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Public Bill Committees

Debated on Tuesday 7 February 2017

Local Audit (Public Access to Documents) Bill (First sitting)

The Committee consisted of the following Members:

Chair: Nadine Dorries

Carswell, Mr Douglas (Clacton) (UKIP)

† Colvile, Oliver (Plymouth, Sutton and Devonport) (Con)

Harris, Carolyn (Swansea East) (Lab)

† Harris, Rebecca (Castle Point) (Con)

† Kennedy, Seema (South Ribble) (Con)

McMahon, Jim (Oldham West and Royton) (Lab)

Mackinlay, Craig (South Thanet) (Con)

† Morton, Wendy (Aldridge-Brownhills) (Con)

† Murray, Mrs Sheryll (South East Cornwall) (Con)

† Percy, Andrew (Parliamentary Under-Secretary of State for Communities and Local Government)

Pound, Stephen (Ealing North) (Lab)

† Sandbach, Antoinette (Eddisbury) (Con)

† Saville Roberts, Liz (Dwyfor Meirionnydd) (PC)

Smeeth, Ruth (Stoke-on-Trent North) (Lab)

Twigg, Stephen (Liverpool, West Derby) (Lab/Co-op)

† Whittaker, Craig (Calder Valley) (Con)

Glenn McKee, Committee Clerk

† attended the Committee

Public Bill Committee

Tuesday 7 February 2017

[Nadine Dorries in the Chair]

Local Audit (Public Access to Documents) Bill

Welcome to this Public Bill Committee on the Local Audit (Public Access to Documents) Bill. I have a few preliminary announcements. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings. No amendments have been tabled to the Bill, so we begin with a debate on clause 1, but I suggest that Committee members make any remarks about clause 2 during this debate. In other words, we will have a general debate about the contents of the Bill on the question that clause 1 stand part of the Bill. If the Committee is content with that suggestion, I will put the question that clause 2 stand part of the Bill formally once we have completed consideration of clause 1, on the basis that clause 2 will already have been debated. Is that agreeable? [Hon. Members: “Yes.”] Thank you.

Clause 1

Inspection of accounting records by journalists and citizen journalists

Question proposed, That the clause stand part of the Bill.

It is a privilege to serve under your chairmanship, Ms Dorries, and to have the benefit of your expertise and good guidance. I thank hon. Friends and hon. Members for attending this sitting, and hope that they can continue to support this Bill on its passage through this House. I especially thank the Minister, for representing the Government today in lieu of his colleague, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton (Mr Jones), who I believe is in another Committee. I believe that a number of years ago, before entering this place, my hon. Friend the Minister served as a councillor on Hull City Council, and I am sure that his experience will be of great use today and will serve us well.

We had a very good debate on the Bill on Second Reading, so I do not intend to take up too much of your time today, Ms Dorries. The Bill is short and sweet, with only two clauses in total. It seeks to give journalists and citizen journalists—that is, bloggers and others who scrutinise local authorities, but who may not be accredited members of the press—the same rights of inspection as interested persons under section 26(1) of the Local Audit and Accountability Act 2014. It will require relevant authorities—other than health service bodies—as defined in that Act to make available for inspection the accounting records and supporting documents for such an authority for the audit year.

The Bill’s purpose is simple: it seeks to enable such persons to access a wider range of accounting material, so that they can report and publish their findings, making them available to local electors, thus providing them with information enabling them better to hold their local council to account for their spending decisions, by either questioning the auditor or objecting to those accounts. Let me make it clear that the Bill will not enable journalists to question the auditor or object to those accounts, unless of course they are also a local government elector for the area.

I do not want to repeat all the points made on Second Reading, as the responses received then were comprehensive and covered all the issues raised. However, if anybody wishes to ask a question, I will be more than happy to answer it this morning. Besides, the Minister who has responsibility for local growth and the northern powerhouse, wishes to say a little about the Bill, and perhaps to touch on the consultation that has taken place since Second Reading.

It is a pleasure to serve under your chairmanship, Ms Dorries, on my first—and possibly last, depending on how well this all works out—Bill Committee as a Minister. I apologise for the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton, who is on a Bill Committee just a couple of Committee Rooms away. It is a pleasure to respond to my hon. Friend the Member for Aldridge-Brownhills this morning. She has already done far more than I managed to do in my six and a half years as a Back Bencher in successfully—hopefully—getting a Bill though this House, and I congratulate her on that. She is right to say that I served as a local councillor; I was also a parish councillor for the village of Airmyn, so this is a matter in which I have some interest from my previous role.

I am delighted to support the Bill on behalf of the Government and congratulate my hon. Friend on steering the Bill successfully thus far. I am reminded of Margaret Thatcher, who in her maiden speech introduced the Public Bodies (Admission to Meetings) Act 1960, which was in a similar vein; it was about opening up local government to journalists and other interested parties. In that respect, my hon. Friend is very much channelling Margaret Thatcher with the Bill. Conservatives will be happy with that, but I am not sure whether the hon. Member for Dwyfor Meirionnydd is quite so pleased.

As my hon. Friend the Member for Aldridge-Brownhills said, this small amendment could increase town hall accountability and ensure that councillors are responsible for their spending decisions. As she also said, we held a consultation with a range of interested parties, including the Information Commissioner, the National Association of Local Councils, the Society of Local Council Clerks, the National Union of Journalists, the News Media Association, local authority treasurers’ societies, Public Sector Audit Appointments, and Smaller Authorities Audit Appointments. The majority of respondents were able to support the Bill’s intentions, but two key issues—whether the Bill’s provisions excluded the very smallest parish councils, and more generally whether the potential cost on local government was onerous—arose during the process that we have considered further, and I should like to put them on record.

As I have said, I served on a very small parish council with a very small budget. During the consultation, we engaged with stakeholders on whether the Bill would grant journalists inspection rights in respect of the very smallest parish councils, by which I mean those with annual turnover of £25,000 or less. Our conclusion is that journalists will have those rights through the Bill. The smallest parish councils are therefore included in the legislation rather than excluded, as we originally thought. That raises the question of whether that is onerous or burdensome for those small parish councils. We have concluded that amending the Bill to exclude those smaller authorities would likely have a limited impact, and is therefore unnecessary. In response to the consultation, the Society of Local Council Clerks stated that

“having a different range of people having inspection rights at bodies under £25,000 compared to those over £25,000 might create confusion, particularly for clerks who serve several councils of differing sizes”.

It is not unusual for a parish council clerk to be clerk to a number of different local parish councils of various sizes. Consequently, we are content that smaller parish councils will be within the scope of the Bill.

With regard to the potential cost of extending inspection rights to a large group of people with no local connection to the area, I can assure the Committee that we have investigated the extent to which current rights are exercised. In 2015-16, it would seem that local electors exercised their rights over a total of 11,000 bodies only around 65 times. Although those rights are to question and make objections to the auditor, rather than broader inspection rights offered to interested parties, it is clear that this set of public rights is not used to any great extent, so it is not particularly burdensome on authorities.

Furthermore, in its response to our informal exercise, the Society of Local Council Clerks, which represents around 5,000 parish clerks, reported that its members had not experienced a high level of interest in their accounting records. I can attest to that, because journalists from around the country did not swoop down on the accounting records of Airmyn parish council, important though it is to have the power to do so. Only around 5% of the 562 attendees at 10 SLCC regional events last year had ever had someone exercise their inspection rights. A significant proportion of those inspections—perhaps a third—were by former councillors. That would seem to bear out our view that the number of requests to inspect is relatively low.

The changes are therefore not burdensome. They are important, in terms of making good on the Government’s intention of increasing local transparency and accountability. This is an excellent Bill. I congratulate my hon. Friend on securing such support so far, and on her handling of the Bill at its various stages. I commend the Bill to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Bill to be reported, without amendment.

Committee rose.

Local Government Finance Bill (Fifth sitting)

The Committee consisted of the following Members:

Chairs: Sir David Amess, † Mike Gapes

† Aldous, Peter (Waveney) (Con)

† Double, Steve (St Austell and Newquay) (Con)

† Doyle-Price, Jackie (Thurrock) (Con)

Efford, Clive (Eltham) (Lab)

† Foster, Kevin (Torbay) (Con)

† Foxcroft, Vicky (Lewisham, Deptford) (Lab)

† Hollinrake, Kevin (Thirsk and Malton) (Con)

† Jones, Mr Marcus (Parliamentary Under-Secretary of State for Communities and Local Government)

† McMahon, Jim (Oldham West and Royton) (Lab)

† Mackintosh, David (Northampton South) (Con)

† Marris, Rob (Wolverhampton South West) (Lab)

† Pow, Rebecca (Taunton Deane) (Con)

† Thomas, Mr Gareth (Harrow West) (Lab/Co-op)

† Tomlinson, Justin (North Swindon) (Con)

† Turley, Anna (Redcar) (Lab/Co-op)

† Warburton, David (Somerton and Frome) (Con)

Colin Lee, Katy Stout, Committee Clerks

† attended the Committee

Public Bill Committee

Tuesday 7 February 2017


[Mike Gapes in the Chair]

Local Government Finance Bill

On a point of order, Mr Gapes. You will remember that last week the Minister helpfully promised us that he would ensure that the 400-plus submissions to the 2016 consultation document would be published soon. To date I have not seen anything on the Department’s website, but I wonder whether you have more information as to when they might be available, to make possible better scrutiny of the Bill.

I do not have any information at all, but if anyone does perhaps they can inform us.

Further to that point of order, Mr Gapes. I have made it clear to the Committee, including when I gave evidence, that we will shortly bring forward a summary of the responses to the consultation. We will certainly do that.

Schedule 1


I beg to move amendment 24, in schedule 1, page 33, line 13, at end insert—

“(1D) The principles of allocation statement must be approved by a resolution of the House of Commons.

(1E) In the year prior to any reset of the Business Rate Retention Scheme a principles of allocation statement must be approved by a resolution of the House of Commons.”

This amendment, together with amendment 25, would require a principles of allocation statement to be approved by the House of Commons. Subsection (1E) would in particular require a principles of allocation statement to be approved by the House of Commons in the year before any reset of the Business Rate Retention Scheme.

With this it will be convenient to discuss the following:

Amendment 25, in schedule 1, page 33, line 27, at end insert

“and that statement has been approved by resolution of the House of Commons.”

See explanatory statement for amendment 24.

Amendment 26, in schedule 1, page 34, line 42, leave out sub-paragraph (4) and insert—

“(4) In sub-paragraph (4), at end insert ‘, which must be approved by a resolution of the House of Commons.’”

This amendment would retain the requirement that an amending statement be laid before the House of Commons and additionally would require that the report be approved by a resolution of the House.

It feels a little like the morning after, and I cannot promise to wake up Members and act as caffeine, as I usually like to try to do after a late night. The amendments are about parliamentary scrutiny. In a sense, last week’s proceedings were an hors d’oeuvre to the main course: the case for ensuring that there is proper parliamentary scrutiny of local government finance.

Last week the hon. Member for North Swindon made an enlightening contribution to the Government’s case. It is a pity that the Minister could not achieve the same heights. Given that the hon. Gentleman for North Swindon works closely with the Whips, what he said was revealing, and this is why parliamentary scrutiny matters. He did not have much interest in the case for redistribution of local government finance, and foresaw a new Jerusalem as economic growth incentives kick in.

To be fair to the Minister, there was a small benefit in terms of parliamentary scrutiny when he revealed, after much mulling over, that any local authority that cut its multiplier in the future would not be entitled to any top-up under the new system. I suspect that that means that few local authorities will rush to cut business rates.

Those two small indications—the Government mindset, which the hon. Member for North Swindon helped us to understand a little better, and the Minister’s indication of how future arrangements underpinning the Bill will work—serve as a reminder of the importance of continuing parliamentary scrutiny, which is what the amendments would help to embed in the Bill.

It may be worth reminding the Committee how accountability to the House of Commons is envisaged under the Bill. Paragraph 7 of schedule 1 repeals the requirement to provide a local government finance report that must be approved by the House of Commons. Instead, under paragraph 12 the Secretary of State will be required to publish a principles of allocation statement, which will set out how the tariff and top-up levels have been calculated. Everyone expects that that will substitute for the local government finance settlement.

Under the Bill, the Secretary of State could publish a principles of allocation statement covering several years at once. Indeed, the requirement to publish a statement annually is abolished by the Bill. Paragraph 15 of schedule 1 provides that an amending statement may be made, and again that would not have to be put to the House of Commons for approval. That amending statement allows for tariffs and top-ups to be altered retrospectively up to a year after the financial statement, so presumably the tariff and top-up could in the most dramatic cases be axed completely. I grant that there has to be a consultation with local authorities, but in theory dramatic change to local councils’ spending power could be the result of such retrospective change.

The amendments stand in my name and that of my hon. Friend the Member for Oldham West and Royton. Amendments 24 and 25 would require the principles of allocation statement to be approved by Parliament in the same way as the existing local government finance report. Similarly, amendment 26 would require that any amending statement to the principles of allocation statement would need approval by the House of Commons.

Why on earth would Parliament want to ensure scrutiny for local government finance in future? There is a series of reasons, which I will take a little while to explore. A House of Commons occasion such as the local government finance settlement provides a moment for change whereby the Executive can be held to account for their performance, or lack thereof. That is crucial. For example, the issue of social care has been debated in many guises, both by this Committee and by the House, and last September’s local government finance statement provided an important opportunity to scrutinise the Department for Communities and Local Government on its handling of the social care crisis.

There is also the question of how local government finance should be scrutinised. Should it be done purely by Members of Parliament seeking to discuss their individual local authority’s situation through a Back-Bench debate? There is of course a case for that. I had the pleasure of taking part in a debate on the local government finance of midland authorities, including Birmingham. My hon. Friend the Member for Coventry South (Mr Cunningham) also took part in that debate.

The role of individual Back-Bench MPs in securing an Adjournment debate and fighting their local council’s corner will always be an important way of scrutinising local government finance. Before I returned to a Front-Bench post, I, too, sought to do that, on a number of occasions raising the difficult financial situation of Harrow Council. Before my hon. Friend the Member for Oldham West and Royton joined the Front-Bench team, I had the pleasure of hearing him fight the corner of his local authority of Oldham.

Under reforms to Parliament, Back-Bench MPs on both sides of the House now have the opportunity to work together to secure time—usually on a Thursday and sometimes in Westminster Hall—for a particular subject to be debated. I pay tribute to the hon. Member for Thirsk and Malton for his support in securing a Back-Bench debate on maternity discrimination. Perhaps it would also be legitimate for Back Benchers to work together to secure debates on issues relating to local government finance.

Her Majesty’s Opposition might want to use one of our Supply days to focus on local government finance. Indeed, in this session we have already used one of our Supply days to highlight the problems of social care. The Communities and Local Government Committee has done excellent work looking at local government finance. I will come back to that. Yes, there is a role for Back Benchers, for the Select Committee and for Opposition-led debates, but surely an annual debate on the state of local government should be timetabled in the House. Without our amendments, I fear that that opportunity will be lost.

I want to explore what the hon. Gentleman has just said. He says that he wants an annual debate and a vote on the settlement, but that does not seem to concur with his amendment. What does he want to get out of this?

I appreciate the fact that the Minister may have had too much caffeine in the wake of very few hours’ sleep, but I encourage him to be patient. I will come to the merit of the amendments and what they seek to achieve.

I would not have thought that the Minister was naturally frightened of appearing before the House, although he has a track record of getting things wrong. He was recently a member of the Standing Committee that considered the Housing and Planning Bill, which tried to introduce a pay-to-stay scheme. Our parliamentary scrutiny in that debate helped to begin the process of getting Ministers to cave in and to recognise that they were wrong. There is a strong case, not for less parliamentary scrutiny, as the Minister envisages with this Bill, but at least for maintaining, if not increasing, the scrutiny of local government on the Floor of the House.

Does my hon. Friend agree that it is difficult to give an adequate response when the Minister has not bothered to say why scrutiny has been taken away in the first place?

As my hon. Friend knows, one of the reasons that I tabled the amendments was to try to draw out from the Minister why he does not want sustained and effective scrutiny of local government finance.

There is a timing issue. You will remember, Mr Gapes, from our debates last week that under the Minister’s plans we can expect a series of new responsibilities to be devolved to local government as the quid pro quo for the extra £12.5 billion being handed down under the 100% business rates devolution. Surely there should be an opportunity, when we know what those new responsibilities are, to be able to debate how, in the context of local government finance, they are likely to be handled by local government up and down the country. Again, proper parliamentary scrutiny and a clear requirement for the House to approve the principles of allocation statement would provide an opportunity for a debate on how those new responsibilities will work in practice.

In addition, this is effectively a completely new system of finance. Sure, we have been working with 50% business rates devolution for three or four years now, but to have 100% of business rates devolved and the revenue support grant, along with a whole series of other Government grants, axed is a very different landscape for local government finance. Surely there should be a regular opportunity to test how that new system of finance for vital public services up and down England is working. It would be sensible to at least maintain the current level of parliamentary scrutiny as part of the new order.

