Rating (Agricultural Premises and Rural Shops) Bill

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Mr. Gray: Does my hon. Friend agree that businesses that rent former agricultural premises on farms from farmers might come into the equation above the rateable value level of £6,000? As the Minister of State made plain on Second Reading, those businesses are eligible where

    ``the farmer still lives on and runs the farm but rents out a part of it to someone else''.—[Official Report, 30 April 2001; Vol. 367, c. 655.]

Surely those businesses come into the equation above £6,000.

Mr. Green: My hon. Friend makes a powerful point. I hope that the Minister will explain, in response to the amendments or in a clause stand part debate, why she thinks such businesses will be eligible when everyone else who has considered the Bill thinks that they will not be.

The Minister might be aware that the Association of Convenience Stores also thinks that the proposed rateable values that we seek to change are unrealistic. It says that stores with the turnover that would be covered by the proposed levels of rate relief operate below the margins of profitability and that those with a turnover significantly below that level are widely seen as no longer viable and are unlikely to survive in the long term. That clearly applies to other businesses that might be set up under diversification proposals. I hope that the Minister will take on board the fact not only that there is incoherence in the plucking out of the level in the Bill but that those who are most closely connected with the businesses that operate under such difficult conditions in rural Britain say that the Bill will have much less of an effect if the Government stick to their limits rather than accepting those that we have proposed. One can, of course, introduce only one of the limits, but not all of them. I merely invite the Government to explain why their figure is better than those that we have suggested in amendments Nos. 10 and 11.

Amendment No. 12 is slightly different and has two aims. The first is to ensure that the level of the rateable value is kept up to date as revaluations happen and if the crisis for businesses in rural areas is long term. It is small in scale compared with the money that such businesses are currently losing, but we do not want the situation to worsen in time and if the crisis continues. That is why we seek an annual look at the level set by the Secretary of State.

The second and perhaps equally important aim of the amendment is to give Parliament some say in the process. Once the legislation has been passed, we shall not want the details to disappear into the interstices of bureaucracy and decisions made by administrative fiat. We want the House to have a handle on how such legislation continues to operate. That is why, having carefully considered the Liberal Democrat amendment and ours, I think that ours is superior. I say that in the knowledge that I shall make generous comments about other amendments tabled to the clause by the hon. Member for Somerton and Frome. I seek no advantage for my party; our amendment simply has a better handle on the Government than amendment No. 1.

Several detailed and key improvements that need to be made to the Bill would be made under our amendments. Amendments No. 10 and 11 are clearly not compatible. If the Minister says which she prefers, we shall not press the other. I invite her to accept the fact that those most intimately concerned with running and preserving rural businesses think that the level of rateable value suggested by the Government in the Bill is not adequate and needs to be changed during the Bill's passage.

Mr. David Heath: Generosity is not a one-way street, and I reciprocate the tone of the comments made by the hon. Member for Ashford. I puzzled for some time on how to put a figure for rateable value into the legislation via an amendment, one that did not ossify the system by adding a figure that would be immutable in future and would quickly go out of date. He has succeeded in doing so, for which I applaud him. He and I tackle precisely the same issues in our amendments, and I am inclined to think that his formulation is better than mine in my amendment No. 1. Therefore, I would be happy to support the relevant amendment, were he to press it.

The rateable value of £6,000 will exclude an awful lot of small businesses—local shops—that operate on the edge of profitability. It will exclude those with premises of a high rateable value, irrespective of the degree of profitability of the site. We know that the two are not necessarily related. On Second Reading, I referred to a point made by the Association of Convenience Stores, which suggests that such businesses need a turnover of at least £4,000 a week to be viable. A rateable value at a low £6,000 threshold suggests a weekly turnover of less than £1,346. That big gap must be made up somewhere. By using that threshold, the Minister is saying that she does not expect the shops that are to be helped by the process to be viable businesses in their own right, and that there must be some other means of injecting finance into them if they are to survive. We would not want such an intention to be behind the proposals.

