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A third point is that the suggestion has been made that the Bill will give local businesses a stake and a real say. Here is a separate point that the Bill simply fails to
address in terms of its own original prospectus. I was having a look at some of the phrases used in the White Paper. Benefits were suggested as including devolved decision making, because resources would be raised and controlled locally and those who have a stake in the success of a scheme and the best understanding of what is needed would be running it. That will not be the case, because the people who have the best understanding and the most at stake are the local businesses and they are not going to have a ballot on this in all cases. Neither is there any provision in the Bill to give those local businesses that contribute an ongoing overview of the implementation and working through of the scheme. In fact, their say is limited, because the compulsory consultation can be ignored. That issue could be addressed—every business group that made representations suggested this—by requiring a ballot in all cases. I hope that the Minister will reflect on that, because if there is to be genuine partnership, there must be good will on the part of local authorities, and that can be achieved.
The Minister rightly said, as did my hon. Friend the Member for Cities of London and Westminster (Mr. Field) and others in interventions, that business improvement districts are a good model for that. I have had the opportunity to talk to several people who run successful business improvement schemes. I recently met Dame Judith Mayhew Jonas, who is leading a successful scheme in a new west end company in my hon. Friend’s constituency. The point that was made by everyone involved in the BID schemes is that they work because there is genuine buy-in from businesses and a real incentive for everyone to succeed. Why not adopt that model with the compulsory ballots?
Mr. Raynsford: The hon. Gentleman knows that I have a particular interest in the Bill’s business improvement district scheme because I introduced it when I was a Minister. I suggest that not all businesses have a say in a ballot because not all businesses pay the business improvement district levy. It is a levy only on tenants, and there is an issue about the non-contribution of freeholders, who are not involved in the balloting, although many make voluntary contributions because they see the benefits of the scheme. Will the hon. Gentleman be more careful in his claim that all businesses contribute through a ballot, because that is not so?
Robert Neill: Voluntary contributions are welcome, but it follows from the right hon. Gentleman’s logic that those who pay should take part in a ballot so that they are represented; otherwise, it would be taxation without representation. That does not detract from the valuable role that voluntary contributions play in BIDs, nor does it undermine the argument that those who are liable to pay the BRS should have a ballot before the scheme is introduced. The point is simple, and would improve the Bill’s credibility hugely. It is difficult to understand why the Government have not given way on that, and I hope that they will reflect on it if the Bill progresses to Committee.
I want to raise some issues about safeguards. First, the most important safeguard, which all businesses say that they want, is the compulsory ballot, and I have discussed that. The second issue is the threshold. The Bill does not specify what it will be. The Minister said that the intention—I do not doubt it—is that it should
be £50,000 rateable value, but we must make allowance for the fact that there will be a revaluation of business rates in 2010, so many more businesses are likely to be above the threshold. The suggestion that nine in 10 businesses will not pay is unlikely to be the case. Surely, the Government should give a commitment—perhaps they could put it in the Bill—to review the threshold after each revaluation. It seems only fair and reasonable to provide businesses with that further protection.
There is concern about the definitions in the Bill. I appreciate that it contains some definitions of what the BRS cannot be spent on, but it is interesting that that is the opposite approach to that adopted for the community infrastructure levy in the Planning Act 2008, which contains a specific definition of what can be the aim of a CIL. Why have the Government adopted virtually the opposite approach in the Bill? A tighter and specific definition of economic development would help businesses.
Some people are worried about the administrative costs of a two-tier structure, and several London boroughs have asked for an assurance that their administrative costs will be met within the costs of the BRS. I hope that the Minister will respond to that.
Those are a number of specific and quite technical points that we might return to in Committee, but they do not take away from the overall thrust of our argument, which is that in a sense this is a form of taxation without representation. I may have spent some of Christmas watching “John Adams” on Channel 4—a very fine series it was too—but I do not want to see the Minister cast as a sort of General Gage, imposing these imposts on business. He does not look at all like Lord North. However, there is a real risk that the relationship that has been built up in good authorities will be damaged. The provision is a burden on businesses at a time when only today we have seen the Prime Minister on television announcing yet another set of supposed initiatives to try to help in an economic downturn. However, it is not the words that count but the deeds. At the same time as we have the spin about more investment in jobs, the Government, as their first legislative act, are introducing a Bill that will impose a burden on businesses and therefore be a threat to jobs.
