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Baroness Hanham: My Lords, I thank the Minister for that reassurance. I do not think that I need to return to the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 [Loans by Public Works Loan Commissioners]:

[Amendment No. 51 not moved.]

Clause 41 [Payments towards local authority indebtedness]:

[Amendment No. 52 not moved.]

Clause 43 [Arrangements with respect to business improvement districts]:

Baroness Hanham moved Amendment No. 52A:

(c) those projects to be financed (in whole or in part) by a levy (an "owner levy") imposed on those holding property interests other than non-domestic ratepayers ("property owners")."

The noble Baroness said: My Lords, these amendments relate to proposals to extend the responsibility for contributing to a levy for business improvement districts to owners of land occupied by business premises. Under the provisions of the Bill, the responsibility for making a contribution under a levy would lie solely with the business owner. My noble friend Lord Jenkin, who is unfortunately unable to be here today and offers his apologies, explained in detail in Committee our concerns and those of others—particularly major landowners—that there appears to

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be a lacuna in the legislation in that there is no provision for owners who are not occupiers, lessors or freeholders to be brought into the statutory scheme. He explained that that was the practice in the United States, where the BIDS concept originated, and that there the liability lay with the owners of properties who, in many cases, passed the cost of the levy on to the occupier through rent reviews and service charges.

My noble friend drew attention to the department's draft guidance on BIDS, in which it was accepted that owners would have a vital role to play in its success, and that there was nothing in the legislation to prevent them from making a voluntary contribution to the scheme. I know that that has already been done in some of the urban environmental improvement schemes around the country. Indeed, many of those schemes would not have left the starting block if such an influential interest had not been readily given. My noble friend drew the Minister's attention to the report prepared by Jones Lang LaSalle for an umbrella organisation for BIDS, known as the Circle Initiative, in which it gave two models for the involvement of landowners and the equitable allocation of the levy.

I shall not go into detail. The Minister will have read Hansard and I know that he listened carefully at the time. But that report and others have demonstrated the real advantage, if not necessity, of the landowners being involved in and committed to the projects. They would give financial and practical support to the schemes proposed, as well as confidence to their business occupiers.

There was something of a spat at the Committee stage when the Minister made it clear that should there be a vote in favour of the amendments being put, he would withdraw Part 4 of the Bill to prevent it becoming part of a ping-pong process. That meant that the Government were not minded to agree to these propositions, their rationale being based in part on whether the levy was a tax; and if it was a tax, their owners, unless they were owner-occupiers, would not be eligible to pay it. That is what I understood it to be about.

During the course of the Minister's long reply, it became apparent that he was not about to concede the principle that my noble friend was addressing. Therefore, some further thought has to be given to this extremely important matter of how landowners become statutorily involved in the bids, and the amendments on the table put forward a viable solution to the problem. One amendment leaves the power ultimately in the hands of Parliament, but delayed until a time of the Secretary of State's choosing, for further provisions to be made to introduce the imposition of an owner levy. The other amendments provide a legislative backing for the administrative detail which would have to be followed.

This is a generous concession to the Minister's problem. It seems likely that the Minister in the other place has had further discussions on this matter with the British Property Federation, although I am not privy to any discussions and I have no knowledge of them. However, it seemed plain from comments on

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one of the papers sent to me that that was likely to happen. It may be that the Minister has considered views on this and that as a result he will be able to accept our amendments as a sensible, straightforward way of dealing with the situation.

If he will not accept the amendments, any further consideration to include the owners on a statutory basis would mean that there would have to be further legislation. Our amendments would ensure that that was not necessary. The permissiveness to put forward the owners as part of the owner levy and the statutory scheme would appear in legislation.

The Government would have the ability to act on what we believe will be an inevitable consequence of these new and welcome schemes. They will not work satisfactorily without the landowner's involvement. I beg to move.

6.30 p.m.

Baroness Hamwee: My Lords, in Committee, the Minister referred to the arguments of the noble Lord, Lord Jenkin of Roding, as being incredibly seductive. He then went on to explain why that was not enough. However, the fact that they are seductive is important because in respect of such innovative schemes, which will require cash and a commitment to make them work, it is important to win hearts and minds. The other parts of the anatomy can follow. His phrase was therefore appropriate.

