Robert
Neill: We come to a fresh and important set of
considerations. It was dealt with in some detail by the witnesses who
gave evidence to us, and it comes back to the issue of the interaction
of the BRS with BIDs. I am happy to say that many of us have seen BIDs
work well in our areas. I know that Ministers do not desire to harm
BIDs schemes, but those who gave evidence expressed real concern that
there is, not for the first time, a risk of unintended consequences and
of an adverse impact on BIDs schemes.
Why does that
risk arise? First, as we said earlier, the tax-raising power in the
Bill is given right across the country. Secondly, it is done against a
background of serious economic downturn and pressure on businesses.
Thirdly, it is done at a time when, for a number of reasons, there are
real constraints on local authority budgets. Finally, and in
particular, it is done against the background of a reduction in the
funding made available to local authorities for a number of economic
development-related purposes, through the cutbacks in the funding of
the LABGI scheme. Whether we call it mainstreaming LABGI, or whatever
else, the fact is that there will be significantly less money available
in the coming two years than was available over the previous
years—£150 million as opposed to £1
billion.
The real
concern that many people have, and which a number of my hon. Friends
share, is that this may create almost irresistible pressure upon a
local authority to use BRS as a means of making up some of that loss
and to push the envelope of the rules to the maximum permissible
extent. One might then get a situation where an authority that can
justify the economic reasons for a scheme within the rules decides to
proceed using a formulation whereby 25 per cent. or 30 per cent. of the
monies are raised by the BRS, so the ballot provisions are not
triggered. That, of itself, might be well and good, but the evidence
suggested that the real concern for many business organisations is the
interaction between that scheme an existing or future BIDs schemes in
the area. Fear was also expressed about the cumulative effect if other
measures are introduced, such as those involving voluntary
contributions, the community infrastructure levy, workplace parking
levies, and so on. There is a limit to how much can be squeezed out of
businesses in those circumstances—one cannot get a quart out of
a pint
pot. Because
the threshold is not met to trigger a ballot, the business cannot
ultimately say yea or nay to the BRS scheme. Realistically, it may not
have much choice about the community infrastructure levy because,
again, there is no ballot provision for that; nor would it have a
choice in relation to the voluntary contributions—that is a
matter of negotiation. The one area where it can say no is the
BID scheme. The temptation in those circumstances will be for local
businesses to say, “The only way that we can prevent an
accumulation of burdens upon us is to say no to the one thing that we
can say no to: the BID scheme,” even though, if the relative
value of the BID scheme was ranked against the BRS scheme in a wholly
dispassionate world and with an even playing field between the two,
they might prefer the BID scheme.
In the current
economic climate, the most important thing to them is containing their
costs. That creates a perverse incentive to say no to BID schemes that
might otherwise have been approved. That might not be the
desired consequence, but it is the reality for lots of businesses. That
was highlighted in the evidence of a number of witnesses on the effect
of the economic
downturn. 6.45
pm Even
the big multiples are shedding many jobs because their turnover is
being squeezed. The Federation of Small Businesses made the point that
for many of its members who may be caught above the threshold, cash
flow is king. The one thing that they will do is restrict avoidable
overheads. If they cannot avoid the BRS because they do not have a
ballot, they will avoid the BID scheme. That would be tragic, because
BID schemes have worked well and been hugely successful. I accept that
the case for them has been proved by experience. They work well because
businesses have real and genuine buy-in and the ultimate ability to say
no. That is the background and why the measures are an area of concern
to us. It is not a fanciful concern; it was flagged up, in one way or
another, by all the various business organisations that gave evidence
to us.
How can that
unfortunate consequence be prevented? It seems to us that the best and
safest way is to adopt the desire of all the business organisations to
allow an automatic set-off for BID levies. In some cases, it may be
said that the BRS deals with a different magnitude of scheme than BID
schemes. Sometimes that is the case, but sometimes there will be an
overlap. Another idea that might have been available, but which the
Government have not made available in the Bill, is to have some
reduction in the business rate multiplier to compensate, giving a
set-off that way. However, that is not on the table, so we cannot
sensibly advance
it. How
can we protect the growing BID sector from damage in this difficult
time? We can permit the automatic set-off. That could then be
compensated in other ways, such as how thresholds or other poundages
are adjusted within the scope of the Bill. It would at least create a
situation of clear linkage between the area of a BID scheme, which
might cover the whole of a local authority that also wants to do BRS,
where there is substantial overlap. The automatic set-off would be a
reassurance to businesses that they will not be hit, in effect, by a
double whammy. That is the thinking behind the amendment. As you will
have noticed, Mr. Atkinson, the amendment’s main
thrust is to insert a new subsection (1) into clause 16 to
achieve that effect, and other consequential amendments
follow.
