Draft Business Improvement Districts (Property Owners) (England) Regulations 2014
The Committee consisted of the following Members:
† Abbott, Ms Diane (Hackney North and Stoke Newington) (Lab)
† Blackman, Bob (Harrow East) (Con)
† Colvile, Oliver (Plymouth, Sutton and Devonport) (Con)
† Crockart, Mike (Edinburgh West) (LD)
† Donohoe, Mr Brian H. (Central Ayrshire) (Lab)
† Fitzpatrick, Jim (Poplar and Limehouse) (Lab)
† Fox, Dr Liam (North Somerset) (Con)
† Hilling, Julie (Bolton West) (Lab)
† Lancaster, Mark (Lord Commissioner of Her Majesty's Treasury)
† Mactaggart, Fiona (Slough) (Lab)
† Mordaunt, Penny (Parliamentary Under-Secretary of State for Communities and Local Government)
† Neill, Robert (Bromley and Chislehurst) (Con)
† Sawford, Andy (Corby) (Lab/Co-op)
Simpson, David (Upper Bann) (DUP)
† Vickers, Martin (Cleethorpes) (Con)
† Ward, Mr David (Bradford East) (LD)
† White, Chris (Warwick and Leamington) (Con)
Fergus Reid, Kate Emms, Committee Clerks
† attended the Committee
Fourth Delegated Legislation Committee
Monday 24 November 2014
[Andrew Rosindell in the Chair]
Draft Business Improvement Districts (Property Owners) (England) Regulations 2014
4.30 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Penny Mordaunt): I beg to move,
That the Committee has considered the draft Business Improvement Districts (Property Owners) (England) Regulations 2014.
It is a pleasure, Mr Rosindell, to serve under your chairmanship. Hon. Members will know that business improvement districts provide a mechanism for the local business community to come together and agree to fund improvements to their local trading environment. Business improvement districts have been a success since their introduction in 2004. There are now 180 business improvement districts in operation across England, many of which are now in their second or third term. They all play an important part in boosting local growth.
BIDs are often used in connection with our high streets and town centres, and are very much part of the package of tools and support in that area. Our long-term economic plan supports high streets with a £1 billion package of investment that includes a £1,000 discount for smaller shops on their rates; doubling small business rate relief; making small business rate relief easier to claim; and new relief to get empty shops back into productive use. In addition, we have introduced sensible planning changes to get empty buildings back into use and increase the resident population of town centres, as well as to tackle over-zealous parking practices.
However, we also want to do more to support local growth, and although business improvement districts have proved to be a popular tool across the business community, currently only business rate payers—usually the occupiers of property—can vote in a ballot to establish a business improvement district and be subject to a levy. Property owners can contribute, but only on a voluntary basis and only after the business improvement district has been established. This means that property owners are unable to influence the activities or services provided by the business improvement district. The arrangements are arguably inequitable, since all property owners benefit from the business improvement district’s activities, while only some contribute financially.
Through the regulations, we propose to give property owners the opportunity to promote their own business improvement districts where primary legislation allows. I say “where primary legislation allows”, because at this point, property-owner business improvement districts can only exist where a ratepayer business improvement district is in operation and where a business rate supplement is levied. That is because the enabling powers are contained in the Business Rate Supplements Act 2009. The only business rate supplement in operation is in London to fund the delivery of Crossrail, so a property-owner business improvement district could only be established
for the time being in London. We will certainly consider rolling out these powers more widely once we have had chance to review the first schemes.The case for property-owner business improvement districts was recognised during the Mary Portas 2012 review on the future of the high street, which highlighted the role of property owners in the regeneration of town centres. She recommended that the Government should legislate to allow landlords to become high-street investors by contributing to business improvement districts.
The Government accepted that recommendation in 2013 and consulted on the introduction of property-owner business improvement districts. Consultation responses supported the principle of establishing such entities and the detailed approach proposed by the Government—the rules and procedures for property-owner BIDs should, as far as possible, mirror the successful model adopted for ratepayer BIDs. The regulations before the Committee enshrine that approach.
The main difference from ratepayer BIDs is that under property-owner BIDs, it is the owner of the property who would vote and potentially be liable for the levy. Importantly, it is for the proposer to set out the type of owner who should be liable for the proposed levy. For example, it may be the freeholder or the long leaseholder, as the proposer sees fit, taking into account local circumstances.
Apart from that distinction, the regulations closely mirror those for ratepayer BIDs. The regulations give a large degree of discretion to the BID proposer on the size and location of the BID; the identification of those liable for the levy and therefore eligible to vote in the ballot; the amount of the levy; and the activities or services to be provided within the BID. All those matters are to be determined locally and must be set out clearly in the proposal document. That document should also clearly identify the ballot date, the commencement date, a statement of any existing baseline services in the area, and a map and description of the geographical area of the business improvement district.
The ballot will be organised and run by the ballot holder, who will be the returning officer for elections for the relevant local authority. The ballot holder will be responsible for issuing the ballot papers and announcing the outcome. In doing so, the ballot holder is required to state the total number of votes cast, the aggregate rateable value of each property class identified as being eligible to vote, the total number of votes cast in favour of the question on the ballot paper, and the aggregate rateable value of each property class represented in those votes cast in favour.
