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Session 2008 - 09
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General Committee Debates
Business Rate Supplements

Business Rate Supplements Bill



The Committee consisted of the following Members:

Chairman: Mr. Peter Atkinson
Binley, Mr. Brian (Northampton, South) (Con)
Burt, Lorely (Solihull) (LD)
Dunne, Mr. Philip (Ludlow) (Con)
Farrelly, Paul (Newcastle-under-Lyme) (Lab)
Field, Mr. Mark (Cities of London and Westminster) (Con)
Healey, John (Minister for Local Government)
Khan, Mr. Sadiq (Parliamentary Under-Secretary of State for Communities and Local Government)
Love, Mr. Andrew (Edmonton) (Lab/Co-op)
Neill, Robert (Bromley and Chislehurst) (Con)
Raynsford, Mr. Nick (Greenwich and Woolwich) (Lab)
Rogerson, Dan (North Cornwall) (LD)
Scott, Mr. Lee (Ilford, North) (Con)
Sharma, Mr. Virendra (Ealing, Southall) (Lab)
Turner, Mr. Neil (Wigan) (Lab)
Twigg, Derek (Halton) (Lab)
Watts, Mr. Dave (Lord Commissioner of Her Majesty's Treasury)
Alan Sandall, Gosia McBride, Committee Clerks
† attended the Committee

Witnesses

Jane Milne, Director of Business Environment, British Retail Consortium
Tom Ironside, Policy Executive, Local Government and Taxation, British Retail Consortium
David Frost, Director-General, British Chambers of Commerce

Public Bill Committee

Tuesday 20 January 2009

(Morning)

[Mr. Peter Atkinson in the Chair]

