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Last Thursday, the hon. Member for Ilford, South (Mike Gapes) and I went to Ilford town centre to promote the business improvement district—the BID—that has been proposed there. It is precisely in this time of
recession that we need such an arrangement, because we are seeing empty shops in our high streets. I shall not list all the shops that are going, and I pray to God that not too many more will go. I fear that some will, but I believe that the BIDs could help to stop that in these difficult times. We appeared in the local press only this week to persuade people to become involved in the BIDs and to encourage them to pay the business rate supplement that would be required. We are encouraging people across the board, in small and large businesses, although I believe that there is a particular onus on some of the larger businesses that perhaps have more resources to fund these arrangements than the smaller businesses, which might find that more difficult.
I want to talk briefly about the BID in my own constituency, the Hainault business park, and to pay tribute to Mr. Jim Ridley and Mr. Chris Wyles, who co-chair the organisation. Before I came to the House as a Member of Parliament, I was the cabinet member in Redbridge for regeneration in the community, and we promoted the BID project with Hainault. There were some difficulties in the area, in relation to levels of crime and to the number of empty units in the business park. The BID project has enhanced the area by bringing in new businesses, closed-circuit television, signage, and extra police community support officers. Various other projects have been linked in and brought in funding from banks, from businesses and from the wider area. This is all making the business park a thriving area, and one that I hope will be more resistant to recession than other areas that do not have such an arrangement. I am a great fan of the project.
Of course, the project was set up by means of a vote. In Ilford, everyone was fully engaged and fully involved in voting to get the extra funds. My problem with the provisions in the Bill is that consultation, however well meaning it might be, is simply consultation. It is not the same as engaging people in voting, getting them involved and enabling them to feel part of a project. I believe that that is where the Bill falls down. What we need is a provision for such voting, and certain guarantees in the Bill. I shall push for that if I am on the Public Bill Committee. Looking down at those on my Front Bench, I believe that there is a possibility that I might find myself in that position. I genuinely believe that we have to push for those provisions.
You will be pleased to know, Madam Deputy Speaker—with no offence to my hon. Friend the Member for Northampton, South—that my conclusion will be brief rather than lengthy. We have heard about the problems of recession and if I may have a little latitude, Madam Deputy Speaker, I would like to say a few words about a small business whose owner came to see me shortly before Christmas. It does about 80 per cent. of its trade over the Christmas and January period. A bank that will remain nameless decided that it would be prudent to call in the overdraft facility before Christmas, putting that business in an impossible position: either the business was being given the keys to shut up shop or it would be allowed to trade its way through the difficulties in the Christmas period. The bank would not move. Fortunately, we introduced the business owner to a new bank, which was able to honour the overdraft facility and allowed him to trade through Christmas. I am delighted to say that the business had a good Christmas and is now able to trade on. The Government have to look further into
the practices revealed by that case. I realise that that example may not be strictly relevant to the Bill, but I wanted to raise it so that the Minister may pass on those details to the Treasury to enable it to take some action.
I obviously support the Opposition’s amendment, but I also want it put on the record that I fully back Crossrail, which I believe is vital and needs our support. I would, however, like see votes on every issue that involves and engages our business community, so that it is part of any decisions taken.
7.10 pm
Mr. Mark Field (Cities of London and Westminster) (Con): The issue of the business rate supplement is nothing terribly new. Much as we like to present it, as did my hon. Friend the Member for Northampton, South (Mr. Binley), as coming from the bowels of the Government over the last decade, it actually goes back quite some time. At the heart of the legislation lies the age-old questions: how should large-scale infrastructure projects that promote economic development be most equitably financed; and should business be able to benefit without contribution when windfall gains benefit property values as a result of infrastructural development projects that are made for the common good? It is difficult to get our heads round those difficult issues.
The whole conundrum of “value capture” has been with us in many ways since the great railway building mania of the 1840s and 1850s, when things were somewhat simpler. The promoters of the new railway networks that sprouted like bindweed across the UK during that crazy decade or so bought up the surrounding land, built houses and in that way paid back the capital costs of the new infrastructure. That, at least, was the theory; but all too often in practice, boom turned to bust. I wonder where we have heard that phrase before. The only investors who profited were those who either cashed out very quickly or those who were genuinely in the project for the very long term.