There are also significant unknowns about the future pattern of local government finance. We do not know how the system of tariffs and top-ups will work in practice. We have had only mild illumination from the Minister. We know that people who reduce their business rates will not be entitled to a top-up, but we do not know any arrangements for tariffs. Last week I gave the example of Heathrow and the third runway. I will come back to that later, too, but what about tariffs that might or might not be imposed on Hillingdon and Maidenhead councils, both of which potentially stand to gain significantly from a third runway at Heathrow? Many local authorities want to know whether there will be an enhanced contribution from such local authorities to help with the redistribution process. Surely how little we know about how tariffs and top-ups will work in practice underlines the case for at least maintaining, if not enhancing, the level of parliamentary scrutiny.

I know that England matters hugely to you, Mr Gapes, with your ongoing interest in West Ham football club. In essence, the local government finance settlement is an opportunity for England to take centre stage in the House of Commons and in our political process. Conservative Members, however, seem determined to axe an opportunity for England to take centre stage. That, frankly, is something that we are profoundly disturbed about.

Lastly—well, not “lastly”, I would not want to create a false impression—under the Bill, a range of powers will be available to the Treasury, to the Department for Communities and Local Government and to the Minister to interfere in local government finance. Although the Minister likes to see himself as the Che Guevara of local government finance, ushering in a radical new process, in practice there will be plenty of scope for the nanny state in the form of the Department for Communities and Local Government to continue to meddle in local government finance up and down the country. Indeed, thanks to the House of Commons Library, we know that the Bill—should it go through unamended—contains at least 56 new opportunities for the Treasury, the Minister or other Communities and Local Government Ministers to meddle in how local government finance will operate. Surely that makes another aspect of the case for continued serious scrutiny by the House of Commons and the House of Lords.

The Treasury or the Department for Communities and Local Government may want to introduce new reliefs to help business in future. The official Opposition, as a pro-business party, want to help businesses—[Interruption.]

There might also be a case for ensuring that various public services are not subject to business rates relief. We want to explore that question a little later in our proceedings.

On the question of debate and the lack of scrutiny of reliefs, is my hon. Friend aware—he has talked about the Government possibly introducing more reliefs—that a couple of years ago, the National Audit Office found that approximately 1,200 tax reliefs are in operation and that the Government keep track of the effectiveness of fewer than 300? Therefore, the debate sought by these amendments would be extremely helpful in respect of any reliefs relating to local government.

I was not aware of that work by the National Audit Office, or indeed that so many reliefs are not properly scrutinised. That merely underlines the case not only for the work the NAO does generally, but in particular for the work, perhaps by the NAO, relating to local government finance, as well as the more general case for at least maintaining the scope for effective scrutiny of local government finance.

Perhaps this is my last point on the case for scrutiny of the Department, before I seek to develop these arguments further. Given that an amendment to the principles of allocation statement can be laid at any time, albeit after consultation with local authorities, and given that it could have a significant impact on local government finances, surely there should be the opportunity to look at why those tariffs and top-ups have been amended and the impact on councils. Therefore, there are probably eight arguments for maintaining the level of scrutiny. I hope, Mr Gapes, with your permission, to develop the argument a little further to help Conservative Members, who are not always the quickest at getting the argument and the point I am seeking to make. They are a little slow, if I may say so, to react to the point.

Let us think of the series of ways in which local government finance is going to operate. We heard from the Minister last week that section 31 grants will still be able to be offered to local councils.

Entirely discretionary, as my hon. Friend says from a sedentary position. One thinks of a situation where perhaps there is a large influx of refugees. I can foresee, sadly, another situation of flooding—the Conservative party has failed to properly protect our country from the impact of climate change—or coastal erosion, which I know the hon. Member for Waveney is particularly interested in. There will potentially be scope for discretionary section 31 grants to local authorities. There will be an assessment of need. We have no idea yet what that assessment of need for each English local authority will look like. We do not even have any sense of when it will be published. All we know is, mañana—it will be published at some distant point in the future, when the Minister and his officials can get around to it. Bearing in mind that the Minister and his officials cannot get round even to publishing the 400 submissions to last year’s consultation on the Bill, we cannot have much confidence that that assessment of need will be brought forward any time soon.

We do know that the expectation is that, aside from business rates, local councils will have to depend even more not only on the fees and charges they can raise from different services they offer, but, crucially, on council tax. My hon. Friend the Member for Oldham West and Royton reminded the Committee of the Government’s own assessment that, over the lifetime of this Parliament, there will be a 25% increase in council tax. One wonders whether that is on the conservative side, bearing in mind what Surrey County Council has done with its planned referendum and the case that it is making for a 15% increase in council tax, such is the terrible state of social care funding for that authority. We have not yet heard from the Minister how he is going to recommend the citizens of Surrey and Members of Parliament who represent Surrey should vote in that referendum. I look forward to hearing from him on that subject.

We know from the way in which Conservative Chancellors have sought to meddle with local government finance that additional reliefs will probably be announced at different times. Local government will get its finance in a series of ways in the new system. Surely there should be an opportunity to debate the way in which those different sources of finance dovetail with each other, so that we can see how individual local authorities throughout England, our great nation, are able to provide—or are not able to provide, as I fear will be the case—the public services that the citizens of England expect.

Bear in mind that Opposition Members, over the last six years or so, have been able to highlight just how much funding local government has lost over the terrible years since 2010, when the Conservative party came to power. By 2020, many councils will have lost more than 60% of their income. Arguably, an annual debate—or at least a regular debate—on local government finance will be all the more important in the first years after the introduction of the system.

It would be helpful to hear from the Minister why he thinks the requirement for a local government finance settlement report should be axed now. Why should there not be a 2018 local government finance settlement report, given that the new system will not be in force? Why should there not be one in 2019? We will hopefully have a little more information than we have now. We hope that, by 2019, the Minister may finally have got around to publishing the 400 submissions that have been put in as a result of the 2016 consultation paper. I hope, perhaps, that the Select Committee on Communities and Local Government might have had the chance to wade through those reports to give us its considered take on the concerns, or not, about the future of local government finance. Specifically, it would be interesting to hear from the Minister not only why he thinks parliamentary scrutiny of local government finance should be reduced in the way that the Bill proposes, but why it should be reduced before the new system has been introduced in its entirety.

We are the most centralised country in the western world. Almost 90% of local government finance is delivered by central Government—all the more reason for scrutiny of local government finance in the way we at least have at the moment. I suggest that it should be enhanced, not reduced in the way the Minister envisages. Our political system is weighted overwhelmingly to the power of the Executive in Whitehall. Notwithstanding the excellent contribution that the judiciary occasionally make to keep the Government honest on issues such as exiting the European Union—at this point, one should surely pay tribute to Gina Miller and her advocacy for scrutiny by Parliament—

Order. I am sure that there will be lots of opportunities in the Committee that is considering the European Union (Notification of Withdrawal) Bill to raise those points. I would be grateful if they are not raised in this Committee; we have other matters on the amendment paper.

I am very glad to hear that.

My point simply is this: there are few safeguards on the Executive’s power, and one of those is the transparency, openness and scrutiny that Ministers and their officials are subject to through the work of this great House. I struggle to understand why Ministers propose to abolish any scope for further debate about local government finance. They almost want to rush things out quietly. The principles of allocation statement will no doubt come out on the last Friday before the summer or just before Christmas so there is not even a great opportunity for proper media scrutiny of local government finance.

I had the privilege of serving as a Minister, and I have felt the fear of sitting where the Minister sits. I understand that Opposition Members often take delight in trying to catch Ministers who perhaps have not done the work off-guard. Fortunately, I was never caught off-guard or exposed for lack of information in the way that the Minister has been already during the passage of this Bill and his boss was over pay to stay during scrutiny of the Housing and Planning Bill.

As a Minister, I recognised the benefit of parliamentary scrutiny. If a Minister knows that there are difficult, dedicated, serious Back Benchers like my hon. Friend the Member for Wolverhampton South West—I remember a case when he almost caught me off-guard with one of his questions—on a Committee, that keeps them honest in terms of the work that they have to do to prepare for debates. It makes them go through legislation with a fine-toothed comb and work hard late into the night trying to think of all the difficult questions they might be asked. In so doing, they ask their officials similarly difficult questions to try to move things forward if there is a concern that things are not moving forward in the right way, or to understand why things might have gone wrong.

The leverage of a Minister having to stand in the Chamber and answer questions about local government finance up and down the land is hugely important in its own right and may help to ensure high-quality decision making. I fear that will be lost if the current opportunities for parliamentary scrutiny of the local government finance settlement are, if not abolished, swept under the carpet, as the Minister seeks to do by sweeping away the principle of accountability to the House of Commons for local government finance decisions.

It is surely important to air the big issues that affect local government. Social care is a classic example. When the local government finance settlement statement was made in December, Ministers knew that they would face sustained media scrutiny and, crucially, parliamentary scrutiny of their performance on local government finance, particularly in so far as it related to social care, not least because a disagreement between the Prime Minister and the Chancellor of the Exchequer had meant that that issue was not addressed in the autumn statement. Even though the Secretary of State brought forward a dismal package, one has to acknowledge that there was at least an attempt to begin to answer the question that council leaders, the Association of Directors of Adult Social Services and social care professionals up and down the land were asking about how we would continue to finance the system. The local government finance settlement statement forced Ministers to know that they were going to have to come up with at least some semblance of an answer to that big question. Sadly, the response was dismal, and the Secretary of State has continued to be chided by Conservative council leaders, Labour council leaders and many Conservative Members of Parliament—one thinks of the contribution of the Chair of the Health Committee.

I can see the logic from the Secretary of State’s point of view. He does not want to be held to account or do the detailed work. He wants to be able to go on another trip to a nice Republican think tank, rather than do his day job of thinking about the future of local government finance. I am not suggesting that the Minister would be invited to such a gathering, but the Secretary of State has a penchant for that type of thing.

Parliamentary scrutiny is essential because councils are the very embodiment of the power, capability and spirit of the people of England. Councils were created by the Municipal Corporations Act 1835, and in the last decades of the 19th century, local authorities, acting on their own initiative, pioneered welfare provision, cleared slums and built homes, parks, hospitals, museums, libraries, swimming pools and playing fields. They were great examples of the English entrepreneurial spirit at its very best, and also of the very best of the English Christian sense of responsibility for the circumstances of others. They introduced gas, water, electricity and transport services, which made a huge difference to our fellow citizens. We should genuinely free local councils in the way the Labour party envisaged in our manifesto, not only in memory of their past contribution. I hope the hon. Member for Torbay has now read the excerpt from our manifesto. The Prime Minister seems to have a copy by her bedside, and it now appears that the Secretary of State for Communities and Local Government dips into it regularly—one thinks of one or two of the provisions that will be in the housing White Paper.

At their best, local councils are still champions of change for the better for the citizens in their communities. As Members of Parliament, we should continue to challenge them, as I suspect we have all done at one time or another, but we should also ensure that they are stood up for and that their voice is heard in Parliament, given the significance of the Executive’s decisions on how they can stand up for their people. By weakening the accountability of the Department and its Ministers to this House, as the Minister wants to do, there is a risk of saying that the people of England matter a little less in terms of how their services are provided.

If the Minister and his colleagues are struggling to understand the strategic case for at the very least maintaining the current level of parliamentary scrutiny when funding settlements or principles of allocation statements are reduced, let me give him some examples that may help him understand the case for parliamentary scrutiny. One thinks of the councils of Nuneaton and Warwickshire. Thanks to the excellent work of that superb trade union, Unison, we know that Nuneaton and Bedworth Borough Council was facing a loss of more than £2.5 million in revenue support grant. Under the current system of business rates retention, it was expecting to gain less than £339,000 back in business rates income. Given the scale of additional responsibilities that will no doubt be loaded on to that council by the Minister as part of the fiscal neutrality requirement for the measures, and given that one suspects 100% business rates retention will not generate huge increases in revenue, there is clearly a continuing imbalance in Nuneaton’s funding.

Money from central Government is disappearing, and money from business rates income that the council can generate at a local level is not increasing. Without parliamentary scrutiny, the next Member of Parliament for Nuneaton will not be able to fight Nuneaton’s corner quite as well as the current one should do, were he to defect and come over to the Opposition’s side.

Warwickshire County Council is another local authority of which the Minister may have some knowledge. Again, thanks to Unison, we know that Warwickshire County Council, as a result of the local government finance settlement, expects a loss of some £53.86 million in revenue support grant. It is gaining just over £5.8 million from its share of the 50% business rates devolution at the moment. Given the extra responsibilities that the Minister will no doubt load on to that council, and given that 100% business rates devolution is not likely to mean a substantial increase to make up for the loss of revenue support grant, the citizens of Warwickshire might expect to see their Members of Parliament standing up and demanding an explanation from DCLG as to why their council is being so badly funded under the local government finance settlement that the Conservative party is introducing.

Revealingly, we know that Warwickshire County Council is deeply worried about its financial situation and estimates that it will have to cut more than £18 million—the equivalent of just under 20%—from the adult social care budget by 2019-20. Those who have elderly relatives and people who are vulnerable in Warwickshire might be entitled to expect Members of Parliament from across the country, but particularly those who represent them in the House of Commons, to take the opportunity of a local government finance settlement report or a principles of allocation statement being debated on the Floor of the House of Commons to ask why there is not sufficient funding in the adult social care budget in Warwickshire. I suspect we will not hear anything from Warwickshire MPs until they are replaced by Labour MPs and those citizens get representatives who are determined to fight their corner.

If the Minister is not worried about the example of Warwickshire and why MPs representing that area should have the chance to debate the local government finance settlement or the principles of allocation statement in the new world of 100% business rates devolution, let us take the example of Waveney District Council. That council is set to lose some £2.53 million in revenue support grant between 2015-16 and 2019-20. It has gained just £370,000 under business rates devolution. We had some discussion last week about the constraints on Waveney District Council as a coastal authority facing an obvious natural barrier to economic growth. It is probably not expecting to see a huge increase in business rates income when 100% of business rates are fully devolved as a result of the Minister’s pronouncements. Waveney may have contributed to the big consultation, but we have not had a chance to see the response—the hon. Member for Waveney may be able to tell us during our proceedings. We know that Waveney District Council is losing significant sums in revenue support grant from the council and we know it will be expecting new responsibilities to be devolved to it as part of the fiscally neutral requirement of this package, but we expect that the increase in business rates income will not make up for that shortfall. Understandably, Waveney District Council is worried about that.

I am grateful for the hon. Gentleman’s care and attention to my constituency. Does he agree that business rates retention needs to go hand in hand with a review of core spending and the needs assessment? The Minister has already provided that assurance.

Of course it needs to go hand in hand with the needs assessment. Not only that, it needs to go hand in hand with the fair funding review. It would be lovely to know what the needs assessment will be for each council and what the fair funding review will mean for each council, but the brutal truth is that we do not know. I suggest the hon. Gentleman looks at one of the last amendments on the amendment paper to be considered on Tuesday 21 February, which deals with commencement of the Bill. We should wait for the full picture before we allow the Bill to come into force.

We do not know what that needs assessment will be or what that fair funding review will look like for Waveney. We would know more if the Minister and his officials had got around to publishing the 400-plus responses to last year’s consultation document, which may include a contribution from Waveney District Council. However, he has not published the responses, so we do not know what the council thinks of it. All we know from the papers we have seen from Waveney District Council is that it is extremely concerned about the financial position it faces. In its report on the budget and council tax for 2016-17 on 24 February 2016—it was looking ahead—it said there is

“potential to create an extremely serious financial position for the Council, with genuine issues regarding the Council’s financial viability and ability to set a balanced budget”.

The council is worried about its very serious financial position, its financial viability and its ability to set a balanced budget as early as 2018-19. It said that reductions to revenue support grant

“are now much larger and faster than previously forecast”.

Revealingly, it added that

“the Council is not well placed to generate additional localised funding from council tax and business rates–there is very limited potential for growth in the medium term to offset these huge reductions”

in revenue support grant and new homes bonus.

In the new Jerusalem of the hon. Member for North Swindon, everything will be all right in his constituency, but we know from those at the sharp end in Waveney that the situation will be much tougher. The hon. Member for Waveney does a very good job fighting for his constituents—not that a Labour Member of Parliament would not do it ever better, but in the meantime he does a good job. I gently suggest that he might relish the ongoing opportunity to question Ministers on the Floor of the House, either on the fact that a local government finance settlement and report is still to be approved by the House of Commons, or that a principles of allocation statement—the device that Ministers want in the new world—is yet to be approved by the House. He can challenge the Minister or the Secretary of State to think about the problem facing his constituents.

I always support the rights of Back Benchers, so I will give way to the Minister’s Back-Bench colleague before giving way to him.

I thank the hon. Gentleman for his caring contribution. He very much supports the need for a radical reform of the fair funding formula to address the concerns of councils such as Waveney.

I am always up for things that are radical and transformative, but I like to see the detail before I decide whether they are radical or transformative in a positive way. The hon. Member for Thirsk and Malton, of whom I am very fond—I am always keen to promote him to his Whips—made a series of interventions about the case for rural authorities in north Yorkshire. I gently suggest that his contributions were, sadly, slightly less impressive than those of the hon. Member for Waveney. The hon. Member for Thirsk and Malton sought to bash London at every opportunity, which I would gently suggest is par for the course for him.

