Business Rate Supplements Bill

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Mr. Field: My hon. Friend makes some interesting points about consultation. Does he not accept that, particularly in relation to quite a few local programmes, all too often there are some deep-rooted interests whose concern, however much consultation they get, is the outcome of a particular inquiry? How would he address the fact that there is always a small minority that can be consulted until the cows come home—in whatever efficient or inefficient way—but that ultimately, if the outcome of the inquiry does not go its way, it feels that it has not had a fair say?
Mr. Binley: I thank my hon. Friend for that interjection because it raises an important point. The obvious answer is to bring in professionals. However, to do that throughout the whole nation would be massively expensive. The alternative is to ensure that local government is much more equipped to deal with consultations from its own perspective. It should not see a consultation as simply asking the questions to get the answers that it wants. Furthermore, in a consultation where there has been a sizeable view in opposition to the council’s plans, it should not then override it as being meaningless and ignore it. There is no reason why it should. There is no law that says, “You have to take note of a given consultation.” There is also no sanction where people who do not have a vote are involved in that consultation, and therein lies the serious problem. The whole question of consultation therefore needs to be looked at as a separate issue in local government. However, consultation is not the answer to reassuring local businesses regarding projects where the projected amount that they will need to pay is less than 33 per cent. by the levy of the rate. The second reason why they need reassurance is that very fact in itself.
I wish I could tell the Committee that the projections of a given capital project made by local authorities were worth putting great faith in. The truth of the matter is that, over the length and breadth of the country, assessment of projects by Government, and especially by local government, have been way off target when the total is presented at the end of the project.
I shall cite a situation where a local authority says that the cost to be generated from a local rate of a given project is only 30 per cent. of that rate, so there is no need for the ballot. We then find, after the ballot is taken and the rate is levied, that the cost of VAT contribution turns out to be less, in total, than was projected by the local authority. The business rate contribution therefore becomes 40 per cent. of the total. Do the Government then give that money back? There is nothing in the Bill to say that they should. Again, the situation will simply be created where business feels that it has been conned.
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The Bill will simply open up the fear that, create more suspicion that and add to the thought that the Government’s only concern for business, when it comes down to action rather than words, is that it is a milch cow and is there for local government to grab whatever it can in its interests, and not necessarily in the interests of business. The only way to convince business that it has a proper say in this matter is to give it a proper vote on every project that requires a supplementary business rate.
The Chairman: Before I call the Minister, as the clause before us is central to the Bill, if hon. Members want to debate it I suggest that they do so now. I will accept a more wide-ranging debate, rather than wait for a clause stand part debate at the end. That is a warning shot for anybody who has anything else to say, before I call the Minister.
John Healey: I welcome you to the Chair, Mr. Atkinson, particularly as we enter the scrutiny period of the Bill. Like other hon. Members, I look forward to serving under your chairmanship and that of your co-Chairman, Mrs. Dean. It is great to see such a strong scrutiny Committee, made up of hon. Members who have long experience in local and national Government, from the north and south of the country, and those with business experience that they can bring to bear on our deliberations. That can only strengthen our scrutiny of the Bill, and I look forward to that.
We are probably all surprised at the level of interest in this Bill in certain sections of the media over the weekend, and look forward to the amendments that may be tabled in the other place when the Bill arrives there.
The amendments that we are debating strike at the core of the Bill, which is the proper relationship between a local authority and the businesses in its area, and the degree to which there is a common, shared interest in the future prosperity and economic development of that area. I think that all hon. Members would accept that, as we heard in evidence from local government and business last week, we are considering the legislation in an era that is different from two decades ago. We must be careful not to base our judgments about this legislation on outdated mindsets, or myths about local government wanting to soak local business for everything it can get. Frankly, we put have put those days well behind us, and I was particularly encouraged to hear confirmation of that from the business organisations that gave evidence last week.
We need to deal with the sort of relationships that are currently in place and, through this Bill, how they need to be strengthened. We are legislating for the potential use of a supplement and a power not just next year or the year after, but—if appropriate and if determined by a local authority with its local businesses—at any time in the future, should there be a strong case for doing so.
Mr. Field: On that general point, is the Minister personally uneasy at the idea that we lack a democratic safeguard in this regard? He is quite right that local authorities work much more closely with their local businesses in trying to plan for the regeneration of particular parts of the local authority area. However, as we have repeatedly pointed out, there are many business men and women who do not live in the locality. In other words, they have no say on the election of a particular authority. Does the Minister instinctively feel uneasy at the lack of any democratic safeguard, notwithstanding the desire of business and local authorities to work together more closely?
John Healey: No, because the democratic safeguard is in the elected local government. The requirement is for elected local government to account for its decisions, and to be subject to scrutiny, public cross-examination and challenge and, ultimately, to being voted out of office for those decisions. That is why the hon. Gentleman will see that, when we get to clause 2, the proposed levying authorities all have that direct democratic mandate. Some have argued that transport authorities ought to have similar powers, but they do not have a direct elected mandate—the democratic safeguard. In the end, we elect our politicians locally and nationally to make decisions that sometimes have to mediate or adjudicate between competing interests, which can sometimes never be reconciled. Ultimately, our job is to stand up and account for our decisions. If people do not like them, there is a strong debate and then, essentially, the opportunity to get rid of us. I am not uneasy in the same way as the hon. Gentleman is, because we framed the Bill to be based in democratic elected local government. That is local government’s proper role, and the proper place to have the ultimate accountability.
The hon. Member for North Cornwall moved amendment 1 and indicated that he might want to press it to a vote. I hope that I can dissuade him from doing so. I shall then come on to the two central issues at the core of our debate and the other amendments: whether there should be a ballot in all cases, and whether London’s Crossrail is an exception.
