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The British Property Federation, British BIDs, London BIDs, London First and other organisations have long argued that BIDs should have the power to decide whether or not to include property owners in BIDs. Currently, they are exempt from paying any BID levy. Many property owners have contributed voluntarily to BIDs. Other property owners benefit from the activities of BIDs but do not contribute to them. The Bill represents an opportunity to rectify this imbalance. Also this measure would be a helpful way of ameliorating the impact of the BRS on BIDs by spreading the levy across a wider pool of payers.”
That is what the Mayor of London wrote, and I wholeheartedly agree with his views and hope his letter will lead a number of Members of the same party as him to believe that this is a splendid measure.
While reading the letter, I was very impressed by the Mayor’s grasp of the complexities of the issue, because—as hon. Members will understand from my presentation, which has gone on for too long already—this is complex territory. On reflection, I came to the conclusion that the Mayor’s letter probably owed quite a lot to the input of his chief of staff, the former leader of Westminster city council, who is not only an expert on local government, but was the leader of the council which has, I think, the largest number of BIDs of any authority in the country. Therefore, he is fairly expert in this matter.
Angela Watkinson: I have been following the right hon. Gentleman’s remarks to the best of my ability. When business owners are consulted about a new BID proposal, do they have to give a unanimously positive response, or does there need to be a positive response from a certain proportion of those approached? What does “majority” mean, if there is to be a majority vote? If the proportions are 49 per cent. to 51 per cent. will the scheme go ahead?
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Mr. Raynsford: The procedure is the same as the one that applies to the property occupiers ballot. There has to be a numerical majority among the occupiers in the areas who will be liable to the levy and there has to be a majority according to the rateable value, too. It is a double key ballot that requires a majority on both counts before the levy can be imposed. That has worked extremely well with BIDs and it is strongly recommended by the business interests that are supporting the new clause as a similar safeguard for property owners to that which exists for property occupiers.
I hope that the cross-party endorsement of new clause 2, which is clear from the Mayor of London’s support for it, will be reaffirmed this afternoon. It is a practical measure that addresses the short-term challenge of the potential adverse impact of the BRS on BIDs and the longer-term challenge of ensuring an equitable and sustainable funding base for BIDs. I have been greatly heartened by the degree of support that new clause 2 has attracted from all quarters, and I hope that my right
hon. Friend the Minister, if he is unable to accept it here and now, will be able to give us assurances that the Government will be prepared to amend the Bill in the other place to give effect to the intentions of the clause.
I accept entirely that details are needed about how the ballot and the dual-key safeguards will apply in practice. Complex issues will need to be clarified before the property owner levy can be introduced. We touched on several of those issues in the meeting that my right hon. Friend the Minister set up last week with the interested parties from BIDs and the British Property Federation. Dr. Julie Grail of British BIDs has prepared a very helpful paper on the subject. I accept her judgment that none of the details is a show-stopper and I feel confident that they can be dealt with in regulations to avoid any delay in incorporating the principle of a permissive property owner levy in the Bill.
We also have the experience of Scotland, where a property owner levy has been implemented as an option as part of the BIDs scheme. As British BIDs has pointed out, only two of the Scottish BIDs have chosen to apportion the levy between owners and occupiers, which reinforces the case for allowing the greatest flexibility in how the scheme is implemented area by area.
In conclusion, I commend new clause 2 to the House as a pragmatic response to a real challenge and as a measure that has secured widespread support from those concerned with improving the effective operation of BIDs and the longer-term objective of enhancing the economic competitiveness of our towns and cities.
Robert Neill: I am grateful to the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) both for having reintroduced his clause in a slightly different form from the one that we saw in Committee and for having returned to the issue, which is very serious and warrants significant consideration. Like hon. Members from all parties, I am grateful for the care that he has taken to outline the issue. It is necessarily complex and somewhat technical and, ironically, it is a good demonstration of how regrettable it is that we are constrained by the programme motion that was passed earlier. This one element of the Bill will take up a considerable part of Report, but that is necessary so we can get our heads around the detail.