I will give way in just a second to the hon. Gentleman. In his contributions to date—he might be about to recover the situation—he failed to mention any assessment of need in London, or indeed in any authority outside the particular ones in north Yorkshire that I suspect he cares about.

I am grateful for the hon. Gentleman’s kind comments, which of course are reciprocated.

The hon. Gentleman misquoted me. In my remarks to him, I talked about the differential between Harrow and North Yorkshire—it is £80 more spending per person, per year, despite the income and age demographics. He has a younger and richer population in Harrow. I am not saying that those are the only demographics and the only cost drivers that we need to look at, but the key is fairness. Would he support a system that is fairer and that truly reflects the cost drivers in Waveney, North Yorkshire and Harrow, even if that disadvantages his local area?

Of course I would support a fairer system. I think of the ways in which the system is not fair in relation Harrow council’s finances—£80 million plus of cuts in the last four years. I wonder how that is fair.

The exchange that the hon. Gentleman and I have had about fairness is an entirely reasonable debate. I simply think it should be had on the Floor of the House on an annual basis on the local government finance settlement.

I will give way to the Minister. I have not forgotten him. I am trying to but not succeeding.

We should have that debate on fairness in local government finance, and on how spending power is allocated across local authority areas, on a regular basis, and ideally on an annual basis, when we debate the local government finance settlement. I cannot understand why it should be abolished before the new system comes in. When there is a principles of allocation statement or an amending statement, surely that should provide the hook for a debate on the Floor of the House of Commons about fairness and a series of other issues related to local government finance.

I will give way to the Minister before I come back to Suffolk, which I know will be of interest to the hon. Member for Waveney.

With his usual charm and wit, the hon. Gentleman decided to go off on a tangent and talk about coffee rather than answer my earlier question. He still seems to want to back two horses. Does he want an annual vote, or does he want a vote to set the principles at the start? His amendment says one thing, but he seems to be speaking another language at the same time. What does he actually want?

Given the sorry state of local government finance, I would be up for a debate every three months if it was going to lead to action on social care.

The point of the amendments, a couple of which are probing amendments, is to explore the issue of scrutiny by the House of Commons. The Minister—let me be generous to him for a second—in responding to an intervention by the Chair of the Communities and Local Government Committee on Second Reading appeared to hint that he might be willing to look at this question. I gently encourage him to do so.

There is a long tradition of Members of Parliament raising the concerns of their local authorities, be they North Yorkshire, Thurrock, Torbay or wherever, on the Floor of the House when we debate the local government finance settlement. I hope the Minister has some respect for local authorities and for the role that this great House plays in helping local government to ensure that there is a regular opportunity for scrutiny of local government finance.

I was dwelling on the authorities of the hon. Member for Waveney as part of the case for such ongoing scrutiny. If the situation in Waveney is bad—this time last year, Waveney was extremely worried about its ability to survive and prosper—the situation for Suffolk is surely as dramatic. The local government finance settlement for Suffolk suggested that it was set to lose more than £73 million in revenue support grant between 2015-16 and 2019-20, and that it was gaining only just over £9.3 million under the system of 50% devolution of business rates.

Suffolk County Council will clearly recognise that more responsibilities are coming its way in the brave new world of 100% business rates devolution. I suspect it will be sceptical that it, like Waveney, can generate significant additional business rates income. If it is getting only £9.3 million under 50% business rates devolution, it seems unlikely that it will be able to get anywhere close to the £73 million in revenue support grant that it has lost or is going to lose by the end of this Parliament.

Let us take an extract from the January 2017 cabinet meeting of Suffolk County Council on 24 January, where that Conservative council says:

“The Council should be under no illusion that the future financial outlook continues to be extremely challenging and deep ‘cuts’ to services will be required to remain viable even with a future general council tax increase.”

Among its proposals were cuts to libraries and archive services; culture, heritage and sport facilities in Suffolk; children and young people’s services; the travel support budget for children and young people; help for local schools with their budgets; public health; and housing. That is the scale of financial difficulty Suffolk County Council faces.

I have a suggestion for the hon. Member for Waveney, who I know will be as concerned about the financial situation facing Suffolk County Council as he is about the one facing Waveney District Council. His leverage as a Member of Parliament will be weakened if Parliament does not have to approve the principles of allocation statement. If there is not an opportunity on the Floor of the House of Commons for a debate, he might be able to persuade Mr Speaker to grant a Back-Bench debate on the finances for Waveney or Suffolk councils or both. He might be able to persuade Opposition Members to come together to look at the local government finances facing the east of England for a Back-Bench debate. He might even be able, if he whispers in my ear, to persuade the Opposition on occasion to use one of our Supply days for a debate on local government finance. Those are all good things in their own right. However, his leverage as a Member of Parliament for his two authorities will be weakened by the provisions in the Bill and the loss of parliamentary accountability envisaged in it. I gently suggest to him that that is surely negative and that he might want to use his considerable influence and charm on the Secretary of State to persuade him to think again.

I want to dwell briefly on another issue linked to parliamentary scrutiny—the mandate for the changes. There was no indication in the Conservative party manifesto. I hope the hon. Member for Torbay has learned the lesson of his experiences of intervening in debates so far—one should read what one’s opponents say before challenging them. I have read the Conservative manifesto—and what a dismal read it was. That is a part of my life that I will not get back. [Interruption.]

I am grateful to you, Mr Gapes, for getting Conservative Members under control again.

I return to the essential point: there was no mandate for what the Minister and the Secretary of State propose. There was no mention of a shift to 100% business rate retention in the 2015 Conservative party manifesto. There has been no Green Paper and no White Paper about the changes. There has, of course, been a great session of the Select Committee on Communities and Local Government, of which the hon. Member for Thirsk and Malton is an excellent member, but the only commitment I could see in the manifesto was to a pilot scheme for allowing councils to keep a higher proportion of business rates in Cambridgeshire, Greater Manchester and Cheshire.

The hon. Gentleman is in danger of suffering from the same disease as the hon. Member for Torbay, and of repeating his question. Of course I am in favour of the principle of 100% business rate devolution. Indeed, we had it in our manifesto as part of a much bigger package of devolution than anything envisaged by the Conservative party. Perhaps the hon. Member for Thirsk and Malton, who has a reputation for hard work, would like to dig out a copy of the Labour party manifesto, where he can check the section on local government. I will happily pay for him to have a cup of tea with the hon. Member for Torbay so he can point out to him the passage about the increased spending power that councils would have had if Labour had been in charge.

It is good to be back on the Committee with the hon. Gentleman. I have looked at the Labour party manifesto: there was a significant commitment to devolve additional responsibilities for additional funding, but did the former shadow Chancellor, who lost his seat at the general election, say there would not be a penny piece more for local government if the Labour party were elected?

I am struggling. I thought that I had helped the hon. Member for Torbay not to make that mistake. Hearing the Minister make the same mistake as a Back-Bench Member is too much. A £30 billion increase in revenue spending power for councils was the centrepiece of our manifesto for local authorities, together with an English devolution Bill.

Page 13 of the Conservative party manifesto clearly states that

“we will pilot allowing local councils to retain 100 per cent of growth in business rates”.

Was not the direction of travel clearly expressed in the manifesto?

“We will pilot” is somewhat different from “we will introduce”. One might have thought that the hon. Gentleman’s party would follow up with a Green Paper and a White Paper. Where is the Green Paper? [Interruption.]

Order. Mr Marris, perhaps you could keep the noise down. I cannot hear what Mr Thomas is saying.

I am intrigued that Conservative Members have to check Google to find out what their manifesto commitments were. We are very clear what ours were, and we are very clear that a number of them have been taken on in the Housing and Planning Act 2016 and the Bill. Does my hon. Friend agree that the Labour party’s manifesto commitment was very clear: the local government and health budgets would be brought together, with local government in the driving seat making efficiencies in health to help properly fund adult social care?

My hon. Friend is absolutely right, and not only that but we committed to the fair funding, which the hon. Member for Thirsk and Malton wanted to see. I was trying to move on, before being interrupted by interventions from Conservative Members, to explore one of the other concerns about the way in which business rates retention has worked to date and how it might work over the rest of this Parliament. We would not be able to explore that if the local government finance settlement report did not have to be voted on by the House of Commons.

It has been gently pointed out to me that there is a surplus on the main non-domestic rate account. As we all know, in 2013, the Government changed the system, allowing councils to keep 50% of business rates, with the remaining 50%—crucially—paid into a central Government account: the main non-domestic rate account. Councils then still needed £15 billion in funding from central Government on top of the 50% of business rates that were kept. That was called the revenue support grant. In the first two years of that 50% business rates devolution scheme, the Government’s share of business rates was less than the amount they paid out to councils in revenue support grant. However, in 2015-16, the account moved into surplus.

That growing surplus releases resources for the Treasury to use for other purposes such as reducing corporation tax for Sports Direct or banks, reducing capital gains tax, increasing inheritance tax allowance or other things. In 2015-16, this so-called surplus from the central share alone was some £1.9 billion, rising to £4.2 billion this year as revenue support grant continues to be cut further. Crucially, the surplus will reach more than £10 billion in 2019-20. Here is a major source of income for local authorities that is, in effect, being top-sliced by the Government for a whole series of other purposes when it could be used to fund the spending pressures facing local councils.

According to published accounts, in 2015-16, the Secretary of State debited the account by £12.89 billion but only £9.34 billion of that was used to pay revenue support grant to local councils, leaving a surplus of some £3.5 billion. That surplus will grow by at least £2.4 billion in 2016 and at least a further £2.4 billion in the coming financial year. No decision has yet been made about what that £2.4 billion growth in 2017-18 will be spent on. There is an opportunity for the income generated by business rates to be spent on tackling the biggest crisis facing local government spending at the moment: social care. We will have fewer opportunities to debate that if the Minister has his way and parliamentary scrutiny is dramatically rejected.

If that were not reason enough for Conservative Members to be further convinced of the case for change, it is worth pointing out that in the autumn statement and spending review in 2015 the then Chancellor of the Exchequer, before he was sacked for incompetence by the current Prime Minister, cut the funding for local government from central Government for a further five years. He also introduced a series of new reliefs. There was no consultation with local government on the cut in revenue support grant or on the impact on business rates income of introducing those new reliefs, even though both would have a significant impact. We had an opportunity to debate those measures, and seized that opportunity, in terms of the local government finance settlement at the time, but they indicate the way in which the Treasury and the Executive more generally can interfere with local government finance—sometimes for the best of reasons, but nevertheless with a significant impact on local government finance. Surely there is, therefore, a need for ongoing scrutiny.

The hilarity that the hon. Gentleman has been causing has certainly kept me awake all the way through the last hour and 10 minutes. To help my hon. Friend the Member for Thirsk and Malton, I point out that he can find the Labour party manifesto in the fiction section of the House of Commons Library. The point that I wished to intervene on is this. The hon. Member for Harrow West has just criticised the previous Chancellor’s decision on business rate reliefs. He said that that was not consulted on. Will he tell me which one of those reliefs he opposed the introduction of?

My point was not about whether one opposes particular reliefs, but about the impact on local government finance. There is a consequential impact for local government, which we are debating today—a consequential impact on the finances of the hon. Gentleman’s local authority, my local authority and, indeed, the local authorities of all members of the Committee—and surely those consequential changes need to be considered. My point is that, under the Minister’s proposals, which I suspect the hon. Gentleman has been told he has to support, come what may—that is the reason he has the privilege of serving on the Committee and being mentored by Opposition Members—parliamentary scrutiny is being weakened in relation to local government finance. There may well be further justification for further reliefs to business, or for further public services to benefit from reliefs. We will seek to explore that later. However, there should be an ongoing opportunity to explore the consequential impacts of decisions that the Chancellor or other parts of the Executive might make on local councils’ finances.

Does my hon. Friend agree that it is right, as the Bill provides, that before making a principles of allocation statement, the Secretary of State will have to consult representatives of local government? That is good, but the Secretary of State will not have to consult or be answerable or accountable to Members of Parliament on the principles of allocation statement, so one thing is being done right and the other is being done completely wrong. The amendments would rectify that imbalance.

My hon. Friend makes a very good point and one that I realise I have not dwelled on until now. Of course he is right to say that local government leaders and their councils should be properly consulted, but one suspects from the contributions that we sometimes see in private from Conservative-led local authorities that they sometimes look to the Opposition to make their case more vigorously in public than they feel they can make it to their own Ministers, and that opportunity will be reduced if there is not similarly a requirement to be answerable to Members of Parliament.

I will offer up to the Committee one further example of a very significant change to local government finance. If something like this were done in the future, we might not have the opportunity fully to explore the consequences. I am referring to the decision by the then Chancellor to switch the indicator, in terms of business rates going up or not, from the retail prices index to the consumer prices index. That is likely to have a significant impact on local government finance. In the 2016 Budget, Ministers suggested that it would reduce business rates income by £370 million in 2020-21. In 2020-21, under the Minister’s plans, there will not necessarily be an opportunity for a debate on the Floor of the House on the principles of allocation statement or the local government finance settlement report, to see what the consequences of that change are in that year for local government finance.

And that is just one year. Each year, that reduction in income generated by business rates for local authorities will continue. Over a decade, it is estimated that councils will lose over £3 billion. That is a £3 billion benefit to business, and there is a debate to be had outside this Committee on whether that is the right support to give to business. In the context of this debate, there must be an issue as to whether it is the right choice for local government finance and the public services such as social care that are being provided.

How will Nuneaton, Warwickshire, Waveney, Suffolk, Torbay or North Yorkshire be able to provide public services if they are seeing their authorities hit by their share of that £3 billion cut in capital funding? Sadly, there was no consultation with local authorities about that switch from RPI to CPI. I want to dwell on that issue a little more as part of the clause 5 stand part debate, which I hope we will get on to soon.

Shortly. But it is another example of the way in which the Executive can make significant changes that may have substantial merit in their own right in terms of the support they give to business—one could think of other such examples—but which nevertheless have a significant impact on local government finance. Surely it is the responsibility of this House to think about local government finance in detail and about all the complexities that are envisaged, and to worry about what those might mean in future. Amendments 24, 25 and 26 stand in my name. Two of those are, I suspect, amendments that we will continue to regard as probing amendments, but the principle of scrutiny by the House of Commons is something that we on the Labour Benches take extremely seriously.

It was remiss of me not to provide members of the Committee with the opportunity to reflect a little further on one of my favourite areas of the country: Allerdale in the Lake district and the local authority there. After the post-tariff top-up was introduced, it benefited from just £3.64 million in 2013-14 under business rate retention. That went up slightly to £4.91 million in 2014-15. Then it went down to £4.63 million in 2015-16 and by 2016 it had gone up slightly again, to £4.7 million. That is not very much business rates income under the 50% scheme. One assumes that it will get a little more income under 100% business rates retention.

The council is surrounded by agricultural land, which is not rated in business rate terms, and has significant natural barriers to further economic growth—I am thinking of the wonderful lakes of Derwentwater, for example, and the wonderful mountains of Skiddaw. The council faces natural barriers to economic growth, with which the hon. Member for Waveney will sympathise. Surely we have a responsibility—even though we represent other authorities as individual Members of Parliament—to think about the impact on authorities such as Allerdale, whose financial means might otherwise be forgotten if there is not the ongoing opportunity for parliamentary scrutiny.

It would be even more remiss of me if I did not dwell briefly on the situation facing my local authority. In 2013-14 it was fortunate to retain some £34.88 million in business rates. That went up slightly to just over £35 million in 2014-15 and to almost £36 million in 2015-16, but sadly it drops to £34.5 million this financial year. Members might expect me to fight my local authority’s corner, and of course I do. They might also expect the hon. Member for Harrow East (Bob Blackman) to fight its corner, although he seems to spend more time fighting the local authority in Harrow.

I thank the hon. Gentleman for his generosity in giving way. He seems to be criticising my hon. Friend the Member for Harrow East (Bob Blackman). Does he not know that during the settlement process this year, my hon. Friend brought in a finance officer from Harrow Council to discuss its settlement with me? I have not seen any evidence of the hon. Gentleman doing that.

I was not going to criticise the hon. Member for Harrow East (Bob Blackman), although the Minister almost provokes me to do so; I was merely suggesting that he might not want to criticise Harrow Council quite so much. I welcome the fact that he brought in the finance officer from Harrow Council. Indeed, I knew about that, and suggested that if I came along too I might upset the Minister inadvertently, so it was probably best for the finance officer to go in with just the hon. Gentleman. I deliberately stood back so as to try to ensure—[Interruption.]

Order. I know we have all had relatively little sleep after a late night. Nevertheless, I would be grateful if we could calm down. It will not be long before we adjourn the sitting, but I would like to make a little bit of progress. Mr Thomas, are you coming to the end of your remarks?

I am getting closer, Mr Gapes. I thought the Minister’s intervention did not do him justice. I fight for my local authority and I respect the contribution of the hon. Member for Harrow East, although I try to guide him to make better defences of the local authority. I hope that the Minister listened carefully and will act on what the finance officer from Harrow Council said.