Mr. Clifton-Brown: My hon. Friend will have noticed that the thrust of the Minister’s argument for not having a ballot under the regulations is that he is worried that businesses would block the proposal. Surely businesses know what is best for them, and if they block such a proposal they obviously cannot see a benefit to it. If they cannot see a benefit, surely the proposal ought to be carried out under general taxation.
Robert Neill: My hon. Friend is absolutely right, and the point is well brought out by the experience of the business improvement districts. When there is a good BID proposal and businesses see the merit of it, the proposal is carried through in the ballot and businesses vote for it. The test is as simple as that. My hon. Friend makes a very solid point.
I hope that we have set out a number of our concerns about where the Bill fails to address the objectives of the initial debate. I also wanted briefly to touch on the other matters referred to in the amendment, which
include the missed opportunities in the Bill. Not only do we have to consider the proposals with the BRS, but we have to consider them alongside the accumulation of other burdens on businesses. We have the BRS on top of the community infrastructure levy. In some areas, we have the possibility of congestion charging and now we have the revival of the cost potential of a workplace parking levy. I hope that at some point the Government will give us some overall assessment of the economic impact of all those potential burdens on business. Will the Government also look again at whether BIDs’ contributions should be automatically offset to avoid a form of double taxation?
I want to address two other issues to which we have referred where action has not been taken. The first relates to the situation with empty properties. I know that my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) will deal with the point later, but there is a real concern about the way in which the Government’s proposals have worked through in relation to empty property relief. It cannot be satisfactory to have a set of disincentives that cause people to take the roofs off buildings and to demolish industrial plants simply to avoid the levy. We cannot blame the businesses because, with respect to the Minister, there was a lack of economic reality in the advice he was given when he said that the move would be an incentive for people not to leave business premises empty for so long. No landlord wants to leave their premises empty. In the current economic climate, premises are empty because there are not the customers. Clobbering people with the loss of relief is hardly helpful to business confidence at a time when it is falling.
Mr. Binley: Does my hon. Friend recognise that in certain parts of the country ground rents are being advertised at £1 per square foot simply so that the rates will be paid by the new tenant and not by the owner of the empty property?
Robert Neill: That point very well demonstrates the pressures businesses are under and why the addition of even 2p in the pound on the business rate in its current form—about 4.3 per cent. on the current 46.2p business multiplier—would be an enormous burden on businesses, just as we hope they will be starting to come out of recession, if we reach that stage by 2010. My hon. Friend’s point is well made.
The final area of rating injustice that the Bill does not tackle is the rates situation for businesses in registered ports. The issue has been raised a number of times in the House by Members on both sides. I know the Minister is well aware of it because he and I have had some dealings about it in the past. The Bill would have been an opportunity to address what is happening to businesses in the ports, where there is the reality of a £33 million tax hike on their liability. Because the Valuation Office retrospectively increased the levy and changed the basis for calculation from the old cumulo system to a new one, port businesses are faced with backdated rate demands that in some cases exceed their turnover. So far this year, two businesses in the ports have gone bust specifically because of their inability to meet the backdated rates demand. That means 50 or 60 jobs. Many such firms are small, but when we add things up we find that the situation is serious.
A number of ports businesses lobbied Members on both sides of the House just before the Christmas break. Operators of major firms, such as DFDS Tor Line, said that if the situation continued, such would be the difference to them that they would have to consider whether their investment should be in the UK or in Rotterdam on the other side of the North sea.
Robert Neill: I give way to the Minister—perhaps he has some good news for us.
John Healey: I am grateful to the hon. Gentleman for his generosity in giving way. Does he not recognise that I and the Government are also concerned about the scale of the backdated liabilities? We announced in the pre-Budget report that we would allow backdated liabilities from previous years to be spread over a full eight years, so that backdated tax liabilities that are due from those businesses can be made more manageable and less likely to tip companies over the edge, particularly at this difficult time.
Robert Neill: I appreciate the Minister’s expressions of concern and I do not doubt that they are genuine, but perhaps we need to go back to the almost total lack of business experience among his departmental advisers. The reality is that simply spreading the payment does not remove the liability. The problem facing businesses is that under the accounting rules they have to bring the whole of their liability into the current year’s account and put it on the balance sheet, so, with the rates due by 31 January, that could push many of them into a position where they were trading insolvently. That is the bit that the Government do not seem to grasp. However well intentioned the proposal for spreading the payment may be, it does not get businesses around the legal problem that pushes them into insolvency—as it has done in two cases. If the Minister could come up with a solution to that problem, I should be the first to applaud him and welcome it, but so far the Government’s measures—whatever their intention—have not addressed that crucial issue. That is why there is a real threat to businesses in the ports. The Bill has missed yet another opportunity.
