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The Earl of Caithness: The Minister should not be so reticent in saying that a Minister of State in this House cannot accept an amendment. When in government, my noble friend Lady Blatch and I regularly accepted the principle of amendments. We even had them redrafted by civil servants and returned to the noble Lords who introduced them. I used to return such amendments to Members of the Opposition. I believe that the Minister would like to accept the principle of the amendment that we are discussing, take it away, redraft it and return it to the noble Lord, Lord Phillips, for Report stage.
The Deputy Chairman of Committees (Lord Geddes): I hope that I may be of assistance to the Grand Committee. The amendment to which we are speaking now is Amendment No. 138ZA. It has not yet been agreed or withdrawn. Then we shall revert to Amendment No. 138. I look to the noble Lord, Lord Smith of Leigh, as to what he wishes to do with his Amendment No. 138ZA.
Lord Smith of Leigh: I thank the noble Lord for that advice. I am sorry that there seems to be doubt that the scheme we are discussing could work. I assure the Committee that it is a practical scheme that works in my authority. We draw up a contract with the sports clubs that receive discretionary relief to ensure that the savings they obtain from rate relief are channelled into new investment. Clubs need to show how they will benefit from the relief by allocating the money that is saved to new investment. Otherwise
Baroness Blatch: This is my first intervention, but I am grateful to the noble Lord for giving way. The noble Lord said that he wanted a commitment to new investment if the relief was granted. However, as regards some of the remarks of the noble Lord, Lord Phillips, and as regards the information that I have,
Lord Smith of Leigh: I understand the point that has been made. However, sports clubs have bars. Sometimes the bar section may have great influence as it is making money rather than spending it. My concern is that the money we are discussing may be allocated to the bar section of the club and not be channelled, as the Committee would wish, into sporting activity. As I say, my local authority has a scheme that works very effectively in that regard. However, having listened to the comments that have been made, I beg leave to withdraw the amendment.
Lord Phillips of Sudbury: I am extremely grateful to the Minister and to all those who have spoken in this mini debate. I got two crumbs of comfort from what the noble Lord, Lord Rooker, said. First, he did not continue with the line adopted by the Government in the Commons of saying that the measure would be anomalous or that we ought to wait and see. Secondly, I was certainly encouraged when the noble Lord was quite open in admitting that he did not realise what a pathetically low take-up there has been so far both for charitiesthe figure is about 40and CASCs where the figure is some 400.
Therein perhaps lies a little hope. I know that Gordon Brown is extremely keen on the sentiment behind the amendment and the sentiment behind the introduction of CASCs. His speech on the matter during the debate on the Finance Bill was extremely eloquent. He could have been speaking on this amendment on behalf of Members on this side of the Committee. If the Minister could be prevailed upon to present the measure to Gordon Brownbecause he is probably not aware that the ambitions we all had in this regard have not been realisedthe Government may take a different view at Report stage.
I believe that it is hoped to increase the number taking advantage of both CASC and charity tax exemptions, which include rates, by means of an off-the-shelf charity pack. However, it does not work like that. The process is much more cumbersome, complex and long-winded. The experience of Banbury Cricket Club has scared the living daylights out of every cricket club in the land. To be fair, the CASC regime has been wonderfully effective and efficiently run by the Inland Revenue. To register as a CASC involves filling in two sides of one sheet of A4 paper. That scheme is well administered. The simple truth is that we shall not get the benefit of this great reform unless we can bring
Lord Rooker: I certainly cannot give the commitment that was originally asked of me. However, I am happy to draw to the attention of my colleagues in the Treasury the speeches that have been made today and, in particular, the actual practical effects of the Finance Act 2002. I shall ask them for an update on the effectiveness of that legislation as it is clear that I shall have to return to the matter on Report. I fully accept what the noble Lord, Lord Phillips, said; namely, that the thrust of the Chancellor's remarks made when the Finance Act was being debated was that he wanted the provision we are discussing to work. Changes that have been made in the area of charitable giving are not always followed up. It is a question of introducing such changes widely. There is enormous potential in that regard of which people are unaware. As I say, I shall inquire into the effectiveness of the legislation in regard to the matter that we are discussing in order to be able to return to the issue on Report.
Lord Phillips of Sudbury: I am most grateful to the Minister for those remarks. I assure him that Richard Caborn, the present Minister for Sport, is no less rabidly keen on the matter than was his predecessor, Kate Hoey. He is trying to do something in the way of roadshows going round the countryI am involved in thistrying to drum up support and to eliminate misconceptions. As I said, I am most grateful to the Minister for his comments. I beg leave to withdraw the amendment.
The noble Earl said: We return to the more esoteric subject of the details of rating rather than the charitable aspects of it. Amendments Nos. 138A and 138B are probing amendments on the funding of the small business rate relief. I posed a number of questions to the noble Lord, Lord Bassam of Brighton, on Amendment No. 136. I hope he now has the answers for me.