I must confess that I share my party’s concern that in today’s desperately uncertain economic and commercial climate there could scarcely be a less opportune time to introduce what undoubtedly amounts to a new stream of business taxes. The Minister fairly argued that we are putting in place a regime that will have an impact not just now, but in the decades to come, and it is also probably fair to say that relatively few schemes will come onstream during these difficult and tumultuous times, but I none the less share many of the concerns expressed by those on the Opposition Front Bench that now is not the time to bring such a Bill into play.
The very compulsion that is instrumental to a supplementary business rate is in stark contrast to the business improvement district initiative, which has been referred to by many hon. Members. My hon. Friend the Member for Ilford, North (Mr. Scott) made it clear in his contribution that BIDs had proved a great success in his own area. I have to say—I am surprised that the Government have not yet pointed it out—that the initiative was initially opposed by the Conservatives during my first term as a Member, but I acknowledge that there have been great successes in my own constituency. My hon. Friend the Member for Bromley and Chislehurst (Robert Neill) referred earlier to a new west end company
and there is also the Paddington Waterside BID; a number of other areas are also keen to go through this procedure.
As I have said, the real issue relates to what is a proper sense of consultation and true ownership of how the process works. Such consultation contrasts with the element of compulsion that is integral to this particular Bill. Consent by local businesses under the process in the Bill would be sought only for those projects where the supplement made up for one third of the total cost. There are some understandable fears that that arrangement will become a charter that ends up driving business both old and new away from the parts of the UK that most need regeneration. The Government must address that concern as they follow up how the legislation works. Nothing could be more disastrous than areas desperately requiring regeneration having it taken away from them simply because a lot of business melts away, but that could well be the case.
I am lucky in that my part of central London has a thriving business sector, but there is no doubt that the problems affecting the retail sector as a whole might well impact on the west end. If secondary charges for various initiatives are levied on top of successful BIDs, it could well tip a number of businesses over the edge. The worst thing would be if vulnerable, small, independently owned and run businesses rather than the large-scale retailers went under. I hope that the Government will give some thought to that. If we look at the disadvantages stemming from the licensing regime over the past half decade, particularly since the Licensing Act 2003, we find that it is the small independent businesses that have proved most vulnerable.
I hope you will forgive me, Madam Deputy Speaker, if I focus the remainder of my brief comments this evening at a slightly more parochial level, as the provisions on prospective Crossrail developments, which my hon. Friend the Member for Ilford, North mentioned, may have a significant impact on central London.
The Business Rate Supplements Bill originates from the Lyons inquiry recommendation that local authorities should have greater flexibility, subject to certain safeguards, to raise revenue to invest in their local areas. I was unable to put the point to the Minister earlier, but the City already and uniquely has the ability to raise a supplementary business rate—reflecting the fact that in part it has a business franchise—so the notion is nothing new within the Square Mile. Given its long-standing support for the Crossrail project, the City’s position is also understandably informed by the fact that the proceeds of the supplementary rate in the capital are earmarked for the construction of Crossrail. With that objective in view, the City supports the introduction of SBR in London at the Greater London authority level.
I understand the concerns expressed earlier by my hon. Friend the Member for Croydon, South (Richard Ottaway) and other Members representing the suburban areas that are unlikely to benefit to any significant or direct degree from Crossrail—that this will be seen as a template and that it will benefit only certain parts of a particular district. London is obviously a very large area of 650 or so square miles. Crossrail benefits are regarded as being of national importance in the same way as the Olympics, but there is little doubt that a number of these infrastructure projects will benefit certain areas rather than others. The right hon. Member
for Greenwich and Woolwich (Mr. Raynsford) made a robust defence not just of the Bill, but of the Crossrail project and spoke about the issue of additional stations. I am sure that he will appreciate, however, that a new station in north Woolwich will not be of much benefit to people who live in Hillingdon, Enfield or Croydon. Any Crossrail configuration will definitely go through my constituency and there will be great benefits, but we London Members need to appreciate the concerns that are felt elsewhere.
Mr. Raynsford: The hon. Gentleman will recall that I argued in an intervention—or perhaps in my speech—that Crossrail has conducted research showing that the project will bring economic benefits for all parts of London, not just those parts directly affected by it.