Let us step back to the objective behind the new clause, on which I think I am in agreement with the right hon. Gentleman. This issue was flagged up to the Government at an early stage and they need to address it: how will we deal with the potential interaction of BIDs and the BRS in a way that does not place an undue burden on businesses? Some of us would perhaps not start from this point, but if we have that interaction we need at the very least to try to ameliorate the situation to the greatest possible degree. That is the issue that I want to see addressed.
If the right hon. Gentleman’s formulation can be taken forward following work and tweaking, I hope that the Government will consider it sympathetically. I take on board the comments made by the Mayor of London. There is a lot more detail that we probably need to explore, and that might need to be done elsewhere, but I hope that the Government will respond seriously to the proposal. The assurance that my right hon. and hon. Friends and I want is that there should ultimately be no perverse consequence of such a provision, either
through the total revenue take being increased through the back door or through some failure to pass on in practice, regardless of any good intentions, the offset of the owner levy to ameliorate and reduce the bid that comes down to the occupiers. If those concerns can be met, the proposal warrants consideration.
Mr. Redwood: Is that not the danger? In this climate, when there will be very little private finance for such schemes, will it not be very tempting for the BID organisations to say, “We can find another bunch of people and companies that have to pay too” and to simply ask for more money from the levy because they will get less money from elsewhere?
Robert Neill: That is precisely the risk. It concerns me with regard not only to the new clause but to the Bill in general. Local authorities as well the promoting bodies of BIDs will be tempted always to go down that route. It might be possible, with good will and work from all parties, for a solution to be found. I get the impression that the right hon. Member for Greenwich and Woolwich will not press his proposal to a vote today, but I hope that what I have said is of some help in concentrating minds on finding a way forward.
Mr. Scott: Does my hon. Friend share my concern that where BID schemes are being voted on an element of fear might be put into businesses—even though it might not be accurate—and that that might force them to vote the opposite way to how we might want them to vote? Like my hon. Friend, I am a great supporter of BIDs.
Robert Neill: My hon. Friend highlights one of the conundrums that the Government have created in their handling of this matter. I am prepared to learn from experience and see the advantage of BIDs. Given that we have a ballot for BIDs but do not have a guaranteed ballot for the BRS, the accumulation of the BRS plus BIDs plus other costs will ratchet up a fear factor and will also cause businesses to wonder where they can take some steps to cut costs, and because they cannot vote against the BRS they will vote against the BID. That will be a shame, because the BID will often be a desirable and worthwhile project. I think that the right hon. Member for Greenwich and Woolwich takes that point on board and we are all looking for a means to prevent that from happening. Perhaps it is work in progress at the moment, but that is why I have made sympathetic noises without committing to the detail. Avoiding the perverse incentive mentioned by my right hon. Friend the Member for Wokingham (Mr. Redwood) and others will be crucial in seeing that the provision delivers the results that are wanted in practice.
I have shown where I am coming from and I shall be interested to see how the Minister responds, because the issue needs to be dealt with. We had considered other alternatives at other points in the Bill, such as automatic offsets. I am not seeking to return to those alternatives at this stage, but the conundrum of the interaction has to be resolved and the Bill as drafted does not achieve that.
Dan Rogerson:
I echo the comments made by the hon. Member for Bromley and Chislehurst (Robert Neill) in saying that the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), in tabling his new clause, has sought within the constraints of the Bill to revisit the BID system that he played a great role in
introducing. As other hon. Members have said, it has proved to be a beneficial process and I am sure that it will continue to be so.
As was said at the beginning of the debate, there has been a conflict in the minds of business people who have been asked to consider whether they should support an ongoing BID in their area or whether they should be part of putting together a new BID when there is the prospect—as there is in London—of a supplementary business rate being levied, too. It has been clear to me from discussions that I have had with representative business organisations that the sort of approach that the right hon. Gentleman wants to take and that he is encouraging the Government to adopt represents a way forward. The British Property Federation, the representative organisation of the people whom right hon. and hon. Members are seeking to protect—that is, property owners—has been keen to point out that it supports this way forward. That reassures me, as I am sure it does other Members.
Inevitably, because we are not talking about legislation to revisit BIDs and widen their scope, the new clause is limited in scope. Therefore, I return to what I said in my earlier intervention on the right hon. Member for Greenwich and Woolwich: the proposal does not allow us to address the formation of new bids. As a result, there is a disincentive for a BID to be successful in the ballot and that would be unfortunate for the areas involved if they are also facing the prospect of a BRS.
