Q
197 Mr.
Mark Field (Cities of London and Westminster) (Con): Just
very briefly.
The
Chairman: It will have to be
quick.
Q
198 Mr.
Field: Yes. How is this going to operate? Every last
business in Barnet or Bromley will create a BID for a localised benefit
on a localised project and thereby exempt themselves from the BRS. Do
you not see that there would be a massive problem for a like-for-like
exemption? Whatever your concerns about BRS—and we do share some
of them—effectively to avoid the
obligations to Crossrail or anything else in that way would surely
undermine the entirety of it. It would become a template for every last
authority that was far enough away from the route of Crossrail, or
Metrolink in Manchester—or whatever other project were put in
place—to subvert the whole idea of the general
gain. Karen
Dee:
Yes—
The
Chairman: Order. Sorry to interrupt, Ms Dee, but the
deadline has come, so that question will have to remain for ever
unanswered. I thank you both for coming here this afternoon—we
appreciate the contribution that you have
made. 4.45
pm
The
Chairman: Good afternoon Dr. Grail. Thank you for giving
up your time and coming here this afternoon. To start with, for the
benefit of the record, please can you introduce
yourself? Dr.
Grail: I am Julie Grail, chief executive of British
BIDs, a national membership organisation for the BIDs
industry.
Q
199 Dan
Rogerson: You may have had the opportunity to look at some
of the discussions that we have already had with witnesses. One thing
that emerged is that the business community likes the BIDs
model—it feels that it works. Can you tell us a bit more about
that model and what lessons can be learned from it, in terms of the
potential for greater funds to be raised locally from business, in
order to provide infrastructure schemes, for example?
Dr.
Grail: Yes, sure. As I set out in five points in our
brief written submission to the Committee, it is twofold: it is not
just about the ballot in advance, it is about the running of the scheme
as well. Businesses like BIDs because it is run by business for the
benefit of business. It is very much focused on being accountable to
that clearly defined electorate—not just at the point of ballot,
but through the whole life of the scheme, which is a finite period.
That gives them a sense of confidence in what is being managed, year on
year. There is a commitment in the business plan at the point that they
vote about the amount that they are going to be charged during that
period. So they have certainty about how much they will be charged and
certainty that if the business plan and the delivery organisation seeks
to move away and vary from that business plan, there are ways in which
they can bring them back on to the focus of that original commitment.
It is also about having those funds clearly ring-fenced for the
expenditure of that company, which is governed by the business
community. It is by business, for business.
With regard
to the business rate supplement, we have heard a lot today about the
concern with the ballot. We have some issues with that, but it is not
just about the ballot and about getting something set up; it is about
managing the relationship going forward. One huge value that we have
seen coming out of BIDs is that it has truly brought together local
government and the business community. A danger about the business rate
supplement is that it could rip it apart again. That
would be a terrible shame because we are seeing some great value coming
out of strong working relationships between the two
partners. Q
200 Dan
Rogerson: Having had the opportunity to look at the Bill
as it currently stands, do you think that if it was enacted, would put
into practice something based on the lessons learned from BIDs, or are
there potential pitfalls there that need correcting before it is fit
for
purpose? Dr.
Grail: It is important for me to say that we, as an
organisation, are not anti the business rate supplement—we can
see that it could work, for a host of reasons, in certain locations.
But, to get the Crossrail issue out of the way, London is
unique—we accept that. We hear your point and agree that a full
offset in London would be a ridiculous and dangerous move and would
give an open door to every business community in London to go and get
itself a cheaper business rate supplement, which is ridiculous. We have
been encouraging the Mayor to consider a partial offset at a value
which was reasonable to the business community, but not such that it
would enable people a free vote into a bid. So we are asking for 0.25
per cent. offset—a quarter of their price of a bid
levy.
Beyond that,
we can see outside of London all sorts of scenarios where a business
rate supplement could work very well. We could certainly see how
business communities and existing partnerships in town and city centres
might benefit from having part of a budget that has been drawn from a
wider area, directed straight into a town centre company via a business
rate supplement rather than a BID ballot. So we are not against it, in
principle, but there are points of concern. I mentioned the starting
point earlier: there will be no control for a business community under
the current arrangements in the Bill in terms of the ongoing management
of the funding, and no safeguards to give businesses any sense of
governance over the ongoing spend of the money. Indeed, without a
finite, fixed period—a BID has five years—there is no
knowing how long that situation might go on.
