament, who from next April are likely to see large numbers of aggrieved constituents coming to ask why they suddenly have to pay sums of money that they do not have the means to pay. Then—this is an interesting point about the hon. Gentleman’s suggestion about fraud—when those constituents see that some councils will not pursue relatively small arrears, just because it is uneconomical to do so, they will probably think, “Well, there’s probably no need for me to pay.” If ever something were likely to undermine the culture of payment and responsibility, it is this kind of scheme, in just the same way that the poll tax undermined the culture of paying because it was seen as unfair, because it was arbitrary and because the arrears that built up took an enormous amount of time to recover.

All this is unnecessary. We can have a debate about whether council tax benefit should be localised. I have been happy to participate in that debate, and there are arguments both ways. There is an argument that council tax benefit should be part of a universal credit and benefit system. There are also arguments about localisation. We can have those debates. I would have been happy to participate in an argument about that and to try to develop either a local or national scheme that worked and that met the objectives that had been articulated. However, that is not what we are debating this afternoon. This is a ham-fisted set of proposals, cooked up by the Government in a way that shows a complete lack of joined-up thinking between Departments—the Department for Communities and Local Government is going in a completely different way from the Department for Work and Pensions—and then imposed to a chaotic timetable.

The way this House has handled the process is a cause for concern in itself. Our first debates about the Bill were in January, when the Committee stage was taken on the Floor of the House and had to be rushed through without adequate time to consider all the issues. Then the Bill was parked for three or four months. We heard nothing more about it. We wondered what was going on, until the penny dropped and one of the Clerks was wise enough to point out what was happening. The Government had suddenly realised that if they went through the parliamentary procedures, the Bill would fall with the end of the Session. They had to park it because they had not realised that the only way to get it through the current Session was not to take it through the House of Lords in the previous Session, so that they could then reintroduce it in this one.

Here we are, less than six months before the implementation of a hugely complex scheme that will affect the benefit entitlement of around 4 million people nationally, without the details agreed and with an extraordinary series of last-minute adjustments, including the transitional relief. We could not devise such a chaotic implementation programme if we tried. I am really disappointed that Ministers have not acknowledged that this is a mess. The right way forward now is to say, “We need time to get it right.” Let us give them credit: let us give them the opportunity to say that localisation is the right thing to do, but then please let us recognise that this is not the right way to do it. We have to give local authorities sufficient time to prepare, consult and carry their communities with them. We have to give them the means to do that without these arbitrary cuts, which affect individuals so harshly and unfairly, because there will be marked differences between categories of people.

Let us take the position of two households, one just over pension age and the other just under. Under the arrangements that are being introduced, if they both receive an equivalent amount of benefits, one group will be protected from any cuts because they are over pensionable age and the other will not. How will that be explained? How is there any sense of fairness whatever if those households’ circumstances are broadly the same? There will be anomalies, problems and a sense of injustice on the part of the public, and then there will be all the administrative issues in trying to collect small sums of money. It cannot make sense to proceed in this rushed way towards what is likely to be serious administrative chaos in early spring next year. The sensible measure would have been to say, “We must take stock. We must now pause and try to get this right.” Even if the Government will not accept that, they should at least confirm that there will be a review. It cannot be right to proceed with such a chaotic scheme that has gone through such a bad gestation period and that is now going to produce the kinds of problems that Members have articulated so well today, without a commitment to a thorough review.

The other place did us a service by passing the amendment that would make a commitment to such a review, and the Government should, at the very least, accept that the measure must be reviewed independently and fairly; otherwise, we shall be condemning large numbers of our citizens to an unfair and harsh series of measures that will impact on their livelihoods and that they will find impossible to understand. The Government are committing local authorities to implementing harsh and unfair measures for which they will get quite a lot of the blame. The whole thing is a terrible mistake, and I just hope that the Government will now recognise that they have a serious responsibility to the public and to local authorities to try to make the best of the very unfortunate position that they have got themselves into.

I will deal first with the points raised by the right hon. Member for Greenwich and Woolwich (Mr Raynsford). I am still relatively new to the House, having joined in 2010, and I am certainly new to the Dispatch Box. I have to say that the opening remarks of his speech were the most undignified I have heard in this Chamber in my short time here. I therefore do not intend to comment further on what he had to say.

