Second Standing Committee
on Delegated Legislation
Monday 17 June 2002
[Mr. Edward O'Hara in the Chair]
Local Government Finance (England)
Special Grant Report (No. 100) (HC 869),
on 2001–02 Special Grant for Rate Relief
in Respect of Hardship Caused by
Foot and Mouth Disease
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): I beg to move,
That the Committee has considered the Local Government Finance (England) Special Grant Report (No. 100) (HC 869), on 2001–02 Special Grant for Rate Relief in Respect of Hardship Caused by Foot and Mouth Disease
Thank you, Mr. O' Hara, for your precision in calling me today. It is with great pleasure that I undertake my first special grant report Committee.
The report specifies that special grant will support the cost to local authorities of granting rate relief to small businesses suffering financially due to the outbreak of foot and mouth disease. Local authorities already have discretionary powers under the Local Government Finance Act 1988 to grant rate relief of up to 100 per cent. for any ratepayer who is suffering hardship for any reason. It is available to all businesses that have suffered a significant loss of trade due to the foot and mouth outbreak and which may have suffered financial hardship as a result.
Farms are already exempt from rates altogether, but many other businesses were affected by the outbreak during the last financial year. Those include other agricultural and ancillary businesses, food processors, retailers, hotels and other tourism businesses, restaurants, pubs, transport and haulage firms. All can be considered for rate relief, whether they were affected directly or indirectly by the outbreak. That includes rural areas where there has been little or no incidence of the disease, but where businesses were affected by precautionary measures, or reduced trade was caused by the knock-on effects on tourism.
Rate relief for hardship is usually 75 per cent. and centrally funded, with local authorities meeting 25 per cent. of the cost. However, we recognise that funding even a quarter of the cost of hardship resulting from the foot and mouth outbreak would place a heavy burden on rural local authorities. Therefore, we have addressed the issues through a series of special grant reports. Special grant report No. 100, which is before the Committee, is the third and final report.
Before discussing that report, it may help if I set out some details of the preceding reports. Special grant report No. 80 was approved by Parliament on 2 April 2001. Under its terms, we increased central funding from 75 to 95 per cent. of the cost of relief given to small businesses affected by foot and mouth. That
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extra funding was made available for 151 rural local authorities in England in respect of businesses with rateable values of up to £12,000. In those areas, councils were left to fund just 5 per cent. of the cost of rate relief for those small businesses. The scheme was approved initially for three months, and it expired on 30 June 2001.
As the Committee may be aware, the difficulties caused by the outbreak continued into last summer, and as a result the Government extended the scheme under the provisions of special grant report No. 86. The report extended the arrangements in three important areas. First, we extended the funding arrangements for a further six months so that they applied until 31 December 2001. That continued the increased central Government contribution of 95 per cent. of the cost of giving rate relief to small businesses seriously affected by foot and mouth for the 151 rural authorities listed in special grant report No. 80.
Secondly, we provided additional help to 37 authorities in the areas most seriously affected by foot and mouth disease. In those authorities, which were specified in the report, central Government support increased from 75 to 95 per cent. in respect of relief granted to larger businesses with rateable values of up to £50,000, rather than just £12,000. That funding was provided for nine months, and applied retrospectively from 1 April 2001 until 31 December.
Mr. Greg Pope (Hyndburn): Will my hon. Friend explain to the Committee how the Government identified the 151 local authorities in England as the most rural? They clearly excluded several—the two local authorities in my constituency were left out, despite having had foot and mouth outbreaks. I would be interested if he explained why some authorities in Lancashire were included and some were not.
Mr. Leslie: I shall touch on those matters later, but my understanding is that the Countryside Agency has a list of which authorities it defines as rural. Following recognition by the former Department of the Environment, Transport and the Regions of the classification of rural authorities, those 151 were so classified. Therefore, because a line had to be drawn somewhere, the decision was taken to work on that basis.
Mr. Pope: Further to that point, I dispute whether there was a need to draw the line somewhere or, indeed, anywhere. The very nature of foot and mouth disease meant that the number of outbreaks in non-rural areas would be small. Therefore, the cost to the Government would be correspondingly small.
There are several cases in my constituency of people who suffered real hardship but cannot get relief from the local authority because, arbitrarily, the authority was excluded, yet two neighbouring authorities of similar rurality were included. I understand that the Countryside Agency's definition was used, but the Government cannot shuffle off their responsibility in that way. I want to know how the authorities were defined and why some with rural areas were excluded.
