Peter Aldous calls for the needs-based review of fair funding to be synchronised with the move towards full business rate retention by local authorities

23rd January 2017

Speaking in a debate on the Local Government Finance Bill, Peter Aldous welcomes moves to ensure greater retention of business rate revenue by local authorities but seeks assurance that the needs-based review of fair funding is synchronised with the move towards full business rate retention. He also raises concerns relating to the provision of sufficient supported housing and growth constraints that are out of the control of local authorities.

I apologise for not being here at the start of this debate. I am grateful to you, Madam Deputy Speaker, for allowing me to say a few words. I will not detain those on the Front Benches for very long.

This Bill provides a framework for a major change in the funding of local government, and it provides for the greater retention of business rate revenue by local authorities, and that principle is the right one. Ideally, money raised in an area should remain there, rather than being circulated and perhaps lost as it goes around the country. People and businesses in an area are entitled to expect their money to be spent on local services, with spending decisions made by local councillors to whom they can talk on a day-to-day basis. It is right that we are moving away from a system whereby the man in Whitehall knows—or thinks he knows—best. That is an important move by the Government, but, as is often the case in such circumstances, there are potential pitfalls along the way. I wish briefly to outline three of those pitfalls this evening, and I do so in my capacity as an MP for a county and a coastal area, and as chairman of the all-party parliamentary group for counties.

My first concern is what I will call an unintended consequence. As part of the devolution process, in order to facilitate the new business rate retention process, at present various responsibilities are being transferred from central to local government to ensure fiscal neutrality. I have no problem with that in principle, but there is a danger that in some circumstances there might be unintended consequences. An example that I have come across is in the field of supported housing. Traditionally, developers of supported housing have been able to rely on the fact that their bankers are prepared to fund much needed new schemes in the relative comfort of knowing that they will be underwritten and underpinned by central Government. It is now proposed that in future that should be a function of local government. I regret to say that the feedback I have received from many specialist supported housing providers indicates that they are very uneasy about whether the supported housing that we need will actually come forward. Practical steps need to be taken to address this concern—there might be others—if this aspect of the devolution process is to succeed.

My second concern relates to what I will call growth constraints. An underlying premise behind the move to greater business rate retention is that those authorities that promote growth in their area should be rewarded for it. Again, this is right, but the other side of the coin is that authorities that would like to promote economic growth in their area should not be penalised if, for reasons outside their control, they are unable to do so. For example, if much of a local authority area is a national park, it would not be realistic to promote a science park. Moreover, one cannot buck the market, and the success of such business park developments rests on the old adage of location, location, location. If they are not in the right location, there is nothing they can do about it; they cannot move their district, their borough or their county.

My third and principal concern focuses on the requirement for the needs-based review of fair funding to take place at the same time as the move towards full business rate retention. I am aware that that is the Government’s intention and that a consultation is due to start next month. It is absolutely vital that we keep to this. If we do not, county areas, such as the constituency I represent, will be placed at an even greater disadvantage than they are at present. The current formula does not take proper account of the demand pressures that county areas and, as my hon. Friend the Member for Torbay (Kevin Foster) said, coastal areas face. There is the adult social care time bomb that we have heard so much about, the obligation to maintain hundreds, if not thousands, of miles of local roads, and the cost of delivering services in sparsely populated, rural areas. The current formula is opaque and, after years of tinkering, no longer fit for purpose, as it is no longer directly linked to need. The needs-based review must be synchronised with the move towards greater business rate retention—they must be joined at the hip. If it is not, a large section of the population will be very unfairly penalised.

In conclusion, I commend the Government for being bold, for their ambition and for their direction of travel. I thus support the Bill, but I urge the Government to remember that the devil is in the detail and to pursue the needs-based review in a timely and fair way. Time really is of the essence in this issue.

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