I am still having difficulty understanding why a new tax on property occupiers is okay but it is not okay when it is on owners. I thought that his arguments in Committee about administrative difficulties were most telling, but that should not be the driver and certainly not the complete answer. The Land Registry can give us information and I wondered whether the Inland Revenue had been asked to comment on the practicalities of the proposals. It might have useful comments to make.

We are all agreed that the introduction of the scheme is important and we ought to find ways of meeting the requests of property owners. It is extraordinary to have a group which is clamouring to pay a new levy or tax and these amendments, in particular the central Amendment No. 52B allowing regulations to be introduced, are wholly reasonable.

The Minister said earlier today that local government Bills come along like buses, so there will be another opportunity to tack on an issue. The trouble is that sometimes there are long gaps between their arrival, or they are only single deckers when one needs a double decker. The Bill provides the opportunity to enable the extension which is being widely requested. That is why I have put my name to this raft of amendments.

Lord Rooker: My Lords, in introducing my reply, I have good news and bad news. I will let noble Baronesses work out which is which. The role that property owners should play in the business improvement districts, which are henceforth referred to as BIDs, stimulated a great deal of debate in this

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place in Grand Committee and in another place. We are well aware of the support that exists for including property owners in BIDs on a mandatory basis and we have received many representations from those in the property industry and others to that effect. As the noble Baroness said, it is unusual for people to queue up to say, "We want to be part of a new tax"—or, "We want to be the reason for the new tax".

I can assure your Lordships' House that my colleague, Nick Raynsford, has given a great deal of thought to the views expressed in this House and put to us widely on the subject. While we recognise that property owners will play a key role in developing, encouraging and taking forward business improvement districts, we remain convinced that the Local Government Bill, as drafted, gives property owners ample opportunity to be involved at every stage of the BID process.

The amendments seek to include the property owners in the mandatory BID levy, in the BID ballot and in the appeal procedures. The mechanism for doing this is set out in Amendment No. 52A, which seeks to give the Secretary of State the power to include property owners in BIDs by order.

Clause 45 enables property owners to make voluntary financial contributions to the BIDs. As we stated in the White Paper, Strong Local Leadership—Quality Public Services,

    "there are significant practical difficulties in extending a BID levy to property owners outside the rating system. This would, in effect, be a new tax on property ownership".

That is why there is a distinction to be drawn as regards it being the same tax on the occupiers of the property or the owners, mentioned by the noble Baroness, Lady Hamwee. It will not be the same tax; it is a completely new tax.

The Treasury has confirmed that any mandatory levy on property owners would be defined as a new tax. My ministerial colleague, Nick Raynsford, wrote to Ian Henderson, chairman of the British Property Federation, on this issue. I want to quote from Nick Raynsford's letter to clarify the matter for this House. He stated:

    "As you may know, the national accounts are drawn up in accordance with international guidelines (ESA95) which we are bound to follow by law. The ESA95 states that we need to distinguish between transactions in goods and services and transactions that are essentially unrequited or not directly linked to a service received by an individual fee-payer. This second definition is the definition of a tax.

    The BID levy falls into the second category because the individual payer does not receive an individual service in proportion to the amount they are charged. All ratepayers, and in theory if they were subject to the levy, all property owners, contribute to a collective service or project. They are not paying for a specific product. Therefore in ESA95 terms the bid levy is a tax and will be classified as such in the national accounts".

I know that there has been some debate on whether it is appropriate to classify the BID levy as a tax. However, I can assure the House that these are the classification rules by which we are bound and arguments about whether they are appropriate are, frankly, fruitless.

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Legislating for a new tax on property ownership would be a significant change to the basis of our current local taxation system. That would be very difficult to justify for the sake of business improvement districts alone when many town centre schemes have flourished on the basis of voluntary contributions from landlords.

We do not consider it appropriate to make such a significant change to local government finance through an order made by the Secretary of State, as the amendments suggest. I realise that they are seeking to be constructive; nevertheless, I am a little surprised that amendments have been tabled which would give order-making powers to a Secretary of State to invent a new tax. I have to say that I would be laughed out of court if this were put to the other place. A brand new tax by statutory instrument? Come off it! I suspect that the Delegated Powers and Regulatory Reform Committee of this House would throw it out hook, line and sinker. Secondary legislation is not the way to introduce a new tax. I must make it absolutely clear that we are talking about a taxation issue. It would be a significant change and, if we were minded to do so, we could not possibly contemplate doing it in this manner.

