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However, we have concerns about the financial implications for business. That is why we have struck the balance contained in the Bill, in preparing the policy and the provisions, and why a series of safeguards for business is set out in the Bill, involving statutory consultation in all cases. There will be an upper limit on the business rate supplement of 2p, a double lock ballot where the BRS will fund more than a third of the total cost of a project, and a rateable value threshold of £50,000, under which no business will be liable to pay a business rate supplement.
We have also carefully considered the extent to which business should be able to influence the projects that are funded by business rate supplements. The involvement of business in decisions about projects will reflect its financial contribution. Businesses will be consulted in all cases; indeed, there is a legal obligation on councils to do so. It is right that business should have a vote when firms are picking up a larger share of the cost. Where businesses are providing more than a third of the money for a project, they will have a vote on the future of that project. However, where businesses contribute less, they will be consulted in the same way as others, including communities affected by that project. That is because it is not right for business to be able to block projects when it is contributing a small minority share of the funding.
Robert Neill: On what basis was the figure of one third arrived at and what consultation took place, either with business or elsewhere, in determining that figure, as opposed to a quarter, a fifth or a half?
John Healey: There has been considerable debate on and analysis of this policy area for some time, not least in the contributions and evidence to Sir Michael Lyonss inquiry. As I have tried to explain, we have judged that the right balance between the competing interests is that one third of the cost of any large project is the appropriate point to trigger a vote of businesses that may be liable to pay the supplement. However, we will no doubt scrutinise that in more detail as the Bill I hope proceeds through the House.
Mr. Clifton-Brown: In order to give businesses a flavour of what is in the Governments mind for this Bill, will the Minister tell us how many such schemes there are likely to be in any one year? Is it likely that the Bill will operate only in wholly exceptional circumstances such as Crossrail, or are we likely to find that, as local authorities become increasingly squeezed financially, they will use this mechanism to raise revenue from businesses?
The short answer to the hon. Gentlemans question is that the extent to which business rate supplements are introduced will depend on the decisions and discussionsand, in some cases, the votesof businesses in local authority areas. The Bill clearly sets out that any project funded by a business rate supplement must be additional to the authoritys current spending plans, and that it would not have happened if the supplement had not been in place. We will support and strengthen this with guidance, on which we will consult, but the Bill also makes it clear that the funds raised by the business rate supplement may not be diverted to plug spending gaps in local authority budgets. In
other words, any revenues raised from the business rate supplement must be additional and cannot be spent on the kind of services for which a local authority has other statutory responsibilities.
In addition, there is the safeguard that the funds raised by the business rate supplement must support projects designed to improve the economic development of an area. These might include infrastructure projects, the promotion of an area or perhaps a strong skills programme. I also want to make it clear what the money cannot be spent on, as I tried to do a moment ago. It has to be additional, and it cannot be spent on mainstream services such as housing, health, social care or education, which a local authority has an existing obligation to provide. I intend to set this out in more detail, in guidance or regulations, to make it clear. I also plan to introduce drafts of the guidance or regulations for formal consultation alongside scrutiny of the Bill during the Committee proceedings in this House.
Mr. Mark Field: Does the Minister not recognise that the issue of additionality fills us with a certain amount of gloom? After all, it is less than a decade and a half since the national lottery was introduced, with much the same idea of additionality in mind. Is there not a concern that, after a decade or so, this legislation might be used to provide local authorities with an income where certain grey areas exist, and that such an income could be utilised as a broad, general rate rather than one specifically earmarked for economic development in the way that the Minister envisages?
John Healey: I understand the hon. Gentlemans concern. He and I were elected to the House together in 1997; neither of us was here when the national lottery legislation was passed. I hope he will consider the detail of this Bill, and that he will appreciate that the framework of the provisions requiring funds raised through a business rate supplement to be additional will be a sufficient safeguard. I hope that he will be able to continue these debates as a member of the scrutiny Committee, when we could look at these matters further.
Bob Spink: Will the Minister give me some clarification? If an infrastructure project, for example, were to be especially beneficial for one or two boroughs within a county council area, would that county council have to levy the rate increase on all the boroughs in the county, or could it levy the increase only on the specific boroughs for which the project was going to be particularly beneficial?
John Healey: At the moment, our view would be that we would like it to be possible for a county council to levy a business rate supplement in those parts of the county where there was support for doing so from the district councils in the circumstances that the hon. Gentleman has suggested. Ultimately, however, that would be a matter for the upper-tier authority, in dealing with the business community in its area, either through consultation and discussion alone, or through consultation, discussion and a ballot.
In conclusion, the Bill provides an important new power for our long-term prosperity. It will enable the Mayor of London to raise the money he needs to meet his commitments to Crossrail here in London, and it will extend that power to all upper-level authorities in
England and Wales so that they, too, can fund projects that will create wealth and jobs in all our communities in the future. I commend the Bill to the House.
