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Business Rate Supplements Bill

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6.07 pm

Clause 1 : Power to impose a BRS

Amendment 1

Moved by Baroness Hamwee

1: Clause 1, page 1, line 3, at beginning insert “Subject to the provision of section 4,”

Baroness Hamwee: My Lords, I welcome the noble Lord, Lord Davies of Oldham, who is a veritable and valiant Pooh-Bah, taking up this Bill at what I assume was very short notice. I should say almost in the same breath that I am very sorry that the noble Baroness, Lady Andrews, is not here to see it through this stage.

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She described the Bill as “pristine” when she first introduced it. We are hoping that it will become a little grubbier as we go through today.

I should declare an interest as one of three joint presidents of London Councils. I was also a member of the London Assembly, part of the Greater London Authority, and the London Borough of Richmond upon Thames.

As well as moving Amendment 1, I shall speak also to Amendments 6 to 9, 20, 21 and 25 to 28. Amendment 1 is a paving amendment and, I accept, not a very subtle one at that. This is the way we do things here. The noble Lord, Lord Bates, on behalf of the Conservative Benches, has put his name to all the amendments in this tranche. I am grateful for that. The Bill provides for a ballot if more than one-third of the total cost of the project is to be raised from the business rate supplement or if the levying authority decides to hold a ballot. For us on these Benches—and, I believe, for all the Opposition—it is a point of principle that all those who are being asked to contribute should have their say, whatever the proportion of the BRS to the total cost of the project. Their view may, of course, not prevail—that is in the nature of voting—but they should be given the opportunity to exercise a vote. We are well aware that the Local Government Association is not enthusiastic about having a ballot in all cases. I suspect that this has something to do with a mixture of amour-propre and pride, confidence in how local authorities operate, and, no doubt, the cost of holding ballots. I explained in Committee that, although I would normally be heard to be supporting local authorities, that support is not without a critical approach. I believe in this case that the claim of the business organisations for a ballot and, more importantly, our own values and the strength of our own feeling about the necessity of allowing for a ballot should prevail.

At the previous stage the Minister quoted the LGA’s claim that no authority will make a decision that has a detrimental effect on its local business community. Of course not, but that is not quite an accurate description. No authority will make a decision which it thinks will have a detrimental effect on its local business community. But that is not the point. What is proper is that business should be able to express its view via a ballot and affect the outcome. Views will have been expressed before a ballot through consultation. The two stages of consultation and ballot are complementary, not alternative. The Minister defended the provision that there should be a compulsory ballot if one third of the costs are to be met by the BRS and said:

“I would ask noble Lords to think about whether it would be right, democratic or fair that an entire project of some significance that was being marshalled by a balance of partners should be put in jeopardy due to uncertainty over a relatively small but critical element of a funding package. I would argue that it unbalances the partnership and introduces an avoidable degree of uncertainty. It is not worth taking that risk if the BRS is contributing only to a relatively small proportion of the overall funding package, which is one that would genuinely help business because it will be the test to be applied”.

A relatively small proportion which would genuinely help business? This is a top-down approach. I am sure that the noble Baroness, Lady Andrews, did not mean

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this. It quite honestly just dismisses businesses as not knowing what is good for them. It fails the test of what is right. She said that one-third was “a fair point” because the business rates supplement is,

Whatever the proportion of the total cost, the effect on the individual ratepayer of that BRS will not vary.

In the case of the other contributors to a project when there are a number of funders of a package, each contributor or investor will take a decision as to its own contribution—its loan or whatever it might be. In the case of BRS, it will be the local authority, not the ratepayers, which will take the decision about the “smaller contributions”. The CBI and others have put forward arguments in support of a mandatory ballot on the basis of its practical benefits because business has better experience and understanding of investment than local authorities. They may have a point, but for us this is a matter of principle. Describing a mandatory ballot, as the Minister did in the Commons, as giving business a veto, is, as I have said before, offensive.

I should make clear that the amendments would not bring Crossrail within the ballot provisions because of the amendment to Clause 27 agreed in Grand Committee. Crossrail is very different. It has been the subject of discussion, publicly available information and legislation over a long period, as has the contribution of businesses with a high rateable value.

