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John Healey: I am interested in the common cause that the hon. Gentleman is making with the Liberal Front-Bench team. Setting the business rate nationally is a way of making sure that the revenues available are redistributed fairly, particularly to poorer areas. It also
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ensures that the system itself is fair in that, when a local economy or area has relatively few businesses, the ones that do exist are not disadvantaged by having to pay a higher rate. The business rate system we have today is a way of ensuring in a number of ways—not just that one—that there is a fair system of taxation for all businesses in all areas.

Mr. Mark Todd (South Derbyshire) (Lab): While my right hon. Friend is right in saying that this taxation system is not particularly new, what is relatively new is the early imposition of business rates on empty property, following the Barker review. In times such as these, no sane property owner will needlessly hold on to empty property, so although the focused support for smaller businesses is welcome, will my right hon. Friend review the level at which that assistance comes into play? In my area, companies are struggling to let properties while desperately trying to meet business rate demands they cannot cover.

John Healey: I shall make sure that my hon. Friends at the Treasury take that as a Budget representation from my hon. Friend. I am glad he welcomes the change that we shall be making from April this year, which means that there will be a higher threshold and thus no new liability to pay on probably about 70 per cent. of empty properties. He urges us to review the operation of the scheme and we shall of course do so once it is in place.

I turn again briefly to the questions about the business rate system as I think it would be useful for the House to understand how we have tried to design it so that it is fairer for businesses—I have mentioned the benefit of a nationally set rate in that regard. The system is based on the hypothetical rate that an occupant would pay to use a property. If a property is in a better location or provides better amenities, the rent that someone may be willing to pay will be greater and the rateable value and the rates that flow from that are, therefore, also greater.

The hon. Member for Bromley and Chislehurst talked about the multiplier. He is right: the actual amount a business pays in business rates is calculated as a function of both the rateable value and the multiplier. Contrary to the assertion that through the business rate system, business is a cash cow for Government funding, or even local government funding, business rates rise only by the rate of inflation. Each year since 1990, and consistently since 1997, the rates have risen only in line with inflation. That has meant that since 1997 the proportion of local government funding from business rates has dropped from about 25 to 21 per cent.

Before anyone from the Opposition jumps to their feet, it is not the case that the proportion of the council tax contribution to council funding has risen in a mirror image. Investment from central Government has increased above inflation every year since 1997, but the proportion of local government funding from council tax has been roughly the same over the past decade.

Mr. Mark Prisk (Hertford and Stortford) (Con): The Minister is right to point out the importance of the retail prices index. If the RPI is negative this September, will the Government commit to reducing business rates for the coming year?

John Healey: As the system stands, that would be the effect on the business rates multiplier for the following year, if RPI is negative in September. The multiplier is
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capped each year by RPI—inflation. Through the cap and by setting rateable values for a five-year period, we can give businesses certainty about the level of their business rate liability.

In addition, where we think there is a strong case, we have been ready to introduce reliefs to make the system fairer still. There are now mandatory reliefs for charities and community amateur sports clubs of at least 80 per cent., which last year were worth almost £800 million to those bodies. We introduced rural rates relief, which has been available since 1998. Pubs and post offices in rural areas can get 50 per cent. rate relief. I have to say that the Conservative party opposed the legislation that introduced that relief.

Peter Luff (Mid-Worcestershire) (Con) indicated dissent.

John Healey: The hon. Gentleman shakes his head, but his party voted against the Second Reading and the Third Reading of the legislation that brought in that measure. However, he is, I am pleased to say, a strong advocate for that relief, as is the Conservative party now. According to the last figures, that relief is worth about £260 million to nearly 400,000 small businesses. So there is relief in the business rates system, particularly for small firms, where there is a good, principled case for it.

Peter Luff: Of course, the Minister is being a bit tendentious. We opposed the Bill for the bad things that it did. The relief provisions were a good thing in it that we always supported, so he was not right to say what he did. The automatic rate relief was always supported by Opposition Members. I support it, and I am glad that the Government embrace it. I have had constructive discussions on making that relief automatic in my private Member’s Bill. He has indicated that he is in constructive discussion on the issue with other parts of Government. I have now examined all the arguments against making it automatic, and none of them has any validity. May I join in pressing him to make Budget representations to the Chancellor, and ask him to make sure that automaticity forms a part of the Budget measures next month?

John Healey: I shall personally forward a copy of the Official Report to the Chancellor tomorrow, and I shall highlight the hon. Gentleman’s contribution with my doughty yellow marker pen, which I have here. Let me mention revaluation, because the Conservative Front-Bench spokesman raised the subject. It is a major part of the rating system—and, I would argue, of the fairness in that system. That fairness comes from the regular five-yearly revaluations.

Andrew Selous (South-West Bedfordshire) (Con): Will the Minister give way briefly on the issue of fairness?

John Healey: Of course.

