Local Government Finance Bill

Mark Field (Cities of London and Westminster) (Con)

It would be remiss of me not to congratulate the Minister for Housing and Planning, who will respond to the debate, because today is his birthday. What a way to spend a birthday: having to sit around and listen to this debate. Of course, The Guardian, in its typically cavalier approach to the facts, suggested that he is only 45 years old.

I commend the Government for their more flexible approach to local government financing, which I think is broadly supported by the two local authorities in my constituency.

It is a pleasure to follow the hon. Member for Sheffield South East (Mr Betts). I share some of his concerns about the way in which local authorities might, if there is a lag in the system, try to game the system by holding back on new developments either being given permission or being built until such a time as they would qualify. I hope that that concern, along with other possible unintended consequences of this measure, will be addressed by the Minister tonight and later in our consideration of the Bill.​
The City of London corporation is grateful for the provisions that will compensate councils for losses arising from valuation appeals. That has been a very significant problem for the City, particularly in the aftermath of the commercial property downturn in the late part of the previous decade, for which the corporation had borne the substantial risk under the rates retention scheme, despite the matter being entirely out of its control. Clause 2 addresses that issue, and I believe that it is very welcome. However, I should note that it comes in the form of a discretionary power to be exercised by the Secretary of State. Further information would be appreciated on how precisely that power will be used, and particularly whether full compensation will be provided for appeal losses.

It is also correct at this stage to put on the record the support that the City of London feels for the wider devolution proposals put forward by London Councils and the Greater London authority, but it seeks to maintain the special arrangements that recognise that the City ought to retain a greater proportion of the business rate since the amount it can raise from council tax is limited by its small residential population—it has only around 7,000 inhabitants.

I am very aware that many colleagues here who are not London Members will feel, as we all probably do, that if we were starting to look at Government finance, we would not start from the position we are in now, which is an accumulation of various bits of legislation that go back many decades. I am not sure that any of us really wants to go through the rigmarole of looking at this issue entirely from first principles or that we would be brave enough to do so—perhaps only my hon. Friend the Member for Christchurch (Mr Chope) would be happy to. However, the difficulty is that if we do not, there will be what many of my rural colleagues will feel are great advantages to London. The truth about London is that it is an extremely expensive place to live, what seems like relatively generous treatment in council tax terms reflects that high cost of living in many ways.

If I may, I will turn to the western part of my constituency, which is where we are now. Westminster City Council is seeking Government support for its West End partnership investment programme, which might also incorporate parts of the London borough of Camden. The programme aims to maintain private sector investor confidence at a time when businesses are anxious about the imminent impact of a business rate revaluation. The council would be looking for the programme to work alongside the Bill. The programme would consist of transformative works to improve the public realm, infrastructure and environment in the west end of London, such as in the Oxford Street district. That will, in turn, secure direct private sector co-finance and trigger additional investment by landowners and business occupiers.

I accept that my local authority is very unusual. Westminster contributes 3% of UK tax revenues, making the highest single contribution of any borough. It also has the highest business rates collection in the country, at £1.8 billion a year, and that will rise, it is assumed, to about £2 billion in the next financial year. Rate payers in Westminster also contribute more business rate supplement than those in all 20 outer London boroughs combined, including £1 billion towards Crossrail, with businesses in the Oxford Street area contributing half of that. I appreciate that the capacity of west end businesses ​to contribute business rates and other tax revenues for other projects, such as Crossrail 2, is now highly dependent on their confidence in the west end operating environment.

Major improvements to paving, roads, lighting, traffic lay-outs and infrastructure will be required to bring the west end up to the standard expected by the firms located there and the millions of people—both UK and non-UK residents—who visit. Existing local authority and GLA funding mechanisms are simply unable to address all those problems, and I appreciate, as someone who represents two parts of this central, global city, that a mechanism cannot necessarily apply in this case and that there has to be a sense that this state of affairs is exceptional.