We remain convinced that BIDs will be successful without the inclusion of property owners on a mandatory basis. The Local Government Bill, as drafted, gives owners ample opportunity to be involved at every stage of the BID process. The draft guidance on BIDs details a variety of different ways that property owners can contribute to BIDs without implementing a new tax.

However—this must be the good news—in recognition of the concern expressed about the success of BIDs, and as a sign of our commitment to their success, we have given an undertaking to review business improvement districts over the next two to three years to ensure that property owners are effectively engaged in the whole process of setting up and administering a BID. If we see substantial evidence that BIDs are failing because property owners are not included on a mandatory basis, then we shall consider ways that that situation can be rectified.

We have not made that undertaking lightly. We are not prepared to commit to including property owners in BIDs on a mandatory basis before we have seen how they work in practice and whether including them would, in the majority of cases, warrant the very great amount of work involved in setting up a brand new tax on ownership, which this would be. We also wish to give other property owners who may not wish to pay the levy and who are probably not aware of the debate which has taken place on this issue the opportunity to comment in full.

We mentioned previously that the administrative burden on local authorities would increase if property owners were included in BIDs on a mandatory basis. It is very important that any collection and enforcement system for administering an "owner levy" is robust and has been consulted on extensively. I gave considerable

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detail on that matter in Grand Committee. We are not prepared to commit to introducing an owner levy at some point in the future until we are convinced that there is an overwhelming need to do so and that it is possible to find a workable way to administer such a levy.

We intend to review the role of property owners in BIDs as we review all aspects of the BIDs. We shall, of course, focus on the role of property owners. That review will be carried out by the Office of the Deputy Prime Minister and will have three stages. First, it will examine the ways that the pilot BIDs have engaged property owners and how successful that has been. That will begin in autumn 2004.

However, the review cannot simply rely on the lessons learned from the pilots, as they are receiving special support and advice. Therefore, the second stage of the review will examine BIDs which are evolving independently. That will take place throughout 2005, when we expect to see some BIDs established which have not been involved in the pilots.

In Nick Raynsford's recent discussions with the British Property Federation, concerns were raised that, while the property sector may be enthusiastic at the beginning, it may lose interest and withdraw its support during the course of a BID. While we are confident that that will not happen, the third stage of the review will seek to measure the continuing involvement of property owners in BIDs once results from their initial investments are evident. That will happen throughout 2006.

While the Office of the Deputy Prime Minister will be responsible for conducting the review, as part of the evaluation process we shall need to work closely with organisations such as the British Property Federation and the British Retail Consortium to gain feedback on the way that their members have engaged with BIDs. I understand that Nick Raynsford has already written to the noble Lord, Lord Jenkin, who explained to me why he would not be here today, offering to meet him to discuss BIDs. We would be happy to broaden that meeting to discuss in greater detail the review of the role of property owners.

The Inland Revenue, which we consulted, has advised that it would be necessary to compile a specific list for this purpose. I believe I stated in Grand Committee that I would be happy to give the response of the Inland Revenue to be recorded in Hansard. There is good news and bad news there. The bad news was given first and then the good news. We want to be constructive about this matter.

As I said, we are not in the business of inventing a brand new tax. In any event, we certainly could not contemplate doing so via this route. If it were a new tax, I suspect that it would be brought forward in a finance Bill or a local government finance Bill. But we are not promising to do that or, indeed, contemplating doing so. As I said, there will be a three-stage review process genuinely to analyse the setting up of the BIDS with the ongoing involvement of the property owners. If there were a genuine problem which meant that they

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could not do what they wanted to do without a mandatory process, and if we could find a practical way to make it mandatory, then we would seriously consider that.

6.45 p.m.

Baroness Hamwee: My Lords, before the Minister sits down, as I understand it, it would be a tax because essentially the property owner would not receive anything in return. Is the Minister aware whether the Treasury has considered the views of property owners through the British Property Federation, who, as I understand it, seem to have said, "We want to be involved and we want to pay because in return we will get added value to our properties". I am not seeking to challenge what the Minister has just said, but I believe it is relevant to the continuation of the debate. The noble Lord may not be able to give an answer today.

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