There is a
general acceptance that, in many cases, as someone said, it will become
a normal cost to business, which it might, but the problem is
influencing ongoing spend. There is a concern about offset outside
London and we can envisage scenarios in which we will be in danger of
losing the BID concept completely in number of areas. I will give you
some of the numbers: in the next three financial years, 51 of the
current 76 BIDs will go to renewal ballot; and in London, 14 of the
current 18 BIDs will go to renewal ballot by 2012. I am not
scaremongering when I say that there is huge concern about the period
after 2010, when businesses could be asked for a BID levy, even though
you might be able demonstrate value, when they have just been charged
2p, especially in London.
We therefore
accept—this is another point in our submission—that a
full offset in the case of London is not possible, but phasing in a
business rate supplement in certain areas of the market is possible.
That is in the impact assessment document. In London, if you could
consider a phasing in of the business rate supplement to safeguard the
businesses in the BID areas that are going to renewal in that tricky
period, over two and a half years, you would hopefully safeguard the
life of BIDs in London.
It is also
very important to recognise that most of the BIDs in London that are
going to ballot will be seen as a barometer for the rest of the
country, because they are trailblazers and the ones that are going to
renewal ballot first. If we start losing the ballots in London, it will
put a really negative message out to the rest of the country, which
needs to be borne in mind.
Q
201 Dan
Rogerson: Although you have been clear that it is not all
about ballots, and that there other concerns, particularly ongoing
management—that useful point has not come up before, so I
appreciate that you mentioned it—do you think it likely, bearing
in mind what you just said, that if businesses know that they will not
be balloted for a potential supplement, they will say no just in case,
because they are worried about the overall cost to them? Will the lack
of a ballot have an effect on the likelihood that BIDs will continue or
come
together? Dr.
Grail: Yes, without a doubt. With the layering of
occupancy costs, if the only thing that businesses have a choice over
is the BID levy, and they are in a tight market, that is what they will
choose not to go ahead with.
Having said
that, we are trying to design BIDs that are focused on local need and
that are of value to the local community. Some of that goes back to the
earlier debate on ballots for the business rate supplement, which we
might say yes to for major infrastructure schemes across a region when
we are dealing with an entirely different issue and project scale. Part
of the worry that businesses have about business rate
supplement—let us say that we are talking about outside London,
because there is a different debate in London—is that local
authorities will seek to use the Bill to fund activities that would be
better funded through a BID. That will be a dangerous situation,
because you will lose a strong business-local authority relationship,
which we have just established, and which I talked about
earlier.
Q
202 Mr.
Raynsford: May I pursue that point a little? If there were
to be a scheme involving, for example, infrastructure investment in a
particular city region or area, is it likely that local authorities
would enter into a BRS without trying to engage local businesses in a
constructive way? They were required by the legislation to consult
local businesses, and I would have thought that the likelihood of
winning support without such engagement was minimal. Let us remember
that if the contribution is more than a third, there has to be a
ballot. Do you think it likely that local authorities will simply enter
into major projects of this nature without bothering to consult
business in the way that you rightly want them to?
Dr.
Grail: Well, I do not mean to sound facetious, but we
have run a lot of ballots and have been at the coal face of running BID
ballots in the past four years. As someone mentioned earlier, a ballot
really focuses the mind for both sides on what is deliverable,
workable, viable and acceptable. That is very different from a
consultation. In a consultation you can ask the questions you wish to
ask to glean a particular answer. A BID ballot, or any type of ballot
on business, focuses people’s minds on whether there is real
value for money in that project. I do not believe that consultations
will necessarily achieve that. A cynic will suggest that you simply
design
your project so that it only reaches less than a third of the project
cost, in order not to put yourself through a ballot. If I was on the
other side of it, I would do
that.
Q
203 Mr.
Raynsford: If we take the example of Crossrail—I am
sorry to go back to it, but it is the only concrete one we
have—there was clearly detailed discussion with representative
business bodies. Their support was secured. The only evidence we have
of a concrete project shows that the public authority did not cynically
use the absence of a ballot to push through its
plans. Dr.