When the Minister responds, I hope that he will explore these matters in more detail. Although my party supports the concept of a supplementary business rate where a ballot has been held to determine local approval—an issue to which I hope to return in respect of a later set of amendments—we would regret anything that called into question the benefits of a positive BID process, which will help a local area’s residents generally, as well as its visitors, business community and property owners.
For those reasons, my party supports what the right hon. Member for Greenwich and Woolwich is trying to do. We very much appreciate the lengths to which he has gone to explore the matter fully, and to consult widely before our debate this afternoon. I congratulate him on his contribution and hope that, regardless of whether this new clause is accepted, we will hear about a way forward that will satisfy the concerns that have been raised.
Mr. Redwood: I, too, praise the right hon. Member for Greenwich and Woolwich for the way in which he spoke to his proposal. He has drawn the House’s attention to a very important matter, and if some Ministers spoke to their amendments in similar detail and with similar concern for the House, we would have much better informed debates generally, and perhaps better legislation. [ Interruption. ] I am not referring to the Minister dealing with the debate today, but if he feels that my remark applies to him, I hope that he will demonstrate shortly that it need not do so. He certainly made no sensible contribution to the earlier debate on the allocate of time, but we live in hope that he might make a sensible response to the points that we are making about the Bill, as I believe he did in Committee.
I think that the right hon. Member for Greenwich and Woolwich is trying to paper over some cracks with this proposal. As a Minister, he was the architect and sponsor of the BIDs scheme, which has met with quite a lot of approval in the places that it has affected. It has been used in areas with councils of different political persuasions, often to good effect. However, he sees the danger that the supplementary levy will hit exactly the same people who are financing the BIDs scheme, at a time when the world has changed dramatically.
I am afraid that the Minister has to deal with the very important point that all these schemes—the BIDs idea, the supplementary levy and some of the other ideas that the Government have floated and not proceeded with—rested on the heroic assumptions that rents and property values would go up and that most properties would find tenants very easily. The idea was to try to capture, for the public sector and the common weal, some of the enhanced value that the private sector seems to create so easily. The aim, through the variation of levies and betterment charges and so on, was that some of the gain could be shared, as well as to provide public infrastructure and support to the glamorous private sector developments that were going ahead.
This is not the place to debate all that again. Indeed, I do not think that we can have that sort of debate any more anyway, because that is no longer what the real world is like. In today’s real world, there will be fewer tenants and more void properties. Rentals are falling and could fall a lot further, while commercial property values have fallen some 30 per cent. from their peak and many experts feel that they will fall further. That is not a good background for doubling charges, and the proposed scheme looks like one that might have been designed by a firm called Clobber and Clobber. That is, an area is clobbered first of all with a BID, and then again with the supplementary levy.
Mr. Mark Field: My right hon. Friend is making his case very powerfully, and he is right to say that there was a sense that things would go from good to even better over the years ahead. However, does he agree that there is at least some mileage in the notion of value capture? Although I think that it is right for Opposition Members to stand up for our much-beleaguered business sector just now, does he accept that there is a risk that we are failing to put in place something that could be of use in the upturn? Provided that there are the safeguards that we have discussed, especially in relation to balloting, might not an idea such as the business rate supplement be the right way to find elements of the funding that will be needed as the economy moves out of recession, not least because of the value capture to which he and I have referred? I must add that I probably share his fears that the recession and downturn are likely to be part of the economic tableau before us for quite some time to come.
Mr. Redwood: I think that my hon. Friend and I can agree that the current situation is bad and will get worse, and that this therefore is not the time to introduce an extra levy.
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We are not at present debating the extra levy that is the subject of the Bill. Rather, we are debating a proposal from the right hon. Member for Greenwich and Woolwich that is designed to try to abate the consequences of that
levy. He has rightly seen that introducing the levy in the same area as a BID would amount to a double whammy, or something from Clobber and Clobber, as I have just described it. He has rightly asked himself, “How do I ameliorate that?” He has produced a positive suggestion, but within a framework in which the Government wish to take the risk of upping the tax burden in these difficult areas at a time when the business community is flat on its back.