The hon. Member for Warrington North (Helen Jones) made a point about the scheme in general, and I shall respond to it directly. She seemed to suggest that her party would like to see a centrally controlled policy scheme, rather than trusting local councils. I must point out that the Local Government Association does not want this provision to be part of universal credit; it wants it to be localised, if it needs to change. I was disappointed that Labour Members seemed to lack trust and faith in local councils and local councillors to do what is right for their communities. We have far more trust and faith in them than Labour does.

I was astounded to hear at least one Member complain that the Government’s pledge of a further £100 million to help local authorities with the transition was unhelpful. That provision is of course voluntary; local councils do not need to take part and do not need to take up any of the money. It is simply a transitional grant that will be available if councils wish voluntarily to take up the offer of it. Some councils will come up with different schemes. It is part of localism that they will do what they think is right for their local communities. Some might have large reserves. If, for example, a council had about £45 million in reserve, it might use some of that to prepare for the changes. The Government’s position is that that should be a local decision. This is about local councils having the political will to do the right thing, to look at what is right for their communities, and to work to develop economic growth to get more people off benefits and into work. That goes hand in hand with the business rate retention that we discussed earlier.

It is important to record the fact that no Labour Member is saying that localism is a bad thing. The Minister cannot have it both ways, however. Either the Government take a localist approach, in which the arrangements for council tax benefit will be different from one local authority to another, or they do what the Minister says he wants to do, which is to simplify the system. That would involve one nationwide system.

I am not quite sure what point the hon. Gentleman is trying to make. This is a localised scheme in which local councils will do what they want to do. Different councils are consulting on different schemes, and in response to some of the consultations the Government have made provision to allow local authorities some transitional money to help them to move to what might be a better scheme for their area. But—this is the key point—that money is part of a voluntary scheme. It is up to local authorities whether they take part in it, or whether they go ahead with what they believe is the right scheme for them.

By the Minister’s own admission, then, this is not a simplified scheme. It is a localised scheme, but it is not simplified. Every local authority will have a different system in place, which will add to complexity.

I think the hon. Gentleman is starting to understand that localism means that local councils can do what they think is right for their local communities, understanding that what might work in one local community would not necessarily be right in another local community in respect of the schemes they devise to secure economic growth, to create more jobs or to get more people off benefits in the first place.

It is not an absolute certainty that localising council tax will indeed lead to fiendish complexities. It is entirely within the gift of local councils to negotiate among themselves to have council tax schemes grouped, which could then be agreed across, say, Hampshire. Given the commonality of economic prosperity in the area I represent, that would seem to make sense. Does the Minister agree?

My hon. Friend makes a good point. I would add that there is a range of things for local councils to look at. Some local authorities will be looking to bear down on some of the fraud and error, which we believe is worth £200 million a year. They will be looking to come up with schemes to drive economic growth, to put more people into work, to be more efficient. They might be looking at saving money through shared services in the management teams and various other schemes. The flexibilities we are putting in place give them a huge opportunity.

The hon. Member for Warrington North (Helen Jones) made a comment, implying that the Government have somehow depressed the council tax benefit forecast. She will be aware that the forecasts for council tax benefit expenditure are considered and ratified by the independent Office for Budget Responsibility. I entirely reject her suggestion, if that is what it was, that we have in any way been able to influence these forecasts.

On the point of simplicity, many of us, including Government Members, sat through the Welfare Reform Bill debates, in which the simplicity of universal credit was presented to us as a great advantage. This change undermines that simplicity—fatally, it seems to me. As the director of the Social Market Foundation said in an article this morning, under this proposal

“not only will you need a computer to work out your benefit entitlements, you’ll need a map”.

Coming from a party that had 32 different benefits to work through, I find that quite an amazing comment.

It is all down to local councils to decide, but one of the complications is that the Government are localising council tax benefit, but centralising housing benefit. Local councils can get no sensible decisions from the Department for Work and Pensions on whether an arrangement will be allowed whereby applicants can go to one point for information and advice about both benefits. Are the Government to sort out this problem between the two Departments?