A BID can be established only if the outcome of the ballot confirms that a majority of the persons voting and a majority of the aggregate rateable value have voted in favour of the proposals. That mechanism provides protection against the setting of excessive levies. Once a property-owner business improvement district has been established, the relevant billing authority will be responsible for issuing bills and collecting the levy. That is consistent with the existing ratepayer BID and business rate supplement requirements. The authority will be required to hold a separate business improvement district revenue account. The billing authority can veto the establishment of a BID where it feels that the proposed activities conflict with any of its policies or where it considers that there is a significant and inequitable financial burden on a particular class of property owner.
Members will wish to note that there is a right of appeal against the ballot where a material irregularity appears to have occurred. A request to declare the ballot void must be made to the Secretary of State within 28 days of the notification of the outcome of the ballot. That can be made by the billing authority, the business improvement district proposer or a person representing at least 5% of those eligible to vote.
The regulations allow for the creation of property owner business improvement districts, which the Government believe will be a welcome addition to the tools we have provided to regenerate the high street and help businesses grow. Property-owner BIDs will be created through a set of rules and safeguards built on tried and tested ratepayer business improvement district regulations. I commend the regulations to the Committee.
4.38 pm
Andy Sawford (Corby) (Lab/Co-op): It is a pleasure, Mr Rosindell, to serve under your chairmanship, I think for the first time. It is also the first time I have been in Committee with the Minister in her new role. I wish her well with her important responsibilities. She has many roles at the Department for Communities and Local Government, and they include being the fire Minister. If she is ever stuck for advice, I am sure that members of this Committee could assist her, given their past experience on those issues as well as many others, including those we are considering today, in particular the regeneration of our high streets.
I have consulted on the regulations with local government bodies, including the Local Government Association, as well as representatives from the business community. While they have a number of observations and questions, some of which I will put to the Minister, they have not raised any major issues or concerns, so I do not intend to speak for long.
Successful small and medium-sized businesses are critical for the success of our high streets—on that, the Minister and I can agree—and that applies particularly to the independent retail sector. So many people wish to see it thrive in their area, to give their high street back some local identity in its retail, cultural and leisure offer. Small business owners are facing a cost-of-living crisis as high streets struggle. Many are under pressure from business rate increases. We have said that a future Labour Government would help small and medium-sized businesses by cutting their businesses rates. That has been welcomed by John Allan, the national chairman of the Federation of Small Businesses, who said:
“The FSB welcomes the focus by the Labour leadership on this critical issue for small businesses. It affects thousands of our members across the UK”.
The issue is championed by our new high streets advisory group, which is led by former Wickes CEO, Bill Grimsey. He has highlighted the business rate cut and is looking at future opportunities and, crucially, the role of BIDs.
We have set up the high streets advisory group partly because of the failure of the Government’s Portas pilots. We wish those projects well, but the Minister will have seen the analysis in The Economist this week which labelled them a “waste of money”. That is disappointing for all of us. The regulations follow on from the Portas review, which recommended that the Government
“legislate to allow landlords to become high street investors by contributing to their Business Improvement District.”
Given that the Portas review was published three years ago, why has it taken so long for the regulations to be introduced? Why did Ministers previously block that recommendation or not see it as a priority? What has made the hon. Lady introduce the regulations now?
Will the Minister say a bit more about the Secretary of State’s role in the ballot process, and why he feels that he needs such overarching control? Is there a good reason for it or is it another symbol, such as meddling with how often councils collect the bins, of his not being a localist at all but rather quite a controlling Secretary of State? Will the Minister explain why the business rate supplement BID proposer has to notify the relevant authority and the Secretary of State in writing of his or her intention to put the proposal to a ballot? Why can that not be left to the local authority? The local authority will have to evaluate the quality of the proposals and whether the processes set out in the regulations are followed accordingly. I do not see why the Secretary of State should have that meddling role.
“All expenditure properly incurred by the ballot holder in relation to the holding of a ballot under these Regulations shall be paid by the relevant billing authority.”
Will the Minister expand on that? How much does she expect a ballot to cost? That was raised by the bodies that I consulted, and I understand why they are concerned to know what estimates have been made of the likely cost. Will her Department issue any good practice examples to help proposers keep costs down? Is it concerned about a situation where a ballot is rejected and the main proposers submit further ballots again and again, incurring costs to the billing authorities? Will the local authority keep having to foot the bill, or is there a point at which no further ballots can be triggered because of the unreasonable costs of continuing to seek ballots? She may be able to explain that there is a perfectly reasonable limit to the amount that this process will cost an authority. However, given the content of the regulations—they are quite detailed for a statutory instrument—it is noticeable that the bit about who pays is very thin. The Hansard report of today’s debate will be read by many people who are thinking about holding a ballot. I am sure that they would appreciate further information about that point, either now or in due course.