The late Iain Macleod, an international-standard bridge player, once observed that politics was rather like bridge: timing is everything. In the current economic climate the timing of the Bill would certainly not bring the Government to international standards; their timing would relegate them not from the bridge club but from the under-fives tiddlywinks league. I honestly hope that the Government will reflect on a Bill that is likely to do considerably more harm than good and will undermine many of the objectives shared by Members on both sides of the House in this time of economic difficulties.
5.39 pm
Mr. Nick Raynsford (Greenwich and Woolwich) (Lab):
I start by drawing attention to my declaration in the Register of Members’ Interests. I strongly support the introduction of the Bill, and I disagree profoundly with the view expressed by the hon. Member for Bromley and Chislehurst (Robert Neill) at the end of his speech that the Bill will bring “more harm than good”. He, as a
London Member, will rue that remark, because the Bill is crucial to the future economic success of London. If ever there was a time when we needed investment in important infrastructure that will bring long-term benefits, this is it.
Robert Neill: The right hon. Gentleman, as a fair man, would not want to misquote anyone; he knows full well that I made it abundantly clear at the beginning of my speech that we support Crossrail and the use of the business rate supplements to fund the Crossrail package. However, it is perfectly reasonable to observe, in the context of the rest of the Bill, that damage will be done. I am sure that he will know that the suggestion that I was undermining Crossrail is not an accurate reflection of my words.
Mr. Raynsford: I have to say to the hon. Gentleman that the whole tenor of his speech was one of carping, criticism and attacks. I quoted his words at the end of his speech, which he made very clear; he indicated that the Bill would bring “more harm than good”. Those were his words; he felt that it would bring fewer benefits than disbenefits. If he takes that view, he is condemning Crossrail, given that Crossrail is far and away the largest scheme that is likely to benefit from the Bill. He is trying to say, “Well, the measures are okay for Crossrail, but not for anything else,” but that stance is intellectually unjustified and incoherent, as I will demonstrate later. It is an attempt to cast a veil of respectability over the disreputable argument that the Bill is not beneficial.
The Bill is important because it helps to build partnerships between business, local government and other stakeholders for the funding of necessary infrastructure. People may ask why that is necessary, when there is already a business improvement district scheme. A brief reference was made to BIDs at an earlier stage in the debate. As I made clear, I believe strongly that the BID scheme is an important initiative that helps local investment in improving areas.
If we look at the BIDs created to date, the pattern is that they are essentially local. The focus on improvement is very much to do with relatively small-scale local enhancements, such as improving the cleanliness, safety and attractiveness of shopping areas, making it easier for people to access those areas and to benefit from shopping there. Those are the main characteristics of most of the BIDs put in place to date. Of course, we are talking about major infrastructure investment on a much larger scale. The benefits will be felt over a much wider area than the relatively small town centres that have tended to adopt BIDs.
I am a strong supporter of BIDs, but the BID mechanism alone is not sufficient. Crossrail is a classic illustration of why the Bill is necessary, and why there needs to be a larger, more extensive and ultimately more robust framework for funding important infrastructure, in cases where business stands to benefit substantially from that investment.
Mr. Clifton-Brown:
The right hon. Gentleman earlier boasted that he was the Minister who introduced BIDs. He and I spent many hours in Committee on what form the ballot should take. Given that he was so keen on ballots for the BID system, and given that he has just said that we are now talking about a system on a much larger scale, will he vote against the system until the
Government undertake to introduce provision for a full ballot to be held on each and every occasion on which the measures are used?
Mr. Raynsford: No, I will not, for precisely the reason that the hon. Gentleman mentions: we are talking about a proposal that is far more wide-ranging than the BIDs, which have a narrow, local focus. As he will have heard in my exchange with the hon. Member for Bromley and Chislehurst, the Front-Bench spokesman, not every business has a vote on BIDs. The landowners do not have a vote. Many people saw that as a potential weakness in the BID mechanism, but we regarded it as necessary, because it would have been a huge complication to create an electoral register for freeholders and landowners that is separate from that for tenants, who are liable to pay the business rate. To avoid unnecessary bureaucracy and complication, we did not extend a voting right to freeholders. So in the case of BIDs, not every business has a vote.
