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Mr. Ken Purchase (Wolverhampton, North-East) : My hon. Friend the Member for Burnley (Mr. Pike) suggested that the Conservative Benches may be empty because the Government do not want their supporters to open their mouths and put their feet in it. I think that that is a rather kind explanation.
Mr. Bill Olner (Nuneaton) : He is a big softie.
Mr. Purchase : That is true. I have a rather different explanation, because I believe that Ministers do not want their rather naive and innocent Back-Bench colleagues to see what a "fine mess they have gotten us into, Stanley."
The origin of that fine mess is Mrs. Thatcher, as she then was, who stamped her feet in the mid-1970s and determined that her policy and that of her subsequent Government should be designed to do something about the rating system. Those who recall the arguments, the discussions and the frayed tempers will also recall the common saying, "We pay our taxes in sorrow and our rates in anger."
At that time, our rates fell through the letter box on to the mat with a resounding thump. Mrs. Thatcher decided there and then that something had to be done to protect
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those she felt she represented--the middle- class, property-owning democracy. It never occurred to her that that was a contradiction in terms, but we can let that pass.It is sensible to remind ourselves of the original system that was so hated by the Conservatives, who have tried three times to make sense of it according to their own plans. That rating system had the perfect properties of all sensible taxes. First, it was cheap to administer ; historically, less than 1 per cent. of the total take from the old rating system went on the administration and collection of the rates. Secondly, it was easy to collect, because it was based on property that did not move about from place to place, so the rates could be levied with certainty and collected with ease.
In my time in local government, the amounts written off under the rating system were extremely small. We used to talk about a few thousand pounds being written off about three years after a company had gone into liquidation or someone had absconded with the money. That represented a tiny proportion of the amount collected. For all the criticisms of that system, it was broadly progressive. It was based upon the size of the property or the premises occupied, and that was a good indicator of wealth and ability to pay. Once rebates were introduced, the system became even more sensible, and progressive into the bargain.
The Governmen's failure to revalue the rates are borne out of disgraceful gerrymandering. They knew that the weight of that revaluation would undoubtedly fall on the Tory heartlands. They put if off year after year. In the early 1980s, Government decimated the industrial manufacturing base of the west midlands in particular. I do not mean that they reduced it to one tenth of its original size, but they certainly caused great damage.
As a consequence, the rateble value in the west midlands and in my borough of Wolverhampton was extremely high in comparison with that set in other parts of the country. Had a revaluation been made at a proper time and in a proper way, the west midlands, the north-west, Yorkshire and the north would have benefited.
As it was, those regions suffered from the changes brought about by Tory loony economic policy, which wiped out the value of properties and premises in those industrial heartlands. That revaluation would have moved the burden, as it properly should have been, to those regions in the south which were then still exceedingly prosperous. During that period, the west midlands moved from being the second wealthiest region in the United Kingdom to being the second poorest--second only to the poverty and deprivation of Northern Ireland.
This sort of financial gerrymandering was not confined to revaluation. The formula for the distribution of revenue support was changed from what had been a relatively scientific process, based on historical costs and unavoidable growth, to a wholly subjective formula that was intended to favour the counties and the Tory voters. While trying to give the appearance of being fair, rational and scientific, the formula became so convoluted that no computer installation in this country could handle it, and the job was carried out in Houston, Texas--such was the mess that the Conservatives got the country into by trying to change the way in which the tax fell. It soon became obvious that this gerrymandering affected not only domestic ratepayers ; in the inner cities it
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pulled down companies, so there were fewer and fewer jobs, people became poorer and poorer, and it was more and more difficult for companies to pay the rates.We have often made the point that proper services are worth paying for. The rates used to form only a minor part of an industrialist's costs--certainly that was true under Labour Governments. No more than 2 or 3 per cent. of a company's raft of costs was dedicated to paying the rates. Of course, no industry wants to pay any additional costs that do not appear to work to its advantage immediately, but the services that companies used to receive in return, and the education that their workers received, made the costs seem well worth while. Even 2 per cent., however, when no profits are being made, can begin to seem an impossible burden, and when that rises to 4 or 5 per cent., it becomes absolutely impossible for any company to bear. So industry's screams for mercy had to be answered in some way, and we saw the start of the cynically dishonest process of blaming local government. We were told that local government was putting up the rates.
The Government were not prepared straightforwardly to tell the people that their own gerrymandering of the revenue support grant formula had hit industry and commerce hard. Instead, they blamed local authorities, using the dreadful ploy to which we have now become accustomed. Nothing is ever the fault of this morally bankrupt Government--it is always someone else's fault.
Mr. Derek Enright (Hemsworth) : Has my hon. Friend noticed that the scourge of local government, the hon. Member for Colne Valley (Mr. Riddick), has not been here throughout the debate, but will no doubt appear, like rain-sodden pulp, to file through the appropriate door?
