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In seeking leave to withdraw the amendment, I should perhaps do so with some optimism, given the remarks of my noble friend Lord Jenkin of Roding. While we are arguing against double-charging and on the need for burdens on business to be released, and the Minister is making a valiant defence on why that cannot be the case, it may be that in six or 12 months some proposed new legislation called the local levying tax simplification Bill will be introduced which will answer all the points that have not been answered here. I say sincerely, and not in any churlish way, that efficiency of legislating when things can be dealt with in one place at one time aids the process. Speaking from a business perspective, on taxation matters and so on, businesses hate—yes, paying it, but to a greater extent—the uncertainty and complexity of the rules. While we converse fluently in the language of business rate supplements, community improvement levies, business improvement districts and growth initiatives, the average person out there, who is actually paying, has no clue about any of them. It is deeply confusing.
There is no one with more experience and knowledge of local government finance than my noble friend Lord Jenkin, but this was how it went in the 1980s and 1990s and what led the then Conservative Government
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Amendments 52 to 55A not moved.
55B: Clause 16, page 12, line 9, at end insert—
“( ) Schedule (Amendments to Local Government Act 2003) contains amendments to the Local Government Act 2003 (c. 26) applicable in any business improvement district where a BRS is imposed.”
Baroness Valentine: As Amendment 55B is consequential, I shall focus on Amendment 60A, which is grouped with it, and apologise for its length and complexity.
This amendment provides the ability to broaden the way that business improvement districts are funded by giving BIDs the power to decide whether or not to include property owners as well as occupiers as contributors to their funding. I, too, join the Minister in paying tribute to the noble Lord, Lord Jenkin, for his work on BIDs legislation. At a time in which businesses will be hit by both BRS and BID levies, these measures will go some way to mitigate the impact by spreading the overall burden of both levies from occupiers to both occupiers and owners. As the noble Lord, Lord Bates, and I mentioned at Second Reading, an occupier will potentially be hit by an uplift in rates, an absence of empty property rate relief and the sharp effects of revaluation due to the valuation having been taken in April 2008 at the peak of the market.
BRS is but one more levy, and for occupiers who are already funding a BID it seems a reasonable request of government to reduce the burden by allowing the cost to be spread to owners, a move which most property owners support. After discussion with existing business improvement districts, the amendment allows for flexibility in both the financing of BIDs to include owners and/or occupiers, and for flexibility in the way that the levy is calculated.
I should like to touch on four areas of detail in the amendment. First, proposed new paragraph 3(5) gives two options for the means of calculating a BID levy to be paid by a property owner: the first is the allocated proportion and the second is the allocated multiple. The allocated proportion is where the amount paid is divided up as 30 per cent by owners and 70 per cent by occupiers, or whatever proportion is agreed between the two. The allocated multiple is where the calculation is based on a multiple of rateable value. These are complicated proposals and I shall speak later to a local authority veto as a last resort to ensure fair and equitable use of the funding mechanism.
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The second area of detail relates to proposed new paragraph 6, which seeks to retain the principle of 50 per cent by value and 50 per cent by number that is applied to occupiers at the moment. By aggregating and ensuring that the two together, 50 per cent by value and 50 per cent by number, vote in favour, the BID takes place.
The third point of detail relates to the local authority veto in proposed new paragraph 7. As a last resort, the local authority can verify that the arrangements to deal with the allocation are fair and equitable, particularly in relation to the allocation by multiple under proposed new paragraph 3, which is fairly complex.
Proposed new paragraph 10 deals with where a leasehold interest may or may not be counted as ownership. It suggests that if a lease is longer than seven years, a person should be treated as being a property owner.
Those are the points of detail that I wished to raise in relation to the amendments. I now wish to make two specific comments on issues that the amendments do not capture. First, the amendment deals only with BIDs where there is a BRS; it does not deal with BIDs outside BRS areas. This clearly creates a two-tier arrangement for business improvement districts. I believe there is a legal problem with sweeping up BIDs outside the BRS areas in the Bill and I am in discussion with the Bill Office about that.
