House of Commons Hansard Debates for 12 Jan 1994

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wrong. The national business rate goes further in the direction of centrally administered rather than locally administered funds. Conservative Members generate many myths about local authorities. Thank God none has been generated in this debate, certainly not from the Minister, and Conservative Back Benchers have chosen not to speak. They say that local authorities are spendthrifts and that they hate and suppress business. That is nonsense. All councils--I speak on behalf not just of Labour-controlled councils but of those controlled by Liberal Democrats or Conservatives--co-operate with chambers of commerce. There may be exceptions to that, but I do not know of any. They also co-operate with local firms because it is in their interests and in the interests of business to do that.

There is co-operation on planning, on the environment and on services such as waste disposal and removal. There is a great deal of co-operation on roads and other communications, which are vital to businesses and which are, on the whole, controlled by county councils. Such dialogue is important. There is co-operation on education. At one time, I would have said that there was co-operation especially on higher and technical education but, alas, the functions in relation to those have been removed from local authorities. People from technical colleges can no longer see councillors to discuss schemes because the technical colleges are no longer controlled by county councils.

Local authorities, not the Government, are the best judges of the needs of counties and districts. A uniform business rate is a wedge between business and the council which it should not be. The business rate collected by councils goes into a national pool and the council itself does not benefit from it. As I have said, the 1995 revaluation will be traumatic for business no matter what the Minister says. All the forecasts are that the burden of rates and the revaluation will shift from London and the south to the north, the north-west and the midlands. It will shift from retail to manufacturing and such a trend should not be allowed. I passionately believe in manufacturing industry. Service industries such as tourism play a vital role, but a nation depends on what it makes, and to put an additional burden on manufacturing at this time is a shift in the wrong direction. We have tabled new clauses and amendments on matters about which the Bill is totally silent, but those matters should be addressed. The Bill says nothing about the utilities of gas, electricity, British Telecom or cable, which were formerly nationalised industries but are now profitable private businesses which can cause more trouble to a local authority than all the chemical industries put together : roads which have been dug up require reinstatement and traffic deployment schemes, but the firms that cause the problems are lightly treated under the rating system. In fairness not just to the domestic ratepayer but to businesses which have to bear the greater part of the burden of rates, the Bill should contain measures to deal with that or we should have a proper Committee stage to address those problems. I know that the rating of utilities is a complex matter but it could still be addressed.

The Bill gives the Secretary of State undue powers for which he is not accountable to the House. As I have said, even affirmative resolutions are not properly debatable

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because they are presented at a time when most hon. Members want to go home. They are not amendable and have to be accepted as a whole or not at all. Such crucial matters should be addressed by primary legislation and not by regulations.

The Government want to go back to basics. There are two age-old-basics : the basic right of democratically elected local councils to provide and be responsible for the needs of their areas, and the right of the House to question, amend or reject any Government measure. The Government want rule by regulation but there should be rule by democratic debate. The Government and the Leader of the House, who is in his place, should carefully consider those basic principles and not try to railroad the House without any reason whatever. There is ample time to pass the legislation long before 1 April, which is the start of the financial year. I do not think that any hon. Member likes that, and the House will not stand for it. 5.46 pm

Mr. David Rendel (Newbury) : It is interesting to note that you, Mr. Deputy Speaker, have not had an opportunity to call any Conservative Member. I am surprised that the Government cannot find a Back Bencher to support them, at least vocally. That reminds me of what happened last night, because at the end of the debate on the money resolution for the Bill the Minister was not prepared to answer the questions that had been raised. Some of us felt that that was not a great display of courage because some serious issues were raised. I hope that the Minister will answer some of those questions in the winding-up speech at the end of this debate.

Yesterday, I said that the origin of the problems of the national non- domestic rate was the lack of revaluation of business premises between 1973 and 1988. I should like the Minister to address that. Perhaps that was due to a lack of political courage by, first, the Labour Government and then the Conservative Government, who feared business reaction to the huge increase in business rates that would have been likely if revaluation had gone ahead. That lack of courage meant that when the revaluation finally took place on the introduction of the national non-domestic rate, there were large increases for some businesses, and the Government were forced to introduce a transitional scheme.