The right hon. Member for Greenwich and Woolwich is asking whether it is possible to take some of the burden off tenants and put it on to the property owners. His suggestion has the agreement of most property owners, although quite a lot of important ones do not necessarily support it. In his ideal world, the tenants would have an abated total cost. They would still have a much bigger total cost, because they would have to pay the supplement imposed by the Bill as well as the BID, but there would be an abatement.
Not only did I think that the right hon. Gentleman spoke well to his new clause, but I gave him a fair hearing because he was trying to move in the right direction. Before I could possibly support the proposal, however, I would need to be satisfied that there would not be leakage in the way that my hon. Friend the Member for Bromley and Chislehurst suggested. My understanding is that a lot of local authorities, as soon as they see another group of people liable to pay a levy, will not decide that that allows them to cut the levy paid by someone else. Instead, they will think, “Whoopee! We can have a bigger levy! We have broadened the tax base and so we can have a bigger scheme.”
Alternatively, authorities re-entering BID projects that are already up and running might understandably say, “We started this BID in the extremely favourable property circumstances of 2006 and 2007, when we though that the private sector would contribute a particular amount. However, we now discover that the private sector banks have been largely nationalised and cannot make the money available, and that the private sector players no longer have the profits to do so. As a result, we have to make good the shortfall—the amount that the private sector can no longer provide—out of public moneys. What a good idea the right hon. Member for Greenwich and Woolwich has given us. He has provided us with the answer, and we have another bunch of people to put a levy on.”
Dan Rogerson: The right hon. Gentleman is setting out what is clearly a cautionary principle, and it is right and proper that we acknowledge it. However, at the risk of starting another debate about his view of how local government operates—as opposed to the one expressed by other hon. Members, especially the hon. Member for Halton (Derek Twigg)—I venture to suggest that the BID process is slightly different. The organisations operating the BID, which would therefore decide how an offset would work, include bodies apart from just the local authority. As the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) said, the BID would be operated by a wider group. That is certainly some reassurance to me, and I hope that the right hon. Member for Wokingham (Mr. Redwood) agrees.
Mr. Redwood:
I accept that, and there will be some examples of good BID organisations that would not go down the route that I am setting out. However, the hon.
Gentleman will accept that the local authority often starts with an important role in a BID organisation, or comes to play such a role, because it has the necessary public funding and staff. Local authorities in that situation are in some ways the continuity people. When the private sector is in a state of financial haemorrhage and collapse, it loses time, confidence, money and power in the BID organisations. Proportionally, the power and confidence of the public sector rises, and that is what is happening very visibly at the moment.
Mr. Raynsford: When the BIDs were introduced, some people in the business community expressed the fear that local authorities would simply substitute business contributions for their expenditure. I am pleased to say that actual practice on the ground has shown the business community to be pretty canny, on the whole. Its members vote in favour of BIDs only when they have been reassured by the local authority that it will continue and in some cases enhance its contributions to those areas. I would expect there to be a similar positive and constructive dialogue between the two parties in the context of the owners levy that I am proposing.
Mr. Redwood: I am sure that the right hon. Gentleman is right; he has more experience of BIDs than I do. There are many examples of such good practice, but I think that he would concede that what I am saying is possible. I am not saying that it would be a typical experience; I am sure that there will still be many good BIDs and that the business communities will stay fully engaged in many places, but he should not underestimate how much stuffing is being knocked out of the business community by the day-to-day pressures on cash flow, the collapse of turnover and the difficulty in getting access to banking facilities. That is sometimes going to make even the best of intentions among the business community difficult to carry through. Businesses simply will not have the time to do these things, let alone the cash, or the intellectual self-confidence, given the recent very destructive few months, which have hit them badly.
Like my hon. Friend the Member for Bromley and Chislehurst, who is leading for us on this issue, I am not ill-disposed to what the right hon. Gentleman is trying to do. If I felt that the words could mirror exactly what he wished to achieve, and if there were a cap on the ability to take extra money out of the community, I would be much more in favour of the proposal. I would like to hear the Minister’s response, to see whether it might be possible to find a way forward. I hope that he will equally understand my concern—alongside those of the right hon. Gentleman—that at this juncture, above all, the main aim of the House should be not to take more money off the business community.
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