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Business Rates: Devolution

Volume 777: debated on Wednesday 21 December 2016


Asked by

To ask Her Majesty’s Government what progress they have made in implementing plans for the devolution of business rates to local government.

I beg leave to ask the Question standing in my name on the Order Paper and draw the House’s attention to my interests as the directly elected mayor of Watford and a deputy chair of the LGA.

My Lords, councils have long campaigned for 100% business rates retention. We recently conducted a consultation on our proposed approach and will publish our response and our proposed way forward shortly. In the meantime, we will continue to work closely with local government to shape the reforms.

I am very pleased to hear that, because close collaboration with local government is essential if this very new and radical approach is to work. Is the Minister aware that, as part of the new regime, councils are being asked to undertake new burdens, in particular the controversial attendance allowance benefit? Will the Government consider dropping these new and additional burdens in favour of allowing us to fund existing ones, such as adult social care?

My Lords, the noble Baroness is right that there is discussion on attendance allowance being devolved, although no conclusion has been reached on that. We are currently considering responses on that. I do not think we have had a response from Watford in general terms on the reforms we are suggesting.

My Lords, will the Government, in the course of changing the new system, allow local authorities to vary the business rate, or will the level of business rates still be determined at national level and merely the receipts be localised? Further, what steps will the Government take to redress the imbalances that will arise from some areas having significantly higher potential yield from business rates than others?

My Lords, as I indicated, we are consulting on this and we will discuss it with local government as the reforms come forward. On the general point on redistribution, that has to be an element of this. The noble Lord is quite right that some local authorities will be in receipt of far more in business rates than others. We will need a corrective mechanism to deal with that.

My noble friend mentions consultation. What consultation is taking place with representatives of the retail trade and small businesses?

My Lords, obviously the consultation is primarily designed to take account of the position of local authorities. That is something we are taking forward. I am sure that feeding through views from retailers will be something local authorities will wish to bring forward in the consultation and discussion we are having.

My Lords, to follow up on the Question, and given that the new responsibility is placed on local government, do conversations take place with the Treasury as to whether local authorities can afford to take on that responsibility? What is the process? Is everybody involved in the discussion, or is it just one side working against another?

My Lords, the first point I make to the noble Lord is that, although new responsibilities are being talked about, he will recognise that a considerable amount of new finance will be generated by 100% business rate retention. We are talking about some £12.5 billion—a considerable sum. Yes, of course the discussion is both within government and, as I indicated, with our local authority partners.

My Lords, does the Minister agree that business rate income for local authorities can be quite erratic and unpredictable, particularly for small local authorities, owing to the large number of appeals against business rate valuations now in the system? Will the Minister take steps to speed up the process of dealing with such appeals? Does he understand that, for many local authorities, it is very difficult to plan a budget for the next year without putting aside a serious amount of reserve money—which could otherwise be used for services—as a means of mitigating potential risks arising from a reduction in business rate owing to appeals, which can involve the payment of refunds as well as reducing the current year’s income?

My Lords, the noble Lord is right about there being an element of risk and volatility in the system. We are seeking to address both those points to ensure that we smooth the process. Risk from a single business on which a local authority was very dependent would perhaps create an issue and so would appeals, which, as the noble Lord indicated, can have an effect on cash flow. We are seeking to address both of those in discussions with local authorities. We also have a technical working group drawing on people from local authorities as well as from the DCLG and elsewhere to address the very issues that the noble Lord raises.

My Lords, I welcome what the Minister has said about looking at distribution to more disadvantaged areas. Given the recent report from the Social Mobility Commission highlighting blackspots of disadvantage across the country, will he look again at the funding of local authorities to see whether some money can be found to help them improve the life chances, the social mobility and the social opportunity of disadvantaged young people in their areas?

My Lords, the noble Earl is right to refer to redistribution, which is fundamental to the system because we are able to identify it very easily. Quite separate from that but something that he will know we are looking at is the issue of fair funding. We are consulting local government on that with a view to ensuring that new formulas are in place by the end of the Parliament to take account of the very issues of social mobility to which the noble Earl referred and to which the Prime Minister is of course very committed.

My Lords, on a related matter, when will the Government consider revising council tax bands, which no longer reflect the value of property, particularly in the south-east?

My Lords, may I draw my noble friend’s attention to my Council Tax Valuation Bands Bill, which was on the whole well received in the House? It has not made very much progress, but it would be the answer to updating without having to revalue property for council tax. It would make it much fairer and very easy to apply.

My Lords, I congratulate my noble friend on his commercial. I do not think that it needs any added words from me.

My Lords, I draw the House’s attention to my interest in the register as a member of Sheffield City Council. On the Question asked by my noble friend Lady Thornhill, will the Minister give a specific commitment that no new burdens will be placed on councils as part of any review until the funding crisis in social services is dealt with?

My Lords, as I have indicated, we are moving forward, essentially by consensus, in discussing this matter with our colleagues in local government. I have also indicated that the 100% business rate retention scheme will be in force by the end of the Parliament. I am sure that the noble Lord will understand that we would expect local authorities to pick up something in return for that added money.