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I shall very briefly touch on the issue of businesses in ports. As I have said, my right hon. and noble Friend the Secretary of State has already taken action. As to the allegation that the revaluation was somehow a desk-top exercise—it was made by the hon. Member for Meriden (Mrs. Spelman), who I see is not listening to a word I am saying, but there we are—it was, in fact,
based on more than 300,000 actual rents collected by the Valuation Office Agency and analysed for the revaluation. I wanted to clarify that point.
Finally, it is the Government’s package of measures—the introduction of the business rates deferral scheme, the small business rate relief scheme, a fairer revaluation scheme and so forth—combined with the real help offered to businesses through structured support at local, regional and national levels that will make the difference. In contrast, the Opposition offer nothing but ill-thought-out ideas and empty promises. That is why I urge the House to reject the Opposition motion and support the Government amendment.
8.53 pm
Julia Goldsworthy (Falmouth and Camborne) (LD): I think that hon. Members of all parties would agree that we are living in unprecedented economic times and that many small businesses probably feel as if they are facing an onslaught from all sides. We have already heard that an accountancy firm has predicted that nearly 34,000 small businesses—120 a day—will close in 2009 and that difficulties paying their business rates may well be a factor for some of them. However, it may be that businesses have suffered from falling incomes, unaffordable rents, delayed payments from suppliers or trouble paying their tax liabilities. Their difficulties might be compounded by personal economic problems, too.
If Back Benchers get the opportunity to contribute to the debate—if I carry on for as long as the two previous speakers, we will move straight into the concluding speeches—I am sure we will hear about similar experiences from businesses all over the country. The motion at least provides us with an opportunity to raise constituency experiences.
I find it slightly odd that the Conservatives’ motion is drafted so narrowly. It deals specifically with business rates, rather than with all the other issues that might interact to cause difficulty to businesses. What I also find rather bizarre is the similarity of the wording of this motion to that of a motion that was debated on a Conservative Opposition day on 25 March this year. That motion also referred to the above-inflation increases in the business rate, the ending of transitional rate relief, support for a move to automatic business rate relief, and the 2010 revaluation. It condemned the ending of empty property rate relief, and highlighted the issue of the ports.
I think that there can be only two reasons for that. It is possible that the Conservatives’ current spokesperson was not in her post on the earlier occasion, and has either been doing her homework very assiduously or did not realise how similar this motion was to the earlier one. Alternatively, it may well be that the Conservatives have so little positive policy that they have to rotate it, so that it comes around every couple of months on their Opposition days.
This is clearly a significant issue, but it would be more helpful if Conservative policy had moved on since that debate at the end of March. That leads me to wonder whether the Conservatives considered the issue to be the main factor affecting businesses, or whether they simply have nothing to say about anything else. I am not entirely sure of the answer to that question. Judging by the last Opposition day debate that I sat through—on housing—I suggest that the Conservatives simply have nothing to say.
What the Conservatives have to learn is that if they want to say with credibility that they can form the next Government, they cannot just oppose things; they must propose things as well. It is clear that the motion will not take the debate about local government finance any further forward. I think that, if anything, it will increase confusion rather than providing clarity. It is a critique of the Government’s failure to address problems relating to business rates, but it also criticises measures that the Government have tried to take to address those problems.
For example, the Minister described the deferral scheme that the Government want to introduce. What the Government had not realised was that the problem had been caused by a double whammy: the very high increases in inflation combined with the end of the transitional scheme. I did not catch what the Conservatives said that they would do differently. They attacked the ending of empty property rate relief, but they did not say what they would do themselves.
Another issue was not raised. In some areas, the problem is not just that businesses are in accommodation that will be very expensive if the empty property rates continue. In my constituency, the problem is risk aversion. A massive regeneration scheme is taking place there, part of which involves new accommodation for businesses. What investors will take the risk if they think that a property will be left empty, and that that will cost them a huge amount?
What we also heard from the Conservatives was an interesting critique of how the port rating process had gone wrong. Again, however, we gained no clear sense of what they would have done differently, or of how they planned to put the wrongs right.
Christopher Fraser: In the four or five minutes for which the hon. Lady has been speaking, we have not heard a word about what the Liberal Democrats will do. May I ask her to address that point, so that we can at least have a proper debate?
Julia Goldsworthy: I fully intend to do so. However, we must debate the Conservative motion and the alternative presented by the Opposition. [Hon. Members: “The Government.”] I mean the Government.
We have been debating the motion for about an hour or so, and I have been speaking for four minutes. I think the hon. Gentleman should give me a chance to get my points across.
What we did hear from Conservative Members was the new thinking about flexibility for councillors to reduce business rates, and to allow areas to benefit from economic growth. That is similar to the approach that the Conservatives have taken to council tax. It is clear that very few of the Conservative-run councils that have come forward would benefit from their council tax freeze proposal. The fact is that, at a time of huge economic pressures, every council will find it incredibly difficult to deliver. If the Conservatives had real confidence in local authorities, they would give them the discretion to consult their businesses, and I am sure that, in some areas there would be a possibility of the improvements that businesses want.
