Q
294Dan
Rogerson: I think that it is a question of whether that is
a veto, or just a decision reflecting whether they feel it is the right
time to participate in such a scheme, but thank you very
much. John
Healey: Well, Mr. Rogerson, I put this to
you. Were the BRS element of Crossrail not available, the Crossrail
funding package would unravel and the plans for the project would not
go ahead. The Mayor has confirmed that in his written evidence to the
Committee.
Q
295Dan
Rogerson: I am very aware of that. I am sure that you have
had the chance to look at the amendments in my name and that of Lorely
Burt, which talk about ballots but exempt Crossrail from a ballot, for
all the reasons we have talked about and because there is an Act of
Parliament on the subject. But I thank the Minister for his
contribution. John
Healey: If I may say so, that is an intellectually
inconsistent and illogical position, and one that we might debate
later.
Q
296Mr.
Mark Field (Cities of London and Westminster) (Con): In a
moment or two, I may come back to the subject of Crossrail. However, my
fundamental question is: has consideration been given to a de
minimis-type provision to ensure that the additionality issue can
successfully be countered? We heard mixed views in the evidence on
Tuesday. Some groups were firmly against the Bill, while others were
broadly positive and could see where the Government were coming
from. Crossrail
slightly clouds the whole issue, in that it is a practical proposition,
on the table, for a £16 billion or £17 billion project,
and everyone can see that benefits are to be gained from such a
large-scale project, which could not be funded from the normal
day-to-day business rates in London. Obviously, the question is: how
far does the benefit go? Certain London boroughs—the Barnets and
the Bromleys of this world in particular—feel that they will get
little direct benefit, because of the artificial way in which the
boundaries in London are
created. Looking
at future projects, one of the things that could be most corrosive to
the case for the measure would be if relatively small-scale
infrastructure improvements, which one would generally think should be
paid for out of normal rates, were subject to a BRS surcharge. Has
thought therefore been given to precisely what sort of projects it
should cover, and indeed in what sort of area? London is a city of 7
million souls. Are we looking to give the power to relatively small
areas, where there might be only a couple of hundred thousand
residents? What is the thinking on how to counter the idea that, in many
ways, this is another stealth tax against
business? Mr.
Khan: The concern that you articulate is one that we
recognise. If you look at the history—the consultation that
Lyons undertook and the Select Committee’s investigation and our
response—you will see that we recognise the need for
additionality. By definition, this is supplementary—it is a
business rate supplement. If you look at the Bill, you will see that we
try to make it clear we envisage the BRS helping to finance projects
that would otherwise not take place. That is crucial, and there are
safeguards. For that reason it is upper-tier authorities, such as the
GLA, that are tasked with using the
power. That
is one of the reasons why Tuesday was so frustrating. There seems to be
a lack of understanding of the difference between purposes envisaged
for BIDs and for BRS. They are tools at the disposal of local
communities, one more local and designed for micro-level than the
other; one more long-term than the other, which is for a finite period
of five years; one that will benefit short-term occupants and one that
will benefit long-term occupants plus property owners; one that will,
by definition, benefit a small community, and one that will benefit
wider communities. Barnet and Bromley may not directly see the benefits
of Crossrail, but all the expert advice is that there will be 110,000
jobs, and many people in Bromley and Barnet may get some of those
jobs.
Robert
Neill: Bromley benefits hugely from
Crossrail. Mr.
Khan: Because they have a great MP, who will, I am
sure, support the Bill on Report and Third Reading, as well as in this
Committee. That is one of the differences. One of the frustrations,
Mark, is that it seems to us that people have not understood what BRS
is planned for. I know that one of your questions will be about the
borrowing part of Crossrail and whether that could happen without
guarantees of an income stream coming in. That is the frustrating
thing. When you have a long-term project with different funding
streams, you need certainty. If there was a potential veto, which is
what this sword of Damocles wielded by businesses would be, do we
honestly think that the other income streams would come in? That is one
of the real questions that you and other Opposition Members will need
to grapple with in Committee, on Report and at Third
Reading. John
Healey: If I may say so, Mr. Field, you
are right to have this concern and you are right that it has been
reflected to us by witnesses who have given evidence. However, I think
that you are wrong to say that Crossrail clouds the issue. I think it
helps to clarify the approach. It is a developed project. It shows us
the principles on which we would expect a business rate supplement to
work elsewhere. In other words, the business rate supplement that will
form part of Crossrail’s funding is not substitute funding for
other things that are already being undertaken. That is in the Bill and
is part of the prohibition. It will be fleshed out in guidance.
