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Mr. Sebastian Coe (Falmouth and Camborne): I do not think that my hon. Friend has got it wrong. Two weekends ago, I walked the entire length of the main retail street in Redruth, in my constituency. The main issue that every retailer raised with me was having to trade shoulder to shoulder with charitable shops that had budgets that most Redruth traders could only dream of, and competing with central purchasing managers. Like my hon. Friend, I am not knocking charities.
Mr. Nicholls: My hon. Friend's intervention shows that the problem is not unique. It also reminds me to say that my hon. Friend the Member for South Hams (Mr. Steen), who wanted to attend the debate, was unable to do so because of a regional planning conference. He tells me that the position is similar in Totnes and Kingsbridge in his constituency.
What is to be done? Again, I emphasise that I am not attacking charities. It is important for me to make that point, because some people will try to misrepresent what I am saying. Nevertheless, if traders cannot compete with
others who are traders in all but name, I feel that the Government should comment. The position is considered a local issue in at least three areas in the west country.
I should be interested to hear from my hon. Friend the Minister whether it would be possible to amend the law if such amendment proves necessary, even allowing for the constant pressure on legislative time; I should also like to know whether there is a judicial definition of "mainly" that is easy to understand. I suspect that the possibilities for litigation are legion.
It would also be useful to know more about the relationship between a local shop and the charity of which it is part, and to hear of any guidance that my hon. Friend can give. I suspect that charities themselves would welcome guidance. It must sometimes be hard for them to know precisely how the legislation applies to them. Some may be saying, "Perhaps we should take advantage of the position; other charities have. Where do we stand?"
The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford):
I am always glad of the opportunity to listen to Conservative Members from the south-west, but I feel that they tend to gang up. When they have a cause, they pull together and fight for their constituents in a way that is seen in no other country. Dealing with their concerns can be a bit like facing the All Blacks.
As my hon. Friend the Member for Teignbridge(Mr. Nicholls) said, we recognise the good work done by charities, and realise that charity shops are an important source of funds for many of them. My hon. Friend, however, is worried about the possible effect on local businesses. He acknowledged the special role of charities. They are given relief from many of the taxes that commercial businesses pay, including rates, and in many cases that is right and proper; but I think it worth touching on some recent history.
Rate relief for charities predates the non-domestic rating system. Rate relief of 50 per cent. was mandatory for property wholly or mainly used for charitable purposes under the provisions of the General Rate Act 1967. Rate relief for charity shops is not a recent innovation; it has existed for some time. Specific legislation was introduced to provide rate relief for charity shops in the Rating (Charity Shops) Act 1976. Those provisions were carried through to the new system in the Local Government Finance Act 1988.
Initially, the Government proposed that the provisions from the earlier legislation be repeated in their entirety. They specified, as now, that to qualify for relief a charity shop had to be wholly or mainly used for the sale of goods donated--it is worth emphasising that--to the charity. If a shop met the criteria, 50 per cent. rate relief had to be given by local authorities: that was mandatory. The amount could be increased to as much as 100 per cent. if the authority saw fit. If it felt that the charity was particularly deserving of local support, it could top up the relief, but the extra cost would be borne by local ratepayers.
At the time of the passage of the 1988 Act, it was feared that the new rating system might impose an unacceptably high rates burden on charity shops, and interfere with their ability to raise funds. In response to enormous pressure, the House increased the mandatory element of the relief from 50 per cent. to 80 per cent. The cost of the mandatory part is borne by the non-domestic rating pool. If a billing authority decides to give discretionary relief, it can, as under the previous legislation, top up the relief to 100 per cent., but 75 per cent. will be borne by council tax payers; the remaining 25 per cent. will be borne by the pool.
My hon. Friend is concerned about competition with local traders. He spoke of the difficulties experienced by various shops and towns, and mentioned a number of causes. Let me keep to the point, however.
To qualify for relief, charity shops must sell donated goods. That generally seems to mean old clothes, old toys and second-hand ornaments, but--anticipating the fierce case put by my hon. Friend--I decided to visit some charity shops in my area, as did some officials in the Department. They had the impression that the shops that they visited would have accepted unwanted Christmas presents: indeed, there seemed to be a fair display of those on the premises. I was reminded of a Conservative association bring-and-buy stall, and beat a hasty retreat. I saw nothing that quite fitted the pattern suggested by my hon. Friend. I suspect that, in fact, the shops I visited contained genuinely donated goods.
My hon. Friend asked how many other representations I had received. I cannot give the precise figure, but I think that the number of letters I have had must amount to about 5 per cent. of the number we receive about rates in general. Ultimately, I do not feel that my hon. Friend's concern is justified to the extent that a change in the existing law is needed. Charity shops that wholly or mainly sell goods bought from wholesalers are not entitled to relief. If the charities choose to raise revenue through such means, they too must pay rates on the shops, just like their neighbours.
I am sure that shops that sell donated goods rely on the good will and generosity of members of the public, as my hon. Friend pointed out, both in the donation of goods and as a means of donating to the charity. I am also sure that people who donate their old clothes, books and unwanted Christmas presents to a worthy cause want the money raised from the sale to go to those causes.
As I think my hon. Friend will accept, the issue pivots on the action of the local authority, not on a blunderbuss, across-the-board treatment by central Government through legislation or direction. There is a
horses-for-courses arrangement, in which the local authority has the ability and the expertise, and can visit each premises and judge for itself.
The phrase is not simply "mainly", but "wholly or mainly". References to premises used "wholly or mainly" for certain purposes are found throughout rating law, and the definition of "wholly or mainly" will depend largely on the circumstances of the case involved. There is a body of case law on the meaning of
which may shed light on the issue. If my hon. Friend wishes, I will write to him with some examples.
Mr. Nicholls
indicated assent.
Sir Paul Beresford:
I see that he would be interested.
In the case of charity shops, in the first instance it is for each local authority to decide whether a shop meets the legal requirements to qualify for relief. The authority might want to consider a wide range of factors when deciding whether a charity shop is wholly or mainly selling donated goods. Local authorities are in the best position to see the local situation and to judge it. Indeed, most local authorities have been exercising judgment on charity shops sensibly for at least two decades.
There is a discretionary element, and again, it is right and proper that local authorities should use that when deciding which charities are deserving of local support. I understand that Teignbridge district council has decided that a blanket policy is to be avoided, which is right. It is approaching the element of local discretion in entirely the right way. Each case should be decided on its merits and on local circumstances, and each billing authority should decide whether the charity is worthy of additional relief. The authorities have a financial incentive to choose wisely. After all, they have to pick up three quarters of that extra funding if they decide to give the relief.
Proper consideration and implementation of the legislation, as it stands, and leaving the matter in the hands of the local authorities are the right way to proceed, but I will write to my hon. Friend with some additional bits and pieces to explain cases that we considered. I hope that, in areas of concern, he will apply pressure to the local authority to do what it is there to do.
It being eight minutes to Two o'clock, the Motion for the Adjournment of the House lapsed.
"wholly or mainly for charitable purposes",
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