I am concerned that the regulations place another burden on local authorities. I am a supporter of the new burdens doctrine: if local authorities are asked by central Government to undertake a new burden—for example, through statute or secondary legislation—the costs and implications of that should be fully funded. The regulations state:
“Each relevant billing authority shall, by the commencement date, provide for the imposition, administration, collection, recovery and application of the BRS-BID levy in its area”.
I get the sense that the regulations were drafted without the practical implications for local authorities being fully thought through. I understand why the Minister and her officials are mindful of the intended objective, which is to support our high streets. However, the role of local authorities is clearly a concern at a time when they are faced with huge cuts. The measure states:
“The Secretary of State has consulted such representatives of local government as appear to him to be appropriate.”
I would be grateful if the Minister would say who has been consulted.
My final question is on the territorial extent of the measure. I understand that the measure applies only in England, but will the Minister confirm that it will apply only in London at present? If so, what, if any, future extension of the measure could be considered for the rest of the UK—certainly England? If she does not think that necessary, why not? What alternative arrangements are in place in other parts of the UK? If she can respond to those points and questions, particularly since there is not a huge amount of concern out there but rather a number of detailed questions, we will not push this to a vote.
4.44 pm
Penny Mordaunt: I thank the hon. Gentleman for his kind words of welcome, which are much appreciated. He cantered through his list of questions. I will do my best to answer as many as I can today, but if I miss out any areas, I will write to him.
The hon. Gentleman mentioned business rates, and I mentioned the £1 billion business-rate package that we have given to businesses. As well as that, we have extended powers to local authorities to vary business rates, which some local authorities have taken up, with central Government sharing the burden, and that has proved extremely productive. We felt that that was a priority and have invested in that.
I am sorry to hear the hon. Gentleman’s criticism of the Portas pilots, which have been extremely successful. I have visited various pilot sites since taking office and they are hugely impressive. For example, in Brighton, the pilot has regenerated areas of the town and made things much safer. Crime has fallen owing to various initiatives that have been introduced, and cultural offers in the high street have dramatically changed footfall. We will consolidate the work that we do on the Portas pilots. Far from being a waste of money, as I think the hon. Gentleman described them, they have generated an enormous amount of good practice. Sharing good practice between areas that are doing well and areas that are not doing so well is absolutely key so that lessons can be learned and we can speed up the regeneration of our high streets.
Robert Neill (Bromley and Chislehurst) (Con): As well as congratulating my hon. Friend on taking up a fascinating part of the portfolio, does she accept that in areas such as Chislehurst high street, good practice has been put in place? Even though it was not successful in its Portas bid, great benefit has been achieved and the traders wanted that placed on the record, as well as their thanks to the officials in her Department with whom they liaised in taking that good practice forward.
Penny Mordaunt: I thank my hon. Friend for his intervention. I will certainly pass that back to my officials. We not only have Portas pilots, but town teams as well, and we have been able to share good practice through the Great British high street portal. In the Great British
high street competition, we had 135 entries. Those trailblazing high streets are now being buddied up with areas that need additional inspiration and support. I think a huge amount has been levered from a comparatively small investment in town teams and Portas pilots.Far from dragging our feet, there has been an evolution. We wanted to work with business owners and consult properly with local authorities, so I can give the hon. Member for Corby reassurance about some of the things he raised in the latter part of his speech. Clearly, we want to ensure that the policy works. A pragmatic approach is needed, and flexibility in the system will cover a wide mix, from property owners to property owners who have contracted out the management of their property to third parties. We are introducing the proposals in a speedy way, but clearly we want to end up with something that works.
The hon. Member for Corby asked about the Secretary of State’s role in the ballot process. The role is a safeguard. It is tremendously important that there is transparency in the processes. The Secretary of State has a power to declare a ballot void when there is a contravention of the regulations. That is a safeguard mechanism. It is not overly bureaucratic or an additional burden.
The ballot cost will vary from area to area, because we are talking about a wide range of circumstances. I can write to the hon. Gentleman in more detail, and I can also set out the concerns that arose in our consultation about what would happen if there were recurring ballots or some local difficulty that needed ironing out. The benefit of the approach is that it requires people to be pragmatic. It requires the BID proposer to consult and to think about who should be included in the BID— for example, what type of property owner should be included—because it is to everybody’s advantage that the ballot is successful and we do not get stuck in a recurring cycle.
The hon. Gentleman spoke about the regulations creating a new burden. Far from being a burden, we have seen from existing BIDs that in addition to the fact that money raised from levies has been invested in the high street and elsewhere, a huge amount of additional funding has been levered into those areas. My Department is on track in terms of the one in, two out policy to ensure that we do not add to the regulatory burden on local authorities. I will write to him with a full list of consultees and the responses that the Department received. We consulted extensively with local authorities and the LGA.
On the hon. Gentleman’s final point about London, we are committed to reviewing the operation of property-owner BIDs in London. As I explained, because of the peculiarity of the circumstances, only London can currently make use of the scheme, but we will consider extending its scope on the basis of that review. I think I have covered most of his points, and we will write to give him further detail on the costs and the consultation responses. I recommend the regulations to the Committee.