Secondly, the BRS provides an additional source of funding without
which Crossrail will not go ahead.
In relation
to any project in any other part of the country where the BRS may form
part of the funding package, we will look for that to be spelt out very
clearly. As in Crossrail, it must form an additional element of the
funding package without which the project would either be in jeopardy,
or definitely held in the starting gates. Crossrail helps us to see how
a business rate supplement should
operate. Let
me say, Mrs. Dean, that to help the Committee, before we sit
next week, I intend to produce the draft of guidance for consultation
and for the Committee’s comments on how to deal with matters
like additionality, economic development, definitions and some of the
other aspects that are central to the proposition of a business rate
supplement.
Q
297Mr.
Field: I appreciate that you do not necessarily want to
have a totally inflexible arrangement, but could you give at least an
indication of the size of the projects you have in mind? Crossrail is
probably going to be one of the very biggest and most expensive
projects in the foreseeable future and in the first 20 years in which
this Bill will operate. Some £3.25 billion will be raised from a
large net of businesses that happen to be in the capital for a project
that will cost £17 billion—obviously, we will only see in
the outturn just how much it does cost. No one would dispute what you
said: the mechanism of a BRS works for a project of that magnitude.
Clearly some businesses and business organisations will be against the
idea of a BRS as a matter of principle, but those who are open minded
about the prospect will think that Crossrail clearly falls into the box
and that this is
appropriate. My
concern is this. Take a higher-tier authority such as a unitary
authority in Luton or Swindon where there was a rail or
metro-type project costing perhaps £200 million, with a business
contribution of £50 million. You are then in the grey area with
people saying, “Hang on a second, this is what we pay our
general rates for. This is an ongoing project. To get a BRS is a slap
in the face and another stealth tax.” Could such a project be
the subject of a BRS, or is it too small? Are you comfortable with the
idea that if a local authority and other stakeholders proposed it, it
could be subject to a BRS-type scheme?
John
Healey: It is a question of relative scale. Crossrail
is a special project by dint of its large scale. The BRS element is
significant, largely because the capacity across the 32 boroughs of
Greater London means that they could raise £178 million a
year—that is what the latest figures suggest. Compare that with
an area closer to home: in Northamptonshire, the potential total from a
BRS is £9 million and in Shropshire it is £1.8 million.
Such sums could be equally essential elements of funding a large-scale,
long-term investment project in those counties, which would be unlikely
to go ahead without that contribution, but would clearly be far smaller
than Crossrail because of the nature of London and of the project
itself. In principle, it is a difference of scale and relative figures
rather then character that makes Crossrail unique and, therefore, a
special case warranting special treatment within the provisions of the
Bill.
Q
298Mr.
Field: With your permission, Mrs. Dean, I want
to touch on Crossrail and the assertion made by both witnesses that
without the BRS, Crossrail will fall.
Mr.
Khan: The Mayor of London says that as well, so we
are in good company—well, I am about sure about good company,
but it is company.
Q
299Mr.
Field: We know how the politics are. I was delighted to
hear you say such positive things about the work of the aggressively
Tory-run Wandsworth council and the local businesses. I am sure that
the people in Tooting will be delighted to hear your
endorsement.