The other issue relates to the passing on of costs to tenants. It has been a worry that owners, if billed, will pass on the costs to tenants. In my view, this is not a significant risk. Indeed, where property owners are voluntary contributors to BIDs already operating, that has not been the experience. I do not believe this issue needs to be dealt with in the Bill.
Finally, I appreciate that my amendment is complex but, as I understand it, the principle has cross-party support. Given the pressures on business at the moment, I urge the Government to support these proposals and to accommodate the most unusual desire from the property community to be taxed. I beg to move.
7 pm
Lord Jenkin of Roding: I support the amendment and congratulate the noble Baroness, Lady Valentine, on having dealt with such a complex subject—the schedule is indeed a complicated document—so briefly and clearly. I want to add just one or two points.
The first is that the pressure for owners to be included within the BID system has existed from the beginning. When my Bill, to which I referred in rather intemperate terms on the previous amendment, was introduced, we had amendments to do that. The Government made it clear then that they did not really approve of that but, as they knew that the Bill would not make any progress in the other place, we got owners included in the final version. When what became the Local Government Act 2003 was introduced, it very wisely went through a pre-legislative committee—the Transport, Local Government and the Regions Committee—which reported on this issue. The research paper published by the House of Commons Library stated:
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“During the consultation process it was also suggested that property owners, as well as rate payers, should be liable for the levy, and the Select Committee report on the Draft Bill recommend that property owners should be included”.
That was in 2002, so we are going back a long way. The Select Committee in another place said:
“We recommend that the Government works with the British Property Federation and other business organisations to find the best way of involving property owners as contributors to Business Improvement Districts, if necessary amending primary legislation and certainly covering this point in regulations and guidance”.
However, that recommendation did not commend itself to the Government. When amendments were moved in the other place proposing that owners should be included, the then Minister, Nick Raynsford, for whom I have considerable respect, led the charge against including owners.
However—surprise, surprise—on this occasion, the honourable gentleman who moved the amendment in the other place proposing that owners should be included in BIDs was the right honourable Nick Raynsford MP. There is more joy in heaven over a sinner that repenteth and so on, and it is very good that we now have his support on this matter. I hope that that augurs well for support from the Government.
The noble Baroness’s amendment may well not be in the form in which it should finally appear in legislation but that is frequently the fate of those who move amendments. They then wait for government amendments that have the benefit of being drafted by parliamentary counsel. However, the noble Baroness’s final point is very important. Because the Bill is concerned with the business rate supplement, the amendment has had to be drafted, on advice from the Public Bill Office, so that it applies only to BIDs where there is a BRS levy. That gives rise to the astonishing anomaly that, if we do indeed agree that owners as well as occupiers should pay a contribution to a BID levy, it can apply only in areas where a local authority has decided to put forward a proposal for a business rate supplement. BIDs in other areas would affect only occupiers and not owners, but that would be wholly illogical.
I, too, have had discussions with a helpful gentleman in the Public Bill Office. The reason is not so much the Long Title of the Bill, but simply the Bill’s general intention as evidenced by its provisions. It would be inappropriate, and therefore impossible, to have an amendment that would cover BIDs that are not in a district which was going to have a BRS. When I asked what would be necessary to achieve that, the answer was that it would probably require an amendment to the Long Title of the Bill. I said, “What do we have to do to do that?”, and was told, “We can’t do that in this House. It will have to be done in the other place”. This means that there must be a peg in the Bill as it leaves this House and goes back to the other place which would enable those who wish to support owners being included in BIDs in every area to have an amendment to the Long Title.
I hope that I have made myself clear. This is the sort of procedural difficulty that one finds oneself in, with rules that have grown up over a long period and for which I have always felt a great respect. It is therefore for the Government to ensure, when we come to Report or Third Reading, that there is a provision in
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Lord Bates: I feel as though I have sat through a master class in parliamentary draftsmanship, consequential detail and research of the history of the Bill. I am immensely grateful for the way in which the noble Baroness, Lady Valentine, moved this hideously complicated amendment. What is trying to be achieved now makes perfect sense.