The other difficulty is the new anomaly between the rateable value threshold for shops as set out in the Bill and the rateable value that has been applied by secondary legislation to pubs and petrol stations. There is no obvious reason for the Government to differentiate. The argument that properties are bigger in the case of pubs or petrol stations is not borne out by the evidence. At the very least the Government should tell us how they arrived at their chosen figure and how many properly defined small businesses and shops in rural communities will be excluded by setting it so low.

The suspicious mind might say that, because so few shops will apply, the measure allows the Government to appear to be doing something of value to those shops without costing the Exchequer any money. I hope that we can banish that ungenerous notion from our deliberations this morning. However, as far as local businesses in my constituency and many like it are concerned, the measure is little more than a gesture because so few of the shops in question will benefit to any great degree.

We are not discussing the reform of the business rate in toto, but we should be. The system is anomalous and unfairly biased against small shops and in favour of large retailers—the Asdas and the Sainsburys of this world. However, we should provide as much equity as is available within the terms of the Bill.

The hon. Member for Ashford has proposed that provision should be made for annual audits. That is a sensible suggestion. My amendment seeks simply to ensure that a review takes place before the completion of the initial five-year period of the agricultural premises elements of the Bill. It is clear that any figure that the Secretary of State chooses should be affected by rate revaluations, and needs to be uprated at regular intervals. However, despite Ministers' assurances, that uprating has not occurred under the present arrangements. The Minister must deal with that difficulty and explain how it arose.

This is a core section of the Bill and this is a core criticism from those outside the House who are interested in the Bill. We await the Minister's justification for a threshold figure that, to any independent mind, is set too low to be fully effective.

Ms Armstrong: I am grateful to the hon. Members for Ashford and for Somerton and Frome for outlining their objectives in tabling the amendments. There is some confusion in the Committee about this part of the Bill and the effect of the amendments. This part of the Bill relates not to shops but to farm diversification. Hon. Members are, rightly, asking why the issues relating to shops differ from those relating to farm diversification, and I shall come to that. However, the comments of interest groups such as the Association of Convenience Stores really apply to those clauses of the Bill that relate to shops, rather than to this clause, which relates specifically to farm diversification. Different limits have been set and I shall attempt to assist the Committee by explaining why.

The four amendments in this group concern the setting of the rateable value thresholds for farm diversification relief. Amendment No. 1 requires the Secretary of State to review the rateable value threshold for rate relief for new farm diversification enterprises within three years and amendment No. 12 makes such a review an annual requirement. I understand from our debate that the hon. Members for Ashford and for Somerton and Frome would come down, if pressed, on the side of annual reviews. I shall return to that. Amendments Nos. 10 and 11 would set a minimum level of £8,000 and £12,000 respectively for the threshold.

Amendments Nos. 1 and 12 are unnecessary and would have no practical effect. In any case, I give the Committee a commitment that we shall keep the level of the threshold under review. Under the order-making power in the Bill, we shall be able to change it at any time if necessary. A statutory requirement to review the threshold or to make an order each year will not affect whether any change in the threshold is necessary, nor will it necessarily lead to such a change.

11.15 am

We intend to review the threshold at the time of the next national revaluation. Committee members will know that revaluation takes place on a statutory basis every five years, and the next revaluation is due to take effect on 1 April 2005. The previous revaluation took effect on 1 April 2000, when we increased the threshold for mandatory village shop rate relief from £5,000 to £6,000 in line with the overall increase in rateable values for properties of that size. We shall do so again if necessary. That demonstrates that the Government review the threshold at which such reliefs are set and that they do so at the time of the revaluation, when we know what changes it will bring and, therefore, what a new, appropriate threshold would be. The House approved the new threshold at the time.

We intend to commence the relief as soon as possible after the Bill is enacted. The three-year period required by amendment No. 1 would end in mid-2004, which would be less than a year before the 2005 revaluation. That means that the threshold would have to be reviewed twice in the same year.

The annual review under amendment No. 12 would add unnecessarily to the number of regulations laid before Parliament. There would be no point in making an order every year when there was no change in the threshold. Rateable values for a property of a given size do not change from year to year, but are adjusted only at the five-yearly revaluations or when there is a significant material change to the property, such as extension. Thus annual changes to the threshold are not needed to ensure that the relief is kept up to date. We have said that we shall keep the level of the relief under review and change it if we need to.

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