Mr. Peter L. Pike (Burnley) : Is the hon. Gentleman aware that the flagship of the Conservative Government, the 1987 legislation on the poll tax, included that ? It was debated at great length and one of the problems addressed was that transitional arrangements for the non-domestic rate would be overtaken by another transitional arrangement because of another revaluation. The situation in which the Government now find themselves was forecast during the debate on the poll tax legislation, and they are now trying to force legislation through the House.

Mr. Rendel : The hon. Gentleman makes a valuable point, but what he says is not surprising, because it was clear even at that time that the revaluation would result in enormous changes to business rates and that some sort of transitional arrangement would be needed for a long time.

The transitional relief was expected to be, and, indeed, was to start with, self-financing in the sense that businesses which suffered big increases in rates were compensated by those that were likely to gain from a reduction. But the

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gains were not given to them straight away, and that meant that the original scheme was self-financing. However, shortly afterwards, we entered a recession and the Government faced a general election. Just before that general election, the Government decided to allow all the benefits for firms and businesses that were looking for a reduction in their rates to be given to those businesses.

That was clearly an electoral bribe and it has made necessary the increase in other funds to make up for that drop in rates coming in ; that bribe has, therefore, caused the problems that we are facing today--the need to change the transitional relief year by year. The challenge that I gave to the Government last night--I would welcome an answer today, as they did not have the courage to answer last night--is : do they agree that the electoral bribe given in March 1992 is the main cause of the problems now?

I shall go a little further into how the need for huge transitional relief has arisen and point out that it has been necessary in some areas of the country, particularly the rather more prosperous south-east, which had the tremendous economic boom of the late 1980s, spurious though it has turned out to be. As a result of that boom, there were huge property value rises in the south-east.

In areas around my constituency, large rateable value increases have led to large increases in the NNDR payable. That has put the south-east and similar parts out of kilter with less prosperous parts, which did not perhaps gain such benefits as were gainable from that boom. We have found, of course, that the recession has had almost the opposite effect. Those parts of the country that benefited in the short term from the boom have been the same parts that have been hit--often worst--by the recession.

The areas where property values rose at the time of the revaluation of 1988 are often the same areas that will be revalued at a much lower rate under the property revaluation of 1 April 1993. That has led to a curious situation in which there had been huge increases in business rates, which have had to be reduced by transitional relief. But those increases may lead to reductions in the total amount payable once next year's revaluation--it was introduced on 1 April 1993, but the new business rates will become payable next year--comes into effect.

Those huge increases have led to a number of business bankruptcies in the meantime. It is my fear that if the increases are allowed to go ahead, even at the levels that are being contemplated over the next year, a number of businesses will become bankrupt during that year--businesses that would have found their rates reduced by the revaluation had they survived as long as the beginning of next year. I therefore believe that it is foolish of the Government to go ahead with increases in rates charged this year for some of those firms which are likely to be, or could be, put out of business during the next 12 months, but which, if they could survive that period, might survive thereafter and become viable once more.

There is a good case to be made for saying that the amount of rates relief that has been allowed--or will be if the Bill is passed--is insufficient and will lead to a loss of businesses, which the Government could avoid if they chose to do so. If the Government chose to avoid that loss of business, that might be self-financing because the loss of businesses inevitably means that rates will be lost as well and the country's general level of prosperity will fall.

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I shall now deal with the details of Labour's amendment, because I have certain sympathy with much of what Labour Members have talked about and much of their amendment in terms of the apparently illogical way that the Government were planning at first not necessarily to make up losses, but now, as promised, are to make them up.

However, it seems that we should on this occasion support the Government on Second Reading and not support the amendment, because although I have certain sympathy with some of what the Labour party has said today, the point that it is making is a rather technical one. I say that for the following reason. The amount that council tax payers will have to pay in any year depends on what comes back to them not only from the NNDR--the distributable amount--but from the revenue support grant.

It is open to the Government to make increases or decreases in the revenue support grant as they wish. Were they, for example, not to make up the full amount in the distributable amount as a result of changes to transitional arrangements, it would still be open to them to make up that amount by increases in the revenue support grant. Equally, if they chose to make up the whole amount lost in transitional arrangements, they could nevertheless reduce the revenue support grant. So the ultimate effect on the council tax payer is not in itself determined by the passing or otherwise of the Labour amendment.

Mr. Betts : Does the hon. Gentleman accept that, first, the total amount of money available in the revenue support grant to local authorities is likely already to have been announced by the Government by the time they announce their decision on whether they will make up any shortfall under the legislation, and, therefore, that there may be a direct impact on local authorities in total from the Secretary of State's decision in the future?