Mr. Field: I appreciate that, but I am sure that the right hon. Gentleman will also appreciate that some benefits will be more apparent, more direct and more extensive in certain parts of London in comparison with others—an inevitable consequence of living in a capital city. The issue is whether the Greater London authority rather than the boroughs provides the right way to implement the legislation. The exclusion of the City of London and the 32 London boroughs from those able to fund local development through an SBR highlights the importance of ensuring that the community infrastructure levy introduced by the Planning Act 2008, which can be levied at either the GLA or city-borough level, is available to fund genuinely local projects. The case for such a measure is further strengthened by the Mayor’s proposed changes to the London plan. They will enable him to fund £300 million of his contribution to Crossrail from money obtained through the City and some of the boroughs via section 106 planning agreements made with developers in London’s central activity zone.
The requirement in the Bill for the Mayor to consult the City, as with the London boroughs, on any proposal to impose an SBR is in my view welcome, but I also understand the concern that consultation in this context may not be enough; there needs to be a sense of consultation with a certain amount of teeth. I hope that the Bill will not include an entitlement for any of the London boroughs to propose projects to be supported by SBRs without there being a proper dialogue in developing ideas for those projects. Of course, this is not immediately relevant, given that in London the SBR will initially be used just to fund Crossrail, but the situation cannot continue indefinitely.
The Bill’s formal consultation processes regarding who will pay for the supplementary business rate in London will also provide an opportunity to record business support for Crossrail. This support has been demonstrated by the substantial financial commitments made by BAA, to the tune of £230 million, and by the Canary Wharf Group, which has committed £150 million. The City Corporation has agreed to a direct contribution of some £200 million to Crossrail, and has guaranteed another £50 million from the further contribution of £150 million that it is trying to attract from businesses at large.
Although I have long had some reservations about the route that Crossrail takes, now that the hybrid Bill is on the statute book it is essential that we avoid delay,
because a delay will only result in crippling planning blight for those businesses and individuals who would otherwise be affected by the work. There will be some very important medium-term benefits from Crossrail. The demand for some 14,000 jobs during its construction will be an important source of employment during what promises otherwise to be very difficult economic conditions here in the capital. However, it is also an important signal to the world at large about London’s intention to invest for the longer term. Delay now would betray a lack of self-confidence in our capital in its role as a leading global city.
I want to finish on a practical note. The detailed provisions on the consultation process and the collection of the supplement suggest some significant complexities and additional expense for the billing authorities, including the City of London itself. We believe that the most practical way to collect the supplement would be together with the non-domestic rate, if that is what the Minister has in mind. I appreciate that this is likely to be discussed at a practical level in Committee, but I wanted to put on the record my concern, given the projected early introduction in London to satisfy the Crossrail financing requirements, that the administrative detail will need to be swiftly settled in order that the software can be adjusted in readiness for any such circumstances.
I regret that I will be joining my Front-Bench colleagues in opposing the Bill tonight because I am concerned that this is not the right time to put such legislation into place. There are some important practical issues that will need to be ironed out, assuming that the Bill gets a Second Reading and goes through to Committee. There are also some important issues of principle regarding such legislation, which I would not entirely oppose. This has been an important opportunity for us to discuss them, but we will no doubt do so in the months and years ahead if supplementary business rates become a part of the horizon affecting both businesses and local authorities in the future.
7.24 pm
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): I am delighted to catch your eye in this debate, Madam Deputy Speaker. I had not intended to speak. I entered the Chamber this afternoon with a relatively open mind on this proposal, but the more that I listened to the debate, the more I realised that the Bill lacks adequate safeguards for businesses and the more I therefore realised that my Front-Bench colleagues are right to oppose it, for the reasons that I wish to outline.
The people of London have already been, or are likely to be, caned through increased council tax to pay for the Olympics, and it now seems that the businesses of London are to be caned through this mechanism to fund Crossrail. Before the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) leaps up to intervene on me, I wish to say that I totally support Crossrail, but a fairer method of funding it—if the Government wish to do it that way—would be a supplemental increase in the uniform business rate so that all businesses throughout the country pay for it. As he and others have made perfectly clear, all businesses in London and businesses elsewhere in the country are likely to benefit from these measures, so why should they not all pay, rather than just a certain section of them?
There are a number of reasons why I oppose the Bill, but my hon. Friend the Member for Northampton, South (Mr. Binley) made the very powerful case that now is not the right time to introduce such a measure. The country is enduring negative growth and huge increases in unemployment, the rate of business failures is increasing alarmingly, and the rate of business output is decreasing alarmingly. Perhaps the most important reason is that given by the hon. Member for North Cornwall (Dan Rogerson): we have to remain internationally competitive. If we keep increasing bureaucracy and taxation on businesses, they will simply relocate away from these shores.
