Dan
Rogerson: Although I entirely take the Minister’s
point that amendment 17 might be leading us into the dangerous
territory of competition, my intention was to reflect the point he has
just made on specific local circumstances. It would increase
flexibility for local authorities because those circumstances might
apply to one BID area and not to others in a large rural
area.
John
Healey: I understood why the hon. Gentleman felt that this
proposal should be looked at, but I have already explained the problems
with it and why I cannot accept it. I hope that he will treat this
discussion as a useful airing of the issues and not press amendment 17
to a
vote. The
hon. Member for Bromley and Chislehurst suggested that another way of
offering an offset might be to have a reduction in the business rate
multiplier. He mentioned in passing the point he made on Second Reading
that the Government have not provided in the Bill the option for a
levying authority to reduce the business rates and give a reduction
rather than a supplement. We raised that question in the White Paper in
October 2007, but decided not to pursue the idea in the Bill because
detailed discussions with business, local government and other
interested parties revealed no real appetite for it and, in fact, a
number of problems were
foreseen. Robert
Neill (Bromley and Chislehurst) (Con): Will the Minister
give way—at a convenient point, of
course?
John
Healey: If I continue for a minute before giving way, I
may answer the hon. Gentleman’s question.
In the end,
the principal problem was that people found it hard to see how the
proposal could work in practice without having an impact on mainstream
local authority services, as it would take funding from them. It could
also have an impact on council tax payers, who would have to meet any
shortfall caused by a reduction in the business rate. For those
reasons, we did not pursue that proposal in the
Bill.
Robert
Neill: I am grateful to the Minister for that explanation
and for his earlier explanation of the Government’s thinking on
the automatic offset. He will not be surprised to hear that I am not
entirely convinced. The issues of local flexibility, resolving
potential conflicts with mainstream revenue and the impact on council
tax payers could have been addressed had the Government provided for an
automatic ballot in all cases. Had they done so, those issues would
then be part of the local debate and it would be for local people to
decide whether to go ahead with the
BRS.
John
Healey: I am interested in the hon. Gentleman’s
point. Does he mean a ballot of council tax payers, as they would pick
up the tab, or is he returning to his argument for a ballot of
business? The logic of his proposal for a ballot was that all
businesses that would have to pay more through business rate
supplements should be balloted. With a reduced business rate, the extra
burden would fall on the council tax payers. Logic demands that he is
now proposing a ballot of council tax payers rather than
businesses.
Robert
Neill: That is a good try by the Minister. He knows that
our point is that a ballot of those who pay under the BRS scheme would
inevitably be informed by the views of the council and the council tax
payers who are the customers of the businesses. Such a ballot would
naturally generate a public debate in the area. A ballot of council tax
payers is not required, as they will get their own vote in the council
elections. At that point, they can judge the wisdom of the local
authority in embarking on such a
scheme. I
understand and accept the Minister’s point about the difference
between the BRS and BIDs, particularly from the point of view of
Government and local authorities. Does he concede that from the point
of view of the businesses that will have to pay, the BRS and BID levies
will come out of the same pot? From their point of view, both affect
their bottom line and their cash flow. That is why the automatic ballot
might have resolved the questions we are
discussing.
John
Healey: I do not want to re-rerun the arguments on the
compulsory ballot that the hon. Gentleman has lost for now. He is right
that a business may have to find a BID levy and a business rate
supplement. However, to return to my general argument, if in an area
there is a case for both, the benefits likely to be derived and the
purposes for which the two charges might be introduced are different,
so one cannot automatically and fully offset the other.
I shall now
move on to the new clause proposed by my right hon. Friend the Member
for Greenwich and Woolwich. I am grateful, as are other members of the
Committee, for the opportunity to debate the issues
that arise from his proposal. On Tuesday, he was right to hope that I
would be sympathetic to the new clause but also to suspect that I would
be unlikely to accept it. I want to give further careful consideration
to what he described as a fundamental problem with BIDs, which is that
the levy cannot be applied to the owners of business properties. I know
that he has regarded this as unfinished business since the Local
Government Act
2003. My
right hon. Friend mentioned the research that we undertook. He
correctly stated that we did two stages of research on property owners
and BIDs. Both sets of research were inconclusive—in other
words, they demonstrated that BIDs could go ahead successfully without
contributions from property owners and that some went ahead
successfully with voluntary contributions from business owners. He is
also right to say that we pulled or perhaps postponed the third phase
of the scheduled work, not least because the prospect of the BRS
suggested that that was sensible, which is the stage we are at
now.
As I
understand it, my right hon. Friend’s proposal is that where a
BID is in place in an area that is likely to be subject to a BRS, the
BID body would be able to decide whether the owners of the properties
in the BID should be liable for the BID levy. A register of the BID
owners in that area would therefore have to be prepared. By enabling
property owners to pay towards the BID, extra revenue would be
available to offer occupiers a reduction on their BID payment. I think
that that is the logic behind what he has in mind and how it would
operate. In effect, it would be an offset for the occupiers, or a
cushion against a BRS, where local judgment suggested that it would
otherwise place a BID in jeopardy.
I agree with
my right hon. Friend that his proposal is elegant—in many ways,
it is. If he wants to intervene, I will be interested to know the
extent to which he has discussed his proposition and approach with some
of the obvious interested organisations, such as British BIDs. I am
interested in that because clearly the proposal would break new
ground.
Mr.
