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Noble Lords: Oh!

Lord Rooker: No. It is right. I do not want to be accused of misleading the Committee. I say that only because of what was said both by my noble friend and the noble Lord, Lord Jenkin, about future stages. This Bill is important. Business improvement districts—that is the first and only time I shall say that; I shall stick to "BIDs" from now on—are also important. But they are not so important that we could contemplate delaying Royal Assent to this Bill. Everyone here knows that there is a target date for Royal Assent in order to get the new system of local government financing operating from the next financial year—that is, next April. It is crucial that we meet the agreed date for Royal Assent. Ping-pong is not even on the agenda. It is as simple as that. As regards the comments made by the noble Baroness, in some respects the introduction of the amendments by the noble Lord, Lord Jenkin, was like a mini-Second Reading. I am happy to encompass the amendments on the voting.

There is a further issue that I should clear up because it sets the tone of my comments. I know that people have been taking advice on this—I have read some of the documentation—but obviously I am not the policy Minister so I will not claim to have read everything. A question raised was: is the BID levy a tax? The answer is, "Yes, it is a tax". We are not denying that it is a tax. It will be paid through, in effect, the council tax and the business rate, which are taxes. But the BID levy is accounted for as a tax by the Treasury and will be recorded as such in the national accounts. That is because a tax is defined as a payment that is made when an individual payer does not receive an individual service in proportion to the amount that they are charged. This is in accordance with international guidelines—ESA 95—which we are bound to follow by law.

All ratepayers will contribute towards projects that will benefit them collectively. They will therefore be paying a tax. We do not hide that it is a tax. The question arises: do we want a new tax? That is the implication of the thrust of the amendments tabled by the noble Lord, Lord Jenkin, but not those from the noble Baroness. Do we want a new tax? The answer is, "No". That is all the bad news really—just to sour it to start with.

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Lord Jenkin of Roding: I wonder whether the noble Lord might give way to allow me to put this question to him at this stage because I shall certainly want to return to this issue of whether it is a tax. I have been doing my homework introducing the European System of Accounts 1995 and I have been in touch with the people in the ONS. If it is a tax for the owners, why is there a tax on the occupiers?

Lord Rooker: No. That is the whole point. It is a tax. We are not about that. The levy is a tax.

Lord Jenkin of Roding: Why is it not—

Lord Rooker: The Bill proposes that the occupiers, who already pay a tax, will pay the levy—a tax. The owners do not pay a tax at present.

Lord Jenkin of Roding: That has nothing to do with it.

Lord Rooker: It has everything to do with it. I shall explain. We are not in the business of introducing what would be a new tax. I shall explain the details as to why, although I am also prepared to say that this is not the end of the matter. Nick Raynsford is having meetings constantly. There was a meeting last week with the British Property Federation and I know that he will be writing to them in the next couple of days. While we are saying that in respect of the Bill, we cannot find a way to accept the amendments, that is not to say that in the future, these matters will not be considered. However, Nick Raynsford will be writing to them in the next few days following the meeting.

From now on, I shall stick to my notes, but I just wanted to get all that bad, souring news up front so that the context in which I am speaking can be understood. I shall now turn to the individual amendments.

Amendments Nos. 113 to 116 relate to the role that property owners play in business improvement districts. That is something to which a great deal of thought has been given, both when drafting the Local Government Bill and during discussions in another place.

I should say at the outset that the arguments put by the noble Lord, Lord Jenkin, are incredibly seductive. I remember at the Urban Summit in Birmingham last year, I was walking across one of the promenades at the International Convention Centre. A man stopped me, took me on one side and started to explain. I said that it sounded incredibly sensible. I went away and took further advice and my learned friends in the department said, "It might sound sensible Jeff, but it won't work in practice". It is seductive and I can understand why people see it that way.

We recognise that property owners will play a key role in developing, encouraging and taking forward business improvement districts. But we think that the Local Government Bill, as drafted, gives property

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owners ample opportunity to be involved at every stage of the BID process. I shall qualify that, because they will not get a vote.

Noble Lords: Oh!

Lord Rooker: I read that at the time and I thought that it could not be right; they cannot be involved at every stage because they have not got a vote. But there are plenty of other things that they can do. Clause 45 enables the property owners to make voluntary financial contributions to BIDs. Many property owners would like to make mandatory contributions in the same way as non-domestic ratepayers—that is, existing taxpayers. However, there are significant practical difficulties in extending a BID levy to property owners outside the rating system. Simply, that would create a wholly new tax on property ownership. That would be a very significant change in taxation principles in this country and would have far-reaching consequences that go well beyond the BIDs issue. By the way, most of the points that I shall make are practical. These are not ideological or political arguments; they are practical arguments.

Bringing in the property tax would seem difficult to justify when experience suggests that voluntary contributions are successful and many town centre schemes have succeeded on the basis of voluntary contributions from landlords. The suggested amendments not only provide for a wholly new tax on property ownership, but also allow the BID proposers to have discretion about whether or not this tax will apply to property owners or simply to business ratepayers.