Mr. Purchase : I dare not disagree with my hon. Friend's elegant point, which no doubt will bear examination at a later date. It is perhaps interesting to consider whether we can actually trust the Government to be fair. We know that we cannot. The enterprise zones are an example. Sir Geoffrey Howe, now Lord Howe, had a splendid idea about enterprise zones which would not have to pay rates.
If the Government had bothered to read a few lines by Ricardo, that long- ago economist, they would have learnt about the nature of rent. As one set of costs fall, landlords inevitably increase the rent to make up the difference. That is what happened in the enterprise zones. When the Government ended the rates that enterprise zones had to pay, the rest of us had to meet the increase in rent, and there was no advantage to anyone.
How can we trust a Government who cynically use that system to prevent a proper input from the Treasury to make up the shortfall in the rate support grant? The Government are mealy-mouthed. Although my hon. Friend the Member for Wakefield (Mr. Hinchliffe) prods and pushes, how can we trust a Government whose record throughout the 1980s was to take from local government, which had to pay for initiatives out of whatever was left? We cannot trust them, and shall vote against Second Reading.
9.41 pm
Mr. Doug Henderson (Newcastle upon Tyne, North) : In the six and a half years that I have been here, I cannot recall a major Second Reading debate in which not one Conservative, apart from the Minister, has been prepared to
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support the Bill. Conservative Members usually prattle on about how companies are under great strain from the burden of business rates. Where are those Members now? They are either so embarrassed at their thinking being proved wrong, or they have so little confidence in their Government that they are not prepared to be here to support them. It is probably a combination of the two.This important Bill affects every business and the ability of every local authority to raise revenue and use it to provide the services that people want and need. We are extremely concerned about the procedure and the timetable adopted by the Government. They amount to no less than an assault on the democracy of the House. It is an outrage that the money resolution was taken yesterday before the principles of the Bill were discussed on Second Reading. That is the first time that that has happened since the poll tax debate in 1991. It is also outrageous that the Bill may go into Committee immediately after Second Reading without any organisation in the land having had time to reflect on what has been said by the Opposition and to make representations and promote amendments.
Mr. Curry : This "outrage" was announced before the Christmas recess. Will the hon. Gentleman explain why Opposition Members were on a one-line Whip, and 59 of them turned up to vote last night?
Mr. Henderson : The hon. Gentleman's intervention is quite irrelevant. The issue is that the procedures of the House to enable democratic debate to take place have been negated by the Government. That is the real issue. It is presumptuous to believe that the House will go in a certain direction before the debate takes place. That amounts to a contempt of the House, and that point has been reinforced by many of my hon. Friends.
As my hon. Friend the Member for Blackburn (Mr. Straw) said, there is no argument from the Labour party on the general need to introduce a timetable to deal with business rates, because the previous procedure was costly and created instability among the business community. But there is no excuse for the Government to introduce their timetable on the Bill. They do not even have the support of local authorities.
I have a letter from Birmingham city council that makes it quite clear that it does not need to have the figures until the middle of February to calculate the appropriate rates. I do not need to bring forward the representations that Birmingham city council has made, because the Department of the Environment has made those representations in a letter of 30 November 1993 to the chief executive of local authorities around the country.
In it, the Department says that authorities will be required to calculate their provisional contribution in January on the assumption that the pre- Budget transitional limits will apply, and that it will not be possible to make calculations that anticipate the passage of the Bill in case it is delayed. The letter also says that regulations will be introduced once the Bill is enacted to enable
authorities--this is the key phrase--to recalculate the amount of their contribution to take account of the changes.
Government officials themselves are accepting that there is no need to rush into regulations and legislation early in January, because local authorities have to make provisional estimates and then re-do them once they know the transitional arrangements that have been made.
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The argument that the Government used last night, which they were again using when the Minister of State opened the debate--that it is necessary to expedite the introduction of changes in the business rates--is totally without foundation. That is why there is such anger among Labour Members and among all those organisations which would want to make representations on these important matters.There are many things that I would want to say in relation to the Bill if I had more time, but we are pressed for time. I shall summarise the position of the Opposition. There are serious concerns not only about parliamentary democracy and the timetable but about economic circumstances. As my hon. Friend the Member for Kingswood (Dr. Berry) has said, the Government have been forced into introducing further transitional changes because the economy is not strong enough to take the impact of the revaluation.
That point has been made by many business organisations, ranging from the CBI, the Institute of Directors and many of the chambers of commerce to the TUC. There is clearly agreement in the country that the business community is suffering from the economic recession ; that there are virtually as many businesses going bankrupt this year as there were in those dreadful years 1992-93 ; that there are major regional variations in the way that the economic recession impacts, and consequently on the way that there is a need for different treatment on rates ; and that there are also a number of different solutions proposed.