Secondly, if the money is made up from the revenue support grant rather than through a direct making up of the shortfall under the discretion available to the Secretary of State under the legislation, the impact on individual authorities will certainly be different, and, therefore, so will the impact on individual council tax payers in the services that they receive.

Mr. Rendel : In practice, the Government will decide the level at which they will make up the distributable amount before they make any announcement on the revenue support grant, whether or not the decisions are announced in the appropriate order. Therefore, in practice it is still within the Government's capability to decide on the total final result for the individual council tax payer.

Mr. Jim Cunningham : Does the hon. Gentleman accept that, looking at the record of the Government, in practice the local authorities are not compensated by the full amount and that that is one of the problems with the Bill?

Mr. Rendel : I accept that. The problem is that the Labour amendment does not seem to overcome that difficulty, but I accept that the difficulty exists.

Mr. Vaz : I am grateful for the hon. Gentleman's sympathy for the Opposition's amendment, but does he not accept, as was said by my hon. Friends earlier, that it would be much better if the commitment that the Minister gave to the House were put in the legislation? Therefore, does he

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not accept that it is much better to support the reasoned amendment, which calls for that commitment to be put in the legislation?

Mr. Rendel : To a large extent, I have already given my reasons for thinking that it does not much matter whether that commitment is in the Bill or not. Therefore, my reason for opposing the reasoned amendment proposed by the Labour party is that, in practice, there is insufficient reason for voting against the Second Reading of the Bill when to do so might cause other problems. It is those other problems that I shall particularly put to Opposition Members who wish to see the amendment passed.

Mr. Robert Ainsworth (Coventry, North-East) : I am grateful for the hon. Gentleman's indulgence, as I know that he has given way many times today. I understand the point that he is making, but surely he accepts that we are dealing with a Government who have shown stealth and guile in imposing taxation burdens on everybody in the country over a period and it would be a good thing to remove the opportunity for them to increase other people's taxation by stealth and guile through the mechanisms provided in the Bill. They may well do that. The Minister is saying that he accepts the principle of hypothecation and that all the product of the business rate will go to the pool, but he refuses to put that in the Bill. Surely, if that were in the Bill, we should at least achieve one thing--we should remove one bush behind which the Government could hide when imposing what will effectively be extra tax on ordinary people.

Mr. Rendel : I have some sympathy with the hon. Gentleman's point, as I said in my remarks about Labour's amendment. However, I do not feel that passing the amendment will enable us to force the Government to play fair in the long term, because they are answering only one of the two parts of the problem, which are the NNDR and the revenue support grant. However, my sympathy is not strong enough to lead my party to refuse to support the Bill as a whole. I have now answered that point four times in a row.

As I was going on to say, further difficulties are liable to accrue if we do not give the Bill a Second Reading. I ask Labour Members to consider to what extent they feel that they could deal with the problem of the excessive rates in certain areas that are likely to lead to business failures later this year if the Bill or something like it is not passed. We should not forget that, once it receives Second Reading, it can be amended in Committee.

Furthermore, we must consider not only what would happen to those businesses facing excessive rate rises this year but what would happen after the revaluation has taken place and we see, perhaps in areas rather more relevant to Labour Members, excessive rises next year. The relative value of businesses in some of the more prosperous parts of the country may be reduced compared with the value of businesses in rather less prosperous parts of the community, which have not suffered to quite such a significant extent from the change in business values.

Mr. Pike : The hon. Gentleman is raising a couple of points for the Labour party to answer. My hon. Friend the Member for Blackburn (Mr. Straw) told the House that we are not opposed to the principal objective of the Bill, but

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we believe that there should be more time to consider its proposals and that it needs some amendment. The amendment is not aimed at defeating the principle of the Bill. We believe that people outside the House should have the time to put their views on the Bill so that they can be taken into account. Some amendments, such as those that we have tabled today, should be debated and, we hope, agreed to so as to improve the Bill.

Mr. Rendel : I thought from the previous four interventions that the Labour party was more distrustful of the Government than I am, but that intervention implies that I am more distrustful of the Government's intentions than is the Labour party. If we do not at least give the Bill a Second Reading, thereby giving us a chance to amend it, we may lose the whole thing. If that happened, there would be no guarantee that the Government would introduce another Bill. That would leave businesses facing enormous rate rises. Because my distrust of the Government's intentions is such that I do not believe that they would introduce another scheme for transitional relief, I would rather we had what is on offer in the Bill.