Robert Neill (Bromley and Chislehurst) (Con): I beg to move an amendment, to leave out from That to the end of the Question and add:
this House declines to give a Second Reading to the Business Rate Supplements Bill because supplementary rates threaten to become another local stealth tax at a time of economic downturn; because local firms should have a vote on any supplementary rate, as already occurs with Business Improvement Districts; because cuts to the Local Authority Business Growth Incentive Scheme will put pressure on councils to levy the supplementary rate; because the proposed exemption threshold for small business will be far less generous following the 2010 revaluation; because the Bill does not address the problems that local firms are suffering as a result of the Governments business rate rises on empty property and retrospective increases in rates levied on business in the registered ports; and because the Bill fails to limit the application of supplementary business rates to the Greater London Authority and the Crossrail project.
In moving the amendment in the name of my right hon. Friend the Member for Witney (Mr. Cameron) and others, I congratulate the Minister on the one thing that is always held in his favour: he is a man capable of being very reasonable. In this Government, the ability to say outrageous things reasonably is, of course, a valuable commodity, so I quite understand the right hon. Gentlemans valued presence on the Government Front Bench. If he will forgive me for saying so, when it comes to outrageous statements of 2009 so far, the idea that the Bill deals not with a tax but only with a power to levy a tax is a pretty good kick-off. Here is a new conundrum with which children can be entertained over the Christmas period: When is a tax not a tax? When it is a power to have a tax. Dry old lawyers such as me used to have a sayingagreement for a lease is as good as a lease and there was good sense in that, because that was the reality. A power to levy a tax is, in practice, a taxand that is the reality. With every respect to the Ministers competent performance in defending the indefensible, let us at least be honest about what is happening.
I understand, of course, the reasons behind the desire to examine how local government finance is approached. There is the whole background of the Lyons report and there is a sense in which we should genuinely seek to give local authorities an incentive to encourage economic development in their areas. Two points arise, however. If the Minister will forgive me, it might be thought that that does not happen at the moment, but in fact it does. Local authoritiesEssex was mentioned earlier and there are many other examplesare already busy using a raft of powers and are encouraging economic development by means of brokerage, encouragement, effective use of planning powers and so forth, but there is no need to provide for tax-raising powers to go along with them.
Secondly, the Lyons review spoke of flexibility in raising business rates in a number of ways. Not for the first time in relation to Lyons, the Government have rather cherry-picked what best suits their own purposes. We may remember that at the beginning of this argument, suggestions were made of flexibility either way. The Governmentlet there be no mistake that this is a Treasury-driven measurehave chosen a form of flexibility that goes only in one direction: the ability to raise a tax,
but not to reduce the business rate, as was mooted at one point. They are making selective use of the arguments. Furthermore, the Government have ignored the point made throughout the Lyons report and, indeed, in the subsequent White Paperthat it was necessary for business to have a real say in any such proposals.
If the Minister will forgive me for referring to another interesting phrase of the year so far, compulsory consultation is not the same as having a right to vote. If anyone thinks that compulsory consultation can prevent peoples rights from being ignored, they should think about the previous Mayor of London and the introduction of the western extension to the congestion charge, where a compulsory consultation was required by Act of Parliament. The Mayor carried it out; the majority said that they did not want it, yet the Mayor ignored them. That shows the value of such compulsory consultation. Whatever the intentions, rather than encouraging closer partnership between local authorities and business, which happens in the best run authorities, there is a real danger of driving a wedge between local authorities and business, which will be sad and damaging in the long term.
John Healey: Will the hon. Gentleman tell me whether the present Mayor of London believes that there should be a vote in all circumstances?
Robert Neill: I was about to come on to Crossrail, and if you will forgive me, Mr. Deputy Speaker, I will pick up on that point. Interestingly, the briefing document that the Mayor of London made available to all Members of this House states specifically that he supports the use of the business rate supplement only for the Crossrail project, so using London as an example for rolling out the business rate supplement across the country misses the point.
Let me move on and deal with Crossrail
Mr. Raynsford: Will the hon. Gentleman give way?
Robert Neill: I will, because I was coming on to Crossrail anyway.
Mr. Raynsford: The hon. Gentleman will know that Crossrail is a project of such size, significance and length, in terms of the construction period, that it would be completely unrealistic for the Mayor of London to think of any other possible use for the business rate supplement in the next decade.
Robert Neill: The right hon. Gentleman is right to an extent: Crossrail is a unique project because of its size and extent. I will come back to that point because, in fact, it is an argument against the Governments approach to the Bill. Secondly, it rather flies in the face of the Governments own position that they take Crossrail and use it as an example to roll out nationally. The right hon. Gentleman is correct: Crossrail is a one-off. It is of exceptional size and economic importance, and its funding mechanisms have been the subject of exceptional complexity and negotiation for a very long time.