The West End partnership programme is resolutely designed to improve the dwell-time of visitors and, of course, their average expenditure, reversing a recently declining trend, compared with other world cities. That will not only improve onward tourism from London to other parts of the UK—that is an important point to make—but increase the number of international business visitors who trade with several global-facing sectors located in central London. Those include, for example, the Soho media cluster just south of Oxford Street east; the Harley Street medical cluster north of Oxford Street west; the knowledge and creative quarter around the northbank, or the Strand and Aldwych area; and, of course, the very significant financial services sector, which is no longer just in the City, with hedge fund land now very much in the Mayfair and St James’s area.

As far as London is concerned, it is important to stress that the supply chains and jobs often reach out to the UK regions. It is often said—I am looking at the hon. Member for Erith and Thamesmead (Teresa Pearce), whose constituency is in one of the outer London boroughs —that London gets a very good deal and that we get all the infrastructure development, whether that is the Olympics or Crossrail, but it is important to make the vital point that if a lot of that money did not come to our capital city, it would not come to the UK at all, but go to another global city. It is also the case with so much of the money that is invested that jobs are created, with contractor and construction jobs going beyond the capital. Fellow Members who walk to Victoria station or in the west end can see what is happening with Crossrail, but phenomenal numbers of jobs are going to other parts of the UK. The truth of the matter is that this investment has great benefits beyond London, so we should not look too harshly on what seems like special pleading from the capital city for future development. [Interruption.] I can see there is already another division on the Front Bench of the Labour party, given the knowing look from the hon. Member for Erith and Thamesmead. However, that is an important point to make, because the iconic and UK-wide opportunities based on central London will hinge on the outcome of the funding decision for the West End partnership programme.

Many overseas retail brands and retail concepts new to the UK will obviously be trialled in central London and then rolled out nationally. These and similar economic flows between London and the UK regions are often two-way, with London dependent on supply chains in the regions, and the regions highly dependent on London’s performance. If the capital city succeeds, there are benefits for the rest of the UK—this is not a zero-sum game. We need to make that point, and I appreciate, as ​a London MP, that I need to make it very robustly. However, it would be foolish to cut away London’s success, because the rest of our country would also suffer.

Westminster’s local authority believes that the programme it has in mind could create £12.3 billion of additional economic output and generate a further £2.5 billion to £3 billion in tax returns to the Exchequer simply by producing additional floor space, increasing revenues over and above existing Government projections for the business rates to be collected in our area. The private sector is prepared to invest in a very joined-up, strategic approach to the development of the west end. That will consist of cash payments from property firms and business occupiers towards public realm and road works packages.

My local authority submitted its strategic case and programme to Her Majesty’s Treasury in March 2016, and discussions are ongoing. The core of the programme would currently cost £814 million. Of that, £409 million would be required that cannot otherwise be funded from existing sources available to Westminster City Council, such as cash contributions from the private sector, GLA funding and the community infrastructure levy. The preferred funding option would result in Westminster City Council increasing local retention from 4% to 6.5%, enabling it to borrow sufficient funds to finance the entire programme over a 15-year period.

Let me say one quick word—this will probably unite Members of the House, albeit in different ways—about business rates, which are a looming nightmare for many small businesses in my constituency, and I think that that applies to much of London, but also beyond the capital. I appreciate that the Government have put together a very welcome £3.4 billion relief scheme nationally, which is designed to benefit the capital city more than other regions. None the less, the most recent consultation did not provide some London authorities with sufficient time to work out the extent to which our local businesses will be affected. I make this appeal to Ministers: Westminster City Council would like to see something more akin to the 2010 relief scheme, and it very much supports the suggestion that we break rateable value into three categories to recognise the varying abilities of small, medium and large businesses to pay business rates.

I take this opportunity to wish the Government great success with the Bill. I hope it is the first of many moves towards devolution. It has been rightly pointed out that this country, for historical reasons, has the most centralised tax base of any western European country. That cannot be a healthy state of affairs if we are to have thriving local democracy. The Bill is an important first step forward—the first, as I say, of many.