Looking at the issue in more detail and looking at the threshold of £8,000 of rateable value, that is probably equivalent to £150 a week in rent. Not many people with offices and retail property will benefit from that in the South East and particularly in London, although those may be small businesses. If there is such a finite cut-off point as £8,000, however the Government seek to justify that, it seems grossly unfair that someone just above the line has to subsidise
I suggest that the Government look at the Scottish scheme. In Scotland not only is there a different rateable value for small business relief of £10,000, but those who will have to pay for that have to be in premises with a rateable value of over £25,000. So the top end will subsidise the bottom end. Therefore, there will not be the problem that the Government will impose on many businesses in England, where those just above the line pay more than those just below it. In Scotland there is a break in the middle. I commend that system to the Government.
Lord Hanningfield: We intend to oppose the Question that Clause 64 stand part of the Bill. I believe that the Bill will be more readable without that clause and its complications. Can the Minister mention the timing of the provisions in the clause and how he believes that it will work, bearing in mind its complicated nature?
Lord Bassam of Brighton: I shall try to deal with both points. We all know that since 1990 there has been a national single rate poundage or multiplier introduced by the former government and one for the whole of Wales.
Clause 64 introduces something different. I believe it is a better system. Instead of one multiplier and a single rate poundage, it provides for two multipliers. There will be a small business non-domestic rating multiplier and a non-domestic rating multiplier.
When a small business rate relief scheme is run under Clause 63, the non-domestic rating multiplier will be set at a higher level than the small business rating multiplier to produce an addition to rate yield equivalent to the cost of the small business relief. That is how it will work. The addition to the rates bills of those not receiving relief will be small. As we said in the White Paper, it will probably be less than 2.5 per cent.
In addition to providing for the funding of small business relief in England, the clause makes changes in the case of England and Wales as to how the multipliersincluding the English small business multiplierare to be adjusted to take account of the effects of revaluations.
Every five years, all non-domestic properties are revaluedthe Committee knows that better than I do. The purpose is not to change the total yield from rates, but to redistribute the rate burden in line with movements in the property market since the last revaluation. Therefore, if there is a significant increase in total rateable value at a revaluation, the multiplier must be reduced. Alternatively, if there is a significant decrease in total rateable value, the multiplier must be increased. Thus in a revaluation year the English and Welsh multipliers will include an adjustment to offset
However, the value for the first day of the new lists is subject to erosion through successful appeals by ratepayers for reductions in their new rateable values where those reductions have retrospective effect from 1 April. So the Secretary of State and the Welsh Assembly are currently required to estimate what will be shown for 1 April once the effect of successful appeals has been allowed for. Those are the estimated final rateable values for 1 April, which are used when making the adjustment to the multipliers to offset the effect of revaluation.
The estimates may be difficult to make. Accordingly, Clause 64 allows adjustments in the multipliers for subsequent years to compensate for any error in estimation at the revaluation. That is plain, good sense. The calculation of the multipliers at the 1995 and 2000 revaluations were based on what have turned out to be sound estimates of losses in rate yield. That being the case, the new power to adjust the multiplier to compensate for errors in estimating losses in rate yield is likely to have only a marginal effect on the level of multipliers. I should stress that this new power to make subsequent corrections to the multipliers could see the multipliers being set at lower levels as well as higher levels.
Finally, the provisions contained in Clause 64 are not designed to affect the total rate yield. They will ensure that the relief given to small businesses will be paid for by an increase of a per cent or two perhaps in the bills of other ratepayers. They will also ensure that the multiplier can be set with even greater accuracy to offset the effects of a revaluation.
I am reluctant to say this, as it will probably upset Members of the Committee opposite, but the amendments would wreck Clause 64. That is plain. It would be impossible to fund the English rate relief scheme through a small supplement on the bills of other ratepayers. It would also be impossible to adjust the England and Welsh multipliers, whether down or up, to offset the effects of a revaluation that had not been fully provided for when originally setting the multiplier at that revaluation.
The noble Earl does not like where we have struck the balance, but we believe that we have it about right. Our research has shown that something like 1.7 million rateable valuesabout a million or soare less than £8,000. That is roughly two thirds of those who will be subject to the new system. A majority of ratepayers in this scheme will benefit. We calculatethis answers one of the points made earlier by the noble Earlthat the £8,000 threshold would have an impact of less than 2 per cent on the rate bill. The judgment was that that was at the appropriate level.
There was also a question about the timing of the introduction of the small business relief. The answer is that it cannot be introduced before April 2004 because the preparation will take time and so an introduction in 2005, the point of revaluation, may be appropriate.
The noble Lord, Lord Hanningfield, spoke of his intention to oppose the Question that Clause 64 stand part. I have a complicated note here that explains more of the mechanisms. I have gone over most of those points in what I have said so I believe I have answered the range of issues. However, omitting the clause would blast a major hole in the operation of the scheme. We believe that we have the balance of benefit about right. The Scottish scheme demonstrates the joy of devolution; that is how they want to deal with the matter in Scotland, which is fine. The Scots have designed the scheme rather differently. We believe that we are providing the majority of non-domestic ratepayers with a benefit. Clearly, the numbers demonstrate that.
The noble Earl has made a point about those on the margin and just above it. That is a reasonable point to make, but we have to draw the line somewhere and that is where we have cast it.
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