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5 Mar 2003 : Column 833—continued
Mr. Hammond: I am disappointed that the Minister said that the regulations will be made by negative resolution. Can he assure us that if they are laid before the House and are prayed against by the Opposition he will use his influence with the business managers to ensure that a proper debate on such a negative resolution is held?
Mr. Raynsford: I know that the Opposition tend to pray against almost any regulations, but it would be right and proper to have a full debate on those particular regulations. I would use any influence that I may have to assist with that aim, as there is every reason to debate those important matters. I hope that the hon. Gentleman will approach the matter in the spirit of constructive engagement that has characterised previous exchanges, and will seek to improve the scheme and ensure its effective implementation.
Mr. Edward Davey: I do not understand why the Government do not want to introduce the regulations using the affirmative procedure. Is there a reason why they cannot take that route, as it would appear to be the most appropriate one, even though there may have been prior consultation with groups outside the House?
Mr. Raynsford: I do not believe that it would be appropriate or precedented. I repeat that there should be a full discussion during the course of the consultation. I extend to the hon. Member for Kingston and Surbiton the undertaking that I gave to the hon. Member for Runnymede and Weybridge—if Opposition Members are concerned about the detail of the regulations and would like an opportunity for debate, I shall certainly use my influence to ensure that that is possible.
May I move on to the important issues raised by the hon. Member for Runnymede and Weybridge? He asked for clarification of our intention that there should be growth in the tax base. He is right that the key is growth in the non-domestic rate base. If that were just the result of a general uplift, as I have suggested, it would just be a buckshee gain for authorities that may have done nothing at all or even have pursued policies that worked against business investment in their areas. That would not be fair or appropriate if other authorities with much greater difficulties put huge effort into trying to attract business to their areas. Equally, if the scheme was limited to areas of new development, areas that have great difficulty in attracting new development would be penalised, so it must take account of authorities' ability to maintain investment and retain and enhance businesses that might otherwise have left their areas. The scheme would certainly not be restricted to new development, although that would obviously qualify, as it would bring additional rate value to the area.
I should make it clear that the increases are additional—it is not a question of simply top-slicing the existing national non-domestic rate. A baseline will be important in ensuring that we are talking only about additions that are available under the scheme. If the whole national non-domestic rate pot was treated as a basis for the scheme and top-sliced, irrespective of whether there had been enhanced value, that would diminish the value of the scheme. The aim is to establish an agreed baseline; to continue with the national non-domestic rate and pooling arrangements, as I have already said; and to allow the additional value achieved through the kind of initiatives that I have described to be reflected in the scheme, permitting authorities to retain that additional value.
Mr. Hammond: I am not entirely sure how the scheme will work. My understanding is that all national non-domestic rates went into the pot for redistribution, so I am not sure how the Minister will ensure that the pot is the same size after he has allowed some authorities to retain some non-domestic rates. Will he explain that again for those of us who have not been quick enough to grasp it the first time? Is he saying that there will be an annual ratchet? Does a local authority that scores a bit of additional tax base and retains 10 or 20 per cent. accumulate a certain sum forever, or does the ratchet mean that next year it has to run further up the escalator to get anything? Finally, is the Minister saying that there will be no losers, and that every authority will either be in the same position or will be a winner?
Mr. Raynsford: The answer to the last question is yes. I have already said that there is no intention to penalise authorities. This is an incentive scheme designed to give an additional benefit to authorities that have either successfully enhanced their non-domestic rate base through positive initiatives or have been able to stem the decline in that base through effective partnership with the private sector.
The hon. Gentleman asked some interesting questions about the period for which the benefit lasts. We are discussing those issues ourselves at present, and they will be the subject of consultation. There are some interesting policy issues. When there is a revaluation, a rebasing will obviously be needed. If an authority has the prospect of getting the benefit immediately after a new revaluation, but would lose it if the addition came before the revaluation, that would be a perverse incentive. We certainly do not want perverse incentives to affect the timing of schemes to attract new development. Our aim is to ensure that there is a reasonable time in which authorities can derive benefit from the addition, but clearly it cannot be indefinite, as that would involve a curious change in the tax base over a period of years. If any increase accumulated at any point in time there would never be any rebasing. We believe that there must be a rebasing; there must be a period in which authorities can secure the benefit; there must not be scope for perverse incentives. All of that, as hon. Members will understand, will be the subject of full consultation.
Mr. Hammond: As the Minister attempts to answer my questions, it is becoming apparent that the scheme will be an incredibly complex mechanism. Can he give
the House an order-of-magnitude figure for the sums of money we are talking about? I would caution him against going down a complicated route if, in fact, we are talking about small sums of money. Can he give us an idea of the budgeted figure for the total amount of retained national non-domestic rates?
Mr. Raynsford: The hon. Gentleman is making the mistake of assuming that the scheme has already been worked out in fine detail. I have made it clear to the House that it is an exciting proposal introduced by the Chancellor towards the end of last year. It has considerable benefits and advantages, which Opposition Members recognise, and we are keen to ensure that there is a full and thorough consultation during which the scheme can be discussed, refined and improved before we introduce regulations giving effect to it. There is no rush—we are not rushing to introduce the scheme in the near future, and do not anticipate it being in force before 2005, so there is plenty of time for the full discussion and debate that we should rightly have. If we had not proposed the scheme now, and if there is not an appropriate legislative vehicle in the next couple of years, that opportunity may have been lost. It was therefore right to make provision for it in the Bill. At the same time, we accept that the scheme is in its early infancy and needs to be developed and refined.
As with all matters of local government finance, we will need to establish an appropriate balance between fairness and complexity. If the scheme becomes too complex, it simply will not be worth the candle. On the other hand, if it is seen as rough justice and some of the downsides that we talked about earlier seemed likely to happen, that would undermine confidence in the scheme. That is why we will need arrangements that give the incentives that I described and give a local authority a reward for a reasonable period, but do not produce a distortion over time or perverse incentives. Those are the kind of issues that we will need to explore in the consultation.
1.30 pm
Mr. Hammond: I understand the need for consultation and the fact that these are complex matters, but I find it alarming that the Chancellor is proposing a scheme of incentivisation, apparently without any idea of what sum has been budgeted to pay for it, so the Minister can give the House not the faintest idea whether we are talking about £10 million, £100 million or £1 billion across all local authorities. Could that rather casual approach to the public finances be the reason why the Chancellor will have to borrow £24 billion in the coming year and £35 billion the year after?
Mr. Raynsford: The hon. Gentleman is in danger of getting away from the subject of the Bill. As a result of the prudent management of the country's public finances, we are able, uniquely among major developed countries, to undertake the substantial investment in public services that the Government are delivering. It is sad that the Opposition are committed to a 20 per cent. cut in public service expenditure, which would decimate the public services that we are discussing.
Mr. Edward Davey: This seems to be a little debate about some new power that may never be used, as it is
such a dog's breakfast. Let me pose another problem to the Minister, so that it can be considered even before the consultation document is written. The business rate tax base could suffer from a cyclical effect: some businesses could come into an area, pay rates for two or three years, and then move out. There is a degree of variability within a particular valuation period, adding further complexities to those that we have discussed. There is a final complexity with which the Minister failed to deal in response to an intervention from the hon. Member for Runnymede and Weybridge (Mr. Hammond) with respect to the central pot. Although it may not be top-sliced, it will lose additional funds because they will go into the scheme under discussion.
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