Mr.
Raynsford: I shall be brief. I simply want to bring us
back to reality rather than theory. The hon. Member for Northampton,
South stressed that he was a practical man and did not want to talk in
theoretical terms; he wanted to examine the impact. I remind Opposition
Members that the Mayor of London has made it clear that he requires the
revenue predicated on the £50,000 threshold for Crossrail, and
that if they press the case for amendment of the threshold, which would
reduce the number of potential business rate supplement payers, that
could damage the funding of Crossrail.
Opposition
Members have said that they support Crossrail. They have said that
Crossrail is an exception and because it is an exception, they accept
that it should proceed without a ballot. Of course, they have the Mayor
of London in their party and they have made it clear that they support
what he is doing. I just put it to them that if they believe that, they
should tonight accept the logic of the £50,000 figure on which
the modelling has been done and examine the evidence from the Mayor of
London, which shows how that disproportionately focuses the business
rate supplement levy on properties predominantly in central London and
along the main
axes—
Mr.
Binley: I am most grateful to the right hon. Gentleman for
giving way. He is held in very high regard in Northampton, not least
because he is a native of the town. Will he accept that this is the
weakness of tying in Crossrail in this respect? Although it might be
important for Crossrail to raise that amount of money, should the fact
that it may well be doing sizeable damage to the societies in other
parts of the country not be considered? Should we not be fighting for
our communities and saying, “Maybe we ought now to look again at
Crossrail, not least because you won’t get a return from the
City anywhere near the size of the one that you expected when you first
talked about the financing arrangements for
Crossrail”?
Mr.
Raynsford: The answer is no because, as the hon. Gentleman
will know, the Bill provides the flexibility for authorities to choose
alternative thresholds. If they want one higher than the minimum, they
can raise it. I hope, therefore, that if Northampton chooses to
consider the possibility of a business rate supplement and the hon.
Gentleman’s fears are real, he will prevail on the local
authority, along with the business community in Northampton, to go for
a different figure to reflect that point. The flexibility is there to
do so. But the key point is that the project that depends on the
passage of the Bill, the project that will proceed only if the business
rate supplement is agreed, has been modelled on the basis of a
£50,000 threshold and the Mayor of London says that the passage
of the Bill on that basis is fundamental to funding Crossrail. I hope,
therefore, that Opposition Members will be practical when they consider
how to vote on the clause and that they will not press an alternative
figure, which could only undermine the viability
of—
Robert
Neill: Does the right hon. Gentleman not recognise that
there is an inherent contradiction in what he says? He says that the
passage of the Bill is fundamental because Crossrail is modelled on a
£50,000 threshold, but the £50,000 never appears in the
Bill. What it is predicated upon is the use of the regulation. It is a
matter of whether the Minister feels that it is appropriate
to use the flexibility of the regulation to have a different starting
point in a different part of the world to deal with that
issue.
Mr.
Raynsford: That is a good try, but when the hon. Gentleman
looks at Hansard he will recognise that I referred to the
modelling that has been done by the Crossrail team, under the overall
tutelage of the Mayor of London, which is based on the assumption of a
levy with a threshold of £50,000. That is the basis, and I am
urging Opposition Members to be realistic and practical in their
approach and to recognise that the one scheme that we know is dependent
upon the business rate supplement will not proceed if their flights of
fancy about alternative thresholds are
pursued.
John
Healey: This is an important part of how a business rate
supplement may work and therefore requires the sort of serious
consideration given by the Committee this afternoon. It is good to see
a contribution from all the Opposition Members on the issue, and I
quite understand
why. Amendment
16, tabled by the hon. Member for North Cornwall, would put the
£50,000 rateable value threshold in the Bill, rather than
setting it in secondary legislation, as currently drafted. When I saw
the amendment I was puzzled. Apart from providing the basis of a debate
such as this, I could not see why he would want to press the amendment
into primary legislation. In his opening remarks, he said that it was
because he wanted to ensure that business had a greater certainty about
the threshold. The exchange that we just heard between my right hon.