Grail: That is right. I absolutely agree with that.
As we heard earlier, the worry is that we must not make Crossrail the
precedent for building the rest of the Bill and the rest of the ways in
which this is likely to work. A major infrastructure project of this
type with layering of funding is an entirely different situation from
an upper tier authority elsewhere in the country looking to fund
economic development activity in a relatively small region. It is a
totally different
scenario.
Q
204 Mr.
Raynsford: I accept there are differences but I would have
thought we would want to try to learn from the experience of Crossrail
and the positive relationships that have been developed between the
promoters of Crossrail and the business community in London to try to
spread that, in the same way that you are quite rightly trying to
spread good practice from successful BIDs to other
areas. Dr.
Grail: I am not sure that that experience could be
translated down to a local authority elsewhere in the country and its
relevant business community. I still spend a lot of time being asked by
local authorities how they can get a BID in their area. They argue that
we should get those businesses to put their hands in their pockets
because they have more money than they have. That is not what the
relationship is about. Because you have to go through a lot of hoops to
develop a BID and a real reality check to go through a BID ballot, we
are seeing the process slowed and we are seeing very carefully crafted
BID proposals going out to the business communities. If we did not have
the safeguard of the ballot, a great many more BIDs would have tried to
come through to the business community and we would see some really
poor
behaviour.
Q
205 Mr.
Raynsford: You know that I am extremely supportive of all
that you have done and of the development of the BIDs programme. Can I
change the theme for a moment to the slightly different but rather
important issue of how you ensure that the landowners who currently do
not contribute to BIDs and will not contribute to the business rate
supplements may be involved? This is an ongoing issue that has been
discussed right from the outset. It has not, contrary to the gloom
mongers at the start, destroyed the BIDs programme, but it remains a
weakness and it is a weakness with the business rate supplement scheme,
in that landowners will not contribute, although they will benefit very
considerably from the infrastructure investment. Do you have thoughts
on how this particular knotty problem might be
resolved? Dr.
Grail: I confess to being one of the gloom mongers at
the beginning. I still believe that there is a place to have the option
for a provision of a mandatory property owner levy within BIDs in areas
where it is appropriate.
There are still areas across the country, particularly the bigger cities
and the centre of London, where they want to see a mandatory property
owner levy to supplement their occupier levy. We have done some
forecasting of what might happen to the make-up of a BID budget if you
have a business rate supplement and you have pressures on the occupier.
The danger is twofold: there is a real pressure to try to force more
money on to the owners without the ability to do that in a mandatory
way, and to force more charge on to the small businesses below the
threshold because they are currently not paying a BID levy. If they are
not to pay a business rate supplement either, they will reduce the
thresholds in BIDs and put a lot more money on the bottom
end.
You say that
a lack of a mandatory levy has not been detrimental to BIDs growing. In
some
ways—
Q
206 Mr.
Raynsford: I did not say that. I said that it had not
scuppered
them. Dr.
Grail: I painfully agree with you. In one way it has
not, and we have seen real growth, but still the property owner
position has not changed. Property owners still wish to see a mandatory
levy. We now have some concrete evidence that—despite some early
good will by owners investing, particularly ahead of a ballot, to see a
BID come into being—they are dropping out as time goes on. They
are dropping out of property sales; there is no commitment for a new
owner of a property to carry on that voluntary contribution, and some
of the bigger BIDs are losing huge amounts of annual income as a
result. With one owner, you may lose £100,000 a year from a
previous contribution. That is a real danger, so there is definitely a
problem that has not yet been resolved.
We still
believe that there is an opportunity to put in a provision for a
mandatory owner levy if a BID chooses to use it—not to use it
everywhere, but when it is necessary. There are scenarios where it
would never be used and never be workable. For instance, with huge
disparate ownership it would be far too much of an administrative
burden to start charging them; but where you have reasonably large
portfolios you could top-slice the top 20, 25 or 30 owners with a
threshold, in the same way as we do with occupiers, and raise a
reasonable amount in a guaranteed and sustainable way. That, I think,
is what BIDs are going to need to have in the longer term if they start
having these additional occupier
costs.
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