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Lord Whitty: My Lords, it is not for me to reply on the issue of the timing. I simply say that it was not the Government, but the House, that agreed those terms on the basis of an all-party report. Clearly, there are a few hiccups, but I am sure that the usual channels will look at concerns expressed by the noble Earl, the noble Baroness and others.
On the substantive points, the noble Baroness, Lady Byford, raised the issue relating to the Water Bill, as indeed did the noble Baroness, Lady Miller, in a slightly less direct sense. She asked how Clause 28 of the Water Bill, dealing with water resource management, related to this order.
This provision does not give British Waterways any additional abstraction rights. It already has those, and will continue to do so under the Water Bill. The order provides for what it can do with the water subsequent to abstracting it, which is principally to treat it and sell it in competition with other water suppliers. The water resources management side is not affected, as no additional rights are involved.
It must similarly be the case in relation to Clause 7. I cannot see why the drainage provisions would alter as well. I am pretty sure that the same answer would apply, but if there is any difference, I shall talk to the noble Baroness before the Water Bill is considered tomorrow. I think that that must be right logically.
In relation to English Nature, I think that I would accept the view of the Committee in another place. The consultation with English Nature and wildlife interests was not sufficient at an earlier stage. The Environment Agency was heavily involved in the discussion of this proposal at an early stage, but English Nature almost certainly should have been consulted earlier. On the substantive concerns of English Nature, the committee in another place felt that it was adequately reassured. That also appears to be the case with English Nature. Therefore, those concerns have been covered.
The noble Baroness, Lady Miller, raised a point about the Water Bill, which deals with British Waterways' reservoirs. The only reservoirs exempted from the Water Bill are those that are not connected with the system. They are significant but any part of British Waterways' reservoirs that are connected with the system, and would therefore have an effect on the total availability of water within the system, are covered by the Water Bill. Therefore, in this context and in the context of Clause 28, raised by the noble Baroness, Lady Byford, the abstraction position of British Waterways is covered by the general provisions of the Bill. This order does not alter the existing rights of British Waterways.
I hope that with that explanation, the House will give a fair wind to the order.
On Question, Motion agreed to.
- House adjourned at eighteen minutes before midnight.
Official Report of the Grand Committee on the
Local Government Bill
(Fourth Day) Wednesday, 11th June 2003.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Viscount Simon) in the Chair.]
Clause 43 [Arrangements with respect to business improvement districts]:
Lord Jenkin of Roding moved Amendment No. 113:
- Page 20, line 2, after "work" insert ", invest"
The noble Lord said: With this amendment, we shall also discuss Amendments Nos. 114 to 116, 118 to 124 and 132. It is a large group of amendments which have been tabled in the names of various noble Lords. No doubt, we shall spend a little while this afternoon debating them. I shall open the debate by speaking primarily to Amendments Nos. 113 to 116, 120, 123, 124 and 132, which are in the names of my noble friend Lady Hanham, the noble Baroness, Lady Hamwee, the noble Lord, Lord Rogers of Riverside, and myself. I am particularly grateful to the noble Lord, Lord Rogers of Riverside, for adding his name and authority to the amendments.
The amendments are intended to provide that owners or lessors of property in a business improvement district shall have a role in the processes for establishing a BID alongside the occupiers, the non-domestic ratepayers. I know that the noble Lord, Lord Rooker, does not like the name "BIDs", but the full name is so long. I hope that he will be happy with that.
I start by repeating the welcome that I gave to this part of the Bill at Second Reading. I welcome the fact that the Government have chosen to proceed by means of BIDs as the instrument whereby businesses can pay to improve and enhance their local area. It is clear that the BID concept has attracted wide support from the representative bodies of business and property interests, including bodies such as the Association of Town Centre Management, the British Retail Consortium, the British Council for Offices and the British Property Federation, as well as a long list of others.