My amendments are not an attack on local government. If a local authority has the confidence to propose a project and put together a funding package, it should have the confidence that local business will support it. It will have to put it to local business if business is to contribute more than a third. After all, what is appropriate for BIDs is appropriate for the bigger schemes which are likely to be the subject of the business rate supplement. I beg to move.

6.15 pm

Lord Bates: My Lords, I support this amendment and endorse the remarks so ably made by the noble Baroness, Lady Hamwee. I want to put on record our thanks to the noble Baroness, Lady Andrews, for the way in which she has conducted the negotiations and discussion, trying to keep us informed throughout this process. We have appreciated it and it has helped enormously, even if we have not always been able to agree. In that respect, I welcome the noble Lord, Lord Davies, to this part of the debate.

We start with an issue which has been rightly identified as one of principle. The objective of the Business Rate Supplements Bill, we are led to believe, is to encourage a genuine partnership between business and local authorities. How can there be a genuine partnership if one argument is that business has a veto and the other is that local authorities have a veto about consulting with local businesses? The noble Baroness, Lady Hamwee, has already referred to a particularly interesting exchange in Committee when the noble Baroness, Lady Andrews, asked noble Lords to think about whether it would be right, democratic or fair to consult with businesses. That seems in many ways to give away the myth of

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what is going on here. What has been proposed is not really a partnership but a tax. Therefore, there is no desire to involve businesses in the decision.

There is a problem with the notion of the threshold: where the proposal for a business rates supplement exceeds one-third of the total cost being put forward, that gives rise to a ballot. That leaves it open, given that there is such an arbitrary strike of where that boundary should fall, for local authorities to so manage their affairs in putting forward these proposals that a ballot does not actually take place. The simple way of starting off on the right footing towards making this a genuine partnership is to say that business involvement is essential from the outset. After all, if the objective of the business rate supplement is to promote economic regeneration, surely businesses will have nothing to fear from a referendum. All businesses will benefit from it. That is why business improvement districts work: because the people with a clear vested interest in an improvement in their area attracting more customers, more trade, must be totally signed up and committed. If the business rate supplement is genuinely additional, for economic regeneration in an area, and is crafted in a way focused on the needs of business, when business is invited to contribute to it, most businesses will want to support it. Therefore, why not test that opinion from the outset?

The other benefit has been identified by the CBI in its helpful briefing on the clause. It states that it would deliver an improved relationship between local government and business from the outset—a point already made—and that it would mean better investment decisions, because businesses’ experience would mean that only projects with demonstrable benefits to local economies would proceed. Again, that is a very important and valuable point. It would also enable levying authorities to have greater flexibility, because business communities are likely to accept greater flexibility in the knowledge that they will really be able to influence the final outcome. That is only fair when it will lead to firms paying higher taxes for projects—above and beyond what they already pay. The CBI states that that is not a business veto but a judgment about whether businesses actually expect to see value for money when they pay more tax in order to support a project. We very much support those sentiments on behalf of business. If the Government were to accept a compulsory ballot, that would be a clear way to settle down some of the sceptics about the Bill, because it would clearly state that it is a genuine partnership between business and the local community for the benefit of all concerned.

My final point relates to the size of business involved. We are not talking about a ballot that involves hundreds of thousands of businesses in a local area. The threshold proposed is of a rateable value of £50,000. I am sure that the figures for central London will be higher, but outside London, that points to an office or retail space of between 3,500 and 4,000 square feet. There could be 35 to 40 people in there. In a given area, there will be relatively few of those businesses, but they will be a significant part of that local community and the local economy. The notion that they may somehow be excluded from decision-making and discussion—having a voice—on something to which they may be asked to contribute

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and which is notionally presented as for their benefit is unacceptable. I am therefore very happy to support the amendment and hope that it is secured.

Lord Jenkin of Roding: My Lords, I did not take part in the debate in Grand Committee. I have of course received the briefing from the Local Government Association suggesting that there should not be ballots in all cases. When I told someone who was arguing that there should be ballots in all cases that the Local Government Association does not want that, they gave the Mandy Rice-Davies answer: “Well, they would say that, wouldn’t they?”. That is the position I have come to. The argument advanced by the noble Baroness, Lady Hamwee, and my noble friend on the Front Bench is right as a matter of principle. There should be ballots in those circumstances.

