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5 Mar 2003 : Column 825—continued
Mr. Davey: Before the hon. Gentleman moves to a detailed analysis of this proposal, will he clarify that, in principle, the Conservatives are in favour of part of the increase in the business rate being kept locally? Can he
explain how that is consistent with previous Conservative policies? It may be, but, for the benefit of the House, will he elaborate the exact Tory position?
Mr. Hammond: The hon. Gentleman and I have had these enjoyable exchanges on many occasions during proceedings on this and other Bills. It is our position that increasing local autonomy is right, and that genuinely community-based local government is the right approach. To the extent that it can be prudently done within the overall fiscal framework, the maximum possible autonomy should be accorded to local authorities.
The phrase in the Minister's short written statement of 25 February that has given me concern is the following:
- "We are looking at a range of options to get the best distributional fit, with each local authority receiving an incentive that is relevant to them, whilst keeping the scheme as simple as practical."—[Official Report, 25 February 2003; Vol. 400, c. 9WS.]
Mr. Bercow: It certainly appears that the fog of confusion descending on this subject is becoming deeper by the moment. If moneys are to be shuffled back and forth in an uncertain way and in accordance with a labyrinthine formula, what assessment has my hon. Friend made of the principles on which calculations of entitlement to interest will be made?
Mr. Hammond: I can tell my hon. Friend with absolute honesty that I have made no assessment at all of that matter.
Mr. Hammond: I suspect that the Minister, with the substantial resources available to him, is also not in a position to make any such assessment, precisely because we lack many of the relevant details about how the scheme will work.
Let me pick up on something that the Minister said in his brief contribution at the outset of this debate. To paraphrase, he said that this was genuinely new
additional money and was not intended to interfere with the existing pooling system for national non-domestic rates. I do not profess to be an expert on local government finance. Indeed, one of the Minister's predecessors many years ago once remarked to me that only one person in his Department genuinely understood local government finance, and he was about to retire.
Mr. Bercow: It is like the Schleswig-Holstein question.
Mr. Hammond: As my hon. Friend says, it is like the Schleswig-Holstein question, often posed and never resolved.
The Minister says that this additional money will not interfere with the pooling system. I presume, however, that there is only one pot, and money that does not go into that pot because it is effectively top-sliced to the retaining local authority will not be there for distribution to other local authorities. That could have several consequences. The amount of NNDR received by all other local authorities that do not achieve the Government's threshold may be reduced, and Government grant, under the formula grant process, may be increased to make up the gap. If that is the case, perhaps the Minister could say so clearly. If that is not the case, taking anything out of the NNDR pot must reduce the amount for redistribution to other authorities.
The only other alternative is that there are no other authorities, and the so-called incentive scheme is so structured—or tailored, as the Minister calls it—that every authority gets to retain a slice of its NNDR, in which case the effect may be minimised, although that will make it difficult to see the benefits of the scheme. Can the Minister give a pledge, here and now, that grant will make up the shortfall in the NNDR pot available for redistribution as a result of top-slicing for retention by local authorities? The grant that is retained will therefore be genuinely additional to the total amount of money—council tax receipts, plus formula grant, plus NNDR redistributed—that that authority would have received had it not been for the top-slicing that the scheme involves. If the Minister can give that assurance, he clearly has the details of the scheme in his mind, if not on a piece of paper. Why has he not been able to share those details with the House?
I turn to a specific question, which I apologise for asking, as it is the kind of question that one would ask properly in Committee. When the Government introduce new clauses on Report, however, we must ask such questions on the Floor of the House. Proposed new subsection (3B) of subsection (4) of the new clause, which inserts new words into section 99 of the 1988 Act, refers to
- "rules that may be prescribed under paragraph (a) of subsection (3)".
The principle of local retention is welcome, but it must be a genuine additional resource and not just a redistribution from one authority to another. The Government have said that no authority will suffer from negative business rate growth, but they have not said that none will suffer from the reduced size of the total NNDR pot for redistribution. Will the Minister give that assurance today?
The Treasury document and the ministerial statement have sounded alarm bells, and we need to see the regulations before we know whether their sounding is justified. I hope that the Minister will be able to explain why he cannot provide even an indicative outline of the Government's intentions in the way that he has done for some other clauses. Will he make a commitment today that such an outline will be available when the Bill reaches the other place?