We have serious concerns on the long-term movement in business rates. What will happen after 1992 ? Will the transitional relief continue ? On what will it be based in 1995 ? We have serious concerns about the future structure. Will the Government introduce further transitional arrangements ? If so, will they top up the rating pool so that local authorities will not suffer ? If they do that, will they account for that in the calculation of their external financial limits ?
Those are crucial questions. I believe that people who are affected by the proposed legislation, in making a judgment on whether the provisions for this year are appropriate, will want to know what is in store for future years, because it is impossible to make a sensible calculation without having that information before us. We then have to ask whether the system is the right one in the first place. All the evidence that I have collected from a wide range of institutions, again including chambers of commerce, the Institute of Directors and, as my hon. Friend the Member for Blackburn (Mr. Straw) said, the ex-Tory leader of Westminster city council, shows that it is far better that those matters are determined at a local level. In that way, local businesses can have some influence on the rating provisions affecting them, and local authorities can be influenced by business organisations in their community.
Apart from that, there is a basic democratic issue at stake. Where decision making can be devolved to a local level to make it more sensitive to the needs of local people, that should happen. There is no need for the excessive centralisation incorporated into the Bill and many of the Government's other approaches to local government matters.
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The Opposition are not opposed to the purpose of the Bill. We recognise that there is a need for transitional relief. We are not even arguing that there should be different transitional arrangements. We are arguing that all right hon. and hon. Members, including Ministers, should be prepared to listen to the representations that people might want to make before making a decision on how appropriate the proposals are.This evening, the House can accept either the Bill or the reasoned amendment. The latter stands for giving local communities a chance, giving the business community a chance to make its views known, and giving democracy a chance both in the House and in the country. 9.51 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry) : The debate has been characterised by rather a lot of polished perturbation and some unpolished perturbation. Although it has taken all day, only four points have been raised--objection in principle to the non- domestic rates, concern about the procedures for dealing with the Bill, a continuous argument about the difference between duties and powers and the question why we should have the scheme anyway. Perhaps I should briefly look at each of those four points.
If hon. Members were ever concerned about why the business rates were introduced in the way that they were, it would be worth their while going back and reading some of the documents from the mid-1980s. I have refreshed my memory of what the Association of British Chambers of Commerce had to say in 1986, because it has been prayed in aid quite a lot this evening :
"A large majority of Chambers support the principle of a UBR The majority of Chambers would prefer to see a genuine national rate--i.e. a business rate."
We have heard a good deal about the relationship between business rates under the old system and jobs. This document, which I commend to the Opposition, who have clearly forgotten it, gives a litany of chambers of commerce making representations about how high increases in rates were destroying jobs in their areas.
The hon. Member for Wolverhampton, North-East (Mr. Purchase), the last Opposition Back Bencher to speak, might be interested to know that, in 1986, the chief executive of the Wolverhampton chamber of commerce and industry said :
"Discussions in Wolverhampton clearly indicate that the high level of rates in our area is a major deterrent to companies purchasing industrial and commercial property. Indeed, it has been a significant factor in preventing local economic revival. It is, for example, our firm belief that the level of Rates was responsible for one firm (who formerly employed over 600 people) moving out of the area."
If anyone wants to be reminded of why we introduced the non-domestic business rate, he has only to look at the evidence that was there in 1986.
Mr. Robert Ainsworth : The Minister has quoted the views of the Wolverhampton chamber of commerce in 1986. Will he tell us what its views are now? Have they changed? I bet they have not.
Mr. Baldry : I have no reason to believe that the views of either the Association of British Chambers of Commerce or the CBI have changed. Anybody who reads Hansard tomorrow will notice that at not one point have
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the Opposition prayed in aid representations or concerns from any chamber of commerce or the CBI as to how the business rate--Mr. Jim Cunningham : Will the Minister give way?
Mr. Baldry : No. I have considerable ground to cover.
Then there was concern about the procedures for dealing with the Bill. I suspect that everyone on both sides of the House, you, Madam Speaker, and my auntie Flora in Aberdeen know that the concerns raised this evening are fairly synthetic. They owe far more to the fact that there has been a breakdown in the usual channels than to real concerns about the substance of the Bill. The smiles on the faces of Opposition Front-Bench Members are testament to that. They know that, in previous years, such Bills have been dealt with speedily.
As the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) acknowledged last night, last year and in previous years such matters have been dealt with almost on the basis of a sweetheart deal. This year, for the first time, we have had a long, protracted debate because the usual channels have broken down and Opposition Members want to make a fuss about it.
Mr. Henderson : Will the Minister give way?