It would not be appropriate for me on this occasion to rehearse all the details of the scheme. They were well described by several noble Lords, including the Minister, at Second Reading on 3rd April. However, I remind the Committee that the essence of a BID scheme is that the proposers, in consultation with the local authority and in relation to a defined area, should
draw up proposals to raise a levy for improving the area by means of facilities over and above those that the local authority already provides. There was some discussion of that at Second Reading. Such proposals might include measures to enhance the environment, strengthen security, improve the infrastructure and provide a range of services. The proposals are then put to a vote of non-domestic ratepayers—the occupiers—and, if they are approved by a majority, the scheme goes ahead. All must pay, not only those who voted for the scheme.Wisely, the legislation allows for much flexibility in, for instance, defining which occupiers should contribute, and allows for variation in the rate of the levy for different classes of occupier or for the exclusion of small businesses. It is up to the proposers of a BID scheme to decide how they will deal with that. As a last resort, the local authority has the power to veto the scheme, if it decides, for any reason, that it cannot support it. One of our amendments was tabled so that we could explore what that might mean.
There is a gaping hole in the legislation. There is no provision for owners who are not occupiers—lessors or freeholders—to be brought into the statutory scheme. The amendments to which I speak aim to fill that lacuna. Before I come to the detail of the amendments, I shall make three important points. The first point, which was made by several noble Lords at Second Reading, is that it is clear that, in most cases, a BID scheme will simply not get off the ground, unless it is promoted by the property owners and they are involved from the outset. Property owners have a key long-term interest in urban management, whether through a BID scheme or by the continuation of existing voluntary schemes. The benefits of a successful scheme—higher property values that may, in turn, lead to higher rents—will often be felt most keenly by the owners of property, not necessarily by those who occupy it. Landowners have initiated and funded most of the voluntary BID-style arrangements to date. There is a broad consensus among organisations representing landlords—such as the British Property Federation—and tenants and among bodies representing small businesses.
The involvement of owners in schemes developed under the Bill should be more clearly encouraged and facilitated. That is the experience in the United States, where the BID concept originated. There, the liability of a BID levy sits with the owners of a property. In many cases, at least part of the cost is passed on to the occupier through rent reviews and service charge negotiations. Generally, that happens only after the benefits of the BID have been demonstrated.
If the current proposals in the Bill are adopted, the cost to an occupier will be borne, first, through the BID levy, secondly, through increased rental levels as a result of rent review negotiations, and, thirdly, through increased business rates following the increases in rental levels. It may be felt that occupiers are unlikely to vote for such a scenario or to have the motivation to initiate a scheme without the total commitment of their landlord.
That fact is well recognised by the Government—I come to my second point—as evidenced by the explicit statements in the draft guidance produced by the Minister's department, the Office of the Deputy Prime Minister. Although noting that, under the Bill—this is what we are complaining about—owner contributions can only be voluntary, the guidance lays some emphasis on the owner's role. In section 2 of part 2 of the guidance, under the heading "Motivating Key Partners", there is a whole page about the role of owners. I was tempted to read the whole page into the record at this stage. In this Parliament, we do not have a system of reading documents into the record simply by handing them in. I resisted the temptation, although we may have to come back to it later. I shall read just one or two sentences. I have, however, placed copies of the whole page about property owners at the back of the Committee Room. They are available to any Member of the Committee who wishes to read the whole thing.
Under the heading "Property Owners", the ODPM has said:
- "Property owners will have a vital role to play in the success of Business Improvement Districts".
- "For many, enhancing their local area will be a key objective because it will result in an increase to the value of their property. For this reason, businesses will need to ensure that property owners are a part of the BID process from the earliest stages. Once property owners are convinced that the BIDs objectives are beneficial to the area, they are likely to be willing to invest in the scheme".
- "There are ways in which property owners can contribute financially to BID schemes".
- "paying the additional BID levy on behalf of tenants. In an area where a property owner is particularly keen to endorse the BID, they could agree to pay the additional levy on behalf of their tenants in return for the support of tenants",
The document spells out other ways in which the property owner could be included in BID schemes. It says that it would be good to have representative property owners on the BID board. That seems sensible. It goes on to say:
- "Property owners have an important role in 'selling' individual BID schemes to other interest groups".