Mr. Newmark: Will the hon. Lady give way?
Julia Goldsworthy: May I finish what I am saying?
Later we will discuss the business rate supplement scheme. The Conservatives have sought to prevent any local authority from participating in it. The Liberal Democrats have said that they are more than welcome to do so, provided that there is proper consultation with businesses and that businesses have a say in the improvements that they want to see. I am sure that many businesses would like to see reductions, but businesses must also be allowed to have the opportunity to support improvements. The Conservatives appear to be offering only a one-way street.
Mr. Newmark: Will the hon. Lady give way?
Julia Goldsworthy: No; instead I will try to make swift progress so as to give the hon. Gentleman a chance to make his own contribution.
We think that the automated business rate relief is a sensible idea, but it is not an entirely original idea because it has already been achieved in Wales. I was disappointed by the Government’s justifications for not introducing it. The reality is that half of all eligible businesses do not claim the relief, and automating it will therefore make the whole process more efficient, not more costly.
Although there is, perhaps, consensus on this issue, I am not entirely sure what the hon. Member for Putney (Justine Greening) committed her party to. The Leader of the Opposition continually calls on people to vote for change, but the evidence at present suggests that it would be a vote merely to change the labels on the same tin. There is no radical rethink. If we really want to understand what is going on in this regard, the name of the party gives the game away: the fact that they are called the “Conservatives” means that they generally want to change things back to the way they were before—and therefore they do not want to revalue, nor to set business rates according to inflation, nor to change anything with regard to the way business rates work. We heard nothing about anything they would do differently. As I have said, their approach is intellectually incoherent. It is consistent only with the way they look at another aspect of local government finance: council tax. Their approach is that the system is broken and unaffordable, but the way to solve that is, apparently, not by revaluing, and we will therefore end up having a system of local taxation based on property values that are decades out of date. They should either say that the system of council tax is bust and that they will replace it with something else, or defend the council tax system and offer a revaluation. [Interruption.] The hon. Member for Putney asks from a sedentary position about my party’s position. Our position is very clear. It involves changing the balance of funding so that more that is spent locally is raised locally. That will partly be achieved through localising business rates entirely and moving to a system of local taxation based on the ability to pay. We are very clear about that, and we are very happy to explain how we will achieve it. The Conservatives, however, have not said what they would do.
Mr. Betts: Will the hon. Lady give way?
Julia Goldsworthy: No: I wish to make progress as I am aware that there is very little time for Back Benchers to speak.
The Government’s response to the Opposition motion is equally inadequate. The exchange this evening echoes one outside the Chamber in which the Conservatives and Labour are trying to blow chunks out of each other’s spending plans. Instead of having a debate about what the level of future funding should be and what difficult decisions need to be taken, we have two parties arguing at cross-purposes. While the Conservative motion is so narrowly drawn as to be highly limiting, the Government response is merely to produce as long a list as possible of all the things they have done or have said they might do at some point in the future. What we did not hear from the Minister is whether these measures and pronouncements have been effective. That is unsurprising as, to put it charitably, the results have been patchy. They praise themselves for righting wrongs that were their responsibility in the first place. They also praise themselves for extending the relief for empty properties, but fail to point out that they did so only in response to extreme pressure, and that at the end of the day that is only deferring pain for another year. Moreover, in terms of their proposals to defer payment for some of this year’s inflation-busting 5 per cent. increases in business rates, they have not acknowledged that the whole process of trying to address this is still causing pain for businesses, which are having to make those payments as we speak. The Government motion says that their behaviour has provided “certainty” and “fairness”, but it is very difficult to see how either has been delivered.
The Government praise themselves for policy proposals that have had a limited impact. They say that they
“aim to pay Government suppliers within 10 days”.
I am not entirely sure what that has to do with business rates, but their performance in that regard is patchy even within Government Departments. Whereas the Department for Communities and Local Government has managed to hit 88 per cent. of payments, the Home Office figure is just 50 per cent. They therefore have a lot to do to improve their own record.
The amendment praises the regional development agencies for being at the cutting edge of supporting businesses. Again, that is nothing to do with business rates, and the reality is far from what is claimed.
The Minister will know from our discussions in the Committee considering the Local Democracy, Economic Development and Construction Bill, that the South West of England development agency has unilaterally decided to cut more than £50 million of projects, which are in place to support and create jobs in the region, including in my constituency. The RDA has done that without any consultation, yet the Government’s amendment contains praise for some of the activities that are going on.