Sadly, one thing we have not touched on thus far is bus services—a small issue in the context of the state of local government finance, but it matters—and there will be even less scope to debate it if our amendments are not accepted. You may not know this, Mr Gapes, as, like me, you are a London Member of Parliament—we are lucky to be north London Members of Parliament in particular—but around the country, local authorities that have direct responsibility for bus services say that those services face substantial cuts. That is a concern. There is obviously scope for that to be debated in part at Department for Transport questions, but given that those services are financed by local government, surely that should be part of the issues relating to local government finance considered by the House regularly.

The Campaign for Better Transport says that reductions in local authority funding have already resulted in thousands of bus services being reduced or cancelled in recent years. According to its research, people in Lincolnshire, Derbyshire, Leicestershire, Somerset, Dorset, West Berkshire, Wiltshire, Oxfordshire, Hertfordshire, North Yorkshire and Lancashire will be among the worst affected by the cuts in funding to local authorities—cuts that they will have to pass on to bus services. Surely that is an issue that Members of Parliament want to debate. Certainly, Opposition Members regularly seek to raise it through Adjournment debates or in questions, but it is surely part of the broader picture of local government finance and should be considered properly.

The hon. Gentleman said earlier that I was trying to stand up for rural areas as against urban areas, but that is not the case. The biggest disparity is between London and the rest of the country. He talks about transport in London, but we need only walk outside to see buses, trains and trams galore. The top 10 authorities for spending power per head—including Camden, Kensington and Chelsea, Islington, Hackney, Tower Hamlets, Southwark, Hammersmith and Fulham, and Lambeth—all have about £400 more per person per year than North Yorkshire and many other places. The lowest-spending authority in the country is York, an urban area. The disparity is between London’s spending power and that of the rest of the country. That is what needs to be dealt with, and that will also be reflected in our ability to provide decent bus services in rural areas.

Over the course of our proceedings, I have been gently suggesting to the hon. Gentleman the need for a proper fair funding review—I strongly support that—but he is a little misguided in his assessment of the level of need in London. It is not an issue of rural and urban outside London against London—that would be a huge mistake to make—but an issue of the quantum of local government finance, and spending power being savagely reduced by the party of which he is a member, in the misguided belief that that will somehow lead to a substantial reduction in the national debt. We know how that played out: the previous Chancellor of the Exchequer got sacked.

I therefore gently suggest to the hon. Member for Thirsk and Malton that if he has been unable to support any amendment of mine up to now, and cannot be tempted—although I hope he will be—to put pressure on the Minister to give way on the issue of ongoing levels of parliamentary scrutiny, he might want to consider the matter of when the Bill should come into law. Should it do so when we know the details of the fair funding review and of the regulations, and when the Minister finally gets around to publishing the 400-plus responses to the consultation document? Should the Bill not take effect at that point, instead of in this financial year?

The hon. Gentleman’s point about the distribution is absolutely right. I support a review of the funding formulae that will be introduced before the Bill takes effect in 2020. His point about quantum was interesting, but to increase quantum he has to do one of two things: take spending power from elsewhere in the economy, from other Departments; or raise taxes. Which one would it be? Will he specify which one of those two things he would do, or which Departments he would remove funding from?

The hon. Gentleman, in his usually charming way, is tempting me down a path that will get me into a lot of trouble with the shadow Chancellor. [Interruption.] “Be brave!” say Conservative Members, and I am, but nevertheless I will not use the Committee to announce future Labour party policy. It would feel like a missed opportunity if only a few party members were present to hear about the new direction that Labour will take when it returns to government.

I find it ridiculous of Conservative Members to suggest that a tax bombshell is waiting, when we know that the only one being suggested is the council tax bombshell—a 25% increase throughout the country. That is the only tax bombshell being discussed, although not at anywhere near the level of detail that is justified. Does my hon. Friend agree that we need to see the funding formula in the round before making a decision on the Bill?

I do agree. I have described the changes as a triptych. One normally thinks of triptychs in connection with great works of art, and I suppose the hon. Member for Thirsk and Malton, who believes that the Bill will be a radical transformation of local government, might be tempted to see it as one, but we know that that is a long way from the truth. The Bill is only one relatively small part of the package; the needs assessment and the fair funding review will have to be done before we truly know the impact of 100% business rates retention and whether it is in the interest of all local authorities, as Conservative Members claim.

On the quantum of local government finance, I gently point out to the hon. Gentleman that Unison research shows that there is a surplus in the main non-domestic account for business rates that could be used to fund an increase in social care, if Ministers so chose. If my amendments are not agreed to, we risk having fewer opportunities to debate the quantum of local government finance, the question of how it is allocated and the consequences for the public services that local authorities throughout England are allowed to offer.

I am beginning to contemplate the conclusion of my remarks, but let me first dwell on delayed transfers of care. If my amendments are not agreed to, there will be fewer opportunities for the House of Commons to consider those, too. I have some sympathy—not a lot, but some—with the Prime Minister’s point that the speed and quality of transfers of people from hospital back to a social care setting varies among local authorities and clinical commissioning groups. I do not want to explore that issue in detail, because that would be outwith the purview of the debate, but when Hampshire County Council, a Conservative-led local authority, is responsible for the highest number of delayed transfers of care—more than 8,000 in November alone—I have to wonder whether there is a problem with its funding. I do not represent Hampshire, but I recognise that as Members of Parliament we have a responsibility to think about the fortunes of people in England, not just in our areas but in others, and I worry about what that statistic says about the state of local government finance in Hampshire. Whenever there is a change in local government finance, there should be a regular opportunity for Members of Parliament to explore the situation, not just for each of our authorities, but for others throughout the land.

If Hampshire does not inspire concern among Conservative Members, what about Essex County Council, which had 5,684 delayed transfers of care in last November alone? In Northamptonshire, which at least one hon. Member may have some interest in, there were more than 5,400 delayed transfers of care in November; again, that suggests some difficulties with the authority’s social care funding. Surely it is our responsibility as Members of Parliament not just to focus on the authorities that we represent—on Harrow or Oldham—but to think about the citizens of Northamptonshire, and to worry and ask questions about what their local authorities’ finances look like.

In Kent, there were 4,884 delayed transfers of care—the sixth highest number in the country—in November alone. What does that say about the state of Kent County Council’s finances? Much of that wonderful county is taken up with agricultural land, so in the brave new world of 100% business rates retention, there are likely to be fewer opportunities for business rates growth there than in other areas. Again, those of us who can think strategically should be worried about the situation that Kent County Council faces. I offer those four examples of delayed transfers of care as a reason for concern, and I look forward to the Minister’s explanation of why local government finances should not be debated regularly on the Floor of the House and why the Secretary of State should not have to answer for what he plans to do.

I end, perhaps, with this reference—it is a tribute, I suppose—to the hon. Member for Thirsk and Malton. In the evidence session last Tuesday afternoon, he teased out this quote from Sean Nolan, the director of local government at the Chartered Institute of Public Finance and Accountancy:

“The Government—and, I suppose, Parliament—have an opportunity to eventually look at what will be, in their timetable, a complete review of needs.”––[Official Report, Local Government Finance Public Bill Committee, 31 January 2017; c. 42, Q77.]

Mr Nolan referenced the fair funding review, too. The fact that he said “and, I suppose” shows that there is doubt in the mind of a key witness about whether Parliament will really have the opportunity, on the Floor of the House, to scrutinise how the new regime will work in practice, and hold the Secretary of State to account for local government finances. In that spirit of concern for scrutiny, and the ongoing responsibility of Members of Parliament to think about the state of finances for public services in not only their areas but others, I ask the Committee to support amendments 24 to 26.

The Bill will provide the framework for a series of reforms to help local government boost local economies and become more self-sufficient and less dependent on Whitehall. This is a move away from a centralised state. The Bill will provide a clear framework in law for multi-year settlements, which will increase funding certainty and ensure that accountability for funding local services with local resources sits with local councils.

These radical changes require a new mindset. Under 100% business rates retention, there will no longer be a local government finance settlement to distribute central grants to support local services; local authorities will become more financially self-sufficient and will fund local services from local resources.

As the Minister knows, there is provision in schedule 1 for an amending statement to be made to the principles of allocation statement. Can he give an example of when such an amending statement might be required?

The hon. Gentleman raises an interesting issue. If the country had the misfortune of another Labour Government—perhaps a discredited Labour Government, such as the one in the 1970s that went with a begging bowl to the International Monetary Fund—and inflation was soaring beyond belief, the Secretary of State might need to make some sort of amending statement to deal with the inflation and allow local authorities additional funding to deal with the mess that the Labour Government had again made. However, we are speculating, because I suspect it may be a little while before the Labour party is once again in a position to form the next Government.

Perhaps we can give the Minister a few seconds to capture his thoughts and reflect on the question. Does he envisage, then, that this power would be used only every 30 to 40 years?

It is not for me to speculate on how often there will be a Labour Government. I do not think that I want to get into that this morning; I want to come back to the amendments and the Bill.

The amendments shift the focus back to Whitehall and Parliament by introducing a need for a resolution in the House of Commons, thereby jeopardising the move to more local accountability. The Government will be required to consult with local government on the principles for allocating funding over a period of years, and we envisage that whenever there is a reset of the business rates system, further consideration will be given to the allocation principles, in consultation with local government. Above all, it is important to provide as much certainty through this consultation as possible.

I am confused about the proposals, because on several occasions the hon. Member for Harrow West on the Opposition Front Bench has talked about a system of an annual vote, and about a vote at the start of the process to set the principles. He cannot have both things, but he seems to want to have his cake and eat it. I am worried that he is trying to undermine the principles of what the Government are trying to achieve.

The Minister, who I believe is moving towards suggesting that the amendment should not be accepted, just prayed in aid the consultation with local government representatives. On page 33 of the Bill, proposed new sub-paragraph (2) in schedule 1(12)(4) says:

“Before making a principles of allocation statement, the Secretary of State must consult such representatives of local government as the Secretary of State thinks fit about the general nature of the principles of allocation.”

The Secretary of State could deem two local government representatives fit under that provision. Can the Minister say a little more about how wide the consultation would be? Would it be wider than my extreme example of two, which the Bill would allow?

The hon. Gentleman’s example was rather extreme. I would envisage that we would properly consult local government in its entirety.

Why does the Minister think that the principles of allocation statement should not be approved by the House of Commons?

The point I was making to the hon. Gentleman is that I am rather confused about what he is looking for here. He has argued against the proposal he makes here and in favour of an annual vote in Parliament on this. There is very little clarity in his argument and, therefore, in what he is seeking to achieve by tabling this amendment, which seeks to undermine the principles of the Bill.

I hope in my closing remarks to deal with the fog of confusion that surrounds the Minister. It is the job of Opposition Members to ask questions of Ministers about the Bills they are bringing forward. The Minister needs to give us a justification for why the principles of allocation statement should not be approved by the House of Commons.

I have spent some time in my contribution explaining that. It is always good to hear the hon. Gentleman speak from a sedentary position, like the archetypal school bully, but I will not take that to heart. I would never think he would do anything other than try to improve the discourse in the Committee.

The hon. Gentleman mentions from a sedentary position tough love. With regard to his proposals, his version of tough love seems to be very confused. The point I am making, and the reason I urge him not to press the amendments, is that there needs to be far more clarity about what he is looking to achieve. What he suggests at the moment, particularly on having an annual vote—or not, as the case may be—seems to very much undermine the principles behind the amendments, so I ask him not to press them.

It is a pleasure to serve under your chairmanship, Mr Gapes. I will be quite brief, as I recognise that we are pushed for time in the morning sitting and that a vote will take place.

My hon. Friend the shadow Minister will want to reply to that very brief response from the Minister, which I struggled with. My hon. Friend explained at length the concerns we have and probed in great detail about where we are trying to get to, but the Minister could do nothing more than read out a pre-prepared statement from his folder in response. That really lacks respect for this Committee and for the amount of work and dedication that has gone into probing these provisions. I ask the Minister to reflect, before this afternoon, on whether he is happy with his performance this morning and to think about the great deal of weight and responsibility that his post carries.

It is not good enough just to dismiss the legitimate concerns raised here and bat them away as if they are not important. We are talking about the future financing of vital public services that our communities rely on. The amendments have not been tabled for the sake of it or to cause trouble and make waves; they are here because we are seeking certainty about the future sustainability of public services. For the Minister’s response to be five minutes—certainly less than 10 minutes—is quite disrespectful, and not only to us. He can be disrespectful to the Opposition—that is part of the Punch and Judy of politics—but to be disrespectful to the millions of people who live in this country and rely on those services is quite unforgiveable.

I would like a bit more clarity on what this provision means. We heard from the Minister in the evidence session that an additional £12.5 billion will be provided through business rates to local authority services, but no detail was provided on what grants would be taken away in lieu of that or what additional responsibilities will be pushed down. We still do not have clarity on whether mandatory relief and small business rate relief will be net of that figure. The Minister was at best confused and vague in his evidence.

Let me run through the numbers to clarify how big the gap could be depending on the financial review that is carried out. We know from the evidence session and the paper that the fantastic team at the Library have produced that the Government will release £12.5 billion, but they have not said whether the revenue support grant, the rural services delivery grant, the public health grant, the improved better care fund, the independent living fund or the early years grant will be included. They have excluded the Greater London Authority transport grant from those numbers. If we were to roll up those grants and expect them to be covered by the £4.5 million, we would have a gap, because their total cost is £14.7 billion. Can we have clarity on whether the £12.5 billion is new money? Is money going to be taken away that is provided to local authorities through grant support at the moment?

Order. I am conscious that we are in danger of going wider than the specific amendments under consideration. I would be grateful if the hon. Gentleman would bear that in mind. As he said, we have limited time.

Order. It is not a matter for argument with me. It is a matter for sticking to the terms of the amendment that we are considering at this moment. There will be other opportunities to make those points.

Okay. My contribution is about parliamentary scrutiny and the role of MPs, both Opposition and Conservative Back Benchers, representing their local areas in Parliament. The reason the annual statement has to come to Parliament is so that we can ask these probing questions. However, before we get there, a decision will be made on which of these grants will or will not be included. As far as I can see, there is potential for there to be a very significant funding gap. More than that, we know that the adult social care gap is £3.5 billion. We also know that, despite a 25% increase profiled for council tax, that will generate only £1.8 billion.

There is concern about the grants that have been provided and whether the £12.5 billion will be enough. There is also concern about the £3.5 billion social care funding gap and the £1.8 billion profiled council tax increase. Those questions, which I accept are detailed, are critical and the reason these amendments are so important. For a Back Bencher, this is their only opportunity to have the debate and, more important, to have a vote on the day. The vote says to their constituents that they have represented their interests in Parliament. If the amendment is not accepted, that ability will be taken away from MPs.

Again, the hon. Gentleman is seeking an annual vote of the House. Does he not think that an annual vote would completely undermine the principles of what we are trying to achieve here, which is certainty for local government over a longer period? This is something that local government itself has wanted for some time and something that 97% of local authorities have signed up to during this spending review period.

I thank the Minister for his intervention and for showing that in some ways he may have a slightly better grasp of his brief than I thought. However, 97% of local authorities have submitted their multi-year financial settlement. The Minister has still not confirmed how many of those local authorities have identified a funding deficit. It is all very well saying that local authorities have submitted the plan. What we have not had is the detail of how many are in deficit and will not be able to fund statutory services over the life of that multi-year settlement. That is why the annual scrutiny of public finances in local government is really important.

We do not yet know what the safety net arrangements will be. If there is an in-year shock to the business rate base, how will we know that that will be rectified in the formula that is being assessed? How will we know that any new formula will take into account the very different geographies and demographics in our areas? It may need to be rectified mid-year. That would be picked up in an annual review.

I accept the Minister’s point that the question of a vote on an annual basis may raise some uncertainty for local government, but it has coped with that for decades. Is there not an issue about the uncertainty for local government from new decisions that the Treasury may make on, say, small business rate relief? I think of the Budget measure that the previous Chancellor introduced to extend business rate relief to smaller businesses and shops, which took £7 billion out of the total business rate taken in. Arguably, that had more impact on local government finances than any tiny uncertainty about a vote in the House of Commons.

That is absolutely right and I fully concur with it. I intend to wrap up now so the shadow Minister can respond more fully and we can hopefully move to a vote.

Think about where politics is not just in this country but in the world. People are fed up of having things done to them and being told that their lot is what it is, and that they have no voice. Parliament’s very important function is to give people a voice. When people talked about getting back control, they did not mean taking power from Brussels and giving it to junior Ministers; they meant that their elected representatives should have a voice in Parliament and real power. For the Minister and the Government to introduce 56 new powers on top of local government and take away the role of Parliament is absolutely unacceptable in today’s political climate.

It is a pleasure to have the chance to summarise the debate so far. I indicated in the middle of my remarks that at least a couple of these amendments are probing amendments. At this stage, I do not intend to press amendments 24 and 25 to a vote. I will come to amendment 26 in a second.