Given the quite explicit statements in the draft guidance—I recognise that it is only draft—produced by the ODPM, owners still have no statutory role. They have no right to vote on the BID scheme, and their contributions can only be voluntary. That is what I call a gaping hole in the legislation. The key point is exactly the same as with occupiers. If occupiers vote
for a BID scheme and achieve a majority, there can be no free-riders. All occupiers in the BID must contribute to the levy because they will get the benefit of the improvements to facilities and services and to the environment or whatever. Why does not the same apply to owners? What about the free-riding owner who says, "I'm not going to contribute to this. If others want it, let them go ahead". He gets all the benefit of the scheme, while contributing nothing to help finance it. That cannot be fair.The third point is that I have evidence that Ministers are trying to find ways in which owners can be brought into the statutory scheme. They blow a bit hot and cold. I have a letter from a senior manager in Boots, and I shall quote one paragraph from it. There was a launch of the BIDs pilot in February, and the Boots executive wrote to me to say:
- "I find it interesting that after the presentations, Nick Raynesford came to me and asked how we could find a way of formally including landlords in the process".
I will summarise. The owners' involvement is essential, and the Government fully recognise that. Apparently, the Government are searching for a way to achieve it, but there is nothing in the Bill. I hope that our amendments will show a way ahead.
Amendment No. 113 would simply add the word "invest" to Clause 43(2)(a), which identifies those whom a BID may benefit as,
- "those who live, work or carry on any activity in the district".
Subsection (1) of Amendment No. 116 requires the details of superior property interests to be set out in the BID arrangements. Subsections (2), (3) and (4) contain the heart of the system. The bid arrangements must describe how the owner's share of the levy is calculated. Obviously, that is a key issue. It defines that share as "the allocated proportion". They must then specify how much is left to be paid by the occupiers, which is defined as "the residual proportion", and the clause ends by stating that the sum of the allocated proportion and of the residual proportion must not exceed what would be paid if the occupier alone were paying. There cannot be more because there are two paying—it is simply a question of how the share is calculated. I will return to how this would work, but first I would like to complete my references to the rest of the amendments to which I am speaking.
Amendment No. 120 states that no person should have more than one vote. This is intended to ensure, for example, that the owner of a shopping arcade—a shopping centre, even—with a great number of shops would not have more than one vote in respect of his superior interest. To do otherwise would tilt the vote very unfairly—or it could.
Amendment No. 123 is consequential on the new clause, making it clear that in calculating the outcome of the vote, an owner is to be treated as voting in respect of his "allocated" share and the occupier in respect of his "residual" share.
Amendment No. 124 sets out how the local authority should approach its decision whether to veto or not. In particular—and this is a very important point—local authorities must be satisfied that the arrangements are "fair and equitable". I am assured by the lawyers that there is ample statutory precedent for that.
Amendment No. 132 is a new clause entitled:
- "Restriction on reimbursement of levy".
Those are the amendments, but before I sit down—I may be disappointing the noble Lord, Lord Rooker, in that the afternoon is yet young—there are three further points I must touch on. First, the amendments are drawn up in a form that makes the levy by property owners a charge in the sense that what they pay is directly attributable to the benefits that are to be provided. As such, they create a recoverable debt which the BID managers can recover by civil action. Like the occupiers' levy, it is not a tax.
Secondly, we envisage that it will be for the local authority to use its powers under Section 16 of the Local Government (Miscellaneous Provisions) Act 1976 to secure details of the ownerships of property. There will probably need to be added to the Bill, at some stage, regulations to set out how this should be done. This is necessary because there is real commercial value in establishing precise ownership patterns, rental payments and other lease terms, and these powers should not therefore be given to BID managers.
Thirdly, and most importantly, there is the issue of how the apportionment of the levy between "allocated" and "residual" shares should be done. Our proposals envisage that it would be done by the BID proposers, based on information supplied by the local authority and by the owners and occupiers. The calculation could be done for each hereditament and would depend on the terms of the lease, the rent paid, and so on.
