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5 Mar 2003 : Column 830—continued
Mr. Hammond: And the 55 per cent. council tax rises.
Mr. Davey: The hon. Gentleman refers to the huge rises in council tax, and he is right. Unfortunately, they may be part of the shift, though not a very welcome one. It is such an unfair tax.
However, before I am called to order, Mr. Speaker, I shall move on to the point that I was about to make. The Government have set up the review and, if they wish to change the balance, surely the business rate is one of the ways they could do that. Businesses are often in two minds about such a suggestion. In the past, they were worried that some local authorities would behave unwisely, levy too high a business rate and undermine economic activity. I presume that is why the Tories nationalised the business rate. I suspect that the proposal is framed in such a complex manner in an attempt to avoid that problem.
Other business people—and sometimes the same business person in the same conversation—will argue that, since the business rate was nationalised, their links with the local authority have been weakened. The dialogue between businesses and local authorities has been significantly reduced. That is certainly the experience in Kingston, the borough containing my constituency. Although local authorities have tried to overcome the problem of reduced dialogue, the fact that we no longer have a locally raised business tax has got in the way of an important partnership.
The Government talk about building up that partnership. Given the logic of that and of this provision, will the Minister tell us whether the Government have contemplated going even further to the full denationalisation of the business rate? It could be a local business rate that is based on properties or, as the Liberal Democrats propose, it could be based on land values. I commend our proposal because by widening the tax base to include undeveloped land, we would reduce the business rate burden on existing businesses.
I hope that the Minister will explain why he is taking a partial route. We are minded to support the new clause because it will give a little extra financial autonomy to local authorities, but we want to see the details before we sign up to it in the other place and agree to the regulations that will follow.
Mr. Raynsford: We have had a useful debate on an important issue. I appreciate the generally positive response of the hon. Members for Runnymede and Weybridge (Mr. Hammond) and for Kingston and Surbiton (Mr. Davey). I agree with the hon. Member for Runnymede and Weybridge that it is right to explore ways in which we can give greater freedom and flexibility to local government. In fact, that is one of the great themes running through the Bill. Therefore I was a bit disappointed at his churlish remarks about other freedoms, such as borrowing, trading and levying charges on discretionary charges, all of which are included in the Bill. The hon. Gentleman's Government took more from local government than any other in
recorded history. He should surely recognise and acknowledge this Government's steps to give greater discretion to local authorities. However, I welcome a sinner who even partially repents and I am delighted that he feels able to support, at least in principle, our proposal to allow some measure of local discretion over additions in value, created through either development or local authority actions, to enhance the non-domestic rate base.
Mr. Hammond: The Minister emphasises the word "additions". I hope that he will say what is meant by additional increases. He also refers, however, to actions that are due to the local authority. Will some Government official determine which bits of economic growth are due to the work of the local authority and which are due to the work of the market?
Mr. Raynsford: I will deal with those matters. Let me start with the philosophic principle behind the policy. We do not believe that those areas where there is an increase in the non-domestic rate base should automatically get the full benefit; nor do we think that those areas that have a much harder task to retain industry and investment and to attract new investors should not get the benefit, because they face far greater difficulties. It is right to have a regime that genuinely rewards additional increases to non-domestic ratepayers but does not penalise those authorities that succeed in stemming decline when an authority would otherwise face economic problems. The issue is difficult and we have not yet finalised our proposals.
We have not published regulations because the scheme is in its early stages. I am grateful to the hon. Member for Runnymede and Weybridge for his kind remarks about our willingness to try to make regulations available on all other matters covered by the Bill, but the scheme's proposals have just been made, following the Chancellor's announcement, and we intend to hold a full and thorough consultation, beginning in the summer, on how it will operate. The scheme will inevitably be complex. Difficult issues need to be addressed and we want to ensure that there is a full debate.
Mr. Edward Davey: I agree that areas that are experiencing a relative economic decline with a falling business rate tax base should not be penalised and that the system should be asymmetric, but I cannot get my head around trying to measure different speeds of decline and what actions have been taken by whom—the market or the local authority—to change those speeds of decline. I understand why the Government want to help those areas, but is that the right mechanism?
1.15 pm
Mr. Raynsford: It is the right way to help those areas. Authorities should have an incentive. The hon. Gentleman mentioned the importance of creating closer links between business and local authorities. We are keen to do that in many ways. He knows that the business improvement district arrangements are a specific attempt to create closer links between business and local authorities. We believe that the incentive scheme will do exactly that. It would be perverse,
however, as I think he acknowledged, if those authorities that have a much harder task to attract new investment and to expand their non-domestic rate base were prevented from benefiting from the scheme, especially if any huge effort that they put into encouraging good relations with business and attracting new investment is offset by a general trend of decline in the area's economic prospects.We want a scheme that allows such efforts to be rewarded. I accept that that will be difficult. A baseline will need to be established which is founded on principles that will be the subject of full consultation. It will need to reflect the starting point against which any increases or reductions can be measured. The mechanisms will need to be agreed and the measurements will also be the subject of fairly detailed discussion.
Mr. Hammond: Can the Minister clarify whether he means a growth in the tax base, by which I mean the base of property, some of which may be empty, that has rateable value, or growth in the rates received? In other words, does an empty factory that is filling up and starting to pay rates count as growth?
Mr. Raynsford: The hon. Gentleman raises an interesting question. We relate growth to the rate base. We do not want short-term variations, as a result of premises being empty for a short time, to distort the arrangements. There will clearly need to be rules to govern what should happen if there is a significant increase in the tax base but no overall increase in the rates derived.
Before I go into the detail, let me explain how we will ensure that information about the proposals is made available in the most comprehensive way to help discussion. We will provide notes for consideration in the other place, setting out our broad policy intent. They will outline a number of options on the scheme's detail. They will not take the form of a draft set of regulations because it would be premature to draft regulations before the consultation is complete, especially as the consultation is designed to tease out some of the complexities that may have to be addressed and to enable us to reach the right formulation. We intend to provide Members of the other place with more detailed information about our policy. I hope that the hon. Gentleman will recognise that that is in keeping with the spirit that we have adopted throughout the Bill's consideration.
The hon. Member for Runnymede and Weybridge asked whether we would extend the principle to the council tax. The answer is no, because the council tax is raised in such a way that the local authority receives the revenue raised. It would be bizarre to have an incentive when there is no question of them not receiving whatever council tax is due to them. The scheme is a response to his Government's action to ensure that non-domestic rates are not locally available other than in exceptional circumstances. As I said, we want to provide an incentive to local authorities to attract additional investment. The scheme will give them an additional bonus and it would be inappropriate to apply it to council tax.
The hon. Gentleman also asked whether regulations would be made by affirmative or negative resolution. We intend to make them by negative resolution but, to pick
up on what the hon. Member for Kingston and Surbiton said about statutory instruments, that will only take place after a full discussion that is based on the consultation. That will allow the issues to be examined in great detail not just by Members of Parliament, but by a wider public. We all recognise that it is important to have full consultation on the scheme.
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