I gently suggest that the Minister needs to reflect a little more on this debate and the question of the accountability of the House of Commons. In his response, he did not justify taking away the requirement for the House of Commons to approve the principles of allocation statement and the amending statement, although he made a perfectly fair debating point about whether it should take place annually.

The broad thrust of my remarks was to challenge the notion that Parliament should not have to approve the principles of allocation statement and any amending statement. We will want to return to that on Report. The Minister hinted on Second Reading that he might take seriously the concern of the Chair of the Communities and Local Government Committee about the reduction in scrutiny of local government finance. When the Minister’s feeling that he has been subjected to tough love on this Committee has subsided, I hope he will reflect more positively on the case for parliamentary scrutiny. He may not be able to see it at the moment, riding high as he is in the Department for Communities and Local Government, but things do come around and Governments do change colour. Perhaps he will still be a Member of Parliament in those circumstances, and perhaps the people of Nuneaton and Warwickshire will wonder why he is not doing more to raise questions about the financing of their local public services on the Floor of the House of Commons. The measure that he is locking into the Bill risks denying him an opportunity to give his constituents satisfaction in future.

I take the point that an annual vote on local government might inject an element of uncertainty into the proceedings, but the brutal truth is that parliamentary arithmetic normally allows the Government to get their way, so that element of uncertainty is rather overstated. In that context, I gently say to the Committee that, at a suitable time, I intend to press amendment 26 to a vote, because parliamentary scrutiny is so important. I hope the Minister reflects further on the fact that Conservative Members will table amendments on Report. The issue of parliamentary scrutiny no longer seeks to divide Members on both sides of the House, committed as we all are to the principles of the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.

Local Government Finance Bill (Sixth sitting)

The Committee consisted of the following Members:

Chairs: † Sir David Amess Mike Gapes

† Aldous, Peter (Waveney) (Con)

† Double, Steve (St Austell and Newquay) (Con)

† Doyle-Price, Jackie (Thurrock) (Con)

† Efford, Clive (Eltham) (Lab)

† Foster, Kevin (Torbay) (Con)

† Foxcroft, Vicky (Lewisham, Deptford) (Lab)

† Hollinrake, Kevin (Thirsk and Malton) (Con)

† Jones, Mr Marcus (Parliamentary Under-Secretary of State for Communities and Local Government)

† McMahon, Jim (Oldham West and Royton) (Lab)

† Mackintosh, David (Northampton South) (Con)

† Marris, Rob (Wolverhampton South West) (Lab)

† Pow, Rebecca (Taunton Deane) (Con)

† Thomas, Mr Gareth (Harrow West) (Lab/Co-op)

† Tomlinson, Justin (North Swindon) (Con)

† Turley, Anna (Redcar) (Lab/Co-op)

† Warburton, David (Somerton and Frome) (Con)

Colin Lee, Katy Stout, Committee Clerks

† attended the Committee

Public Bill Committee

Tuesday 7 February 2017


[Sir David Amess in the Chair]

Local Government Finance Bill

Schedule 1

Local retention of non-domestic rates

I beg to move amendment 31, in schedule 1, page 33, line 31, at end insert—

“(3B) After sub-paragraph (2) insert—

(2A) As soon as is reasonably practicable after calculating the payments to be made or received under sub-paragraph (2), the Secretary of State must assess whether each local authority has sufficient resources to provide all statutory services in its area for the relevant year.

(2B) The assessment under subsection (2A) must be published in a report and the Secretary of State must lay it before Parliament.”

This amendment would require the Secretary of State to assess whether each local authority has sufficient resources to provide all statutory services in its area.

It is genuinely lovely to have you in the Chair, Sir David. This is no shame on Mr Gapes, but his presence in the Chair sadly did not inspire a series of helpful statements from the Minister. You missed three speeches from Conservative Members, including an excellent speech from the hon. Member for North Swindon, who gave away far more detail about the ideology behind the Bill than the Minister was willing to give. There were some very interesting interventions by the hon. Member for Thirsk and Malton, who will be very interested in hearing the case for amendment 31, which I am about to set out.

Order. It is very kind for the hon. Gentleman to give me a resume of what happened this morning, but it is not necessary, so I ask him please to speak to the amendment.

I am always grateful for your guidance, Sir David, but you intervened on me just as I had finished giving a very helpful resume of this morning’s debate.

I am delighted to have the opportunity to speak to amendment 31, which is in my name and that of my hon. Friend the Member for Oldham West and Royton. It would require the Secretary of State to assess whether each local authority has sufficient resources to provide all statutory services in its area. The explanatory notes state:

“These reforms to the local government finance system will move local authorities away from dependency on central government grant and towards greater self-sufficiency.”

Which side of the divide one sits depends on the extent to which one believes that statement.

A local authority may be able to reduce its business rates multiplier to encourage economic growth, or it may be incentivised to permit new business development, but there is no direct relationship between that and the number of people who need social care or who have been made homeless. A unitary authority at least has responsibility for both local taxation collection and service delivery, but the situation is more complex in areas with two tiers of local government, where one authority collects taxes and another provides some statutory services. I am sure we will return to the mechanism for enabling a billing authority and a presenting authority to consult as we debate the Bill. I want to concentrate on funding for statutory services and whether there is a full and proper assessment of the case for statutory provision at a local level.

We will reach 100% business rates retention in, I understand, April 2019, the revenue support grant and other grants will be phased out and additional responsibilities will be passed down to local government. The Minister tells us that the change will be fiscally neutral. What Ministers have not yet told us is what they envisage happening if local authority revenues diverge significantly from the funding needed to provide statutory services. As the hon. Member for Thirsk and Malton pointed out a number of times—or it might have been the hon. Member for coastal erosion or Waveney—the Government are conducting a fair funding review, but will set the needs baseline only at the point of transition from the current business rates system to the new 100% retention system. One might ask what happens if the overall funding in the system fails to keep pace with the cost of providing services.

It is worth paying close attention to the Government’s record on that point. The cross-party Local Government Association has calculated that local government faces a £5.8 billion funding gap by 2020. Local authorities have statutory obligations to provide several services. As we have said several times, we support the principle of 100% business rates retention, but we want an honest assessment of the implications for councils’ finances and their ability to continue to deliver the services they are obliged to provide.

I stress again that there is no inherent or causal link between a council’s ability to encourage local growth and boost its business rates revenue, and local demand for key services. The hon. Member for North Swindon said that the economic incentives in the Bill would cause a huge surge in business rates income. People who are perhaps more expert than him—there are clearly not that many—worry about whether his optimism is as justified as he might hope.

We heard before lunch that Ministers in Whitehall will retain huge power over the resources available to local authorities but are determined to face less scrutiny in Parliament. There are some 56 new powers in the Bill for the Secretary of State, the Treasury or some other bit of Whitehall to interfere with local government finances. Amendment 31 would place just one additional duty on the Secretary of State—a duty to assess whether each local authority has sufficient resources to provide all statutory services. You are a diligent Member of the House, Sir David, so you will be well aware of the crisis in adult social care, which is perhaps the most visible example of the funding pressures facing local authorities and, in terms of statutory services, the most pressing justification for amendment 31.

Just this weekend, Councillor David Coppinger, who is the cabinet member for adult services and health in the Prime Minister’s local authority, the Royal Borough of Windsor and Maidenhead, and Councillor Simon Dudley, the leader of that council, added their voices to the clamour for a solution to the adult social care crisis. Perhaps they were encouraged to speak out by my amendment 31. Councillor Dudley told The Observer:

“The burden is increasing disproportionately over time against a backdrop of more required efficiencies from local authorities. You see that with situations like Surrey”.

I remind hon. Members that Surrey wants to put up its council tax by 15% purely to pay for social care. [Hon. Members: “No it doesn’t!”] Well, it certainly did last week. Councillor Dudley went on to say that Surrey

“simply can’t achieve that, and there will be others. I have absolutely no doubts at all. Other local authorities will find themselves in the same situation as Surrey over the coming years.”

The situation as of today is that Surrey will not have a referendum on a 15% council tax increase. I understand that that is not because it assesses the need as any less but for other reasons. However, my hon. Friend’s fundamental point about social care funding is absolutely critical and needs addressing.

I am grateful to my hon. Friend for making that clear. It will be interesting to see what pressure was applied to the leader of Surrey County Council. He obviously has a close relationship with the Chancellor of the Exchequer, who is one of his Members of Parliament, and it will be interesting to see whether that had anything to do with that volte-face. My hon. Friend may not know this, but Surrey has the great advantage of having one Labour councillor. There is only one at the moment, but I am sure that will change after the elections. His name is Robert Evans. He is a former Member of the European Parliament and was leading the campaign, on behalf of those in Surrey who were only just about managing their finances, against the 15% increase in council tax. I am sure he will be feeling very proud today of the success that he has had in persuading Surrey County Council not to increase council tax and hit those in Surrey who are not so well off.

I will return to Councillor Coppinger of the Royal Borough of Windsor and Maidenhead. He believes that the current funding model for social care is sustainable for only two more years. It is worth remembering that the Prime Minister’s local social care authority is one of the few that has been able to increase spending on social care since 2010 by 5.7% in real terms.

To take another example, Liverpool has been able to increase spending by 6.7% in real terms over the same period. However, the situation there is even worse. Liverpool’s adult social care director, Samih Kalakeche, has tendered his resignation. He said that, as things stand, councils such as his will probably soon be unable to meet their statutory requirements:

“Frankly I can’t see social services surviving after two years. That’s the absolute maximum. If we don’t do something within the next six months, I believe social services will not exist by 2018-19. This isn’t scaremongering, this isn’t me asking you to feel sad for me—whoever is making decisions out there has looked at social care as the Cinderella of the service, which means more and more people are staying at home with high needs because of the removal of the prevention agenda. People are struggling, people are suffering, and we’re really only seeing the tip of the iceberg”.

The Minister may not be sympathetic to the former director of adult social care in Liverpool, but he might be more sympathetic when he considers that the Local Government Association shares similar concerns. He will probably be aware of what Councillor Izzi Seccombe said last month. She is Conservative leader of Warwickshire County Council—I am sure she is well known to the Minister. She is also chair of the LGA community wellbeing board. She said that

“the intentions and the spirit of the 2014 Care Act that aims to help people to live well and independently are in grave danger of falling apart and failing, unless new funding is announced by government for adult social care”.

The leader of the Minister’s own council has set out how grave is the funding for one key statutory service, which is all the more reason to tempt you, Sir David, to agree with the case for amendment 31, albeit you cannot do so given your position.

As far back as 2015, local authority representatives told the King’s Fund that they were struggling to meet their obligations under the Care Act 2014. Just 8% of council directors of adult social care say they are confident they can fulfil their duties under the Act in 2017-18, which is a pretty difficult situation. The LGA is not the sort to scaremonger, but it has been calling for urgent measures to plug a funding gap in social care. It says that £1.3 billion is needed, with the funding gap expected to rise to £2.6 billion by 2020 if nothing changes at all.

A new story seems to emerge every day to illustrate the crisis in social care and to underline the need for the assessment that is at the heart of amendment 31. Yesterday, we learned of the case of Iris Sibley, who was stuck in a hospital ward for six months as a suitable nursing home place could not be found. Mrs Sibley’s son has described how her mental and physical health deteriorated as she was stuck on the ward, well enough to be discharged but with nowhere suitable to go.

One wonders what it would take for Ministers to act. Perhaps amendment 31 might prompt more action, more quickly from Ministers.

You did not have the privilege of being here this morning, Sir David, when I dwelt on the terrible situation that 20 local authorities face with the huge number of delayed transfers of care. Of those 20 worst councils—I use that language advisedly—14 are Conservative-run. Instead of attacking local authorities, as has been happening too much of late, I hope that will prompt the Minister to recognise the seriousness of the crisis. Amendment 31 is needed for the future, but a solution is needed now.

We have all been trying to help the hon. Member for Torbay improve his performances so that he is allowed to move from the back of the Back Benches to be a little closer to the front.

The shadow Minister is his usual generous self, and I thank him for giving way. I can only say that I can guess who my hon. Friend the Member for Shipley (Philip Davies) looks to for inspiration in terms of brevity in making speeches on Fridays. The hon. Gentleman has been referring to social care. Torbay has one of the lowest levels of delayed discharge, despite its demographics. Does he agree that setting up a good quality integrated care organisation is the actual solution, rather than his amendment?

To my great surprise, I am almost in agreement with the hon. Gentleman—there has clearly been a huge improvement as a result of our collective mentoring of him—but I add one reservation to my encouragement. What he suggests makes some sense going forward, but amendment 31 would be a useful addition that would give us the opportunity to understand whether Ministers have properly grasped the social care funding situation for each local authority, whether that is joint or not joint with others.

In making the case for amendment 31, let us move into an area that is particularly topical in the light of the housing White Paper: homelessness services. Clearly, those are key statutory services that local authorities offer. Local authorities have already faced a substantial number of legal challenges on their statutory duties to support the most vulnerable people who are at risk of homelessness. In September last year, 74,630 households were in temporary accommodation, including those in bed and breakfasts. That was the 21st consecutive quarter in which the number of homeless households in temporary accommodation increased. If we factor in the 40% increase over the past four years in the cost of providing temporary accommodation, the LGA—not a body to sound the alarm unnecessarily—estimates that the funding gap for homelessness services will be £192 million by 2020.

I was not able, because I was preparing for this debate, to be in the Chamber to hear the Secretary of State speak, but just from looking briefly at the social media reaction, I did not get the sense that he announced an additional £192 million for homelessness services by 2020. That is a further reason to encourage action after the new system comes in by accepting amendment 31.

Sunderland City Council has already announced that because of the very difficult financial situation it is in, it may have to cut its entire housing support budget, which is used to pay for vital services, such as hostel beds, refuges and supported housing. Services for those who are most at risk of homelessness, including ex-offenders, people with mental health conditions and those with learning difficulties, are also being cut. When we bear in mind that the life expectancy of those sleeping rough is just 47, according to charities in Birmingham, one fears that vulnerable people will die as a direct result of the proposed cuts to housing support services in Birmingham of some £10 million over the next two years. That is an indication of the financial crisis affecting another local authority.

The new duties to be introduced under the Homelessness Reduction Bill, which the Minister prayed in aid last week, are welcomed, but many of us remain sceptical that councils are being adequately funded to fulfil them. On Second Reading, as I recollect from glancing at the debate, quite a few of the interventions raised directly with the Minister concern about the availability of funding. Were amendment 31 on the statute book, Ministers would have less chance of inadvertently not understanding or not recognising financial needs in that area.

There is great concern about the insufficiency of the £48 million of funding that the Minister announced to expand necessary homelessness provision for single men and women. The Association of Housing Advice Services, which is a non-profit organisation, estimates that London’s 32 boroughs alone will face a combined bill of £161 million to implement the new duties.

The full scale of the housing crisis is clearly beyond the scope of the amendment, but I am sure that in our advice surgeries we have all come across incidences of families struggling to find affordable accommodation near their workplaces or children’s schools. It is clear that the funding for the vital role that local authorities play in protecting the most vulnerable and in finding that most basic need, a home, is under severe pressure.

Another key statutory service that should surely be recognised by inclusion of amendment 31 in the Bill is children’s services. Looking after children is one of the most important statutory duties of councils, with a total of £11.1 billion a year spent on un-ring-fenced funding on children’s social care and education services. Again there has been an increase—60% since 2008—in the number of children requiring children protection plans. That is at a time when, from 2010 in the previous Parliament, councils lost 40% of their funding from central Government. The LGA estimated a £1.9 billion funding gap for those vital services by 2020.

For many councils, the pressure on children’s services is even more acute than that on adult social care. Three hundred and seventy-seven Sure Start centres have closed since 2010, with only eight opening in that time. That is the result, I suggest, of a spending cut on the centres of 47% in real terms. Sure Start centres have been crucial in supporting children from disadvantaged backgrounds during the vital early years before they reach school age, but again service cuts are diminishing such children’s prospects. Were amendment 31 on the statute book, Ministers might feel a little more reluctant to push such savage cuts through.

In the context of education and education services, will the Minister explain why the Government still intend to go through with the planned cut to the education services grant? It is entirely appropriate to ask that question in the context of amendment 31—let me explain why. The Education Secretary was correct in deciding not to proceed with the forced academisation programme of her predecessor. Under the proposed education-for- all Bill that would have delivered that programme, it would seem sensible for councils to lose their funding for their school improvement responsibilities—given that all schools would become academies. Forced academisation having been scrapped, however, we are left with a situation in which councils keep their school improvement responsibilities, although the funding is still being cut.

May I caution my hon. Friend not to be too hard on the Minister because it is Ministers from the Department for Education who demonstrate time after time on the Floor of the House that they do not understand the difference between early years education and childcare? They constantly elide the two. It is not the Department for Communities and Local Government that makes that mistake, although it may, but the Department for Education and its ignorance is shocking.

Order. Before the hon. Member for Harrow West responds to that intervention, may I say that I have been listening carefully? It is certainly within Erskine May, but if we continue to go through the statutory regulations in minute detail we will have an all-night sitting. Will the hon. Gentleman draw his remarks more closely to amendment 31 before we start going on about early years learning?

