Local Government Finance (England) Special Grant Report No. 80 and Draft Non-Domestic Rating (Public Houses and Petrol Filling Stations) (England) Order 2001

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Mr. Geoffrey Clifton-Brown (Cotswold): Is my hon. Friend aware that I represent 10 market towns in the Cotswolds that are beginning to be badly hit by the crisis? We are getting more cases of foot and mouth in Gloucestershire every day. Many of the businesses in those market towns have rateable values of more than £12,000, and they are the ones with a higher cost structure that will be especially badly hit.

Mr. Green: My hon. Friend is right. In every constituency, businesses that fall into that category will be affected by the outbreak. I urge the Minister to consider that and the points made by the Local Government Association. The association rightly says that local authorities have invited applications for relief, but smaller district councils cannot afford the 25 per cent. cost that they will face under these proposals. That unfortunate loophole could have a damaging effect on several businesses. Some district councils, especially the smaller ones, will be unable, because of the potential impact on other services or on council tax payers, to provide relief for larger businesses. That is one of the most serious weaknesses of the proposals.

The tight drawing of relief within three months from 1 April also puzzles me. The attached notes suggest that the pressures on councils are all the other way, and that they could be less generous and restrict relief to less than three months. The Minister knows that three months will be inadequate. If the summer season disappears from direct tourist businesses and if those businesses survive—let us hope that they do—the hardship will certainly last longer than three months. The tourism industry expects to be adversely affected at least until September. The Local Government Association says that that has led to further anxiety about district councils' ability to cope.

I should be grateful if the Minister would deal with the list of qualifying authorities. The list is clearly based on whether authorities are wholly or predominantly rural, but it excludes urban authorities in predominantly rural areas whose businesses depend on the agricultural industry. For example, businesses in the authorities of Barrow, Swindon and Plymouth are suffering directly from the outbreak, but they are not covered by the order—another unfortunate loophole.

For smaller district councils, cases requiring only a 5 per cent. contribution could still be too much. In Wales, the Assembly is meeting 100 per cent. of the costs of all authorities up to a rateable value of £50,000—obviously a more generous scheme than the one that the Government are introducing through the order.

I welcome the proposals, but they seem surrounded by caveats that do not acknowledge the severity of the crisis. Of themselves, they will not be enough. My right hon. Friend the Member for Richmond, Yorks (Mr. Hague) suggested a loan scheme to address directly the cash-flow problem, which is the immediate crisis facing many businesses. I again invite the Minister to consider that option.

Will the Minister tell us when the taskforce will introduce other measures? The proposals before us today were announced to the House last week. Since then, there has been a deafening silence from the rural taskforce. When shall we hear more? If Parliament is to be dissolved in the next few days, how will further measures be implemented? The rural taskforce is likely to suggest further actions that will require legislative sanction for immediate effect. The crisis is happening now, so we want measures to deal with it now.

Mr. Clifton-Brown: My hon. Friend will recall that the Minister for the Environment announced these proposals as interim measures with more to follow. It is entirely reasonable for my hon. Friend to press the Minister on what they might be. If a general election is announced next week and if further measures require legislative change, how can that happen during an election?

Mr. Green: My hon. Friend eloquently makes a good point. That issue should be at the forefront of the mind of a Prime Minister who says that he is straining every sinew to cope with the crisis. The measures are welcome and a small first step, but there are problems with their detail. The underlying point that I leave with the Minister is that the Government need to take many more and larger steps quickly if they are not to appear unduly complacent in the face of the devastation confronting large parts of our rural areas.

10.20 am

Mr. Colin Breed (South-East Cornwall): May I, too, welcome you to the Chair, Mrs. Michie? I am happy to serve under your chairmanship for, I think, the first time—it might even be the last.