Mr.
Raynsford: My particular interest focuses on new clause 1
and amendment 45, which stand in my name. They deal in a different way
from that proposed by the hon. Member for Bromley and Chislehurst with
the problem of the potentially unhappy interface between BIDs and
BRS.
We have
established that the two vehicles are broadly designed to meet
different needs. BIDs are focused predominantly on local measures to
improve the viability, attractiveness, safety and therefore commercial
success of shopping areas, business districts, town centres and so on.
BRS is predominantly likely to be used for major infrastructure
investments or longer-term improvements to the economic attraction of a
particular area; Crossrail
will definitely be used for that purpose. However,
despite the differences, there could still be circumstances in which
the introduction of the BRS could have an adverse impact on BIDs. We
heard strong evidence from Dr. Julie Grail and others about
the possible knock-on consequence for the viability of
bids—particularly where they are coming up for renewal—if
businesses have been required to pay a BRS levy and feel that that is
enough and they cannot therefore justify continued support for BIDs.
That is a genuine problem that we need to address. The Opposition
proposal, which came from the hon. Member for Bromley and Chislehurst,
is to have an automatic offset against the BRS to provide and direct
financial compensation. As we heard from other witnesses, and as the
hon. Member for Cities of London and Westminster rightly pointed out in
the evidence sessions, the problem with that is it will provide a
perverse incentive for essentially bogus BIDs to be set up to provide a
means of getting out of the BRS contribution. The Mayor of London has
emphatically said that that would seriously risk the viability of
Crossrail. I notice that the Opposition have tabled an amendment saying
that that would not apply in the case of Crossrail, but those are
pretty desperate measures on the part of the Opposition, who all the
way through have tried to say that they support Crossrail, but that
they do not like this
mechanism.
Robert
Neill: Surely, the right hon. Gentleman should be jumping
up to welcome the fact that we recognise the desire to protect the
calculations in relation to Crossrail that he was so concerned about.
He should reflect on the fact that this is a means of achieving both
that and the degree of consistency that he has been urging upon us with
the Crossrail
Bill.
Mr.
Raynsford: One thing is clear: there is no consistency
whatsoever in the Opposition’s position. In order to try to
reconcile the irreconcilable, they have made a series of manoeuvres,
like the antics of mediaeval theologians trying to work out how many
angels can dance on the head of a pin. The Opposition do not like this
BRS thing, but because the Mayor of London is committed to Crossrail,
they are committed to it. They have therefore got to find a way of
squaring of circle—it is not very convincing. I personally take
the Mayor of London’s advice on this, rather than that of the
hon. Member for Bromley and
Chislehurst. The
point we must recognise is that BRS could well apply elsewhere. If it
did apply elsewhere, exactly the same problem would arise in another
city or community where there was an existing BID. The formulation
presented to us would have an automatic offset that would not be
excluded in that context, because the exclusion only relates to
Crossrail. Therefore, we could have exactly the circumstances that the
Mayor of London has identified, scuppering the viability of BRS in that
context because an automatic offset undermined the financial
calculation. That is not a satisfactory
solution. Dr.
Grail suggested an alternative, which was a modest, partial offset.
That seemed a better approach, but it was not adequate and it was
inevitably a bit ad hoc. Her argument was that if it was a modest
offset, it would not really provide the incentive to do bogus BIDs in
order to avoid liability to BRS. Nevertheless, it would have an impact
on the viability of the financial estimates for the BRS, so it is not
an entirely satisfactory option.
However, a more
fundamental problem that has been around since the beginning of BIDs is
that the levy is paid by the occupier, not the landowner. That is
inevitable because that is the basis of our rating system. Businesses
that are liable to pay rates are on the business rates register and
that is the vehicle used to collect the BRS or, indeed, the BID levy.