I cannot ask anything. Perhaps my only function in this debate is to give the Minister’s team time to concoct great answers to the challenges that have been presented. This is simply a case of perfect logic and sense. Why should any business engage any tenant of a retail premises in improving its local area? The answer is that it would increase the footfall into that area and potentially enable it to sell more produce and therefore make greater profits. That is the logic. Hitherto, however, an important group of people was exempted from that: the property owners themselves. If you are renting out a property at £15 per square foot, and if it is valued at £10 million, to use an illustrative sum, then when the business improvement district is established and improvements in the local area take place, you clearly have a more secure tenant. You may find that when you come to re-let or renegotiate, you can increase your rent per square foot. In addition, you have a capital value increase because, as the rental values increase, so the asset’s capital value increases.
So it is obvious that, whereas the tenant may only benefit in one way—the bottom line in terms of sales—and potentially then fall foul of their rent being increased by the landlord in subsequent years, it follows that the property owner is benefiting most from this on two counts. Therefore, the fact that they should contribute seems to be an omission from earlier drafts of the Bill and should certainly be corrected now, even if it needs to be done in such a complicated way.
When the amendment was debated in Committee in the other place on 27 January, at cols. 184-186 of the Official Report, and on Report on 11 March, at cols. 337-338, concern was expressed that there should be no perverse consequences. I took that to mean that the purpose of the amendment ought to be to ameliorate the cost of the project; it should be a mechanism not for increasing the overall take from the business community but for spreading the burden more widely so that some of our concerns about the impact on business, which we have mentioned on a number of occasions, may be softened by including property owners in the measure. It would be helpful if we could hear assurance from Ministers that, should the amendment be acceptable, those guarantees in terms of the overall take and spreading the impact on businesses would be upheld. Perhaps that should be mentioned in the Bill if it is not directly referred to in the amendment which
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Baroness Hamwee: We, too, support the amendment. Given the time, and knowing that we are aiming to finish Committee stage this evening, which imposes a perhaps unnatural constraint—I shall not say why—I have three questions. First, as I recall it, the problem with owners coming into the BIDs arrangements was identifying them and arranging to collect money from them. I am sure that the noble Lord, Lord Jenkin, who carries a lot of credit for all this, will remember in more detail than me, but if those problems were identified at the time of the original proposal, I would be interested to know, whether it is from the noble Baroness, Lady Valentine, or from the Minister, whether the problems have been solved.
My second question is just for the noble Baroness, who referred to the double lock. Reading the amendment, I wonder whether there should be extra locks so that the owners and occupiers as one body are satisfied before they get to the double-lock stage. Perhaps the idea was considered and discarded. There are two constituents; rather than aggregating them, should there not be separate processes first?
My third question follows the comments of the noble Lord, Lord Jenkin. I had written down “Long Title and scope of Bill”. At the beginning of a Committee stage, we postpone the Long Title. I do not understand the procedures as well as I should but postponing it suggests to me that we shall come back to it right at the end of the Committee stage. Does that give us some help and—no pun intended—some scope?
7.15 pm
Baroness Valentine: I will try to pick up some of those points. On the information to collect the money from owners, I believe that Julie Grail of the business improvement districts organisation—I cannot remember the name—said that it is possible to get the information to collect using local estate agents. There is some evidence, to which the Minister might refer.
Aggregate versus separate is a valid question that can be argued either way. I would probably have a strong view if I were to think longer about it; it deserves further reflection. I will not enter into the issue of postponing the Long Title.
Baroness Andrews: I am grateful to everyone who has spoken in the debate, particularly to the noble Baroness for moving the amendment. As the noble Lord, Lord Jenkin, made clear, it raises complex issues. He took us through some of the most recent and longer-term history and put forward some challenges, which he will understand I cannot respond—
Lord Jenkin of Roding: There is not the time.
Baroness Andrews: I may have more than enough time but in terms of the Long Title, it is not so much for the Government but for the House itself. If the
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The noble Lord has taken us through the attempts made by Nick Raynsford in the other place to amend the Bill. He proposed that there should be scope to ballot property owners in BIDs in areas where a BRS is in place. Creating an additional income stream for the BID from the property owners would provide an offset for occupiers against their liability and it would also overcome the concern of property owners who make voluntary contributions that others “free ride” on the benefits that their contributions bring.