Mr. Vaz : I do not know what the hon. Gentleman's problem is. My hon. Friend the Member for Blackburn (Mr. Straw) made it clear that the Labour party supports the subsidies that have been given to businesses not just in this Bill but in other similar Bills in the past three years. My hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson), when he led for the Opposition on this matter last year, made it clear then that we supported the subsidy. My hon. Friend the Member for Burnley (Mr. Pike) and earlier my hon. Friend the Member for Blackburn said that it is ridiculous that the Government are pushing this important Bill through in one day. The hon. Member for Newbury (Mr. Rendel) was elected to the House in a spectacular fashion, and told the electors of Newbury that the Government should not be trusted. Perhaps he is now showing his true colours. He is more prepared to trust the Government than is the Labour party, which is proposing to scrutinise the Bill carefully and to consult local businesses. Surely he supports that aim.

Mr. Deputy Speaker : Order. Interventions are supposed to be brief. Unfortunately, today some of them have not been and I hope that the House will take note that in this and other debates interventions should be short.

Mr. Rendel : That intervention was making the same point as others and it would be wrong of me to repeat my answer to the previous intervention, which was probably adequate. I have made it quite clear that I do not share the Labour party's trust in the Government, and their belief that the Government will introduce a new Bill if this one falls. The problem with Labour's opposition to Second Reading is that the Government might not introduce another Bill. The Opposition are endangering businesses --I accept that they may not intend to do so and that in principle they are supporting the transitional arrangements--by trusting the Government to come back with a further Bill, and I do not have that trust.

The NNDR system as a whole is not a sensible way to tax businesses for local taxation purposes and we should be moving to the system of site value rating, which the Liberal Democrats have proposed for a long time. That would lead to an increased transfer of the burden of business rates

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away from struggling businesses and towards the developers out to make a quick buck. That is an excellent principle to work on, and the Government would be well advised to look at it.

Such a system would be particularly valuable to those parts of the country, including my constituency, that have seen huge pressures of over- development of green-field sites in the past 15 or 20 years. A number of brown-field sites have not been properly developed and could do with further development in place of that damaging pressure on green-field sites.

Mr. Doug Henderson (Newcastle upon Tyne, North) : Will the hon. Gentleman accept that if he pursues his policy of site valuation, that would effectively mean many small businesses in his constituency and other town centre areas paying excessively increased rates? Would not that be damaging, especially to the small business sector?

Mr. Rendel : No, that would not be the outcome. If we can get some of the brown-field sites better developed, with higher rateable values, the rates on the town centre small businesses to which the hon. Gentleman referred would not be so high. I do not accept his point. Site value rating would put a lot of pressure on ensuring the most effective, efficient and productive use of every industrial and commercial site. That pressure is not being properly applied by the NNDR system, but the country could do with it for its greater economic benefit.

I should like to commend one part of the Government's NNDR system, as far as it goes. The Government would do well to develop it further in an effort to overcome some of the problems we have been discussing today. I refer to local authorities giving discretionary rate relief to certain vital businesses. I speak from some experience as a member of a local council who has often sat on panels deciding whether discretionary relief should be applied.

The problem is that the current system is very restrictive. It is extremely difficult for failing businesses to get an allowance for discretionary relief. The local authorities almost invariably know best which businesses in their areas should be getting discretionary relief and which should not. The trouble is that, although they may know that certain businesses deserve and would get real value from the system, they may well be unable to grant relief to those particular businesses because of the way in which the legislation has been drawn up.

The legislation does not appear particularly restrictive ; the problem is that it has been left to case law to decide whether or not particular businesses fall within the remit. I give the example of a firm in my constituency which manufactured and then either hired or sold period costumes. The business was struggling to survive. The owners and directors of the business were drawing no salaries and, as a result, at the end of the year the company had made what was described in the accounts as a small profit, only because in effect there were no labour costs. As it was making a profit, it was deemed not to be suffering hardship.

One of the difficulties about the discretionary system is that, in order to be eligible for a discretionary award, a company has to be suffering hardship. That is an example of the way in which the scheme is unnecessarily restrictive and I would welcome any move from the Government to

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make it clear in the legislation that the scheme should be applied more freely and openly to a number of businesses which otherwise would go under as that business has.

