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27 Oct 2009 : Column 58WH—continued
Put simply, the revaluation of 2008 will lead to a bad tax change that will be implemented at a time of unprecedented uncertainty in the economy. There are so many businesses teetering on the edge of viability that Westminster city council really must ask that the
changes be deferred until the wider economy improves, and I reiterate its words. The sums of money already being sucked from central London businesses to other parts of the country are huge, and the latest changes will simply accelerate that trend. Most firms in the capital accept that their location comes at a cost, but if such huge levies are to be imposed, it seems only fair that some part of the business rate is retained locally to give a real link between businesses and local authorities that provide their setting and many of their services. The Government must look urgently at reviewing the rate relief scheme to assist businesses that are being pushed over the threshold simply because of the supposed value of their premises.
Without the kind of changes that I am proposing, the Government are in danger of prolonging and deepening the economic slow-down for Britain's largest economy. London's largest businesses will suffer, but those with premises nationwide might have their increases partially off-set by decreases in other sites. For shopkeepers such as those in my beloved Cecil court, small office workers and the burgeoning city centre enterprises, there is no such compensation and their future is grim.
I wish to raise one final point, as representatives of the City of London have asked me to address an issue that arose during a House of Lords debate on the Business Rate Supplements Bill. From a somewhat tangential angle, it relates to a clarification of the tax deductibility of voluntary contributions, as opposed to payments made compulsorily by rate supplements that are made by businesses for the Crossrail scheme. As the Minister may be aware, the Corporation of London is putting in its own money but is also raising money from businesses based in the square mile. We are keen to know whether there will be a tax deductibility element for that. I appreciate that I have not had a chance to speak to her in advance about this, so I would be happy to take a written reply in due course. I hope she will be able to address some of the other issues that I raised today.
1.20 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Barbara Follett): I congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on securing this timely debate. The issue exercises my Department and many businesses across the country. Like him, I love London, and I share his interest in and enthusiasm for its many and varied businesses, especially those in Cecil court where, like him, I spent a large chunk of my youth. Sadly, Foyles is no longer there, but I have good memories of it.
The businesses in Cecil court, along with the myriad large and small businesses that make London one of the most important drivers of our economy, use community services such as transport, lighting, the police and education. As I am sure the hon. Gentleman will agree, it is only right and proper that, as they do so, they pay their rates.
As the hon. Gentleman said, rateable values are reassessed every five years. The next revaluation will take effect from 1 April next year and will be based on the rateable values at 1 April 2008. As he explained
extremely clearly, thanks to the current economic turbulence and changes, and because London has experienced the highest rise in property values in England over recent years, the city will almost certainly experience the highest rise in rateable values in the country. Unlike the hon. Gentleman, who puts the increases at around 35 per cent., we estimate that they are likely to be about 10 per cent. on average, before inflation and other reliefs are taken into account.
However, before everyone, including me, takes a sharp breath, that does not mean that rateable values across London will all increase at that rate. We estimate that ratepayers occupying almost 45 per cent. of properties in London-about 124,500-will in fact see their rates liability fall as a result of revaluation. In fact, small shops in London such as those in Cecil court could see their rates liability fall by 3 per cent. on average in 2010-11. If the hon. Gentleman would care to look at some of the figures we have that detail that, I would be happy to share them with him. Overall, there would be a reduction of some £6.5 million.
I am glad to say that 56 per cent. of properties in outer London-about 72,000 in total-will also benefit from the revaluation. We estimate that they should see an average decrease of £950 in their rates liability for 2010-11.
Those liable for business rates in London, including me, can also take some comfort from the fact that looking at rateable values in isolation does not always give an accurate indication of the bills that businesses will be expected to pay. The multiplier that the hon. Gentleman mentioned, which is used to calculate bills, is adjusted at the same time that new rateable values take effect. If they go up across the country, the multiplier is adjusted downwards. For example, at the 2005 revaluation, the multiplier was reduced by 4p in the pound.
Then there is transitional relief. There is more comfort here, even though the hon. Gentleman does not see it as a solution to the problems. The Government consulted on the 2010-11 transitional relief scheme over the summer. Under their proposal, rates on small properties will be capped at 5 per cent., and at 12.5 per cent. on larger properties. We estimate that that should reduce the average increase of 10 per cent. in rates in London to about 3 per cent.-in other words, a 7 per cent. drop-and that the businesses that see the biggest rise in their bill as a result of revaluation will gain the greatest amount of relief. In total, we expect that 112,000 properties in London-24 per cent.-will benefit from transitional relief. In fact, we estimate that 16 London boroughs will see the total rates liability fall due to the revaluation and transitional relief.
As the hon. Gentleman knows, the Government do not share his view that business rates should be relocalised. Pooling the proceeds of business rates on a national basis and redistributing them between authorities ensures that the revenue that is raised is allocated fairly. If local areas kept all the business rates they collected, those with a firm business base would be over-resourced in comparison with those with a smaller base.