Andrew Selous: I am grateful. The Minister has been extremely generous in giving way today; I think that we all appreciate that. Last week, I was approached by someone whose business operates from small, one-storey premises. It is charged the same business rates as a much larger, two-storey building on the other side of the road. He has been in contact with the Valuation Office Agency, which said that it would take him to court, before offering him a payment plan. He has been told that it will cost him about £800 to challenge the decision. Is
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that fair? What sort of help can the Minister offer to businesses in that situation that are being treated unfairly? There does not seem to be equity in some cases.

John Healey: I think that it is reasonable that the hon. Gentleman’s constituent should question the Valuation Office Agency’s rating valuation. If his constituent is still contesting the view that the agency takes, he has the right to challenge it. He has the right to take the case to a tribunal to have it properly adjudicated. I would encourage the hon. Gentleman to encourage his constituent to do just that, as is his right. The Valuation Office Agency is there to deal with people’s questions or challenges in the first instance, but the independent tribunal is there to adjudicate between the assessment made by the agency and the evidence that people such as his constituent produce.

Let me return to revaluation. It ensures that businesses contribute at a level that is based on up-to-date information. The next revaluation is due to take effect from 1 April 2010. The revaluation will not raise extra business rates revenue; that is an important protection for all businesses. Some rates bills will rise and some will fall after the revaluation, but the average national rates bill for businesses will change only by inflation. For those rate payers who face big increases at the 2010 revaluation, we will introduce transitional arrangements, so that we phase in those increases. We plan to consult later this year on the design of those transitional arrangements, which will substantially benefit business in the new rating list period.

Robert Neill: I am grateful to the Minister for giving that indication. Will he confirm that the transitional arrangements will be, at the very least, no less generous to businesses than the current arrangements, and will he consider looking again at the methodology for calculating the revaluation?

John Healey: I can confirm that we are considering the appropriate methodology at the moment. I can further confirm that we aim to publish the proposals for consultation later this summer. I look forward to debating them, and to hearing the hon. Gentleman’s representations on them.

Let me move on briefly. I said earlier that we were very conscious of the economic pressures on business at present—the pressures that the international credit crunch and the economic slowdown are having. That is why, contrary to the argument that we heard earlier, there is a range of practical measures in place that is offering real help to businesses, particularly to small firms, in the face of not just a credit crunch, but a crunch of confidence, demand and, increasingly, jobs. Not to act, as independent commentators and some of the specialists have said, is likely in the long run to cost us more than the action that we are taking.

To help cash-flow pressures from business taxes, those measures include putting in place a mechanism for deferring tax payments. Since it was announced in the pre-Budget report, HMRC has done so for 93,000 businesses at a value of £1.6 billion. The measures include help to secure finance for small and medium-sized enterprises through the Government enterprise finance guarantee. That enables banks to provide an initial £1.3 billion of lending to SMEs that have viable business plans but find that their normal commercial sources of
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support may have been choked off in the current circumstances. So far 26 lenders have signed up to the scheme and 20 of those lenders have already made offers; 1,300 businesses have been registered as eligible for support, and support to date totals almost £150 million.

Mr. Binley: I am grateful to the Minister. He is always generous in giving way and, as my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) said, it is appreciated. What assessment have the Government made in relation to deferment of VAT payments with regard to indebtedness? When a drowning man sees something in front of him to grab hold of, he grabs hold of it. My concern is that the degree of indebtedness that might be incurred will make more people insolvent, rather than fewer.

John Healey: The Government have not made a precise assessment of that, but the general concern, particularly about cash-flow pressures and sources of credit that will help see companies through this period, has been at the root of the schemes that are now in operation. That was the root of the deal that we did with the European Investment Bank to make sure that we have £350 million for small and medium-sized firms, which has been agreed by UK banks. It is also why we want our banks to lend responsibly again, so that those banks that have taken a good slice of taxpayers’ support are required in legally binding agreements to increase the level of lending that they will undertake next year. So Lloyds will increase its lending in the next 12 months by £14 billion over last year’s figure, with £11 billion of that to business. RBS will lend an extra £25 billion, £16 billion of that to business.

In conclusion, I return to the speech that we heard from the hon. Member for Bromley and Chislehurst and to the motion. The speech was long on criticism, as I have come to expect from him, but it was short on solutions and even shorter on commitments that businesses could take seriously, rely on and expect from the Conservative party. Faced with an unprecedented failure of the global financial system, which is now having severe repercussions on jobs, confidence, credit and demand, there are easy criticisms, but there are only hard decisions that need to be taken.

Recognising the problems, as we do, and recognising the pressures that business faces, we have been clear and committed and are acting in every way we can to help them through the period. That is why we have in place targeted support for business, we have deferred the increase in small companies corporation tax, we have carried out almost 36,000 business health checks, we have the lending schemes in place, an extra £100 million has gone into debt advice, and it is the Government’s aim and commitment to try and pay invoices, particularly to small firms, within 10 days.