Under case law, it is difficult for a business to obtain discretionary relief unless it is the only business of that kind in the area concerned. Another case in my constituency involved a copy shop which was providing valuable business services to a number of businesses in Newbury, but which was suffering difficult times because there are other copy shops in the area and competition was severe. As it was not the only copy shop in the area, it was unlikely to be eligible for relief. That seems absurd. The Government, who claim to be in favour of competition between businesses, surely should not be using discretionary relief in such a way that only one or two competing businesses may survive.

There is a clear case for making discretionary relief less restrictive so that it would be possible to retain both businesses in the town. They are both valuable small businesses in the town centre. It would be of great help for the scheme to apply to such businesses.

In summary, the Bill offers some valuable help to small businesses and others. It is a pity that the help offered is so small, particularly because of the circumstances of some businesses. Their rates may come down next year, but it may be too late to help them survive.

It is a pity that the Labour party has not recognised the importance of making sure that at least some help is given to business. To be fair to Labour Members, they have worked hard recently to make friends in business and I welcome that. There has been antagonism between Labour and the business sector for too long and I am glad that they are trying to do something about it. However, it is a pity that their attitude to the Bill does not necessarily fall in with that policy.

The Government could take further measures. They have the chance to provide further transitional relief, to consider site value rating and to make discretionary relief less restrictive. The Government are trying to help businesses. They could and should have done much more and I hope that they will consider that seriously.

6.15 pm

Mr. Robert Ainsworth (Coventry, North-East) : Anyone looking in on this place at the moment would be surprised at how we have been conducting business tonight and for quite some time. We are discussing the national non-domestic rates. It is an opportunity for hon. Members on both sides of the House to discuss business, the problems that businesses face and the burden caused by the rates in particular, yet we have not heard a single speech from the Conservative party, which pretends to be the party that represents business.

What is going on here tonight will surprise people, but when they see the manner and the time in which the legislation is being pushed through, they will be even more surprised. I get nothing but stares of disbelief when I explain to my constituents how we consider business in this place, the holidays we get and the working time in Parliament throughout the last Session and at the start of this Session, yet Bills were guillotined before Christmas.

We are discussing an important Bill, and the money resolution was pushed through last night without adequate discussion and before the main debate on the principle. It is thus quite clear that the Government have no intention of

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listening to any of the points raised by hon. Members about the legislation, as the financial arrangements for it have already been pushed through. It certainly leaves a lot to be desired. People talk in jargon about the democratic deficit, which has grown to such an extent that, if we are not careful, Britain shall have no credit because of the way in which the Government are running the country. As my hon. Friend the Member for Blackburn (Mr. Straw) said earlier, it was not just the hon. Member for Rutland and Melton (Mr. Duncan) who was reluctant to come to the House today : most Conservative Members seem reluctant to debate such an important issue. People outside will not understand that. It will do no credit to the democratic process and the way in which the Government are running the country.

The way in which the Government propose to push the Bill through also leaves much to be desired for those who will be affected by it. We would have expected the Bill to provide opportunities for people to make representations and to be consulted about legislation that will be of some financial importance to themselves. That is the normal process of parliamentary scrutiny.

I am sure that businesses have made representations to the Government about the national non-domestic rate. I am sure that the CBI and the small business organisations have made representations to the Government. They have certainly made representations to the Opposition parties and to individual Opposition Members.

Organisations should be given time within the parliamentary process openly to make adequate representations to Parliament, not simply to make rushed representations to individual Members while the Government rush the Bill through before anyone understands it in detail. That is disgraceful. It is causing upset in this place and has resulted in scorn being poured on the way in which we conduct our business. It should be condemned in the strongest terms.

I speak as an ex-chairman of finance in Coventry city council, so I am fully aware of the problems that councils will face in collecting the national non-domestic rate on behalf of the Government. However, there is no need for the time scale that is imposed by the Bill. Coventry city council's treasurer's department always took pride in doing its business efficiently and correctly. Its officers took a pride in their work which went beyond political pride. In particular, they took pride in being the first, or almost the first, to send out the bills. Certainly for them, there is no need for this legislation to be passed before the end of February. They will not have completed the decision-making process for the council tax, so there is no need for them to discuss the collection of business rates before the end of February.