It is not enough for the local authority to say, “We believe that it is in the interest of the business community that we introduce these improvements and charge property holders and occupiers with more than £50,000 rateable value the business rate supplement to pay for it”. They should go to those people to ask them, not just as a consultation but to say, “If you support this, do so in a ballot”. If the majority both by value and by number of occupiers votes yes—as it is put in the clause, if A is greater than B—it would go ahead. If more than a third is involved, there will have to be a ballot anyway, but where less than a third is involved, I think the authority should ask the occupiers in a ballot whether they approve of and will vote for it.

That is the same principle—no doubt we will come to this later—as we had for business improvement districts. In the BIDs, there was always going to be a ballot of the occupiers. We now know that that can be extended in certain circumstances to the owners as well. The ballot was an essential part of that mechanism. So should it be in the business rate supplement.

I support the amendments and I hope that, on reflection, the Government may feel able to accept them.

Earl Cathcart: My Lords, I declare an interest as a chartered accountant and as a director of companies that pay business rates, and I have been a councillor for more than 10 years, so on this amendment, I probably have a foot in each camp. I cannot see the logic of the Government's position in not giving businesses a vote in all instances. That seems to defy all logic.

Last night, while listening to the European election results, I heard Harriet Harman saying time and again that the Government must listen to what the people are saying, that the Government must address their concerns. Here is the ideal opportunity for the Government to do just that. All business organisations are saying that there should be a vote in all instances where a business rate supplement is charged. In fact, most, if not all, submissions from lobby groups that I have received argue that there should be a vote in all instances. That is, except for the Local Government Association. As my noble friend Lord Jenkin has just said, “They would say that, wouldn’t they?”. If, as Harriet Harman says, the Government are going to listen to and address the concerns of business, this would be a good place to

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start. After all, the Government and the Prime Minister keep telling us that they want to support business. Here is their opportunity.

The second piece of logic in the Government's position that I do not follow is that of consistency. The Government are prepared to give business a vote if its total contribution is greater than a third of the total cost of the project. I cannot follow the logic of not giving the vote below one-third. What is the significance of the percentage to businesses? None at all, really—a 2 per cent charge is a 2 per cent charge as far as business is concerned. In addition, as my noble friend Lord Jenkin just mentioned, the Government allow voting in all instances under the BID schemes, whatever the percentage contribution from businesses, so why not now with the business rate supplement? If the Government want to be consistent, they should allow voting in all instances for the business rate supplement, as they do for the BID schemes.

The whole point of the Bill is to raise money for local infrastructure projects that will benefit local businesses. Local authorities are expected to work in partnership with local businesses. There will be consultation but, as the Bill stands, that can be ignored. Local government can press ahead with a pet project despite the wishes of businesses. Business may not consider that the local authority’s chosen project is the right or best project for business in that area, but as things stand the local authority can override its wishes. What would concentrate the minds of local government is the knowledge that, at the end of the day, the project will be subject to a vote from the business community in all instances. It would also ensure that both parties really worked in partnership to ensure that the right project was selected.

6.30 pm

Lord Brooke of Sutton Mandeville: My Lords, this is my first contribution to any stage of this Bill, so my remarks will be extremely brief. I represented a constituency in central London where, for many years before we reached the stage which we have now reached, and generally under the supervision of Mr Tony Travers, whom a number of noble Lords will know personally, I discussed the particular issues which we are embracing today.

Since everything that could be said on this subject, other than perhaps what the Minister is about to say in reply, has already been said, I will not go on at length; I will simply rely on two things that have been said before but are very brief. Neither exactly matches the case we are dealing with, but their spirit certainly does. The first is the old saying that help is always better defined by the receiver than by the giver. The second is the remark by that great Ulsterman, CS Lewis, that if you hear about somebody going around doing good to others, you can always tell the others by their hunted look.

Lord Davies of Oldham: My Lords, I am grateful to all the noble Lords who have spoken in this debate and particularly grateful for the kind remarks about my noble friend Lady Andrews from the noble Baroness,

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Lady Hamwee, and the noble Lord, Lord Bates. I am sure we will miss the contributions of my noble friend, who worked so assiduously on these matters and with such great precision. No one will miss her more than me as far as the Bill is concerned. I will do my best to respond to the issues that were raised. I appreciate that these are matters of concern but I do not think that there is a huge difference between the Government’s position and that of the noble Lords who have contributed to this debate. I give way to the noble Lord.