I broadly welcome the proposals. We sometimes have a problem with the definition of a small business, but such businesses will obviously welcome any support that they can get. Whether it will ultimately prove adequate for many of them is difficult to determine at present, partly because we are still just beginning to see the extent of the effect of foot and mouth disease in many different areas. It could be described as a ripple effect, and we can see that the ripples from the crisis are going much further than we had anticipated.

For instance, there is a business in my constituency that is, on the face of it, pretty unaffected by the crisis, because it supplies industrial consumables. One of its customers, however, makes farm gates, sheep pens and the like and is receiving virtually no orders. We can understand that a business providing gates and pens is directly affected by the crisis, but the ripple effect of that is that the business supplying the abrasives and tools is also hit. In turn, services that are usually provided to that business will not be required. They are often small businesses in terms of turnover and rateable value. In addition, they often have the smallest profit margins. A minor loss of business can sometimes turn a marginally profitable business into a loss-making business that will not survive for long.

The ripple effect also has implications for employment. The hon. Member for Ashford (Mr. Green) mentioned a large caravan park in Devon, and there are similar establishments in Cornwall and elsewhere. The effect ripples right down to the part-time cleaners of caravans and such, who will not be required to do their weekly bit, but whose income is vital to support quite a lot of families. They are ordinary families who live in a coastal position nowhere near a foot and mouth outbreak or a farm, but who depend very much on the cleaning work done by a member of the family. We must recognise that the crisis has a ripple effect on related businesses and employment opportunities.

Therefore, although I can understand the £12,000 limit, there need to be boundaries and a definition of or way of identifying those who qualify. It is an arbitrary figure and needs in some respects to be recognised as such. At present, I probably have most objection to the three-month limit, because even today we recognise that the effects of foot and mouth disease will last much longer than three months. For many people involved in tourism, those three months will cover what is usually their best three or four months. Many small tourism operators are not receiving the usual inquiries about bookings later in the year. Fortunately, they may have some visitors now, but holidays later in the year provide them with the bulk of their income, because they get the best rates and the greatest concentration of use of their rooms, cottages and so on in the summer. We should, therefore, attend to the three-month limit now.

All sorts of suggestions have been made about the banks. They are the principal providers of the cash flow to those businesses. They can assist in the cash flow. They must decide whether to honour cheques or to bounce them. I am sure that they will be sympathetic as that is in their best interests. As a former controller of advances for a major bank, I can assure hon. Members that they would be sympathetic in every case; it is in their interests. However, some difficult decisions will have to be taken, even later in the year.

The Government's loan guarantee scheme has been in existence for some years. It could be a useful model to extend to what might be called a guaranteed interest scheme. Businesses could smooth out their cash-flow problems over a two to three year period by being able to borrow a limited amount of money on which the Government would be prepared to cover the finance cost. That would have to be focused and clearly identified, but it is a means whereby the administrative costs could be borne by the banks. They would have the money to do it. It would be an elegant way of solving some of the longer-term cash-flow problems of some bigger businesses, particularly those with rateable values of more than £12,000.

In the past year or two, support has been given to a plethora of different interests. In some cases, primary legislation is involved, in others, special grants, and in others the local authority has discretion to provide some support. I suspect that at the end of all this, we shall have at least one debate on the food chain and the way in which our food travels from the farm gate to our plates. I hope that that will show that we need a full debate on the way in which the uniform business rate and rates as a whole are tackled. We cannot carry on targeting different areas with special grants and different reliefs. Some wholesale changes are needed in the way in which the Government and local government raise revenue in this area.

I welcome the measures. It will help small businesses generally to know that they do not have to shoulder that burden. The measures will not be the whole answer. Some businesses will not be saved. I hope that the Minister will confirm that this is just a first step, albeit a good one and in the right direction. As we begin to recognise the extent of the crisis and the way that certain businesses that we do not even consider now, will be affected, other measures must be brought forward so that when we come to the end of this wretched crisis we still have as much of our small business and rural economy intact as we possibly can.

10.28 am

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