Business Rate Supplements Bill

10.30 am
The Chairman: Before we begin, I shall draw the Committee’s attention to the normal procedure. First, would you make sure that your mobile phones are switched to silent? I shall check mine in a minute. There is a money resolution in connection with the Bill—copies are available in the room. Also, the formal warning about starred amendments: in general, my fellow Chairmen and I do not intend to call starred amendments, including any that may be reached during an afternoon sitting.
For those unfamiliar with the slightly new system, I shall outline what will happen today. The Committee will be asked to consider the programme motion, on which debate is limited to half an hour. We then proceed to the motions to report written evidence and to permit the Committee to deliberate in private—I hope that we can deal with them formally—in advance of the oral evidence sessions. Assuming that the motion is agreed, the Committee will move into private session. Once the Committee has deliberated, witnesses and members of the public will be invited back into the room and our oral evidence session will commence. The arrangements are similar to those in a Select Committee—look at the brief provided and we shall work out who wants to ask any questions.
If the programme motion is agreed, the Committee will hear oral evidence this morning, this afternoon and on Thursday morning. On Thursday, the Committee will meet in the Boothroyd room, moving to the more familiar scene of the Committee corridor next week and reverting to the normal clause-by-clause scrutiny of the Bill. Is that reasonably clear to everyone? We shall see if we can find our way through that.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 10.30 am on Tuesday 20 January meet—
(a) at 4.00 pm on Tuesday 20 January;
(b) at 9.00 am on Thursday 22 January;
(c) at 10.30 am and 4.00 pm on Tuesday 27 January;
(d) at 9.00 am and 1.00 pm on Thursday 29 January;
(e) at 10.30 am and 4.00 pm on Tuesday 3 February;
(2) the Committee shall hear oral evidence in accordance with the following Table—
Date
Time
Witness
Tuesday 20 January
Until no later than 12 noon
British Retail Consortium
Tuesday 20 January
Until no later than 1.00 pm
British Chambers of Commerce
Tuesday 20 January
Until no later than 4.45 pm
Confederation of British Industry
Tuesday 20 January
Until no later than 5.30 pm
British Business Improvement Districts
Tuesday 20 January
Until no later than 6.15 pm
Royal Institution of Chartered Surveyors
Tuesday 20 January
Until no later than 7.00 pm
Local Government Association
Thursday 22 January
Until no later than 10.25 am
Department for Communities and Local Government
(3) proceeding on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 5; Schedule 1; Clauses 6 to 22; Schedule 2; Clauses 23 to 32; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 7.00 pm on Tuesday 3 February.—(Mr. Khan.)
Resolved,
That, subject to the discretion of the Chairman, any written evidence received by the Committee shall be reported to the House for publication.—(John Healey.)
Written evidence to be reported to the House
BRS 01 British Chambers of Commerce
BRS 03 British Retail Consortium
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted—(John Healey.)
The Committee deliberated in Private.
10.38 am
On resuming—
The Chairman: We will now hear oral evidence from the British Retail Consortium. I welcome Jane Milne and Tom Ironside to the Committee. Will they introduce themselves for the benefit of the record?
Jane Milne: I am director of Business Environment at the British Retail Consortium.
Tom Ironside: I am the policy executive who deals with local government and taxation issues at the British Retail Consortium.
Q 1 Robert Neill (Bromley and Chislehurst) (Con): Before I question the witnesses, I wish to say what a pleasure it is to see you in the Chair, Mr. Atkinson. I hope that that is the proper way in which to start our proceedings. It is a new process for all of us, and you are very welcome in the Chair.
Ms Milne, I wonder whether you can help me. The background to such matters stems very much from the Lyons report and the suggestions of flexibility and an appetite for engagement with local authorities and business. What is your assessment of whether this will assist local authorities in engaging with business? Do you see other potential pitfalls?
Jane Milne: We think that we already have a good model for engagement between business and local authorities in the business improvement districts and the way in which they are organised, so that there is a genuine conversation and partnership between the two parties in developing proposals that will benefit the communities. I am afraid that the business rate supplements proposals try to short-cut some of those processes, such that there may not be a proper conversation between local authorities and the business community. They have the air of something that might be imposed on business, rather than being worked out together with business.
Q 2Robert Neill: What do you mean by the phrase “short-cut”?
Jane Milne: In terms of developing the prospectus, although there is talk of consultation once the initial prospectus has been published, it is to appear as if by magic from the local authority, whereas within the BIDs process there is a genuine engagement of business at the initial stages, so that the whole project is worked up together in partnership.
Q 3Robert Neill: What would need to be done differently to make the engagement genuine?
Jane Milne: One of the key things that gives everybody an incentive to work together within BIDs is the fact that there is a mandatory ballot that has to approve the whole project before it can go forward. That means that everybody has an incentive to work together to find schemes that genuinely address the issues within the community and that therefore will benefit the community.
Q 4Robert Neill: Have you carried out any assessment of the impact that the current proposals might have on your members?
Jane Milne: We have certainly done some costings.
Tom Ironside: Based on the proportion of rateable value that retailers account for, we have calculated that anything up to a quarter of the overall moneys that could be raised through a business rate supplement may fall on our members.
Q 5Robert Neill: In the written submissions there is a statement that the proposals would
“increase costs without any correlation to a business’s profits or ability to pay.”
The argument might be: if we do not use rateable value as a measure, what other measure could we use?
Jane Milne: The problem with rateable value is that it is, in effect, an input tax. It does not try to match contributions to the benefits that will be derived from a given project, so there is no proportionment between different sectors of the economy. Because retail is a property-intensive sector and retailers have relatively little choice in which properties they occupy—they need to be in the high-access, high-footfall areas like the high street or certain retail parks—we have historically seen rents and property values, and hence rateable values, move up much more sharply for retailers than for office accommodation or other parts of business. Therefore, as Tom said, not only do we pay 25 per cent. of the overall rates bill, while actually generating 8 per cent. of GDP by value—we are paying three times our overall output—but that is likely to increase rather than decrease in future, so we see the burden falling increasingly heavily on us. In some respects it is the modern equivalent of a hearth tax or a window tax; it is not actually about the overall prosperity of different sectors in the community.
Q 6Robert Neill: Because, you will argue, you are being taxed on a measure that is a higher percentage of your members’ costs than other sectors of the economy?
Jane Milne: Yes, exactly so, rather than according to how much additional profit are we making as a result of the investments.
Q 7Robert Neill: Where does that leave you as to a cost-benefit analysis for your members of what might come from a BRS scheme?
Jane Milne: It would obviously depend on the precise details of an individual scheme, and different schemes will favour different sectors of the business community. One of the advantages of the BIDs process is that all that can be worked through at an early point in drawing together the proposals.
Q 8 Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): May I take up a couple of the points you have made and refer back to one of the points in your written evidence? You talked about retailers paying about a quarter of all business rates and you estimated that about a quarter of any business rate supplement will be met by your members. The retail sector is very diverse—it includes small shops as well as large ones. Under the design of the scheme, it is proposed that those with rateable values of under £50,000 will be excluded. What is your estimate of the proportion of total business rates paid by your members with rateable values over £50,000?
Tom Ironside: We do not have an accurate estimate of what that proportionate impact would be. You are correct in saying that, for a significant proportion of our members, the £50,000 threshold will have a beneficial impact. However, for members who sit above the £50,000 threshold, that might act to increase the burden on them for any given BRS-funded economic development project.
 
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