We all agree that BIDs are an important complementary policy to give local authorities a range of choice to support economic development. It will come as no surprise to the Committee that we have been working on proposals to address the issue that has been raised by the noble Baroness, Lady Valentine, this afternoon, so I am happy to put on the record that we will be tabling amendments on Report. We will certainly be discussing the nature of the amendments with her.
The noble Lord, Lord Bates, asked whether it meant that everyone will get to pay less. If owners are to be signed up, they must have an interest in the project, so increasing income to fund more owners and focusing on better projects has some merit. I will have to write to noble Lords to follow through on some of the issues that I am addressing, as there is no time to go into sufficient detail. If the noble Lord will leave it with me, I shall write to him on that as well.
Our amendments will propose that when a BID is in place, those proposing a new BID or the body running an existing BID, can choose whether they want to involve property owners. If the BID, body or proposer choose to involve property owners, they can ballot them. We intend that there should be flexibility so that the BID, body or proposer should be able to decide whether property owners should be balloted at the same time as, and as part of the ballot of, other ratepayers, or to hold two separate ballots. Clearly, those are issues that we need to discuss and get right.
The level of the property owner BID levy will be set out in the BID proposal. Where the purpose of the property owner BID is to offset the BRS liability of those also liable for a ratepayer BID, the extent of the offset will be as specified in the BID proposal. We will, wherever possible, replicate for property owners the arrangements that currently exist for ratepayer BIDs. However, when certain details are specific to property owner BIDs, we propose to deal with these in regulations.
I shall write to noble Lords following up this debate, as I am leaving out quite a lot of detail due to our having three more groups with which to deal. When I write, I shall certainly address some of those issues and I shall also give the Government’s view on the matters raised by the noble Baroness, Lady Hamwee, which she addressed to the noble Baroness, Lady Valentine. I hope that with that rather brief summary, noble Lords will be content.
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Baroness Hamwee: Perhaps I did not catch it but is the noble Baroness saying that the Government’s amendment will extend to all BIDs or only to BIDs in BRS areas?
Baroness Andrews: It will extend only to BIDs where a BRS is in place.
Lord Jenkin of Roding: As I understand it, the noble Baroness also said that she would examine the question of the Long Title.
Baroness Andrews: This is a matter not for the Government but for the House authorities and so on, to which the noble Lord himself alluded. However, I will read the debate properly, and I certainly know what has inspired it. Will the noble Lord allow me to think about the matter before we continue our discussions?
Baroness Valentine: I thank noble Lords for their constructive contributions and look forward to discussing the amendment further. I beg leave to withdraw the amendment.
Amendment 56 had been withdrawn from the Marshalled List.
Clause 18 : Notice to billing authorities before start of financial year
Clause 19 : Notice to billing authorities during financial year
Clause 21 : Collection and enforcement
58: Clause 21, page 14, line 19, leave out “prescribed” and insert “reasonably determined by the levying authority”
Baroness Hamwee: I shall speak also to Amendments 61A and 61C. Amendment 58 relates to the abandonment of a project and to collection and enforcement in that situation. I seek to take out the provision that the Secretary of State may prescribe the date when the BRS is treated as having come to an end. I believe that that should be a matter for local authority discretion, and my amendment simply asks the Minister to justify the Secretary of State’s role.
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Amendment 61A is an amendment to Schedule 2 and was prompted by the Minister’s letter following the first day of Committee. The letter, for which I thank her very much, dealt with BRS refunds. At 4.56 pm on Thursday, having just received the letter, I dictated this little amendment. I am sure that it is not very good but it gives me the scope to ask whether there can be, as she seemed to imply, no circumstances where a refund is desirable or proper before the end of a project.
When we debated refunds on the previous Committee day, I was aware that there are provisions for refunds at the end of a project. However, it has occurred to me that there might be circumstances where a refund is appropriate part-way through a project—for example, if there is a bit of stop-go. I may be told that the right thing there will be to vary the amount of the BRS in a subsequent year.
I do not know whether paragraph 3(1)(a) of Schedule 2 relates to the BRS for a particular year or to the BRS coming to an end. I am not clear what that means. It does not seem a natural reading to relate it to a particular year within a number of years.
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