On a serious
level, with Crossrail we are talking about relatively small chunks of
money—a fifth of the overall funding package. We have gone
through the long rigmarole of getting the hybrid Bill through
Parliament and the Standing Committee. Crossrail is now one of those
big infrastructure projects that we should obviously move on with
fairly quickly if we are going to pump-prime in a Keynesian way,
particularly given the difficulties in the London and south-east
economy. There are already parcels of money—over 80 per cent. of
the total budget—so are you saying that we could not go ahead
and find a way of squirreling out a further 18 or 19 per cent. without
the
Bill? John
Healey: The only alternatives are that the national
taxpayer pays more—they are already going to contribute a bigger
proportion of Crossrail than the BRS will deliver—or that the
local taxpayers of London do more of the heavy lifting. If you are
proposing that alternative, I, and the taxpayers in London, will be
interested to hear about it.
Q
300Mr.
Field: I am trying to get to the bottom of things; we are
talking of Crossrail falling.
John
Healey: Nobody is now arguing that Crossrail will go
ahead without the BRS as an element of the funding package—not
the Mayor and certainly not the Government. The main business
organisations have accepted the
case.
Q
301Mr.
Field: You will be aware that the City of London
Corporation has not only agreed to put the money up, as has the Canary
Wharf Group, but has also said that it will try to squirrel out a
further £150 million from various City connections.
That will be a rather harder exercise today than it might have been a
couple of years ago, but obviously we do not know how things will pan
out. It is not as if all elements of the package are entirely robust
and in place.
John
Healey: You are right to pay tribute to the City of
London Corporation; just before Christmas, Sir Michael
Snyder
said: “Crossrail
is absolutely crucial in keeping London and the UK globally competitive
and for this reason we are delighted to support the funding of this
vitally important new
railway.” He is
right.
Q
302Mr.
Field: I do not disagree, but I am trying to get to the
bottom of it and it is important that it not be used simply as a
political football. All sides want to get Crossrail moving. By
questioning elements of it, we are doing our bit to try to scrutinise
it on behalf of business, which is concerned about additionally. In
fairness, there is less concern in London about how the project will
work, although I cannot speak for all the suburban areas. A lot of
businesses will regard the additionally as another stealth
tax—little parcels with bids.
Mr.
Khan: Under the terms of the statutory consultation
required, a local authority would need to persuade businesses that it
had exhausted all other avenues of funding and state what other income
streams there are
and what its plans are, and it would have to persuade businesses to
join. Some almost pejorative comments were made about consultation by
witnesses on Tuesday, but let us be clear that there is a statutory
requirement to consult. Forget the ballot, which is stage 2 of
consultation if it is more than one third. Consultation would iron out
some of the problems you have identified. If businesses felt that they
were being made to pay a stealth tax, that would come out during the
process, and if a local authority still steamrolled ahead, it could be
challenged. As John has just said, we will be publishing the full first
session, which should hopefully assure you that this is not a backroom
way of turning business into a cash
cow.
Q
303Mr.
Neil Turner (Wigan) (Lab): I wonder whether we could take
a more national look at things and remember that we are a national
Parliament, rather than an extension of the LGA. One of the witnesses
from the LGA—I think that it was the independent
representative—suggested that the lower-tier authority should
decide that, rather than the upper-tier authority. Would you give us
your comments on that, with regard to two-tier authority areas,
obviously? John
Healey: There are two things to consider. First, with
regard to business rate supplements, we are doing something that is
different in several respects from business improvement districts. BIDs
are a power for billing authorities—in two-tier areas, districts
rather than counties have the capacity to introduce them if they
wish.
Secondly,
because the projects to which we will restrict the potential use of
business rate supplements are generally larger scale and longer term,
it will be the larger authorities that are likely to be in a position
to develop and see delivered projects of that scale, for which the BRS
may form a part. That is why we have taken the view that it should be
available to upper-tier authorities only. Also, we resisted the view of
the LGA, which, after all, represents authorities of all levels, that
all authorities should have the power to raise their business rate
supplement. We took the view that it would be complicated, uncertain
and to a degree unfair on businesses if they were open to a potential
business rate supplement levied by both their district and county
councils. Mr.
Khan: It should be said that upper-tier authorities
are required to consult with lower-tier authorities and are obliged to
do so under the
proposal.
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