On business rates, the Government’s package of measures includes, among other things, the commitment to the annual retail prices index cap, the introduction of the small business relief scheme and the regular revaluation every five years. That combination of measures enables the business rate system to raise revenue vital for local services while being certain and fair and, when appropriate, providing reliefs for specific businesses. That is what our amendment to the Opposition motion sets out, and I urge my hon. Friends to support it.

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5.40 pm

Lorely Burt (Solihull) (LD): More than 20 years ago, my company moved into its first commercial premises. My shock on receiving my first non-domestic-rates bill stays with me to this day: “You mean I have to pay all that without even having my bins emptied? What am I paying the rates for?” I cried. I imagine that that innate sense of unfairness at the Government’s milking of a person’s business for cash has been replicated among many business owners throughout the years.

On complaining to my local authority, I discovered that it had no hand in setting the rates, which had been set by central Government; the local authority would not have any interest in providing a service, given that the money that it was instructed to collect went straight into Government coffers. I know that some of the money is reallocated back and that local authorities see some of the fruits of their labours, but it seemed wrong to me then that I, the business rate tax payer, was powerless, and that the local authority had no power either. It just played the role of tax collector.

There have been a number of attempts to link various payments from businesses to the quality of service that they receive. There are business improvement districts, for example. When businesses are strong participants in a bid, the districts seem to work well, although some have enjoyed mixed success. However, at least businesses get a vote and a say in such a bid.

As has been mentioned, we recently debated the Business Rate Supplements Bill. We supported it because we recognised that major infrastructure developments such as Crossrail need businesses to support them financially and that businesses along the route supported Crossrail. Such a big project would not be able to survive without business support. The Liberal Democrats tabled several amendments to the Bill in an attempt to introduce a ballot for all businesses that were to be levied. The measure was supported by the Federation of Small Businesses, the Institute of Directors, the CBI, the Royal Institution of Chartered Surveyors and the British Chambers of Commerce—but not by the Government. We tabled amendments to give businesses a say by means of a project delivery board, through which the expertise of business could be used in the delivery of improvements supposed to be for the benefit of all. Nevertheless, all those amendments were rejected or talked out.

Businesses are back more or less where they have always been: paying the piper, but never calling the tune. The Conservative motion proposes that local authorities should have the power to apply local business rate discounts, and there has already been some discussion of that. The proposal goes in the right direction, but it is still only tinkering about on the edges of the problem. We need a proper relationship between the local authority and the businesses operating in its area.

Businesses might be more willing to pay business rates if they could see what they were getting for their money and if services could be tailored around them; they might be more willing to pay if they had some say in the matter. However, under this Government—or the Conservatives—the chances of that happening are about as likely as Fred Goodwin’s getting a Christmas card from the Prime Minister.

Mr. Prisk: He got a knighthood!

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Lorely Burt: Yes, he did, but that was some little time ago; I doubt if he would get one today.

In their amendment, the Government cite no fewer than 12 initiatives that they purport to have introduced to help business, some of which are most welcome. The HMRC scheme allowing deferral of tax payments is welcome. The local authority business growth incentive scheme was welcome, if overly complex to administer, but I understand that its funding has now dropped to £150 million. Why, at a time of crisis, have the Government reduced the ability of local authorities to extend help to local businesses in their area? Perhaps the Minister could comment on that in the wind-ups.

The amendment mentions the aim of paying Government suppliers within 10 days. I understand that the practicalities of that are causing difficulties, because 10 days is something of a random number, and implementation even of the aspiration seems to be pretty random. If all taxpayer-funded suppliers were paid even within 30 days, that would be a huge improvement for many companies who are having to wait months for payment on Government contracts. The amendment refers to free business health checks. The Minister said that 130,000 have already been carried out, but I would be interested to know what percentage of businesses know about the checks, especially those in the smallest business categories.

This blizzard of Government initiatives sounds great, but are they achieving any real penetration? Are we just skating about on the surface of an iceberg whose depth we do not know?

Mr. Mark Oaten (Winchester) (LD): Will my hon. Friend also consider the possibility of the Government trying to simplify the procurement system so that small businesses can apply for and win contracts much more easily than through the current process, which requires endless forms and delays? Is not that another initiative that needs to be speeded up?

Lorely Burt: My hon. Friend makes an excellent point. Procurement is hugely important. Where local authorities have a responsibility to procure locally, simplification of the approved supplier status would be tremendously helpful. Some organisations are trying to work on a simple one-size-fits-all approved supplier application form. I hope that the Government will take that on board and give it some consideration.

Anne Milton (Guildford) (Con): Does the hon. Lady agree that the Minister said nothing that will help the 272 businesses in my constituency which, at the end of transitional relief, face increases of between 5 and 1,000 per cent.? There is no way in which some of those businesses will be able to withstand those sorts of bills.

Lorely Burt: I am grateful to the hon. Lady for that intervention. We have been tantalised with a suggestion from the Minister that some form of transitional relief system will be introduced for businesses that will have large increases. I look forward to hearing a little more detail on how that might operate.

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