The truth is that billing authorities need to send out rate bills from late February. [Interruption.] I am not frit. Hon. Members have spoken at great length and they would complain if I did not respond to the points raised in the debate.
The NDR Bill changes will reduce rate bills for some ratepayers. Authorities will need to reprogramme their software so that bills for ratepayers in transition reflect the changes. Obviously, some authorities will be reluctant to do that until after the Bill receives Royal Assent.
The hon. Member for Newcastle upon Tyne, North banged on about provisional estimates. Provisional estimates are very different from the actual bills that local authorities will have to issue. Of course, local authorities need as much certainty as possible.
Mr. Olner : On a point of order, Madam Speaker. Is it not a fact that there is no limit on the debate, so there is no reason for the Minister not to give way to hon. Members who want to make a proper intervention?
Madam Speaker : It is up to the Minister whether or not he gives way. The Minister has the floor.
Mr. Baldry : That was a spurious point of order, following a spurious debate.
Clearly, a delay would cause confusion and uncertainty for businesses. The Bill needs to be passed speedily so that local authorities can deal effectively with the delays.
Mr. Straw : Will the Minister give way?
The other point of substance which the Opposition sought to argue this evening--
Mr. George Howarth (Knowsley, North) : On a point of order, Madam Speaker. Will you confirm that there is no time limit on the debate?
Madam Speaker : The House has first to pass the 10 o'clock motion.
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Mr. Baldry : The third concern was about powers and duties. There is an important distinction between the character of the provisions we are seeking for 1994-95 and those for future years. For 1994-95, a specific scheme of relief has been drawn up in detail, and to ensure its implementation in time we must spell out all the detail on the face of the Bill, and we have done that. For years beyond that, we do not know yet whether transitional relief arrangements will be required.
My hon. Friend has made it clear on numerous occasions that, if local authorities' revenue needed to be made up and if there were a shortfall, it would be made up in a way that was not at the expense of council tax payers. I am not sure how many times, and in how many ways, we have to make that clear.
Mr. Betts : Will the Minister give way?
Any reasonable hon. Member looking at Hansard tomorrow will recognise that the debate about hours and duties has been totally spurious. As the Opposition readily acknowledged, they are not opposed to the principle of the Bill ; they have made it clear that they support the subsidy in the Bill ; they are not opposed to the purposes of the Bill ; and they know it to be a sensible Bill that will give much needed help to businesses. I commend it to the House, and suggest that, the sooner it is passed, the better it will be for every business in the land.
Question put, That the amendment be made :--
The House proceeded to a Division --
Madam Speaker : Order. The Serjeant-at-Arms is to investigate a possible hold-up in the Aye Lobby.
The House having divided : Ayes 253, Noes 327.
Division No. 61] [9.59 pm
AYES
Abbott, Ms Diane
Adams, Mrs Irene
Ainger, Nick
Ainsworth, Robert (Cov'try NE)
Allen, Graham
Anderson, Donald (Swansea E)
Anderson, Ms Janet (Ros'dale)
Armstrong, Hilary
Ashton, Joe
Austin-Walker, John
Banks, Tony (Newham NW)
Barnes, Harry
Barron, Kevin
Battle, John
Bayley, Hugh
Beckett, Rt Hon Margaret
Bell, Stuart
Benn, Rt Hon Tony
Bennett, Andrew F.
Benton, Joe
Bermingham, Gerald
Berry, Dr. Roger
Betts, Clive
Blair, Tony
Blunkett, David
Boateng, Paul
Boyes, Roland
Bradley, Keith
Bray, Dr Jeremy
Brown, N. (N'c'tle upon Tyne E)
Burden, Richard
Byers, Stephen
Caborn, Richard
Callaghan, Jim
Campbell, Mrs Anne (C'bridge)
Campbell, Ronnie (Blyth V)
Canavan, Dennis
Cann, Jamie
Chisholm, Malcolm
Clapham, Michael
Clark, Dr David (South Shields)
Clarke, Eric (Midlothian)
Clarke, Tom (Monklands W)
Clelland, David
Clwyd, Mrs Ann
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cook, Robin (Livingston)
Corbett, Robin
Corbyn, Jeremy
Corston, Ms Jean
Cousins, Jim
Cryer, Bob
Cummings, John
Cunliffe, Lawrence
Cunningham, Jim (Covy SE)
Dafis, Cynog
Dalyell, Tam
Darling, Alistair
Davidson, Ian
Davies, Bryan (Oldham C'tral)
Davies, Rt Hon Denzil (Llanelli)
Davies, Ron (Caerphilly)
Davis, Terry (B'ham, H'dge H'l)
Denham, John
Dewar, Donald
Dixon, Don
Dobson, Frank
Donohoe, Brian H.
Dowd, Jim
Dunnachie, Jimmy
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