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4.13 pm
John Healey: I beg to move, That the Bill be now read the Third time.
Through each stage of the Bill, I have been impressed by, and grateful for, the serious level of scrutiny by all Members— [Interruption.]
Mr. Deputy Speaker (Sir Michael Lord): Order. If Members are leaving, will they leave quietly and if they are not leaving, will they remain quietly?
John Healey: I welcome the degree of interest in the Third Reading expressed by those on the Government Benches. The level of serious scrutiny given to the Bill by Members from all parties is very welcome and is important to the House. We have benefited from the contributions of Members representing areas in the north and the south, Members representing both rural and urban constituencies and, indeed, those from London and from well beyond it.
The Bill introduces a discretionary power for upper-level local authorities and, in London, the Greater London Authority to levy a limited supplement to the business rate to fund projects intended to promote economic development. We are not imposing a new business tax; we are introducing a new power to allow local authorities—with serious safeguards for business—to raise some of the money that they need to boost their local economies. London is a leading example of that principle, and of the purpose of the new power. The business rate supplement in London will enable the Mayor to make good his commitment to an essential part of the funding package and allow Crossrail to go ahead. It will boost recovery in this part of the country and long-term growth in London.
Angela Watkinson: Will the Minister give way?
John Healey: I have only just begun my speech, but I will give way.
Angela Watkinson: That is generous of the Minister. I wanted to comment specifically on what he has just said about London. As he will know, the circumstances of the 32 London boroughs vary enormously. I am sure that outer- London borough councils such as Havering—which has received a central Government grant of £240 per head, compared with the average of £526 per head—will be tempted by the prospect of raising additional funds through the supplementary rate. The financial circumstances of such councils are very different from the circumstances of the councils in the west end of London to which the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) referred earlier, with their prosperous businesses. The outer-London boroughs tend to contain very small businesses.
John Healey: The hon. Lady is right to say that the circumstances of the London boroughs vary, but she may have missed what I said immediately before I gave way to her. In London, the authority with the power to levy the business rate supplement will be the GLA, not the London borough councils. This will not be a choice, or a power, that is exercisable by the hon. Lady’s own London borough council.
I recognise that the present difficult economic period makes it much harder for the House to deal with legislation of this kind, but it should also be recognised that, during such difficult financial times, there is a risk that investment and major projects will be sidelined because of short-term concerns. There is also a risk that we will retreat to a centralism that removes local discretion and flexibility, particularly when tough choices need to be made. Furthermore, there is a risk that we will not establish the powers and policies relating to skills, regeneration and worklessness that will be necessary both to see us through the current downturn and, more important, to enable us to make the most of the upturn that will follow.
Derek Twigg: Opposition Members have made the important point that businesses are under considerable pressure and stress and strain at present. We all know that that is the case because of what we see in our constituencies and the figures that we see in the newspapers every day. However—this is a point that I made repeatedly in Committee—are not local authorities an important part of the solution, and are they not also under great pressure in having to meet the extra demands being made of them? They are well aware of the pressures on business, and they are providing additional services to help people. It should be recognised that, because of the stresses and strains that they are experiencing, local authorities want to work in partnership with business rather than imposing extra burdens on it.
John Healey: My hon. Friend is right. He has made the same point at several stages during the Bill’s progress. However, the Bill builds on a strong existing working relationship between local authorities and local businesses. My hon. Friend may recall that during one of the evidence sessions the director general of the British Chambers of Commerce, David Frost, told us that
“relationships between chambers of commerce and local authorities are extraordinarily strong”.
As my hon. Friend says, the Bill provides an opportunity for authorities and businesses to plan major projects for the future. Such projects can contribute to the economic recovery and, more important, to the future long-term growth of areas, but it will take time for them to develop. If we are to channel investment to support the upturn and the success that will follow it, we need to make preparations now. Difficult as it is for the House to deal with the Bill at this time, it is part of the foundation for that upturn.
At each stage of the Bill, we have discussed the interaction between business rate supplements and business improvement districts, and at each stage concern has been expressed about business improvement districts. I am glad to say that our debates have confirmed that there is now strong cross-party support for BIDs, recognition of their success and a cross-party desire to protect them, where that is possible. We will no doubt return in the other place, following the debate on new clause 2 and the further work that I intend to ensure that we undertake, to the proposals of my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford).
Concerns have been expressed on behalf of business and by business. I understand those, but the BRS will not come out of the blue for any business in any area.
Local authorities will work with their local businesses to create projects and to examine whether the BRS may form part of the funding for those. As I have said, that will build on the strong relationships between local authorities and local businesses.
We have been urged to go further in the Bill not just by those who gave evidence to the Public Bill Committee, but by the all-party Select Committee on Communities and Local Government and the all-party Conservative-led Local Government Association. They have argued for an increase in the threshold for the business rate supplement; for discretion for local authorities as to whether and when to have ballots on the introduction of a BRS; and for freedom to use BRS funding for purposes other than the economic development of the local area.