Mr. Mark Field:
I am sure that the Minister would not wish to characterise my proposal for an element of localisation as saying that the entire rates amount should be retained. Clearly, ratepayers in both the city of Westminster and the City of London are not unrealistic
about the huge amount of money that is at stake, much as many of them do not like the present arrangements, but does she share my concern that, if there is literally no nexus whatever between local authorities and those who pay rates locally, that could do great damage to the whole democratic process, and that trying to introduce an element of localisation would be a sensible way forward?
Barbara Follett: Successive Governments-not just my own, because this system came in in 1990 under the hon. Gentleman's party-have tried to ensure that the distribution is as fair as possible. It is obviously not always feasible to make it totally fair, but we believe that at present we have the fairest system possible.
The hon. Gentleman expressed concern about the impact of the Greater London authority's business rate supplement, which is due to be introduced across London at the same time as revaluation in 2010. As he knows, the supplement will play a key part in funding Crossrail. The London Mayor, who is responsible for levying the supplement, has recently consulted on the detailed arrangements. While it is for him to argue the merits of the case for introducing a supplement in April 2010, I believe that many hon. Members on both sides of the political divide agree that London has waited too long for Crossrail, and that we have to do what we can to reap its benefits. It should also be remembered that businesses are not being expected to contribute something for nothing: Crossrail will bring huge benefits to the London economy.
The hon. Gentleman asked why the Government have not committed to increasing the £50,000 threshold in line with the revaluation in 2010. Rateable values are unlikely to rise equally across the country. Indeed, as I said, in some areas they are likely to reduce, and any upward revision of the threshold would mean that councils saw a reduction in their ability to raise revenue, thereby limiting the size of project that they could fund using the supplement.
Mr. Field: I accept that, but, equally, it is widely recognised that the Business Rate Supplements Act 2009 is there, first and foremost, for Crossrail, a project that is already on the stocks. Therefore, this is a London-related issue, not one that necessarily will initially have an impact on other parts of the country.
Barbara Follett: I understand what the hon. Gentleman is saying, but, again, the problem is getting fairness in a hugely varied picture. Given the regional variations, we believe that the £50,000 threshold sets a minimum level of protection for businesses. Any further exemptions would have to be decided locally, and, to that end, levying authorities such as the GLA have the power to increase the threshold. It could be done, but it would have to be done locally.
I understand that businesses are going through particularly difficult times at present, and that is why my Government have taken steps to ensure that business is supported through the recession-
Mrs. Joan Humble (in the Chair): Order. We must move on to the next debate.
Family Finances
1.30 pm
Ms Sally Keeble (Northampton, North) (Lab): I am grateful for the opportunity to debate this important subject, which goes to the heart of public concerns about the recession.
All of us know just how hard it is for hard-working families to cope in the recession, and adapting to the changing circumstances has produced some major changes in family life that I suspect will become permanent-more women as breadwinners and more men caring for children. These and other changes are set out in a research project that I ran in my constituency from March until September, which is written up in a report titled, "Northampton Families and the Recession 2009".
I want to ask the Government what they are doing to meet those changing circumstances and family roles and how the welfare state and the different forms of support that the Government provide will adapt to them. Let us look at the stark statistics of the recession. Unemployment has risen to 7.9 per cent. nationally and to 7.2 per cent. in my constituency of Northampton, North-up by nearly 83 per cent. on the same period last year. It is not only unemployment that is hitting family incomes hard. Family budgets are squeezed because people are losing hours at work and overtime shifts and are sometimes also agreeing to wage cuts so that they can keep their jobs.
It did not take long for the effects of the recession to be seen in my advice surgeries, where constituents, many of them women, told me about what was happening to their families. They were fearful about how they would manage to weather the financial storm, about what was happening to their husbands and, particularly, about the future for their children. Due to the number of people who came to the surgeries, I commissioned research to investigate and chart the financial and social effect of the recession on the working families of Northampton, North and to look at the policy implications for the Government. The project included quantitative and qualitative research, through a survey and group discussions, to gain insight into the experiences and concerns of the community and to find out what Government action was helping and what else needed to be done.
Some of the results were surprising. More than 40 per cent. of the people who took part in the survey had experienced a change in their work status, in the form of reduced hours, going from full-time to part-time work or losing their job entirely. Many of those who had not faced job changes themselves spoke of changes in their partner's employment. In Northampton there is a high track record of both partners working: both men and women work.
One of the most startling results was finding that more than 40 per cent. of women described themselves as the breadwinners for their families; this was nearly the same number as men. It is a change in the notion of the male-the man-as the primary breadwinner, which has been accepted as a social norm and on which many of our benefits and support systems have, to a great extent, been based.
Although there has been a shift in economic power in the family, the responsibility for caring for the children is not changing so fast. The survey demonstrated that, although caring responsibilities are certainly being shared by partners, the vast bulk of them are still being borne by women. This has meant that the women have carried a great burden in this recession.