I am grateful for your guidance, Sir David. I will leap forward and give one specific, tangible example of the concern that motivated me to table amendment 31. In 2015, Lancashire County Council commissioned a report by PricewaterhouseCoopers to look at the level of resources it needs to provide statutory services going forward. That report makes sobering reading. It forecast that even if the council achieved everything in its saving plans, it would have an in-year deficit of £148 million in 2020-21 and a cumulative deficit of £398 million.

The report identified several areas in which planned savings were at risk of slipping and not delivering the full range of savings, meaning that the forecast budget gap would be even greater. That example of Lancashire County Council and the independent work by PricewaterhouseCoopers on whether it could continue to fund its statutory services in the future surely cuts to the very heart of the case for amendment 31.

Given the scale of spending cuts that councils have experienced and the sheer number of councils in all parts of the country and of all colours that have outlined their views, councils are under huge pressure. I gently suggest that Ministers cannot continue to press ahead without a significant change in direction and recognition that a central part of the new 100% business rates retention scheme should surely involve putting local councils on a sustainable financial footing. That is the context in which I make the case for amendment 31.

If Ministers are not convinced by the example of Lancashire County Council, let me give the example of Nottingham City Council. Councillor Jon Collins gave evidence to the Committee and made clear the scale of the cost pressures affecting the council—£11.2 million of cost pressures, wage demographics, additional inflation and charges from providers. He talked about the extra funding and pressure on his budget and raised a comparison with a nearby local authority—Rutland. He noted that the spending challenges facing his authority in Nottingham were substantially less than those facing nearby Rutland.

Clearly, amendment 31 might help to persuade Ministers to iron out such difficulties if there was a proper assessment of need. That is the spirit in which I tabled amendment 31. I hope the Minister might now be willing to be more careful with the future of local authority finances. Amendment 31 would be a sensible additional safeguard.

It is a pleasure to serve under your chairmanship, Sir David. I thank Opposition Members for the amendment, which provides an opportunity to set out the Government’s position on the future sustainability of local government. Before turning to the amendment, I would like to take the opportunity to clarify that medium-term fiscal policy decisions in the United Kingdom are managed, as the hon. Gentleman knows, through spending reviews. The spending review in 2015, for example, set local government expenditure limits to 2019-20. The Government will continue to assess the funding of local government after the introduction of 100% retained business rates through spending reviews.

Where a spending review identifies that increased funding for service delivery is required in excess of expected business rates receipts, additional resource would be needed to fund that service. As we discussed at great length in last Thursday’s sitting, the Bill does not remove the Government’s power to use section 31 grants to provide additional funding to local authorities if needed. A good example of that has been identified recently. The hon. Gentleman mentioned the Homelessness Reduction Bill, which has been welcomed by Members on both sides of the House, including the hon. Gentleman’s Front-Bench colleagues. The Government have looked very carefully at the additional responsibilities that local authorities will have to deal with. We have come up with a significant funding package of £61 million, which will be subject to a form of distribution, taking into account areas that have higher need for homelessness services than others. That funding will be distributed by way of section 31 grants.

Given the concern about how tariffs and top-ups and distribution of resources will take place between local authorities, will the Minister give a bit more clarity on the criteria for the distribution of that homelessness funding? Will it be guided by the index of multiple deprivation? How will Ministers be guided in terms of the distribution of that finance?

The hon. Gentleman raises a good question. As was made clear in Committee and, if I recall correctly, on Report of the Homelessness Reduction Bill, a clear commitment has been given by the Government to work with the local government sector, particularly the LGA, on how that funding will be distributed to reflect need. As the hon. Gentleman will know, the spending review process and a number of different processes will follow from the Bill. The Government also take the position that they will work with local authorities and their representative bodies to come to conclusions, particularly on the quantum of funding required and how it is distributed.

Amendment 31 would require the Secretary of State to assess whether each local authority has sufficient resources to provide statutory services in its area. Our concern with the amendment is that it replicates what is rightfully a matter for the Government to consider through a spending review. Furthermore—the hon. Gentleman alluded to this point—the fair funding review will consider the suitable distribution of funding across local government.

I hope I have reassured hon. Members that the Government will continue to consider the level of funding for local government. I therefore ask the hon. Gentleman to withdraw the amendment.

I listened carefully to the Minister and take his point about the fair funding review. I would gently suggest to him that that is discretionary, although it is a pivotal element to this particular measure and is one of the parts that will come sometime in the long-distant future to inform us how 100% business rates devolution will work in practice. What we do not know is whether there will be a fair funding review in future if there were to be another Conservative Government. We do not know whether there would be a spending review in future —they are entirely at the discretion of the Government.

Amendment 31 would lock into law the requirement to produce that assessment. In the context of such a radical transformation, to use the Minister’s words, of local government finance, the additional duty on the Secretary of State seems like a sensible precaution to put in place. Much as I would like to accept the assurances from the Minister, I fear that I cannot, and I intend to put amendment 31 to the vote.

Question put, That the amendment be made.

Amendment proposed: 26, in schedule 1, page 34, line 42, leave out sub-paragraph (4) and insert—

“(4) In sub-paragraph (4), at end insert ‘, which must be approved by a resolution of the House of Commons’.” .(Mr Thomas.)

This amendment would retain the requirement that an amending statement be laid before the House of Commons and additionally would require that the report be approved by a resolution of the House.

I beg to move amendment 27, in schedule 1, page 35, line 32, leave out sub-paragraph (1).

This amendment would retain levy accounts.

It is a pleasure to serve under your chairmanship, Sir David. You have not had the pleasure of attending many of the debates we have had and I will refrain from repeating them, although they were fascinating in many ways. They were a source of great training and education from my hon. Friend the shadow Minister. I would hope that, on reflection, the Minister picks up some of the points about attention to detail, really understanding the brief and assessing the impact of decisions made in Parliament.

I have the honour of explaining some of the more technocratic parts of this Bill. If you are interested, Sir David, in what a levy account is, and that mysterious way of working and why it is there, this is the amendment for you. Amendment 27, which is in my name and that of my hon. Friend the shadow Minister, is in many ways technical, but it is also very important—I will explain why in my short summary of support for it. I say at the outset that it is a probing amendment because I want the Minister to pay attention to my contribution and to address the issues I raise.

The last levy account, covering 2015-16, was presented to Parliament under the requirements of the Local Government Finance Act 1988. If the Minister wants to look it up, it is dealt with in paragraph 19 of schedule 7B. The business rates retention scheme introduced on 1 April 2013 allowed local authorities to retain 50% of rates collected in their area. Cash flows in respect of that scheme are reported in two White Paper accounts: the main non-domestic rating account and the levy account. The amendment refers to the latter.

In simple terms, the levy account provides transparency of cash flows between local authorities and the Government in respect of the 2013 scheme. A reasonable response would be: “We’re moving away from the 2013 scheme, which provided 50% of rate retention, to 100% rate retention,” but, critically, the levy is basically just a mechanism for bringing money in from areas that pay a tariff, and sending it back out to areas that have depressed business rate bases—it effectively provides the accounting mechanism to allow those payments to take place. If we had 100% retention but also intended to create a safety net to support local authorities that have experienced unforeseen impacts on their business rates bases, the levy account could perform that function, regardless of how much was retained and redistributed locally, which is important if we consider that 326 billing authorities in the country may well have a claim on the levy account. Some will use it only temporarily. For instance, there is a facility for mid-year payments to be made from the levy account and, when the accounts are made up at the end of the financial year, if a local authority has been overpaid, the amount will be recouped and paid back into the levy account.

The levy account has an interesting history, some of which is contentious, if I am honest, to local government friends. Several years ago, a top-slice was taken from the revenue support grant. That meant that less money was distributed to councils in the first place, but at least it provided a safety net. For instance, last year £50 million of additional money from the RSG was sent into the levy account to support councils that had had an unforeseen depression in their tax base.

That raises an important question about where the Bill is going. We have talked about support in principle for rate retention, and for a system of tariffs and top-ups whereby areas that could not retain the money they needed locally would have sufficient money to pay for public services in their area. We have talked about what formula could be used, rural areas and urban deprivation—we have talked about a range of issues. In some ways, that is not for this amendment, which is solely about the mechanism by which safety net payments are provided.

It is fair to say that, during our debates on the Bill, no information has been provided about what mechanism will replace the levy account, which raises a question: if there is a desire for some kind of safety net to support councils that fall on difficult times, how will it be provided if the mechanism is deleted?

My hon. Friend will know that a consultation document was published in July last year and that there have been more than 400 responses. Does he share my view that it would be helpful if the Minister gave a summary of what those responses said about the levy?

This has been a theme throughout the Committee’s sittings. We are having a debate in almost complete isolation, without knowing where the Government intend to go on the fair funding formula—as has been discussed, that is absolutely critical and underpins the Bill—and without understanding the sector’s views. We debate issues and make laws to which other people have to adhere, and they have real-life consequences. The local authorities that have to live with the consequences, and that know the impact on the frontline, have responded to that consultation, but we are discussing the Bill without sight of their responses. I am not sure whether that is due to a Trump-esque view—if something does not support someone’s view of the world, it is dismissed as fake polling data or fake news. Is it possible that those consultation returns are being screened for “fake” consultation responses? How long does it take to compile the information submitted by the sector and send it out in a report? Even the raw data—a copy and paste of what had been provided—rather than a summary would at least mean we could scrutinise it and undertake the questioning and answering that should take place.

I thank my hon. Friend for his support for my request for at least a summary of the responses on the levy when the Minister replies. Does my hon. Friend not share my view that it would be particularly interesting to hear what contribution the Prime Minister’s authority made, not least as it is one of the local authorities that stands to benefit, in business rate terms, when a third runway is built at Heathrow?

I absolutely agree with that point. It has been made a number of times, but the Minister has consistently failed to address it. The Minister may well have been passed the answer by one of his advisers; perhaps he can share that knowledge with us in his response—that would be very helpful.

The important thing about the levy account is that it is not just about the mechanism; it is also about how much money is put in the pot that can be used to support councils with a depressed local business rate base. Critically, that relies on a vote of Parliament. We talked about parliamentary scrutiny of the annual financial settlement that will support local government, and about the referendum limits and how that would be subject to a parliamentary vote. The Government seem determined to make sure that Parliament does not have a role in how local government is funded. This is another example of Back Benchers not having a say on how much money is provided for any kind of safety net.

I am not sure what confidence we are meant to have in the system, when we do not know what local government has said as we are debating and scrutinising the Bill, what the method of redistribution will be, or how much will be provided by way of a safety net—or even whether that mechanism will be inside or outside Government, because in the consultation, there has been a nod to a semi-independent body potentially being established. However, we are of course framing our own view and interpreting the Minister’s limited responses in these debates, rather than seeing that set down on paper.

The scale of the payments from the levy account are quite important. These are not small payments—well, sometimes they are, but the scale of the call on that budget is significant. For 2015-16, the Secretary of State approved payments of £112 million to support local council services. Imagine what £112 million could pay for—how many day care and youth centres that would fund, and how many older people could be looked after in their own home with that. If that money was not there, what would be the human cost of councils being told to sink or swim without having that safety net in place? Some clarity on that from the Minister would be greatly appreciated.

In all this, we are trying to understand what the end will look like. We are aware of what is being taken away, and of how the Secretary of State, and the Minister in this Committee, are reducing the role of Parliament and parliamentary scrutiny; we are less clear on what the end will be. All of us in politics accept that to make good legislation and good decisions, we have to make difficult decisions at times, but we should never go forward with a bad decision based on a lack of information and half-reports. Please say what mechanism will be there to support the levy account. We can then hopefully have a meaningful debate on what the safety net and mechanism will be, and can test whether it is fit for purpose.

I rise in support of amendment 27. It is worth touching on a couple of the ways in which the levy rate works. Tariff authorities may be subject to a further levy on growth in business rates income. Each such authority was set a levy rate of between 0% and 50% at the outset of the 50% business rates retention scheme in 2013-14. An authority with a 0% levy rate will keep all its growth in revenue. An authority with a positive rate—over 0%—must pay that percentage of its growth in revenue to the Government. The purpose of the levy is to ensure that authorities with very high business rates tax bases relative to their assessed needs do not benefit disproportionately from the system. As my hon. Friend so eloquently set out, the Bill will remove the Secretary of State’s power to set such a levy. Clearly, our amendment would retain that power.

I have already mentioned the example of Maidenhead’s council, the Royal Borough of Windsor and Maidenhead, which has a 50% rate—the highest rate that it can have. Presumably, this is because the council already benefits from its proximity to Heathrow, and from all the businesses that want to be close to Heathrow to export their goods to markets around the world. We commend Maidenhead on its good fortune, but surely as it benefits from a major piece of infrastructure—Britain’s most crucial hub airport—it has not had to do huge amounts to encourage that growth in business rates income, although I am sure that the council’s leader would point to one or two things it has done to encourage business. However, even Maidenhead would struggle to claim that it has not benefited from being so close to a major airport. I cannot see anyone in this room who is an opponent to a third runway at Heathrow.

I apologise to my hon. Friend. As ever, he helpfully corrects me, but the majority of Committee members support a third runway. With a third runway, Maidenhead’s council will presumably benefit from being even more attractive to businesses that want to get their goods out to export markets. It will have done nothing to put in place new conditions for economic growth; it will simply have benefited from a major strategic decision taken by this great House. The irony is that Maidenhead opposes a third runway at Heathrow.

Order. I am listening very carefully to the hon. Gentleman, but it is not appropriate for him to continue on the point about Heathrow airport. Will he return precisely to amendment 27, which we are debating?

Thank you, Sir David. Hillingdon has a 50% levy rate at the moment. The worry is that in future, it may not have to pay quite so much back into the national pool for redistribution to other local authorities, such as North Yorkshire. We have heard regular and understandable pleas for additional finance from the hon. Member for Thirsk and Malton. One would have thought that he would want Maidenhead’s council to benefit from a third runway, so that some of its growth in business rates revenue could be redistributed to North Yorkshire.

It is a pleasure to serve under your chairmanship, Sir David. The hon. Gentleman makes a very good point, but some of that revenue will presumably be redistributed at reset periods, so North Yorkshire would benefit from increased business rates there. The principle behind the measure, and the scrapping of the levy, is to increase the incentive for local authorities to grow their business rates; levies decrease that incentive. Does he welcome the fact that there will be a greater economic imperative without the levies in the system?

At the heart of the debate is the question of whether there will be quite the economic imperative that the hon. Gentleman and the hon. Member for North Swindon suggest. I hope that there will be such an imperative, but the evidence from the witnesses was not hugely encouraging on that point, as I set out when I referred to the contribution of the chair of the Federation of Small Businesses.

The hon. Member for Thirsk and Malton made a point about resets, but we do not know how often they will take place. I gently suggest to him that it might be better to think about retaining the levy arrangement, so that his authority and mine can benefit from some of that income a little more quickly. Perhaps he does not know that North Yorkshire has a 0% levy, so it is one of the authorities that does not have to contribute to London authorities such as mine, Wolverhampton or anywhere else. I am sure he is pleased to hear that.

Is my hon. Friend aware that under the system that the amendment seeks to retain but that the Bill will remove, over the past four years there have been 52 winners—if I may put it that way—and 119 losers, according to the Institute for Fiscal Studies? Surprise, surprise: most of the winners are district councils, and most of the losers are larger councils, including many metropolitan borough councils and unitary authorities.

My hon. Friend is right. As he knows, I have expressed concern about the distribution between tiers of authorities and how redistribution mechanisms would work in practice without a levy, but we are none the wiser about redistribution in practice, because the Minister has not been able to tell us about it. Perhaps you, Sir David, can use your influence with him to elicit the summary that has been promised for some time in the future, we know not exactly when. We are told it will be soon-ish, but how long that is, we do not yet know. Perhaps some of the 400-plus responses to the consultation document that the Department produced last year will give us some sense of how the levy will work.

The hon. Gentleman made a remark about North Yorkshire not contributing to his local authority, but that is quite right, because his local authority already has greater spending power, so why should it? He also made mention of my hon. Friend the Member for North Swindon and me; we are in concert on economic opportunity, but so is the Select Committee on Communities and Local Government, which heard from many witnesses and took much evidence. The Committee concluded that the business rates reforms

“are, nevertheless, transformative and create a real opportunity for local government; in retaining 100 per cent of business rate revenue, councils will have a direct and strong incentive to promote local growth and economic development.”

Does the hon. Gentleman not agree with the Select Committee and its Chair, his colleague the hon. Member for Sheffield South East (Mr Betts)?

I bow to no one in my admiration of the Chair of the Communities and Local Government Committee. I am glad that the hon. Member for Thirsk and Malton mentioned the Select Committee report, because it said some interesting things about the potential volatility of the business rates income and the need for an effective safety net. One wonders how that will work in practice without the levy arrangement that we are discussing. My hon. Friend the Member for Oldham West and Royton is itching to get into the debate on the safety net, and I will not stand in his way when we come to it, but I hope to catch your eye after he has spoken, Sir David, to explore the concerns of the Select Committee a little more.