Many have reported that they think that the benefits of the enterprise finance guarantee scheme and the working capital scheme have been limited. Nine out of 10 of more than 2,000 entrepreneurs and business owners surveyed stated that the Government are not supporting small and medium-sized enterprises sufficiently, and the majority of respondents were not even aware of the schemes that were designed to support them. More than half of all SMEs have never heard of any of the schemes, and eligibility, red tape and issues relating to efficiency are creating an insurmountable barrier for many, yet the Government’s amendment has the audacity to claim that the VAT cut has helped people. Once again, instead of permanent solutions to make the tax
system fairer and to support businesses, we are seeing a deferral of more pain later and billions of pounds being wasted on something that most businesses say has not benefited them or has actually cost them money.
If the Conservatives’ approach is to say as little as possible, the Labour approach is to produce as long a list as possible, irrespective of how effective any of the measures have been on the ground. I wonder whether there is a parallel with the First Secretary of State, Baron Mandelson of Foy in the County of Herefordshire and Hartlepool in the County of Durham, in that the longer and grander his title and the more Ministers serving beneath him, the more effective he thinks he is. Such an approach has also been taken in this Government amendment but it fools nobody.
This argument at cross-purposes has missed the fundamental point: local authorities are already doing a huge amount on the ground to support businesses, they understand what the problems are and they are best placed to tackle them. I could cite examples of how local authorities have been examining their procurement of services and instead of just setting an arbitrary figure of 10 days in which to pay their bills, which probably would not be hit, as is the case with the Departments, they are trying to create a level playing field for contracts that allows consortiums of local businesses to get together to make their bids. It is that kind of thing that will make the real difference, not press releases.
More should be done to push down the budgets of regional development agencies to make decisions on spending more accountable, and we should be freeing up councils to reinvest in housing. These are all things that would help not only to tackle this country’s affordable housing crisis, but to support the economy and jobs. Both the Conservatives and Labour have failed to realise that what is needed is not tinkering around the edges or a long list of initiatives; but a fundamental change in the relationship between central and local government, which is essential if people’s confidence in those institutions is to be restored.
Lots of politicians have been keen to jump on this particular bandwagon and to make the connection between MPs’ expenses and the need for constitutional reform, but people have not realised that if businesses’ and individuals’ trust in all levels of government is to be restored, there needs to be a clear statement of the terms of the relationship and work at the grass-roots level to rebuild that relationship. At the national level that might mean constitutional reform, but change needs to take place at the bottom too. That is not only about ensuring that there is proper participation and that decisions about how public money is spent are accountable, but about making a much clearer link between the local taxes that people and businesses pay and the services that they receive in return.
That link does not exist at the moment. On average, council tax funds about 25 per cent. of the services that are provided locally, and although business rates are collected locally they remain centrally distributed despite the fact that most businesses think their taxes are directly paying for the services that they receive locally. Both aspects of taxation need to be fundamentally changed to make the relationship clearer and to ensure that there is a much stronger link between what is raised and spent locally. As I have said, that means moving away from a
regressive council tax system to one based on the ability to pay. Alongside that, business rates must also be localised. Only if those changes are taken together will that stronger link be made clear and will people be able to see what they are getting and how they are paying for it.
The last thing that is needed are the temporary measures that the Government have announced—deferring corporation tax increases, deferring empty property rates, deferring business rate increases and introducing temporary VAT cuts—which provide no certainty and will do nothing to give people confidence. Instead we need permanent changes to make the system fairer and clearer to everyone, individuals and businesses alike. But neither Labour nor the Conservatives are prepared to face up to that fact, let alone engage in the debate. That is the biggest disappointment of all.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order, Thirty minutes remain before the winding-up speeches and six hon. Members wish to contribute. I leave it to them to see how equitably they can share out that time between them.
9.10 pm
Mr. Clive Betts (Sheffield, Attercliffe) (Lab): When I saw that the Opposition had raised the question of business rates, I thought we would be having a thoroughgoing, wide-ranging debate on the principles behind business rates and how we might do better. Instead, we had a niggardly and rather empty proposal criticising various aspects of the mechanics of the current system. I was surprised that the party that is now supposed to believe in localism did not go for something a bit more radical.
I am also disappointed that the Minister for Regional Economic Development and Co-ordination, with whom I agree on most issues, was not prepared to be more radical. I agree that we need constitutional reform in this country, and one of the most important aspects of that is to improve the balance of power and responsibilities between central and local government. We need to ensure that there are more powers and responsibilities at local level, and I commend to the House the report recently produced by the Communities and Local Government Committee, on the balance of power between central and local government.
If we are to get the balance of power right and push out more responsibilities and powers locally, we have to ensure that we get the balance of funding right and give local councils more responsibility for raising the funding that pays for their services. I noticed that the words “local income tax” did not pass the lips of the hon. Member for Falmouth and Camborne (Julia Goldsworthy). I wonder whether there is a shift in policy coming from the Liberal Democrats. The easiest way to transfer more powers for raising money to local government would be to localise the business rate and put it back to where it was before the poll tax led to the changes.
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