Yet, despite the fact that Parliament has just enjoyed an extended holiday, this legislation is being forced through in our first week back as though we faced a major national disaster to which Parliament must respond. One would have thought that the Russians had invaded the Ukraine and were moving westward. There is no need for it, and it is a disgraceful way in which to conduct business.

The Opposition's main concern is the pledge by the Chancellor of the Exchequer that further help to business

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should not be at the expense of the domestic council tax payer. We need to know whether that pledge and the Minister's assurances tonight are worth anything at all.

As hon. Members have said, it is all very well for the Minister to come to the Dispatch Box and give an assurance that he sees the national non- domestic rate as a hypothecated tax, the product of which will go back into the rating pool and not be interfered with. But such an assurance is not worth a light, particularly given recent comments by other Ministers.

People in this place and elsewhere have said that pledges given before elections mean nothing and are of no value. They have been dismissed in the most cavalier of fashions. Reference has been made to things said on rainy nights, and so on. The assurance given from the Dispatch Box tonight is worth nothing. In a couple of years, a different Minister may be in post, so the assurance tonight is valueless.

If the Government want to curtail debate on the Bil, get the business through the House and earn some credit, they need only accept that that guarantee should be built into the legislation, by changing the word "may" back to "shall".

When we see a single word changed in that way, and given the Government's record, we are entitled to ask why. The Minister has said that effectively it does not mean anything, and that the Government intend to guarantee that all the money raised from the national non-domestic rate will go into the pool. If that is the case, why was the Bill drafted in this way? People are entitled to be highly suspicious about that, and to ask that it be reversed and that the guarantee be built into the legislation. A commitment from the Dispatch Box is not worth anything.

I disagreed with only one intervention by my hon. Friends during the speech of the hon. Member for Newbury (Mr. Rendel) : that was when my hon. Friend the Member for Leicester, East (Mr. Vaz) said that he did not understand why the hon. Gentleman was saying what he was. At the end of those interventions, I understood only too well what the hon. Gentleman was doing. Like me, he is a relatively new Member, but he was doing what his hon. Friends on the Liberal Bench often do, and that is saying two different things. He attacked the Government for not giving business the necessary protection, while saying that the Labour party's amendment was good but that he could not support it because it was not good enough. He then went on to say that the Labour party was effectively leaving business open to higher bills, which he and everyone else knows is not the case.

We are seeing the classic ploy of the Liberal party. Liberal Members say two different things which are reported in two different parts of Hansard, so that they can tell the natural Labour supporter that they backed the Labour party in the House on the national non-domestic rate, and at the same time tell the natural Conservative voter that the Labour party cannot be trusted because of what it tried to do over this Bill.

I am sure that, over a period, the hon. Member for Newbury will become much better at that sort of thing and will be able to disguise it much more effectively. He will learn from his hon. Friends, and I am sure that we shall see many similar performances from him, getting better by the day. But let us make no mistake : he was using the old Liberal trick of saying one thing in one place and a different thing in another, so that he always has an appropriate quote to suit his purpose. We need have no doubts about what was going on there.

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Mr. Rendel : Will the hon. Gentleman accept that everything I said today concerned the Opposition's amendment and the Government's policies, and was not personal abuse?

Mr. Ainsworth : I am sorry if the hon. Gentleman feels offended. I was congratulating rather than abusing him. I am sure that he was doing his best to toe his party line and to behave as other members of his party have behaved over a period. I would not have thought that that was an insult, but if the hon. Gentleman feels that I have insulted or slighted him, I assure him that that was not my intention. Whether I was insulting his party is another matter, which we would need to discuss outside the Chamber, where we could talk more freely.

Much has been said tonight about the connection between rates and jobs, and the need to protect businesses from excessive rates. My experience of regular discussions in Coventry suggests that the introduction of the national non-domestic rating system was most damaging, in that it broke the tradition of consultation between local authorities and business rate payers. Although such consultation survives in Coventry as elsewhere, it is not of the quality that previously obtained. That is true of both sides. It is difficult to motivate business men and their representatives to spend time consulting, under a statutory system, on the level of spending that a local authority is about to set when it will not make a blind bit of difference to the bills that businesses will pay. As a consequence, although we enter into consultations in Coventry with many good people, others are totally out of touch with current legislation, and seem to think that the local authority still sets the district rate. The national system has effectively destroyed the incentive for the business community to consult properly with local government over the way that it conducts its affairs.