Raynsford: I am most grateful to my right hon. Friend for
inviting me to intervene. I shall try to answer his question as quickly
as I can because interventions should be brief. I have held discussions
with the British Property Federation about the concept of a power being
available to allow a levy to be raised following a ballot of property
owners—that ballot would be essential. The proposal is the
result of those discussions. I have consulted interested people, but I
have not specifically discussed it with Dr. Grail, although I would be
more than happy to do so.
John
Healey: That is helpful. It indicates both the serious
intent and the how early the stage of examining and developing the idea
is. I shall respond to my right hon. Friend on that
basis.
Mr.
Philip Dunne (Ludlow) (Con): May I help the
Minister?
John
Healey: I would be delighted if the hon. Gentleman wishes
to help.
Mr.
Dunne: I am always helpful. I am sure that the Minister
has seen the note prepared by the British Property Federation in
connection with the new clause. It claims that the new clause has the
“explicit support” of not only the British Property
Federation, with which the right hon. Member for Greenwich and Woolwich
held discussions, but the British Retail Consortium, British BIDs and
London First. If the Minister has not received a copy of that note, I
will be happy to provide him with one after the
Committee.
9.30
am
John
Healey: As the hon. Gentleman promised, that was a helpful
and useful contribution to the Committee’s debate on this
approach.
As my right
hon. Friend the Member for Greenwich and Woolwich has acknowledged,
should we be able to make a response to the concerns raised by Dr.
Julie Grail, one of the things we will need to deal with is the
principal problem of 2003: bringing property owners into the BIDs
framework. The problem at the time was that BIDs were based on the
ratings system, in which liability for rates falls on the occupier
rather than the owner in most cases. The view at that time was that
including them would have amounted to a new tax on property owners.
That is why at that stage, the provision was made elegantly for
property owners to make a voluntary contribution towards the BIDs. That
is the approach that we have followed with the Bill. I referred to that
last week in my evidence to the
Committee. The
other principal argument for taking that approach in 2003 and in the
current Bill is provided by Cambridge Econometrics, which has looked at
evidence for the feed through of business rate rises from property
owners to occupiers. It found that the majority of the change in
business rates is passed on through reduced rents. While the formal
burden of taxation for business rates falls on occupiers, the economic
incidence—the actual costs—passes on to the landlords in
large part, if not in whole, in the medium term. That raises a question
about the extent to which property owners should be required to
contribute, particularly for a medium or long-term project facing
levies such as the business rate
supplement. There
are other questions about the proposition in the clause that come to
mind. There are practical questions about the suitability of a
double-lot ballot and the prospect of property owners voting to reject
a levy, and the question of not guaranteeing that any additional
contribution by property owners to the BID would be passed on to the
occupiers. Finally, there is the question of the administrative burden
on billing authorities to set up a
register. I
say to my right hon. Friend that I will consider this further and
consider the scope for property owners to be bought more fully into the
BIDs system. I would be very pleased to meet him to discuss that
further, if he wants me to, when he is ready. I hope that, on that
basis, he will not press the new clause to a vote—I think he has
indicated as much to the
Committee. Finally,
I return to the question of the automatic offset, which has been raised
by a number of outside organisations and is on the agenda as amendment
30. There are voices calling for that, but others are arguing the
opposite case. Let me finish, therefore, with a couple of quotes from
important and informed sources. The first is from the South Bank
Employers Group—an
association of major organisations on the south bank in the Waterloo and
Blackfriars areas—which helps to deliver a BID-type benefit for
their local area through an alternative but voluntary BID levy. Members
of the group, comprising a high proportion of the largest business rate
payers in the area, decided not to propose a BID. Their view was that
the present voluntary arrangements worked extremely well in their area
and that a BID would not bring greater benefits. They have also looked
at an automatic offset and their view is that having an offset for BID
payers would be unfair. The group
said: “The
fact that business have chosen to contribute to this fund of local
additionality...should not in any way relieve them of the
obligation to contribute to a major pan-London project like Crossrail.
This would be seriously unfair on major businesses which are not in BID
areas, whether because they have voted against the BID proposals or
because a BID proposal has not come forward, or because the area is not
seen as suitable for a
BID.” If
Opposition Members are going to press the case for an automatic offset
to the business rate supplement for BIDs levy payers, they have to deal
with the argument of the association that represents the BIDs
themselves, which we heard in evidence last week from Dr. Julie
Grail: “a
full offset in London would be a ridiculous and dangerous move and
would give an open door to every business community in London to go and
get itself a cheaper business rate
supplement”.——[Official Report, Business
Rate Supplements Public Bill Committee, 20 January 2009; c.47,
Q200.]
Robert
Neill: I hear what the Minister says. Sometimes when there
is conflicting evidence, people come to different conclusions, and I
think that that is where we are at. The South Bank Employers
Group’s argument would have been met in the event of a
ballot—I am not going to repeat the point again after
this—because that would have involved an informed choice. On the
second piece of evidence, the exemption for Crossrail would have dealt
with that issue.
So, grateful
though I am to the Minister for his detailed and helpful response, and
alive as I am to the very valid points raised by the right hon. Member
for Greenwich and Woolwich, I hope that I do not damage the chances of
his proposal going forward if I commend it to the Minister for further
consideration, as well. None the less, my hon. Friends and I will seek
to press our amendment 30 to a
vote. Question
put, that the amendment be made.
The
Committee divided: Ayes 4, Noes
9.
Division
No.
5] Question
accordingly negatived.
Clause 16
ordered to stand part of the Bill.
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