Mr. Leslie: I have explained the initial definition of rural authorities, and I shall shortly discuss the current special grant and how we consulted and listened to
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authorities that were outside the original definition. We worked with the Local Government Association and others to listen to and reflect on feedback on the initial definition, and other authorities were included as a result. I have an open mind on such matters and the Government consider applications from authorities, but, because of finite resources, we must draw the line somewhere.
The 37 councils that were most significantly affected were among the 151 rural authorities in the seven most badly affected counties: Cumbria, Devon, Durham, Gloucestershire, Lancashire, North Yorkshire and Northumberland. We clearly recognised that the more hardship applications an authority received and dealt with under the arrangements, the more difficult it would be for it to fund them, even at the relatively modest 5 per cent. contribution specified under the special grant reports. Therefore, we increased the central Government contribution further, from 95 to 98 per cent., for those councils facing the highest costs. That meant that if any of the 151 local authorities granted relief worth more than 8 per cent. of their annual net budget requirement on hardship relief under the special grant report, central Government would pay any costs above the threshold at the increased rate of 98 per cent.
The old arrangements applied until the end of December 2001, but, before the end of the year, two reports were published on the foot and mouth outbreak and the Government's response to it: the rural taskforce report, ''Tackling the Impact of Foot-and-Mouth Disease on the Rural Economy'', and Lord Haskins's report, ''Rural Recovery after Foot-and-Mouth Disease''.
Both reports welcomed the additional financial support provided by the Government to local authorities for funding hardship rate relief. However, they also acknowledged that the problems facing rural businesses were likely to persist for the rest of the winter and recommended that the support be extended until the end of the 2001–02 financial year. The Government accepted the recommendation and announced their intention to bring a further special grant report before the House.
Mr. Eric Pickles (Brentwood and Ongar): Does the Minister draw any distinction between areas that were effectively closed down because of foot and mouth and areas where the disease was prevalent?
Mr. Leslie: The extra support in the changes between special grant reports Nos. 80 and 86—the threshold of £50,000 and the increase in relief to 98 per cent.—reflect our consideration of the 37 authorities that were most severely affected. That is significant support to businesses that were affected by the outbreak.
Mr. Pickles: I am grateful for the Minister's reply, but, with the deepest respect, he has answered a question that I did not ask. I asked whether he draws any distinction between businesses that were effectively closed down because of foot and mouth and businesses in areas in which it was prevalent. Does he give any weight to the problems in areas in which firms could not operate because of the various
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restrictions put in place, even though foot and mouth might not have been as prevalent as in other parts of the country?
Mr. Leslie: My understanding of the arrangements as they have been operating and as they are defined in the special grant report is that they allow for many different businesses with many different characteristics to be treated relatively similarly and with a presumption of generosity.
Sitting suspended for a Division in the House.
Mr. Leslie: Special grant report No. 100 will extend the special funding arrangements in special grant report No. 86 until the end of March. There has, however, been some delay in bringing the report before the Committee, and I should like to explain why.
Over recent months, my Department has received representations from a small number of local authorities that believe that their local circumstances justify an extension of the arrangements set out in special grant report No. 86. During the first nine months of the funding arrangements, the LGA carried out the important role of monitoring both take-up of the scheme among rural local authorities and the level of hardship relief, and I thank it for those efforts.
As a result of that initiative, the LGA recommended to the Government that, as well as the arrangements being extended until the end of March 2002, the scheme should be extended to North Cornwall and West Somerset district councils. Both local authorities are rural and both were eligible for funding under special grant reports Nos. 80 and 86. However, in both cases the arrangements provided additional funding for hardship relief only for properties with rateable values up to £12,000, as both local authorities are outside the worst affected counties.
The LGA recommended that both should be eligible for conditional funding in respect of the hardship relief granted for properties with rateable values of up to £50,000, placing them on the same footing as the worst affected areas of the country. The Government had to be satisfied that the extension to the arrangements was justified, so we conducted inquiries with both authorities following the announcement of our intention to extend the scheme to the whole of the 2001–02 financial year.
We were satisfied that the additional support recommended by the LGA is justified in both cases. Both local authorities border Devon, which had a very high incidence of foot and mouth disease and where rural authorities already qualify for the higher level of support. In addition, both areas rely heavily on tourism and both reported many applications for relief. Special grant report No. 100 therefore places both authorities in table 2 of annexe A, which means that both will qualify for the higher level of support for the duration of the scheme in the 2001–02 financial year.
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I should also say that the Government received approaches from two other local authorities. However, they are not regarded as rural for the purposes of the special grant arrangements, so we decided against an extension.