Let me make it clear that if this Bill were limited in its extent purely to putting in place what is required to carry out the funding agreement for Crossrail, we Conservatives would support it, not oppose it. There
has been a long-term debate about Crossrail, going back probably almost to the days before the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) and I were even in the Housecertainly to when he first arrived here. It has been around for a long time, and there has been massive consideration. Business in London has been very closely involved, and it is significant that all the representative business groups in London, organisations such as the CBI and the chambers of commerce, support the supplementfor Crossrail, which is the important caveat. Their national representative organisations criticise the Bill for using the Crossrail project as an excuse to introduce a stealth tax on businesses across the rest of the country. That is the key point that is being missed.
The other point, so far as London and Crossrail are concerned, is that there has been a long-standing political consensus in favour of Crossrail in London. All the major candidates at the mayoral election last year stood on a platform of supporting Crossrail and the funding package, so a democratic legitimacy exists that is not allowed for and presented in the Bill before us. It needs to be made abundantly clear that Crossrail is therefore not a justification for the Bill in its current form. It is, I am sorry to say, a classic example of the Treasurys approachas I said, this measure is essentially Treasury driven, as was the sub-national reviewa form of fiscal mission creep to find means of gathering in more public money.
A second point made in favour of the Bill is that it is additional funding.
Richard Ottaway: I was waiting until my hon. Friend had finished on Crossrail before asking him a question, and I think he is now moving on. The Opposition amendment declines to give the Bill a Second Reading because it
fails to limit the application of supplementary business rates to the Greater London Authority and the Crossrail project.
What limitations would my hon. Friend like to have seen, had we been in government at the time?
Robert Neill: As we have set out, we would agree with the Mayor that if a Bill was presented that simply gave effect to the funding package that was agreed some time ago, and which has been in place for some time, we would see the logic of that and give a fair wind to it. However, the problem is that the Bill goes well beyond that. The package was the subject of considerable public debate during the mayoral election, so there was an opportunity for Londoners to express a clear view on it. That does not apply to these other matters. We do not want to delay CrossrailI understand that some of the Bills provisions make quick progress possiblebut we do not want it to be used as a Trojan horse to expand the burden on businesses elsewhere. That is the error that is being made.
Mr. Rob Wilson (Reading, East) (Con): Although we have been talking about Crossrail very much in terms of London, it will go out as far as Maidenhead in the west and we hope that, ultimately, it will come to Reading. Will my constituents have to pay the supplementary business rate for Crossrail to come to Reading? Will the same apply in respect of Maidenhead?
Robert Neill: I understand my hon. Friends point, but, with respect, may I say that I suspect it would be more appropriate to address the question to the Minister than to me? Currently, the provisions simply give power to upper-tier authorities and do not specify which. I should point out to my hon. Friend that the Bill contains a clause that would enable upper-tier authorities to levy a business rate supplement jointly, but he would have to ask the Minister about that. Perhaps we will be able to return to that point when we examine the details of the relevant clause, where safeguards are not properly addressed.
Another point advanced in favour of the Bill is that it provides additional money, and my intervention hinted at the issue that I take with the Minister about that. If the Government are serious about making additional money available for economic development by local authorities, it is extraordinary that they almost strangled the local authority business growth incentivesLABGIscheme at birth by cutting its funding so drastically. The LABGI scheme was not perfect, but it edged in the direction of giving a greater incentive to local authorities to attract business to their areas. The funding was cut from £1 billion over the first three years to £150 million in the following three. In effect, the Treasuryyet again the villain of the pieceis taking moneys from local economic development and by sleight of hand, in the form of this Bill, shifting the burden for economic development on to businesses and their customers and employees.
The Treasury has used that trick repeatedly under this Administration. May I give one other London-based example in that regard? Interestingly, when the opportunity for the Mayor of London to levy a congestion charge was first introduced under the Greater London Authority Act 1999 an assessment was made of the likely take of the congestion chargeit did not turn out to be terribly accurate, but that was consistent with most of the other things in the assessments at that time. Lo and behold, the following year the central Government grant to Transport for London was reduced by an amount that was almost exactly the same as the projected take of the congestion charge revenue. The truth is that the Government have form for this, and they are robbing shopkeeper, businessman Peter to pay the Treasurys Paul.
I hope hon. Members forgive my saying so, but there is no credibility to the suggestion that this measure will attract additional money. The points outlined by a number of my hon. Friends in interventions were well made. I can understand why local authorities have been interested in the ability to use such a powerI do not blame thembut one of the reasons they are interested is precisely that they are being put under enormous pressure by central Government. Local authorities have had a range of unfunded obligations placed on them in recent years, they have been given a range of ungenerous, rather tight financial settlements and they have seen the LABGI scheme funding slashedno wonder they are under pressure to seize any opportunity that they can. In a sense, the Minister is setting up local authorities to be his human shield against criticismhe is pushing them into the front line and saying they want this, when it is almost being done with a financial gun to their heads. That is the reality, and the suggestion being made does not have much credibility.
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