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Dan Rogerson: I am pleased that the hon. Gentleman is exploring the matter and supports us on the general concept, although I appreciate that he is unhappy with some of the details of the new clause. We have been at pains throughout the process to point out that there is a distinction between Crossrail and projects in the rest of the country. Indeed, his own party has sought to do that as well. Although I believe that a mechanism could be found to ensure that local government and the business community in London are represented, we need to consider closely how the system will operate in other areas. We are considering a specific case in London, but the Bill may well be applied across the whole country.
Mr. Field: I appreciate that the Bill will not necessarily create fully fledged Crossrails across the board.
The hon. Gentleman made a comparison between the proposed business rate supplements and business improvement districts. I believe that we will return to that matter in other debates this afternoon. It is crucial that we draw a firm distinction between the two. My biggest fear is that by putting the Bill on the statute book, we will allow it to be used for small infrastructure projects that should be covered not by a BRS but by BID-type schemes. A BID works by being highly localised and highly focused, and by working for businesses that, as in my constituency, are often within a couple of roads or a small number of blocks of each other. Those schemes work extremely well, and having some sort of delivery board mechanism makes sense in the context of a highly localised scheme.
My concern, which is implicit in all the amendments in this group, is that no local authority should be able to say, “Right, we’ve now got our BRS scheme through and we do not need to bother with worrying about the concerns of business or anybody else for the next 10 or 12 years”, or however long the project takes. That would be wrong, which is why I support amendment 16. Equally, we should avoid highly prescriptive man-management that would only provide a further level of bureaucracy and confusion. I hope that the Government will give some thought here and in another place to finding a way to ensure that the credibility of BRS schemes is maintained. I know that we will come on to ballots later this afternoon, but my biggest concern is that without some safeguard for business, there is a real risk that credibility will be undermined and the system will simply be seen as another opportunity for a cash-grab from the Government, rather than used for a specific purpose that benefits a business community in infrastructure terms.
Mr. John Redwood (Wokingham) (Con): I see the need for something that will satisfy the business community that a project is worthy and well managed, but I share the concerns of those who believe that imposing a board in every case might be difficult, inappropriate or unnecessarily bureaucratic. Under the terms of new clause 1, it is difficult to know who from the private sector side would want to volunteer to sit on such a board. We learn from new schedule 1 that there would be no remuneration, and we can imagine that in some cases the meetings would be long and frequent.
Anyone considering sitting on such a board would want to know what their legal duties and responsibilities were and what the consequences might be if something
went wrong. Would it be a board in the legal sense, on which a director sits only if he is aware that serious legal duties and requirements are placed on him, and aware of what provision is to be made for officer insurance, professional indemnity and all the other things that anyone placed in that position of trust deals with? If so, that would represent a labour due imposed on top of the cash charge that the business community will be invited to expend. It is bad enough that a company will have to pay the tax, but worse for it to be told that it must put up some people to sit on the supervising board so as not to make an even bigger mess of the scheme. That would mean that they were invited to give of their time free, on top of having to give their money to the project in question. I see certain difficulties in that.
I assume that in line 3 of proposed subsection (1) of new clause 1, we do not need the word “to” twice, and that that is a typing error or misdrafting that could be dealt with.
New schedule 1 provides what support there is for the idea of the board, but it is quite slim. We are told in paragraph 6 that the board’s functions would be specified by regulations. If that idea were to go any further, those regulations would be of great interest to the House, as they are where the meat of the system would be. Currently, we know nothing about the intended responsibilities, duties or legal requirements, the degree of surveillance required or the necessary reporting, accountability and so on.
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We learn from the new schedule that the members of the board are to be appointed in the following way. One third are to be representatives from the affected local authority; one can understand that. However, only one third are to be representatives of those paying—the affected local business community. The remainder—one’s mental arithmetic might run so far as to say the other one third—are to be
“members appointed as thought appropriate by the relevant levying authority.”
In other words, the authority seeking the money and imposing the tax on the local community could have two thirds of the board members. It could therefore win any simple majority vote and a lot of weighted majority votes up to the two-thirds threshold. That would give it effective control.
I am sure that the framers of the new schedule have it in mind that the local authority will be well disposed towards the local community and want people of independence and stature on the board. However, that is not what the new schedule actually says.
Mr. Brian Binley (Northampton, South) (Con): The objective of allowing scrutiny is to allay suspicion and fear. The appointment of the whole board would be in the hands of local authorities, some of which are very unpopular. In my area we currently have a Liberal local authority that is immensely unpopular. Does my right hon. Friend agree that suspicion would not be allayed if such power were invested in the hands of such an authority?