A constituent told me that her husband had been made redundant, so she decided to go back to work, but was still expected to care for the children. Others spoke about the challenge of flexible working. Although the Labour Government have made enormous progress over the past 12 years in providing flexible working and family rights at work, many women spoke of the increased pressure that they faced as a result of the recession, which sometimes meant that they were not able to take up their entitlements. I was told by a constituent that the many redundancies at her company were pushing people to work ever longer hours and that there was a lack of understanding of those who needed to work part time to care for children. Another woman wrote about the juggle that she and her partner performed on a weekly basis after having their first child. She did a remarkable amount of work. She said:
"I had to go back to work full-time when my daughter was nine months old I work 6.30 to"
"My husband works"
"Both of us work Monday to Friday. We can't afford to pay childcare and the mortgage. We don't have a family life, just see each other 15 minutes each day. CHILDCARE IS TOO EXPENSIVE."
It is clear that child care must meet the needs of families in which people are having to work extended and flexible hours. This means providing facilities for families out of hours-in irregular hours-and ensuring that it is affordable, so that work pays. It is no good if child care costs eat up most of the wages.
Pensions were raised over and over in the survey and in the group sessions. In fact, pensions came second only to children in the concerns raised by people who took part in the survey. Many people said that they had not considered how to pay for retirement until their children had grown up, but were now concerned about their pensions. Others expressed anxiety because they worked part time in different jobs and so did not qualify for a state pension. Of course, many of them work past pensionable age. In the past, the focus has been on ensuring that women get equal pension rights. Now and in the future, with men moving from full-time to part-time work or into unemployment, there will be concern over men and women losing their entitlement to a state pension.
Action is needed to protect the post-retirement income of households affected by the recession. With people losing hours at work, the Government need to ensure that they are not penalised in retirement for working fewer than 18 hours. Many of my constituents, particularly women, do a number of different part-time jobs but do not qualify for a state pension as they do not meet the threshold of 18 hours a week. Thus far it has not been possible to find a way for people to pool the hours that they have worked in a number of small part-time jobs to
reach the threshold. The Government need to look again urgently at a pooling system, so that those working part time can pool the hours from their different jobs and couples can share credits towards their future pensions, effectively supporting incomes in retirement and enabling couples to plan together for their post-retirement income.
A further acute set of problems face people who are self-employed. The Government must ensure that those who opt for self-employed status because they are in the building industry or who are in another form of self-employment understand that their pension rights are different from those of people who are employed. We must ensure that pensions advice is included in all state-funded money advice services.
The outstanding finding of the research was that tax credits were vital in supporting family incomes. More than 50 per cent. of the families were in receipt of tax credits and this has been key in supporting families in the recession. Most people in Northampton are still in work, albeit sometimes on reduced hours, and tax credits are succeeding in keeping them afloat.
The findings of the research present some challenges for the Government to ensure that families can manage their way through the recession and beyond. I am sure that, for many people, the recession will be a temporary phase, because families in Northampton have long track records of working. The task is to support them so that they can get back into employment.
I should like to make a number of recommendations to ensure that the needs of families are met. Working families fall off a cliff edge if there are two earners and one loses their work. What happens then is that the unemployed person gets jobseeker's allowance for six months, but after that the families can face real pressures, particularly if the other partner works but is not entitled to support. It might help if the contributions-based jobseeker's allowance were extended from six months to a year.
Flexible working arrangements and affordable and flexible child care are paramount. It is easy to say, as the Opposition have often suggested, that the Government can ill afford that, but if women are breadwinners and fathers take on part-time work and more responsibility for child care, more flexible working is needed for men as well as women so that women can make the most of their careers and earning power and fathers are supported in caring for families. It is ironic that the recession could achieve what years of progressive social policy has not-a more equitable sharing of financial and caring responsibilities between parents.
Research has shown that tax credits are extremely effective in supporting family incomes, but the Opposition plan to cut them for 130,000 families. Any steps that can improve and build on tax credits would be greatly welcomed, particularly if the tax credit could be put at the heart of other benefits. That would be a simpler way for families who are already on tax credits to access the extra help that they need during the recession, particularly support for mortgage interest. Many families have benefited from support for mortgage interest, but many are excluded because of how it works.
I was a member of the Select Committee on the Treasury, which produced a report suggesting that the support for mortgage interest scheme should be linked to tax credits if it is to provide more effective help for
families in my constituency. I urge the Government to reconsider the proposed link of the SMI to the tax credit system, and extend much needed support to more families.
I also urge the Government to change the education maintenance allowance to a real-time benefit. At present, it is assessed on parents' income in previous years, but if one or both parents lose their job, they may no longer be able to provide any or as much support for their children's schooling, so the children in turn may suffer. Assessing EMA on current income would ensure that children whose parents lost their jobs did not miss out on education and the qualifications necessary to succeed in future.
The recession has had a profound impact on families. It has aggravated some old inequalities, and created new pressures. That has affected working families, and some pensioners. Some people have had to defer their retirement because they need to support their families. One woman wrote:
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