Lord Jenkin of Roding: My Lords, I apologise for intervening at such an early stage in the proceedings on this amendment, but the noble Lord said that we will all miss the noble Baroness, Lady Andrews. What has happened to her? Why is she not here?

Lord Davies of Oldham: My Lords, I am in some difficulty because no announcement has been made, but let me assure the House that my noble friend Lady Andrews will be fulfilling a role in the public service of great significance and she will, I have no doubt, in due course earn the commendations of the House on that fact. However, the announcement has not been made and that is why I am constrained. It was not clear just when the announcement would be made and therefore to my enormous joy I was drafted in over the course of Friday and the weekend to deal with the Bill. That is why I am delighted to be before the House now. If all the questions are going to be as difficult as the one the noble Lord, Lord Jenkin, has just addressed, I am going to have a very difficult time indeed. I hope I am not going to be so evasive on all the other points.

I emphasise that, although I recognise that it is a key issue of the Bill, I do not think that there is a great deal of difference between the position adumbrated by noble Lords who have spoken and that of the Government. The issue is more a question of emphasis than one of principle. None of us thinks that businesses should not be involved in a BRS. We recognise that the policy will not work unless there is effective, constructive partnership between local government and businesses. The whole premise of this concept of any such project is based on that position. We have said that we of course expect levying authorities to engage with businesses early on in the development of any proposals and we would expect that dialogue to continue as the proposals are developed further. We are at one with the sentiment that is behind this amendment, that progress cannot be made unless business is involved in the development of the proposals and has a real say in these matters.

How this happens, we believe, should be left to the levying authority to decide. We do not see the case for being overly prescriptive with regard to local authorities but we have strengthened the statutory guidance by encouraging levying authorities to think about how they will engage with businesses over and above the necessary statutory consultation which is already envisaged in the measure. By engaging in this way, the levying authorities will be able to gauge how businesses feel about the emerging proposals before they are complete and to reflect feedback from businesses as the project moves on towards that more formal consultation stage which is involved in the process.

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We should be able to leave local authorities to work responsibly with businesses to develop projects to benefit the economic development of the local area. It surely cannot be the case that the levying authority needs a ballot in every case. We have indicated that ballots are important where businesses are making a contribution above 33 per cent to the total position, but the approach we have adopted is that ballots must be proportionate and reasonable, bearing in mind that BRS revenues will contribute the lion’s share of project funding in some cases. In other cases, it may well be that the business rate supplement is a very small part of the project envisaged. The fact that we are not requiring a ballot in all cases does not mean that this gives levying authorities carte blanche to bulldoze through their pet projects. Businesses will have a vote if they are involved in more than 33 per cent of the expenditure, levying authorities will be required formally to consult with businesses on top of any preparatory dialogue they have, and with all proposed projects they can be held to account if they fail to carry out this consultation.

It is surely recognised that it is in authorities’ best interests to ensure that they consult businesses effectively, but if I have followed the position which has been put forward by noble Lords—it was certainly the burden of the case put forward by the noble Lord, Lord Jenkin, and the noble Earl, Lord Cathcart—that even where the proportion to be funded is fairly small, the danger is that this would put undue emphasis on one aspect of a project. I accept the point that talk of a veto is somewhat excessive, but noble Lords will recognise that a ballot for business, when it may be contributing as little as 10 per cent, certainly puts very considerable emphasis on a contribution which is relatively marginal to it. We have guaranteed that the authorities will have already engaged with businesses that are contributing 10 or 15 per cent and the development of the project will have had the benefit of businesses’ responses to the local authority consultation. I give way to the noble Lord.

Lord Bates: My Lords, I am grateful to the Minister for giving way. He says that 10 per cent or 5 per cent are small figures. Does he consider 30 per cent to be inconsequential?

Lord Davies of Oldham: My Lords, I do not, but a line has to be drawn somewhere. If the noble Lord concedes a contribution of 10 per cent ought not to occasion a ballot, then having listened to my careful arguments, he will not support the amendment before the House. If I say 33 per cent and he responds by saying that 32 per cent is only 1 per cent below and the ballot will be denied, logic dictates that one is faced with the same problem wherever the line is drawn. I merely indicate that there is a strong case for such a line to be drawn because where the contribution is relatively small, it cannot be logical or proper that local authorities which have carried out a consultation then have to go to ballot.

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