I have in my hand the executive summary of a very interesting report prepared for an umbrella body for BID proposals, the Circle Initiative, about which I am sure the noble Lord, Lord Rooker, has heard. The report has been prepared by a leading firm of property consultants, Jones Lang LaSalle. It suggests two possible models, as they call them—the formula model
and the broad-value approach. Both models seek to achieve the objectives which are stated in the report. It says:
- "We consider that the Model needs to be:
- "Based upon a business plan that will fulfil the requirements of both property occupiers and owners within the BID area; implementable/deliverable; cost and time effective to implement; simple and transparent i.e. readily understandable; as fair and equitable as possible".
The report describes the formula model in these terms:
- "The Formula model is based on an apportionment between owners and occupiers based on:
- "i) a banding of interests by reference to lease length (which should be adjusted to reflect the BID business plan and services);
- "ii) apportionment of the owner levy between owners on the basis of net rent receivable and lease length subject to a threshold test of sufficient economic interest.
- "The Formula model relies on a simple calculation based on these two measures of "value". This has the advantage of being transparent in providing an objective explanation of how individual assessments have been reached".
Under the heading, "An Alternative Approach", the report describes the broad value approach as follows:
- "We have also considered the potential for a less complex approach where occupier and owner interests could be assessed in relation to relative broad value bands (rather than measured in absolute financial value terms).
- "Accordingly, we have developed the 'Broad Value' approach which categorises property interests through a subjective assessment of the same key ownership factors for individual property interests as we have used in the Formula approach, namely term of interest and net rent receivable.
- "The Broad value approach, however, works on the basis of the BID manager's assessment of the appropriate value band for the individual interest. This relies on a more subjective assessment than the Formula approach".
I hope that this demonstrates that there has been a great deal of very skilled professional work to establish the workability of the apportionment that would be required by the amendments to which I am speaking. It is, in fact, a perfectly feasible operation. Yes, there will be some cost, put by one commentator as perhaps as high as £50,000. But in the context of a BID which may be aiming to spend several million pounds over a period of five years, £50,000 may not seem very much as the price of getting the owners statutorily involved in the scheme. Indeed, they describe it as an entirely reasonable cost.
To sum up my case, I make six points. First, the approach offers choice. The proposal allows each BID to choose whether to involve property owners. It does not force them to do so. In some cases, where the focus is on short-term services, a BID may simply seek to charge occupiers. Conversely, where the works proposed by the BID are of a capital nature, the bulk of the charge would probably be borne by those with longer term interests. The proposed mechanism would allow that.
Secondly, the approach allows local decision-making. Each BID would have to decide for itself whether the investment in establishing a property register is worthwhile. There will, as I have said, be a cost attached; in some cases the benefit will not justify it, but in others it will. In other cases, it may be sensible
just to seek to charge property owners with a "significant" property interest, with the level of significance agreed locally. If the proposals meet the "fair and equitable" test, this, too, should be acceptable.Thirdly, the approach is simple. It builds on the proposed measures in the Bill and ties any payment to the rateable hereditament. There will never be a situation where the combination of occupiers and owners of any hereditament pay more than a single occupier would pay. All that is suggested is that in relation to each hereditament the BID levy should be fairly allocated between the immediate occupier and the owners—if any—standing "behind" that hereditament.
So we have choice, it is local, it is simple, and my fourth point is that it is fair. Nobody will be asked to pay without being able to vote. Anyone being asked to pay any amount will get a head count vote. Everyone being asked to pay will get a value-related vote, with the "weight" of that vote being directly proportional to the percentage of the total value of the hereditaments in the BID area.
Fifthly, there are no disadvantages. There is wide business support. There is small business support and there is strong local authority support. There is national and international experience suggesting that it is the most sensible approach.
Sixthly, there is a real risk that without statutory property owner involvement, BIDs will tend to concentrate on short-term fixes with limited imagination. While they may succeed in securing initial support—and perhaps one is entitled to be a little sceptical, given the "freeloader" concern—the view is expressed that they will be very likely to fail to secure a second term.
These amendments seek to fill the gaping hole to which I drew attention at the start of my speech. I commend them to the Committee. I beg to move.
4 p.m.
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