Equally, it is difficult for a councillor to persuade colleagues to spend time discussing with members of the business community who are not themselves liable to pay the business rate why the ruling group has decided to set local taxes at a particular level. Many councillors face a restriction on the amount of time that they are allowed off work, and say, "Why should I spend my valuable time consulting the business community over the level of a tax that is set nationally when I could be participating in determining council policy and decisions?"

Furthermore, nothing has replaced that traditional consultation. Most businesses could write a letter to the relevant Minister, although whether they would receive a reply is something else--but there is no effective opportunity for effective consultation at a national level.

Mr. Pike : Does my hon. Friend agree that, when the rate was set locally, business representatives could meet council officers and councillors to discuss the services that they would receive? That direct link meant that they could often persuade the council to respond positively on improvements to car parks, bus services and so on.

Mr. Ainsworth : My hon. Friend is right. In Coventry, as elsewhere, local chambers of commerce made a massive effort annually to ensure that they properly consulted their own members and made valuable representations to the council. They engaged with the council in a positive dialogue each year. Great efforts have been made to continue that process, but the dislocation of decision

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making mitigates against that dialogue. It has become far more difficult to motivate both sides to continue that debate--the quality of which, as a result of the break in the link, has deteriorated. Government Members have repeatedly said that a prime reason for businesses relocating is the level of local tax, but that is not my experience. It may be a factor for businesses, but Coventry undertook substantial research into the reasons why companies relocate--and I am sure that other local authorities throughout the country in areas of mass unemployment have done the same.

In Coventry, it was found that the business rate level was a relatively minor element in the decision-making process. Companies were more concerned with finding a location that offered good access to their market ; a good infrastructure, in terms of the road and rail network ; and a decent environment for staff at all levels. That impacts on directors who want to live in the leafy hinterland of Warwickshire. It was important to company chairmen and directors that they could enjoy a high standard of living in Stratford-upon-Avon, while being able to drive into Coventry relatively quickly. Companies also wanted a good environment for their employees, and they sought high-quality recruits. They therefore looked for high spending by the local authority on a good standard of education in the local work force, on whom relocating companies could draw. They did not consider only local tax levels--their decisions had a much more sophisticated basis.

On the principle of the NNDR, it has been said that the proportion of taxes raised locally has fallen drastically. The main reason is the transfer of the business rate to national level. The percentage accounted for by local taxes was once 57 per cent., but it is now 18 per cent. Any sort of decent accountability by local government cannot be achieved while local government raises such a small proportion of the money that it spends.

Under any acceptable system, we cannot increase the level of taxation raised at local level unless we increase the tax base. The Government have recognised that fact, and have run away from their own decisions on accountability : when it got too hot, they introduced the poll tax system.

One of the principles of that system was to increase

accountability. However, before long, they were ensuring that VAT rose to an astronomical level to keep poll tax bills down, because they could not handle the heat from their own supporters and opposition of every description. Therefore, they effectively destroyed accountability at a local level by taking away the ability to raise a high proportion of tax. Decisions on the level of council services are now effectively taken at a national level.

Mr. Rendel : Does the hon. Gentleman accept that one way in which local accountability could be quickly increased would be by a system of local income tax, so that local income taxes could be quickly raised, while national taxes could be quickly reduced? That would enable a larger proportion of taxation to be raised locally and would provide just the accountability that he seeks.

Mr. Ainsworth : As the hon. Gentleman may have expected, I have discussed the issue of local taxation with many people over a long period and, as somebody who has always earned a living on a pay-as-you-earn system and has paid income tax at the proper rate on the full amount of income, I have usually found that the debate has reached

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the conclusion that the income tax payer is the only person who pays all the taxes due from him. There are so many fiddles and ways around the taxation system for other people that it is unbelievable. One of the emotional arguments against the rates was that it was the only tax that the rich ever had to pay in full, and that was why they were always so scathing about it. It is not wise to propose that we empty the basket of taxation available and load it on to the income tax payer, and that we should have not a property-based tax but an entire system of income-based tax. That is a crazy policy, which I would not support. However, I know that the hon. Member for Newbury does support that idea, and that it is the policy of his party.

Quality decisions on services are best taken at a local level. One cannot make good decisions at national level about all the matters that are currently dealt with by local government. More responsibility ought to be passed to local government to achieve that quality, rather than decisions being made at national level, which, in the case of Coventry, is 90 miles from where they will take effect.