Friend the Member for Greenwich and Woolwich and the hon. Member for
Bromley and Chislehurst on the Opposition Front Bench also underlines
the importance of certainty for any potential levying authority in
being able to model a potential yield from BRS as a possible
contribution towards larger project funding. For that reason, back in
the October 2007 White Paper, we said that we intended to set the
threshold at £50,000. The Committee knows that I have been
consistent about that ever since. To use the words of the hon. Member
for Bromley and Chislehurst, we have signalled up the £50,000
threshold since that time, and we were right to do
so. I
have three points to make. First, in response to the question of when
we confirm the threshold value, we did that back in October 2007, for
those reasons. The second question, which the Committee has been
chewing away at, is whether £50,000 is the right level. The
third is the one that the amendment deals with, which is whether the
threshold value should be in primary legislation or whether we should
have the flexibility to deal with it in secondary legislation. To be
fair, the amendment would put it in the Bill but retain the flexibility
of subsequent amendment by regulation, which sort of undermines the
case for introducing it in the first
place. Having
dealt with the importance of consistency and certainty—the
reason why we announced our intent to set the threshold at
£50,000 early, and our continued intent to do so—I turn
to the question of the £50,000. It is, in the end, a judgment,
based on a number of factors. The critical factor is the extent to
which a potential business rate supplement, even with safeguards such
as the 2p limit, would place a burden on business, and the extent to
which we can deal with that through a
threshold—one that would nevertheless give
the levying authority the sort of yield that makes the BRS worth
while. Our assessment
of business rates and the size of business suggests that the proportion
of costs for businesses with a turnover of about £100,000 is
significantly greater than for bigger firms. We are concerned about
small firms. For those with a turnover of between £500,000 and
£1.9 million a year, business rates as a proportion of their
costs generally tail off significantly. That is particularly so for
firms with a turnover of more than £1.9 million.
I accept that
those figures will not be precise in all circumstances; I am giving the
Committee an indication of the sort of analysis and modelling that led
us to our decision on the figure of £50,000. Businesses with a
rateable value of more than £50,000 will, on average, have a
turnover of £1.9 million or more. It is logical. The larger the
company, the more likely it is to have premises with a higher rateable
value; the larger the turnover—the larger the company—the
smaller will be the relative proportion of the business costs, of which
business rates form part.
Robert
Neill: I understand the logic of the Minister’s
argument; the impact assessment shows how those figures are arrived at.
In a sense, he flagged up my concern when he said that the
£50,000 threshold was mentioned in the 2007 White Paper. I
understand how those figures might have been arrived at then, but has
he asked his officials to revisit them—in particular, the
suggestion that businesses with a rateable value of more than
£50,000 will on average have a turnover of at
least £1.1 million in the light of the economic
developments since October 2007? That proportion may have changed, and
many businesses that had a turnover of £1.1 million may no
longer do so, but the rateable values will not have
changed.
John
Healey: The hon. Gentleman is probably overstating his
argument. I shall deal later with other flexibilities that are intended
to allow scope for the introduction of the business rate supplement.
That may help the Committee.
Essentially,
businesses with a rateable value of £50,000 or less are
responsible for about only 40 per cent. of the total business rates
yield. By setting the threshold at £50,000, given the general
correlation with turnover and recognising the relatively small part of
the yield from business rates that is returned from businesses with a
rateable of less than £50,000, we can protect most small and
medium-sized companies from being liable to the business rate
supplement. In other words, we can protect up to about 90 per cent. of
small companies from paying it and still allow the BRS to raise a
revenue stream that makes its introduction worth
while.
Derek
Twigg (Halton) (Lab): Does my right hon. Friend agree that
the Opposition seem to suggest—I go back to the crux of the
argument about trusting local government and its responsibility to make
a decision without some form of ballot—that despite the economic
downturn and the resulting business difficulties and loss of jobs,
local authorities would not take account of the problems? In the
current economic climate, what local authority would want to push firms
out of business and make people redundant? I find that bizarre. The
crux of
the Opposition’s argument seems to be that
because of the downturn the measure is surplus to requirements, and
that we need to raise the threshold because we cannot trust local
authorities to take account of such
factors.
John
Healey: My hon. Friend is right. In an earlier debate we
mentioned the requirement for local authorities to make that sort of
assessment if they are considering any proposal for a business rate
supplement. A number of Members have made the point that no local
authority, whatever the nature of the area or its political leadership,
is likely to want to introduce policies that drive businesses in its
area out of
business. 6.15
pm
Mr.
