 House of Commons |
Session 2008 - 09 Publications on the internet General Committee Debates Business Rate Supplements Bill |
Business Rate Supplements Bill |
The Committee consisted of the following Members:Alan Sandall, Gosia
McBride, Committee Clerks †
attended the
Committee WitnessesJohn
Healey, Minister for Local
Government Mr.
Sadiq Khan, Parliamentary Under-Secretary of State for Communities and
Local Government Public Bill CommitteeThursday 22 January 2009[Mrs. Janet Dean in the Chair]Business Rate Supplements Bill9.1
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.
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.
John
Healey: Let me deal with the latter one
first.
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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| ©Parliamentary copyright 2009 | Prepared 23 January 2009 |