This would set up a dual system that would be inherently unfair to ratepayers who will be obliged to contribute to the BID levy should a majority vote in favour of the scheme. It would be extremely costly and difficult to administer. We do not know on what basis a BID proposer will decide whether to include a property owner in the levy. Additionally, creating a new tax on property would create a significant new burden on local authorities. Local authorities would have to put together a database of property owners in their local area and come up with new systems of collecting and enforcing the payments of the BID levy from property owners. By basing the business improvement districts on the existing non-domestic rating system, we seek to minimise costs to local authorities and to make the BID framework suitable for all locations.

We are also concerned that the definition of a "superior" interest in a property, as set out in Amendment No. 115, could provide further complications. This definition means that the BID levy could extend to superior leaseholders, as well as to the freeholders of a property, making the system even more confusing to administer. We have recently issued a working draft of guidance on business improvement districts which is available in the Library—I believe that it is available in this room at the present time. In this document, we detail a variety of different ways

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that property owners can contribute to BIDs without implementing a cumbersome new tax or making the system unduly expensive to administer.

Clause 43 currently provides that a business improvement district can be established for the purpose of enabling "projects" to be carried out for the benefit of,

    "those who live, work or carry on any activity"

in the BID area. Amendment No. 113 to Clause 43 seeks to ensure that a BID can be used for the benefit of anyone investing in an area as well as those working or carrying on any activity in the area. However, to "invest" in an area is "to carry on an activity" there. The amendment is therefore redundant because it adds nothing to the meaning of the clause.

We have concerns about Amendment No. 116, which relates to the apportionment of the BID levy. First, the administrative burden of identifying the individual with the superior property interest and then calculating the proportion of the levy paid by ratepayers and property owners respectively, would be detrimental to setting up a business improvement district. Ratepayers' rateable values are identified on the rating list drawn up and made by the Valuation Office. The local authority already records ratepayers' addresses for billing purposes. It will not cost a BID money to identify the ratepayers or to work out their rateable values, as this list is already publicly available.

If the BID or the billing authority is compiling its own list of owners, that would be a significant fiscal and administrative burden. If the money used to identify owners is later recouped through the BID levy, that would leave less money for the BID to spend on improvements in its local area. If a BID simply received voluntary financial contributions from landlords, it would not have to offset the identification and collection costs, leaving more of the levy to spend on local projects.

As the Bill stands, Clause 52 requires that for a BID ballot to be approved, two tests must be met. First, at least a simple majority of those voting must vote in favour. That is basically the principle of the voting system in this country. Secondly, those voting in favour must represent a majority of the rateable value of those voting.

Amendment No. 118 seeks to amend Clause 52 so that two-thirds of those ratepayers voting must vote in favour for a ballot to be successful and Amendment No. 119 requires that 75 per cent of the ratepayers in the defined area turn out to vote.

These additions to the balloting process are unnecessary and make the voting process much more cumbersome. The principle behind much of this legislation regarding business improvement districts is to provide adequate protection to ratepayers, who will be liable for the additional levy, within a permissive framework—a framework that will encourage partnership and co-operation without excessive legislation to complicate the process.

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Sufficient protection for small businesses is provided through the "dual key" voting mechanism which was specifically designed to protect the interests of ratepayers without making the criteria for a successful ballot too difficult to meet. I assume it is taken for granted that the system set out in Clause 52, which comprises the A and B formula, cannot work if there is a secret ballot. So we are not talking about a secret ballot. You have to be able to identify the voters in favour so that you can cross-check their rateable values. I refer to the practical point about which the noble Baroness asked. All this information is publicly available; that is, what the rateable values are and who the occupiers are. Therefore, once it is known how they voted, it will be possible to calculate A and B to ensure that the "dual key" system works. That is not a new point. I understand that it was referred to during the Bill's passage in another place.

Amendments Nos. 118 and 119 create additional complications that are felt to be unnecessary. A simple democratic principle in this country is that democracy involves the right to vote rather than the obligation to vote. This should be the same within a business improvement district, especially as protection for small businesses is already written into the voting mechanism.

Amendments Nos. 120 and 121 concern the number of votes an individual may cast in a ballot on a BID proposal. Amendments Nos. 120 and 121 seek to limit each person voting in the BID ballot to no more than one vote. That discriminates against the ratepayer who occupies a number of properties in the defined area by limiting him to one vote. If an occupier pays rates on an hereditament he is entitled to a vote relating to that hereditament as he will have to pay the additional levy on that hereditament.

If property owners were allowed to vote in the BID ballot, we would need to decide whether an owner-occupier had one or two votes. This issue merely illustrates another of the complexities of granting property owners the right to vote.

Amendment No. 122 would remove the second test of the dual key: that those voting in favour must represent a majority by rateable value of the hereditaments of those voting. It would replace that test with a turnout threshold for the vote. This does not protect the interests of small businesses against the interests of larger businesses or businesses against the interests of larger businesses or vice versa as the "dual key" mechanism was designed to do. This safeguard is essential if businesses are to have the confidence to support business improvement districts. This safeguard has been embedded since the districts. There is an interesting gap in that sentence. I have to assume that the sentence should state: this safeguard has been embedded since the business improvement districts were first a gleam in someone's eye. The word processor did not work properly. The same thing happened with an earlier sentence.

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4.30 p.m.

Lord Jenkin of Roding: I have every sympathy with the difficulty experienced by the noble Lord in reading his brief. However, he managed to avoid the solecism of one Minister who read to the end of his brief which stated: "This is not much of an argument but it should do for their Lordships".

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