Binley: All the evidence on parking charges in our towns
suggests that they are so desperate for money that they will forget the
importance of business. That is one of the major concerns of retail
outlets in my constituency in relation to the massive business charge
rises in my town. I do not buy the argument about the honour of local
government when it is under pressure for money, as many authorities
are. However, my real concern relates to the points that I made about
the revaluation that we expect by 2010.
John
Healey: I was going to come to
that.
Mr.
Binley: Then I will sit
down.
John
Healey: I will deal first with the question of the
£50,000 threshold. Essentially, the threshold will allow us to
protect about nine out of 10 businesses from liability for the business
rate supplement while protecting the yield from a business rate
supplement to make it worth while as a source of funding for big
projects. I think that all Members would recognise that the provision
to set the threshold in regulation rather than on the face of the Bill
gives the flexibility to ensure that the threshold can be updated, if
it is warranted, to continue to offer protection to small and
medium-sized businesses, as rateable values may fluctuate considerably
over time.
To respond to
the hon. Member for Northampton, South, the Bill is given effect by
Royal Assent. The date that he mentioned, 1 April 2010, is the date
from which the Mayor of London has declared his intention to use this
legislation to introduce a business rate supplement for London in order
to make his contribution to the funding of Crossrail. The hon.
Gentleman is right, as are other Members who made the point, that April
2010 is also the start of the new period for business rates listing. It
will be based on a comprehensive revaluation being conducted at the
moment by the Valuation Office Agency. The provisional revaluation list
will be published, as my hon. Friend the Under-Secretary of State for
Communities and Local Government mentioned, in the autumn of
2009. The
Bill therefore contains a flexibility for the Mayor of London, in the
light of any assessment that he might make of the revaluation rateable
values and the yield required in order for the business rate supplement
to fulfil his obligation as part of the Crossrail funding package, to
propose his business rate supplement at a threshold above
£50,000. Future clauses contain a number
of flexibilities available to any levying authority, which will allow it
also to phase the introduction of the business rate supplement, taper
it or introduce differential rates. There are flexibilities for the
levying authority, in this case the Mayor of London, to deal with any
consequences thrown up by the revaluation
process. The
hon. Member for Ilford, North made an interesting point; I am sorry
that he cannot stay for the rest of our discussions. He said that
different areas might warrant a different approach, drawing a
distinction between his constituency and the situation in Oxford street
that was reported to the Committee. He is quite right. That is
precisely why we have provided the scope to allow authorities to do
things differently in their area if the circumstances of their project
or businesses warrant
it. Beyond
the question of the new valuation lists, clearly in the long term we
will want to see how any BRS works, including the one that the Mayor of
London plans to introduce from April 2010. In the longer term, we will
also want to take a view on whether the £50,000 threshold
remains appropriate. The regulation-making power gives us the scope to
vary that threshold, straightforwardly and swiftly, should it be
appropriate. The £50,000 threshold will be set in regulations,
as long as Parliament agrees to them, but no levying authority will be
bound to use it, if it wishes to introduce a BRS with a higher
threshold, and if the circumstances of its businesses and project allow
it to do so. I hope that that has been helpful and that, in the light
of our discussion, the hon. Member for North Cornwall will not press
his
amendment.
Dan
Rogerson: It has indeed been an interesting debate, and I
am glad that I have had the opportunity to prompt that, if nothing
else. The Minister rightly said that the Government signalled their
intention, way back, to set £50,000 as the limit. The right hon.
Member for Greenwich and Woolwich hit the nail on the head when he said
that the threshold has been so set because that is what suits
Crossrail, not because it has any inherent benefit across the rest of
the country. However, my party supports Crossrail, so it seems to be a
sensible provision, in the light of the fact that currently the only
proposal likely to be enacted any time soon is Crossrail—in
terms of the imposition of a supplementary business rate.
The amendment
was prompted by my dislike of doing things later by secondary
legislation. I think back to my experience on previous Bills. Many of
the questions and concerns raised by organisations, whether
professional bodies, non-governmental organisations or whatever,
concern what is to come later—the devil being in the detail.
Arguably, a greater level of scrutiny is possible when primary
legislation is being
considered.
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