We should think about the purpose of the initiative. If it is meant to secure the support of business for major infrastructure schemes, it is vital, first, that there is a framework to ensure that support and, secondly, that it cannot be prevented from operating by the activities of businesses that do not see the benefits. We have heard the view of the hon. Member for Croydon, South (Richard Ottaway), who is no longer in the Chamber; he did not see what benefits small businesses in Croydon would gain from Crossrail. He is wrong, because businesses in Croydon will benefit substantially from Crossrail, which has conducted a detailed survey of the economic benefits resulting from improved journey times and greater access to commercial premises and of all sorts of other benefits from improved transport. It demonstrated significant economic benefits in all parts of London—including areas such as Croydon, which would be some distance from the nearest Crossrail station—as London’s transport network is an integrated whole. When part of that network does not function, the consequences spread across the whole city. There are benefits, even in Croydon, and as my right hon. Friend the Minister made clear, small businesses will be exempt. The supplements will apply only to businesses above the threshold, which we think will be set at the rateable value of £50,000, although that has not yet been confirmed in the Bill.
The risk of a universal ballot by businesses outside the area immediately affected by the infrastructure investment, which could destroy the huge benefits for those businesses that are more familiar with the scheme in the area where it will be constructed, could prevent necessary improvements. However, I stress that there are safeguards. First, schemes where less than a third of its cost is met by business will not be subject to a ballot. In any case in which business is expected to meet the majority or a significant proportion of the cost, if the cost is less than 50 per cent. but more than a third, businesses will have a ballot, which is a fair safeguard. Secondly, as we know from the Crossrail experience, the measure would not command the support of business if business in London did not believe that it was a good thing. Even without holding a vote, business representatives in London—the CBI, London First and the chamber of commerce—all know how crucial Crossrail is to the future of our city. That is why there is extensive business support for the concept of a business supplement.
This is important because, as Opposition Members know only too well, Crossrail has been a long time a-coming. The scheme—the hon. Member for Bromley and Chislehurst made this point—has been in gestation for 20 years or more. I remind the hon. Gentleman that when his party was in government, the scheme fell. His party introduced a Bill in the early 1990s to create a Crossrail scheme, but it did not get through the House, not because of the activities of Labour Members but primarily as a result of the stance of the Conservative Chairman of the Select Committee that looked at the scheme. Perhaps that is a comment on part of the Opposition’s past to which they do not want to return or of which they do not want to be reminded, but that was the shambles of the hon. Gentleman’s Government in the 1990s, and that was the reason why the Crossrail scheme did not proceed.
Without a sound, broad funding base, which is now in place, I do not think that Crossrail would proceed even now. It is difficult to see where the funding would come from to enable it to happen if it were a wholly publicly funded scheme without an element of business contribution. It is fundamental if we are to enable a scheme such as Crossrail to proceed that we have the option for that type of joint partnership funding for major infrastructure schemes. Under the Crossrail formula, funding will come partly from central Government, and it is right that they should contribute; partly from the Greater London authority, and it is right that there should be a GLA contribution; partly from the users of the service through the fare box, which has been taken into account in the financial formula; and, crucially, from business.
The business contributions are not uniform. There are two separate types of business contribution. There is the direct contribution of those businesses that have premises or development sites in the immediate locality of a new Crossrail station, which stand to benefit enormously from the creation of the new transport links. I think of Berkeley Homes in my constituency which is carrying out an important new development on the Royal Arsenal in Woolwich—a major regeneration project that is rightly attracting a great deal of support, plaudits and awards, because it has transformed a formerly derelict site into an area with real prospects in the next two decades of becoming one of the great locations not just for residential premises but for businesses.
Businesses recognise the huge benefits that will come to them from having a Crossrail station in Woolwich and they are contributing towards the cost of that station. That is a direct contribution. There are similar contributions at Canary Wharf from the City of London and elsewhere. That direct contribution is an element, but other businesses not so closely connected to the areas where there will be stations will benefit for the reasons that I referred to in the study that Crossrail carried out into the wider economic benefits. It is right that above the threshold—a £50,000 rateable value threshold seems a reasonable one—there should be a contribution from business towards something that will unquestionably improve the economy of London and the prospects for London businesses. That is the nub of the argument in favour of the type of mechanism that the Bill represents.
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