Mr. Redwood:
Yes. I do not want to make this party political, although I have had experience of what my hon. Friend mentions, but a council of any kind could
become unpopular. It might make itself unpopular by proposing one of the supplementary levies provided for in the Bill, no doubt on top of a large council tax increase at the capping threshold. Yet under the new schedule, local authorities would not just be given the power to have a third of the representatives and to choose the third who are perhaps intended to be more independent, although that is not stated. They would be given the power to choose the whole lot.
The business community might choose for the board two or three good people who, despite all the obvious aggravation and the lack of wisdom involved in sitting on one of these things, decided that they wanted to do so because there was a big project. The local authority would have every right to say, “No, we’re not having them. We would rather have some friendly, helpful people who are of our political disposition or agree with us about this project”, so that there would be no grit in the oyster and no challenge to how the project was going ahead. The new schedule reveals a weak system, which in certain circumstances would prevent the board from acting as an accountable body with control over costs and responsibility for better project management. If a local authority were determined to drive something through, against the interests of its electorate, it could do so. That is a great weakness in the system that is suggested.
We are told that a board would be established
“at the first instance of an initial prospectus being published for the imposition of an approved BRS”,
and that it would continue for the whole period for which the BRS existed. That means that it would be a long task in many cases, and that, too, would make it more difficult to get people of good quality on the board. We are told:
“In appointing members to the Board the levying authority must have regard to the desirability of securing that the Board is able to perform its functions effectively and efficiently.”
That is a very wide suggestion, and I do not believe that it requires a local authority to have much discipline in choosing people of substance who are likely to provide the critical analysis and accountability that we would like. We are told that everything else will be sorted out in regulations—doubtless, they are still to be drafted.
I therefore have more sympathy with the more wide-ranging amendment 16, in which my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) leaves open the question whether we need such a body, and correctly directs attention to the lack of accountability in the projects if we do not provide for some sort of mechanism. We are here, even at such a late stage in the Bill’s progress, to tell the Government that there is a genuine problem of accountability. The system is unsatisfactory anyway, in that it enables the imposition of big levies on local communities in times of stress. If there is no proper system for engaging them and getting them to believe that a project is well run and that the expenditure is properly controlled, that makes matters far worse. Amendment 16 gives scope for the Government to make regulations under the Bill that might get nearer the mark.
I therefore hope that the Government will use new clause 1 as a prod and a stimulus to improve their Bill. I do not believe that it is quite right, for the reasons that I
identified and for others with which I shall not delay House. Perhaps amendment 16 provides a way forward if the Government are willing, and if they are prepared to produce regulations to give some accountability under the law.
The Minister for Local Government (John Healey): We have now moved beyond the programme motion debate and back to the serious scrutiny that has been characteristic of the way in which all hon. Members who have been involved with the Bill have dealt with it. I shall try to respond in kind. I want to encourage the hon. Members for North Cornwall (Dan Rogerson) and for Bromley and Chislehurst (Robert Neill) to feel that they do not need to press either the new clause or the amendment that they respectively tabled.
Let me start by looking for common ground. I agree that it is important for businesses to feel confident about the running of any project to which the business rate supplement contributes a funding stream. It is also important that they are kept informed of a project’s progress and of the costs that are incurred in running it. However, new clause 1 would over-centralise and is too prescriptive, as other hon. Members have pointed out. I intend to achieve the same end through much more flexible means.
I urge the hon. Member for North Cornwall to consider that, if the duty on levying authorities to set up a body to oversee the delivery of any project that was funded or part funded by a business rate supplement existed—even if that supplement were a small element of a much larger funding package, which would inevitably have its own governance arrangements—the authority would still need to establish a project delivery board such as he has described. Although I am with the hon. Gentleman in principle, a moment’s pause suggests that, in practice, the new clause would be too prescriptive. It may not work in all circumstances, and the hon. Member for Cities of London and Westminster (Mr. Field) rightly asked whether we could imagine it working for the arrangements that are properly in place for Crossrail. The new clause is likely to blur the lines of accountability and could lead to less rather than more effective management of the delivery of any project linked to the business rate supplement.
The right hon. Member for Wokingham (Mr. Redwood) made an important point about the new clause. It specifies that the board should be a “body corporate”, which has implications for those who would sit on a board. They may face the possibility of being legally liable and responsible for a project over which they have relatively little direct control. Ultimately, responsibility for such a project must rest with those who are put there to take it.
My preference is in keeping with the arguments that my hon. Friend the Member for Halton (Derek Twigg) presented. The levying authorities, clearly with wide local consultation, are best placed to determine the appropriate governance for a project. It is neither easy nor appropriate to specify that centrally. It should certainly not be done in of the Bill.
Amendment 16 attempts to introduce a similar provision more flexibly. As the hon. Member for Bromley and Chislehurst said, the delivery board model may not always be appropriate. He wants to ensure that the business rate supplement prospectus makes it clear how
those paying it can expect to be informed, especially about the amount of revenue that has been raised and how it is being spent. The Bill already provides for that. Paragraph 11 of schedule 1 requires levying authorities to make clear in their prospectus the way in which those liable for the supplement will be informed about the expenditure incurred on a BRS project. It also requires the authorities to set out how they will provide updates on the work until its completion. In other words, levying authorities will not be able to keep in the dark businesses that pay the business rate supplement.