I have just come back from Hong Kong where there is a maximum corporation tax of 15 per cent., no capital gains tax, no inheritance tax and very low business rates. It is very easy to get money in and out of Hong Kong, and the tax returns are one page long. Let us compare that with the bureaucracy of this country and the huge increase in it that this proposal will engender. It is not just tax-raising problems that these proposals will engender; there is the whole bureaucracy connected with collection, which the local authorities will have to undertake. As my hon. Friend the Member for Cities of London and Westminster (Mr. Field) said in the closing moments of his speech, a whole new form of software will be required to collect these rates.
The Bill does not contain adequate safeguards. We all know what happened when the Conservative Government introduced the lottery. We were clearly told that it would be additional to normal Government expenditure and that in no way would it be used to supplement their tax-raising powers, expenditure on health or other normal expenditure. But what happened? This Government came along and started raiding the lottery for all sorts of purposes—health, education—that the lottery was never designed to pay for in the first place.
Clause 3 sets out clearly some purposes that the mechanism is not supposed to pay for: housing, social services, education services, services for children, health services and so on. The problem with the Bill is that it contains very wide order-making powers. My reading of it is that the Government would easily be able to alter those purposes by a simple statutory instrument discussed upstairs. Indeed, almost anything proposed in the Bill could be altered by a simple statutory instrument after an hour and a half’s debate upstairs.
There is a second thing that I dislike about the Bill. Clause 4, entitled “Conditions for imposing a BRS”, indicates that there is to be consultation on these proposals. One of the conditions is that a levying authority
“has consulted the relevant persons on the proposal”.
Who are the “relevant persons”? Are they strictly businesses? Are they other organisations? In any case, this Government have made a new art form of consultation. We all know what happens when they consult on anything: they may take people’s views but then they completely ignore them.
Let us take the example of the post offices in my constituency. Twelve post offices were proposed for closure. There was a huge number of demonstrations, public meetings and letters and much annoyance of every sort—and the Government took not one jot of notice. I warned when my ambulance trust was going to be merged that there would be problems. What did the
Government do? They consulted—and proceeded with the proposal. There have been countless occasions when they have consulted on things and completely ignored that consultation, so the safeguard in the Bill is very scant.
Thirdly, there are other safeguards in the Bill. As has been mentioned by other Members, there is a 2p in the pound rateable value safeguard. There is a £50,000 safeguard—we believe—to be implemented. There are safeguards whereby a local authority can introduce transitional measures. Again, however, those can all be altered on a whim by a statutory instrument discussed upstairs. The Government must give an undertaking that those things will be constantly reviewed, because we all know what happens if monetary safeguards in a taxation regime are not upgraded from time to time—through fiscal drag the Government end up raising more money. For example, personal allowances, which were not increased for years under this Government, were, in effect, just an extra income tax that the Government were raising.
The most important aspect of this Bill is the lack of a mandatory ballot of all the affected businesses. That is what I object to most, because if the Government had confidence in their proposals—and they clearly do not—they would be perfectly happy to allow businesses to have a ballot. As I said in an intervention on my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), the Government might be scared that businesses will block a proposal, but businesses will do so only when they consider it not to be in their interests. If they consider that improved infrastructure will improve their profits, they will want things to go ahead. The argument being made is incredibly weak, and I hope that my hon. Friends will address it in Committee—indeed, I have a forlorn hope that the Government may yet recant on this provision.
We can all remember the days when businesses without representation went bust under the old local business rates system. In Sheffield, business owners had to take the roofs off their factories so that they were not liable for the excessive local business rates that the Sheffield borough council wanted to raise. If we are not careful, we will go back to that system and we will simply put businesses out of business. I was not elected to this place to put businesses out of business; I was elected to help my constituents form businesses for this country, so that we can create the wealth to pay the tax to have the Government expenditure on the projects that we want.
I am extremely concerned about the lack of a ballot. The right hon. Member for Greenwich and Woolwich and I spent a great deal of time discussing business improvement districts in Committee when that system was introduced by the Local Government Act 2003. We discussed not only the fact that there needed to be a ballot, but the form of the ballot. I do not think it beyond the wit of man to see that we should do the same this time.
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