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Session 2008 - 09
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General Committee Debates
Business Rate Supplements Bill

Business Rate Supplements Bill

The Committee consisted of the following Members:

Chairmen: Mr. Peter Atkinson, † Mrs. Janet Dean
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


John Healey, Minister for Local Government
Mr. Sadiq Khan, Parliamentary Under-Secretary of State for Communities and Local Government

Public Bill Committee

Thursday 22 January 2009

[Mrs. Janet Dean in the Chair]

Business Rate Supplements Bill

9.1 am
The Committee deliberated in private.
9.3 am
On resuming—
The Chairman: Good morning, everyone. I remind members of the Committee and witnesses that the evidence session this morning must end at 10.25 at the latest. I hope that I do not have to interrupt hon. Members or witnesses in the middle of their sentences, but I shall do so, if need be.
I welcome Mr. Healey and Mr. Khan as witnesses this morning. I understand that Mr. Healey would like to say a few words at the beginning of our sitting.
John Healey: Thank you, Mrs. Dean. I wished principally to welcome you to the Chair of what I believe is your first Public Bill Committee. I have found the evidence sessions very useful generally. They help all Committee members, as well as Ministers, to find their range on the issues and concerns relevant to a Bill.
We are legislating in the Bill for a revenue-raising power. Doing so is never easy, particularly at the time of an economic downturn; I recognise that. However, the Bill is part of the Government’s programme to look beyond the short-term concerns that people understandably have about the economy at present, and on to the long-term policies, measures, projects and powers that need to be put in place to secure future economic growth and prosperity—long-term interests and projects such as Crossrail, and the long-term policies and powers that are needed in all areas of the country to secure growth for the longer term and to strengthen the economy. The legislation is for the whole of England and Wales. What is good enough for London is good enough for the rest of the country. I have no truck with arguments that the provision should be available only to London.
I am glad to say that the Confederation of British Industry, British BIDs and the all-party Local Government Association accept business rate supplements in principle, as we heard in a previous evidence-taking session. I am also glad that both Opposition parties accept the principle—they did not vote against the Bill on Second Reading. Some witnesses and members of the Committee have detailed concerns and objections, and Sadiq and I will do our best to deal with those, not only today, but throughout the Bill’s passage through Parliament.
The Chairman: Thank you for your welcome, Mr. Healey. I can tell you that I have chaired one short Bill Committee before, but not an evidence-taking session.
Q 288Robert Neill (Bromley and Chislehurst) (Con): Welcome to the Chair, Mrs. Dean.
I preface my first question by telling the Minister that I am sure he recalls that my party did not vote against the Bill on Second Reading clearly because of the inclusion of Crossrail and an extension of the measure to the rest of the country. If there is a desire elsewhere in the country—the Mayor of London wishes to use the measure for Crossrail only—why were officials of the LGA, when they gave evidence, unable to name a single local authority that desired to take up the BRS power at this time?
John Healey: The point of the legislation is to put in a framework for the powers that may be appropriate, in some areas, at some time, to help to strengthen the local economy. London is a special case to the extent—in my view, only to this extent—that in Crossrail we have a further advanced project with further advanced plans and discussions on its funding package, and a very clear view that a BRS is an essential element of that.
My original point was that in the 1980s and 1990s, policy making generally, but particularly economic policy making, was heavily skewed towards the preoccupations, concerns and principal position of Greater London; the problems and potential of the economy in other parts of the country were largely overlooked. We are not prepared to accept that situation and we have not done so in the past 10 years. A framework of new powers that is available to London—to the Mayor and the Greater London authority—should, in principle be available to other top-level councils and local authorities in England and Wales, should they, in detailed discussion and consultation and, in some circumstances, with a ballot of businesses, take the view that using the powers could help to strengthen their economy for the long term.
Q 289Robert Neill: In such circumstances, is it not desirable to achieve, if possible, consensus between the taxor and the taxed? Does not the evidence that we have heard suggest that although in London there is a broad consensus with the business representative organisations, which accept the BRS as a mechanism for Crossrail, outside London there is strong opposition from business organisations, first because of the present circumstances and, secondly, because a ballot is not to be compulsory?
John Healey: To be honest, I find the logic of some of the evidence that we have heard from business organisations inconsistent and mixed up. We have heard, for instance, that the British Chambers of Commerce is concerned about a BRS without a ballot, yet the director general confirmed to this Committee that it accepted the 30 per cent. threshold. He acknowledged that
“in a number of parts of the country...there is a need for more local determination and...for the ability to raise additional revenue from the business community”.——[Official Report, Business Rate Supplements Public Bill Committee, 20 January 2009; c. 20, Q85.]
The BRS will put in place the potential for local authorities—through discussion and required consultation, and in some cases ballots, of their business community—to use that power for the interests and the economic long-term benefit of their area, which seems entirely right to me.
Q 290Robert Neill: I have one final point I should like to raise. I feel that I am about to suffer the same senior moment that one of our colleagues had in the statutory instrument Committee yesterday. It is about to come back to me as I waffle my way through it. With luck, perhaps you could just help me on this last point, Minister.
Is there not a danger that, in the current circumstances, what the measure really represents is a shift in the burden of funding infrastructure improvements from the Treasury to local businesses, when you look at this power being coupled with the mainstreaming or the reduction in the amount of monies available under the local authorities business growth incentive scheme? If we are being generally localist, should we not also give local authorities a power to place a discount on the business rates as well as raise a supplement?