To return briefly to the levy, Maidenhead pays 50% of its future business rates growth into the levy, but frankly does not have to do much to benefit from economic growth because of its location. If Maidenhead does not serve as a warning to Conservative Members, perhaps the London Borough of Hillingdon will. It, too, will benefit hugely from the construction of a third runway, and will not have to do much to promote economic growth—it will not need to, because of the strategic decision that we have taken. Hillingdon’s council has a levy rate of 50%.

The hon. Member for Thirsk and Malton has used almost all of his interventions in Committee so far to bash London authorities and demand that spending power be redistributed away from London to North Yorkshire. I do not get the sense that he cares about anybody else’s local authority—not even those of Members on his side. One would have thought that he might therefore be sympathetic to our concern that on the face of it, Hillingdon’s council will no longer have to make a significant contribution to the redistribution to others.

The hon. Gentleman says that I do not care about other local authorities, yet earlier I quoted York, which has one of the lowest amounts of spending power per head. Windsor and Maidenhead has the lowest, and Trafford the third lowest. There is also Leicestershire, Staffordshire, Northampton, Kirklees, Swindon, Warrington and Medway. I speak on behalf of all these authorities that have approximately 50% of the spending power of the London councils I mentioned. Does he agree that that cannot be right?

As you can see, Sir David, the hon. Gentleman is a passionate advocate for redistribution away from London. We have tried to convince him to get underneath the detail of the scale of need in London, but clearly we have been unsuccessful today. A little progress is needed. I have made the point that I wanted to make. I look forward to the Minister’s answer, and the response of my hon. Friend the Member for Oldham West and Royton.

I thank the hon. Members for Harrow West and for Oldham West and Royton for the amendment, and for the opportunity to set out why we want to remove levy payments. As the hon. Members have explained, the amendment would retain the Government’s ability to make regulations requiring a levy. As we set out when we announced our intention to move to 100% rates retention, we do not believe that imposing a levy on growth is desirable; nor is it necessary for the purposes of funding the safety net. Through rates retention, we want to encourage and incentivise authorities to work with their businesses and communities to deliver economic growth. We want them to use their powers, through the planning system and more widely, to support development and create the conditions in which business can thrive. Where they do so, we want to allow authorities the benefit of all the growth in their business rates that will follow.

We heard from my hon. Friend the Member for Harrow West that Maidenhead is paying a 50% levy. That suggests that it has done well in growing its business rates—good for it. Can the Minister tell us what places such as Maidenhead have done to grow their business rates base, so that other councils, such as mine, could learn lessons from Maidenhead?

Certainly. There is good practice happening in local authorities, and I would always recommend the hon. Gentleman’s local authority taking a leaf out of the book of a good Conservative authority that is doing the right thing on growth.

The levy works as a tax on growth, taking up to 50% of any benefit that authorities may have seen. This certainly acts as a disincentive and, for that reason, we have said clearly that we want to remove the Government’s ability to set a levy. Nor do we believe that that the levy is necessary as a way of funding the safety net. To come back to the comments of the hon. Member for Oldham West and Royton, there are other, fairer ways of dealing with the safety net, the most obvious being to take a top-slice at the point at which we set up the scheme and use that to fund any safety net payments needed.

If there is no need for the levy, there is no need for the levy account. Indeed, if such an account was prepared, there would be nothing to report in it. In that sense, this matter is quite simple: we will abolish the levy, and therefore there is no need for the levy account. I hope that the hon. Gentleman will withdraw his amendment.

I thank Members who have contributed to the debate. I am left slightly worried that the Minister does not understand the levy mechanism and the function of local government group accounting.

The Department is required to produce group accounts for local government that show the balance of transfers between local authorities and the Department. Whatever mechanism is in place to provide payments to and fro requires an account to be set up, because if an account does not exist, it will not be included in the group accounts and will be off the books, which makes no sense. We could call it a different name, but the function of an account is that it sits somewhere and annually feeds into the group accounts, which give the Chancellor an overview of departmental spend, and that is fundamental to how we account for public money. We could call it a levy account or even the Jones account, for all local authorities care, provided there is an account to be drawn upon.

At the moment, the top-slice is funded by revenue support grant. It was £120 million; it went down to £50 million in 2015-16. The Minister did not say this, but I take it that if the money does not come from a top-slice of revenue support grant, it will come from the £12.5 billion of additional money through 100% business rates retention.

The Government have been clear that through the implementation of this system, local government will not be worse off, and that we will not expect local government to bear the burden of the safety net in the system. Does the hon. Gentleman not accept that?

I find that contradictory. Either the burden will be on central Government, which means there will be a requirement to find the money from elsewhere in Government, or the money will come from existing budgets within local government, which means local government will take the burden.

At the moment, the majority of funding for the safety net comes from the business rates that are not going to local authorities.

I accept the point, but the Minister must accept that over the past two financial years, £170 million has been taken from revenue support grant top-slice. That money will need to be provided from somewhere, because at the moment there is a deficit in the levy account of something like £14 million. That shows more money is being drawn down from the account than is being added on top through revenue support grant top-slice or business rate levies from authorities that are exceeding their profiled business rates increases.

The Government cannot have it both ways. The money is either already within local government and is just being re-profiled, or it is coming from elsewhere within Government, in which case it will be a burden on other departmental budgets. We will come on to safety net payments later; this is simply the mechanism by which we make those payments. Either way, we will need group accounts. We have to account for the transfer of funds from one departmental account to local government. I do not intend to press the amendment to a vote; it was a probing one.

The Minister’s response is disappointing. The amendment would retain the levy. He urges the Committee to reject the amendment and to abolish the levy because, according to him, it is acting as a disincentive to growth. When I asked him for evidence of that at the evidence session, he could not produce any.

I am open to persuasion, but—call me old-fashioned—I like a bit of evidence. When I asked the Minister today what Maidenhead has done well to be in a position where it pays a 50% levy, he could produce no evidence. Since Monday last week, he has had his officials available to produce some evidence. However, he has produced no evidence for his assertion that a measure such as the abolition of the levy will incentivise councils more than they are incentivised already to grow the businesses in their areas, thereby increasing business rates revenue.

Therefore, I am driven to the conclusion—I hope the Minister can dissuade me of this—that his arguments are totally hollow and mere assertions backed up not with evidence, but merely with a hope that the changes promulgated by the Bill, including the abolition of the levy, will produce the intended effects. In the absence of evidence, I find that singularly unconvincing.

I agree with my hon. Friend that the evidence base was not provided in our evidence session. We have asked for written evidence, but it has not been forthcoming. It is difficult to scrutinise, given the throwaway comments that have been made.

During the opportunities to challenge and ask questions of the witnesses, did any Opposition Member ask that question of them?

I thank the hon. Gentleman for that intervention. He was at the hearing when that question was asked. The answer was less than forthcoming, but there was an answer of sorts. The question from my hon. Friend Member for Wolverhampton South West is in Hansard. It is on the record, as a matter of fact. It is also a matter of fact that the answer has not been provided.

My hon. Friend’s point is about the lack of evidence for the great assertions by the hon. Members for Thirsk and Malton and for North Swindon, never mind the Minister, that economic incentives will flow afresh. One would have thought that Ministers would have had some sort of economic impact analysis to offer, but there is no Green Paper, no White Paper and no sign of any evidence that this will be the new Jerusalem we have been promised.

Sir David, you have been very patient in this debate. To be fair, we had the exchange in our evidence session and we have had a protracted debate during our last couple of sittings. In some ways, we are going around in circles. We have repeatedly asked for the evidence base. We have asked what end we are working towards and what evidence base underpins that approach. Consistently, that has not been forthcoming. It is right, therefore, that Members continue to press the matter, but we need to make progress. We need to be slightly mindful of the time we have already taken and the number of amendments that we need to get through.

Even if the ambition is for 100% business rates retention and there is a view—the evidence base does not support this—that having any kind of clawback facility would inhibit growth, actually, the legislation provides for the levy account to remain in place and to be zeroed. If at some point it required a top-up, because there was not enough money in the levy account to provide the safety net payment, the Minister, without going through the rigmarole of Bill Committee sittings and all the other things we do here, would be able to change that through negotiation and consultation with local government. It strikes me as a complete dereliction. There is not just a lack of evidence—the provision is quite reckless.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 32, in schedule 1, page 36, line 2, at end insert—

‘(1A) In sub-paragraph (1)(a), after “year,” insert “on the basis of a safety net payment threshold that is not less than 95% of the authority’s baseline funding level for the relevant year’.

This amendment, together with amendments 33 and 34, would ensure that the threshold at which an authority receives safety funds is a fall in income of not more than 5 per cent.

With this it will be convenient to discuss the following:

Amendment 33, in schedule 1, page 36, line 7, at end insert—

‘20A (1) Paragraph 26 (calculation of safety net payments) is amended as follows.

(2) In sub-paragraph (1)(a), after “year,” insert “on the basis of a safety net payment threshold that is not less than 95% of the authority’s baseline funding level for the relevant year,’.

See explanatory statement for amendment 32.

Amendment 34, in schedule 1, page 36, line 8, leave out from start to “omit”.

See explanatory statement for amendment 33.

There is a theme running through this group of amendments, as there has been previously. We have talked about the mechanism by which we account for the money coming in being paid out to local authorities. We have talked about the principle of having the levy account in place. The amendment is about the purpose of the safety net payments to local authorities.

The principle of the safety net is fairly clear-cut: it provides an element of protection that is completely in line with the concerns raised by the Select Committee inquiry. That was not a press release or report from nowhere; it was the result of a number of thoughtful, well researched hearings, where the evidence base was scrutinised. The headline was that it is absolutely right, and to be welcomed, that we move towards 100% retention, but serious questions remained about how we redistribute within the system and about what safety net mechanism would be in place to ensure that if a local authority had a shock to its business rate base there would be sufficient funds somewhere for it to draw on.

It is fair to say that, although the Select Committee showed support for the first element, the safety net issue has not been resolved satisfactorily. We have not had details about what system might be in place. We have not been told how much will be provided in the safety net pot to ensure that it is sufficient to provide for the different types of shocks. We have not been told, for instance, by what percentage a business rate base would have to fall before a local authority was eligible for a safety net payment. All those points, which are fundamental to understanding whether a safety net is a true safety net or whether it has gaping holes in it, are critical to the debate. That is why we tabled these amendments.

My hon. Friend will remember the intervention from the hon. Member for Thirsk and Malton, in which he prayed in aid the Communities and Local Government Committee report in defence of his case. Has my hon. Friend noted at paragraph 56 of that report the concern of Sharon Gregory, who said that Cambridgeshire and Northamptonshire county councils

“have some very big businesses that represent a large proportion of the business rates base, and there are significant risks around those businesses leaving or failing”?

Surely that underlines his concern on the safety net.

I absolutely agree with that point and on the thrust of the challenge to come. I hope that in response the Minister will address that issue and those raised by the Select Committee and the LGA, and in the lesser-spotted consultation response, which hopefully we will get a flavour of later.

When the safety net system was set up, the statement of intent—this was in 2012—was clear in its aims. It said:

“The Rates Retention Scheme will include a safety net to protect local authorities from significant negative shocks to their income by guaranteeing that no authority will see its income from business rates fall beyond a set percentage of its spending baseline.”

That essentially means that central Government accept that there is an inherent cost in providing public services at a local level across the range of 700 or so council services, and local authorities and communities should not be put at risk to such a degree. Let us say that a local supermarket decides to close. In many areas that could be a £1 million a year business rate base taken away from a town. That would have a significant impact on local public services, and the local authorities could call on the safety net.

There was always a facility to say, “A business might leave today, but tomorrow you might attract further investment, and that could make up the difference.” There is a facility in the system to recoup any overpayments above the baseline. The safety net is there for the right reasons and the principles are sound. They are supported by the LGA and, I assume, by the Select Committee. They are supported by individual local authorities, which call on that fund because it absolutely makes sense. Their youth centres, day care centres or support for older people in the community should not be vulnerable to Tesco or Sainsbury’s deciding to up and leave town. That would instinctively be the wrong way to run a fair and balanced community. As I have said, the payments that have been made from that account are not insignificant. In 2015-16, the Secretary of State paid £112 million to local authorities. I will not repeat the point about the types of services that can be provided for that kind of money, but we can imagine that, across a range of 326 local authorities, that would have a significant impact on their business rates.

If I think of my own local authority of Oldham, I consider it to be a double cruelty that the Government are closing central Government departments in my town, such as the HMRC offices and jobcentre offices. The county court is closing soon, the magistrates court has already closed, and the number of police stations has reduced to a third of the number before. The local authority has closed day care centres and youth centres and a range of public buildings just to try to balance the books. Is it not cruel that because of that its business rate base will be affected? Not only has it reduced the number of public services because its revenue support grant has been taken away, but it is potentially having the safety net snatched away that would have protected it from the loss of business rates in those areas.

It is beyond negligent; it is almost vindictive now. The Government are kicking local authorities when they are down and some local authorities are absolutely down on their knees. We have heard about the issues in North Yorkshire. It is right that Members are here to represent their constituents.

On that point, does my hon. Friend want to try to stimulate the interest of the hon. Member for Thirsk and Malton in Stockton-on-Tees Borough Council and its concerns about the safety net? He was on the Select Committee when it gave evidence. It said:

“The safety net is set too low with local authorities being required to accommodate very significant reductions in income before triggering it. Based on the current system, Stockton would need to lose approximately £5 million in one year before it is activated”.

Does that not underline my hon. Friend’s concern?

It does underline the concern. In the last financial year £112 million was drawn down from the scheme. That was in the context of local authorities still receiving revenue support grant on top of their council tax and business rate income. As we move towards the brave new world—there is a fine line between bravery and stupidity, but let us call it brave for now—whereby councils will be funded solely by council tax and the business rate base that they can generate, councils are even more vulnerable to shocks in the system where business leave and they are forced to deal with the consequences of that loss of income. Without the safety net system in place—

The whole thrust of the hon. Gentleman’s argument is that the Government are going to get rid of safety net payments. Where has he got that idea from? Does he not think that the business rate retention pilots that are taking place in a number of areas are a good thing for the Government to work out that they have struck a balance to ensure that, when we roll out the full system, it is as right as it can be?

I take the Minister’s point entirely. It would be easier if we had a scheme that we could review and scrutinise and ask questions about, based on the scheme that was presented. In the absence of that, we are relying on the Minister sharing every now and again the fount of wisdom from the notes that are passed to him by his advisers, which is one way of doing government, I suppose. Another way of doing government is to consult, to speak to the sector and to understand what is coming back. We know a consultation has been conducted and we look forward to the results of that, but a consultation was also undertaken when the scheme was introduced in 2012. At that time, the Government reviewed the type of safety net that would be needed for it to be fair and balanced. At the time, the percentages that were considered were 7.5% to 10%. In the end, the Government erred on the side of caution and went for the 7.5% level. That was the result of that consultation. It was the result of an assessment of what type of safety net would be robust and provide certainty. So we have been there; we have done that. We have been through that process.

It is interesting that the Minister should stand up and pray in his defence the pilot authorities and the way in which they are implementing the safety net scheme, if indeed they are doing so. We could have used that information to inform our contributions, but sadly the Minister is not intending to publish any details of how those pilot authority schemes are going to work until after this Committee has concluded its deliberations.

I am going to be charitable. Perhaps I am too soft for my own good. I feel a slight degree of charity towards the Minister given the fairly rough ride that he has had—a rough ride of his own making. I will not prolong that. Labour Members question whether the knowledge is there, even, for the Minister to understand the Bill, whether the diligence has been there to assess the impact that that has had, and whether the capacity is there to bring forward the type of information that would lead to a meaningful debate. I would be far more generous than that and say that perhaps today is just not the Minister’s day. However, we will be here again and we can review the information when it comes. I hope that we will have a better session, the Minister will feel far more empowered, better informed and on the front foot, and we as an Opposition will feel that we are able to hold the Government to account, which is why we are here. We are not here to have circular discussions that take hours and hours of parliamentary time. We are here to get to the root of what the Bill is intended to do and the impact of the Bill. By doing that, we make good laws—we know the impact and we know, collectively, that we are making the right decision, not a bad decision in the absence of that information.

We have heard that there will be some kind of safety net, although we do not know what the criteria or threshold will be. We are discussing the pilots that are taking place, but a number of pilot authorities have not been told what the safety net will be. We are expected, outside of those pilot authorities, to make an assessment—a leap of faith almost—that those pilot authorities will deliver the evidence base required, when they themselves do not know what the new settlement will be, and they are waiting for the Secretary of State to confirm that to them.

A lot of people in this place and in local government are waiting for some clarity. I am pleased that, during the exchanges, we have at least agreed a principle that a safety net is required. However, the real test is not words. The real test is the application of the legislation going through.

I hope that the Minister will answer this. The threshold is 7.5% below the base. Members will know from our amendments that we are suggesting a more favourable rate of 5%. The reason is that, as revenue support grant is being taken away, local authorities are more vulnerable to business rates and it feels as if that is the right balance to strike. I ask for a quick response from the Minister: what will the percentage be?