I am sure we can take that back to the DWP, but I am sure the hon. Gentleman will appreciate that this goes some way outside the remit of the amendments. I will reflect on his comment and come back to him on it. As I have said, councils will have choices about how to meet the cost of support, and local authorities that have consulted on their proposals will need to consider whether they want to apply for the grant or whether they need to make changes to the proposed schemes in order to do that. I shall return to that issue in a few moments, if Members wish it.

Let me deal with the specific amendments. I shall ask the House to agree to Lords amendment 3 and to the other Lords amendments, but to resist the Opposition amendments to the amendments, which I shall ask the hon. Member for Warrington North to withdraw.

Lords amendment 3 requires the Secretary of State to provide for a review of council tax reduction schemes within three years of the Act coming into effect and sets out certain considerations for that review. As Baroness Hanham made clear in the House of Lords, Government routinely review policy and respond to ensure our objectives are met. The transitional grant scheme announced on 16 October was a direct response to those authorities that are proposing schemes that place what the Government consider to be an unacceptable burden on the very poorest. That is why we will accept that amendment, but we will not seek to overturn it.

In accepting the principle that Government should keep policy under review, I would make a couple of points. The terms of the review, as set out in the amendment, do not bind the Government to any course of action as a result of the review’s recommendations. I know that the Local Government Association is keen for us to make that clear. We will need carefully to consider the findings of the review before considering how we will respond. We remain clear that localisation is our preferred policy. It strengthens incentives to support local growth and jobs, drive down fraud and error and hold down council tax. It gives local authorities control over how to design support schemes, taking into account the impact on local populations and council tax collection rates. It also ensures that funding for council tax support is paid directly to the authorities that provide vital services. All those are important considerations that the Government would want to take into account in any future review.

The Opposition’s amendments seek to ensure that such a review would apply only to England, but I believe that if the Secretary of State is required to review the operation of local schemes in England that are provided for under powers in this Bill, such a review should also take place in relation to schemes that are similarly provided for in Wales. Let me explain that further.

Such schemes will be provided for under regulations to be introduced by Welsh Ministers, so it is right for Welsh Ministers to lead on any review. In complying with the requirement of the Lords amendment, the Secretary of State will therefore seek to agree with Welsh Ministers the scope and format of the review in relation to Wales. It will also be for Welsh Ministers to consider the implications of the review’s recommendations for the framework for schemes provided for through their regulations, and the powers provided, at their request, in the current Bill.

In the light of these assurances, I do not think that the Opposition’s amendments are necessary.

Lords amendments 83, 84 and 86 would enable regulations made by the Secretary of State or Welsh Ministers about council tax reduction schemes of billing authorities in England or Wales to make provision equivalent to the provisions of, or the provisions that could be made under, sections 32 to 34 of the Welfare Reform Act 2007. The amendments would also give billing authorities in England power to make additional provision in their local scheme which replicates, or could be made under, those sections. The amendments would allow local authority schemes to provide for extended payments, which are an important way of supporting work incentives.

Lords amendment 85 is a technical amendment. It is intended to ensure that the power in new paragraph 6 of schedule 1A to the Local Government Finance Act 1992, which allows major precepting and billing authorities to reach an agreement to vary payments or instalments that are required to be made under regulations about funds, applies—as was intended—only to regulations in relation to council tax.

Lords amendments 87 to 90 would ensure that the expertise of members of the First-tier Tribunal could be used in the deciding of appeals against decisions made in relation to council tax reduction schemes. The amendment would enable First-tier Tribunal members to sit as members of the Valuation Tribunal for England at the request of the president of the tribunal, with the approval of the Senior President of Tribunals, and only in relation to appeals that relate in whole or in part to council tax reduction schemes.

I urge Members to agree to the Lords amendments and resist the Commons amendments, and invite the hon. Member for Warrington North to consider withdrawing amendment (a).

Lords amendment 3 agreed to.

More than three hours having elapsed since the commencement of proceedings on consideration of Lords amendments, the proceedings were interrupted (Programme Order, this day).

The Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83F).

Lords amendments 4 to 91 agreed to, with Commons financial privileges waived in respect of Lords amendments 4, 5, 10 and 19 to 85.

I am extremely grateful to the Minister and I did wonder whether he had had a rather urgent job swap, but he has not. We are grateful to him for his conscientiousness, but he is not needed at this stage.