Let me be clear and, by doing so, attempt to be helpful. We also expect levying authorities to consider how they will involve businesses in running any project that is funded or part funded by a business rate supplement. Indeed, in the draft statutory guidance that is out for consultation, we have made it clear that authorities should consider how they can involve businesses over and above the specific statutory consultation. Consultation on the draft statutory guidance closes on 17 April.
Amendment 16 is also too prescriptive. The message in the guidance is clear to authorities: it is important to ensure that those who pay the business rate supplement are informed and involved in running a BRS project. It also gives authorities the scope to determine what is appropriate given the nature of the project and the needs of the local community as well as the desire of local businesses to get involved.
As I said in Committee, consultation on the statutory guidance is under way and we have put down markers in it. I also made it clear to the Committee that we will consider the points that were made in the debate as part of the consultation.
Robert Neill: I am grateful for the spirit in which the Minister has approached the matter. I do not seek to be needlessly prescriptive and I am grateful for his comments on paragraph 11. I understand the intention behind his point about the statutory guidance, which is out for consultation, but what is the sanction if a levying authority does not come up with the goods under that guidance? We must give the business community some assurance that there is a fall-back and a sanction.
John Healey: The hon. Gentleman has a good memory and I am surprised that he has overlooked our detailed discussion in Committee about the provisions that set out the range of sanctions. Ultimately, the Secretary of State has the power to suspend a business rate supplement. Before that point, there is range of other potential interventions and sanctions, which we discussed.
Robert Neill: The Minister is generous, as always, in giving way. His response may help us crystallise our thinking about what we do. Does he envisage a position whereby the draft statutory guidance, once it is issued—I do not know what his time frame is or how it will fit in with considerations in another place—will set out how the business community is to be involved before a decision is made? I do not want to be unduly prescriptive, but does he understand that moving in and using sanctions is to shut the stable door after the horse has bolted? We want an assurance that people will be informed before they make a decision about a BRS.
John Healey:
The guidance is statutory and authorities are therefore clearly expected to follow any terms set out in it, especially when it applies to the way in which
they are expected to consider a case for a business rate supplement: consulting on the ideas and involving others, including potential BRS payers, in their preparation. We have published the proposed guidance in draft and we will update it after the consultation closes.
I have said that we will take into account the points made in this debate and in Committee in coming to our conclusions about the content of that guidance. I hope that the hon. Members for Bromley and Chislehurst and for North Cornwall will both regard that as a sensible and flexible but nevertheless clear and firm way of ensuring the aims that they seek.
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The hon. Member for North Cornwall said that he was testing my view with amendment 1, which would mean that levying authorities in two-tier areas would be able to levy a business rate supplement or vary one only from the beginning of any billing round in April each year. It will certainly be more efficient for billing authorities to collect the supplement at the same time as they collect business rates. That is why we want to encourage, as we are doing, any authorities to collect the supplement in order to do just that.
As the impact assessment that accompanies the Bill says, and as I explained in Committee, when the business rate supplement is collected as part of the annual billing round, the Bill provides for the costs of that collection to be met from the revenues of the business rate supplement. When the business rate supplement is collected as a separate exercise, the costs of collection would have to be met by the levying authority. There is therefore a clear financial disincentive to do anything other than make the collection part of the annual billing round.
The hon. Gentleman’s proposal is unnecessarily restrictive—he is nodding, which I hope means that he would accept the general argument and not press amendment 1 to a vote. The risk is that if there were a minor delay—say, a month—in a project for any reason, including any reason not connected with the BRS, amendment 1 would require a whole year’s delay before that project with the BRS element could get up and running. That is unduly inflexible and gives undue weight to administrative processes rather than to the proper delivery of the projects concerned.
In summary, hon. Members have ably made their arguments this afternoon. I hope that they will allow us to consider those arguments as part of the current consultation on the statutory guidance. We are concerned about the credibility of any BRS-supported project, as the hon. Member for Cities of London and Westminster urged that we should be, as well as about the delivery of those projects. The guidance is clear and so is our aim through that guidance. Our approach is more flexible than that proposed either by new clause 1 or amendment 16. It allows for arrangements that will properly inform and involve the business community, and BRS payers in particular. Our approach will also mean that any proper arrangements can suit the area, the project and the BRS scheme concerned. I hope that the hon. Members for North Cornwall and for Bromley and Chislehurst will not need to press their amendments to a Division.
Dan Rogerson: I am pleased to have prompted a debate about the issue, if nothing else, although I sense that there may be a range of views not entirely sympathetic to new clause 1.
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