We ought to see a big increase in decision-making at local level, yet, by the introduction of a national non-domestic rate system, we have destroyed local accountability and the ability of local government to take decisions about the level of service it wants to provide and for which it is accountable to its electorate. The real problem with the national non- domestic rating system is that it deprives local government of the ability to raise taxes locally and pay for services. That ability should be returned in some way to a local level not only for domestic tax but for business tax also.

6.44 pm

Mr. Hugh Bayley (York) : I make no apology for speaking in a wholly partisan fashion on behalf of the small businesses in my constituency, because in York the revaluation in 1990 hit harder than in any other district council in the country.

The average revaluation was a 15.5 times increase--higher than anywhere else. The combination of the 1990 revaluation and the introduction of the uniform business rate was a lethal cocktail which has sent the tax for York businesses spiralling into the stratosphere. The average increase in business rates in York is the ninth highest of all 367 local authorities.

What is so surprising is that York is alone at the top of the league of massive increases as a northern local authority. Above it are Windsor, Winchester, Kensington and Chelsea, Westminster and Wandsworth. From the top 100 local authorities that faced rises, only another four were in the north of England. Three of those four were in north Yorkshire : Selby, Scarborough and Harrogate. The fourth was South Lakeland.

Understandably, the increase provoked a wave of protest from businesses in my constituency. More than one third of all the businesses in York appealed against the revaluation and, four years later, all those appeals have still not been heard. It shows how inept and inappropriate the introduction of the UBR and the revaluation was in York. It shows what is wrong when a centralising Government claws the power into Whitehall to set local taxes and overrules generations of local decision making.

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Local authorities know local businesses, they know who works for those businesses, they know who runs them and they know the local business conditions. They could set rates with the knowledge of what the local economy could and should take. Instead, we have a centralised, ever stronger state which lays down what businesses must pay, with no respect for their ability to do so or to the local variations in economic performance.

York was especially hard hit by the introduction of the UBR and revaluation, but it was not alone. The political cost of sending the taxes of many small businesses through the roof persuaded the Government to introduce their transitional relief scheme. That was intended to be a bridge over a maximum of five years to enable those businesses that had been clobbered most by the revaluation and the UBR to go through the five easy stages to catch up to the point at which the revaluation had placed them.

The trouble is that, in cities such as York, the five-year period is nowhere near long enough to enable businesses to catch up to where the district valuer, a central Government official, had said that the new revaluation would put businesses' taxes. Come 1995, when the next revaluation is due, many businesses in York will not have reached the level of taxes stipulated by the 1990 revaluation brought in by the Conservative Government.

In York, there are 3,867 non-domestic hereditaments. In year four of the five-year period, 2,071 are still receiving transitional relief. The rise in their taxes was so great that they have not caught up to the level of tax that the Government said they should have been paying four years ago. Half the total number of businesses still depend on the safety net.

In the first year of transitional relief, businesses in York received rebates worth £11 million ; this year, the amount is still £6 million. If this were a taper--and if the target were to be met in five years--it would be down to the last £2 million, or even £1 million ; but it is not. We are speaking of a botched tax ; a blunt national instrument. Although it may have helped businesses in some parts of the country, it is basically a crude implement that did not respond to local needs.

In 1989-90--the last year of the old local tax system--a butcher in the centre of York paid £722 in rates. In the current year, that butcher will pay £23,550 in uniform business rate, without the benefit of transitional relief--which is just under £7,000 : £6,957. That is one year away from the end of the taper. At the end of next year, the transitional relief will run out, and the Bill gives no guarantee that it will continue. As the company is over the £10,000 threshold, next year it will pay an increase equivalent to the inflation rate, plus 10 per cent. ; but it will still be a long way from the target set in 1990--by some £5,000, or even more. Unless the transitional relief rolls forward, it will face a £5,000 increase in its business tax.

Someone who works in that butcher's shop could well be sacked : that is really the only flexible cost that small businesses retain. That is what the Bill will do--not just in one butcher's shop, but in dozens of small businesses in York. In 1989-90, an ironmonger's business paid £3,868 under the local rating system--the amount set by York city council, a Labour authority. Its current UBR bill is £59, 100, and this year it will receive transitional relief of £18,700. At the end of the year, however, that relief will be swept away, because the Bill makes it discretionary whether the Government roll on transitional relief.

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