John Healey: There are two different questions there.
Robert Neill: That is because I thought of the other one half way through.
John Healey: Let me deal with the latter one first.
Robert Neill: That was the real question.
John Healey: Post-Lyons report and in the detailed discussions leading up to and after the White Paper, there was very little appetite in any quarter for a power to downward-flex the business rate at a local level. The reasons for this were threefold. First, there was a concern about its potential impact on local services, because business rates are a source of revenue to support local services. Secondly, there was an associated concern to protect the council tax payer in such circumstances, mirroring the way that this Committee is concerned about the interest of business rate payers with the prospect of a BRS. Thirdly, there was concern about the additional complexity in the tax system—something on which you and your colleagues, quite rightly, have been effective in pressing Ministers over the past decade. For a combination of reasons, principally adding up to a lack of appetite from any quarter for that downward shift, which may have been part of the original discussion on the BRS, we have not included that in the Bill.
Mr. Khan: On your first point, the picture you paint in your generalisation about businesses is just not true. We know that the relationships that councils and businesses have are far more productive and constructive than they were when you were first elected to a local authority, all those years ago. Also, it is simply a statement of fact that the proportion of revenue raised locally by business rates over a period of time, has gone down, whereas the revenue rates via other streams—council tax being one, grants from a generous central Government being another—have gone up. What we heard from the LGA and the evidence from other people was that there is now a healthy relationship with businesses—one of partnership with local authorities—and we want to engender that and make the relationship continue. This is one mechanism, one tool in the toolkit, for doing so.
Q 291Robert Neill: Against that background, is the Minister going to bring forward proposals to enable local authorities to have an incentive to grow their business tax base?
John Healey: Yes. Such an incentive—local authority business growth incentive—has been in place for the past three years, including this current financial year. As you will know, there are plans from next year to reintroduce that, not as a one-off grant scheme over three years, which is what the first LABGI scheme was, but to build that in as an integral part of the design of the business rate system. It seems right to us to provide both an incentive and some sort of reward to local authorities that take steps to foster their business base and promote business growth in their area.
Q 292Dan Rogerson (North Cornwall) (LD): I echo the hon. Member for Bromley and Chislehurst and the Minister, Mrs. Dean, in welcoming you to the Chair. I look forward to your chairmanship as we go through consideration of the Bill.
Having listened carefully to what the Minister has had to say, I will start by asking the key purpose of the Bill: Crossrail or a wider power for local authorities?
John Healey: The key purpose is the latest in a series of measures reflecting the analysis and conclusions drawn by Sir Michael Lyons that local authorities could benefit from greater scope to raise revenue at the margins in their local area, particularly to support business, economic development and the general long-term economic future of their area. That is the policy purpose.
As I said earlier, Crossrail happens to be a large project and the project most fully developed for which a BRS can form an essential element of the funding package. The Bill therefore both provides a framework for a BRS, which the Mayor has made clear will be used in London to support the Crossrail funding package, and rightly gives that same power and opportunity to local authorities across the country. As I said earlier, what is good enough for London is good enough for the rest of the country.
Q 293Dan Rogerson: You talked about various parties’ support for the principle behind the Bill. I should take this opportunity to clarify the position of my own party: we are not opposed to the principle of a BRS where the business community has agreed to it through a ballot. We have been keen to point out that principle and will no doubt want to explore it further as we go through Committee. On that issue, why is there no provision for a ballot in all cases and why has a threshold—a cut-off point—been inserted in the Bill?
John Healey: For these reasons, I think. The BRS is unlike business improvement districts, for which there is a ballot in all cases; we can explore that in a moment. Unlike a BID, a BRS is designed to apply across a wider area, bringing wider benefit, often for longer-term projects, which may be beyond the immediate self-interest of the businesses that contribute towards BID-style funding. As with Crossrail, in any potential BRS-supported project we can expect to see different funding elements reflecting the wider interests that may benefit; therefore council tax payers may play a part, as may the national taxpayer through Government grant—just as in Crossrail—because of those wider benefits.
If the case is to be made for a ballot in all circumstances, the principal question must be, is it right that business should have a vote and a veto in all cases, when the funding comes from other sources as well as a BRS, the benefits are much wider and there is a will to see that funding and development go ahead? Is it right to enable business to block projects to which its funding contribution may account for a quarter, a tenth, or even a negligible proportion of the total? Through the conduct of a ballot, business potentially has the vote and the veto over such projects going ahead.
We have taken the view that that is not right. The all-party Conservative-led LGA, as you will know, takes the view that there should be no requirement to ballot—that it should be left to the discretion of local authorities. We have taken the concerns of business very seriously and believe there should be some safeguards, which is why we are proposing in the Bill that where the BRS forms more than a third of the funding of any project, and in those circumstances alone, business should have a vote and should, therefore, potentially be in a position to block not just the introduction of a BRS, but the whole project.
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Prepared 23 January 2009