It is a pleasure to follow the hon. Gentleman, who is giving me something of an education, or thinks he is giving me something of an education, on this issue, such a placid fellow that he is. I thank him for tabling this amendment and for giving me the opportunity to set out the Government’s approach to the safety net. He seemed to ignore most of the information that had come forward and was almost saying that the Government were not going to put in place a safety net. I agree with him that a safety net is an important element of the system and will certainly become more so—again, agreeing with his analysis—once we are relying on business rates for a larger proportion of councils’ income. Where I must disagree with him is that these amendments are the best way of ensuring that we have the most appropriate safety net in place for the new 100% system. These amendments would hardwire the current arrangements into the system by requiring the safety net to be measured against baseline funding levels. However, that is only one way in which we could construct the safety net under the legislation as drafted. There are others—using different baselines, for example, or providing for different percentage losses for different types of property. Until we have finished our work with the local government sector and put in place all the scheme’s design elements, it is too early to say what form the safety net should take.

It is entirely possible and perhaps likely that the safety net will be constructed along similar lines to how it is constructed now, but if so, it is not clear that a 95% baseline funding level is the right threshold. Indeed, in the pilot areas I have referred to, we are testing elements of the 100% rates retention from 2017 and have set the safety net at a 97% threshold. I will certainly want to see how that works before I commit myself to the design of the safety net under the full scheme.

That is the first bit of clarity about how the pilots are working—I was going to ask what the safety net was in context. I simply praise the Minister for giving just a tiny fraction of information about how the pilots are going to work. It would be nice to have the rest of the information before the end of the Committee.

It is always nice to have praise from the hon. Gentleman, which is quite often difficult to come by.

Such are his high standards, indeed.

Getting back to the real world, I add that amendment 34, by reversing the Bill’s removal of sub-paragraphs 25(2) and (5) of schedule 7B to the Local Government Finance Act 1988, would make it impossible to deliver changes for which local government has asked. The changes we want to make through the Bill mean that, in future, safety net payments need not be made at the end of a financial year. Instead, as with other payments under the scheme, they can be made at the beginning of the year, based on the estimates, and then reconciled at the end of the year once outturn figures are available.

Authorities asked us to make that change as soon as a legislative opportunity arose. The changes made by the Bill have no material effect on what authorities will receive in safety net payments; they simply change the way in which we account for them. I hope that resolves some of the concern of the hon. Member for Oldham West and Royton.

In conclusion, the amendments, if allowed to stand, would remove the flexibility that we and the local government sector need to design a safety net regime that is fit for the needs of 100% business rate retention. They would reverse a change that local government welcomes and for which it has long called. I hope that, with that explanation, the hon. Gentleman withdraws amendment 32 and does not move amendments 33 and 34.

I know it is sometimes difficult for Chairs and I wanted to hear what the Minister said to know whether I wanted to speak.

The very helpful Library brief says on page 19:

“It is not yet clear what form, if any, the safety net would take under 100% retention of business rates.”

That was published almost three weeks ago on 19 January. It is singularly disappointing when the Minister comes before a Public Bill Committee of the House of Commons and says, “Oh, I cannot give you any information because the Government want the flexibility.” I understand why Governments want flexibility. When my party was in office, it always wanted flexibility. I kept saying, “I do not think you should have that flexibility in lots of cases.” To use the vernacular, the Minister and his Government ought to show a little more ankle. Otherwise, they are asking us to buy a pig in a poke, which I think is unacceptable in a parliamentary democracy.

We ought to have the information. What is the big rush? This is so that the Government can get the Bill through, with all its flexibility. The amendments would lessen that flexibility, which is why they are good amendments. The Minister has nothing to counterpose that with, except to say, “We’re talking about 97%, but we want the flexibility.” I am sure he wants the flexibility, but that kind of flexibility is not good for councils—not only Wolverhampton City Council, but councils around England—because of the uncertainty.

In that case, the Minister should not have introduced the Bill at this stage or until he has got his ducks lined up.

You have been extremely patient with us, Sir David. We have got to a position where there is agreement, in principle, on a safety net.

We have a sense of what the pilots would bring in terms of 95% baseline protection. However, I challenge the idea of pointing to any pilot and giving the impression it could be rolled out as a national scheme. We know that any pilot can be made to work with the right energy and finance behind it, but having a safety net of that order without new money in place would be very difficult. I would like to see the figures on that, to test what it would mean in practice. When the last review took place and we were looking at a 7.5% threshold, it was very difficult to make a national scheme stand up in a way that encouraged growth and allowed areas to keep an element of what they were developing through their efforts, and that brought money back into a central pot.

We still unfortunately do not have sight of what the finances mean overall, but we have a flavour of what the pilots mean. We have been told that the measure will not be a new burden, but will be accommodated for within local government spend. We know that the only real room is in either the grants given to local authorities or the business rates and the £12.5 billion that has been referred to.

As we have heard, there is a great call on what feels like an ever diminishing resource. We talked about the £7.4 billion revenue support grant that will need to be accommodated. We talked about the £65 million rural services delivery grant, the £3 billion public health grant, the £105 million improved better care fund, the £177 million independent living fund and the £3.4 billion early years grant that will need to be accommodated—not to mention the £3.2 billion of business rates relief payments currently within the system. We still have not had clarity.

Excluding the relief payments, just those grant payments, which could well be deleted as part of full business rates retention, are £14.7 billion. Only £12.5 billion is going back into the pot. If there is going to be a safety net, where will the money come from? A bit more information on that would be extremely useful for us to give proper scrutiny and hold the Government to account. These were probing amendments. We made a bit of progress, although not as much as we would have liked. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 47, in schedule 1, page 37, line 5, leave out sub-paragraph (3).

This amendment would remove the proposed power of the Secretary of State to force an authority to join a pool. It would retain the current position where every authority covered by a designation must agree to it; and that the designation can be revoked only in limited circumstances, including a request from an authority covered by the designation.

With this it will be convenient to discuss amendment 28, in schedule 1, page 37, line 7, at end insert

“only if—

(a) an order to that effect has been made in the form of a statutory instrument and has been approved by a resolution of each House of Parliament, and

(b) the relevant Select Committee has been consulted.”

This amendment would ensure that any revocation of a designated authority must first be approved in the form of a statutory instrument and consulted upon with the relevant Select Committee.

We are moving naturally through the principles of a levy account system being maintained, a safety net being provided and, as the Minister referred to, the business rate pooling arrangements that are being piloted in a number of areas.

The principle of pooling is sound. It is one that local government has asked for and one I personally support. We recognise that the development of a business base is not necessarily predicated on local authority boundaries. We have heard the example of Heathrow and the impact there. The same is true in Greater Manchester, where we see the economic area and the businesses developing in that city region acting separately from the local authority boundaries because they are acting as one economic unit. I fully understand the principle behind that and why we would want, on that basis, to have a single budget or business rate pooling across that area.

Where pooling works—this is true of the pilot—it is because, first, there is an understanding of the financial relationship. Sir David, I do not know whether you have taken the opportunity, as I have during one of my nights of insomnia, to go on the DCLG website. People can type in the details of their local authority into the website and assess whether business rate pooling would leave them in a better or worse net position. The idea of that is to give agency to local authorities to determine for themselves what is right for them before they even enter into negotiations with central Government. That is an empowering way of doing that.

Local authorities then speak to areas within a natural pool. Where they have a logical economic centre and want to come together, they can assess what that new settlement would be, and whether they would be in a better or worse position as a result. They will get together; discuss with their neighbouring authorities what works in their locality; agree which local authority will be the lead local authority; and, on that basis, make a bid to the Government to be a pilot authority. In the spirit of localism, that is the right way of doing it. We are allowing a grassroots organisation to take place, where people come together, have the information to hand to make an informed decision, and come to the Government and say, “We think this is the best deal for our community.”

That is inspiring, but unfortunately, the Bill is an absolute shift in the culture and balance of that relationship. Rather than local authorities being able to come together and co-produce, and rather than it being a relationship of equals in which local authorities choose other authorities to join and then present to the Government, the Secretary of State can mandate local authorities to come together, potentially against their wishes, and can mandate who the lead authority will be. The direction of travel is very unsettling.

In any relationship of equals at a local level, coming together to create a business rate pool is usually only one element of a complex relationship of working together in the interests of a locality. I worry that, by imposing one lead authority, potentially against the wishes of other neighbouring authorities, the Government will fundamentally change the balance of trust and the relationship within that locality. That could impact not just the business rate pool and support for it, but other joint work that will be critical for the successful delivery of public services and economic growth in our areas. When the Minister responds, it would be helpful to get a flavour of where he, on behalf of the Secretary of the State, believes that the power could be implemented in future.

Is this not an example of the nanny state at its very worst, and of the Minister-knows-best mentality which, despite all these pretentions of great commitments to localism, seems to run through the heart of this Bill, with its 56 new powers over local authorities?

It is. I worry about scale. The 18 business rate pools reported to have come forward so far have a collective rate base of £159 million above their baseline, so they are net beneficiaries. We can see why they would want to adopt that position and make that application. However, some areas could be disadvantaged as a result of being in a business rate pooling arrangement. Those areas may not want to be part of a business rate pooling arrangement that is forced on them.

We have heard about the 56 additional powers that the Secretary of State is introducing for himself. We are meant to be about localism, and about giving power back to communities and to their directly elected local authorities. That is not the flavour of the Bill—the opposite runs right through the core of every element in it. The Bill is about an empowered Secretary of State, and a complete lack of parliamentary scrutiny, oversight, challenge and a democratic vote.

The Bill is also not even about Government doing deals with local authorities in smoke-filled rooms, which has been the nature of devolution discussions so far, when areas are picked off against each other. That at least required local authorities to consent. Even though it lacked transparency, and even though it lacked a national framework so people knew what they were bidding for at a local level, it at least required that they were consenting parties to that relationship. That will not be the case. Unless the amendments are accepted, the Secretary of State will have absolute power to impose his will on local authorities whether they like it or not, and whether or not it is in their interests and right for their communities, and to hell with consequences for the local relationships that could be affected.

The amendment is fundamental to what we believe devolution and localism to be. I intend to press amendment 47 to a vote, because we feel so strongly about giving our councils agency and independence and a genuine relationship of equals with the Government. If the Government do not accept the amendment, it will be a message not only to the Opposition but to every local authority in the country. The Government will be saying, “What you want is not as important. It’s not for you to determine what’s right for your local area. If we want to do it and feel like doing it, we can impose our will whether you like it or not.” That is a very slippery slope.

I thank the hon. Gentleman for tabling these amendments on the creation and revocation of a business rate pool.

The intention of the amendments seems twofold: to retain the requirement that each relevant authority must agree before the Secretary of State can designate a pool, and to require that a decision to revoke a pool should be approved by Parliament and subject to consultation with the relevant Select Committee. I will deal with each of those in turn.

As a principle, the Government believe that local authorities can achieve greater impact when working together, and that pools of authorities can benefit from working over wider areas to achieve economic growth. That is why we want to continue pooling arrangements under the new business rates retention system. Business rate pools enable the local authorities within them to be treated as a single entity for the purposes of the system, allowing them to co-ordinate their work and take a coherent set of decisions to help secure economic growth over a wider area. Paragraphs 26 and 27 of schedule 1 provide that the discretion to create, vary and revoke pools lies with the Secretary of State, with a new requirement for a statutory consultation with relevant local authorities on the creation and variation of a pool.

We are introducing those changes because, in the Government’s view, pooling has not worked under the current arrangements as well as it could. The current voluntary approach to pools can incentivise the wrong behaviours, leading to examples where pools across functional economic areas have excluded a single authority due to them being perceived as high risk. That undermines the objectives of pooling and potentially reduces the ability of pooling to secure co-operation and coherent decision making across a sensible economic area.

Amendment 47 would remove the provision enabling the Secretary of State to designate a pool at his discretion. That would, in effect, preserve the current arrangements whereby a pool can be designated only if every authority in the pool area has agreed to it. The risk of a single authority being excluded from sensible pooling arrangements would remain. Removing the requirement that all authorities must agree to being designated as a pool will enable the Secretary of State to ensure that pools are created across functional economic areas that maximise opportunities for growth.

We recognise the ongoing need to work with local authorities on sensible pooling arrangements and have introduced a statutory duty to consult with areas on their pooling arrangements. As I said at the outset, the ultimate decision will rest with the Secretary of State, helping to ensure that all authorities in a functional economic area will engage fully in those discussions.

The Minister is saying in terms that the Government are going to introduce a centralising measure because sensible pooling has not always worked to date. I understand that concept. He knows what I am going to say. Could he produce some evidence that pooling arrangements hitherto have not worked properly in some areas? I know he is not saying that that is the case everywhere, but can he give us one example to elucidate why the Government think these centralising powers are necessary in what purports to be a localising Bill?

As I said, there are places where a view has been taken that certain local authorities are too risky to be included in a business rate pool and, therefore, have been excluded. Returning to the theme the Labour party has used—

I will in a moment.

Throughout our deliberations on the Bill, it is apparent that local authorities have asked for fairness within the system. The challenge is whether that fairness is apparent if a local authority is excluded from a pooling arrangement because surrounding local authorities do not want to include it. Clause 3, which the Committee will consider later, provides an additional tool to strengthen the role of pools to help secure economic growth, with rewards being shared across the pool.

Amendment 28 aims to ensure that Parliament has a role in revoking a business rates pool—paragraph 26 of schedule 1 enables the Secretary of State to revoke the designation of a business rates pool. Revoking a business rates pool is a technical matter, working with the authorities involved to consider how each one operates independently. The Government are concerned that requiring every decision about revocation of the business rates pool be taken through each House and made subject to consultation with the Communities and Local Government Committee would take up valuable parliamentary time. The current process for revoking a business rate pool does not require parliamentary approval or consultation with the Select Committee. The Government do not believe that change is needed.

I repeat the perfectly reasonable question from my hon. Friend the Member for Wolverhampton South West. Can the Minister refer to one example where a local authority has been excluded?

I think there is an example I could point to. In Surrey, district councils have come in and out of the pool in different years. As I said before to the hon. Gentleman, we need to ensure with this new system that we have certainty for local authorities.

When I was a council leader, we changed our pooling arrangements. I can testify—and I am sure the Minister will agree—that that is very disruptive for local authorities, particularly when they are trying to plan. It is also disruptive for businesses.

My hon. Friend makes the exact point I am trying to make—local authorities require certainty. The measures we have put in place over the last year or two on having a longer-term view of council budgets has helped. Within this system, we want multi-year arrangements for local authorities so they know where they are heading. In having more settled business rate pools that make sense in terms of functioning economic areas, we will seek to deliver that certainty and security for local authorities. By definition of what the hon. Member for Oldham West and Royton has said, local authorities need more security and certainty in the new system. Local authorities take on a greater risk challenge if funding is distributed by central Government to them, rather basing local government on locally collected taxes.

Overall, the changes to pooling arrangements will ensure effective business rate pools, with other tools to help drive economic growth. I therefore ask the hon. Member for Oldham West and Royton to withdraw his amendments and commend paragraphs 25 to 31 of schedule 1.

As I said earlier, we feel strongly about amendment 47. The Bill would fundamentally change the relationship between local government and the Secretary of State, which we do not believe is in the interests of democracy or localism.

I have the Minister’s response. There is some merit in having a system in place that provides a degree of certainty, but that could be provided, for instance, by a longer notice period—local authorities wishing to leave a pool could give two years’ notice rather than 12 months’ notice if required—which would at least give the degree of planning certainty required. It could well be tied to economic deals done through negotiations with the Government. For instance, if an economic deal lasted five or 10 years, there would be some sense in saying that, during that period, it should be tied to the business rate pool.

However, that is not on offer. What is on offer is: “Take or leave it. The Secretary of State knows best.” Areas will be forced to join the pool. The example given is of a local authority that wants to join a pool but is told that it cannot for whatever reason. I suspect that the number of such examples is very low. It is more likely that, when a local authority does not want to join for whatever reason is right for its community, the Secretary of State will force it to do so to make a wider pool balance out without having a requirement for central Government funds. I suspect that that is more what the measure is about. I am concerned that the balance of power is changing between national level and local level. Further powers are being given to the Secretary of State, and further mandating can be required, but there is less parliamentary scrutiny.

There is also an unhealthy rebalancing of relationships in some local areas. We talk about the Greater Manchester business rate pool as being one to look at, as a pilot—we are doing so very carefully. However, it would allow the Cheshire authorities to obtain 50% of growth before they returned to the pool. As I have said before, there might be an argument for that, given that it sits outside the city deal that has been agreed as part of the devolution deal, but it beggars belief that two authorities within Greater Manchester—Trafford and Stockport—have negotiated as part of that business rate pooling an agreement to keep a third of growth to themselves before it goes into the pool.

We believe that at a national level, we should agree a way of redistributing that it is the same for everybody, but instead there are deals within deals. Those who write the cheques always have the upper hand, and not those who are potentially the receivers. I do not believe that that is in the interests of the communities we are here to serve. I certainly do not believe that it is in the interests of an equal, balanced relationship at a local level. Although amendment 47 is not quite in the spirit of previous amendments we have voted on, I ask the Minister to support amendment 47 to maintain the balance of a healthy relationship.

Question put, That the amendment be made.

Question proposed, That the schedule be the First schedule to the Bill.