Paul Farrelly (Newcastle-under-Lyme) (Lab): We had a thorough discussion in Committee, but I still have a question about eligibility to vote on BRS schemes and whether the regulations might give local authorities flexibility to allow businesses that actually pay rates to participate, rather than those that are simply liable to pay a charge. On Second Reading, I used the example of a local Conservative councillor who operates three public houses in Newcastle-under-Lyme and who, over six years, has avoided paying business rates. He has not been disciplined in any way. The council does not respond to freedom of information requests but it has confirmed to me that, yet again, his businesses are substantially in arrears. Quite apart from the fact that an elected representative should set an example, my question is whether, in those circumstances, the regulations might give local authorities the discretion to say “You will not be able to participate and therefore influence a BRS scheme if you do not pay your business rates.”
John Healey: Action by any business tax payer deliberately to avoid payment of the business taxes that they are legally liable to pay is a disgrace. When they fail to pay the taxes they are legally liable to pay, others have to make good that shortfall. Therefore, by doing that, they are spreading the burden of taxation on to others who can and will pay, rather than those who can pay but will not.
Concerns have been expressed among business about the financial implications of a BRS, especially at this time, and we have taken them seriously. We have built into the Bill a series of safeguards for business. For example, no business with a rateable value of less than £50,000 will be liable for a BRS. Any local authority that is looking to introduce a BRS can make that threshold higher and more generous still. There is also a requirement for statutory consultation with all affected business rate payers and ballots will be held if a BRS exceeds more than a third of the total cost of a project. Any authority that may levy a BRS also has the discretion to introduce a taper above the £50,000 threshold and to phase in a BRS over a number of years. In addition, if it thinks it appropriate, it has the discretion to exempt empty properties from a BRS.
Mr. Binley: The Minister is generous in giving way and it is appreciated. He referred to the £50,000 rateable value limit, but the Bill does not come into effect until April 2010, by which time we should have had a revaluation. I wonder whether he will give hope to small businesses by saying today that he would be willing to look at that figure, because if he does not, many more small businesses could be brought into the net.
John Healey: In effect, nine out of 10 businesses fall below a rateable value threshold of £50,000. If the hon. Gentleman has small businesses in mind, it is highly likely that they will be below rather than above that threshold. There is merit in consistency. We have set the minimum threshold at £50,000 and have been consistent on that. We are allowing local levying authorities to set a higher threshold if they wish and if the terms of the scheme suggest that that is right. Once that is in place and operating, there may be a case for looking at how it is working, including the question of the threshold. But it is important to be able to get this in place with a degree of certainty so that businesses can look ahead and know whether or not they are likely to be liable to pay the business rate supplement if, indeed, one is proposed for their area.
Mr. Binley: The Minister cannot tell me what the average rateable value will be and we know that the revaluation will be based on the peak property prices in early 2008. Also, rateable values descend as we move out from town centres. Many independent retail businesses in valuable properties in town centres are struggling to survive at the moment, so the level of the rateable value threshold is vital to them.
John Healey: I understand the reason for the hon. Gentleman’s concern and the case he has made; he has made it eloquently in Committee as well. Equally, it does not change our stance. I do not wish to repeat myself and the hon. Gentleman can refer to the Official Report tomorrow.
The Bill has faced, and stood up to, extensive scrutiny in the House. The Bill sets up a limited but valuable and workable framework from which all businesses could benefit in the long term. I await with interest the debates and comments that we expect from the other place as the Bill passes through there. I commend the Bill to the House.
4.27 pm
Robert Neill: I was reminded of the earlier observations by my right hon. Friend the Member for Wokingham (Mr. Redwood) about the insidiousness of timetable motions. This substantial Bill has been debated constructively and positively, but the reality is that the operation of the timetable motion means that the Third Reading debate is such a truncated ritual as to be effectively meaningless. Perhaps we need to think about the values of parliamentary procedure.
We have sought to amend the Bill constructively. We accept its operation in relation to the Crossrail project—the one area where the debate became a little charged at times—but we are where we are. I hear what the Minister says and I pay tribute to him for the courteous way in which he and his ministerial colleagues dealt with the Bill and its detail. As always, it has been a pleasure for Front-Bench Members on both sides to interact on the Bill. That said, we remain unpersuaded that the particular situation of Crossrail justifies the roll-out of a power—albeit a discretionary one—elsewhere in the country. The particular economic circumstances make that especially inappropriate at this time. We should take on board some of the third party observations that were helpfully relayed to the Committee in its evidence sessions. The British Chambers of Commerce made the point that we cannot just look at the discretionary power in isolation. We must consider the business rate supplement in
combination with the other burdens on business: the possibility of community infrastructure levies; in some local authorities, the possibility of congestion charging; and the possibility of workplace parking levies, which have to be taken into account in relation to BID levies. All of those together can create a potentially threatening mixture of burdens for firms in a difficult time. That is why we have concerns about the timing of the Bill.