From the outset, when BIDs were first being discussed, people said it
would be better to have a system whereby the landowner paid for the
BID. That would require the creation of an entirely new rates register
that relates to the value of the properties owned by individuals in
that area. That, of course, is a complex operation because
international ownership would pose serious difficulties in getting an
entirely accurate and satisfactory register. It would certainly require
a lot of work, and in areas where there was no certainty that a BID
would proceed, it would be disproportionate for a local authority to
have to go through the process of compiling a theoretical landowner
register to put forward a BID proposal that might never
happen. When
we introduced BIDs, we accepted that they would have to apply to the
occupier—the tenant. We encouraged the concept of voluntary
contributions from landowners who stand to benefit from the
introduction of the improvements to the area. That has happened to a
degree, and in some areas more than others. None the less, there is the
problem of the freeloader. With a voluntary contribution, one cannot
compel compliance, and some do the right thing and contribute, and
others do not. The problem of the freeloader has been there from the
outset, and has been a recurring leitmotif that people involved with
BIDs have wanted to see
addressed. This
is not the occasion to address the BID problem because we are dealing
with BRS. None the less, new clause 1 gives us an opportunity to
provide a mechanism to introduce a landowner levy to ease interface
problems in areas in which BRS will replace BIDs. In that situation, it
would not be too onerous a task on the local authority to introduce a
register to create a landowner levy because there is an existing BID
there. That would give authorities the confidence that some landowners
are already contributing. The whole ownership and the knowledge of who
owns the property in the area will be better understood because of the
presence of the BID. There would be a clear interest on
everyone’s part to get a viable landowner contribution levy into
existence to ensure that the tenants have a reduction in their BID
levy, which will be a genuine offset against the BRS. I am sorry if
hon. Members are struggling to follow what I am saying, but this is
very complex stuff.
If we had the
landowner levy, there would be an increased contribution from the
landowners. That could allow a reduced contribution from the tenant BID
payers, which would be the kind of offset that Opposition Members and
Dr. Grail want. However, it would be
done in a way that would not damage the BRS revenue because there would
be no reduction in it. I believe that this is an elegant solution that
holds out the prospect of avoiding both the conflict between BRS and
BIDs and the damaging consequences of people being reluctant to vote
for a BID renewal, particularly in London, in which BRS will have been
introduced. We heard the evidence from Dr. Julie Grail about the risk
of some big London BIDs coming up for renewal in the next three years
being in jeopardy because of this. Such a device does hold out the
possibility of avoiding that scenario without jeopardising the
viability of the
BRS. Robert
Neill: I am following the right hon. Gentleman very
closely. In many ways, it is an attractive option; perhaps we can
explore it a bit further in due course. Does he envisage an automatic
correlation between the moneys raised by the landowner levy and the
offset? I am not sure whether that is apparent from the wording of his
provision, which I am trying to get my head around; or is it something
that would have to be in regulations? I am interested to hear how we
can achieve what may be a very satisfactory
objective.
Mr.
Raynsford: I am very grateful for the hon.
Gentleman’s support. It could not ever be an automatic balancing
item because we do not know enough. We would not know the composition
of the landowning register until it was compiled, so there would be an
ad hoc element to it. None the less, at least there is the prospect of
this larger contribution from landowners, which would then allow some
reduction—we do not know how much—in the contribution of
the BID tenants. That is the key to avoiding a conflict between BRS and
BIDs.
I do not
expect my right hon. Friend the Minister to accept the amendment,
because it involves a change in the title of the Bill, as those who
have looked closely at the effect of the amendment will see. We have
had to change the scope of the Bill to allow this measure to be
included. This is quite big stuff, and I understand that although my
right hon. Friend may be sympathetic, he will probably not be able to
accept this.
Mr.
Raynsford: I am getting very near to the time to finish,
so if the hon. Member for Cities of London and Westminster will bear
with this until Thursday morning when I complete my remarks, I will
start by giving way to him at that particular point in
time. Ordered,
That the debate be now adjourned.—(Mr.
Watts.) 7
pm
Adjourned
till Thursday 29 January at Nine
o’clock.
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