Amendment 1 is directed at the question of economic development. I hope that the hon. Gentleman will find that the draft guidance, which was published on Friday, underlines what is already in the Bill. It clearly says that a business rate supplement and the funds it raises must be spent on projects that promote economic development. Before we get on to where we disagree, let me attempt to stake out territory that I am confident we agree on.
First, all members of the Committee and all our parties would accept that local authorities have a central and important role in the economic development and prospects of their area. Sir Michael Lyons was strong in his conclusion on that in his recent report. The all-party, Conservative-led Local Government Association is strongly of that view. The sub-national review of economic development and regeneration, which was published in summer 2007, concluded that. Lyons and the sub-national review, on the proposition that local authorities have an important role and require policies and some freedoms in order to play that role effectively, said that they should have the power to raise additional funds to promote economic development. That is precisely what the business rate supplement will allow them to do.
While I am on areas of agreement, I was encouraged by some words of David Frost. I was not surprised, because I know the British Chambers of Commerce and its director-general well. He confirmed that
“in a number of parts of the country...there is a need for more local determination and...the ability to raise additional revenue from the business community”——[Official Report, Business Rate Supplements Public Bill Committee, 20 January 2009; c. 21, Q85.]
The proposition in amendment 1 is to prevent a business rate supplement from being levied unless those businesses that will pay the supplement are satisfied that the project to be funded by the BRS will promote economic development of the area. I agree with that proposition, but I can say to the hon. Member for North Cornwall that it will not come as a surprise to any businesses. As part of the different relationships that are already in place from a couple of decades ago, local authorities already develop and consider their long-term plans for economic and social development, and environmental improvement, through their sustainable community strategy, local strategic partnerships and detailed discussions with business. In almost every area of the country—every one of us could point to significant business people in our own areas who are playing a part—business is involved with those discussions and ultimately, the decisions that local authorities take.
The latest example is the set of local area agreements that the Government agreed with local government last year. In all except one of the 150 local area agreements, local authorities, in wider conversations and with wider support, have picked priorities for themselves that reflect concerns about improving their local economies. For example, six of Cornwall’s 28 local area agreement priorities are economic in nature; three of Bromley’s 30 targets are focused on the economy. The hon. Member for Cities of London and Westminster may be interested to know that his local authority is the only local authority out of the 150 in the country not to make any of its priorities economic. That is a matter for the local authority, and no doubt it has discussed it with local businesses.
Coming back to the BRS, that sort of discussion and consultation will be part and parcel of any consideration that a local authority gives to the potential role for a business rate supplement, even before the formal consultation stage, which we shall come to later in our deliberations. Any proposal will need to explain clearly why it is necessary to consider the project, even before consideration is given to funding it. The Bill and the draft guidance that I have published make it clear that any proposed project plan should set out how the project will improve the economic development of an area. I sympathise with the proposition of the hon. Member for North Cornwall, but in practice the amendment would mean that the local authority would need to demonstrate that the majority of the business community that might be affected by a BRS was satisfied that it would promote economic development before it could go ahead. It is difficult to see how one could satisfy that requirement without a ballot.
In other words, the local authority would be balloting on whether the majority of the businesses thought that the project proposed would contribute to economic development, and not on whether businesses accepted or agreed with the idea that a BRS might play a part. That is clearly absurd. The amendment would lead to serial balloting in the process of a BRS and that is its ultimate flaw. I shall come to the arguments of principle regarding balloting in a moment, but if the hon. Gentleman presses amendment 1 to a vote, that is the logical and practical flaw in his proposal.
Not least because of my local involvements, but also as a Minister, as the Committee would expect, I understand keenly and clearly the concerns that businesses have about the business rate supplement, although they are from time to time rather overstated, which does not necessarily do their case much good.
Mr. Binley: I find that remark rather surprising. Is the Minister saying that a robust opposition to a given Government proposal will be less well favoured because of its robustness? Is that what he is telling us? If so, that is a worrying situation.
John Healey: No—quite the opposite. The strength of the case and the extent to which it is likely to be carried in the decisions that the Government or this House take rest on how well it is put, not simply on how strongly it is put. It is as true in this field as in any other that organisations sometimes do not best serve their cause by overstating the concerns and anxieties that are at stake. Nevertheless, in framing this Bill we have taken the concerns of business seriously.
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One of the safeguards in the Bill, which we will come on to in more detail, is the requirement for any local authority, if the BRS is expected to contribute more than a third of the total proportion of any project cost, to be subject to a ballot. That is despite equally strong arguments from the all-party Conservative-led Local Government Association that there should be no requirement for a ballot, and that any ballot should be a decision for the local authority itself, as appropriate. The all-party Select Committee also takes a view that is different from ours. It does not seek the requirement to have a ballot where a project’s cost amounts to more than a third from BRS.
The evidence sessions bore this out. On the one hand, we had the CBI saying that we should have ballots in every case, whatever the contribution from the BRS. The LGA argued that ballots are unnecessary and should not take place unless the local authority decided it was appropriate. The most interesting, and overall perhaps the most balanced, evidence came from the director general of the BCC. He was clear with us in recognising the constructive relations that generally exist between local authorities, business organisations and the business community now. He also recognised the concerns that businesses have about the prospect of legislation enabling a BRS.
However, the director general ended by confirming to the Committee, in response to questions from my right hon. Friend the Member for Greenwich and Woolwich, that the BCC accepted the third threshold proposed in the Bill. That threshold is designed to recognise that business should not have a blanket veto on any business rate supplement as a contribution to a major project for an area. However, it is also designed that, where a business is likely to do more of the heavy lifting in the financing of a project, it should have that reassurance and extra opportunity to vote on its introduction.
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Prepared 28 January 2009