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We will not oppose the new clause, but I hope that a substantive debate on the issues will be possible in the other place or, if for any reason that is not possible, when the regulations are laid. I still hope that we will be able to persuade the Government that the provision should involve a small first step to devolution of financial autonomy back to local authorities. The rest of the Bill certainly does not deliver that.
Mr. Edward Davey: The new clause puts me in a bit of a quandary. I want local authorities to have extra autonomy for their spending and local taxation, so allowing local authorities to retain part of the growth in the business rate is clearly a welcome step. However, the sheer complexity of the scheme that is likely to emerge from the consultation is mind-boggling, and not just in terms of working out how the increase will be measured but, as the Minister has acknowledged, in terms of working out how we will assess the relative economic decline of an area that does not have a growing business rate tax base. We will also have to assess whether there had been a reduction in the pace of that decline because of local authority action. All that shows just how complex the proposal is.
We should give credit to the hon. Member for Runnymede and Weybridge (Mr. Hammond). He talked about how the policy would sit alongside the pooling of the uniform business rate. If the Minister answers the hon. Gentleman's question in the affirmative and if it appears that grant will be paid back into the pool to compensate for any loss of rate proceeds, the grant side of the scheme will also be complex. One can imagine the regulations that will have to be introduced. We now realise why they were not ready for consideration by the House today.
We should be worried about complexity in taxation matters. The Government have made the whole tax system far more complicated, and that has put huge extra compliance burdens on businesses and individuals. The provision will place an extra compliance burden on local authorities, and we must try to work out whether the extra financial autonomy that will be gained as a result of this timid devolution of financial power is worth the extra complexity. The House and local authorities will have to consider that balance. Our conclusions will depend on their assessment of whether the proposal is a sensible way forward.
Because of the complexity, I wonder where on earth the scheme came from. As the hon. Member for Runnymede and Weybridge pointed out, it appeared in the Chancellor's pre-Budget report, so does that mean that it came out of No. 11 Downing street and the Treasury? It is a fiendishly complicated and clever scheme of the type that the Chancellor is very good at dreaming up. Did a certain Ed Balls help the Chancellor to dream up the scheme in the back of a cab or in a pub? It has that sort of feel. It does not appear that the policy has gone through rigorous analysis in the civil service. It is rather bizarre.
I am glad that the Government are committed to consulting widely with the Local Government Association and many other stakeholders. The consultation will have to be pretty extensive and involve the consideration of detailed proposals. I hope that we will have an early sight of any draft regulations before we scrutinise them in the House.
As I said in an intervention on the hon. Member for Runnymede and Weybridge, I am concerned that, because we know so little about the proposal's eventual form, the House will be asked to provide primary legislative agreement and will be able to consider the detail only in a Statutory Instrument Committee. The proposal will probably involve hundreds of millions of pounds, and the figure is likely to grow over the years. Therefore, one would normally expect to debate such a matter in a proper Standing Committee. Since I became a Member of the House, I have had the fortune or misfortune to serve on more than seven Finance Bill Committees. They consider tiny and minor tax changes, and we spend hours in a full Standing Committee debating the merits of tax change that is worth just a few million pounds. Although the Minister pumps this up as a major tax change, he says that it will be suitable for consideration in a Statutory Instrument Committee. I have problems with that, so I hope that he will try to convince me that this is the right route for the House to take.
I also want to probe the logic behind the Government's proposal. It seems that the Conservatives have now changed their position, so we can now all agree that it is right that local authorities have, to an extent, more control over business rates in their areas. Would it, therefore, not be logical to go further than the Government propose? Ever since the Government nationalised the business rate, Liberal Democrats have argued that there is a case for denationalisation and for handing back the control of rates to local authorities. We would do that fully and completely and not in the partial and minor way envisaged by this proposal.
Will the Minister reflect on our suggestion? He may try to keep his counsel, but he will know that the Government have set up the balance of funding review. That review is relevant to the debate, because it will examine how much of a local council's budget should be raised through local taxes and how much should come from central Government grant. The presumption is that the review will try to shift the balance so that more
of a local authority's revenue comes from local taxes. Clearly, this proposal would be a small step in that direction.
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