I am not at all against giving local authorities incentives to assist in the generation of economic development. That is why I think it is ironic that we are introducing this discretionary power to charge businesses more at the same time as the Government have reduced drastically the funding available to the local authority business growth incentive scheme. That juxtaposition causes many of us to be very cynical about the ultimate motivation, particularly behind the Treasury’s approach to the Bill.
Many businesses are struggling at present, and there are missed opportunities in that this Bill could have embraced measures to try to improve their situation. If there is to be a discretionary power to levy a business rate supplement, why not also use the Bill as an opportunity to give a discretionary power to levy a business rate discount? That would have won support in all parts of the House, and I am sad that that opportunity to bring some relief in areas of difficulty was not taken.
As my hon. Friend the Member for Northampton, South (Mr. Binley) pointed out, it is a pity, too, that opportunities have not been taken to address problems arising from a possible revaluation that may be based on data that are significantly out of date and out of alignment with the current and future economic situation. It would also have been useful if we had taken the opportunity to make small business rate relief automatic, and taken on board the proposals in the private Member’s Bill of my hon. Friend the Member for Mid-Worcestershire (Peter Luff), especially as when the Under-Secretary of State for Communities and Local Government, the hon. Member for Tooting (Mr. Khan), replied to it on Friday, what he said suggested there was some sympathy for it. There is a sadness, therefore, in that this Bill could have done much more to address the needs of small businesses, but it instead focused on the national roll-out of a scheme that we do not think is appropriate for current circumstances.
Against that background, and given that we have limited time available, I will not rehash all the arguments that have been made. I hope, however, that when the Bill passes to the other place, the opportunity will be taken to pursue some of those issues on which it was agreed that improvements could be made and more could be done. I note in particular the new clause of the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), to which Members on both sides of the House were sympathetic, and I hope something can be done in that regard. I hope, too, that we can take forward constructively in the other place what we discussed on Report about the various models by which we can ensure that, if we are to have the BRS system, the business community is party not only to the early stage of its development, but the outworking of the Bill.
Although measures can be taken to improve the Bill, that does not alter the fact that we remain unhappy with it. We do not intend to vote against it on Third Reading in this House, but we now have to hope that local
authorities will show forbearance by not exercising a power that could have unintended harmful consequences in the current circumstances. That is my concern, and that is why we have set out our caveats, and why we look forward to seeing what can be done to the Bill in another place.
4.33 pm
Dan Rogerson (North Cornwall) (LD): I agree that, as ever, the ministerial team, the civil servants and the Opposition Front-Bench team have conducted the debate and the flow of information in respect of the Bill very constructively, which has been most helpful. I also wish to place on record my thanks to three individuals who have helped me prepare: Beth Warmington, Alex Davies and Lucy Monks put a great deal of work into this Bill, as they have on many other things.
The Bill is a missed opportunity, in that there are some steps that have not been taken. We are very keen on the principle of allowing local authorities to explore whether this measure is appropriate in their area, which is why we were not able to support the Conservative amendment to restrict it to being a London-only measure. Sadly, however, given the time restriction, we were not able to have a debate about ballots, which is where we part company with the Government, as the Minister knows, because we believe that a ballot should be held in all circumstances.
Mr. Scott: Does the hon. Gentleman agree that balloting would be the most sensible way of engaging the business community and getting it behind and on side with all aspects of the Bill?
Dan Rogerson: Absolutely. I agree with the hon. Gentleman. I think that that has been the feeling of just about everybody on the Opposition Benches throughout the various stages of the Bill.
We feel that the Bill makes a useful contribution to the big task that local authorities will face, which, as the hon. Member for Halton (Derek Twigg) said, will be in advising and working with business and preparing for the reconstruction of local economies given the circumstances in which we find ourselves. However, we believe that local businesses ought to have more to say through a ballot and that they ought to have greater involvement in the administration of a project through whatever means the Government come up with. Of course, I should put on record the fact that my party supports Crossrail, although that has been almost a separate debate. For that reason, as well as because of our agreement with the principle behind the Bill, even if we have grave doubts about its operation in its current form, we will not oppose it at this stage and we will allow our noble Friends further to consider it.
I hope that when the Bill is debated in the other place, the Government will have a slightly more generous attitude towards giving way on some of the crucial issues, such as ballots. Perhaps they will revisit business involvement in ongoing oversight and, of course, the interaction with BIDs in order to reassure businesses that they can support BIDs as well as major infrastructure projects to which the BRS might make a contribution.
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